UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
--- EXCHANGE ACT OF 1934
For the quarterly period ended March 29, 1997
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from_____________to____________
Commission File Number: 1-4115
ZENITH ELECTRONICS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 36-1996520
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1000 Milwaukee Avenue, Glenview, Illinois 60025
(Address of principal executive offices) (Zip Code)
(847) 391-7000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
--- ---
As of March 31, 1997, there were 66,448,593 shares of Common Stock, par
value $1 per share, outstanding.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ZENITH ELECTRONICS CORPORATION
------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
-----------------------------------------------------------
In Millions, Except Per Share Amounts
Three Months Ended
----------------------
March 29, March 30,
1997 1996
---------- ----------
Net sales $ 259.1 $ 237.4
---------- ----------
Costs, expenses and other:
Cost of products sold 246.5 229.3
Selling, general and
administrative 28.1 34.8
Engineering and research 10.8 11.2
Other operating expense
(income), net (Note 3) (7.1) (4.1)
Restructuring and other
charges - -
---------- ----------
Operating income (loss) (19.2) (33.8)
Gain on asset sales, net - 0.3
Interest expense (6.3) (3.3)
Interest income 0.3 1.5
---------- ----------
Income (loss) before income taxes (25.2) (35.3)
Income taxes (credit) - -
---------- ----------
Net income (loss) $ (25.2) $ (35.3)
========== ==========
Net income (loss) per share of
common stock (Note 4) $ (0.38) $ (0.56)
========== ==========
See accompanying Notes to Condensed Consolidated Financial Statements.
ZENITH ELECTRONICS CORPORATION
------------------------------
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
-------------------------------------------------
In Millions
March 29, December 31, March 30,
1997 1996 1996
-------- ------------ --------
ASSETS
- ------
Current assets:
Cash $ - $ - $ 79.6
Receivables, net of allowance for
doubtful accounts of $5.7, $6.2
and $3.4, respectively 186.6 208.3 151.1
Inventories (Note 5) 229.6 255.7 228.1
Other 9.5 11.1 9.1
-------- ------------ --------
Total current assets 425.7 475.1 467.9
Property, plant and equipment, net 298.9 278.3 183.6
Other 10.1 11.9 7.7
-------- ------------ --------
Total assets $ 734.7 $ 765.3 $ 659.2
======== ============ ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Short-term debt (Note 6) $ 34.4 $ 47.0 $ -
Current portion of long-term
debt (Note 6) 15.7 17.8 15.2
Accounts payable 243.6 234.1 70.1
Income taxes payable 1.1 1.3 1.2
Accrued expenses 150.1 150.4 124.6
-------- ------------ --------
Total current liabilities 444.9 450.6 211.1
Long-term debt (Note 6) 152.7 152.7 160.6
Stockholders' equity:
Preferred stock - - -
Common stock 66.5 66.6 64.3
Additional paid-in capital 459.8 459.4 444.5
Retained earnings (deficit) (387.5) (362.3) (219.6)
Treasury stock (1.7) (1.7) (1.7)
-------- ------------ --------
Total stockholders' equity 137.1 162.0 287.5
-------- ------------ --------
Total liabilities and
stockholders' equity $ 734.7 $ 765.3 $ 659.2
======== ============ ========
See accompanying Notes to Condensed Consolidated Financial Statements.
ZENITH ELECTRONICS CORPORATION
------------------------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
-----------------------------------------------------------
In Millions
Increase (Decrease) in Cash
Three Months Ended
---------------------------
March 29, March 30,
1997 1996
------------ -----------
Cash flows from operating activities:
Net income (loss) $ (25.2) $ (35.3)
Adjustments to reconcile net income (loss) to
net cash provided (used) by operations:
Depreciation 10.1 8.5
Employee retirement plan contribution
made in stock - 5.3
Gain on asset sales, net - (0.3)
Changes in assets and liabilities:
Current accounts 58.6 13.3
Other assets 1.8 0.4
----------- -----------
Net cash provided (used) by operating activities 45.3 (8.1)
----------- -----------
Cash flows from investing activities:
Capital additions (30.7) (7.8)
Proceeds from asset sales - 4.3
----------- -----------
Net cash used by investing activities (30.7) (3.5)
----------- -----------
Cash flows from financing activities:
Short-term borrowings, net (12.6) -
Proceeds from issuance of common stock, net 0.1 -
Principal payments on long-term debt (2.1) (2.0)
----------- -----------
Net cash used by financing activities (14.6) (2.0)
----------- -----------
Decrease in cash - (13.6)
Cash at beginning of period - 93.2
----------- -----------
Cash at end of period $ - $ 79.6
=========== ===========
Increase (decrease) in cash attributable to
changes in current accounts:
Receivables, net $ 21.7 $ 49.7
Income taxes, net (0.2) -
Inventories 26.1 (25.5)
Other assets 1.6 (1.4)
Accounts payable and accrued expenses 9.4 (9.5)
----------- -----------
Net change in current accounts $ 58.6 $ 13.3
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid (refunded) during the period for:
Interest $ 4.3 $ 0.9
Income taxes - 0.1
See accompanying Notes to Condensed Consolidated Financial Statements.
Zenith Electronics Corporation
-------------------------------
Notes to Condensed Consolidated Financial Statements (Unaudited)
------------------------------------------------------------------
Note One - Basis of presentation
The accompanying unaudited condensed consolidated financial statements
("financial statements") have been prepared in accordance with generally
accepted accounting principles and pursuant to the rules and regulations
of the Securities and Exchange Commission. The accuracy of the
amounts in the financial statements is in some respects dependent upon
facts that will exist, and procedures that will be performed by the
company, later in the year. In the opinion of management, all adjustments
necessary for a fair presentation of the financial statements have been
included and are of a normal, recurring nature. For further information,
refer to the consolidated financial statements and notes thereto included in
the company's Form 10-K for the year ended December 31, 1996.
Note Two - Subsequent Event
On April 2, 1997, the company obtained new financing commitments
which significantly enhance the company's liquidity and are consistent
with its strategy to improve its operating and financial performance.
One of the commitments is a three year $110 million credit
facility composed of a $45 million term loan and a $65 million revolving
credit line. This facility replaces the company's previous credit agreement
and term loan with General Electric Capital Corporation. The term loan
requires scheduled quarterly principal payments of $2 million with a
balloon payment of $20 million at maturity in the year 2000. Under the
revolving credit line, the maximum commitment of funds available for
borrowing is limited by a defined borrowing base formula related to
eligible inventory. The facility is secured by the company's inventory,
trademarks and tuner patent royalties, along with the related patents and
licenses. Interest on borrowings is based on market rates. The facility
contains certain covenants that must be met in order to remain in
compliance with the facility, including financial covenants that must be
maintained as of the end of each fiscal quarter.
A second commitment is a three year trade receivables
securitization which is provided through a Citicorp commercial paper
conduit. The availability of funds under this receivable securitization is
subject to receivables eligibility based on such items as agings,
concentrations, dilution and loss history, subject to a maximum amount
that is currently $140 million, but can be increased to $200 million,
assuming additional bank commitments. LG Electronics Inc. ("LGE")
provides support for this facility through a performance undertaking and a
letter of credit.
Also, on April 2, 1997, the company entered into an $87 million
sale-leaseback transaction whereby the company sold and leased back new
and existing manufacturing equipment in its Melrose Park, Ill., plant and
in its Reynosa and Juarez, Mexico, facilities. The term of the lease is 12
1/2 years and annual payments under the lease will average approximately
$10 million. The company's payment obligations, along with certain
other items under the lease agreement, are fully guaranteed by LGE.
Additionally on April 2, 1997, the company and LGE entered into
an arrangement whereby certain of the company's accounts payables
arising in the ordinary course of business with LGE will be extended for
certain periods of time with interest being charged on the amounts
extended.
In return for LGE providing support for the securitizations and
the sale-leaseback transaction and the extended-term payables
arrangement, the company has granted options to LGE to purchase
approximately 3.9 million common shares of the company at an exercise
price of $0.01 per share, excercisable over time. The accounting for these
stock options will be based upon their fair value with that fair value being
amortized straight-line over the term of the associated commitments.
Upon the closing of the new financing agreements described
above, the company received $142 million of which $77 million was used
to pay off outstanding balances under the credit agreement and term loan
agreement with General Electric Capital Corporation. The remainder of
the funds was used to pay certain vendors, to pay fees related to the new
financing agreements and for general corporate purposes.
Note Three - Other operating expense (income)
Royalty income accrued in relation to tuning system patents was $6.7
million and $4.6 million for the three months ended March 29, 1997 and
March 30, 1996, respectively. These amounts are included in Other
Operating Expense (Income).
Note Four - Earnings per share
Primary earnings per share are based upon the weighted average number
of shares outstanding and common stock equivalents, if dilutive. Fully
diluted earnings per share, assuming conversion of the 6-1/4% convertible
subordinated debentures and the 8.5% convertible senior subordinated
debentures, are not presented because the effect of the assumed conversion
is antidilutive. The weighted average number of shares was 66.5 million
and 63.6 million for the three months ended March 29, 1997 and March
30,1996, respectively.
Note Five - Inventories
Inventories consisted of the following (in millions):
March 29, December 31, March 30,
1997 1996 1996
---------- ------------ ----------
Raw materials and work-in-process $ 154.8 $ 152.1 $ 146.5
Finished goods 74.8 103.6 81.6
---------- ------------ ----------
Total inventories $ 229.6 $ 255.7 $ 228.1
========== ============ ==========
Note Six - Short-term debt and credit arrangements; Long-term debt
As described in Note Two, subsequent to March 29, 1997, the company
entered into a new revolving credit agreement and a new term loan
agreement and paid off the balance outstanding under the credit agreement
and term loan agreement with General Electric Capital Corporation.
The company's credit agreement and term loan agreement with
General Electric Capital Corporation contained restrictive financial
covenants that needed to be maintained as of the end of each fiscal
quarter, including a liabilities to net worth ratio and a minimum net worth
amount. As of March 29, 1997, the ratio of liabilities to net worth was
required to be not greater than 6.00 to 1.0 and was actually 4.72 to 1.0,
and net worth was required to be equal to or greater than $100.0 million
and was actually $126.7 million.(as defined in the agreements).
Note Seven - Related party
As of March 29, 1997, LG Electronics, Inc., and LG Semicon Company,
Ltd., corporations organized under the laws of the Republic of Korea
("LGE"), owned 36,569,000 shares of common stock of the company
which represents 55 percent of the outstanding common stock. As
described in Note Two, the company has granted options to LG
Electronics Inc. to purchase approximately 3.9 million common shares of
the company at an exercise price of $0.01 per share, excercisable over
time.
The following represent the most significant transactions between
the company and LGE during the three months ended March 29, 1997 and
March 30, 1996, respectively, all of which, in the opinion of management,
were made at an arms-length basis:
Product purchases: In the ordinary course of business, the
company purchases VCRs, TV-VCR combinations and components from
LGE and its affiliates. The company purchased $11.1 million and $11.4
million of these items during the three months ended March 29, 1997 and
March 30, 1996, respectively. Sales of products purchased from LGE
and its affiliates contributed $25.3 million and $15.8 million to sales
during the three months ended March 29, 1997 and March 30, 1996,
respectively.
Product and other sales: The company sells CRT tubes and
yokes and other manufactured subassemblies to LGE and its affiliates at
prices that equate to amounts charged by the company to its major
customers. Sales by the company to LGE and its affiliates were $3.7
million and $3.8 million during the three months ended March 29, 1997
and March 30, 1996, respectively.
As of March 29, 1997 and March 30, 1996, receivables included
$4.3 million and $5.5 million, respectively, from LGE and its affiliates
and accounts payable included $122.3 million and $4.7 million,
respectively, to LGE and its affiliates. LGE has agreed to extended
payment terms for certain of the accounts payable to them. The amount
of extended payables was $111.6 million and $4.7 million as of March 29,
1997 and March 30, 1996, respectively. The company is charged interest
on the extended period at negotiated rates.
LG Electronics Inc. is providing support for certain financing
activities of the company that were entered into subsequent to March 29,
1997. See Note Two for further discussion.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
The company reported a first-quarter 1997 net loss of $25.2 million, or 38
cents per share, compared with a net loss of $35.3 million, or 56 cents per
share, in the first quarter of 1996. Total first-quarter sales increased 9
percent to $259.1 million in 1997 from $237.4 million in 1996.
The improved results reflect the combined effect of higher sales and
lower costs resulting from the turnaround plan being implemented by the
company's new management team. Cost controls offset the effect of start-
up problems associated with new color picture tube production equipment
at the company's Melrose Park, Ill., plant.
Consumer electronics revenues increased in the first quarter of 1997
versus the same period last year. The company's color television sales to
U.S. dealers were up sharply in the quarter, despite the picture tube
availability problems. The Zenith brand increased its domestic color TV
market share in the quarter, particularly in key higher-margin large-screen
categories. The company's sales of VCRs and color picture tubes sold to
other manufacturers also increased.
Network Systems revenues were down significantly in the quarter
compared with a year ago because of slowing industry-wide demand for
analog set-top boxes as cable operators prepare to launch digital
networks.
Selling, general and administrative expenses were $28.1 million in the
first quarter of 1997, compared with $34.8 million in the previous year.
The 19 percent decrease was due mainly to the 1996 amounts being driven
up by co-op advertising expenses and outside professional fees.
Results for the first quarter include $6.7 million of accrued royalty
revenues from tuning system licenses. These revenues were $4.6 million
in the first quarter of 1996.
In 1997, the company is focusing on higher-margin home theater TV
systems, and expects to launch a multimillion-dollar national advertising
campaign, the company's first in five years. In addition, the company is
scheduled to begin initial shipments of new digital set-top boxes to
telecommunications companies under the multi-year, $1 billion Americast
contract signed in August 1996.
In recent years, the company has announced product initiatives based
on its set-top box and cable modem technologies. The company has not
yet recognized any revenues from these recently announced product
initiatives. Whether the company will achieve significant revenues or
profits from these product initiatives in the near term or ever will depend
largely on market acceptance of the products and the existence of
competitive products. The company expects from time to time in the
future to announce other product initiatives. The ultimate contribution of
any such initiatives to the financial performance of the company will
similarly depend on such factors.
Liquidity and Capital Resources
During the quarter ended March 29, 1997, $45 million of cash was
generated by operating activities principally as a result of changes in
current accounts. The change in current accounts was primarily
composed of a $26 million decrease in inventories, a $21 million decrease
in receivables and a $9 million increase in accounts payable and accrued
expenses.
During the quarter ended March 29, 1997, investing activities used
$31 million of cash for capital expenditures. For the same period of 1996,
capital expenditures were $8 million. The company anticipates making
significant capital expenditures during the remainder of 1997. The
increased amounts of capital expenditures, both in the first quarter and in
the remainder of the year, relate to planned projects primarily in the color
picture tube area, which include new automated production processes and
the addition of new production lines for computer display tubes.
During the quarter ended March 29, 1997, financing activities used
$15 of million of cash. This consisted of $13 million of reduced
borrowings under the company's credit agreement with General Electric
Capital Corporation and $2 million of cash used to pay maturities of the
term loan agreement with General Electric Capital Corporation.
As of March 29, 1997, the company had $313 million of interest-
bearing obligations which consisted of: (i) $115 million of 6-1/4 percent
Convertible Subordinated Debentures due 2011 (the current portion of
which is $6 million), (ii) $24 million aggregate principal amount of 8.5
percent Senior Subordinated Convertible Debentures due 2000 and 2001,
(iii) a $29 million Term Loan with General Electric Capital Corporation
("GE") (the current portion of which is $10 million), (iv) $34 million
currently payable under a Credit Agreement with GE, and (v) $112
million of extended-term payables with LG Electronics Inc. ("LGE").
On April 2, 1997, the company obtained new financing commitments
which significantly enhance the company's liquidity and are consistent
with its strategy to improve its operating and financial performance.
One of the commitments is a three year $110 million credit facility
composed of a $45 million term loan and a $65 million revolving credit
line. This facility replaces the company's previous credit agreement and
term loan with General Electric Capital Corporation. The term loan
requires scheduled quarterly principal payments of $2 million with a
balloon payment of $20 million at maturity in the year 2000. Under the
revolving credit line, the maximum commitment of funds available for
borrowing is limited by a defined borrowing base formula related to
eligible inventory. The facility is secured by the company's inventory,
trademarks and tuner patent royalties, along with the related patents and
licenses. Interest on borrowings is based on market rates. The facility
contains certain covenants that must be met in order to remain in
compliance with the facility, including financial covenants that must be
maintained as of the end of each fiscal quarter.
A second commitment is a three year trade receivables securitization
which is provided through a Citicorp commercial paper conduit. The
availability of funds under this receivable securitization is subject to
receivables eligibility based on such items as agings, concentrations,
dilution and loss history, subject to a maximum amount that is currently
$140 million, but can be increased to $200 million, assuming additional
bank commitments. LG Electronics Inc. ("LGE") provides support for
this facility through a performance undertaking and a letter of credit.
Also, on April 2, 1997, the company entered into an $87 million sale-
leaseback transaction whereby the company sold and leased back new and
existing manufacturing equipment in its Melrose Park, Ill., plant and in its
Reynosa and Juarez, Mexico, facilities. The term of the lease is 12 1/2
years and annual payments under the lease will average approximately
$10 million. The company's payment obligations, along with certain
other items under the lease agreement, are fully guaranteed by LGE.
Additionally on April 2, 1997, the company and LGE entered into an
arrangement whereby certain of the company's accounts payables arising
in the ordinary course of business with LGE will be extended for certain
periods of time with interest being charged on the amounts extended.
In return for LGE providing support for the securitizations and the
sale-leaseback transaction and the extended-term payables arrangement,
the company has granted options to LGE to purchase approximately 3.9
million common shares of the company at an exercise price of $0.01 per
share, excercisable over time. The accounting for these stock options will
be based upon their fair value with that fair value being amortized
straight-line over the term of the associated commitments.
Upon the closing of the new financing agreements described above,
the company received $142 million of which $77 million was used to pay
off outstanding balances under the credit agreement and term loan
agreement with General Electric Capital Corporation. The remainder of
the funds was used to pay certain vendors, to pay fees related to the new
financing agreements and for general corporate purposes.
As part of this refinancing, and to provide for contingencies, the
company has agreed to raise an additional $33 million by the end of the
third quarter of 1997 through additional sale-leaseback transactions.
There can be no assurance that the company will be able to enter into such
sale-leaseback transactions, or that the company will not experience
liquidity problems in the future because of adverse market conditions or
other unfavorable events. However, the company believes that its new
financing commitments and the extended-term payables available from
LGE, together with its fulfillment of the additional sale-leaseback
obligations, will be adequate to meet its seasonal working capital, capital
expenditure and other requirements during 1997.
Recently Issued Accounting Standards
The Financial Accounting Standards Board issued Statement No. 128,
"Earnings per Share" in February 1997. The new accounting standard
establishes standards for computing and presenting earnings per share
("EPS") and applies to entities with publicly held common stock or
potential common stock. The statement simplifies the standards for
computing EPS and makes them comparable to international EPS
standards. It replaces the presentation of primary EPS with a presentation
of basic EPS. The statement is effective for financial statements issued
for periods ending after December 15, 1997, including interim periods;
earlier application is not permitted. The statement requires restatement of
all prior-period EPS data presented.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
During the three months ended March 29, 1997, no reportable events
or material developments occurred regarding the legal proceedings of the
company that would need to be reported.
Item 2. Changes in Securities
(b) As discussed in Note Two to the Condensed Consolidated
Financial Statements, the company has obtained new financing
commitments. One of these commitments, the three year credit facility,
prohibits dividend payments on the company's common stock and
preferred stock, if issued, and prohibits the redemption or repurchase of
capital stock.
Item 6. Exhibits and Reports on Form 8-K
(4a) Indenture dated as of April 1, 1986 between Zenith Electronics
Corporation and The First National Bank of Boston as
Trustee with respect to the 6-1/4% Convertible Subordinated Debentures
due 2011 (incorporated by reference to Exhibit 1 of the company's
Quarterly Report on Form 10-Q for the quarter ended March 30, 1991)
(4b) Debenture Purchase Agreement dated as of November 19, 1993
with the institutional investors named therein (incorporated by
reference to Exhibit 4(a) of the company's Current Report on Form 8-K
dated November 19, 1993)
(4c) Amendment No. 1 dated November 24, 1993 to the Debenture
Purchase Agreement dated as of November 19, 1993 with the
institutional investor named therein (incorporated by reference to Exhibit
4(a) of the company's Current Report on Form 8-K dated November
24, 1993)
(4d) Amendment No. 2 dated as of January 11, 1994 to the Debenture
Purchase Agreement dated as of November 19, 1993 (incorporated by
reference to Exhibit 4(c) of the company's Current Report on Form
8-K dated January 11, 1994)
(4e) Debenture Purchase Agreement dated as of January 11, 1994
with the institutional investor named therein (incorporated by
reference to Exhibit 4(a) of the company's Current Report on Form 8-K
dated January 11, 1994)
(4f) Credit Agreement dated as of March 31, 1997, among Zenith Electronics
Corporation, Citibank N.A., Citicorp North America, Inc. and the other lenders
named
(10a) Receivables Purchase Agreement dated as of March 31, 1997, among Zenith
Electronics Corporation and Zenith Finance Corporation
(10b) Receivables Purchase Agreement dated as of March 31, 1997, among Zenith
Microcircuits Corporation and Zenith Finance Corporation
(10c) Zenith Trade Receivable Master Trust Pooling and Service Agreement dated
as of March 31, 1997. among Zenith Finance Corporation, Zenith Electronics
Corporation and Bankers Trust Company
(10d) Lease Agreement dated as of March 26, 1997, by and among Fleet National
Bank and Zenith Electronics Corporation
(10e) Lease Agreement dated as of March 26, 1997, by and among Fleet National
Bank and Zenith Electronics Corporation of Texas
(10f) Participation Agreement dated as of March 26, 1997, by and among Zenith
Electronics Corporation, General Foods Credit Corporation, Fleet National Bank
and the other lenders named, and First Security Bank, National Association
(10g) Participation Agreement dated as of March 26, 1997, by and among Zenith
Electronics Corporation of Texas, General Foods Credit Corporation, Fleet
National Bank and other lenders named, and First Security Bank, National
Association
(10h) Financial Support Agreement as of March 31, 1997, between LG Electronics
Inc. and Zenith Electronics Corporation
(27) Financial Data Schedule for the three months ended March 29, 1997
(b) Reports on Form 8-K:
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ZENITH ELECTRONICS CORPORATION
(Registrant)
Date: May 13, 1997
By: /s/ Roger A. Cregg
- ------------------------
Roger A. Cregg
Executive Vice President -
Chief Financial Officer
(Principal Financial Officer)
INDEX TO EXHIBITS
Exhibits:
(4f) Credit Agreement dated as of March 31, 1997, among Zenith Electronics
Corporation, Citibank N.A., Citicorp North America, Inc. and the other
lenders named
(10a) Receivables Purchase Agreement dated as of March 31, 1997, among Zenith
Electronics Corporation and Zenith Finance Corporation
(10b) Receivables Purchase Agreement dated as of March 31, 1997, among Zenith
Microcircuits Corporation and Zenith Finance Corporation
(10c) Zenith Trade Receivable Master Trust Pooling and Servicing Agreement
dated as of March 31, 1997, among Zenith Finance Corporation, Zenith
Electronics Corporation and Bankers Trust Company
(10d) Lease Agreement dated as of March 26, 1997, by and among Fleet National
Bank and Zenith Electronics Corporation
(10e) Lease Agreement dated as of March 26, 1997, by and among Fleet National
Bank and Zenith Electronics Corporation of Texas
(10f) Participation Agreement dated as of March 26, 1997, by and among Zenith
Electronics Corporation, General Foods Credit Corporation, Fleet National
Bank and other lenders named, and First Security Bank, National Association
(10g) Participation Agreement dated as of March 26, 1997, by and among Zenith
Electronics Corporation of Texas, General Foods Credit Corporation, Fleet
National Bank and the other lenders named, and First Security Bank, National
Association
(10h) Financial Support Agreement as of March 31, 1997, between LG Electronics
Inc. and Zenith Electronics Corporation
(27) Financial Data Schedule for the three months ended March 29, 1997
CREDIT AGREEMENT
among
ZENITH ELECTRONICS CORPORATION, as Borrower,
THE LENDERS SIGNATORY HERETO,
CITIBANK, N.A. as Issuing Bank
and
CITICORP NORTH AMERICA, INC., as Agent for the
Issuing Bank and the Lenders
March 31, 1997
CREDIT AGREEMENT
among
ZENITH ELECTRONICS CORPORATION, as Borrower,
THE LENDERS SIGNATORY HERETO,
CITIBANK, N.A. as Issuing Bank
and
CITICORP NORTH AMERICA, INC., As Agent
For the Foregoing Lenders
Index
Page
ARTICLE 1 DEFINITIONS 1
ARTICLE 2 THE LOANS AND THE LETTERS OF CREDIT 28
Section 2.1 Extension of Credit 28
Section 2.2 Manner of Borrowing and Disbursement of Loans. 30
Section 2.3 Interest 35
Section 2.4 Fees 36
Section 2.5 Prepayment/Reduction of Commitment 37
Section 2.6 Repayment 38
Section 2.7 Notes; Loan Accounts 39
Section 2.8 Manner of Payment 40
Section 2.9 Reimbursement 42
Section 2.10 Pro Rata Treatment 42
Section 2.11 Application of Payments 43
Section 2.12 Use of Proceeds 44
Section 2.13 All Obligations to Constitute One Obligation 45
Section 2.14 Maximum Rate of Interest 45
Section 2.15 Letters of Credit 45
ARTICLE 3 CONDITIONS PRECEDENT 50
Section 3.1 Conditions Precedent to Initial Advance 51
Section 3.2 Conditions Precedent to Each Advance 55
Section 3.3 Conditions Precedent to Each Letter of Credit. 56
ARTICLE 4 REPRESENTATIONS AND WARRANTIES 57
Section 4.1 General Representations and Warranties 57
Section 4.2 Representations and Warranties Relating to Inventory 67
Section 4.3 Survival of Representations and Warranties, etc 67
ARTICLE 5 GENERAL COVENANTS 67
Section 5.1 Preservation of Existence and Similar Matters. 67
Section 5.2 Compliance with Applicable Law 68
Section 5.3 Maintenance of Properties 68
Section 5.4 Accounting Methods and Financial Records 68
Section 5.5 Insurance 68
Section 5.6 Payment of Taxes and Claims 69
Section 5.7 Visits and Inspections 69
Section 5.8 Conduct of Business 70
Section 5.9 ERISA 70
Section 5.10 Lien Perfection 70
Section 5.11 Location of Collateral; Consignment of Inventory 70
Section 5.12 Protection of Collateral 71
Section 5.13 Assignments, Records and Schedules of Accounts 72
Section 5.14 Administration of Accounts 72
Section 5.15 The Blocked Account 73
Section 5.16 Further Assurances 75
Section 5.17 Broker's Claims 75
Section 5.18 Indemnity 75
Section 5.19 Environmental Matters 76
Section 5.20 Lease Transactions 76
Section 5.21 Warehouse Arrangement 76
ARTICLE 6 INFORMATION COVENANTS 77
Section 6.1 Monthly Financial Statements and Information 77
Section 6.2 Annual Financial Statements and Information;
Certificate of No Default 77
Section 6.3 Performance Certificates 78
Section 6.4 Access to Accountants 78
Section 6.5 Additional Reports 79
Section 6.6 Notice of Litigation and Other Matters 80
ARTICLE 7 NEGATIVE COVENANTS 82
Section 7.1 Indebtedness 82
Section 7.2 Guaranties 83
Section 7.3 Liens 83
Section 7.4 Restricted Payments and Purchases 83
Section 7.5 Investments 83
Section 7.6 Affiliate Transactions 84
Section 7.7 Liquidation; Change in Ownership, Name, or
Year; Disposition or Acquisition of Assets; Etc 85
Section 7.8 Minimum EBITDA 87
Section 7.9 Current Ratio 87
Section 7.10 Fixed Charge Coverage Ratio 87
Section 7.11 Capital Expenditures 88
Section 7.12 Interest Coverage Ratio 88
Section 7.13 Funded Debt/Total Capitalization Ratio 89
Section 7.14 Tuning Patent Royalties; LGE Payable 89
Section 7.15 Sales and Leasebacks 90
Section 7.16 Amendment and Waiver 90
Section 7.17 ERISA Liability 90
Section 7.18 Payment Instructions 90
Section 7.19 Prepayments 90
Section 7.20 Negative Pledge 91
ARTICLE 8 DEFAULT 91
Section 8.1 Events of Default 91
Section 8.2 Remedies 95
ARTICLE 9 THE AGENT 97
Section 9.1 Appointment and Authorization 97
Section 9.2 Interest Holders 97
Section 9.3 Consultation with Counsel 98
Section 9.4 Documents 98
Section 9.5 Agent and Affiliates 98
Section 9.6 Responsibility of the Agent 98
Section 9.7 Action by Agent 98
Section 9.8 Notice of Default or Event of Default 99
Section 9.9 Responsibility Disclaimed 99
Section 9.10 Indemnification 100
Section 9.11 Credit Decision 100
Section 9.12 Successor Agent 100
Section 9.13 Agent May File Proofs of Claim 101
Section 9.14 Collateral 101
Section 9.15 Release of Collateral 102
Section 9.16 Securitization Documents 102
ARTICLE 10 MISCELLANEOUS 102
Section 10.1 Notices 102
Section 10.2 Expenses 104
Section 10.3 Waivers 105
Section 10.4 Set-Off 105
Section 10.5 Assignment 106
Section 10.6 Counterparts 108
Section 10.7 Governing Law 108
Section 10.8 Severability 108
Section 10.9 Headings 108
Section 10.10 Source of Funds 108
Section 10.11 Entire Agreement 109
Section 10.12 Amendments and Waivers 109
Section 10.13 Other Relationships 110
Section 10.14 Pronouns 110
Section 10.15 Disclosure 110
Section 10.16 Replacement of Lender 110
ARTICLE 11 YIELD PROTECTION 111
Section 11.1 Eurodollar Rate Basis Determination 111
Section 11.2 Illegality 111
Section 11.3 Increased Costs 112
Section 11.4 Effect On Other Advances 113
Section 11.5 Capital Adequacy 113
ARTICLE 12 JURISDICTION, VENUE ANDWAIVER OF JURY TRIAL 114
Section 12.1 Jurisdiction and Service of Process 114
Section 12.2 Consent to Venue 115
Section 12.3 Waiver of Jury Trial 115
EXHIBITS
Exhibit A - Form of Assignment and Assumption Agreement
Exhibit B - Form of Blocked Account Letter
Exhibit C - Form of Borrowing Base Certificate
Exhibit D - Form of Request for Advance
Exhibit E - Form of Request for Issuance of Letter
of Credit Exhibit F - Form of Revolving Loan Note
Exhibit G - Copy of Security Agreement
Exhibit H - Form of Term Loan Notes
Exhibit I - Form of Loan Certificate
Exhibit J - Form of Distribution Instructions Letter
Exhibit K - Form of Performance Certificate
Exhibit L - Form of Subsidiary Guaranty
Exhibit M - Form of Subsidiary Security Agreement
SCHEDULES
Schedule 1 - Commitment Ratios
Schedule 2 - Salomon Lease Transaction
Schedule 3 - Liens
Schedule 4.1(c)-1 - Subsidiaries
Schedule 4.1(c)-2 - Partnerships/Joint Ventures
Schedule 4.1(d) - Outstanding Capital Stock Ownership
Schedule 4.1(h) - Material Contracts; Collective Bargaining
Schedule 4.1(l) - Investments/Guaranties as of the Agreement Date
Schedule 4.1(m) - Litigation
Schedule 4.1(o) - Intellectual Property
Schedule 4.1(u) - Insurance
Schedule 4.1(w)-1 - Leased Real Property
Schedule 4.1(w)-2 - Owned Real Property
Schedule 4.1(x) - Environmental Matters
Schedule 5.11 - Location of Collateral
Schedule 5.15 - Bank Accounts
Schedule 7.1 - Existing Letters of Credit
Schedule 7.6 - Affiliate Transactions
CREDIT AGREEMENT
among
ZENITH ELECTRONICS CORPORATION, as Borrower,
THE LENDERS SIGNATORY HERETO,
Citibank, N.A. as Issuing Bank
and
CITICORP NORTH AMERICA, INC., As Agent
For the Foregoing Lenders, dated as
of the 31st day of March, 1997:
W I T N E S S E T H:
WHEREAS, the Borrower has requested that the
Lenders (a) finance the working capital
requirements of the Borrower and (b) provide funds
to the Borrower to repay its outstanding
indebtedness, for capital expenditures and for
other corporate purposes; and
WHEREAS, the Lenders are willing to make
funds available for such purposes upon the terms
and subject to the conditions set forth herein;
and
WHEREAS, the Borrower has requested that the
Issuing Bank commit to provide the Borrower with
letters of credit for general corporate purposes,
and the Issuing Bank is willing to issue letters
of credit upon the terms and subject to the
conditions contained herein; and
NOW, THEREFORE, in consideration of the
premises and the covenants and agreements
contained herein, the parties hereto agree as
follows:
ARTICLE I.
DEFINITIONS
For the purposes of this Agreement:
"Account Debtor" shall mean any Person who is
obligated under an Account.
"Accounts" shall mean all accounts, contract
rights, chattel paper, instruments, drafts,
acceptances and documents of the Borrower or any
of the Borrower's Subsidiaries arising from the
sale or lease of goods or the provision of
services or the license of Intellectual Property
by the Borrower or any of the Borrower's
Subsidiaries in the ordinary course of its
business, whether secured or unsecured, and
whether now existing or hereafter created or
arising, and "Account" shall mean any one of the
foregoing; provided, however, "Account" shall not
include any of the foregoing that are, now or in
the future, sold, transferred or otherwise
assigned to Finance Corp. pursuant to any
Receivables Purchase Agreement, unless and until
such accounts, chattel paper, instruments, drafts,
acceptances or documents are reassigned or
reconveyed to the Borrower.
"Advance" or "Advances" shall mean amounts of
the Loans advanced by the Lenders to the Borrower
pursuant to Section 2.2 hereof on the occasion of
any borrowing.
"Affiliate" shall mean any Person directly or
indirectly controlling, controlled by, or under
common control with the Borrower, and any Person
who is a director, officer, or partner of the
Borrower. For purposes of this definition,
"control", when used with respect to any Person,
includes, without limitation, the direct or
indirect beneficial ownership of ten percent (10%)
or more of the outstanding voting securities or
voting equity of such Person or the power to
direct or cause the direction of the management
and policies of such Person whether by contract or
otherwise.
"Agent" shall mean Citicorp North America,
Inc., a Delaware corporation, acting as Agent for
the Lenders and the Issuing Banks, and any
successor agent appointed pursuant to
Section 9.12.
"Agent's Office" shall mean the office of the
Agent located at 399 Park Avenue, 6th Floor, Zone
4, New York, NY 10043, or such other office as may
be designated pursuant to the provisions of
Section 10.1 of this Agreement.
"Aggregate Revolving Credit Obligations"
shall mean, as of any particular time, the sum of
(a) the aggregate principal amount of all
Revolving Loans then outstanding, plus (b) the
aggregate amount of all Letter of Credit
Obligations then outstanding, plus (c) the
aggregate amount of all Swing Loans then
outstanding.
"Agreement" shall mean this Agreement.
"Agreement Date" shall mean the date as of
which this Agreement is dated.
"Applicable Law" shall mean, in respect of
any Person, all provisions of constitutions,
statutes, rules, regulations, and orders of
governmental bodies or regulatory agencies
applicable to such Person, and all orders and
decrees of all courts and
arbitrators in proceedings or actions to which the
Person in question is a party or by which it is
bound.
"Assignment and Assumption Agreement" shall
mean that certain form of Assignment and
Assumption Agreement attached hereto as Exhibit A,
pursuant to which each Lender may, as further
provided in Section 10.5 hereof, sell or
participate a portion of its Loans or Commitment.
"Assignment of Notes" shall mean that certain
Assignment of Notes of even date herewith,
executed by the Borrower and microcircuits,
pursuant to which the Borrower and microcircuits
each pledge to the Agent, for its benefit and the
benefit of the Issuing Banks and the Lenders, all
of their respective right, title and interest in
and to the Finance Corp. Subordinated Notes and
certain other promissory notes held by the
Borrower, as the same may be amended or modified
from time to time.
"Authorized Signatory" shall mean such senior
personnel of the Borrower as may be duly
authorized and designated in writing by the
Borrower to execute documents, agreements, and
instruments on behalf of the Borrower.
"Available Letter of Credit Amount" shall mean,
as of any particular time, an amount equal to the
lesser of (a) $15,000,000, and (b) the Available
Revolving Loan Commitment.
"Available Revolving Loan Commitment" shall
mean, as of any particular time, (a) the amount of
the Revolving Loan Commitment minus (b) the
Aggregate Revolving Credit Obligations then
outstanding.
"Bankruptcy Code" shall mean the United
States Bankruptcy Code (11 U.S.C. Section 101 et
seq.), as now or hereafter amended, and any
successor statute.
"Base Rate" shall mean, at any time, a
fluctuating and floating rate per annum equal to
the higher of:
(i) the highest rate of interest
announced publicly by Citibank in New York,
New York from time to time, as Citibank's
base rate; and
(ii) the sum (adjusted to the
nearest one-quarter of one percent (0.25%)
or, if there is no nearest one-quarter of one
percent (0.25%), to the next higher
one-quarter of one percent (0.25%) of (A)
one-half of one percent (0.50%) per annum
plus (B) the rate per annum obtained by
dividing (I) the latest three-week moving
average of secondary market morning offering
rates in the United States for three-month
certificates of deposit of major United
States money market banks, such three-week
moving average (adjusted to the basis of a
year of 360 days) being determined weekly on
each Monday (or, if such day is not a
Business Day, on the next succeeding Business
Day) for the three-week period ending on the
previous Friday (or, if such day is not a
Business Day, on the next preceding Business
Day) by Citibank on the basis of such rates
reported by certificate of deposit dealers
to, and published by, the Federal Reserve
Bank of New York, or, if such publication
shall be suspended or terminated, on the
basis of quotations for such rates received
by Citibank from three (3) New York
certificate of deposit dealers of recognized
standing selected by Citibank, by (II) a
percentage equal to one hundred percent
(100%) minus the average of the daily
percentages specified during such three-week
period by the Federal Reserve Board (or any
successor) for determining the maximum
reserve requirement (including, but not
limited to, any emergency, supplemental or
other marginal reserve requirement) for
Citibank in respect of liabilities which
consist of or which include (among other
liabilities) three-month nonpersonal U.S.
Dollar time deposits in the United States
Plus (C) the average during such three-week
period of the daily net annual assessment
rates estimated by Citibank for determining
the then current annual assessment payable by
Citibank to the Federal Deposit Insurance
Corporation (or any successor) for insuring
deposits of Citibank in the United States;
and
(iii) for any day one-half of
one percent (1/2%) per annum above 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 which is
a Business Day, the average of the quotation
for such day on such transactions received by
Citibank from three Federal funds brokers of
recognized standing selected by it;
but in no event higher than the maximum rate
permitted by Applicable Law. Each change in the
Base Rate shall take effect simultaneously with
the corresponding change in the applicable rate
described in clause (i), (ii) or (iii).
"Base Rate Advance" shall mean an Advance
which the Borrower requests to be made as a Base
Rate Advance or which is reborrowed as a Base Rate
Advance, in accordance with the provisions of
Section 2.2 hereof.
"Blocked Account" shall have the meaning set
forth in Section 5.15 hereof.
"Blocked Account Letter" shall mean any
letter agreement executed by a Blocked Account
depository bank and the Agent and acknowledged and
agreed to by the Borrower, in the form of Exhibit
B hereto, as such letter agreements may be
amended, supplemented or otherwise modified from
time to time.
"Borrower" shall mean Zenith Electronics
Corporation, a Delaware corporation.
"Borrowing Base" shall mean, at any
particular time, the sum of:
(b) up to 60% of the Value of Eligible
Finished Goods VCR Inventory; plus
(c) up to 50% of the Value of Eligible
Finished Goods TV and Other Inventory; plus
(d) up to 35% of the Value of Eligible
Picture Tube Inventory; minus
(e) the amount of reserves which the
Agent shall have established, in its
reasonable discretion, for such purposes as
the Agent shall have deemed necessary,
including, without limitation, for (i) price
adjustments and damages; (ii) obsolescence of
Inventory; (iii) special order goods and
deferred shipment sales; (iv) accrued but
unpaid ad valorem and personal property tax
liability; and (v) market value declines.
"Borrowing Base Certificate" shall mean a
certificate of an Authorized Signatory of the
Borrower substantially in the form of Exhibit C
attached hereto.
"Borrowing Base Deficiencies" shall mean any
condition wherein the Aggregate Revolving Credit
Obligations exceed the Borrowing Base as set forth
on the most recent Borrowing Base Certificate
delivered to the Agent and the Lenders or as
otherwise determined by the Agent.
"Business Day" shall mean any day excluding
Saturday, Sunday and any day which is a legal
holiday under the laws of the State of Illinois or
the State of New York or is a day on which banking
institutions located in either of such states are
closed; provided, however, that when used with
reference to a Eurodollar Advance (including the
making, continuing, prepaying or repaying of any
Eurodollar Advance), the term "Business Day" shall
also exclude any day in which banks are not open
for dealings in deposits of United States dollars
on the London interbank market.
"Capital Expenditures" shall mean, for any
period, on a consolidated basis for the Borrower
and the Borrower's Subsidiaries, the aggregate of
all expenditures made by the Borrower or any of
the Borrower's Subsidiaries during such period
that, in conformity with GAAP, are required to be
included in or reflected on the consolidated
balance sheet as a capital asset of the Borrower
or any of the Borrower's Subsidiaries, including
Capitalized Lease Obligations.
"Capital Stock" shall mean, as applied to any
Person, any capital stock of such Person,
regardless of class or designation, and all
warrants, options, purchase rights, conversion or
exchange rights, voting rights, calls or claims of
any character with respect thereto.
"Capitalized Lease Obligation" shall mean
that portion of any obligation of a Person as
lessee under a lease which at the time would be
required to be capitalized on the balance sheet of
such lessee in accordance with GAAP.
"Change of Control" shall mean any change in
the ownership of the Borrower's Capital Stock that
results in less than a majority of the Borrower's
outstanding Voting Stock being owned beneficially
by the LGE Group.
"Citibank" shall mean Citibank, N.A., a
national banking association.
"Cleanup Period" shall have the meaning set
forth in Section 2.6(c).
"Clearing Account" shall mean Account
No. 4072-6121 (or such other account number
established by the Agent for purposes of
Section 5.15 hereof) maintained by the Agent at
Citibank, N.A. pursuant to Section 5.15 of this
Agreement, and over which the Agent has the sole
and exclusive access and control for withdrawal
purposes pursuant to Section 5.15 hereof.
"Code" shall mean the Internal Revenue Code
of 1986, as amended from time to time.
"Collateral" shall mean all property pledged
as collateral security for the Obligations
pursuant to the Security Documents or otherwise,
and all other property of the Borrower or any
Material Subsidiary that is now or hereafter in
the possession or control of the Agent, the
Issuing Banks or any Lender or on which the Agent,
the Issuing Banks or any Lender has been granted a
Lien.
"Commercial Letter of Credit" shall mean a
documentary letter of credit issued in respect of
the purchase of goods or services by the Borrower
in the ordinary course of its business.
"Commitment Ratios" shall mean the percentage
in which the Lenders are severally bound to make
Advances to the Borrower under the Revolving Loan
Commitment and the Term Loan Commitment, which, as
of the Agreement Date, are set forth (together
with dollar amounts thereof) on Schedule 1
attached hereto.
"Commitments" shall mean, collectively, the
Revolving Loan Commitment and the Term Loan
Commitment.
"Current Assets" shall mean, with respect to
the Borrower and the Borrower's Subsidiaries taken
on a consolidated basis, the aggregate amount of
all assets which would, in accordance with GAAP,
properly be classified as current assets;
provided, however, such method of determination
shall be modified where in conflict with the
following: Current Assets will include only those
assets which may, in the ordinary course of
business, be reasonably converted into cash within
a period of one (1) year from the date as of which
such computation is being made, and Current Assets
will also include, without double counting, all
Accounts of Finance Corp. as of such date
purchased from the Borrower or Microcircuits
pursuant to the Receivables Securitization, and
Current Assets will exclude (a) loans and advances
to or receivables due from employees or officers
of the Borrower, and (b) all deferred assets,
other than prepaid items such as insurance, taxes,
interest, commissions, rents, royalties, and
similar items.
"Current Liabilities" shall mean, with
respect to the Borrower and the Borrower's
Subsidiaries, taken on a consolidated basis, the
aggregate amount of all current obligations, as
determined in accordance with GAAP, but in any
event shall include the total amount of the LGE
Payable, the total amount of the Revolving Loans,
the current portion of the Term Loan and all
obligations under the Investor Certificates, each
in the amount outstanding on the date as of which
such computation is being made, and all
obligations except those having a maturity date
which is more than one (1) year from the date as
of which such computation is being made.
"Date of Issue" shall mean the date on which
an Issuing Bank issues a Letter of Credit pursuant
to Section 2.15 hereof.
"Default" shall mean any Event of Default,
and any of the events specified in Section 8.1
hereof regardless of whether there shall have
occurred any passage of time or giving of notice
(or both) that would be necessary in order to
constitute such event an Event of Default.
"Default Rate" shall mean a simple per annum
interest rate equal to, (a) with respect to
outstanding principal, the sum of (i) the
applicable Interest Rate Basis, plus (ii) the
applicable Interest Rate Margin plus (iii) two
percent (2%), and (b) with respect to all other
Obligations, the sum of (i) the Base Rate, plus
(ii) the Interest Rate Margin plus (iii) two
percent (2%).
"Distribution Instructions Letter" shall have
the meaning set forth in Section 3.1 hereof.
"Dividends" shall mean, any direct or
indirect distribution, dividend, or payment to any
Person on account of any Capital Stock of the
Borrower or any of the Borrower's Subsidiaries.
"EBITDA" shall mean, with respect to the
Borrower on a consolidated basis for any period,
the Net Income for such period, plus, without
duplication and to the extent reflected as charges
in the statement of Net Income for such period,
the sum of (a) income taxes, (b) Interest Expense
and (c) depreciation and amortization expense.
"Eligible Finished Goods TV and Other
Inventory" shall mean, as of any particular time,
the portion of the Inventory which constitutes
finished goods and which: (a) is a television or
any other Inventory (except a video cassette
recorder) manufactured or purchased by the
Borrower; (b) in the opinion of the Agent, is not
obsolete, slow-moving, unmerchantable, and is
readily salable in its current form; (c) is new
and does not constitute any finished goods that
were returned to the Borrower due to defect or
damage; (d) fulfills each and every one of the
Inventory Eligibility Requirements; and (e) is not
Eligible Picture Tube Inventory or Eligible
Finished Goods VCR Inventory.
"Eligible Finished Goods VCR Inventory" shall
mean, as of any particular time, the portion of
the Inventory which constitutes finished goods and
which: (a) is a video cassette recorder
manufactured or purchased by the Borrower; (b) in
the opinion of the Agent, is not obsolete,
slow-moving, unmerchantable, and is readily
salable in its current form; (c) is new and does
not constitute any finished goods that were
returned to the Borrower due to defect or damage;
(d) fulfills each and every one of the Inventory
Eligibility Requirements; and (e) is not Eligible
Picture Tube Inventory or Eligible Finished Goods
TV and Other Inventory.
"Eligible Inventory" shall mean Eligible
Picture Tube Inventory, Eligible Finished Goods TV
and Other Inventory and Eligible Finished Goods
VCR Inventory.
"Eligible Picture Tube Inventory" shall
mean, as of any particular time, the portion of
the Inventory of the Borrower which constitutes
color television picture tubes and which: (a) was
manufactured or purchased by the Borrower; (b) in
the opinion of the Agent, is not obsolete,
slow-moving, unmerchantable, and is readily
salable in its current form; (c) is new and does
not constitute any finished goods that were
returned to the Borrower due to defect or damage;
(d) fulfills each and every one of the Inventory
Eligibility Requirements; and (e) is not Eligible
Finished Goods VCR Inventory or Eligible Finished
Goods TV and Other Inventory.
"Environmental Laws" shall mean any and all
applicable federal, state, local or municipal
laws, rules, orders, regulations, statutes,
ordinances, codes, decrees or requirements of any
Governmental Authority regulating, relating to or
imposing liability or standards of conduct
concerning environmental protection matters,
including without limitation, Hazardous Materials,
as now or may at any time during the term hereof
be in effect.
"Equipment" shall mean all machinery,
apparatus, equipment, fittings, furniture,
fixtures, motor vehicles and other tangible
personal property (other than Inventory) of every
kind and description used in the Borrower's
operations or owned by the Borrower or in which
the Borrower has an interest, whether now owned or
hereafter acquired by the Borrower and wherever
located, and all parts, accessories and special
tools and all increases and accessions thereto and
substitutions and replacements therefor.
"ERISA" shall mean the Employee Retirement
Income Security Act of 1974, as in effect on the
Agreement Date and as such Act may be amended
thereafter from time to time.
"ERISA Affiliate" shall mean any "affiliate"
of the Borrower within the meaning of Section 414
of the Code.
"Escrow Amount" shall have the meaning set
forth in Section 3.1(a)(xxiii).
"Eurodollar Advance" shall mean an Advance
which the Borrower requests to be made as a
Eurodollar Advance or which is reborrowed as a
Eurodollar Advance, in accordance with the
provisions of Section 2.2 hereof.
"Eurodollar Advance Period" shall mean, for
each Eurodollar Advance, each one, two, three,
six, nine or, if available, twelve month period,
as selected by the Borrower pursuant to Section
2.2 hereof, during which the applicable Eurodollar
Rate (but not the applicable Interest Rate Margin)
shall remain unchanged. Notwithstanding the
foregoing, however: (i) any applicable Eurodollar
Advance Period which would otherwise end on a day
which is not a Business Day shall be extended to
the next succeeding Business Day, unless such
Business Day falls in another calendar month, in
which case such Eurodollar Advance Period shall
end on the next preceding Business Day; (ii) any
applicable Eurodollar Advance Period which begins
on a day for which there is no numerically
corresponding day in the calendar month during
which such Eurodollar Advance Period is to end
shall (subject to clause (i) above) end on the
last day of such calendar month; and (iii) no
Eurodollar Advance Period shall extend beyond the
Maturity Date or such earlier date as would
interfere with the repayment obligations of the
Borrower under Section 2.6 hereof. Interest shall
be due and payable with respect to any Advance as
provided in Section 2.3 hereof.
"Eurodollar Basis" shall mean a simple per
annum interest rate equal to the quotient of (i)
the Eurodollar Rate divided by (ii) one minus the
Eurodollar Reserve Percentage, stated as a
decimal. The Eurodollar Basis shall be rounded
upward to the nearest one sixteenth of one percent
(1/16%) and, once determined, shall remain
unchanged during the applicable Eurodollar Advance
Period, except for changes to reflect adjustments
in the Eurodollar Reserve Percentage.
"Eurodollar Rate" shall mean, for any
Eurodollar Advance Period, the average (rounded
upward to the nearest one sixteenth of one percent
(1/16%)) of the interest rates per annum at which
deposits in United States dollars for such
Eurodollar Advance Period are offered by the
principal office of Citibank in London, England to
prime banks in the London interbank market at
approximately 11:00 a.m. (New York time) two (2)
Business Days before the first day of such
Eurodollar Advance Period, in an amount
approximately equal to the principal amount of,
and for a length of time approximately equal to
the Eurodollar Advance Period for, the Eurodollar
Advance sought by the Borrower.
"Eurodollar Reserve Percentage" shall mean
the percentage which is in effect from time to
time under Regulation D of the Board of Governors
of the Federal Reserve System, as such regulation
may be amended from time to time, as the maximum
reserve requirement applicable with respect to
Eurocurrency Liabilities (as that term is defined
in Regulation D), whether or not any Lender has
any Eurocurrency Liabilities subject to such
reserve requirement at that time. The Eurodollar
Basis for any Eurodollar Advance shall be adjusted
as of the effective date of any change in the
Eurodollar Reserve Percentage.
"Event of Default" shall mean any of the
events specified in Section 8.1 hereof, provided
that any requirement for notice or lapse of time,
or both, has been satisfied.
"Fee Letter" shall mean that certain fee
letter of even date herewith executed by the
Borrower and addressed to the Agent.
"Finance Corp." shall mean Zenith Finance
Corporation, a Delaware corporation and a
Subsidiary of the Borrower.
"Finance Corp. Subordinated Note" shall mean
those certain subordinated promissory notes of
even date herewith issued by Finance Corp. in
favor of the Borrower and microcircuits,
respectively, pursuant to the Receivables
Securitization.
"Fixed Charge Coverage Ratio" shall mean,
with respect to the Borrower and the Borrower's
Subsidiaries on a consolidated basis for any
period, the ratio of (a) (i) EBITDA minus (ii) the
sum of (A) Capital Expenditures made during such
period and (B) taxes paid in cash during such
period (without giving effect to any tax refunds)
to (b) the sum of (i) scheduled payments of
principal required to be made with respect to
Funded Debt during such period, and (ii) cash
Interest Expense during such period.
"Foreign Exchange Agreement" shall mean a
foreign currency exchange hedging product
agreement providing foreign currency exchange
protection, and arising at any time between the
Borrower, on the one hand, and the Agent (or an
Affiliate of the Agent), or one or more of the
Lenders (or an Affiliate of a Lender), on the
other hand, as such agreement may be modified,
supplemented or amended, and in effect from time
to time.
"Funded Debt" shall mean, with respect to the
Borrower or any of the Borrower's Subsidiaries on
a consolidated basis, all obligations, liabilities
and indebtedness of the types described in
subsections (a) through (e) of the definition of
Indebtedness set forth herein, including, but not
limited to, all obligations under the Loan
Documents and the Subordinated Debentures, and all
obligations under the Investor Certificates.
"GAAP" shall mean, as in effect from time to
time, United States generally accepted accounting
principles consistently applied.
"Governmental Authority" shall mean any
nation or government, any state or other political
subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or
administrative functions of or pertaining
government.
"Gross Proceeds" shall mean, with respect to
any sale, lease, transfer or other disposition of
assets by the Borrower, the aggregate amount of
cash received by the Borrower for such assets,
prior to the deduction of sales commissions,
underwriting discounts, and other transaction
costs and expenses.
"Guaranty" or "guaranteed," as applied to an
obligation (each a "primary obligation"), shall
mean and include (a) any guaranty, direct or
indirect, in any manner, of any part or all of
such primary obligation, and (b) any agreement,
direct or indirect, contingent or otherwise, the
practical effect of which is to assure in any way
the payment or performance (or payment of damages
in the event of non-performance) of any part or
all of such primary obligation, including, without
limiting the foregoing, any reimbursement
obligations as to amounts drawn down by
beneficiaries of outstanding letters of credit,
and any obligation of any Person, whether or not
contingent, (i) to purchase any such primary
obligation or any property or asset constituting
direct or indirect security therefor, (ii) to
advance or supply funds (1) for the purchase or
payment of such primary obligation or (2) to
maintain working capital, equity capital or the
net worth, cash flow, solvency or other balance
sheet or income statement condition of any other
Person, (iii) to purchase property, assets,
securities or services primarily for the purpose
of assuring the owner or holder of any primary
obligation of the ability of the primary obligor
with respect to such primary obligation to make
payment thereof or (iv) otherwise to assure or
hold harmless the owner or holder of such primary
obligation against loss in respect thereof.
"Hazardous Materials" shall mean any
hazardous materials, hazardous wastes, hazardous
constituents, hazardous or toxic substances,
petroleum products (including crude oil or any
fraction thereof), friable asbestos containing
materials defined or regulated as such in or under
any Environmental Law.
"Immaterial Subsidiary" shall mean any
domestic or foreign Subsidiary of the Borrower,
now existing or hereafter created, which owns
assets (including stock but excluding intercompany
receivables) having an aggregate book value not
exceeding $750,000, and which is not material to
the conduct of the Borrower's business operations.
"Indebtedness" shall mean, with respect to
the Borrower and the Borrower's Subsidiaries, (a)
any obligation for borrowed money; (b) any
obligation evidenced by bonds, debentures, notes
or other similar instruments; (c) any obligation
to pay the deferred purchase price of property or
for services (other than in the ordinary course of
business); (d) any Capitalized Lease Obligation;
(e) any obligation or liability of others secured
by a Lien on property owned by the Borrower or
such Subsidiary, whether or not such obligation or
liability is assumed; (f) any obligation under any
Interest Hedge Agreement or Foreign Exchange
Agreement; (g) any Guaranty (except items of
shareholders' equity or Capital Stock or surplus
or general contingency or deferred tax reserves);
(h) any letter of credit issued for the account of
the Borrower or such Subsidiary; and (i) any other
obligation or liability which is required by GAAP
to be shown as a liability on a consolidated
balance sheet of the Borrower and its Subsidiaries
(other than reserves required under GAAP).
"Intellectual Property" means, with respect
to any Person, collectively, such Person's Patent
Property and Trademark Property.
"Intellectual Property Security Agreements"
shall mean that (a) certain Patent Collateral
Assignment and Security Agreement of even date
herewith between the Borrower and the Agent,
pursuant to which the Borrower grants to the
Agent, on its behalf and on behalf of the Issuing
Banks and the Lenders, a security interest in all
of the Borrower's right, title, and interest in
and to the Tuning Patents, all License Agreements,
all Tuning Patent Royalties and proceeds thereof,
and (b) certain Trademark Collateral Security
Agreement of even date herewith between the
Borrower and the Agent, pursuant to which the
Borrower grants to the Agent, on its behalf and on
behalf of the Issuing Banks and the Lenders, a
security interest in all of the Borrower's right,
title, and interest in and to its Trademark
Property.
"Interest Coverage Ratio" shall mean for any
period, the ratio of (a) the Borrower's EBITDA (on
a consolidated basis with the Borrower's
Subsidiaries) for such period, to (b) the
Borrower's cash Interest Expense (on a
consolidated basis with the Borrower's
Subsidiaries) for such period.
"Interest Expense" shall mean, for any
period, interest expense of the Borrower
(including interest on the LGE Payable) and the
Borrower's Subsidiaries, fees paid by the Borrower
and the Borrower's Subsidiaries under the
Securitization Documents for such period,
determined on a consolidated basis in accordance
with GAAP, and interest paid on the Investor
Certificates.
"Interest Hedge Agreements" shall mean the
obligations of any Person pursuant to any
arrangement with any other Person whereby,
directly or indirectly, such Person is entitled to
receive from time to time periodic payments
calculated by applying either a floating or a
fixed rate of interest on a stated notional amount
in exchange for periodic payments made by such
Person calculated by applying a fixed or a
floating rate of interest on the same notional
amount and shall include, without limitation,
interest rate swaps, caps, floors, collars and
similar agreements.
"Interest Rate Basis" shall mean the Base
Rate or the Eurodollar Basis, as appropriate.
"Interest Rate Margin" shall mean, (i) with
respect to Base Rate Advances, one and three-
quarters percent (1.75%), and (ii) with respect to
Eurodollar Advances, three percent (3.00%).
"Inventory" shall mean all goods, merchandise
and other personal property owned and held for
sale, and all raw materials, work or goods in
process, materials and supplies of every nature
which contribute to the finished products of the
Borrower and any of the Borrower's Subsidiaries in
the ordinary course of its business, whether now
owned or hereafter acquired by the Borrower and
any of the Borrower's Subsidiaries.
"Inventory Eligibility Requirements" shall
mean that the Inventory:
(a) is owned solely by the Borrower;
(b) conforms to all of the warranties and
representations regarding the same which are set
forth in this Agreement or any of the other Loan
Documents;
(c) is located in the continental United
States either (i) on real property owned by the
Borrower, or (ii) on leased premises in regard to
which the landlord thereof shall have executed and
delivered to the Agent an agreement, which shall
be in form and substance acceptable to the Agent,
waiving any lien rights such landlord may hold in
regard to the Borrower's property in favor of the
Lenders;
(d) is not subject to any claim of
reclamation, or Lien, adverse claim, interest or
right of any other Person;
(e) consists of finished goods (which may
include color television picture tubes) purchased
or manufactured by the Borrower in the ordinary
course of its business and does not consist of
Inventory in transit, work in process or raw
materials;
(f) has not been consigned to or by any
Person;
(g) is in good condition and meets all
standards imposed by any Person having regulatory
authority over such goods, its use and/or sale, is
not obsolete, and is currently saleable in the
normal course of the Borrower's business;
(h) does not include any Inventory scheduled
for return to vendors, excess Inventory, slow-
moving or obsolete Inventory, clearance Inventory,
damaged goods, display items, packaging materials,
labels, name plates or similar supplies, cash
discounts, sample Inventory or shrinkage;
(i) is not located at any vendor/trade show;
(j) is not in the possession of LGE;
(k) has not been removed from regular stock
for quality rework or other corporate engineering
matters;
(l) is personal property in which the
Borrower has granted a valid and continuing first
Lien in favor of the Agent and the Lenders
pursuant to the Security Documents, and as to
which all action necessary to perfect such
security interest shall have been taken; and
(m) is not covered, in whole or in part, by
any security agreement, financing statement,
equivalent security or Lien instrument or
continuation statement which is on file or of
record in any public office, except such as may
have been filed in favor of the Agent and the
Lenders pursuant to the Security Documents.
"Investor Certificates" shall have the
meaning ascribed thereto in the Pooling and
Servicing Agreement.
"Issuing Banks" shall mean Citibank, N.A.,
and any other Person who hereafter may be
designated as an Issuing Bank pursuant to an
Assignment and Assumption Agreement or otherwise;
and "Issuing Bank" shall mean any one of the
foregoing.
"Lease Transactions" shall mean,
collectively, the Salomon Lease Transaction and
the Subsequent Lease Transaction.
"Lenders" shall mean those lenders whose
names are set forth on the signature pages hereof
under the heading "Lenders" and any assignees of
the Lenders who hereafter become parties hereto
pursuant to and in accordance with Section 10.5
hereof; and "Lender" shall mean any one of the
foregoing Lenders.
"Letter of Credit Commitment" shall mean the
several obligations of the Issuing Banks to issue
Letters of Credit in an aggregate face amount from
time to time not to exceed $15,000,000.
"Letter of Credit Obligations" shall mean, at
any time, the sum of (a) an amount equal to the
aggregate undrawn and unexpired amount (including
the amount to which any such Letter of Credit can
be reinstated pursuant to the terms hereof) of the
then outstanding Letters of Credit and (b) an
amount equal to the aggregate drawn, but
unreimbursed drawings of any Letters of Credit.
"Letter of Credit Reserve Account" shall mean
any account maintained by the Agent for the
benefit of any Issuing Bank, the proceeds of which
shall be applied as provided in Section 8.2(d)
hereof.
"Letters of Credit" shall mean either Standby
Letters of Credit or Commercial Letters of Credit
issued by Issuing Banks on behalf of the Borrower
from time to time in accordance with Section 2.15
hereof.
"LGE" shall mean LG Electronics, Inc., a
corporation organized under the laws of the
Republic of Korea.
"LGE Group" shall mean LGE and any other
Person that, directly or indirectly, is controlled
by LGE. For purposes of this definition,
"controlled" with respect to LGE means the
possession, direct or indirect, of the power
either (a) to vote more than 50% of the Voting
Stock of such Person or (b) to direct or cause the
direction of the management and policies of such
Person, whether through the ownership of Voting
Stock, by contract or otherwise.
"LGE Payable" shall mean, at any time, the
aggregate outstanding account payable of the
Borrower to LGE arising from the Borrower's
purchases from LGE in the ordinary course of the
Borrower's business.
"License Agreements" shall mean all
agreements, whether now or hereafter in existence,
between the Borrower, as licensor, and any other
Person, as licensee, pursuant to which the
Borrower grants to such Person any license or
other right in connection with any Tuning Patent.
"Lien" shall mean, with respect to any
property, any mortgage, lien, pledge, negative
pledge agreement, assignment, charge, security
interest, title retention agreement, levy,
execution, seizure, attachment, garnishment, or
other encumbrance of any kind in respect of such
property, whether or not choate, vested, or
perfected.
"Loan Account" shall have the meaning set
forth in Section 2.7 hereof.
"Loan Documents" shall mean this Agreement,
the Notes, the Security Documents, the Receivables
Intercreditor Agreement, the Blocked Account
Letters, the Set-Off Waiver Letter, the Fee
Letter, the Distribution Instruction Letter, all
reimbursement agreements relating to Letters of
Credit issued hereunder, all landlord or bailee
waiver agreements in favor of the Agent, all legal
opinions or reliance letters issued by counsel to
the Borrower in connection herewith, all Requests
for Advance, all Requests for Issuance of Letters
of Credit, all Borrowing Base Certificates,
Interest Hedge Agreements between the Borrower, on
the one hand, and the Agent (or an affiliate of
the Agent) or one or more of the Lenders (or an
affiliate of a Lender), on the other hand, Foreign
Exchange Agreements and all other documents,
instruments, certificates, and agreements executed
or delivered in connection with or contemplated by
this Agreement, including, without limitation, any
security agreements or guaranty agreements from
the Borrower's Subsidiaries to the Agent, the
Lenders and the Issuing Banks.
"Loans" shall mean, collectively, the amounts
advanced by the Lenders to the Borrower under the
Commitment, not to exceed the amount of the
Commitment, and evidenced by the Notes, and shall
include the Revolving Loans, the Term Loan, and
the Swing Loans.
"Majority Lenders" shall mean Lenders (whose
voting rights hereunder have not been restricted
pursuant to Section 2.2(e) hereof) the total of
whose Commitment Ratios equals or exceeds fifty-
one percent (51%) of the Commitment Ratios of all
Lenders entitled to vote hereunder.
"Material Subsidiaries" shall mean Zenith
Electronics Corporation of Texas, a Texas
corporation, Zenith Microcircuits Corporation, a
Delaware corporation, Zenith Video Tech
Corporation-Florida, a Delaware corporation,
Zenith Video Tech Corporation, a Delaware
corporation, and any other domestic Subsidiary of
the Borrower, now or hereafter created, which owns
assets (including stock but excluding intercompany
receivables) having an aggregate book value in
excess of $750,000; and "Material Subsidiary"
shall include any one of the foregoing; provided,
however, (i) Finance Corp. shall not be deemed to
be a "Material Subsidiary" at any time prior to
the termination of the Receivables Securitization,
and (ii) Zenith Electronics Corporation of Arizona
shall not be deemed to be a "Material Subsidiary"
unless it owns assets (including stock but
excluding intercompany receivables) having an
aggregate book value in excess of $1,500,000.
"Materially Adverse Effect" shall mean any
materially adverse effect (a) upon the business,
assets, liabilities, condition (financial or
otherwise), or results of operations of the
Borrower, or (b) upon the ability of the Borrower
to perform under this Agreement or any other Loan
Document by the Borrower, or (c) upon the rights,
benefits or interests of the Agent, the Lenders or
the Issuing Banks in or to this Agreement, any
other Loan Document or the Collateral, in each
case, resulting from any act, omission, situation,
status, event, or undertaking, either singly or
taken together.
"Maturity Date" shall mean March 31, 2000, or
such earlier date as payment of the Loans shall be
due (whether by acceleration or otherwise).
"Mexican Subsidiaries" shall mean Cable
Productos de Chihuahua, S.A. de C.V., Electro
Partes de Matamoros, S.A. de C.V., Partes de
Television de Reynosa, S.A. de C.V., Radio
Componentes de Mexico, S.A. de C.V., and Zenco de
Chihuahua, S.A. de C.V., and "Mexican Subsidiary"
shall mean any one of the foregoing.
"Microcircuits" shall mean Zenith
Microcircuits Corporation, a Delaware corporation.
"Multiemployer Plan" shall have the meaning
set forth in Section 4001(a)(3) of ERISA.
"Necessary Authorizations" shall mean all
material authorizations, consents, permits,
approvals, licenses, and exemptions from, and all
filings and registrations with, and all reports
to, any Governmental Authority whether federal,
state, local, and all agencies thereof, which are
required for the conduct of the businesses and the
ownership (or lease) of the properties and assets
of the Borrower.
"Net Cash Proceeds" shall mean, with respect
to any sale, lease, transfer or other disposition
of assets by the Borrower or any issuance by the
Borrower of any Capital Stock or the incurrence by
the Borrower of any Funded Debt (other than the
Obligations), the aggregate amount of cash
received for such assets or Capital Stock, or as a
result of such Funded Debt, net of reasonable and
customary transaction costs properly attributable
to such transaction and payable by the Borrower in
connection with such sale, lease, transfer or
other disposition of assets or the issuance of any
Capital Stock or the incurrence of any Funded
Debt, including without limitation, sales
commissions and underwriting discounts.
"Net Income" shall mean, for any period, the
consolidated net income (or deficit) of the
Borrower and the Borrower's Subsidiaries for such
period, determined in accordance with GAAP.
"Notes" shall mean, collectively, the Term
Loan Notes and the Revolving Loan Notes.
"Obligations" shall mean (a) all payment and
performance obligations of the Borrower to the
Lenders, the Issuing Banks, and the Agent under
this Agreement and the other Loan Documents
(including all Letter of Credit Obligations and
including any interest, fees and expenses that,
but for the provisions of the Bankruptcy Code,
would have accrued), as they may be amended from
time to time, or as a result of making the Loans
or issuing the Letters of Credit, (b) the
obligation to pay an amount equal to the amount of
any and all damages which the Issuing Banks, the
Lenders and the Agent, or any of them, may suffer
by reason of a breach by the Borrower of any
obligation, covenant, or undertaking with respect
to this Agreement or any other Loan Document, and
(c) any obligations of the Borrower to the Agent
(or an affiliate of the Agent) or any Lender (or
an affiliate of a Lender) under any Interest Hedge
Agreement or Foreign Exchange Agreement permitted
hereunder.
"Patent Property" shall mean:
(ii) all of the Borrower's patents
(including the Tuning Patents), patent
applications (including, without limitation,
all patents and patent applications in
preparation for filing) and patent
disclosures throughout the world, including
without limitation, each patent and patent
application referred to in Part A-1 of
Schedule 4.1(o);
(iii) all reissues, divisions,
continuations, continuations-in-part,
revisions, extensions, renewals and
reexaminations of any of the items described
in clause (a) of this definition; and
(iv) all patent licenses of the Borrower
(whether as licensee or licensor), including
each patent license referred to in Part A-2
of Schedule 4.1(o).
"Payment Date" shall mean the last day of
each Eurodollar Advance Period for a Eurodollar
Advance.
"Permitted Amount" shall have the meaning set
forth in Section 7.11.
"Permitted Liens" shall mean, as applied to
any Person:
(a) Any Lien in favor of the Agent, the
Issuing Banks or the Lenders given to secure the
Obligations;
(b) (i) Liens on real estate for real
estate taxes not yet delinquent and (ii) Liens for
taxes, assessments, judgments, governmental
charges or levies, or claims not yet delinquent or
the non-payment of which is being diligently
contested in good faith by appropriate proceedings
and for which adequate reserves have been set
aside on such Person's books;
(c) Liens of carriers, warehousemen,
mechanics, laborers, suppliers, workers and
materialmen incurred in the ordinary course of
business for sums not yet due or being diligently
contested in good faith, if such reserve or
appropriate provision, if any, as shall be
required by GAAP shall have been made therefor;
(d) Liens incurred in the ordinary course of
business in connection with worker's compensation
and unemployment insurance or other types of
social security benefits;
(e) Easements, rights-of-way, restrictions,
and other similar encumbrances on the use of real
property which do not interfere with the ordinary
conduct of the business of such Person;
(f) Purchase money security interests
provided that such Lien attaches only to the asset
so purchased by the Borrower and secures only
Indebtedness incurred by the Borrower in order to
purchase such asset, but only to the extent
permitted by Section 7.1(d) hereof;
(g) Deposits to secure the performance of
bids, trade contracts, tenders, sales, leases,
statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like
nature incurred in the ordinary course of
business;
(h) Liens on assets of the Borrower on the
Agreement Date as more fully set forth on Schedule
3, attached hereto; and
(i) Liens in favor of, or for the benefit
of, the Receivables Trustee under the Zenith Trade
Receivables Master Trust 1997 (as defined in the
Securitization Documents), or the holders of
certificates issued pursuant to the Securitization
Documents as provided for therein, or Finance
Corp. pursuant to the Receivables Purchase
Agreements.
"Person" shall mean an individual,
corporation, partnership, trust, joint stock
company, limited liability company, unincorporated
organization, or a government or any agency or
political subdivision thereof.
"Plan" shall mean an employee benefit plan
within the meaning of Section 3(3) of ERISA or any
other plan maintained for employees of any Person
or any Affiliate of such Person.
"Pledge Agreement" shall mean that certain
Pledge Agreement of even date herewith executed by
the Borrower in favor of the Agent, pursuant to
which the Borrower pledges to the Agent, for its
benefit and for the benefit of the Issuing Banks
and the Lenders, all of the Borrower's right,
title and interest in and to the Capital Stock of
its domestic Subsidiaries, and shall include any
supplement thereto executed in accordance with
Section 7.7(g) hereof, as the same may be amended,
supplemented or modified from time to time.
"Pooling and Servicing Agreement" shall mean
that Pooling and Servicing Agreement of even date
herewith executed by and among the Borrower,
Finance Corp., and the Receivables Trustee,
together with the Series 1997-1 Supplement
thereto, as the same may be amended, supplemented
or otherwise modified from time to time.
"Property" shall mean any real property or
personal property, plant, building, facility,
structure, underground storage tank or unit,
equipment, Inventory or other asset owned, leased
or operated by the Borrower or any of the
Borrower's Subsidiaries (including, without
limitation, any surface water thereon or adjacent
thereto, and soil and groundwater thereunder).
"Receivables Intercreditor Agreement" shall
mean the Intercreditor Agreement, dated the date
hereof, by and among the Agent (in its capacity as
agent under this Agreement and in its capacity as
agent for Corporate Receivables Corporation,
Incorporated under a certificate purchase
agreement), Finance Corp., the Receivables
Trustee, Microcircuits, and the Borrower, as the
same may be amended, supplemented or otherwise
modified from time to time.
"Receivables Purchase Agreements" shall mean
the Receivables Purchase Agreement, dated the date
hereof, between the Borrower and Finance Corp. and
the Receivables Purchase Agreement, dated the date
hereof, between Microcircuits and Finance Corp.
"Receivables Securitization" shall mean the
transactions described and contemplated in the
Securitization Documents.
"Receivables Trustee" shall mean Bankers
Trust Company, or any other Person serving as
trustee under the Zenith Trade Receivables Master
Trust 1997.
"Reimbursement Obligations" shall mean the
payment obligations of the Borrower under Section
2.15(d) hereof.
"Replacement Event" shall have the meaning
ascribed thereto in Section 10.16 hereof.
"Reportable Event" shall have the meaning set
forth in Section 4043(c) of ERISA and the
regulations thereunder, but shall not include any
event which is not subject to the thirty (30) day
notice requirement of such regulations other than
29 Code of Federal Regulations Sections 2615.11,
2615.12 and 2615.19.
"Request for Advance" shall mean any
certificate signed by an Authorized Signatory
requesting an Advance hereunder which will
increase the aggregate amount of the Loans
outstanding, which certificate shall be
denominated a "Request for Advance," and shall be
in substantially the form of Exhibit D attached
hereto. Each Request for Advance shall, among
other things, specify the date of the Advance,
which shall be a Business Day, the amount of the
Advance, and the type of Advance.
"Request for Issuance of Letter of Credit"
shall mean any certificate signed by an Authorized
Signatory requesting that an Issuing Bank issue a
Letter of Credit hereunder, which certificate
shall be in substantially the form of Exhibit E
attached hereto, and shall, among other things,
(a) specify that the requested Letter of Credit is
either a Commercial Letter of Credit or a Standby
Letter of Credit, (b) the stated amount of the
Letter of Credit (which shall be in United States
Dollars), (c) the effective date (which shall be a
Business Day) for the issuance of such Letter of
Credit, (d) the date on which such Letter of
Credit is to expire (which shall be a Business Day
and which shall be subject to Section 2.15(a)
hereof), (e) the Person for whose benefit such
Letter of Credit is to be issued, (f) other
relevant terms of such Letter of Credit, and (g)
the Available Letter of Credit Amount as of the
scheduled date of issuance of such Letter of
Credit.
"Restricted Payment" shall mean (a) Dividends
and (b) any payment of any management, consulting
or similar fees payable by the Borrower or any of
the Borrower's Subsidiaries to any Affiliate.
"Restricted Purchase" shall mean any payment
on account of the purchase, redemption, or other
acquisition or retirement of any shares of Capital
Stock of the Borrower or any Subsidiary of the
Borrower.
"Revolving Loan Commitment" shall mean the
several obligations of the Lenders to advance the
aggregate amount of up to $65,000,000 to the
Borrower on or after the Agreement Date, in
accordance with their respective Commitment Ratios
relating to the Revolving Loan, pursuant to the
terms hereof, and as such amount may be reduced
from time to time, pursuant to the terms hereof.
"Revolving Loan Notes" shall mean those
certain promissory notes of even date in the
aggregate principal amount of $65,000,000, issued
by the Borrower to each of the Lenders and
substantially in the form of Exhibit F attached
hereto, and any extensions, renewals or amendments
to, or replacements of, the foregoing.
"Revolving Loans" shall mean, collectively,
the amounts advanced from time to time by the
Lenders to the Borrower under the Revolving Loan
Commitment, not to exceed the amount of the
Revolving Loan Commitment, and evidenced by the
Revolving Loan Notes.
"Salomon Lease Transaction" shall mean those
certain leveraged lease financings of certain of
the Borrower's and Zenith Electronics Corporation
of Texas's manufacturing equipment used in the
production of color television picture tubes,
computer display tubes and color projection
television tubes, and of certain plastic molding
equipment, arranged for the Borrower and Zenith
Electronic Corporation of Texas by Salomon
Brothers and consummated on or prior to the
Agreement Date, as more fully described on
Schedule 2 hereto.
"Securitization Documents" shall mean the
Receivables Purchase Agreements, the Receivables
Intercreditor Agreement, the Pooling and Servicing
Agreement, the Finance Corp. Subordinated Notes,
and any other agreement, document or instrument
entered into by the Borrower, Microcircuits,
Finance Corp. or the Agent in connection with the
Receivables Securitization.
"Security Agreement" shall mean that certain
Security Agreement of even date herewith between
the Borrower and the Agent, on its behalf and on
behalf of the Issuing Banks and the Lenders, a
copy of which is attached as Exhibit G hereto, as
the same may be amended or modified from time to
time hereafter.
"Security Documents" shall mean,
collectively, the Security Agreement, the Pledge
Agreement, the Assignment of Notes, the
Intellectual Property Security Agreements, the
Subsidiary Guaranty, the Subsidiary Security
Agreement, all UCC-1 financing statements and any
other document, instrument or agreement granting
Collateral for the Obligations, as the same may be
amended or modified from time to time.
"Set-Off Waiver Letter" shall mean that
certain letter agreement of even date herewith
executed by LGE in favor of the Agent and pursuant
to which LGE waives all rights to set-off against
amounts owed to the Borrower, in form and
substance satisfactory to the Agent.
"Settlement Date" shall have the meaning set
forth in Section 2.2(f).
"Standby Letter of Credit" shall mean a
Letter of Credit issued to support obligations of
the Borrower incurred in the ordinary course of
its business, and which is not a Commercial Letter
of Credit.
"Subordinated Debentures" shall mean,
collectively, (a) those certain 8.5% Senior
Subordinated Convertible Debentures issued by the
Borrower, due January 18, 2001 in an aggregate
principal amount not exceeding $20,000,000, and
governed by that certain Debenture Purchase
Agreement dated as of January 11, 1994, between
the Borrower and the institutional investor named
therein (as amended prior to the Agreement Date),
(b) those certain 6.25% Convertible Subordinated
Debentures issued by the Borrower, due April 1,
2011 in an aggregate principal amount not
exceeding $115,000,000, and governed by that
certain Indenture dated as of April 1, 1986,
between the Borrower and The First National Bank
of Boston, as trustee (as amended prior to the
Agreement Date) and (c) those certain 8.5% Senior
Subordinated Convertible Debentures issued by the
Borrower, due November 19, 2000 in an aggregate
principal amount not exceeding $55,000,000, and
governed by that certain Debenture Purchase
Agreement dated as of November 19, 1993, between
the Borrower and the institutional investor named
therein (as amended prior to the Agreement Date).
"Subsequent Lease Transaction" shall mean one
or more lease financings of certain of the
Borrower's manufacturing equipment or real estate
to be arranged for the Borrower after the
Agreement Date, on terms reasonably satisfactory
to the Agent.
"Subsidiary" shall mean, as applied to any
Person, (a) any corporation of which fifty percent
(50%) or more of the outstanding stock (other than
directors' qualifying shares) having ordinary
voting power to elect a majority of its board of
directors, regardless of the existence at the time
of a right of the holders of any class or classes
of securities of such corporation to exercise such
voting power by reason of the happening of any
contingency, or any partnership of which fifty
percent (50%) or more of the outstanding
partnership interests is at the time owned by such
Person, or by one or more Subsidiaries of such
Person, or by such Person and one or more
Subsidiaries of such Person, and (b) any other
entity which is controlled or capable of being
controlled by such Person, or by one or more
Subsidiaries of such Person, or by such Person and
one or more Subsidiaries of such Person.
"Subsidiary Guaranty" shall mean that certain
Guaranty Agreement executed by each Material
Subsidiary of even date herewith with respect to
the Obligations, and shall include any supplement
to the Guaranty Agreement executed in accordance
with Section 7.7(g) hereof, as the same may be
modified, amended or supplemented from time to
time.
"Subsidiary Security Agreement" shall mean
that certain Subsidiary Security Agreement
executed by and among each Material Subsidiary and
the Agent of even date herewith, and shall include
any supplement thereto executed in accordance with
Section 7.14 hereof, as the same may be
supplemented, modified or amended from time to
time.
"Super-Majority Lenders" shall mean Lenders
(whose voting rights hereunder have not been
restricted pursuant to Section 2.2(e) hereof) the
total of whose Commitment Ratios equals or exceeds
eighty-seven percent (87%) of the Commitment
Ratios of all Lenders entitled to vote hereunder.
"Swing Bank" shall mean Citicorp USA, Inc., a
Delaware corporation, or any other Lender who
shall agree with the Agent to act as Swing Bank.
"Swing Loans" shall mean any Loans made to
the Borrower by the Swing Bank from time to time,
in accordance with Section 2.2(f) hereof.
"Term Loan" shall mean, collectively, the
amounts advanced by the Lenders to the Borrower on
the Agreement Date under the Term Loan Commitment,
not to exceed the amount of the Term Loan
Commitment, and evidenced by the Term Loan Notes.
"Term Loan Commitment" shall mean the several
obligations of the Lenders to advance the sum of
$45,000,000 on the Agreement Date, in accordance
with their respective Commitment Ratios relating
to the Term Loan Commitment, to the Borrower
pursuant to the terms hereof.
"Term Loan Notes" shall mean those certain
Term Promissory Notes of even date herewith in the
aggregate principal amount of $45,000,000, in
substantially the form of Exhibit H attached
hereto, and any amendments, replacements,
extensions or renewals thereof.
"Total Capitalization" shall mean, as of any
date of calculation, the sum of (a) Funded Debt,
plus (b) the LGE Payable, plus (c) shareholders'
equity as shown on the consolidated balance sheet
of the Borrower.
"Trademark" shall have the meaning ascribed
to that term in the definition of Trademark
Property.
"Trademark Property" shall mean:
(b) all of the Borrower's trademarks,
trade names, corporate names, company names,
business names, fictitious business names,
trade styles, service marks, certification
marks, collective marks, logos, trade dress
other source of business identifiers, prints
and labels on which any of the foregoing have
appeared or appear, designs and general
intangibles of a like nature (all of the
foregoing items in this clause (a) being
collectively called a "Trademark"), now
existing anywhere in the world or hereafter
adopted or acquired, whether currently in use
or not, whether or not registered, all
registrations and recordings thereof and all
applications in connection therewith, whether
pending or in preparation for filing,
including registrations, recordings and
applications in the United States Patent and
Trademark Office or in any office or agency
of the United States of America or any State
thereof or any foreign country, including,
without limitation, those referred to in Part
B-1 of Schedule 4.1(o);
(c) all reissues, extensions, renewals,
translations, adaptations, derivations and
combinations of any of the items described in
clause (a) of this definition;
(d) all Trademark licenses and other
agreements providing the Borrower with the
right to use any of the types of items
referred to in clauses (a) and (b) of this
definition, including each Trademark license
referred to in Part B-2 of Schedule 4.1(o);
(e) all of the goodwill of the business
connected with the use of, and symbolized by
the items described in, clauses (a) and (b)
of this definition;
(f) the right to sue third parties for
past, present and future infringements of any
Trademark property described in clauses (a)
or (b) of this definition and, to the extent
applicable in clause (c) of this definition;
and
(g) all proceeds of, and rights
associated with, the foregoing, including any
claim by the Borrower against third parties
for past, present or future infringement or
dilution of any Trademark, Trademark
registration or (to the extent applicable and
if permitted by applicable law) Trademark
license, referred to in clause (c) of this
definition, or for any injury to the goodwill
associated with the use of any such Trademark
or for breach or enforcement of any Trademark
license, and all rights corresponding thereto
throughout the world.
"Tuning Patent Royalties" shall mean all
amounts to be paid by any licensee to the Borrower
in connection with the license of any Tuning
Patent under any License Agreement.
"Tuning Patents" shall mean, collectively,
U.S. Patent No. 4,002,986, U.S. Patent No.
4,317,227, U.S. Patent No. 4,516,170, and U.S.
Patent No. 4,598,425, together with all
applications, reissues, divisions, continuations,
continuations-in-part, revisions, extensions,
renewals and reexaminations relating thereto; and
"Tuning Patent" shall mean any of the foregoing.
"Uniform Customs" shall mean the Uniform
Customs and Practice for Documentary Credits (1993
Revision), International Chamber of Commerce
Publication No. 500, as the same may be amended
from time to time.
"Value" shall mean, at any particular date:
(a) the lower of the fair market value of the
Eligible Inventory and its cost, valued in
accordance with the "First-In, First-Out" method
of accounting, minus (b) an amount which is equal
to the amount of reserves which, under FASB No.
48, "Revenue recognition when the right of return
exists," the Borrower shall be required to take in
regard to the amount identified in subparagraph
(a) hereof.
"Voting Stock" shall mean the Capital Stock
issued by a corporation, or equivalent interests
in any other Person, the holders of which are
ordinarily, in the absence of contingencies,
entitled to vote for the election of directors (or
persons performing similar functions) of such
Person, even if the right so to vote has been
suspended by the happening of such a contingency.
"Wholly-Owned Subsidiary" means any direct or
indirect Subsidiary of a Person where such
Person's ownership of such Subsidiary is through
ownership of 100% of all issued and outstanding
Capital Stock (or other ownership interests, but
excluding any directors qualifying shares) and
warrants, options or rights to purchase Capital
Stock (or other ownership interests) at all
levels.
Each definition of an agreement in this
Article 1 shall include such instrument or
agreement as modified, amended, or supplemented
from time to time with, if required, the prior
written consent of the Majority Lenders, except as
provided in Section 10.12 hereof, and except where
the context otherwise requires, definitions
imparting the singular shall include the plural
and vice versa. Except where otherwise
specifically restricted, reference to a party to a
Loan Document includes that party and its
successors and assigns. An Event of Default shall
"exist", "continue" or be "continuing" until such
Event of Default has been waived in writing in
accordance with Section 10.12 hereof. All terms
used herein which are defined in Article 9 of the
Uniform Commercial Code in effect in the State of
New York on the date hereof and which are not
otherwise defined herein shall have the same
meanings herein as set forth therein. All
accounting terms used herein without definition
shall be used as defined under GAAP. All
financial calculations hereunder shall, unless
otherwise stated, be determined for the Borrower
on a consolidated basis with its Subsidiaries.
ARTICLE 2
THE LOANS AND THE LETTERS OF CREDIT
ARTICLE 2Section .1 Extension of Credit.
Subject to the terms and conditions of, and in
reliance upon the representations and warranties
made in, this Agreement and the other Loan
Documents, the Lenders have extended and agree,
severally in accordance with their respective
Commitment Ratios and not jointly, to extend
credit in an aggregate principal amount not to
exceed ONE HUNDRED TEN MILLION DOLLARS
($110,000,000) to the Borrower, as hereinafter
provided.
(a) The Revolving Loans. The Lenders agree,
severally in accordance with their respective
Commitment Ratios relating to the Revolving Loan
Commitment and not jointly, upon the terms and
subject to the conditions of this Agreement, to
lend and relend to the Borrower, prior to the
Maturity Date, amounts which in the aggregate at
any one time outstanding do not exceed the lesser
of (i) the Borrowing Base and (ii) the Revolving
Loan Commitment. Subject to the terms and
conditions hereof and prior to the Maturity Date,
Advances under the Revolving Loan Commitment may
be repaid and reborrowed from time to time on a
revolving basis.
(b) The Term Loan. The Lenders agree,
severally in accordance with their respective
Commitment Ratios relating to the Term Loan
Commitment and not jointly, upon the terms and
subject to the conditions of this Agreement, to
lend to the Borrower on the Agreement Date, an
amount not to exceed, in the aggregate, the amount
of the Term Loan Commitment. Advances under the
Term Loan Commitment may be repaid and reborrowed
as provided in Section 2.2 hereof in order to
reborrow Base Rate Advances, or Eurodollar
Advances for new Eurodollar Advance Periods,
provided, however, that there shall be no increase
in the aggregate principal amount outstanding
under the Term Loan Commitment at any time after
the Agreement Date.
(c) The Letters of Credit. Subject to the
terms and conditions hereof each Issuing Bank
agrees, severally in accordance with their
respective Letter of Credit Commitments and not
jointly, to issue Letters of Credit for the
account of the Borrower pursuant to Section 2.15
hereof in an aggregate outstanding face amount (i)
for all Issuing Banks, not to exceed the Letter of
Credit Commitment at any time, and (ii) for any
individual Issuing Bank, not to exceed such
Issuing Bank's Letter of Credit Commitment.
(d) The Swing Loans. Subject to the terms
and conditions hereof, the Swing Bank, in its sole
discretion, may from time to time after the
Agreement Date but prior to the Maturity Date,
make Swing Loans to the Borrower in an aggregate
principal amount not to exceed at any time
outstanding the least of (i) the Swing Bank's pro
rata share (in accordance with its Commitment
Ratio) of the Available Revolving Loan Commitment,
(ii) the excess of (x) the Swing Bank's pro rata
share (in accordance with its Commitment Ratio) of
the Revolving Loan Commitment over (y) the sum of
the aggregate outstanding principal amount of
Swing Loans and Revolving Loans made by it and the
Swing Bank's pro rata share (in accordance with
its Commitment Ratio) of the outstanding Letter of
Credit Obligations, and (iii) $11,000,000.
(e) Overadvances; Borrowing Base
Deficiencies. If at any time the Aggregate
Revolving Credit Obligations exceed the Borrowing
Base, the Revolving Loan Commitment or any other
applicable limitation set forth in this Agreement,
such Aggregate Revolving Credit Obligations shall
nevertheless constitute Obligations that are
secured by the Collateral and are entitled to all
benefits thereof. In no event, however, shall the
Borrower have the right whatsoever to (i) receive
any Revolving Loan, (ii) receive any Swing Loan,
or (iii) request the issuance of any Letter of
Credit if, before or after giving effect thereto,
there shall exist a Default or a Borrowing Base
Deficiency. In the event that (1) the Lenders, in
their sole and absolute discretion, shall make any
Revolving Loans, or (2) any Issuing Bank shall, in
its sole and absolute discretion (subject to the
terms and conditions set forth in this Agreement),
agree to the issuance of any Letter of Credit, or
(3) the Swing Bank, in its sole and absolute
discretion (subject to the terms and conditions
set forth in this Agreement), shall make any Swing
Loan, which in any such case gives rise to a
Borrowing Base Deficiency, the Borrower shall
make, on demand, a payment on the Obligations to
be applied to the Revolving Loans, the Swing Loans
and the Letter of Credit Reserve Account, as
appropriate, in an aggregate principal amount
equal to such Borrowing Base Deficiency.
Additionally, in no event shall the Borrower have
the right to receive any Advance of a Revolving
Loan in an amount which exceeds the lesser of (i)
the Borrowing Base and (ii) the Available
Revolving Loan Commitment.
ARTICLE 2Section .2 Manner of Borrowing and
Disbursement of Loans.
2(j) Choice of Interest Rate, etc. Any
Advance shall, at the option of the Borrower, be
made either as a Base Rate Advance or as a
Eurodollar Advance (except for the first two (2)
Business Days after the Agreement Date, during
which period the Loans shall bear interest as a
Base Rate Advance); provided, however, that (i) if
the Borrower fails to give the Agent written
notice specifying whether an Advance is to be
repaid or reborrowed on a Payment Date, such
Advance shall be repaid and then reborrowed as a
Base Rate Advance on the Payment Date, and (ii)
the Borrower may not select a Eurodollar Advance
(A) with respect to the Swing Loans, (B) with
respect to an Advance, the proceeds of which are
to reimburse an Issuing Bank pursuant to Section
2.15 hereof, or (C) if, at the time of such
Advance, a Default or an Event of Default has
occurred and is continuing. Any notice given to
the Agent in connection with a requested Advance
hereunder shall be given to the Agent prior to
11:00 a.m. (New York time) in order for such
Business Day to count toward the minimum number of
Business Days required. The Agent shall, upon
reasonable request of the Borrower from time to
time, provide to the Borrower such information
with regard to the Eurodollar Rate Basis as may be
so requested.
(a) Base Rate Advances.
(i) Initial and Subsequent
Advances. The Borrower shall give the Agent
in the case of Base Rate Advances not later
than 11:00 a.m. (New York time) on the
Business Day of a proposed Advance,
irrevocable prior notice by telephone or
telecopy and shall confirm any such telephone
notice with a written Request for Advance;
provided, however, that the failure by the
Borrower to confirm any notice by telephone
or telecopy with a Request for Advance shall
not invalidate any notice so given.
(ii) Repayments and Reborrowings.
The Borrower may repay or prepay a Base Rate
Advance and (a) at any time reborrow all or a
portion of the principal amount thereof as
one or more Base Rate Advances, (b) upon at
least two (2) Business Days' irrevocable
prior written notice to the Agent, reborrow
all or a portion of the principal thereof as
one or more Eurodollar Advances, or (c) not
reborrow all or any portion of such Base Rate
Advance. Upon the date indicated by the
Borrower, such Base Rate Advance shall be so
repaid and, as applicable, reborrowed.
(iii) Miscellaneous.
Notwithstanding any other provision of this
Agreement which may be construed to the
contrary, each Base Rate Advance shall be in
a principal amount of no less than $1,000,000
and in an integral multiple of $100,000 in
excess thereof; provided, however, each Base
Rate Advance that is a Swing Loan shall be in
a principal amount of not less than $100,000
unless a lower amount is permitted by the
Swing Bank in its sole discretion from time
to time.
(b) Eurodollar Advances.
(i) Initial and Subsequent
Advances. The Borrower shall give the Agent
in the case of Eurodollar Advances at least
two (2) Business Days' irrevocable prior
notice by telephone or telecopy and shall
immediately confirm any such telephone notice
with a written Request for Advance; provided,
however, that the failure by the Borrower to
confirm any notice by telephone or telecopy
with a Request for Advance shall not
invalidate any notice so given. The Agent,
whose determination shall be conclusive,
shall determine the available Eurodollar
Bases as of the second (2nd) Business Day
prior to the date of the requested Advance
and shall promptly notify the Borrower of the
same and the Borrower shall promptly confirm
in writing receipt of such notification. The
Eurodollar Advance Period for each Eurodollar
Advance shall in all events be either one,
two, three, six, nine, or, if available,
twelve months. Failure by the Borrower to
confirm any telephonic notice in writing
shall not invalidate any notice so given.
Upon receipt of such notice from the
Borrower, the Agent shall promptly notify
each Lender by telephone or telecopy of the
contents thereof.
(ii) Repayments and Reborrowings.
At least two (2) Business Days prior to each
Payment Date for a Eurodollar Advance, the
Borrower shall give the Agent written notice
specifying whether all or a portion of any
Eurodollar Advance outstanding on the Payment
Date (a) is to be repaid and then reborrowed
in whole or in part as a new Eurodollar
Advance, in which case such notice shall also
specify the Eurodollar Advance Period which
the Borrower shall have selected for such new
Eurodollar Advance, (b) is to be repaid and
then reborrowed in whole or in part as a Base
Rate Advance, or (c) is to be repaid and not
reborrowed. Upon such Payment Date such
Eurodollar Advance will, subject to the
provisions hereof, be so repaid and, as
applicable, reborrowed.
(iii) Miscellaneous.
Notwithstanding any term or provision of this
Agreement which may be construed to the
contrary, each Eurodollar Advance shall be in
a principal amount of no less than $5,000,000
and in an integral multiple of $1,000,000 in
excess thereof, and at no time shall the
aggregate number of all Eurodollar Advances
then outstanding exceed four (4).
(c) Notification of Lenders. Upon
receipt of a (i) Request for Advance or a
telephone or telecopy request for Advance, (ii)
notification from an Issuing Bank that a draw has
been made under any Letter of Credit, or (iii)
notice from the Borrower with respect to any
outstanding Advance prior to the Payment Date for
such Advance, the Agent shall promptly notify each
Lender by telephone or telecopy of the contents
thereof and the amount of each Lender's portion of
any such Advance. Each Lender shall, not later
than 2:00 p.m. (New York time) on the date
specified for such Advance in such notice, make
available to the Agent at the Agent's office, or
at such account as the Agent shall designate, the
amount of such Lender's portion of the Advance in
immediately available funds.
(d) Disbursement. Prior to 3:00 p.m.
(New York time) on the date of an Advance
hereunder, the Agent shall, subject to the
satisfaction of the conditions set forth in
Article 3 hereof, disburse the amounts made
available to the Agent by the Lenders in like
funds by transferring the amounts so made
available by deposit into the Borrower's account
maintained with Citibank or by wire transfer
pursuant to the Borrower's instructions. Unless
the Agent shall have received notice from a Lender
prior to 12:30 p.m. (New York time) on the date of
any Advance that such Lender will not make
available to the Agent such Lender's ratable
portion of such Advance, the Agent may assume that
such Lender has made or will make such portion
available to the Agent on the date of such Advance
and the Agent may, in its sole discretion and in
reliance upon such assumption, make available to
the Borrower on such date a corresponding amount.
If and to the extent such Lender shall not have
so made such ratable portion available to the
Agent, such Lender agrees to repay to the Agent
forthwith on demand such corresponding amount
together with interest thereon, for each day from
the date such amount is made available to the
Borrower until the date such amount is repaid to
the Agent, (x) for the first two Business Days, at
the rate on overnight Federal funds transactions
with members of the Federal Reserve System
arranged by Federal funds brokers, as published
for such day by the Federal Reserve Bank of New
York, and (y) thereafter, at the Base Rate. If
such Lender shall repay to the Agent such
corresponding amount, such amount so repaid shall
constitute such Lender's portion of the applicable
Advance for purposes of this Agreement and if both
such Lender and the Borrower shall pay and repay
such corresponding amount, the Agent shall
promptly relend to the Borrower such corresponding
amount. If such Lender does not repay such
corresponding amount immediately upon the Agent's
demand therefor, the Agent shall notify the
Borrower and the Borrower shall immediately pay
such corresponding amount to the Agent. The
failure of any Lender to fund its portion of any
Advance shall not relieve any other Lender of its
obligation, if any, hereunder to fund its
respective portion of the Advance on the date of
such borrowing, but no Lender shall be responsible
for any such failure of any other Lender. In the
event that a Lender for any reason fails or
refuses to fund its portion of an Advance in
violation of this Agreement, then, until such time
as such Lender has funded its portion of such
Advance, or all other Lenders have received
payment in full (whether by repayment or
prepayment) of the principal and interest due in
respect of such Advance, such non-funding Lender
shall (i) have no right to vote regarding any
issue on which voting is required or advisable
under this Agreement or any other Loan Document,
and (ii) shall not be entitled to receive any
payments of principal, interest or fees from the
Agent (or the other Lenders) in respect of its
Loans.
(e) Special Provisions Pertaining to
Swing Loans.
(i) The Borrower shall give the Agent
written notice in the form of a Request for
Advance, or notice by telephone or telecopy no
later than 11:00 a.m. (New York time) on the date
on which the Borrower wishes to receive an Advance
of any Swing Loan followed immediately by a
Request for Advance; provided, however, that the
failure by the Borrower to confirm any notice by
telephone or telecopy with a Request for Advance
shall not invalidate any notice so given. If the
Swing Bank, in its sole discretion, elects to make
the requested Swing Loan, the Advance shall be
made on the date specified in the notice or the
Request for Advance and such notice or Request for
Advance shall specify (i) the amount of the
requested Advance, and (ii) instructions for the
disbursement of the proceeds of the requested
Advance. The Swing Bank shall have no duty or
obligation to make any Swing Loans hereunder and
the Swing Bank shall not make any Swing Loans
unless, on the date of the requested Advance
thereof, the Borrower satisfies each of the
conditions precedent to an Advance set forth in
Section 3.2 hereof. In the event the Swing Bank
in its sole and absolute discretion elects to make
any requested Swing Loan, the Swing Bank shall
make the proceeds of such Swing Loan available to
the Borrower by deposit of U.S. dollars in same
day funds by wire transfer in accordance with the
applicable notice or Request for Advance.
(ii) The Agent shall notify each Lender
no less frequently than weekly, as determined by
the Agent, of the principal amount of Swing Loans
outstanding as of 3:00 p.m. (New York City time)
as of such date and each Lender's pro rata share
thereof. Each Lender shall before 2:00 p.m. (New
York City time) on the next Business Day (the
"Settlement Date") make available to the Agent, in
immediate available funds, the amount of its pro
rata share of such principal amount of Swing Loans
outstanding. Upon such payment by a Lender, such
Lender shall be deemed to have made a Revolving
Loan to the Borrower, notwithstanding any failure
of the Borrower to satisfy the conditions in
Section 3.2. The Agent shall use such funds to
repay the principal amount of Swing Loans to the
Swing Bank. All interest due on the Swing Loans
prior to the Settlement Date shall be payable to
the Swing Bank. Additionally, If at any time any
Swing Loans are outstanding, any of the events
described in clauses (g) or (h) of Section 8.1
hereof shall have occurred, then each Lender shall
automatically upon the occurrence of such event
and without any action on the part of the Swing
Bank, the Borrower, the Agent or the Lenders be
deemed to have purchased an undivided
participation in the principal and interest of all
Swing Loans then outstanding in an amount equal to
such Lender's Commitment Ratio and each Lender
shall, notwithstanding such Event of Default,
immediately pay to the Agent for the account of
the Swing Bank in immediately available funds, the
amount of such Lender's participation (and upon
receipt thereof, the Swing Bank shall deliver to
such Lender a loan participation certificate dated
the date of receipt of such funds in such amount).
The disbursement of funds in connection with the
settlement of Swing Loans hereunder shall be
subject to the terms and conditions of
Section 2.2(e) hereof.
ARTICLE 1Section .2 Interest.
(a) On Loans. Interest on Advances
under the Revolving Loans and interest on the Term
Loan, subject to Section 2.3(b) hereof, shall be
payable as follows:
(i) On Base Rate Advances.
Interest on each Base Rate Advance shall be
computed for the actual number of days elapsed on
the basis of a hypothetical year of 360 days and
shall be payable monthly in arrears on the first
day of each calendar month, commencing on May 1,
1997. Interest on Base Rate Advances then
outstanding shall also be due and payable on the
Maturity Date. Interest shall accrue and be
payable on each Base Rate Advance made with
respect to the Revolving Loans and the Term Loan
at the simple per annum interest rate equal to the
sum of (A) the Base Rate, and (B) the applicable
Interest Rate Margin.
(ii) On Eurodollar Advances.
Interest on each Eurodollar Advance shall be
computed on the basis of a hypothetical 360-day
year for the actual number of days elapsed and
shall be payable in arrears on (x) the Payment
Date for such Advance, and (y) if the Eurodollar
Advance Period for such Advance is greater than
three (3) months, on each three month anniversary
of such Advance. Interest on Eurodollar Advances
then outstanding shall also be due and payable on
the Maturity Date. Interest shall accrue and be
payable on each Eurodollar Advance made with
respect to the Revolving Loans and the Term Loan
at a rate per annum equal to the sum of (A) the
Eurodollar Basis applicable to such Eurodollar
Advance, and (B) the applicable Interest Rate
Margin.
(b) Upon Default. Upon the occurrence
of an Event of Default and at the election of the
Majority Lenders, interest on the outstanding
Obligations shall accrue at the Default Rate from
the date of such Event of Default. Interest
accruing at the Default Rate shall be payable on
demand and in any event on the Maturity Date and
shall accrue until the earliest to occur of (i)
waiver of the applicable Event of Default in
accordance with Section 10.12 hereof, (ii)
agreement by the Majority Lenders to rescind the
charging of interest at the Default Rate, or (iii)
payment in full of the Obligations. The Lenders
shall not be required to (i) accelerate the
maturity of the Loans, (ii) terminate the
Commitments, or (iii) exercise any other rights or
remedies under the Loan Documents in order to
charge interest hereunder at the Default Rate.
(c) Computation of Interest. In
computing interest on any Advance, the date of
making the Advance shall be included and the date
of payment shall be excluded; provided, however,
that if an Advance is repaid on the date that it
is made, one (1) day's interest shall be due with
respect to such Advance.
Section 2.4 Fees.
(a) Fee Letter. The Borrower agrees to
pay to the Agent, for its benefit and the benefit
of the Lenders, such fees as are set forth in the
Fee Letter.
(b) Unused Line Fee. The Borrower
agrees to pay to the Lenders, in accordance with
the Lenders' Commitment Ratios relating to the
Revolving Loan Commitment, an unused line fee on
the Available Revolving Loan Commitment for each
day from the Agreement Date through the Maturity
Date (or the date of any earlier prepayment in
full of the Obligations), at a rate of one-half of
one percent (.50%) per annum. Such unused line
fee shall be computed on the basis of a
hypothetical year of 360 days for the actual
number of days elapsed, shall be payable quarterly
in arrears for each quarter on the first day of
the immediately succeeding calendar quarter,
commencing on May 1, 1997, and if then unpaid, on
the Maturity Date (or the date of any earlier
prepayment in full of the Obligations), and shall
be fully earned when due and non-refundable when
paid.
(c) Letter of Credit Fees.
(i) The Borrower shall pay to the
Lenders, in accordance with the Lenders'
respective Commitment Ratios relating to the
Revolving Loan Commitment, a fee on the stated
amount of any outstanding Letters of Credit for
each day from the Date of Issue through the
Maturity Date (or the date of any earlier
prepayment in full of the Obligations) at a rate
of three percent (3.0%) per annum on the amount of
the Letter of Credit Obligations. Such Letter of
Credit fee shall be computed on the basis of a
hypothetical year of 360 days for the actual
number of days elapsed, shall be payable monthly
in arrears for each month on the first day of the
succeeding calendar month, commencing on May 1,
1997, and if then unpaid, on the Maturity Date (or
the date of any earlier prepayment in full of the
Obligations), and shall be fully earned when due
and non-refundable when paid.
(ii) The Borrower shall also pay to
each Issuing Bank, (A) a fee on the stated amount
of each Letter of Credit issued by such Issuing
Bank for each day from the Date of Issue through
the expiration date of each such Letter of Credit
(or any earlier prepayment in full of the
Obligations) at a rate of one-quarter of one
percent (.25%) per annum, which fee shall be
computed on the basis of a hypothetical year of
360 days for the actual number of days elapsed,
shall be payable monthly in arrears for each month
on the first day of the next succeeding month,
commencing on May 1, 1997, and, if unpaid on the
Maturity Date (or any earlier prepayment in full
of the Obligations), and (B) a fee in the amount
of $125.00 for issuing, amending and renewing any
Letter of Credit, which fee shall be due and
payable on the date of each issuance, amendment or
renewal of any Letter of Credit. Each of the
foregoing fees shall be fully earned when due, and
non-refundable when paid.
ARTICLE 1Section .2 Prepayment/Reduction of
Commitment.
(a) The principal amount of any Base
Rate Advance may be prepaid in full or in part at
any time upon written notice to the Agent not
later than 11:00 a.m. (New York time) on the
Business Day of such prepayment, without penalty;
and the principal amount of any Eurodollar Advance
may be prepaid prior to the applicable Payment
Date, upon two (2) Business Days' prior written
notice to the Agent, provided that the Borrower
shall reimburse the Lenders and the Agent, on the
earlier of demand or the Maturity Date, for any
loss or out-of-pocket expense incurred by the
Lenders or the Agent in connection with such
prepayment, as set forth in Section 2.9 hereof.
Each notice of prepayment shall be irrevocable.
Upon receipt of any notice of prepayment, the
Agent shall promptly notify each Lender of the
contents thereof by telephone or telecopy and of
such Lender's portion of the prepayment.
Notwithstanding the foregoing, the Borrower shall
not make any prepayment of the Revolving Loans
unless and until the balance of the Swing Loans
then outstanding is zero. Other than with respect
to the Swing Loans and amounts required to be
applied to the Loans pursuant to Section 5.15
hereof, prepayments of principal hereunder (a)
with respect to Base Rate Advances, shall be in
minimum amounts of $1,000,000 and integral
multiples of $100,000 in excess thereof, and (b)
with respect to Eurodollar Rate Advances shall be
in minimum amounts of $5,000,000 and integral
multiples of $1,000,000 in excess thereof. Each
such prepayment of Advances outstanding under the
Term Loan shall permanently reduce the Term Loan
Commitment by a corresponding amount and shall be
applied to reduce the principal payments due under
Section 2.6(b) hereof in the inverse order of
maturity. Each such prepayment of Advances
outstanding under the Revolving Loan Commitment
shall not reduce the Revolving Loan Commitment.
(b) The Borrower shall have the right,
at any time and from time to time after the
Agreement Date and prior to the Maturity Date,
upon at least three (3) Business Days' prior
written notice to the Agent, without premium or
penalty, to cancel or reduce permanently all or a
portion of the Revolving Loan Commitment on a pro
rata basis among the Lenders in accordance with
the Commitment Ratios, provided that any such
partial reduction shall be made in an amount not
less than $5,000,000 and in integral multiples of
$1,000,000 in excess thereof. As of the date of
cancellation or reduction set forth in such
notice, the Revolving Loan Commitment shall be
permanently reduced to the amount stated in the
Borrower's notice for all purposes herein, and the
Borrower shall pay to the Agent for the account of
the Lenders the amount necessary to reduce the
principal amount of the Revolving Loans then
outstanding to not more than the amount of the
Revolving Loan Commitment as so reduced, together
with accrued interest on the amount so prepaid and
the unused line fee set forth in Section 2.4(b)
accrued through the date of the reduction with
respect to the amount reduced, and shall reimburse
the Agent and the Lenders for any loss or
out-of-pocket expense incurred by any of them in
connection with such payment as set forth in
Section 2.9.
ARTICLE 1Section .3 Repayment.
(a) The Revolving Loans. The principal
balance of all Revolving Loans then outstanding
shall be due and payable in full on the Maturity
Date and as may be required by Section 2.6(c)
hereof. Notwithstanding the foregoing, however,
in the event that at any time and for any reason
there shall exist a Borrowing Base Deficiency, the
Borrower shall immediately pay to the Agent an
amount equal to the Borrowing Base Deficiency,
which payment shall constitute a mandatory payment
of the Revolving Loans hereunder.
(b) The Term Loans. The outstanding
principal balance of the Term Loan shall be repaid
by the Borrower in quarterly installments each in
the amount of $2,250,000, commencing June 30,
1997, and at the end of each calendar quarter
thereafter, through the Maturity Date.
Additionally, the Term Loan shall be repaid as may
be required by Section 2.6(c) hereof. Any
remaining unpaid principal and interest on the
Term Loan shall be due and payable in full on the
Maturity Date.
(c) Other Mandatory Repayments.
(i) In the event that after the
Agreement Date, the Borrower shall issue any
Capital Stock, shall sell any of its assets (other
than sales of Inventory in the ordinary course of
its business or pursuant to the Lease Transactions
or the Receivables Securitization) or shall incur
any Funded Debt other than the Obligations, one
hundred percent (100%) of the Net Cash Proceeds
received by the Borrower from such issuance, sale
or incurrence shall be paid on the date of receipt
of the proceeds thereof by the Borrower to the
Lenders as a mandatory payment of the Revolving
Loans and the Term Loan, on a pro-rata basis. The
payment of the Term Loan due hereunder shall be
applied to reduce the Term Loan quarterly
principal installments set forth in Section 2.6(b)
in the inverse order of maturity. The Revolving
Loan Commitment shall be permanently reduced by
the amount of the payment of the Revolving Loans
due hereunder, whether or not such payment is
made. Nothing in this Section shall authorize the
Borrower to issue any Capital Stock, sell any
assets or incur any Funded Debt except as
expressly permitted by this Agreement.
(ii) Upon the completion of the
Subsequent Lease Transaction, one hundred percent
(100%) of the Net Cash Proceeds received by the
Borrower from such transaction shall be paid on
the date of receipt of the proceeds thereof by the
Borrower to the Lenders as a mandatory payment of
the Loans. Such Net Cash Proceeds in an aggregate
amount of up to $43,000,000 shall be applied as a
mandatory payment of the Revolving Loans, but
shall not reduce the Revolving Loan Commitment.
Such Net Cash Proceeds in excess of $43,000,000
shall be applied as a mandatory payment of the
Revolving Loans and the Term Loan, and shall
reduce the Revolving Loan Commitment, in the
manner set forth in Section 2.6(c)(i).
(iii) Notwithstanding any other
term or condition of this Agreement which may be
to the contrary, the Borrower shall reduce the
total outstanding amount of the Revolving Loans
(including the Swing Loans) to $30,000,000 for a
period of not less than forty-five (45)
consecutive days during each twelve (12) month
period (the "Cleanup Period"), commencing on the
Agreement Date and each anniversary of the
Agreement Date, during the term of this Agreement.
ARTICLE 1Section .4 Notes; Loan Accounts.
(a) The Loans shall be repayable in
accordance with the terms and provisions set forth
herein, and shall be evidenced by the Notes. One
each of the Revolving Loan Notes shall be payable
to the order of each Lender in accordance with the
respective Commitment Ratio of such Lender. One
each of the Term Loan Notes shall be payable to
the order of each Lender in accordance with the
respective Commitment Ratio of such Lender. The
Notes shall be issued by the Borrower to the
Lenders and shall be duly executed and delivered
by Authorized Signatories.
(b) The Agent may open and maintain on
its books in the name of the Borrower a loan
account with respect to the Loans and interest
thereon (the "Loan Account"). The Agent shall
debit such Loan Account for the principal amount
of each Advance made by it on behalf of the
Lenders, accrued interest thereon, and all other
amounts which shall become due from the Borrower
pursuant to this Agreement and shall credit Loan
Account for each payment which the Borrower shall
make in respect to the Obligations. The records
of the Agent with respect to such Loan Account
shall be conclusive evidence of the Loans and
accrued interest thereon, absent manifest error.
ARTICLE 1Section .5 Manner of Payment.
(a) When Payments Due.
(i) Each payment (including any
prepayment) by the Borrower on account of the
principal of or interest on the Loans, fees, and
any other amount owed to the Lenders or the Agent
under this Agreement, the Notes, or the other Loan
Documents shall be made not later than 12:00 noon
(New York time) on the date specified for payment
under this Agreement or any other Loan Document to
the Agent at the Agent's Office, for the account
of the Lenders or the Agent, as the case may be,
in lawful money of the United States of America in
immediately available funds. Any payment received
by the Agent after 12:00 noon (New York time)
shall be deemed received on the next Business Day.
In the case of a payment for the account of a
Lender, the Agent will promptly thereafter
distribute the amount so received in like funds to
such Lender. If the Agent shall not have received
any payment from the Borrower as and when due, the
Agent will promptly notify the Lenders
accordingly.
(ii) If any payment under this
Agreement or any of the Notes shall be specified
to be made upon a day which is not a Business Day,
it shall be made on the next succeeding day which
is a Business Day, and such extension of time
shall in such case be included in computing
interest and fees, if any, in connection with such
payment.
(b) No Deduction.
(i) The Borrower agrees to pay
principal, interest, fees, and all other amounts
due hereunder or under the Notes without set-off
or counterclaim or any deduction whatsoever. If
the Borrower shall hereafter be required by law to
deduct any taxes from or in respect of any sum
payable hereunder or under any Note to any Lender,
any Issuing Bank or the Agent, (A) the sum payable
shall be increased as may be necessary so that
after making all required deductions (including
deductions applicable to additional sums payable
under this Section 2.8(b)), such Lender, Issuing
Bank or the Agent (as the case may be) receives an
amount equal to the sum it would have received had
no such deductions been made, (B) the Borrower
shall make such deductions and (C) the Borrower
shall pay the full amount deducted to the relevant
taxation authority or other authority in
accordance with applicable law.
(ii) Each Lender agrees to
deliver to the Borrower and the Agent from time to
time, a true and correct certificate executed in
duplicate by a duly authorized officer of such
Lender before or promptly upon the occurrence of
any event requiring a change in the most recent
certificate previously delivered by it to the
Borrower and the Agent pursuant to this Section
2.8(b). The execution and delivery hereof by a
Lender shall be deemed to be a certification that
such Lender falls within subsection (A) below, and
no further certificates need to be delivered by
such Lender until the occurrence of one of the
events set forth in the preceding sentence. Each
certificate required to be delivered pursuant to
this Section 2.8(b) shall certify as to one of the
following:
(A) that such Lender shall continue
to receive payments hereunder without
deduction or withholding of United States
federal income tax;
(B) that such Lender cannot
continue to receive payments hereunder
without deduction or withholding of United
States federal income tax as specified
therein but does not require additional
payments because it is entitled to recover
the full amount of any such deduction or
withholding from a source other than the
Borrower or from a tax credit or exemption;
or
(C) that such Lender is no longer
capable of receiving payments hereunder
without deduction or withholding of United
States federal income tax as specified
therein by reason of a change in law
(including the Code or applicable tax treaty)
after the later of the Agreement Date or the
date on which a Lender became a Lender
pursuant to Section 10.5 hereof and that it
is not capable of recovering the full amount
of the same from a source other than the
Borrower or from a tax credit or exemption.
(c) Inadequate Payments. If on the
date on which any amount shall be due and payable
by the Borrower in regard to the Obligations, the
amount received by the Agent from the Borrower or
withdrawn by the Agent from the Clearing Account
pursuant to Section 5.15(c) hereof shall not be
adequate to pay the amount which shall be so due
and payable, then the Agent shall be authorized,
but shall not be obligated, to make a Base Rate
Advance on behalf of the Lenders to the Borrower
by crediting the amount of such Base Rate Advance
to the Loan Account hereof pursuant to the
provisions of Section 2.7(b) hereof, whereupon the
Agent shall debit the Loan Account hereof in a
like amount in payment of the part of the
Obligations which shall then be due and payable.
No further authorization, direction or approval by
the Borrower shall be required to be given by the
Borrower for the Agent to take the action
described in this Section 2.8(c).
ARTICLE 1Section .6 Reimbursement. Whenever
any Lender shall sustain or incur any losses or
out-of-pocket expenses in connection with (i)
failure by the Borrower to borrow or reborrow any
Eurodollar Advance, or reborrow any Advance as a
Eurodollar Advance, in each case, after having
given notice of its intention to borrow in
accordance with Section 2.2 hereof (whether by
reason of the election of the Borrower not to
proceed or the non-fulfillment of any of the
conditions set forth in Article 3), or (ii)
prepayment of any Eurodollar Advance in whole or
in part, the Borrower agrees to pay to such
Lender, upon the earlier of such Lender's demand
or the Maturity Date, an amount sufficient to
compensate such Lender for all such losses and-
out-of-pocket expenses. Such Lender's good faith
determination of the amount of such losses and
out-of-pocket expenses, absent manifest error,
shall be binding and conclusive. Losses subject
to reimbursement hereunder shall include, without
limiting the generality of the foregoing, expenses
incurred by any Lender or any participant of such
Lender permitted hereunder in connection with the
re-employment of funds prepaid, repaid, not
borrowed, or paid, as the case may be, and any
lost profit of such Lender or any participant of
such Lender over the remainder of the Eurodollar
Advance Period for such prepaid Advance.
ARTICLE 1Section .7 Pro Rata Treatment.
(a) Advances. Each Advance with
respect to the Term Loan and the Revolving Loans
from the Lenders under this Agreement shall be
made pro rata on the basis of their respective
Commitment Ratios.
(b) Payments. Each payment and
prepayment of the principal of the Term Loan and
the Revolving Loans and each payment of interest
on the Term Loan and the Revolving Loans received
from the Borrower shall be made by the Agent to
the Lenders pro rata on the basis of their
respective unpaid principal amounts outstanding
immediately prior to such payment or prepayment
(except in cases when a Lender's right to receive
payments is restricted pursuant to Section 2.2(e)
hereof). If any Lender shall obtain any payment
(whether involuntary, through the exercise of any
right of set-off, or otherwise) on account of the
Term Loan or the Revolving Loans in excess of its
ratable share of the Loans under its Commitment
Ratio (or in violation of any restriction set
forth in Section 2.2(e) hereof), such Lender shall
forthwith purchase from the other Lenders such
participation in the Loans made by them as shall
be necessary to cause such purchasing Lender to
share the excess payment ratably with each of
them; provided, however, that if all or any
portion of such excess payment is thereafter
recovered from such purchasing Lender, such
purchase from each Lender shall be rescinded and
such Lender shall repay to the purchasing Lender
the purchase price to the extent of such recovery
without interest thereon unless the Lender
obligated to repay such amount is required to pay
interest. The Borrower agrees that any Lender so
purchasing a participation from another Lender
pursuant to this Section 2.10(b) may, to the
fullest extent permitted by law, exercise all its
rights of payment (including the right of set-off)
with respect to such participation as fully as if
such Lender were the direct creditor of the
Borrower in the amount of such participation.
ARTICLE 1Section .8 Application of Payments.
(a) Payments Prior to Acceleration.
Prior to the acceleration of the Obligations under
Section 8.2 hereof, and other than with respect to
payments required to be made pursuant to Section
2.6(c) hereof (which shall be applied as set forth
in Section 2.6(c) hereof), if some but less than
all amounts due from the Borrower are received by
the Agent, the Agent shall distribute such amounts
in the following order of priority: FIRST, to the
payment of interest then due and payable on the
Swing Loans, the Revolving Loans and the Term
Loan; SECOND, to the payment of principal then due
and payable on the Swing Loans, THIRD, to the
payment of principal then due and payable on the
Revolving Loans; FOURTH, to the payment of
principal then due and payable under
Section 2.6(b) on the Term Loan; FIFTH, to the
payment of any fees then due and payable to the
Agent hereunder or under any other Loan Document;
SIXTH, to the payment of any fees then due and
payable to the Lenders and the Issuing Banks
hereunder or under any other Loan Documents;
SEVENTH, to the extent of any Letter of Credit
Obligations then outstanding, to the Letter of
Credit Reserve Account; EIGHTH, to the payment of
all other Obligations not otherwise referred to in
this Section 2.11(a) then due and payable
hereunder or under the other Loan Documents; and
NINTH, to the costs and expenses (including
attorneys' fees and expenses), if any, incurred by
the Agent in the collection of such amounts under
this Agreement or any of the other Loan Documents.
(b) Payments Subsequent to
Acceleration. Subsequent to the acceleration of
the Obligations under Section 8.2 hereof, payments
and prepayments with respect to the Obligations
made to the Agent, the Lenders, the Issuing Banks
or otherwise received by the Agent, any Lender,
any Issuing Bank (from realization on Collateral
or otherwise) shall be distributed in the
following order of priority (subject, as
applicable, to Section 2.10 hereof): FIRST, to
the costs and expenses (including attorneys' fees
and expenses), if any, incurred by the Agent, any
Lender, any Issuing Bank in the collection of such
amounts under this Agreement or of the Loan
Documents, including, without limitation, any
costs incurred in connection with the sale or
disposition of any Collateral; SECOND, to the
payment of interest then due and payable on the
Swing Loans; THIRD, to the payment of the
principal of any Swing Loans then outstanding;
FOURTH, to any fees then due and payable to the
Agent under this Agreement or any other Loan
Document; FIFTH, to any fees then due and payable
to the Lenders and the Issuing Banks under this
Agreement or any other Loan Document; SIXTH, to
the payment of interest then due and payable on
the Revolving Loans and the Term Loan; SEVENTH, to
the payment of principal of the Revolving Loans
then outstanding; EIGHTH to the payment of
principal on the Term Loan; NINTH, to the extent
of any Letter of Credit Obligations then
outstanding, to the Letter of Credit Reserve
Account; TENTH, to the payment of any obligation
under any Interest Hedge Agreement and any Foreign
Exchange Agreement between the Borrower, on the
one hand, and the Agent (or an affiliate of the
Agent) or one or more Lenders (or an affiliate of
a Lender), on the other hand; ELEVENTH, to any
other Obligations not otherwise referred to in
this Section 2.11(b); TWELFTH, to damages incurred
by the Agent or any Lender by reason of any breach
hereof or of any other Loan Document; and
THIRTEENTH, upon satisfaction in full of all
Obligations to the Borrower or as otherwise
required by law.
ARTICLE 1Section .9 Use of Proceeds. The
proceeds of the Loan shall be used by the Borrower
as follows:
(a) The proceeds of the Term Loan and
the initial Advance of Revolving Loans hereunder
shall be used on the Agreement Date to refinance
existing Indebtedness of the Borrower and to fund
transaction costs.
(b) The balance of the proceeds of the
Loans shall be used to fund capital expenditures
and for the Borrower's general operating capital
needs and other general corporate purposes to the
extent not inconsistent with the provisions of
this Agreement.
ARTICLE 1Section .10 All Obligations to
Constitute One Obligation. All Obligations shall
constitute one general obligation of the Borrower
and shall be secured by the Agent's security
interest (on behalf of the Lenders and the Issuing
Banks) and Lien upon all of the Collateral, and by
all other security interests and Liens heretofore,
now or at any time hereafter granted by the
Borrower to the Agent and the Lenders, to the
extent provided in the Security Documents under
which such Lien arises.
ARTICLE 1Section .11 Maximum Rate of
Interest. In no contingency or event whatsoever
shall the aggregate of all amounts deemed interest
on the Loans and charged or collected pursuant to
the terms of this Agreement or pursuant to the
Notes exceed the highest rate permissible under
any law which a court of competent jurisdiction
shall, in a final determination, deem applicable
thereto. In the event that such a court
determines that the Lenders have charged or
received interest hereunder in excess of the
highest applicable rate, the rate in effect
hereunder shall automatically be reduced to the
maximum rate permitted by Applicable Law and the
Lenders shall promptly refund to the Borrower any
interest received by them in excess of the maximum
lawful rate or, if so requested by the Borrower,
shall apply such excess to the principal balance
of the Obligations. It is the intent hereof that
the Borrower not pay or contract to pay, and that
the Lenders not receive or contract to receive,
directly or indirectly in any manner whatsoever,
interest in excess of that which may be paid by
the Borrower under Applicable Law.
ARTICLE 1Section .12 Letters of Credit.
(a) Subject to the terms and conditions
hereof, each Issuing Bank, on behalf of the
Lenders, and in reliance on the agreements of the
Lenders set forth in subsection (c) below, hereby
agrees to issue one or more Letters of Credit up
to an aggregate face amount equal to such Issuing
Bank's pro rata share of the Letter of Credit
Commitment; provided, however, that the Issuing
Banks shall not issue any Letter of Credit unless
the conditions precedent to the issuance thereof
set forth in Section 3.3 hereof have been
satisfied, and shall not issue any Letter of
Credit if any Default then exists or would be
caused thereby or if, after giving effect to such
issuance, the Available Revolving Loan Commitment
would be less than zero or there would exist a
Borrowing Base Deficiency; and provided further,
however, that at no time shall the total Letter of
Credit Obligations outstanding hereunder exceed
the Letter of Credit Commitment. Each Letter of
Credit shall (1) be denominated in U.S. dollars,
and (2) expire no later than the earlier to occur
of (A) the Maturity Date, and (B) 360 days after
its date of issuance (but may contain provisions
for automatic renewal provided that no Default or
Event of Default exists on the renewal date or
would be caused by such renewal). Each Letter of
Credit shall be subject to the Uniform Customs
and, to the extent not inconsistent therewith, the
laws of the State of New York. The Issuing Banks
shall not at any time be obligated to issue, or
cause to be issued, any Letter of Credit if such
issuance would conflict with, or cause such
Issuing Bank to exceed any limits imposed by, any
Applicable Law.
(b) The Borrower may from time to time
request that an Issuing Bank issue a Letter of
Credit. The Borrower shall execute and deliver to
the Agent and applicable Issuing Bank a Request
for Issuance of Letter of Credit for each Letter
of Credit to be issued by such Issuing Bank, not
later than 12:00 noon (New York time) on the fifth
(5th) Business Day preceding the date on which the
requested Letter of Credit is to be issued, or
such shorter notice as may be acceptable to the
Issuing Bank and the Agent. Upon receipt of any
such Request for Issuance of Letter of Credit,
subject to satisfaction of all conditions
precedent thereto as set forth in Section 3.3
hereof, the Issuing Bank shall process such
Request for Issuance of Letter of Credit and the
certificates, documents and other papers and
information delivered to it in connection
therewith in accordance with its customary
procedures and shall promptly issue the Letter of
Credit requested thereby. The Issuing Bank shall
furnish a copy of such Letter of Credit to the
Borrower and the Agent following the issuance
thereof. The Borrower shall pay or reimburse the
Issuing Bank for normal and customary costs and
expenses incurred by such Issuing Bank in issuing,
effecting payment under, amending or otherwise
administering the Letters of Credit.
(c) Immediately upon the issuance by an
Issuing Bank of a Letter of Credit and in
accordance with the terms and conditions of this
Agreement, such Issuing Bank shall be deemed to
have sold and transferred to each Lender, and each
Lender shall be deemed irrevocably and
unconditionally to have purchased and received
from such Issuing Bank, without recourse or
warranty, an undivided interest and participation,
to the extent of such Lender's Commitment Ratio,
in such Letter of Credit and the obligations of
the Borrower with respect thereto (including,
without limitation, all Letter of Credit
Obligations with respect thereto). At such time
as the Agent shall be notified by the Issuing Bank
that the beneficiary under any Letter of Credit
has drawn on the same, the Agent shall promptly
notify the Borrower and each Lender, by telephone
or telecopy, of the amount of the draw and, in the
case of each Lender, such Lender's portion of such
draw amount as calculated in accordance with its
Commitment Ratio.
(d) The Borrower hereby agrees to
immediately reimburse an Issuing Bank for amounts
paid by such Issuing Bank in respect of draws
under a Letter of Credit. In order to facilitate
such repayment, the Borrower hereby irrevocably
requests the Lenders, and the Lenders hereby
severally agree, on the terms and conditions of
this Agreement (other than as provided in Article
2 hereof with respect to the amounts of, the
timing of requests for, and the repayment of
Advances hereunder and in Article 3 hereof with
respect to conditions precedent to Advances
hereunder), with respect to any drawing under a
Letter of Credit, to make a Base Rate Advance on
each day on which a draw is made under any Letter
of Credit and in the amount of such draw, and to
pay the proceeds of such Advance directly to the
Issuing Bank to reimburse the Issuing Bank for the
amount paid by it upon such draw. Each Lender
shall pay its share of such Base Rate Advance by
paying its portion of such Advance to the Agent in
accordance with Section 2.2(e) hereof and its
Commitment Ratio, without reduction for any set-
off or counterclaim of any nature whatsoever and
regardless of whether any Default or Event of
Default then exists or would be caused thereby.
The disbursement of funds in connection with a
draw under a Letter of Credit pursuant to this
Section hereunder shall be subject to the terms
and conditions of Section 2.2(e) hereof. The
obligation of each Lender to make payments to the
Agent, for the account of the Issuing Bank, in
accordance with this Section 2.15 shall be
absolute and unconditional and no Lender shall be
relieved of its obligations to make such payments
by reason of noncompliance by any other Person
with the terms of the Letter of Credit or for any
other reason (other than the gross negligence of
the Issuing Bank in paying such Letter of Credit,
as determined by a final non-appealable judgment
of a court of competent jurisdiction). The Agent
shall promptly remit to the Issuing Bank the
amounts so received from the other Lenders. Any
overdue amounts payable by the Lenders to the
Issuing Bank in respect of a draw under any Letter
of Credit shall bear interest, payable on demand,
(x) for the first two Business Days, at the rate
on overnight Federal funds transactions with
members of the Federal Reserve System arranged by
Federal funds brokers, as published for such day
by the Federal Reserve Bank of New York, and (y)
thereafter, at the Base Rate.
(e) The Borrower agrees that each
Advance by the Lenders to reimburse the Issuing
Bank for draws under any Letter of Credit, shall,
for all purposes hereunder, be deemed to be a Base
Rate Advance under the Revolving Loan Commitment
and shall be payable and bear interest in
accordance with all other Base Rate Advances of
Revolving Loans.
(f) Borrower agrees that any action
taken or omitted to be taken by an Issuing Bank in
connection with any Letter of Credit, except for
such actions or omissions as shall constitute
gross negligence or willful misconduct on the part
of such Issuing Bank as determined by a final non-
appealable judgment of a court of competent
jurisdiction, shall be binding on the Borrower as
between the Borrower and the Issuing Bank, and
shall not result in any liability of the Issuing
Bank to the Borrower. The obligation of the
Borrower to reimburse an Issuing Bank for a
drawing under any Letter of Credit or the Lenders
for Advances made by them to Issuing Banks on
account of draws made under the Letters of Credit
shall be absolute, unconditional and irrevocable,
and shall be paid strictly in accordance with the
terms of this Agreement under all circumstances
whatsoever, including, without limitation, the
following circumstances:
(i) Any lack of validity or
enforceability of any Loan Document;
(ii) Any amendment or waiver of or
consent to any departure from any or all of
the Loan Documents;
(iii) Any improper use which may be
made of any Letter of Credit or any improper
acts or omissions of any beneficiary or
transferee of any Letter of Credit in
connection therewith;
(iv) The existence of any claim,
set-off, defense or any right which the
Borrower may have at any time against any
beneficiary or any transferee of any Letter
of Credit (or Persons for whom any such
beneficiary or any such transferee may be
acting), any Lender or any other Person,
whether in connection with any Letter of
Credit, any transaction contemplated by any
Letter of Credit, this Agreement, or any
other Loan Document, or any unrelated
transaction;
(v) Any statement or any
other documents presented under any Letter of
Credit proving to be insufficient, forged,
fraudulent or invalid in any respect or any
statement therein being untrue or inaccurate
in any respect whatsoever;
(vi) The insolvency of any
Person issuing any documents in connection
with any Letter of Credit;
(vii) Any breach of any
agreement between the Borrower and any
beneficiary or transferee of any Letter of
Credit;
(viii) Any irregularity in the
transaction with respect to which any Letter
of Credit is issued, including any fraud by
the beneficiary or any transferee of such
Letter of Credit;
(ix) Any errors, omissions,
interruptions or delays in transmission or
delivery of any messages, by mail, cable,
telegraph, wireless or otherwise, whether or
not they are in code;
(x) Any act, error, neglect
or default, omission, insolvency or failure
of business of any of the correspondents of
the Issuing Bank;
(xi) Any other circumstances
arising from causes beyond the control of the
Issuing Bank;
(xii) Payment by the Issuing
Bank under any Letter of Credit against
presentation of a sight draft or a
certificate which does not comply with the
terms of such Letter of Credit, provided that
such payment shall not have constituted gross
negligence or willful misconduct of the
Issuing Bank as determined by a final non-
appealable judgment of a court of competent
jurisdiction; and
(xiii) Any other circumstance or
happening whatsoever, whether or not similar
to any of the foregoing.
(g) If any change in Applicable Law,
any change in the interpretation or administration
thereof, or any change in compliance with
Applicable Law by the Issuing Bank as a result of
any request or directive of any Governmental
Authority, central bank or comparable agency
(whether or not having the force of law) after the
Agreement Date shall (i) impose, modify or deem
applicable any reserve (including, without
limitation, any imposed by the Board of Governors
of the Federal Reserve System), special deposit,
capital adequacy, assessment or other requirements
or conditions against letters of credit issued by
the Issuing Bank or (ii) impose on the Issuing
Bank any other condition regarding this Agreement
or any Letter of Credit or any participation
therein, and the result of any of the foregoing in
the determination of the Issuing Bank is to
increase the cost to the Issuing Bank of issuing
or maintaining any Letter of Credit or purchasing
or maintaining any participation therein, then, on
the earlier of the Maturity Date or a date not
more than five (5) days after demand by the
Issuing Bank, the Borrower agrees to pay to the
Issuing Bank, from time to time as specified by
the Issuing Bank, such additional amount or
amounts as the Issuing Bank determines will
compensate it for such increased costs, from the
date such change or action is effective, together
with interest on each such amount from the
Maturity Date or the date demanded, as applicable,
until payment in full thereof at the Base Rate. A
certificate as to such increased cost incurred by
the Issuing Bank as a result of any event referred
to in this paragraph submitted by the Issuing Bank
to the Borrower shall be conclusive, absent
manifest error, as to the amount thereof.
(h) The Borrower will indemnify and
hold harmless the Agent, each Issuing Bank and
each other Lender and each of their respective
employees, representatives, officers and directors
from and against any and all claims, liabilities,
obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever (including
reasonable attorneys' fees) which may be imposed
on, incurred by or asserted against the Agent,
such Issuing Bank or any such other Lender in any
way relating to or arising out of the issuance of
a Letter of Credit, except that the Borrower shall
not be liable to the Agent, any Issuing Bank or
any such Lender for any portion of such claims,
liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs,
expenses, or disbursements resulting from the
gross negligence or willful misconduct of the
Agent, such Issuing Bank or such Lender, as the
case may be, as determined by a final non-
appealable judgment of a court of competent
jurisdiction. This Section 2.15(h) shall survive
termination of this Agreement.
(i) Each Lender shall be responsible
(to the extent the Issuing Bank is not reimbursed
by the Borrower) for its pro rata share (based on
such Lender's Commitment Ratio) of any and all
reasonable out-of-pocket costs, expenses
(including reasonable legal fees) and
disbursements which may be incurred or made by the
Issuing Bank in connection with the collection of
any amounts due under, the administration of, or
the presentation or enforcement of any rights
conferred by any Letter of Credit, the Borrower's
or any guarantor's obligations to reimburse draws
thereunder or otherwise. In the event the
Borrower shall fail to pay such expenses of the
Issuing Bank within fifteen (15) days of demand
for payment by the Issuing Bank, each Lender shall
thereupon pay to the Issuing Bank its pro rata
share (based on such Lender's Commitment Ratio) of
such expenses within ten (10) days from the date
of the Issuing Bank's notice to the Lenders of the
Borrower's failure to pay; provided, however, that
if the Borrower shall thereafter pay such
expenses, the Issuing Bank will repay to each
Lender the amounts received from such Lender
hereunder.
ARTICLE 2
CONDITIONS PRECEDENT
ARTICLE 2Section .1 Conditions Precedent to
Initial Advance. The obligations of the Lenders
to undertake the Commitment and to make the
initial Advance hereunder, and the obligation of
the Issuing Banks to issue the initial Letter of
Credit hereunder, are subject to the prior
fulfillment of each of the following conditions:
(a) The Agent or the Lenders, as
appropriate, shall have received each of the
following, in form and substance satisfactory to
the Agent and the Lenders:
(i) This duly executed Agreement;
(ii) A duly executed Term Loan Note
to the order of each Lender in the amount of
such Lender's pro rata share of the Term Loan
Commitment;
(iii) A duly executed Revolving Loan
Note to the order of each Lender in the
amount of such Lender's pro rata share of the
Revolving Loan Commitment;
(iv) The Security Agreement and the
Intellectual Property Security Agreements,
each duly executed by the Borrower,
(v) The Subsidiary Security
Agreement duly executed by the Material
Subsidiaries;
(vi) Original Uniform Commercial
Code financing statements signed by Borrower
and each Material Subsidiary as debtor and
naming the Agent as secured party to be filed
in all appropriate jurisdictions, in such
form as shall be satisfactory to the Agent;
(vii) The Subsidiary Guaranty duly
executed by the Material Subsidiaries;
(viii) The Assignment of Notes, duly
executed by the Borrower and microcircuits,
with the original Finance Corp. Subordinated
Notes and all other applicable promissory
notes attached thereto;
(ix) The Pledge Agreement, duly
executed by the Borrower, together with the
certificates representing all of the Capital
Stock of the Borrower's domestic
Subsidiaries, and stocks powers duly endorsed
in blank;
(x) The Set-Off Waiver Letter,
duly executed by LGE;
(xi) The opinions of Sidley &
Austin, as counsel to the Borrower and the
Material Subsidiaries regarding the Loan
Documents and the Receivables Securitization,
addressed to each Lender, the Issuing Bank
and the Agent and satisfactory to them, dated
the Agreement Date;
(xii) The opinion of Richard F.
Vitkus, as general counsel to the Borrower
and the Material Subsidiaries regarding the
Loan Documents and the Receivables
Securitization, addressed to each Lender, the
Issuing Bank and the Agent and satisfactory
to them, dated the Agreement Date;
(xiii) The opinion of Paul Hastings
Janofsky & Walker LLP, as counsel to the
Agent, addressed to each Lender, the Issuing
Bank and the Agent and satisfactory to them,
dated the Agreement Date;
(xiv) The duly executed Request for
Advance for the initial Advance of the Loans;
(xv) A duly executed Borrowing Base
Certificate dated as of the Agreement Date;
(xvi) A loan certificate signed by
an Authorized Signatory of the Borrower in
substantially the form of Exhibit I attached
hereto, including a certificate of incumbency
with respect to each Authorized Signatory of
the Borrower, together with appropriate
attachments which shall include, without
limitation, the following: (A) a copy of the
Certificate of Incorporation of the Borrower
certified to be true, complete and correct by
the Secretary of State for the State of
Delaware, (B) a true, complete and correct
copy of the By-Laws of the Borrower, (C) a
true, complete and correct copy of the
resolutions of the Borrower authorizing the
borrowing hereunder and the execution,
delivery and performance by the Borrower of
the Loan Documents, (D) certificates of good
standing from each jurisdiction in which the
Borrower does business, and (E) copies of
employment contracts for key management level
employees of the Borrower;
(xvii) A loan certificate from each
Material Subsidiary by an Authorized
Signatory of such Material Subsidiary in
substantially the form of Exhibit I attached
hereto, including a certificate of incumbency
with respect to each Authorized Signatory of
such Material Subsidiary, together with
appropriate attachments which shall include,
without limitation, the following: (A) a
copy of the Certificate of Incorporation of
such Material Subsidiary certified to be
true, complete and correct by the Secretary
of State for the jurisdiction of its
incorporation, (B) a true, complete and
correct copy of the By-Laws of such Material
Subsidiary, (C) a true, complete and correct
copy of the resolutions of such Material
Subsidiary authorizing the execution,
delivery and performance of each Loan
Document to which it is a party, and (D)
certificates of good standing from each
jurisdiction in which such Material
Subsidiary is qualified to do business;
(xviii) Audited financial statements
for the Borrower for its 1996 fiscal year,
unaudited financial statements for the
Borrower for the month ending January 31,
1997, and pro-forma financial statements for
the Borrower's 1997 fiscal year on a month by
month basis;
(xix) Copies of certificates of
insurance and the related insurance policies
covering the assets of the Borrower and
otherwise meeting the requirements of
Section 5.5 hereof;
(xx) Copies of any pay-off letters,
termination statements, canceled mortgages
and the like required by the Agent in
connection with the removal of any Liens
(other than Permitted Liens) against the
assets of the Borrower or any Material
Subsidiary;
(xxi) Lien search results with
respect to the Borrower and all Material
Subsidiaries from all appropriate
jurisdictions and filing offices (including
search results from the United States Patent
and Trademark Office regarding the Tuning
Patents and the Borrower's Trademark
Property);
(xxii) Evidence satisfactory to the
Agent that the Liens granted pursuant to the
Security Documents will be first priority
perfected Liens on the Collateral (subject
only to Permitted Liens);
(xxiii) Evidence satisfactory to the
Agent and the Lenders that the Salomon Lease
Transaction has closed and that the Borrower
has received Net Cash Proceeds of at least
$80,000,000 as a result thereof (which may
include an amount of up to $2,000,000
(the"Escrow Amount") held in escrow for the
Borrower);
(xxiv) The Distribution Instructions
Letter (the "Distribution Instruction
Letter") duly executed by the Borrower and
Microcircuits, providing for irrevocable
payment instructions from the Borrower to the
Receivables Trustee instructing that all
payments of Servicing Fees (as defined in the
Pooling and Servicing Agreement) to the
Borrower under the Pooling and Servicing
Agreement be paid directly to the Clearing
Account, and further providing for
irrevocable payment instructions from the
Borrower and Microcircuits to Finance Corp.
instructing that all payments to the Borrower
or Microcircuits under the Receivables
Purchase Agreements be paid directly to the
Clearing Account, in substantially the form
of Exhibit J attached hereto;
(xxv) The Agent shall have received
satisfactory evidence that the Receivables
Securitization has closed with liquidity
backstop commitments of at least $130,000,000
and shall have received a copy of the
Securitization Documents, duly executed by
each of the parties thereto, in form and
substance satisfactory to the Agent;
(xxvi) No change in the business,
assets, management, operations, financial
condition or prospects of the Borrower shall
have occurred since December 31, 1996, which
change, in the judgment of the Agent and the
Lenders, will have a Materially Adverse
Effect;
(xxvii) Payment of all fees and
expenses payable to the Agent, the affiliates
of the Agent and the Lenders in connection
with the execution and delivery of this
Agreement, including, without limitation,
fees and expenses of counsel to the Agent;
(xxviii) Evidence satisfactory to the
Agent and the Lenders that no Default or
Event of Default exists under the
Subordinated Debentures or will be caused by
the Borrower's execution of this Agreement or
the Loan Documents; and
(xxix) All such other documents as
the Agent may reasonably request, certified
by an appropriate governmental official or an
Authorized Signatory if so requested.
(b) The Agent and the Lenders shall
have received evidence reasonably satisfactory to
the Majority Lenders that as of the Agreement Date
the Borrower owns all of the issued and
outstanding Capital Stock of Finance Corp.
(c) The Agent shall be satisfied with
the Borrower's cash management system and shall
have received duly executed Blocked Account
Letters as required by Section 5.15.
(d) The Agent and the Lenders shall
have received evidence reasonably satisfactory to
the Majority Lenders that all Necessary
Authorizations are in full force and effect and
are not subject to any pending or threatened
reversal or cancellation, and the Agent and the
Lenders shall have received a certificate of an
Authorized Signatory so stating.
(e) All of the representations and
warranties of the Borrower under this Agreement
shall be true and correct, both before and after
giving effect to the application of the proceeds
of the initial Advance.
ARTICLE 2Section .2 Conditions Precedent to
Each Advance. The obligation of the Lenders to
make each Advance, including the initial Advance,
hereunder (but excluding Advances, the proceeds of
which are to reimburse (i) the Swing Bank for
Swing Loans or (ii) an Issuing Bank for amounts
drawn under a Letter of Credit), is subject to the
fulfillment of each of the following conditions
immediately prior to or contemporaneously with
such Advance:
(a) All of the representations and
warranties of the Borrower under this Agreement,
which, pursuant to Section 4.3 hereof, are made at
and as of the time of such Advance, shall be true
and correct at such time, both before and after
giving effect to the application of the proceeds
of the Advance, and the Agent shall have received
a certificate (which may be a Request for Advance)
to that effect signed by an Authorized Signatory
of the Borrower and dated the date of such
Advance;
(b) The incumbency of the Authorized
Signatories shall be as stated in the certificate
of incumbency contained in the certificate of the
Borrower delivered pursuant to Section 3.1(a) or
as subsequently modified and reflected in a
certificate of incumbency delivered to the Agent
and the Lenders;
(c) The most recent Borrowing Base
Certificate which shall have been delivered to the
Agent pursuant to Section 6.5(a) hereof shall
demonstrate that, after giving effect to the
making of such Advance, no Borrowing Base
Deficiency shall exist;
(d) There shall not exist on the date
of such Advance and after giving effect thereto, a
Default or an Event of Default hereunder; and
(e) The Agent and the Lenders shall
have received all such other certificates,
reports, statements, opinions of counsel, or other
documents as the Agent or Lenders may reasonably
request and all other conditions to the making of
such Advance which are set forth in this Agreement
shall have been fulfilled.
The Borrower hereby agrees that the delivery of
any Request for Advance hereunder shall be deemed
to be the certification of the Authorized
Signatory thereof that there does not exist, on
the date of the making of the Advance and after
giving effect thereto, a Default or an Event of
Default hereunder.
ARTICLE 2Section .3 Conditions Precedent to
Each Letter of Credit. The obligation of the
Issuing Banks to issue each Letter of Credit
(including the initial Letter of Credit) hereunder
is subject to the fulfillment of each of the
following conditions immediately prior to or
contemporaneously with the issuance of such Letter
of Credit:
(a) All of the representations and
warranties of the Borrower under this Agreement,
which, pursuant to Section 4.3 hereof, are made at
and as of the time of the issuance of such Letter
of Credit, shall be true and correct at such time,
both before and after giving effect to the
issuance of the Letter of Credit, and the Agent
shall have received a certificate (which may be a
Request for Issuance of Letter of Credit) to that
effect signed by an Authorized signatory of the
Borrower and dated the date of the issuance of
such Letter of Credit;
(b) The incumbency of the Authorized
Signatories shall be as stated in the certificate
of incumbency contained in the certificate of the
Borrower delivered pursuant to Section 3.1(a) or
as subsequently modified and reflected in a
certificate of incumbency delivered to the Agent
and the Lenders;
(c) The most recent Borrowing Base
Certificate which shall have been delivered to the
Agent pursuant to Section 6.5(a) hereof shall
demonstrate that, after giving effect to the
making of such Letter of Credit, no Borrowing Base
Deficiency shall exist;
(d) There shall not exist on the date
of issuance of such Letter of Credit, and after
giving effect thereto, a Default or an Event of
Default; and
(e) The Agent and the Issuing Bank
shall have received all such other certificates,
reports, statements, opinions of counsel, or other
documents as the Agent or Issuing Bank may
reasonably request and all other conditions to the
issuance of such Letter of Credit which are set
forth in this Agreement shall have been fulfilled.
The Borrower hereby agrees that the delivery of
any Request for Issuance of a Letter of Credit
hereunder shall be deemed to be the certification
of the Authorized Signatory thereof that there
does not exist, on the date of issuance of the
Letter of Credit and after giving effect thereto,
a Default or an Event of Default hereunder.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
ARTICLE 3Section .1 General Representations
and Warranties. In order to induce the Agent, the
Lenders and the Issuing Banks to enter into this
Agreement and to extend the Loans and issue the
Letters of Credit to the Borrower, the Borrower
hereby agrees, represents, and warrants that:
(a) Organization; Power; Qualification.
Each of the Borrower and the Borrower's
Subsidiaries is a corporation duly organized,
validly existing, and in good standing under the
laws of their respective states of incorporation,
has the corporate power and authority to own or
lease and operate its properties and to carry on
its business as now being and hereafter proposed
to be conducted, and is duly qualified and is in
good standing as a foreign corporation, and
authorized to do business, in each jurisdiction in
which the character of its properties or the
nature of its business requires such qualification
or authorization.
(b) Authorization; Enforceability. The
Borrower and each of the Borrower's Material
Subsidiaries has the power and has taken all
necessary corporate action to authorize it to
execute, deliver, and perform this Agreement and
each of the other Loan Documents to which it is a
party in accordance with the terms thereof and to
consummate the transactions contemplated hereby
and thereby. This Agreement and each of the other
Loan Documents to which the Borrower is a party
has been duly executed and delivered by the
Borrower, and is, and each of the other Loan
Documents to which the Borrower is a party is, a
legal, valid and binding obligation of the
Borrower, enforceable in accordance with its
terms.
(c) Partnerships; Joint Ventures;
Subsidiaries. Neither Borrower nor any of its
Subsidiaries is a partner or joint venturer in any
partnership or joint venture other than (i) the
Borrower's Subsidiaries listed on Schedule 4.1(c)-
1 and (ii) the partnerships and joint ventures
listed on Schedule 4.1(c)-2. Schedule 4.1(c)-2
sets forth, for each partnership or joint venture
that is not a Subsidiary of Borrower, a complete
and accurate statement of (a) the percentage
ownership of each such partnership or joint
venture by Borrower or any of its Subsidiaries,
(b) the state or other jurisdiction of formation
or incorporation, as appropriate, of each such
partnership or joint venture, (c) each state in
which each such partnership or joint venture is
qualified to do business on the date of this
Agreement and (d) all of each such partnership's
or joint venture's trade names, trade styles or
doing business forms on the date of this
Agreement. Except as set forth on Schedule
4.1(c)-1 attached hereto, the Borrower has no
Subsidiaries.
(d) Capital Stock and Related Matters.
The authorized Capital Stock of Borrower consists
of one hundred million (100,000,000) shares of
common stock, $1.00 par value per share, of which
sixty-six million four hundred forty-two thousand
seven hundred eighteen (66,442,718) shares were
issued and outstanding as of March 14, 1997 and
are fully paid and non-assessable. As of the
Agreement Date, all holders of five percent (5%)
or more of such Capital Stock, together with a
description of such Capital Stock held by such
Person, are listed on Schedule 4.1(d). Except as
described on Schedule 4.1(d) attached hereto, the
Borrower has outstanding no stock or securities
convertible into or exchangeable for any shares of
its Capital Stock, nor are there any preemptive or
similar rights to subscribe for or to purchase, or
any other rights to subscribe for or to purchase,
or any options for the purchase of, or any
agreements providing for the issuance (contingent
or otherwise) of, or any calls, commitments, or
claims of any character relating to, any Capital
Stock or any stock or securities convertible into
or exchangeable for any Capital Stock. The
Borrower is not subject to any obligation
(contingent or otherwise) to repurchase or
otherwise acquire or retire any shares of its
Capital Stock or to register any shares of its
Capital Stock, and there are no agreements
restricting the transfer of any shares of the
Borrower's Capital Stock.
(e) Compliance with laws, etc., of
Agreement, Other Loan Documents, and Contemplated
Transactions. The execution, delivery, and
performance of this Agreement and each of the
other Loan Documents in accordance with the terms
thereof and the consummation of the transactions
contemplated hereby and thereby do not and will
not (i) violate any Applicable Law, (ii) conflict
with, result in a breach of, or constitute a
default under the certificate of incorporation or
by-laws of the Borrower or any Material Subsidiary
or under any indenture, agreement, or other
instrument to which the Borrower or any Material
Subsidiary is a party or by which the Borrower or
any Material Subsidiary or any of their respective
properties may be bound, or (iii) result in or
require the creation or imposition of any Lien
upon or with respect to any property now owned or
hereafter acquired by the Borrower or any Material
Subsidiary except Permitted Liens.
(f) Necessary Authorizations. The
Borrower and each Material Subsidiary have
obtained all Necessary Authorizations, and all
such Necessary Authorizations are in full force
and effect. None of said Necessary Authorizations
is the subject of any pending or, to the best of
the Borrower's knowledge, threatened attack or
revocation, by the grantor of the Necessary
Authorization. Neither the Borrower nor any
Material Subsidiary is required to obtain any
additional Necessary Authorizations in connection
with the execution, delivery, and performance, in
accordance with the terms of this Agreement or any
other Loan Document, and the borrowing hereunder.
(g) Title to Properties. The Borrower
and each of the Borrower's Subsidiaries has good,
marketable, and legal title to, or a valid
leasehold interest in, all of its properties and
assets, and none of such properties or assets is
subject to any Liens (other than Permitted Liens)
which detract from the value of such properties or
assets or interferes with the business or
operations of the Borrower and the Borrower's
Subsidiaries as presently conducted or proposed to
be conducted.
(h) Material Contracts; Labor Matters.
Schedule 4.1(h) contains a complete list, as of
the date of this Agreement, of each contract or
agreement to which Borrower or any Material
Subsidiary is a party which is material to its
respective business, financial condition,
operations, prospects or property and, upon the
request of the Agent or any Lender, the Borrower
will provide the Agent or such Lender, as
applicable, with a copy of any such contract or
agreement. Except as disclosed on
Schedule 4.1(h): (a) no labor contract to which
Borrower or any Material Subsidiary is a party or
is otherwise subject is scheduled to expire prior
to the Maturity Date; (b) neither Borrower nor any
Material Subsidiary has, within the two-year
period preceding the date of this Agreement, taken
any action which would have constituted or
resulted in a "plant closing" or "mass layoff"
within the meaning of the Federal Worker
Adjustment and Retraining Notification Act of 1988
or any similar applicable federal, state or local
law, and Borrower has no reasonable expectation
that any such action is or will be required at any
time prior to the Maturity Date; and (c) on the
Agreement Date (i) neither Borrower nor any
Material Subsidiary is a party to any labor
dispute (other than any immaterial disputes with
Borrower's or such Material Subsidiary's employees
as individuals and not affecting Borrower's or
such Material Subsidiary's relations with any
labor group or its workforce as a whole) and (ii)
there are no pending or, to the Borrower's
knowledge, threatened strikes or walkouts relating
to any labor contracts to which Borrower or any
Material Subsidiary is a party or is otherwise
subject. Except as set forth on Schedule 4.1(h)
attached hereto, none of the employees of the
Borrower or any of the Borrower's Subsidiaries is
a party to any collective bargaining agreement
with the Borrower or any of the Borrower's
Subsidiaries.
(i) Taxes. All federal, state, and
other tax returns of the Borrower and each of the
Borrower's Subsidiaries required by law to be
filed have been duly filed, and all federal,
state, and other taxes, assessments, and other
governmental charges or levies upon the Borrower
and each of the Borrower's Subsidiaries and any of
their respective properties, income, profits, and
assets, which are due and payable, have been paid,
except any payment of any of the foregoing which
the Borrower or any of the Borrower's
Subsidiaries, as applicable, are currently
contesting in good faith by appropriate
proceedings and with respect to which reserves in
conformity with GAAP have been provided on the
books of the Borrower or the Borrower's
Subsidiaries, as the case may be. The charges,
accruals, and reserves on the books of the
Borrower and each of the Borrower's Subsidiaries
in respect of taxes are, in the reasonable
judgement of the Borrower, adequate. Neither the
Borrower nor any of the Borrower's Subsidiaries
are being audited, or have knowledge of any
pending audit, by the Internal Revenue Service or
any other taxing authority.
(j) Financial Statements. The Borrower
has furnished, or caused to be furnished, to the
Lender financial statements for the Borrower and
the Borrower's Subsidiaries on a consolidated
basis which are complete and correct in all
material respects and present fairly in accordance
with GAAP the financial position of the Borrower
and the Borrower's Subsidiaries on a consolidated
basis as at December 31, 1996, and the results of
operations for the periods then ended. Except as
disclosed in such financial statements, neither
the Borrower nor any of the Borrower's
Subsidiaries has any material liabilities,
contingent or otherwise, and there are no material
unrealized or anticipated losses of the Borrower
or any of the Borrower's Subsidiaries which have
not heretofore been disclosed in writing to the
Lenders.
(k) No Adverse Change. Since December
31, 1996, there has occurred no event which could
reasonably be expected to have a Materially
Adverse Effect.
(l) Investments and Guaranties. As of
the Agreement Date, the Borrower does not own the
Capital Stock, partnership interests or other
securities of or equity interests in, or have
outstanding loans or advances to, or guaranties of
the obligations of, any Person, except as
reflected in the financial statements referred to
in Section 4.1(j) above or disclosed on Schedule
4.1(l).
(m) Liabilities, Litigation, etc.
Except for liabilities incurred in the normal
course of business, neither the Borrower nor any
of the Borrower's Subsidiaries has any material
(individually or in the aggregate) liabilities,
direct or contingent, except as disclosed or
referred to in the financial statements referred
to in Section 4.1(j) above or with respect to the
Obligations, the Subordinated Debentures or the
Securitization Documents. As of the Agreement
Date, except as described on Schedules 4.1(m) and
4.1(x) attached hereto, there is no litigation,
legal or administrative proceeding, investigation,
or other action of any nature pending or, to the
knowledge of the Borrower, threatened against or
affecting the Borrower or any of the Borrower's
Subsidiaries or any of their respective properties
which could reasonably be expected to result in
any judgment against or liability of the Borrower
or such Subsidiary in excess of $100,000. None of
such litigation disclosed on Schedules 4.1(m) and
4.1(x), individually or collectively, could
reasonably be expected to have a Materially
Adverse Effect. The Borrower knows of no unusual
or unduly burdensome restriction, restraint, or
hazard relative to the business or properties of
the Borrower or any of the Borrower's Subsidiaries
that is not customary for or generally applicable
to similarly situated businesses in the same
industry as the Borrower and the Borrower's
Subsidiaries.
(n) ERISA. The Borrower and each ERISA
Affiliate and each of their respective Plans are
in substantial compliance with ERISA and the Code
and neither the Borrower nor any of its ERISA
Affiliates incurred any accumulated funding
deficiency with respect to any such Plan within
the meaning of ERISA or the Code. The Borrower
and each of its ERISA Affiliates have complied
with all material requirements of ERISA Sections
601 through 608 and Code Section 4980B. Neither
the Borrower nor, to the best of the Borrower's
knowledge, any of its ERISA Affiliates has made
any promises of retirement or other benefits to
employees, except as set forth in the Plans.
Neither the Borrower nor any of the Borrower's
Subsidiaries has incurred any material liability
to the Pension Benefit Guaranty Corporation in
connection with any such Plan. The assets of each
such Plan which is subject to Title IV of ERISA
are sufficient to provide the benefits under such
Plan, the payment of which the Pension Benefit
Guaranty Corporation would guarantee if such Plan
were terminated, and such assets are also
sufficient to provide all other "benefit
liabilities" (as defined in ERISA Section
4001(a)(16)) due under the plan upon termination.
No Reportable Event has occurred and is
continuing with respect to any such Plan. No such
Plan or trust created thereunder, or party in
interest (as defined in Section 3(14) of ERISA, or
any fiduciary (as defined in Section 3(21) of
ERISA), has engaged in a "prohibited transaction"
(as such term is defined in Section 406 of ERISA
or Section 4975 of the Code) which would subject
such Plan or any other Plan of the Borrower or any
of its ERISA Affiliates, any trust created
thereunder, or any such party in interest or
fiduciary, or any party dealing with any such Plan
or any such trust to any material penalty or tax
on "prohibited transactions" imposed by Section
502 of ERISA or Section 4975 of the Code. Neither
the Borrower nor any of its ERISA Affiliates is a
participant in or is obligated to make any payment
to a Multiemployer Plan.
(o) Intellectual Property; Licenses.
Borrower possesses adequate Intellectual Property
to continue to conduct its business as heretofore
conducted by it, and all Intellectual Property
existing on the date hereof, (together with in the
case of patents and Trademarks, the date of
issuance thereof), is listed on Schedule 4.1(o).
With respect to Intellectual Property of the
Borrower unless such Intellectual Property has
become obsolete or is no longer used or useful in
the conduct of the business of the Borrower:
(i) it is valid and enforceable, is
subsisting, and has not been adjudged invalid
or unenforceable, in whole or in part;
(ii) Borrower has made all
necessary filings and recordations to protect
its interest therein, including, without
limitation, recordations of all of its
interest in its Patent Property and Trademark
Property in the United States Patent and
Trademark Office and, to the extent necessary
for the conduct of Borrower's business, in
corresponding offices throughout the world;
(iii) Except as set forth on
Schedule 4.1(o), Borrower is the exclusive
owner of the entire and unencumbered right,
title and interest in and to such
Intellectual Property owned by it and no
claim has been made that the use of any of
its owned Intellectual Property does or may
violate the asserted rights of any third
party; and
(iv) Borrower has performed, and
Borrower will continue to perform, all acts,
and Borrower has paid and will continue to
pay, all required fees and taxes, to maintain
each and every item of such Intellectual
Property in full force and effect throughout
the world, as applicable.
Borrower owns directly or is entitled to use, by
license or otherwise, all patents, Trademarks,
copyrights, mask works, licenses, technology,
know-how, processes and rights with respect to any
of the foregoing used in, necessary for or of
importance to the conduct of Borrower's business.
(p) Compliance with Law; Absence of
Default. Each of the Borrower and the Borrower's
Subsidiaries is in material compliance with all
Applicable Laws and with all of the provisions of
its certificate of incorporation and by-laws, and
no event has occurred or has failed to occur which
has not been remedied or waived, the occurrence or
non-occurrence of which constitutes (i) a Default
or (ii) a default by the Borrower or any of the
Borrower's Subsidiaries under the Subordinated
Debentures, the Securitization Documents or any
other indenture, agreement, or other instrument,
or any judgment, decree, or order to which the
Borrower or any of the Borrower's Subsidiaries is
a party or by which the Borrower or any of the
Borrower's Subsidiaries or any of their respective
properties may be bound.
(q) Casualties; Taking of Properties,
etc. Since December 31, 1996, neither the
business nor the properties of the Borrower or any
of the Borrower's Subsidiaries has been materially
and adversely affected as a result of any fire,
explosion, earthquake, flood, drought, windstorm,
accident, strike or other labor disturbance,
embargo, requisition or taking of property or
cancellation of contracts, permits or concessions
by any domestic or foreign government or any
agency thereof, riot, activities of armed forces,
or acts of God or of any public enemy.
(r) Accuracy and Completeness of
Information. All information, reports, and other
papers and data relating to the Borrower or any of
the Borrower's Subsidiaries furnished to the Agent
and the Lenders were, at the time the same were so
furnished, (i) to the extent prepared by third
parties, to the best of Borrower's knowledge, and
(ii) to the extent prepared by the Borrower,
complete and correct in all material respects in
light of all such information, reports and other
papers and data taken as a whole at such time. No
fact is currently known to the Borrower which has,
or could reasonably be expected to have, a
Materially Adverse Effect. With respect to
projections, estimates and forecasts given to the
Lenders, such projections, estimates and forecasts
are based on the Borrower's good faith assessment
of the future of the business at the time made.
The Borrower had a reasonable basis for such
assessments at the time made.
(s) Compliance with Regulations G, T,
U, and X. Neither the Borrower nor any of the
Borrower's Subsidiaries is engaged principally or
as one of its important activities in the business
of extending credit for the purpose of purchasing
or carrying, and neither the Borrower nor any of
the Borrower's Subsidiaries owns or presently
intends to acquire, any "margin security" or
"margin stock" as defined in Regulations G, T, U,
and X (12 C.F.R. Parts 221 and 224) of the Board
of Governors of the Federal Reserve System (herein
called "margin stock"). None of the proceeds of
the Loans will be used, directly or indirectly,
for the purpose of purchasing or carrying any
margin stock or for the purpose of reducing or
retiring any Indebtedness which was originally
incurred to purchase or carry margin stock or for
any other purpose which might constitute this
transaction a "purpose credit" within the meaning
of said Regulations G, T, U, and X. Neither the
Borrower nor any bank acting on its behalf has
taken or will take any action which might cause
this Agreement or the Notes to violate Regulation
G, T, U, or X or any other regulation of the Board
of Governors of the Federal Reserve System or to
violate the Securities Exchange Act of 1934, in
each case as now in effect or as the same may
hereafter be in effect. If so requested by the
Agent, the Borrower will furnish the Agent with
(i) a statement or statements in conformity with
the requirements of Federal Reserve Forms G-3
and/or U-1 referred to in Regulations G and U of
said Board of Governors and (ii) other documents
evidencing its compliance with the margin
regulations, including without limitation an
opinion of counsel in form and substance
satisfactory to the Agent. Neither the making of
the Loans nor the use of proceeds thereof will
violate, or be inconsistent with, the provisions
of Regulation G, T, U, or X of said Board of
Governors.
(t) Solvency. As of the Agreement Date
and after giving effect to the transactions
contemplated by the Loan Documents (i) the
property of Borrower, at a fair valuation, will
exceed its debt; (ii) the capital of the Borrower
will not be unreasonably small to conduct its
business; (iii) the Borrower will not have
incurred debts, or have intended to incur debts,
beyond its ability to pay such debts as they
mature; and (iv) the present fair salable value of
the assets of the Borrower will be materially
greater than the amount that will be required to
pay its probable liabilities (including debts) as
they become absolute and matured. For purposes of
this Section, "debt" means any liability on a
claim, and "claim" means (i) the right to payment,
whether or not such right is reduced to judgment,
liquidated, unliquidated, fixed, contingent,
matured, unmatured, undisputed, legal, equitable,
secured or unsecured, or (ii) the right to an
equitable remedy for breach of performance if such
breach gives rise to a right to payment, whether
or not such right to an equitable remedy is
reduced to judgment, fixed, contingent, matured,
unmatured, undisputed, secured or unsecured.
(u) Insurance. The Borrower and each
of its Subsidiaries have insurance meeting the
requirements of Section 5.5 hereof, and such
insurance policies are in full force and effect.
As of the Agreement Date, all insurance maintained
by the Borrower is fully described on Schedule
4.1(u) hereto.
(v) Broker's or Finder's Commissions.
No broker's or finder's fee or commission will be
payable with respect to the issuance of the Notes,
and no other similar fees or commissions will be
payable by the Borrower for any other services
rendered to the Borrower ancillary to the
transactions contemplated herein.
(w) Real Property. All real property
leased by the Borrower or any Material Subsidiary
as of the Agreement Date, and the name of the
lessor of such real property, is set forth in
Schedule 4.1(w)-1. The leases of Borrower or such
Material Subsidiary are valid, enforceable and in
full force and effect, and have not been modified
or amended, except as otherwise set forth in
Schedule 4.1(w)-1. The Borrower or such Material
Subsidiary is the sole holder of the lessee's
interests under such leases, and has the right to
pledge and assign the same except as qualified in
Schedule 4.1(w)-1. Neither Borrower nor such
Material Subsidiary has made any pledge or
assignment of any of it rights under such leases
except as set forth in Schedule 4.1(w)-1 and,
there is no default or condition which, with the
passage of time or the giving of notice, or both,
would constitute a material default on the part of
any party under such leases. All real property
owned by the Borrower or any Material Subsidiary
as of the Agreement Date is set forth in
Schedule 4.1(w)-2. As of the Agreement Date, the
Borrower or such Material Subsidiary does not own,
lease or use any real property other than as set
forth on Schedule 4.1(w). The Borrower and each
Material Subsidiary owns good and marketable fee
simple title to all of its owned real property,
and none of its respective owned real property is
subject to any Liens, except Permitted Liens.
Neither the Borrower nor such Material Subsidiary
owns or holds, or is obligated under or a party
to, any option, right of first refusal or any
other contractual right to purchase, acquire,
sell, assign or dispose of any real property owned
or leased by it.
(x) Environmental Matters. Except as
is described on Schedule 4.1(x) attached hereto:
(i) To the best of the
Borrower's and its Subsidiaries' knowledge,
after reasonably diligent inquiry, the
Property does not contain, in, on or under,
including, without limitation, the soil and
groundwater thereunder, any Hazardous
Materials in violation of Environmental Laws
or in amounts that could give rise to
liability under Environmental Laws.
(ii) The Borrower and each of
the Borrower's Subsidiaries is in material
compliance with all applicable Environmental
Laws, and there is no contamination or
violation of any Environmental Law which
could materially interfere with the continued
operation of any of the Properties or impair
the financial condition of the Borrower and
the Borrower's Subsidiaries on a consolidated
basis.
(iii) Neither the Borrower
nor any of the Borrower's Subsidiaries has
received from any Governmental Authority any
complaint, or notice of violation, alleged
violation, investigation or advisory action
or notice of potential liability regarding
matters of environmental protection or permit
compliance under applicable Environmental
Laws with regard to the Properties, nor is
the Borrower aware that any such notice is
pending.
(iv) Hazardous Materials have
not been generated, treated, stored, disposed
of, at, on or under any of the Property in
violation of any Environmental Laws or in a
manner that could give rise to material
liability under Environmental Laws nor have
any Hazardous Materials been transported or
disposed of from any of the Properties to any
other location in violation of any
Environmental Laws or in a manner that could
give rise to material liability under
Environmental Laws.
(v) Neither the Borrower nor
any of its Subsidiaries is a party to any
governmental administrative actions or
judicial proceedings pending under any
Environmental Law with respect to any of the
Properties, nor are there any consent decrees
or other decrees, consent orders,
administrative orders or other orders, or
other administrative or judicial requirements
outstanding under any Environmental Law with
respect to any of the Properties.
(vi) To the best of the
Borrower's and its Subsidiaries' knowledge,
after reasonably diligent inquiry, there has
been no release or threat of release of
Hazardous Materials into the environment at
or from any of the Properties, or arising
from or relating to the operations of the
Borrower, in violation of Environmental Laws
or in amounts that could give rise to
material liability under Environmental Laws.
(y) OSHA. All of the Borrower's and
the Borrower Subsidiaries' operations are
conducted in all material respects in compliance
with all applicable rules and regulations
promulgated by the Occupational Safety and Health
Administration of the United States Department of
Labor.
(z) Name of Borrower. The Borrower and
the Material Subsidiaries have not changed their
respective names within the preceding five (5)
years from the Agreement Date, nor has the
Borrower or any Material Subsidiary transacted
business under any other name or trade name.
(a)(a) Investment Company Act. Neither
the Borrower nor any of the Borrower's
Subsidiaries is required to register under the
provisions of the Investment Company Act of 1940,
as amended, and neither the entering into or
performance by the Borrower of this Agreement nor
the issuance of the Notes violates any provision
of such Act or requires any consent, approval, or
authorization of, or registration with, any
governmental or public body or authority pursuant
to any of the provisions of such Act.
ARTICLE 3Section .2 Representations and
Warranties Relating to Inventory. Except as
specifically disclosed to and acknowledged by the
Agent in writing, with respect to all Eligible
Inventory, the Agent may rely upon all statements,
warranties, or representations made in any
Borrowing Base Certificate in determining the
classification of such Inventory and in
determining which items of Inventory listed in
such Borrower Base Certificate meet the Inventory
Eligibility Requirements.
ARTICLE 3Section .3 Survival of
Representations and Warranties, etc. All
representations and warranties made under this
Agreement shall be deemed to be made, and shall be
true and correct, at and as of the Agreement Date
and the date of each Advance or issuance of a
Letter of Credit hereunder, except to the extent
previously fulfilled in accordance with the terms
hereof and to the extent subsequently
inapplicable. All representations and warranties
made under this Agreement shall survive, and not
be waived by, the execution hereof by the Lenders,
the Issuing Banks, and the Agent, any
investigation or inquiry by any Lender, or the
Agent or the making of any Advance or the issuance
of any Letter of Credit under this Agreement.
ARTICLE 4
GENERAL COVENANTS
So long as any of the Obligations are
outstanding and unpaid or the Borrower shall have
the right to borrow, or have Letters of Credit
issued, hereunder (whether or not the conditions
to borrowing have been or can be fulfilled), and
unless the Majority Lenders shall otherwise
consent in writing:
ARTICLE 4Section .1 Preservation of Existence
and Similar Matters. The Borrower will, and will
cause each of the Borrower's Subsidiaries (other
than the Immaterial Subsidiaries) to (i) preserve
and maintain their respective existence, rights,
franchises, licenses, and privileges in their
respective jurisdiction of incorporation
including, without limitation, all Necessary
Authorizations material to its business, and (ii)
qualify and remain qualified and authorized to do
business in each jurisdiction in which the
character of their respective properties or the
nature of their respective business requires such
qualification or authorization.
ARTICLE 4Section .2 Compliance with
Applicable Law. The Borrower will comply, and
will cause each of the Borrower's Subsidiaries to
comply, in all material respects with the
requirements of all Applicable Law.
ARTICLE 4Section .3 Maintenance of
Properties. The Borrower will maintain and will
cause each of the Borrower's Subsidiaries to
maintain or cause to be maintained in the ordinary
course of business in good repair, working order,
and condition, normal wear and tear, removal from
service for routine maintenance and repair and
disposal of obsolete Equipment excepted, all
properties used or useful in their respective
businesses (whether owned or held under lease),
and from time to time make or cause to be made all
needed and appropriate repairs, renewals,
replacements, additions, betterments, and
improvements thereto.
ARTICLE 4Section .4 Accounting Methods and
Financial Records. The Borrower will maintain and
will cause each of the Borrower's Subsidiaries to
maintain a system of accounting established and
administered in accordance with GAAP, and will
keep and will cause each of the Borrower's
Subsidiaries to keep adequate records and books of
account in which complete entries will be made in
accordance with such accounting principles
consistently applied and reflecting all
transactions required to be reflected by such
accounting principles.
ARTICLE 4Section .5 Insurance. The Borrower
will maintain and will cause each of the
Borrower's Subsidiaries to maintain insurance
including, but not limited to, public liability,
product and manufacturer's liability, business
interruption and fidelity coverage insurance, in
such amounts and against such risks as would be
customary for companies in the same industry and
of comparable size as the Borrower from
responsible companies having and maintaining an
A.M. Best rating of "A minus" or better and being
in a size category of VI or larger or otherwise
acceptable to the Agent. In addition to the
foregoing, the Borrower further agrees to maintain
and pay for insurance upon all goods constituting
Collateral wherever located, in storage or in
transit in vehicles, including goods evidenced by
documents, covering casualty, hazard, public
liability and such other risks and in such amounts
as would be customary for companies in the same
industry and of comparable size as the Borrower,
from responsible companies having and maintaining
an A.M. Best rating of "A minus" or better and
being in a size category of VI or larger or
otherwise acceptable to the Agent to insure the
Lenders' interest in such Collateral. All such
property insurance policies shall name the Agent
as loss payee and all liability insurance policies
shall name the Agent as additional insured.
Borrower shall deliver the original certificates
of insurance evidencing that the required
insurance is in force together with satisfactory
lender's loss payable and additional insured, as
applicable, endorsements. Each policy of
insurance or endorsement shall contain a clause
requiring the insurer to give not less than thirty
(30) days' prior written notice to the Agent in
the event of cancellation or modification of the
policy for any reason whatsoever and a clause that
the interest of the Agent shall not be impaired or
invalidated by any act or neglect of the Borrower
or owner of the Collateral nor by the occupation
of the premises for purposes more hazardous than
are permitted by said policy. If the Borrower
fails to provide and pay for such insurance, the
Agent may, at the Borrower's expense, procure the
same, but shall not be required to do so. The
Borrower agrees to deliver to the Agent, promptly
as rendered, true copies of all reports made in
any reporting forms to insurance companies.
ARTICLE 4Section .6 Payment of Taxes and
Claims. The Borrower will pay and discharge, and
will cause each of the Borrower's Subsidiaries to
pay and discharge, all taxes, assessments, and
governmental charges or levies imposed upon them
or upon their respective incomes or profits or
upon any properties belonging to them prior to the
date on which penalties attach thereto, and all
lawful claims for labor, materials and supplies
which have become due and payable and which by law
have or may become a Lien upon any of their
respective Property; except that, no such tax,
assessment, charge, levy, or claim need be paid
which is being contested in good faith by
appropriate proceedings and for which adequate
reserves shall have been set aside on the
appropriate books, but only so long as such tax,
assessment, charge, levy, or claim does not become
a Lien or charge other than a Permitted Lien and
no foreclosure, distraint, sale, or similar
proceedings shall have been commenced and remain
unstayed for a period thirty (30) days after such
commencement. The Borrower shall timely file and
will cause each of the Borrower's Subsidiaries
timely to file all information returns required by
federal, state, or local tax authorities.
ARTICLE 4Section .7 Visits and Inspections.
The Borrower will permit and will cause each of
the Borrower's Subsidiaries to permit
representatives of the Agent, the Issuing Banks
and each Lender to (a) visit and inspect the
properties of the Borrower and each of the
Borrower's Subsidiaries during normal business
hours, (b) inspect and make extracts from and
copies of its books and records, and (c) discuss
with its respective principal officers its
businesses, assets, liabilities, financial
positions, results of operations, and business
prospects relating to the Borrower; provided,
however, if no Default then exists hereunder, the
Agent, any Issuing Bank or any Lender shall give
the Borrower reasonable prior notice of such visit
or inspection.
ARTICLE 4Section .8 Conduct of Business. The
Borrower shall continue, and shall cause each
Material Subsidiary to continue, to engage in
business of the same general type as now
respectively conducted by it.
ARTICLE 4Section .9 ERISA. The Borrower
shall at all times make, or cause to be made,
prompt payment of contributions required to meet
the minimum funding standards set forth in ERISA
with respect to its and its ERISA Affiliates'
Plans; furnish to the Agent, promptly upon the
Agent's request therefor, copies of any annual
report required to be filed pursuant to ERISA in
connection with each such Plan of it and its ERISA
Affiliates; notify the Agent as soon as
practicable of any Reportable Event and of any
additional act or condition arising in connection
with any such Plan which the Borrower believes
might constitute grounds for the termination
thereof by the Pension Benefit Guaranty
Corporation or for the appointment by the
appropriate United States District Court of a
trustee to administer such Plan; and furnish to
the Agent, promptly upon the Agent's request
therefor, such additional information concerning
any such Plan as may be reasonably requested by
the Agent.
ARTICLE 4Section .10 Lien Perfection.
The Borrower agrees to, and will cause each
Material Subsidiary to, execute all Uniform
Commercial Code financing statements, and
amendments and continuation statements thereto,
provided for by Applicable Law together with any
and all other instruments, assignments or
documents and shall take such other action as may
be required to perfect or continue the perfection
of the Agent's (on behalf of the Lenders and the
Issuing Banks) security interest in the
Collateral. The Borrower hereby authorizes the
Agent to execute and file any such financing
statement on the Borrower's behalf to the extent
permitted by Applicable Law.
ARTICLE 4Section .11 Location of
Collateral; Consignment of Inventory.
(a) All Collateral, other than
Inventory in transit, will at all times be kept by
the Borrower at one or more of the business
locations set forth in Schedule 5.11 and shall
not, without the prior written approval of the
Agent, be moved therefrom except, prior to an
Event of Default (i) sales of Inventory in the
ordinary course of business; (ii) sales or other
dispositions of assets permitted pursuant to
Section 7.7 hereof; and (iii) the storage of
Inventory at locations within the continental
United States other than those specified on
Schedule 5.11 hereto if (A) the Borrower gives the
Agent written notice of the new storage location
outside of (x) the state, or (y) if the Uniform
Commercial Code as in effect in such state has a
county filing requirement, the county, in which it
is currently stored at least thirty (30) days
prior to storing Inventory at such location, (B)
the Lenders' security interest in such Inventory
is and continues to be a duly perfected, first
priority Lien thereon, (C) neither the Borrower's
nor the Agent's right of entry upon the premises
where such Inventory is stored or its right to
remove the Inventory therefrom, is in any way
restricted, (D) the owner of such premises agrees
with the Agent not to assert any landlord's,
bailee's or other Lien in respect of the Inventory
for unpaid rent or storage charges, and (E) all
negotiable documents and receipts in respect of
any Collateral maintained at such premises are
promptly delivered to the Agent;
(b) No Inventory will be consigned to
any Person without the Agent's prior written
consent, and, if such consent is given, the
Borrower shall, prior to the delivery of any
Inventory on consignment, (i) provide the Agent
with all consignment agreements to be used in
connection with such consignment, all of which
shall be acceptable to the Agent, (ii) prepare,
execute and file appropriate financing statements
with respect to any consigned Inventory, showing
the Agent as assignee, (iii) conduct a search of
all filings made against the consignee in all
jurisdictions in which any consigned Inventory is
to be located and deliver to the Agent copies of
the results of all such searches and (iv) notify,
in writing, all the creditors of the consignee
which are or may be holders of Liens in the
Inventory to be consigned that the Borrower
expects to deliver certain Inventory to the
consignee, all of which Inventory shall be
described in such notice by item or type.
ARTICLE 4Section .12 Protection of
Collateral. All insurance expenses and expenses
of protecting, storing, warehousing, insuring,
handling, maintaining and shipping the Collateral
(including, without limitation, all rent payable
by the Borrower to any landlord of any premises
where any of the Collateral may be located), and
any and all excise, property, sales, and use taxes
imposed by any state, federal, or local authority
on any of the Collateral or in respect of the sale
thereof, shall be borne and paid by the Borrower.
If the Borrower fails to promptly pay any portion
thereof when due, the Lenders may, at their
option, but shall not be required to, make a Base
Rate Advance for such purpose and pay the same
directly to the appropriate Person. The Borrower
agrees to reimburse the Lenders promptly therefor
with interest accruing thereon daily at the
Default Rate provided in this Agreement. All sums
so paid or incurred by the Lenders for any of the
foregoing and all reasonable costs and expenses
(including attorneys' fees, legal expenses, and
court costs) which the Lenders may incur in
enforcing or protecting the Lien on or rights and
interest in the Collateral or any of its rights or
remedies under this or any other agreement between
the parties hereto or in respect of any of the
transactions to be had hereunder until paid by the
Borrower to the Lenders with interest at the
Default Rate, shall be considered Obligations
owing by the Borrower to the Lenders hereunder.
Such Obligations shall be secured by all
Collateral and by any and all other collateral,
security, assets, reserves, or funds of the
Borrower in or coming into the hands or inuring to
the benefit of the Lenders. Neither the Agent nor
the Lenders shall be liable or responsible in any
way for the safekeeping of any of the Collateral
or for any loss or damage thereto (except for
reasonable care in the custody thereof while any
Collateral is in the Lenders' actual possession)
or for any diminution in the value thereof, or for
any act or default of any warehouseman, carrier,
forwarding agency, or other person whomsoever, but
the same shall be at the Borrower's sole risk.
ARTICLE 4Section .13 Assignments, Records
and Schedules of Accounts. Upon the occurrence of
an Event of Default and if so requested by the
Agent, the Borrower shall execute and deliver to
the Agent formal written assignments of all of the
Accounts weekly, which shall include all Accounts
that have been created since the date of the last
assignment, together with copies of invoices or
invoice registers related thereto. The Borrower
shall keep accurate and complete records of the
Accounts and all payments and collections thereon.
ARTICLE 4Section .14 Administration of
Accounts.
(a) The Agent retains the right after
the occurrence of an Event of Default to notify
the Account Debtors that the Accounts have been
assigned to the Agent and to collect the Accounts
directly in its own name and to charge the
collection costs and expenses, including
attorneys' fees, to the Borrower. The Agent has
no duty to protect, insure, collect or realize
upon the Accounts or preserve rights in them. The
Borrower irrevocably makes, constitutes and
appoints the Agent as the Borrower's true and
lawful attorney and agent-in-fact to endorse the
Borrower's name on any checks, notes, drafts or
other payments relating to, the Accounts which
come into the Agent's possession or under the
Agent's control as a result of its taking any of
the foregoing actions. Additionally, the Agent
shall have the right to collect and settle or
adjust all disputes and claims directly with the
Account Debtor and to compromise the amount or
extend the time for payment of the Accounts upon
such terms and conditions as the Agent may deem
advisable, and to charge the deficiencies,
reasonable costs and expenses thereof, including
attorney's fees, to the Borrower.
(b) If an Account includes a charge for
any tax payable to any governmental taxing
authority, the Lenders are authorized, in their
sole discretion, to pay the amount thereof to the
proper taxing authority for the account of the
Borrower and to make a Base Rate Advance to the
Borrower to pay therefor. The Borrower shall
notify the Agent if any Account includes any tax
due to any governmental taxing authority and, in
the absence of such notice, the Agent shall have
the right to retain the full proceeds of the
Account and shall not be liable for any taxes to
any governmental taxing authority that may be due
by the Borrower by reason of the sale and delivery
creating the Account.
(c) Whether or not a Default or an
Event of Default has occurred, any of the Agent's
officers, employees or agents shall have the
right, at any time or times hereafter, in the name
of the Lenders, or any designee of the Lenders or
the Borrower, to verify the validity, amount or
other matter relating to any Accounts by mail,
telephone, telegraph or otherwise. The Borrower
shall cooperate fully with the Agent and the
Lenders in an effort to facilitate and promptly
conclude any such verification process.
(d) The provisions of this Section 5.14
are subject to any limitations or obligations of
the Agent set forth in the Receivables
Intercreditor Agreement.
ARTICLE 4Section .15 The Blocked Account.
(a) The Borrower shall establish and
maintain one or more special lockboxes or blocked
accounts (each, a "Blocked Account") owned by the
Borrower with such bank(s) as may be selected by
the Borrower and approved by the Agent and which
shall provide that all proceeds of the Collateral
which shall be received in such Blocked Account
shall be remitted in immediately available funds
to the Clearing Account. Each such Blocked
Account bank shall agree to the Agent's standard
Blocked Account Letter or such variation thereof
as shall be mutually satisfactory to the Agent and
such bank. All amounts which shall be deposited
into any Blocked Account shall immediately be
under the sole dominion and exclusive control of
the Agent, on behalf of the Issuing Banks and
Lenders, and the Borrower shall have no right to
withdraw such amounts, and all of the Blocked
Account Letters shall so provide.
(b) The Borrower shall cause, pursuant
to the Disbursement Instructions Letter, all cash,
cash equivalents, checks, notes, drafts or similar
items of payment to be received by it from Finance
Corp., including but not limited to, (1) payments
from Account Debtors (it being expressly
understood that this relates only to accounts not
sold to, or accounts reacquired from, Finance
Corp. pursuant to the Receivables Securitization),
and (2) all payments to be made to the Borrower or
Microcircuits pursuant to the Receivables
Purchase Agreements or the Finance Corp.
Subordinated Notes, to be promptly deposited
directly into the Clearing Account. The Borrower
shall also direct the Receivable Trustee to make
all payments from the Receivables Trustee to the
Borrower for Servicing Fees (as defined in the
Pooling and Servicing Agreement) promptly into the
Clearing Account. Additionally, the Borrower
shall cause all Tuning Patent Royalties and other
payments to be made to the Borrower under any
License Agreement to be promptly deposited by the
obligor thereof directly into the Blocked Account
(and the Borrower has issued such payment
instructions to all licensees under such License
Agreements in effect as of the Agreement Date and
will issue such payment instructions to all
licensees under any License Agreement entered into
after the Agreement Date). In the event that the
Borrower shall at any time receive any remittances
of any of the foregoing directly, the Borrower
shall hold the same as trustee for the Agent,
shall segregate such remittances from its other
assets, and shall promptly deposit the same into
the Clearing Account. All cash, cash equivalents,
checks, notes, drafts or similar items of payment
received by the Borrower otherwise than as
provided elsewhere in this Section 5.15(b) shall
be deposited into the Clearing Account, the
Blocked Account or an account which pursuant to
Section 5.15(d) hereof is subject to a Blocked
Account Letter.
(c) On the Business Day on which any
amount is deposited into the Clearing Account in
immediately available funds the Agent shall
withdraw such amount from the Clearing Account,
deposit the same in the Loan Account, and apply
the same against the Obligations in the manner
provided for in Section 2.11 hereof; provided,
however, and notwithstanding the foregoing, that
unless an Event of Default then exists, no money
on deposit in the Clearing Account shall be
applied against (A) the principal of the Term Loan
unless such payment is then due under Section 2.6,
or (B) any Eurodollar Advance if such application
would constitute a prepayment of such Eurodollar
Advance prior to its Payment Date, and such funds
shall be retained in the Clearing Account (and
will be invested by the Agent in overnight
deposits for the Borrower's account) until the
earlier of (i) such payment of principal on the
Term Loan being due under Section 2.6, (ii) such
Payment Date, (iii) the next Business Day on which
additional Obligations arise, or (iv) the
occurrence of an Event of Default, at which time
such amount shall be applied to the Term Loan
principal, such Eurodollar Advance or such
Obligations (in accordance with the provisions of
Section 2.11 hereof), as the case may be; provided
further, however, that unless an Event of Default
then exists, if at any time there are no Revolving
Loans outstanding and no payment of the Term Loan
then due under Section 2.6, any funds on deposit
in the Clearing Account at such time shall be
delivered to the Borrower upon the Borrower's
request.
(d) The Borrower shall not open any
other deposit account (except as required by the
Securitization Documents) unless the depository
bank for such account shall have entered into an
agreement with the Agent substantially in the form
of the Blocked Account Letters. As of the
Agreement Date, all bank accounts of the Borrower
are listed on Schedule 5.15.
ARTICLE 4Section .16 Further Assurances.
The Borrower will promptly cure, or cause to be
cured, defects in the creation and issuance of any
of the Notes and the execution and delivery of the
Loan Documents (including this Agreement),
resulting from any act or failure to act by the
Borrower or any of the Borrower's Subsidiaries or
any employee or officer thereof. The Borrower at
its expense will promptly execute and deliver to
the Agent and the Lenders, or cause to be executed
and delivered to the Agent and the Lenders, all
such other and further documents, agreements, and
instruments in compliance with or accomplishment
of the covenants and agreements of the Borrower in
the Loan Documents, including this Agreement, or
to correct any omissions in the Loan Documents, or
more fully to state the obligations set out herein
or in any of the Loan Documents, or to obtain any
consents, all as may be necessary or appropriate
in connection therewith as may be reasonably
requested.
ARTICLE 4Section .17 Broker's Claims.
The Borrower hereby indemnifies and agrees to hold
the Agent and each of the Lenders harmless from
and against any and all losses, liabilities,
damages, costs and expenses which may be suffered
or incurred by the Agent and each of the Lenders
in respect of any claim, suit, action or cause of
action now or hereafter asserted by a broker or
any Person acting in a similar capacity arising
from or in connection with the execution and
delivery of this Agreement or any other Loan
Document or the consummation of the transactions
contemplated herein or therein.
ARTICLE 4Section .18 Indemnity. The
Borrower will indemnify and hold harmless the
Agent, the Issuing Banks and each of the Lenders
and each of their respective employees,
representatives, officers and directors from and
against any and all claims, liabilities,
investigations, losses, damages, actions, and
demands by any party against the Agent, the
Lenders, or any of them resulting from any breach
or alleged breach by the Borrower of any
representation or warranty made hereunder, or
otherwise arising out of the Commitment or the
making, administration or enforcement of the Loan
Documents and the Loans; unless, with respect to
any of the above, the Agent, the Lenders, or any
of them are finally judicially determined to have
acted or failed to act with gross negligence or
wilful misconduct. This Section 5.18 shall
survive termination of this Agreement.
ARTICLE 4Section .19 Environmental
Matters. The conduct of each of the Borrower's
and its Subsidiary's business operations will not
materially violate any Environmental Laws, and the
Borrower will not use or permit any other party to
use any Hazardous Materials at any of its places
of business except such materials as are
incidental to the Borrower's or such Subsidiary's
normal course of business, maintenance and
repairs, and then only in material compliance with
all applicable Environmental Laws. The Borrower
shall apply for and/or timely renew all permits
required for the business operations at its places
of business. The Borrower shall promptly notify
the Agent in writing of (i) any and all
enforcement, cleanup, remedial, removal, or other
governmental or regulatory actions instituted,
completed or threatened in writing pursuant to any
applicable Environmental Law; and (ii) all claims
made or threatened by any third party against the
Borrower or any Subsidiary of the Borrower
relating to damages, contribution, cost recover
compensation, loss or injury resulting from any
Hazardous Materials which, in either case, could
reasonably be expected to result in liability
under Environmental Laws in excess of $400,000.
The Borrower shall promptly notify the Agent of
any remedial action taken by the Borrower or any
Subsidiary of the Borrower pursuant to
Environmental Laws with respect to the Borrower's
or such Subsidiary's business operations.
ARTICLE 4Section .20 Lease Transactions.
By May 15, 1997, the Borrower shall have received
the Escrow Amount. By October 15, 1997, the
Borrower shall have entered into and closed the
Lease Transactions and received Gross Proceeds in
the aggregate of not less than $120,000,000 as a
result thereof.
ARTICLE 4Section .21 Warehouse
Arrangement. The Borrower shall at all times make
any payments due and owing to GATX Logistics, Inc.
pursuant to any warehousing agreement at the time
such payments are due (subject to applicable grace
periods contained therein), and shall otherwise
comply with all material provisions of any such
warehousing agreement. The Borrower acknowledges
that the Agent shall establish a reserve against
the Borrowing Base in an amount equal to the
greater of (a) $1,500,000, and (b)(i) the monthly
average during the previous three (3) month period
of all fees or other compensation payable to GATX
Logistics, Inc. by the Borrower, multiplied by
(ii) three. At the time the financial statements
are furnished pursuant to Section 6.1, for so long
as the provisions of this Section 5.21 remain in
effect, the Borrower will include in the
certificate to be delivered pursuant to Section
6.3 information with respect to the amount of all
such fees and other compensation paid by the
Borrower to GATX Logistics Inc. for each of the
three (3) previous fiscal months. Within five (5)
days after the Agreement Date, the Borrower shall
provide the Agent with copies of all warehousing
agreements with GATX Logistics, Inc., and shall
thereafter promptly provide the Agent with copies
of all amendments thereto and any new warehousing
agreements entered into after the Agreement Date
with GATX Logistics, Inc. The provisions of this
Section 5.21 shall be of no further effectiveness
upon the earlier to occur of (a) receipt by the
Agent of a Lien waiver agreement executed by GATX
Logistics, Inc. in form and substance reasonably
acceptable to the Agent, and (b) receipt of an
opinion in form and substance reasonably
acceptable to the Agent opining that under
Applicable Law or the applicable agreements GATX
Logistics, Inc. has no Lien.
ARTICLE 5
INFORMATION COVENANTS
So long as any of the Obligations are
outstanding and unpaid or the Borrower has a right
to borrow, or have Letters of Credit issued,
hereunder (whether or not the conditions to
borrowing have been or can be fulfilled) and
unless the Majority Lenders shall otherwise
consent in writing, the Borrower will furnish or
cause to be furnished to each Lender and to the
Agent at their respective offices:
ARTICLE 5Section .1 Monthly Financial
Statements and Information. Within thirty (30)
days after each fiscal month end in each year of
the Borrower, the balance sheet of the Borrower as
at the end of such fiscal month, and the related
statement of income and related statement of cash
flows of the Borrower for such fiscal month and
for the elapsed portion of the year ended with the
last day of such fiscal month, all of which shall
be on a consolidated basis with the Borrower's
Subsidiaries and certified by the Authorized
Signatory of the Borrower, in his or her opinion,
to present fairly, in accordance with GAAP, the
financial position of the Borrower, as at the end
of such period and the results of operations for
such period, and for the elapsed portion of the
year ended with the last day of such period,
subject only to normal year-end adjustments.
ARTICLE 5Section .2 Annual Financial
Statements and Information; Certificate of No
Default. Within ninety (90) days after the end of
each year of the Borrower, the audited balance
sheets of the Borrower as at the end of such year,
all of which shall be on a consolidated or
consolidating basis with the Borrower's
Subsidiaries, and the related audited statements
of income and retained earnings and related
audited statements of cash flows for such year,
which financial statements shall set forth in
comparative form such figures as at the end of and
for the previous year, and shall be accompanied by
an opinion of Arthur Anderson L.L.P. or other
independent certified public accountants of
recognized standing satisfactory to the Majority
Lenders, together with a statement of the chief
financial officer of the Borrower certifying that
no Default or Event of Default, including, without
limitation, any Default under Sections 7.8, 7.9,
7.10, 7.11, 7.12, 7.13 and 7.14 hereof, was
detected during the examination of the Borrower,
and that such accountants have authorized the
Borrower to deliver such financial statements and
opinion thereon to the Agent and the Lenders
pursuant to this Agreement.
ARTICLE 5Section .3 Performance Certificates.
At the time the financial statements are
furnished pursuant to Sections 6.1 for the months
of March, June, September and December and 6.2
hereof, a certificate of an Authorized Signatory
of the Borrower in the form of Exhibit K attached
hereto:
(a) Setting forth as at the end of such
quarter or year, as the case may be, (i) the
arithmetical calculations required to establish
whether or not the Borrower was in compliance with
the requirements of Sections 7.8, 7.9, 7.10, 7.11,
7.12, 7.13 and 7.14 hereof, and (ii) all domestic
Subsidiaries of the Borrower (other than the
Material Subsidiaries) and the total book value of
assets owned by each such Subsidiary; and
(b) Stating that, to the best of his or
her knowledge, no Default or Event of Default has
occurred as at the end of such quarter or year, as
the case may be, or, if a Default or an Event of
Default has occurred, disclosing each such Default
or Event of Default and its nature, when it
occurred, whether it is continuing, and the steps
being taken by the Borrower with respect to such
Default or Event of Default.
ARTICLE 5Section .4 Access to Accountants.
The Borrower hereby authorizes the Agent to
communicate directly with the Borrower's
independent public accountants and authorizes
these accountants to disclose to the Agent any and
all financial statements and other supporting
financial data, including matters relating to the
annual audit and copies of any arrangement letter
with respect to its business, financial condition
and other affairs. On or before the Agreement
Date, the Borrower shall deliver to its
independent public accountants a letter
authorizing and instructing them to comply with
the provisions of this Section 6.4.
ARTICLE 5Section .5 Additional Reports.
(a) By Tuesday of each week, the
Borrower shall deliver to the Agent and to any
Lender requesting the same, a Borrowing Base
Certificate as of the immediately preceding
Saturday, which shall be in such form as shall be
satisfactory to the Agent, setting forth the
amount of Inventory owned by the Borrower, and
specifically setting forth the amount of Eligible
Finished Goods VCR Inventory, Eligible Finished
Goods TV and Other Inventory and Eligible Picture
Tube Inventory;
(b) Promptly upon receipt thereof, the
Borrower shall deliver to the Agent and the
Lenders copies of all final reports, if any,
submitted to the Borrower by its independent
public accountants in connection with any annual
or interim audit of the Borrower or any of the
Borrower's Subsidiaries, including, without
limitation, any final management report prepared
in connection with the annual audit referred to in
Section 6.2 hereof;
(c) Prior to December 31 of each year,
the Borrower shall deliver to the Agent and the
Lenders the annual budget for the Borrower and any
of the Borrower's Subsidiaries, including
forecasts of the income statement, the balance
sheet and a cash flow statement for the
immediately succeeding year on a month by month
basis;
(d) Promptly after the sending thereof,
the Borrower shall deliver to the Agent and the
Lenders copies of all financial statements,
reports and other information which the Borrower
or any of the Borrower's Subsidiaries sends to any
holder of its Indebtedness or its securities or
which the Borrower or any of the Borrower's
Subsidiaries files with the Securities and
Exchange Commission or any national securities
exchange;
(e) The Borrower shall deliver to the
Agent on behalf of the Lenders promptly after the
same become available copies of the semi-annual
unaudited and annual audited balance sheet of LGE
as at the end of each such period, respectively,
and the related statements of income and cash
flows of LGE for such period, all on a
consolidated and consolidating basis with LGE's
Subsidiaries;
(f) Promptly after the preparation of
the same, the Borrower shall deliver to the Agent
and, if requested of the Borrower by another
Lender, to such other Lender, copies of all
notices, documents, certificates or reports
required to be provided to the Receivables Trustee
by or on behalf of the Borrower, as Servicer (as
such term is defined in the Pooling and Servicing
Agreement) pursuant to Sections 3.04(h), 3.06 and
3.07 of the Pooling and Servicing Agreement; and
(g) From time to time and promptly upon
each request the Borrower shall deliver to the
Agent on behalf of the Lenders such data,
certificates, reports, statements, opinions of
counsel, documents, or further information
regarding the business, assets, liabilities,
financial position, projections, results of
operations, or business prospects of the Borrower
or any of the Borrower's Subsidiaries as the Agent
may reasonably request.
ARTICLE 5Section .6 Notice of Litigation and
Other Matters.
(a) Within five (5) Business Days of
the Borrower's obtaining knowledge of the
institution of, or written threat of, any action,
suit, governmental investigation or arbitration
proceeding against the Borrower or any of the
Borrower's Subsidiaries or any Property, which
action, suit, governmental investigation or
arbitration proceeding exposes, in the Borrower's
reasonable judgment, the Borrower or any of the
Borrower's Subsidiaries to liability in an
aggregate amount in excess of $400,000, the
Borrower shall notify the Agent, and the Lenders
of the occurrence thereof, and the Borrower shall
provide such additional information with respect
to such matters as the Agent or the Lenders may
reasonably request; provided, however, that if the
claim is covered by insurance and the insurer has
acknowledged coverage and assumed the defense of
such suit, the payment or value must be $400,000
in excess of the insurance coverage.
(b) The Borrower shall notify the Agent
and the Lenders within five (5) Business Days of
the Borrower becoming aware of (i) any labor
dispute which may result in claims or losses from
operations greater than $400,000 in the aggregate
not covered by insurance to which the Borrower or
any of the Borrower's Subsidiaries may become a
party, including, without limitation, any strikes,
lockouts or other disputes relating to their
respective plants and other facilities and (ii)
any liability greater than $400,000 in the
aggregate not covered by insurance and incurred
with respect to any closing of any plant or other
facility of the Borrower or any of the Borrower's
Subsidiaries;
(c) Within three (3) Business Days' of
the occurrence of any default (whether or not the
Borrower has received notice thereof from any
other Person) on Indebtedness of the Borrower or
any Subsidiary of the Borrower which singly, or in
the aggregate exceed $1,000,000, the Borrower
shall notify the Agent and the Lenders of the
occurrence thereof;
(d) Within fifteen (15) days of the
occurrence of any default on any Indebtedness of
any Person owed to the Borrower, which singly or
in the aggregate exceeds $2,000,000, the Borrower
shall notify the Agent and the Lenders of the
occurrence thereof;
(e) Promptly upon the Borrower's
receipt of notice or the pendency of any
proceeding for the condemnation or other taking of
any real property of the Borrower or any of the
Borrower's Subsidiaries, the Borrower shall notify
the Agent and the Lenders of the occurrence
thereof;
(f) Promptly upon the Borrower's
receipt of notice of any material adverse change
with respect to the business, assets, liabilities,
financial position, or results of operations of
the Borrower or any of the Borrower's
Subsidiaries, other than changes in the ordinary
course of business which have not had and are not
likely to have a Materially Adverse Effect, the
Borrower shall notify the Agent and the Lenders of
the occurrence thereof;
(g) Promptly following any material
amendment or change to the budget submitted to the
Agent and the Lenders pursuant to Section 6.5(c)
hereof, the Borrower shall notify the Agent and
the Lenders of the occurrence thereof;
(h) Promptly following any (i) Default
under any Loan Document, or the occurrence of any
Servicer Default or Early Amortization Event (as
such terms are defined in the Pooling and
Servicing Agreement) under the Securitization
Documents, or default by the Borrower under any
Subordinated Debenture, or (ii) default under any
other agreement (other than those referenced in
clause (i) of this Section 6.6(h) above) to which
the Borrower or any of the Borrower's Subsidiaries
is a party or by which any of their respective
properties is bound which could reasonably be
expected to have a Materially Adverse Effect, then
the Borrower shall notify the Agent and the
Lenders of the occurrence thereof giving in each
case the details thereof and specifying the action
proposed to be taken with respect thereto;
(i) Promptly following the occurrence
of any event subsequent to the Agreement Date
which, if such event had occurred prior to the
Agreement Date, would have constituted an
exception to the representation and warranty in
Section 4.1(x) of this Agreement, the Borrower
shall notify the Agent and the Lenders of the
occurrence thereof; and
(j) Promptly following the occurrence
of any Reportable Event or a "prohibited
transaction" (as such term is defined in Section
406 of ERISA or Section 4975 of the Code) with
respect to any Plan of the Borrower or any of its
ERISA Affiliates or the institution or threatened
institution by the Pension Benefit Guaranty
Corporation of proceedings under ERISA to
terminate or to partially terminate any such Plan
or the commencement or threatened commencement of
any litigation regarding any such Plan or naming
it or the trustee of any such Plan with respect to
such Plan (other than claims for benefits in the
ordinary course of business), the Borrower shall
notify the Agent and the Lenders of the occurrence
thereof.
ARTICLE 6
NEGATIVE COVENANTS
So long as any of the Obligations are
outstanding and unpaid or the Borrower has a right
to borrow, or have Letters of Credit issued,
hereunder (whether or not the conditions to
borrowing have been or can be fulfilled) and
unless the Majority Lenders shall otherwise give
their prior consent in writing:
ARTICLE 6Section .1 Indebtedness. The
Borrower will not create, assume, incur, or
otherwise become or remain obligated in respect
of, or permit to be outstanding, and will not
permit any of the Borrower's Subsidiaries to
create, assume, incur, or otherwise become
obligated in respect of, or permit to be
outstanding, any Indebtedness except:
(a) Indebtedness under this Agreement
and the other Loan Documents;
(b) Indebtedness under the Subordinated
Debentures and under the Securitization Documents;
(c) Trade or accounts payable and/or
similar obligations, and accrued expenses,
incurred in the ordinary course of business, other
than for borrowed money;
(d) Indebtedness secured by Permitted
Liens described in clause (f) of the definition of
Permitted Liens set forth in Article 1 hereof and
Capitalized Lease Obligations, collectively, not
to exceed the aggregate principal amount of
$6,000,000 at any time (not including any
Capitalized Lease Obligations that may be incurred
pursuant to the Subsequent Lease Transaction);
(e) Indebtedness of the Borrower to
General Electric Capital Corporation existing
prior to the Agreement Date in connection with the
guaranty by General Electric Capital Corporation
of those letters of Credit listed on Schedule 7.1;
(f) Guaranties permitted by
Section 7.2; and
(g) Other unsecured Indebtedness
incurred by the Borrower not to exceed $2,000,000
in the aggregate outstanding from time to time.
ARTICLE 6Section .2 Guaranties. The Borrower
will not at any time guarantee or enter into or
assume any Guaranty, or be obligated with respect
to, or permit to be outstanding, any Guaranty and
will not permit any of the Borrower's Subsidiaries
at any time to guarantee or enter into or assume
any Guaranty, or be obligated with respect to, or
permit to be outstanding, any Guaranty, in each
case other than (a) obligations under repurchase
agreements of the Borrower entered into in
connection with the sale of products in the
ordinary course of business of the Borrower, (b)
obligations under agreements to indemnify persons
or entities which have issued bid or performance
bonds or letters of credit in the ordinary course
of business of the Borrower securing performance
by the Borrower of activities permissible
hereunder, (c) obligations under agreements of the
Borrower entered into in connection with the
acquisition of services, supplies, and equipment
in the ordinary course of business of the
Borrower, (d) the Borrower may guaranty
indemnification obligations of Microcircuits under
the Securitization Documents, (e) the Borrower may
guaranty Indebtedness of any Material Subsidiary
permitted to be incurred by such Material
Subsidiary under clause (c) or (d) of Section 7.1
hereof, (f) endorsements of instruments in the
ordinary course of business, and (g) other
obligations of any Affiliate, which do not exceed
$1,000,000 in the aggregate outstanding at any
time.
ARTICLE 6Section .3 Liens. The Borrower will
not create, assume, incur, or permit to exist or
to be created, assumed, or permitted to exist,
directly or indirectly, and will not permit any of
the Borrower's Subsidiaries to create, assume,
incur, or permit to exist or to be created,
assumed, or permitted to exist, directly or
indirectly, any Lien on any of its property, real
or personal, now owned or hereafter acquired,
except for Permitted Liens.
ARTICLE 6Section .4 Restricted Payments and
Purchases. The Borrower shall not directly or
indirectly declare or make, and shall not permit
any of the Borrower's Subsidiaries to directly or
indirectly declare or make, any Restricted Payment
or Restricted Purchase, or set aside any funds for
any such purpose; provided, however, the
Borrower's Subsidiaries may make Restricted
Payments to the Borrower.
ARTICLE 6Section .5 Investments. The
Borrower will not make and will not permit any of
its Subsidiaries to make any loan or advance to,
or otherwise acquire for consideration evidences
of Indebtedness, Capital Stock, partnership
interests or other securities of or equity
interests in any third party, except that (a) the
Borrower may purchase or otherwise acquire and own
and may permit any of its Subsidiaries to purchase
or otherwise acquire and own, (i) marketable,
direct obligations of the United States of America
and its agencies maturing within three hundred
sixty-five (365) days of the date of purchase,
(ii) commercial paper issued by corporations, each
of which shall (A) have a consolidated net worth
of at least $250,000,000, and (B) conduct
substantially all of its business in the United
States of America, which commercial paper will
mature within one hundred eighty (180) days from
the date of the original issue thereof and is
rated "P-1" or better by Moody's Investors
Service, Inc., or "A-1+" or better by Standard &
Poor's Corporation, (iii) certificates of deposit
maturing within three hundred sixty-five (365)
days of the date of purchase and issued by a
United States national or state bank having
deposits totaling more than $250,000,000, and
whose short-term debt is rated "P-1" or better by
Moody's Investors Service, Inc. or "A-1+" or
better by Standard & Poor's Corporation, and (iv)
up to $100,000 per institution and up to
$1,000,000 in the aggregate in (A) short-term
obligations issued by any local commercial bank or
trust company located in those areas where the
Borrower conducts its business, whose deposits are
insured by the Federal Deposit Insurance
Corporation, or (B) commercial bank-insured money
market funds, or any combination of investments
described in clauses (A) and (B); (b) the Borrower
may hold the Investments in existence on the
Agreement Date and described on Schedule 4.1(l);
(c) so long as no Default or Event of Default
shall have occurred and be continuing, the
Borrower may convert any of its Accounts that are
in excess of ninety (90) days past due into notes
or equity interests from the applicable Account
Debtor so long as the Agent is granted a first
priority security interest in such equity or note
which Lien is perfected contemporaneously with the
conversion of such Account to equity or notes, (d)
Finance Corp. may execute the Transferor
Certificate (as defined in the Pooling and
Servicing Agreement) and take such other actions
required pursuant to the Securitization Documents,
(e) the Borrower and microcircuits may participate
in the Receivables Securitization as provided in
the Securitization Documents and receive the
Finance Corp. Subordinated Notes, (f) the Borrower
may hold the Capital Stock of its Subsidiaries in
existence on the Agreement Date or formed in
accordance with Section 7.7(g), and (g) the
Borrower may make loans or advances to any
Material Subsidiary and any Material Subsidiary
may make loans or advances to any other Material
Subsidiary.
ARTICLE 6Section .6 Affiliate Transactions.
The Borrower shall not, and shall not permit its
Subsidiaries to, enter into or be a party to any
agreement or transaction with any Affiliate except
(a) the Borrower and its Material Subsidiaries may
purchase Inventory from any Mexican Subsidiary in
the ordinary course of business and in a manner
consistent with past business practices; provided,
that the amount advanced to any Mexican Subsidiary
for such Inventory production, together with the
cash on hand or on deposit held by such Mexican
Subsidiary, shall not exceed the cash needs of
such Mexican Subsidiary for working capital during
the period of seven consecutive days following any
date of determination, (b) as listed on Schedule
7.6 hereto, or (c) in the ordinary course of and
pursuant to the reasonable requirements of the
Borrower's or such Subsidiaries business and upon
fair and reasonable terms that are no less
favorable to the Borrower or to such Subsidiary
than it would obtain in a comparable arms length
transaction with a Person not an Affiliate of
Borrower, and on terms consistent with the
business relationship of Borrower or such
Subsidiary and such Affiliate prior to the
Agreement Date, if any; provided that any
contracts, purchase orders, or other transactions
between the Borrower or any Material Subsidiary,
on one hand, and any Affiliate, on the other hand,
that provide for payments in excess of $3,000,000
in a single contract, purchase order or
transaction or a series of related contracts,
purchase orders or transactions shall be
summarized in a quarterly report prepared by the
Borrower certified by an Authorized Signatory of
the Borrower and delivered to the Agent within
forty-five (45) days following the last day of
each fiscal quarter. Nothing contained in this
Agreement shall prohibit increases in compensation
and benefits for officers and employees of the
Borrower or any of the Borrower's Subsidiaries
which are customary in the industry or consistent
with the past business practice of the Borrower or
any of the Borrower's Subsidiaries, or payment of
customary directors' fees and indemnities.
ARTICLE 6Section .7 Liquidation; Change in
Ownership, Name, or Year; Disposition or
Acquisition of Assets; Etc. The Borrower shall
not, and shall not permit any of the Borrower's
Subsidiaries to, at any time:
(a) Liquidate or dissolve itself (or
suffer any liquidation or dissolution) or
otherwise wind up its business; provided, however,
that Productos Magneticos de Chihauhau, S.A. de
C.V., Telson, S.A. de C.V. and any Immaterial
Subsidiary may dissolve or liquidate;
(b) Sell, lease, abandon, transfer or
otherwise dispose of, in a single transaction or a
series of related transactions, any assets,
property or business except for the sale of
Inventory in the ordinary course of business at
the fair market value thereof and for cash or cash
equivalents and except for physical assets used,
consumed or otherwise disposed of in the ordinary
course of business; provided, however, that
(a) the Borrower may sell assets (other than
Collateral) pursuant to the Subsequent Lease
Transaction and may sell or otherwise dispose of
other assets (other than Collateral) with a sale
value not greater than $1,000,000 in the aggregate
for all such assets that may be sold during any
year if the Net Cash Proceeds from such sale are
applied to the Loans as required by Section
2.6(c); and (b) the Borrower, Microcircuits and
Finance Corp. may sell and transfer the
receivables as set forth in the Receivables
Purchase Agreements and the other Securitization
Documents;
(c) Become a partner or joint venturer
with any third party; provided, however, the
Borrower may become a partner or joint venturer
with LGE if (i) no Default exists hereunder at
such time, (ii) such arrangement is in compliance
with Section 7.6 hereof, and (iii) at the time the
Borrower enters into such partnership or joint
venture, the Borrower executes and delivers to the
Agent all documents reasonably necessary
(including UCC-1 financing statements) to perfect
the security interest of the Agent in the
partnership or other equity interest of the
Borrower in such partnership or joint venture;
(d) Acquire (i) all or any substantial
part of the assets, property or business of, or
(ii) any assets that constitute a division or
operating unit of the business of, any other
Person;
(e) Merge or consolidate with any other
Person, except that any Subsidiary of the Borrower
may be merged into or consolidated with the
Borrower or another Wholly-Owned Subsidiary of the
Borrower; provided that the Borrower is the
surviving entity in any such merger or
consolidation, or if the Borrower is not a party
to such merger or consolidation but any Material
Subsidiary is a party to such merger or
consolidation, the surviving entity is a Material
Subsidiary.;
(f) Change its corporate name without
giving the Agent thirty (30) days prior written
notice of its intention to do so and complying
with all reasonable requirements of the Lenders in
regard thereto;
(g) Create any Subsidiary, except for
the creation of a Wholly-Owned Subsidiary of the
Borrower provided; that (i) such Subsidiary is
organized under the laws of a jurisdiction within
the United States of America, (ii) (A) if such
Subsidiary is or becomes a Material Subsidiary,
such Subsidiary executes at the time of its
creation (or within thirty (30) days after it
becomes a Material Subsidiary) a Supplement to the
Subsidiary Guaranty in favor of the Agent, the
Issuing Banks and the Lenders in the form of
Exhibit L attached hereto and a Supplement to the
Subsidiary Security Agreement in favor of the
Agent, the Issuing Banks and the Lenders in the
form of Exhibit M attached hereto, (B) if such
Subsidiary is a domestic Subsidiary, the Borrower
executes an amendment to the Pledge Agreement for
purposes of pledging the stock of such Subsidiary
to the Agent pursuant to the terms of the Pledge
Agreement, and (C) if such Subsidiary is a
domestic Subsidiary, or is or becomes a Material
Subsidiary, the Borrower and such Subsidiary take
all steps required and execute all necessary
documents (including UCC-1 financing statements)
to perfect the security interest of the Agent in
the Capital Stock of such domestic Subsidiary and
the assets of such Material Subsidiary, and (iii)
no Default exists immediately prior to or after
the creation of such Subsidiary; or
(h) Change its year-end for accounting
purposes from the calendar year ending December
31.
ARTICLE 6Section .8 Minimum EBITDA. The
Borrower shall not permit for the fiscal quarter
ended (a) June 30, 1997, EBITDA for the
immediately preceding six (6) month period to be
less than ($25,000,000), (b) September 30, 1997,
EBITDA for the immediately preceding nine (9)
month period to be less than $10,000,000, and (c)
December 31, 1997, and each fiscal quarter end
thereafter, EBITDA for the immediately preceding
twelve (12) month period to be less than the
amount hereinbelow specified for such period:
Quarter End Amount
December 31, 1997 $ 45,000,000
March 31, 1998 $ 60,000,000
June 30, 1998 $ 80,000,000
September 30, 1998 $ 95,000,000
December 31, 1998 $105,000,000
March 31, 1999 $125,000,000
June 30, 1999, and thereafter $135,000,000
ARTICLE 6Section .9 Current Ratio. The
Borrower shall not as of the fiscal quarter ending
June 30, 1997, and for each fiscal quarter end
thereafter, permit the ratio of (a) Current Assets
to (b) Current Liabilities to be less than the
ratio hereinbelow specified for such period:
Quarter End Ratio
June 30, 1997 0.80 to 1.00
September 30, 1997 0.80 to 1.00
December 31, 1997, and thereafter 0.85 to 1.00
ARTICLE 6Section .10 Fixed Charge
Coverage Ratio. The Borrower shall not permit for
the quarter ended September 30, 1998, and each
calendar quarter end thereafter, the Fixed Charge
Coverage Ratio for the immediately preceding
twelve (12) month period to be less than the ratio
hereinbelow specified for such period:
Quarter End Ratio
September 30, 1998 0.80 to 1.00
December 31, 1998 1.25 to 1.00
March 31, 1999, and thereafter 1.50 to 1.00
ARTICLE 6Section .11 Capital
Expenditures. The Borrower shall not make or
incur in the aggregate any Capital Expenditures,
during any fiscal year, in excess of the amount
hereinbelow specified (the "Permitted Amount") for
such year:
Year Permitted Amount
1997 $115,000,000
1998 $ 51,000,000
1999 $ 60,000,000
2000 $ 30,000,000
; provided, however, the Borrower may make
additional Capital Expenditures during (a) fiscal
year 1998 in an aggregate amount equal to (i) the
Permitted Amount for fiscal year 1997, minus
(ii) the aggregate amount of Capital Expenditures
made in fiscal year 1997, and (b) fiscal year 1999
and fiscal year 2000 in an aggregate amount equal
to (i) (A) the Permitted Amount for the
immediately preceding fiscal year, minus (B) the
aggregate amount of Capital Expenditures made in
the immediately preceding fiscal year, multiplied
by (ii) fifty percent (50%).
ARTICLE 6Section .12 Interest Coverage
Ratio. The Borrower shall not permit for the
quarter ended (a) September 30, 1997, the Interest
Coverage Ratio for the immediately preceding nine
(9) month period to be less than 0.80 to 1.0, and
(b) December 31, 1997, and each calendar quarter
end thereafter, the Interest Coverage Ratio for
the immediately preceding twelve (12) month period
to be less than the ratio hereinbelow specified
for such period:
Quarter End Ratio
December 31, 1997 1.70 to 1.0
March 31, 1998 2.00 to 1.00
June 30, 1998 2.25 to 1.00
September 30, 1998 2.50 to 1.00
December 31, 1998 2.50 to 1.00
March 31, 1999, and thereafter 3.00 to 1.00
ARTICLE 6Section .13 Funded Debt/Total
Capitalization Ratio. The Borrower shall not
permit for the fiscal quarter ended June 30, 1997,
and each fiscal quarter end thereafter, the ratio
of (a) the sum of (i) Funded Debt plus (ii) the
LGE Payable, to (b) Total Capitalization for the
immediately preceding twelve (12) month period to
exceed the ratio which is hereinbelow specified
for such period:
Quarter End Ratio
June 30, 1997 0.90 to 1.00
September 30, 1997 0.90 to 1.00
December 31, 1997 0.85 to 1.00
March 31, 1998 0.85 to 1.00
September 30, 1998 0.85 to 1.00
September 30, 1998 0.85 to 1.00
December 31, 1998, and thereafter 0.80 to 1.00
ARTICLE 6Section .14 Tuning Patent
Royalties; LGE Payable.
(a) As of the fiscal quarter ended June 30,
1997, and each fiscal quarter end thereafter, the
aggregate amount of Tuning Patent Royalties
received by the Borrower during the immediately
preceding twelve (12) month period shall not be
less than $18,000,000.
(b) The aggregate outstanding balance of the
LGE Payable for each day from the Agreement Date
through June 30, 1997 shall not be less than
$60,000,000. As of the fiscal month ended
July 31, 1997, and each fiscal month end
thereafter, the aggregate average outstanding
amount of the LGE Payable during the immediately
preceding six (6) month period shall not be less
than the amount which is hereinbelow specified for
such period:
Month End Average Amount
July 31, 1997,
through June 30, 1998 $75,000,000
July 31, 1998,
through December 31, 1998 $85,000,000
January 31, 1999,
through June 30, 1999 $75,000,000
July 31, 1999,
through December 31, 1999 $85,000,000
January 31, 2000, and
thereafter $75,000,000
ARTICLE 6Section .15 Sales and
Leasebacks. The Borrower will not enter into and
will not permit any of the Borrower's Subsidiaries
to enter into any arrangement, directly or
indirectly, with any third party whereby the
Borrower or such Subsidiary shall sell or transfer
any property, real or personal, whether now owned
or hereafter acquired, and whereby the Borrower or
such Subsidiary shall then or thereafter rent or
lease as lessee such property or any part thereof
or other property which the Borrower or such
Subsidiary intends to use for substantially the
same purpose or purposes as the property sold or
transferred; provided, however, the Borrower may
enter into the Subsequent Lease Transaction on
substantially the same terms as the terms of the
Salomon Lease Transaction or the proposed terms of
the Subsequent Lease Transaction as in existence
on the Agreement Date.
ARTICLE 6Section .16 Amendment and
Waiver. The Borrower shall not, without the prior
written consent of the Majority Lenders, enter
into any amendment of, or agree to or accept any
waiver which would adversely affect the rights of
the Agent, the Lenders and the Issuing Banks under
this Agreement or any other Loan Document, of (a)
its certificate of incorporation and by-laws,
(b) the Subordinated Debentures, or (c) the
Securitization Documents.
ARTICLE 6Section .17 ERISA Liability.
The Borrower and each of the Borrower's
Subsidiaries shall not fail to meet all of the
applicable minimum funding requirements of ERISA
and the Code, without regard to any waivers
thereof, and, to the extent that the assets of any
of its Plans would be less than an amount
sufficient to provide all accrued benefits payable
under such Plans, shall make the maximum
deductible contributions allowable under the Code.
Neither the Borrower nor any of the Borrower's
Subsidiaries shall (a) become a participant in any
Multiemployer Plan after the Agreement Date, or
(b) withdraw from any Multiemployer Plan if such
withdrawal would result in material liability to
the Borrower or any Subsidiary.
ARTICLE 6Section .18 Payment
Instructions. The Borrower will not issue payment
instructions to the Receivables Trustee or Finance
Corp. contrary to the payment instructions set
forth in the Distribution Instructions Letter and
the Borrower will not issue payment instructions
to any licensee under a License Agreement contrary
to the provisions of Section 5.15(b) hereof.
ARTICLE 6Section .19 Prepayments. The
Borrower shall not prepay, redeem, defease or
purchase in any manner, or deposit or set aside
funds for the purpose of any of the foregoing,
make any payment in respect of principal of, or
make any payment in respect of interest on, (a)
the LGE Payable; provided, however, that so long
as no Default or Event of Default is then existing
or would be caused thereby, the Borrower may make
current payments of accounts due on the LGE
Payable, and the accrued interest thereon, if the
outstanding aggregate balance of the LGE Payable
remains equal to or greater than the amount
required by Section 7.14(b); and (b) any Funded
Debt (including the Subordinated Debentures),
except the Borrower may (i) make regularly
scheduled payments of principal or interest
required in accordance with the terms of the
instruments governing any Funded Debt permitted
hereunder, (ii), provided no Event of Default then
exists or would be caused thereby, purchase
Subordinated Debentures at prices below 100% of
the principal amount thereof, plus accrued
interest, for delivery 60 days in advance to the
trustee with respect to such Subordinated
Debentures to reduce or satisfy the Borrower's
obligation with respect to any mandatory sinking
fund payment relating thereto, and (iii) make
payments with respect to the Obligations;
provided, however, the Borrower shall not make any
payments (whether with respect to principal,
interest, sinking fund obligations, or otherwise)
on the Subordinated Debentures if such payments
would violate the subordination provisions of the
Subordinated Debentures.
ARTICLE 6Section .20 Negative Pledge.
The Borrower shall not, directly or indirectly,
enter into any agreement (other than the Loan
Documents) with any Person that prohibits or
restricts or limits the ability of the Borrower to
create, incur, pledge, or suffer to exist any Lien
upon any assets of the Borrower.
ARTICLE 7
DEFAULT
ARTICLE 7Section .1 Events of Default. Each
of the following shall constitute an Event of
Default, whatever the reason for such event and
whether it shall be voluntary or involuntary or be
effected by operation of law or pursuant to any
judgment or order of any court or any order, rule,
or regulation of any governmental or non-
governmental body:
(a) Any representation or warranty made
under this Agreement shall prove incorrect or
misleading in any material respect when made or
deemed to have been made pursuant to Section 4.3
hereof;
(b) The Borrower shall default in the
payment of any principal or interest under the
Notes, or any of them, or any reimbursement
obligations with respect to any Letter of Credit,
or any fees payable hereunder or under the other
Loan Documents;
(c) The Borrower shall default in the
performance or observance of any agreement or
covenant contained in Sections 5.5, 5.7, 5.9,
5.10, 5.11, 5.12, 5.13, 5.14, 5.15, 5.18, 5.20 or
5.21, or in Article 6 or Article 7 hereof or in
any Security Document;
(d) The Borrower shall default in the
performance or observance of any other agreement
or covenant contained in this Agreement not
specifically referred to elsewhere in this Section
8.1, and such default shall not be cured to the
Majority Lenders' satisfaction within a period of
thirty (30) days from the date that the Borrower
knew or should have known of the occurrence of
such default;
(e) There shall occur any default in
the performance or observance of any agreement or
covenant or breach of any representation or
warranty contained in any of the other Loan
Documents (other than this Agreement or the
Security Documents or as otherwise provided in
this Section 8.1) which shall not be cured to the
Majority Lenders' satisfaction within the
applicable cure period, if any, provided for in
such Loan Document, or, if there is no applicable
cure period set forth in such Loan Document,
within a period of thirty (30) days from the date
that the Borrower knew or should have known of the
occurrence of such default;
(f) There shall occur any Change of
Control of the Borrower;
(g) There shall be entered a decree or
order for relief in respect of the Borrower or any
of the Borrower's Subsidiaries under the
Bankruptcy Code, or any other applicable federal
or state bankruptcy law or other similar law, or
appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator, or similar
official of the Borrower or any of the Borrower's
Subsidiaries, or of any substantial part of their
respective properties, or ordering the winding-up
or liquidation of the affairs of the Borrower or
any of the Borrower's Subsidiaries, or an
involuntary petition shall be filed against the
Borrower or any of the Borrower's Subsidiaries,
and a temporary stay entered, and (i) such
petition and stay shall not be diligently
contested, or (ii) any such petition and stay
shall continue undismissed for a period of sixty
(60) consecutive days;
(h) Any of the Borrower or any of the
Borrower's Subsidiaries shall file a petition,
answer, or consent seeking relief under the
Bankruptcy Code, or any other applicable federal
or state bankruptcy law or other similar law, or
the Borrower or any of the Borrower's Subsidiaries
shall consent to the institution of proceedings
thereunder or to the filing of any such petition
or to the appointment or taking of possession of a
receiver, liquidator, assignee, trustee,
custodian, sequestrator, or other similar official
of the Borrower or any of the Borrower's
Subsidiaries, or of any substantial part of their
respective properties, or the Borrower or any of
the Borrower's Subsidiaries shall fail generally
to pay their respective debts as they become due,
or the Borrower or any of the Borrower's
Subsidiaries shall take any action in furtherance
of any such action;
(i) There shall be entered a decree or
order for relief in respect of LGE (or any other
direct or indirect holding company between the
Borrower and LGE holding five percent (5%) or more
of the Capital Stock of the Borrower or of any
class thereof) under the Bankruptcy Code, or any
other applicable federal or state bankruptcy law
or other similar law (including without limitation
the laws of Korea), or appointing a receiver,
liquidator, assignee, trustee, custodian,
sequestrator, or similar official of LGE (or any
other direct or indirect holding company between
the Borrower and LGE holding five percent (5%) or
more of the Capital Stock of the Borrower or of
any class thereof), or of any substantial part of
their respective properties, or ordering the
winding-up or liquidation of the affairs of LGE
(or any other direct or indirect holding company
between the Borrower and LGE holding five
percent (5%) or more of the Capital Stock of the
Borrower or of any class thereof), or an
involuntary petition shall be filed against LGE
(or any other direct or indirect holding company
between the Borrower and LGE holding five
percent (5%) or more of the Capital Stock of the
Borrower or of any class thereof), and a temporary
stay entered, and (i) such petition and stay shall
not be diligently contested, or (ii) any such
petition and stay shall continue undismissed for a
period of sixty (60) consecutive days;
(j) LGE (or any other direct or
indirect holding company between the Borrower and
LGE holding five percent (5%) or more of the
Capital Stock of the Borrower or of any class
thereof) shall file a petition, answer, or consent
seeking relief under the Bankruptcy Code, or any
other applicable federal or state bankruptcy law
or other similar law (including, without
limitation, the laws of Korea), or LGE (or any
other direct or indirect holding company between
the Borrower and LGE holding five percent (5%) or
more of the Capital Stock of the Borrower or of
any class thereof) shall consent to the
institution of proceedings thereunder or to the
filing of any such petition or to the appointment
or taking of possession of a receiver, liquidator,
assignee, trustee, custodian, sequestrator, or
other similar official of LGE (or any other direct
or indirect holding company between the Borrower
and LGE holding five percent (5%) or more of the
Capital Stock of the Borrower or of any class
thereof), or of any substantial part of their
respective properties, or LGE (or any other direct
or indirect holding company between the Borrower
and LGE holding five percent (5%) or more of the
Capital Stock of the Borrower or of any class
thereof) shall fail generally to pay their
respective debts as they become due, or LGE (or
any other direct or indirect holding company
between the Borrower and LGE holding five
percent (5%) or more of the Capital Stock of the
Borrower or of any class thereof) shall take any
action in furtherance of any such action;
(k) A final judgment (other than a
money judgment fully covered by insurance as to
which the insurance company has acknowledged
coverage) shall be entered by any court against
any of the Borrower or any of the Borrower's
Subsidiaries for the payment of money which
exceeds $1,000,000, or a warrant of attachment or
execution or similar process shall be issued or
levied against property of any of the Borrower or
any of the Borrower's Subsidiaries pursuant to a
final judgment which, together with all other such
property of the Borrower and the Borrower's
Subsidiaries subject to other such process,
exceeds in value $1,000,000 in the aggregate, and
if, within sixty (60) days after the entry, issue,
or levy thereof, such judgment, warrant, or
process shall not have been paid or discharged or
stayed pending appeal, or if, after the expiration
of any such stay, such judgment, warrant, or
process shall not have been paid or discharged;
(l) There shall be at any time any
"accumulated funding deficiency," as defined in
ERISA or in Section 412 of the Code, with respect
to any Plan maintained by any of the Borrower and
its ERISA Affiliates, or to which the Borrower or
any of its ERISA Affiliates has any liabilities,
or any trust created thereunder; or a trustee
shall be appointed by a United States District
Court to administer any such Plan; or the Pension
Benefit Guaranty Corporation shall institute
proceedings to terminate any such Plan; or any of
the Borrower and its ERISA Affiliates shall incur
any liability to the Pension Benefit Guaranty
Corporation in connection with the termination of
any such Plan; or any Plan or trust created under
any Plan of any of the Borrower and its ERISA
Affiliates shall engage in a non-exempt
"prohibited transaction" (as such term is defined
in Section 406 of ERISA or Section 4975 of the
Code) which would subject any such Plan, any trust
created thereunder, any trustee or administrator
thereof, or any party dealing with any such Plan
or trust to any material tax or penalty on
"prohibited transactions" imposed by Section 502
of ERISA or Section 4975 of the Code or the
Borrower or any of its ERISA Affiliates shall
enter into or become obligated after the Agreement
Date to contribute to a Multiemployer Plan;
(m) There shall occur any default
(after the expiration of any applicable cure
period) under any indenture, agreement, or
instrument evidencing Indebtedness of the Borrower
or any of the Borrower's Subsidiaries in an
aggregate principal amount exceeding $2,000,000,
including, without limitation, the Subordinated
Debentures or the Securitization Documents;
(n) All or any portion of any Security
Document shall at any time and for any reason be
declared to be null and void, or a proceeding
shall be commenced by the Borrower or any of its
Affiliates, or by any governmental authority
having jurisdiction over the Borrower or any of
its Affiliates, seeking to establish the
invalidity or unenforceability thereof (exclusive
of questions of interpretation of any provision
thereof), or the Borrower or any of its Affiliates
shall deny that it has any liability or obligation
for the payment of principal or interest purported
to be created under any Loan Document;
(o) There shall occur any event or
occurrence which, singly or when aggregated with
other events or occurrences, has a Materially
Adverse Effect;
(p) A Termination Event, or an Early
Amortization Event, or, if the Borrower is the
Servicer at such time, a Servicer Default (as such
terms are defined in the Pooling and Servicing
Agreement) under any of the Securitization
Documents shall occur and be continuing and shall
not have been rescinded in accordance with the
terms of such Securitization Documents; or
(q) Any Tuning Patent, any License
Agreement relating thereto or any of the
Borrower's right, title or interest in and to such
Tuning Patent or License Agreement, shall become
invalid or shall be terminated or shall otherwise
no longer be enforceable by or for the benefit of
the Borrower.
ARTICLE 7Section .2 Remedies. If an Event of
Default shall have occurred and shall be
continuing, in addition to the rights and remedies
set forth elsewhere in this Agreement and the Loan
Documents:
(a) With the exception of an Event of
Default specified in Section 8.1(g) or (h), the
Agent, at the direction of the Majority Lenders,
shall (i) terminate the Commitments and the Letter
of Credit Commitment, or (ii) declare the
principal of and interest on the Loans and the
Notes and all other Obligations to be forthwith
due and payable without presentment, demand,
protest, or notice of any kind, all of which are
hereby expressly waived, anything in this
Agreement or in the Notes to the contrary
notwithstanding, or both.
(b) Upon the occurrence and continuance
of an Event of Default specified in Sections
8.1(g) or (h), such principal, interest, and other
Obligations shall thereupon and concurrently
therewith become due and payable, and the
Commitments and the Letter of Credit Commitment,
shall forthwith terminate, all without any action
by the Agent or the Lenders or the Majority
Lenders or the holders of the Notes and without
presentment, demand, protest, or other notice of
any kind, all of which are expressly waived,
anything in this Agreement or in the Notes to the
contrary notwithstanding.
(c) The Agent, with the concurrence of
the Majority Lenders, shall exercise all of the
post-default rights granted to it and to them
under the Loan Documents or under Applicable Law.
The Agent, for the benefit of itself, the Issuing
Banks and the Lenders, shall have the right to the
appointment of a receiver for the Property of the
Borrower, and the Borrower hereby consents to such
rights and such appointment and hereby waives any
objection the Borrower may have thereto or the
right to have a bond or other security posted by
the Agent, the Issuing Banks or the Lenders in
connection therewith.
(d) In regard to all Letters of Credit
with respect to which presentment for honor shall
not have occurred at the time of any acceleration
of the Obligations pursuant to the provisions of
this Section 8.2, the Borrower shall promptly upon
demand by the Agent deposit in a Letter of Credit
Reserve Account opened by Agent for the benefit of
the Issuing Bank an amount equal to the aggregate
then undrawn and unexpired amount of such Letter
of Credit Obligations. Amounts held in such
Letter of Credit Reserve Account shall be applied
by the Agent to the payment of drafts drawn under
such Letters of Credit, and the unused portion
thereof after such Letters of Credit shall have
expired or been fully drawn upon, if any, shall be
applied to repay other obligations of the Borrower
hereunder and under the Notes in the manner set
forth in Section 2.11 hereof. Pending the
application of such deposit to the payment of the
Reimbursement Obligations, the Agent shall, to the
extent reasonably practicable, invest such deposit
in an interest bearing open account or similar
available savings deposit account and all interest
accrued thereon shall be held with such deposit as
additional security for the Reimbursement
Obligations. After all such Letters of Credit
shall have expired or been fully drawn upon, all
Reimbursement Obligations shall have been
satisfied, and all other Obligations shall have
been paid in full, the balance, if any, in such
Letter of Credit Reserve Account shall be returned
to the Borrower. Except as expressly provided
hereinabove, presentment, demand, protest and all
other notices of any kind are hereby expressly
waived by the Borrower.
(e) The Agent may, and upon the request
of the Lenders (whose voting rights hereunder have
not been restructed pursuant to Section 2.2(e)
hereof) the total of whose commitment ratios
equals or exceeds eighty percent (80%) of the
Commitment Ratios of all Lenders entitled to vote
hereunder, the Agent shall, upon one (1) Business
Day's prior notice, terminate transfers under the
Securitization Documents while an Event of Default
is continuing, if on the date of such notice,
either (a) the sum of the outstanding principal
amount of the Loans and the Letter of Credit
Obligations equals or exceeds $75,000,000, or
(b) the sum of the outstanding principal amount of
the Loans and the Letter of Credit Obligations is
less than $75,000,000 and the Available Revolving
Loan Commitment is less than $15,000,000.
Additionally, upon the occurrence of an Event of
Default, the Agent may send an Enforcement Notice
(as defined in the Receivables Intercreditor
Agreement to the Receivables Trustee.
(f) The rights and remedies of the
Agent, the Issuing Banks and the Lenders hereunder
shall be cumulative, and not exclusive.
ARTICLE 8
THE AGENT
ARTICLE 8Section .1 Appointment and
Authorization. Each Lender hereby irrevocably
appoints and authorizes, and hereby agrees that it
will require any transferee of any of its interest
in its Loans and in its Notes irrevocably to
appoint and authorize, the Agent to take such
actions as its agent on its behalf and to exercise
such powers hereunder as are delegated by the
terms hereof, together with such powers as are
reasonably incidental thereto. Neither the Agent
nor any of its directors, officers, employees, or
agents shall be liable for any action taken or
omitted to be taken by it hereunder or in
connection herewith, except for its own gross
negligence or willful misconduct as determined by
a final non-appealable order of a court of
competent jurisdiction.
ARTICLE 8Section .2 Interest Holders. The
Agent may treat each Lender, or the Person
designated in the last notice filed with the Agent
under this Section 9.2, as the holder of all of
the interests of such Lender in its Loans and in
its Notes until written notice of transfer, signed
by such Lender (or the Person designated in the
last notice filed with the Agent) and by the
Person designated in such written notice of
transfer, in form and substance satisfactory to
the Agent, shall have been filed with the Agent.
ARTICLE 8Section .3 Consultation with
Counsel. The Agent may consult with legal counsel
selected by it and shall not be liable to any
Lender or any Issuing Bank for any action taken or
suffered by it in good faith in reliance on the
advice of such counsel.
ARTICLE 8Section .4 Documents. The Agent
shall not be under any duty to examine, inquire
into, or pass upon the validity, effectiveness, or
genuineness of this Agreement, any Note, or any
instrument, document, or communication furnished
pursuant hereto or in connection herewith, and the
Agent shall be entitled to assume that they are
valid, effective, and genuine, have been signed or
sent by the proper parties, and are what they
purport to be.
ARTICLE 8Section .5 Agent and Affiliates.
With respect to the Commitment and Loans, the
Lender which is affiliated with the Agent shall
have the same rights and powers hereunder as any
other Lender, and the Agent and its other
affiliates may accept deposits from, lend money
to, and generally engage in any kind of business
with the Borrower or any Affiliates of, or Persons
doing business with, the Borrower, as if it were
not affiliated with the Agent and without any
obligation to account therefor. The Lender and
the Issuing Banks acknowledge that the Agent and
its affiliates have other lending and investment
relationships with the Borrower and its
Affiliates, and in the future may enter into
additional such relationships.
ARTICLE 8Section .6 Responsibility of the
Agent. The duties and obligations of the Agent
under this Agreement are only those expressly set
forth in this Agreement. The Agent shall be
entitled to assume that no Default or Event of
Default has occurred and is continuing unless it
has actual knowledge, or has been notified by the
Borrower, of such fact, or has been notified by a
Lender that such Lender considers that a Default
or an Event of Default has occurred and is
continuing, and such Lender shall specify in
detail the nature thereof in writing. The Agent
shall provide each Lender with copies of such
documents received from the Borrower as such
Lender may reasonably request.
ARTICLE 8Section .7 Action by Agent.
(a) The Agent shall be entitled to use
its discretion with respect to exercising or
refraining from exercising any rights which may be
vested in it by, and with respect to taking or
refraining from taking any action or actions which
it may be able to take under or in respect of,
this Agreement, unless the Agent shall have been
instructed by the Majority Lenders to exercise or
refrain from exercising such rights or to take or
refrain from taking such action, provided that the
Agent shall not exercise any rights under Section
8.2(a) of this Agreement without the approval of
the Majority Lenders. The Agent shall incur no
liability under or in respect of this Agreement
with respect to anything which it may do or
refrain from doing in the reasonable exercise of
its judgment or which may seem to it to be
necessary or desirable in the circumstances.
(b) The Agent shall not be liable to
the Lenders or to any Lender in acting or
refraining from acting under this Agreement in
accordance with the instructions of the Majority
Lenders, and any action taken or failure to act
pursuant to such instructions shall be binding on
all Lenders.
ARTICLE 8Section .8 Notice of Default or
Event of Default. In the event that the Agent or
any Lender shall acquire actual knowledge, or
shall have been notified in writing, of any
Default or Event of Default, the Agent or such
Lender shall promptly notify the Lenders and the
Agent, and the Agent shall take such action and
assert such rights under this Agreement as the
Majority Lenders shall request in writing, and the
Agent shall not be subject to any liability by
reason of its acting pursuant to any such request.
If the Majority Lenders shall fail to request the
Agent to take action or to assert rights under
this Agreement in respect of any Default or Event
of Default within ten (10) days after their
receipt of the notice of any Default or Event of
Default from the Agent, or shall request
inconsistent action with respect to such Default
or Event of Default, the Agent may, but shall not
be required to, take such action and assert such
rights (other than rights under Article 8 hereof)
as it deems in its discretion to be advisable for
the protection of the Lenders, except that, if the
Majority Lenders have instructed the Agent not to
take such action or assert such right, in no event
shall the Agent act contrary to such instructions.
ARTICLE 8Section .9 Responsibility
Disclaimed. The Agent shall not be under any
liability or responsibility whatsoever as Agent:
(a) To the Borrower or any other Person
or entity as a consequence of any failure or delay
in performance by or any breach by, any Lender or
Lenders of any of its or their obligations under
this Agreement;
(b) To any Lender or Lenders, as a
consequence of any failure or delay in performance
by, or any breach by, the Borrower or any other
obligor of any of its obligations under this
Agreement or the Notes or any other Loan Document;
or
(c) To any Lender or Lenders for any
statements, representations, or warranties in this
Agreement, or any other document contemplated by
this Agreement or any information provided
pursuant to this Agreement, any other Loan
Document, or any other document contemplated by
this Agreement, or for the validity,
effectiveness, enforceability, or sufficiency of
this Agreement, the Notes, any other Loan
Document, or any other document contemplated by
this Agreement.
ARTICLE 8Section .10 Indemnification.
The Lenders agree to indemnify the Agent (to the
extent not reimbursed by the Borrower) pro rata in
accordance with their Commitment Ratios from and
against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments,
suits, investigations, costs, expenses (including
fees and expenses of experts, agents, consultants,
and counsel), or disbursements of any kind or
nature (whether or not the Agent is a party to any
such action, suit or investigation) whatsoever
which may be imposed on, incurred by, or asserted
against the Agent in any way relating to or
arising out of this Agreement, any other Loan
Document, or any other document contemplated by
this Agreement or any action taken or omitted by
the Agent under this Agreement, any other Loan
Document, or any other document contemplated by
this Agreement, except that no Lender shall be
liable to the Agent for any portion of such
liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs,
expenses, or disbursements resulting from the
gross negligence or willful misconduct of the
Agent as determined by a final non-appealable
order of a court of competent jurisdiction. The
provisions of this Section 9.10 shall survive the
termination of this Agreement.
ARTICLE 8Section .11 Credit Decision.
Each Lender represents and warrants to each other
and to the Agent that:
(a) In making its decision to enter
into this Agreement and to make its Advances it
has independently taken whatever steps it
considers necessary to evaluate the financial
condition and affairs of the Borrower and that it
has made an independent credit judgment, and that
it has not relied upon information provided by the
Agent; and
(b) So long as any portion of the Loans
remains outstanding, it will continue to make its
own independent evaluation of the financial
condition and affairs of the Borrower.
ARTICLE 8Section .12 Successor Agent.
Subject to the appointment and acceptance of a
successor Agent as provided below, the Agent may
resign at any time by giving written notice
thereof to the Lenders and the Borrower. Upon any
such resignation, the Majority Lenders shall have
the right to appoint a successor Agent (with the
consent of the Borrower if no Event of Default
then exists). If no successor Agent shall have
been so appointed by the Majority Lenders, and
shall have accepted such appointment within thirty
(30) days after the retiring Agent's giving of
notice of resignation, then the retiring Agent
may, on behalf of the Lenders, appoint a successor
Agent which shall be any Lender or a commercial
bank organized under the laws of the United States
of America or any political subdivision thereof
which has combined capital and reserves in excess
of $250,000,000. Upon the acceptance of any
appointment as Agent hereunder by a successor
Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights,
powers, privileges, duties, and obligations 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
9.12 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 the Agent.
ARTICLE 8Section .13 Agent May File
Proofs of Claim. The Agent may file such proofs
of claim and other papers or documents as may be
necessary or advisable in order to have the claims
of the Agent (including any claim for the
reasonable compensation, expenses, disbursements
and advances of the Agent, its agents, financial
advisors and counsel), the Lenders and the Issuing
Banks allowed in any judicial proceedings relative
to the Borrower or any Material Subsidiary, or any
of their respective creditors or property, and
shall be entitled and empowered to collect,
receive and distribute any monies, securities or
other property payable or deliverable on any such
claims and any custodian in any such judicial
proceedings is hereby authorized by each Lender
and Issuing Bank to make such payments to the
Agent and, in the event that the Agent shall
consent to the making of such payments directly to
the Lenders and the Issuing Banks, to pay to the
Agent any amount due to the Agent for the
reasonable compensation, expenses, disbursements
and advances of the Agent, its agents, financial
advisors and counsel, and any other amounts due
the Agent under Section 10.2 hereof. Nothing
contained in the Loan Agreement or the Loan
Documents shall be deemed to authorize the Agent
to authorize or consent to or accept or adopt on
behalf of any Lender or any Issuing Bank any plan
of reorganization, arrangement, adjustment or
composition affecting the Notes, the Letters of
Credit or the rights of any holder thereof, or to
authorize the Agent to vote in respect of the
claim of any Lender of any Issuing Bank in any
such proceeding.
ARTICLE 8Section .14 Collateral. The
Agent is hereby authorized to hold all Collateral
pledged pursuant to any Loan Document and to act
on behalf of the Lenders and the Issuing Banks, in
its own capacity and through other agents
appointed by it, under the Security Documents;
provided, that the Agent shall not agree to the
release of any Collateral except in accordance
with the terms hereof.
ARTICLE 8Section .15 Release of
Collateral.
(a) Each Lender and each Issuing Bank
hereby directs, in accordance with the terms of
this Agreement, the Agent to release or to
subordinate any Lien held by the Agent for the
benefit of the Lenders and the Issuing Banks:
(i) against all of the Collateral,
upon final and indefeasible payment in full
of the Obligations and termination of this
Agreement; or
(ii) against any part of the
Collateral sold or disposed of by the
Borrower if such sale or disposition is
permitted by Section 7.7 hereof or is
otherwise consented to by the requisite
Lenders for such release as set forth in
Section 10.12 hereof, as certified to the
Agent by the Borrower in a certificate of an
Authorized Signatory.
(b) Each Lender and each Issuing Bank
hereby directs the Agent to execute and deliver or
file such termination and partial release
statements and do such other things as are
necessary to release Liens to be released pursuant
to this Section 9.15 promptly upon the
effectiveness of any such release. Upon request
by the Agent at any time, the Lenders and the
Issuing Banks will confirm in writing the Agent's
authority to release particular types or items of
Collateral pursuant to this Section 9.15.
ARTICLE 8Section .16 Securitization
Documents. The Agent is hereby authorized to
enter into the Receivables Intercreditor Agreement
on behalf of the Lenders and each Issuing Bank.
ARTICLE 9
MISCELLANEOUS
ARTICLE 9Section .1 Notices.
(a) All notices and other
communications under this Agreement shall be in
writing and shall be deemed to have been given
five (5) days after deposit in the mail,
designated as certified mail, return receipt
requested, post-prepaid, or one (1) day after
being entrusted to a reputable commercial
overnight delivery service, or when delivered to
the telegraph office or sent out by telex or
telecopy addressed to the party to which such
notice is directed at its address determined as
provided in this Section 10.1. All notices and
other communications under this Agreement shall be
given to the parties hereto at the following
addresses:
(b)
(i) If to the Borrower, to it at:
Zenith Electronics Corporation
1000 Milwaukee Avenue
Glenview, Illinois 60025
Attn: Manager Banking and Finance
Telecopy No.: (847) 391-8876
with
copies to (which copies shall
only be required to be sent in
connection with a notice under
Article 8 hereof):
Zenith Electronics Corporation
1000 Milwaukee Avenue
Glenview, Illinois 60025
Attn: General Counsel
Telecopy No.: (847) 391-8876
and
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Attn: Douglas H. Williams, Esq.
Telecopy No.: (312) 853-7036
(ii) If to the Agent, to it at:
Mr. Tom Halsch
Citicorp North America, Inc.
399 Park Avenue
6th Floor Zone 4
New York, New York 10043
Telecopy No.: (212) 793-1290
with a copy to:
Chris D. Molen, Esq.
Paul, Hastings, Janofsky & Walker
600 Peachtree Street, N.E.
Suite 2400
Atlanta, Georgia 30308
Telecopy No.: (404) 815-2424
(iii) If to the Lenders, to them at
the addresses set forth on the
signature pages hereof.
(iv) If to the Issuing Banks, at
the addresses set forth on the
signature pages hereof.
Copies shall be provided to persons other than
parties hereto only in the case of notices under
Article 8 hereof.
(b) Any party hereto may change the
address to which notices shall be directed under
this Section 10.1 by giving ten (10) days' written
notice of such change to the other parties.
ARTICLE 9Section .2 Expenses. The Borrower
agrees to promptly pay:
(a) All reasonable out-of-pocket
expenses of the Agent in connection with the
preparation, negotiation, execution, and delivery
of this Agreement and the other Loan Documents,
the transactions contemplated hereunder and
thereunder, and the making of the initial Advance
hereunder, including, but not limited to, the fees
and disbursements of counsel for the Agent, and
reasonably allocated costs for services of
internal counsel for the Agent;
(b) All reasonable out-of-pocket
expenses of the Agent in connection with the
administration of the transactions contemplated in
this Agreement or the other Loan Documents, and
the preparation, negotiation, execution, and
delivery of any waiver, amendment, or consent by
the Lenders relating to this Agreement or the
other Loan Documents, including, but not limited
to, all reasonable out-of-pocket expenses of the
Agent in connection with its quarterly field
audits, and the fees and disbursements of counsel
for the Agent and reasonably allocated costs for
services of internal counsel for the Agent;
(c) All reasonable out-of-pocket costs
and expenses of the Agent, the Issuing Banks and
any Lender in connection with any restructuring,
refinancing, or "work out" of the transactions
contemplated by this Agreement, and of obtaining
performance under this Agreement or the other Loan
Documents, and all out-of-pocket costs and
expenses of collection if default is made in the
payment of the Notes, which in each case shall
include fees and out-of-pocket expenses of counsel
for the Agent, the Issuing Banks and any Lender,
and the fees and out-of-pocket expenses of any
experts, agents, or consultants of the Agent,
including in each case, but without in any way
limiting the generality of the foregoing,
reasonably allocated costs for service of their
internal counsel; and
(d) All taxes, assessments, general or
special, and other charges levied on, or assessed,
placed or made against any of the Collateral, the
Notes or the Obligations.
ARTICLE 9Section .3 Waivers. The rights and
remedies of the Agent and the Lenders under this
Agreement and the other Loan Documents shall be
cumulative and not exclusive of any rights or
remedies which they would otherwise have. No
failure or delay by the Agent, the Issuing Banks,
the Majority Lenders or the Lenders in exercising
any right shall operate as a waiver of such right.
The Agent and the Lenders expressly reserve the
right to require strict compliance with the terms
of this Agreement in connection with any funding
of a request for an Advance. In the event the
Lenders decide to fund a request for an Advance at
a time when the Borrower is not in strict
compliance with the terms of this Agreement, such
decision by the Lenders shall not be deemed to
constitute an undertaking by the Lenders to fund
any further requests for Advances or preclude the
Lenders from exercising any rights available to
the Lenders under the Loan Documents or at law or
equity. Any waiver or indulgence granted by the
Lenders or by the Majority Lenders shall not
constitute a modification of this Agreement,
except to the extent expressly provided in such
waiver or indulgence, or constitute a course of
dealing by the Lenders at variance with the terms
of the Agreement such as to require further notice
by the Lenders of the Lenders' intent to require
strict adherence to the terms of the Agreement in
the future. Any such actions shall not in any way
affect the ability of the Lenders, in their
discretion, to exercise any rights available to
them under this Agreement or under any other
agreement, whether or not the Lenders are party,
relating to the Borrower.
ARTICLE 9Section .4 Set-Off. In addition to
any rights now or hereafter granted under
Applicable Law and not by way of limitation of any
such rights, except to the extent limited by
Applicable Law, upon the occurrence of a Default
or an Event of Default and during the continuation
thereof, the Lenders and any subsequent holder or
holders of the Notes are hereby authorized by the
Borrower at any time or from time to time, without
notice to the Borrower or to any other Person, any
such notice being hereby expressly waived, to set-
off and to appropriate and apply any and all
deposits (general or special, time or demand,
including, but not limited to, Indebtedness
evidenced by certificates of deposit, in each case
whether matured or unmatured) and any other
Indebtedness at any time held or owing by the
Lenders or such holder to or for the credit or the
account of the Borrower, against and on account of
the obligations and liabilities of the Borrower,
to the Lenders or such holder under this
Agreement, the Notes, and any other Loan Document,
including, but not limited to, all claims of any
nature or description arising out of or connected
with this Agreement, the Notes, or any other Loan
Document, irrespective of whether or not (a) the
Lenders or the holder of the Notes shall have made
any demand hereunder or (b) the Lenders shall have
declared the principal of and interest on the
Loans and Notes and other amounts due hereunder to
be due and payable as permitted by Section 8.2 and
although said obligations and liabilities, or any
of them, shall be contingent or unmatured. Any
sums obtained by any Lender or by any subsequent
holder of the Notes shall be subject to the
application of payments provisions of Article 2
hereof. Upon direction by the Agent, with the
consent of the Majority Lenders, each Lender
holding deposits of the Borrower shall exercise
its set-off rights as so directed.
ARTICLE 9Section .5 Assignment.
(a) The Borrower may not assign or
transfer any of its rights or obligations
hereunder, under the Notes or under any other Loan
Document without the prior written consent of each
Lender.
(b) Each of the Lenders may at any time
enter into assignment agreements or participations
with one or more other banks or other Persons
pursuant to which each Lender may assign or
participate its interest under this Agreement and
the other Loan Documents, including, its interest
in any particular Advance or portion thereof,
provided, that (1) all assignments (other than
assignments described in clause (2) herein and in
Section 10.12(b) hereof) shall be in minimum
principal amounts of the lesser of (X) $5,000,000,
and (Y) the amount of such Lender's Commitment (in
a single assignment only), (2) each Lender may
sell assignments or participations of up to one
hundred percent (100%) of its interest hereunder
to (A) one or more Affiliates of such Lender, or
(B) any Federal Reserve Bank as collateral
security pursuant to Regulation A of the Board of
Governors of the Federal Reserve System and any
Operating Circular issued by such Federal Reserve
Bank (no assignment under this clause (B) shall
relieve such Lender from its obligations
hereunder), and (3) all assignments (other than
assignments described in clause (2) herein and in
Section 10.12(b) hereof) and participations
hereunder shall be subject to the following
additional terms and conditions:
(i) No assignment (except
assignments permitted in Section 10.5(b)(2)
hereof) shall be sold without the prior consent of
the Agent and, if no Event of Default then exists,
the Borrower, which consents shall not be
unreasonably withheld;
(ii) Any Person purchasing a
participation or an assignment of the Loans from
any Lender shall be required to represent and
warrant that its purchase shall not constitute a
"prohibited transaction" (as defined in Section
4.1(n) hereof);
(iii) The Borrower, the Lender,
and the Agent agree that assignments permitted
hereunder (including the assignment of any Advance
or portion thereof) may be made with all voting
rights, and shall be made pursuant to an
Assignment and Assumption Agreement. An
administrative fee of $2,500 shall be payable to
the Agent by the assigning Lender at the time of
any assignment hereunder;
(iv) No participation agreement
shall confer any rights under this Agreement or
any other Loan Document to any purchaser thereof,
or relieve any issuing Lender from any of its
obligations under this Agreement, and all actions
hereunder shall be conducted as if no such
participation had been granted; provided, however,
that any participation agreement may confer on the
participant the right to approve or disapprove
decreases in the rate of interest or fees to the
Lenders, increases in the advance rates set forth
in the definition of "Borrowing Base" herein,
increases in the principal amount of such
participant's pro rata share of the Revolving Loan
Commitment and extensions of the Maturity Date
for, or the date for any scheduled payment of
principal, interest or fees on, the Loans;
(v) Each Lender agrees to provide
the Agent and the Borrower with prompt written
notice of any issuance of participation or
assignments of its interests hereunder;
(vi) No assignment, participation
or other transfer of any rights hereunder or under
the Notes shall be effected that would result in
any interest requiring registration under the
Securities Act of 1933, as amended, or
qualification under any state securities law;
(vii) No such assignment may be
made to any bank or other financial institution
(x) with respect to which a receiver or
conservator (including, without limitation, the
Federal Deposit Insurance Corporation, the
Resolution Trust Company or the Office of Thrift
Supervision) has been appointed or (y) that is not
"adequately capitalized" (as such term is defined
in Section 131(b)(1)(B) of the Federal Deposit
Insurance Corporation Improvement Act as in effect
on the Agreement Date);
(viii) Each assignment or
participation hereunder shall be made by the
assigning Lender pro rata with respect to such
assigning Lender's Revolving Loan Commitment and
Term Loan; and
(ix) If applicable, each Lender
shall, and shall cause each of its assignees to
provide to the Agent on or prior to the Agreement
Date or effective date of any assignment, as the
case may be, an appropriate Internal Revenue
Service form as required by Applicable Law
supporting such Lender's position that no
withholding by the Borrower or the Agent for U.S.
income tax payable by such Lender in respect of
amounts received by it hereunder is required. For
purposes of this Agreement, an appropriate
Internal Revenue Service form shall mean Form 1001
(Ownership Exemption or Reduced Rate Certificate
of the U.S. Department of Treasury), or Form 4224
(Exemption from Withholding of Tax on Income
Effectively Connected with the Conduct of a Trade
or Business in the United States), or any
successor or related forms adopted by the relevant
U.S. taxing authorities.
(c) Except as specifically set forth in
Section 10.5(b) hereof, nothing in this Agreement
or the Notes, expressed or implied, is intended to
or shall confer on any Person other than the
respective parties hereto and thereto and their
successors and assignees permitted hereunder and
thereunder any benefit or any legal or equitable
right, remedy or other claim under this Agreement
or the Notes.
(d) Anything in this Agreement to the
contrary notwithstanding, in the case of any
participation, all amounts payable by the Borrower
under the Loan Documents shall be calculated and
made in the manner and to the parties hereto as if
no such participation had been sold.
ARTICLE 9Section .6 Counterparts. This
Agreement may be executed in any number of
counterparts, each of which shall be deemed to be
an original, but all such separate counterparts
shall together constitute but one and the same
instrument.
ARTICLE 9Section .7 Governing Law. This
Agreement and the Loan Documents shall be
construed in accordance with and governed by the
laws of the State of New York, except to the
extent otherwise provided in the Loan Documents.
ARTICLE 9Section .8 Severability. Any
provision of this Agreement which is prohibited or
unenforceable shall be ineffective to the extent
of such prohibition or unenforceability without
invalidating the remaining provisions hereof in
that jurisdiction or affecting the validity or
enforceability of such provision in any other
jurisdiction.
ARTICLE 9Section .9 Headings. Headings used
in this Agreement are for convenience only and
shall not be used in connection with the
interpretation of any provision hereof.
ARTICLE 9Section .10 Source of Funds.
Notwithstanding the use by the Lenders of the Base
Rate and the Eurodollar Rate as reference rates
for the determination of interest on the Loans,
the Lenders shall be under no obligation to obtain
funds from any particular source in order to
charge interest to the Borrower at interest rates
tied to such reference rates.
ARTICLE 9Section .11 Entire Agreement.
Except as otherwise expressly provided herein,
this Agreement and the other documents described
or contemplated herein embody the entire Agreement
and understanding among the parties hereto and
thereto and supersede all prior agreements,
understandings, and conversations relating to the
subject matter hereof and thereof. The Borrower
represents and warrants to the Agent and each of
the Lenders that it has read the provisions of
this Section 10.11 and discussed the provisions of
this Section 10.11 and the rest of the Loan
Agreement with counsel for the Borrower, and the
Borrower acknowledges and agrees that the Agent
and each of the Lenders are expressly relying upon
such representations and warranties of the
Borrower (as well as the other representations and
warranties of the Borrower set forth in Section
4.1 hereof) in entering into this Agreement.
ARTICLE 9Section .12 Amendments and
Waivers.
(a) Neither this Agreement nor any term
hereof may be amended orally, nor may any
provision hereof be waived orally but only by an
instrument in writing signed by the Majority
Lenders and, in the case of an amendment, also by
the Borrower, except that the consent of the
Super-Majority Lenders shall be required for any
increase of the advance rates set forth in the
definition of "Borrowing Base" herein, and the
consent of each of the Lenders shall be required
for (i) any increase in the amount of the
Revolving Loan Commitment, (ii) any sale or
release of any material Collateral except as
permitted hereunder or any release of any
guarantor of the Obligations, (iii) any extensions
of the Maturity Date, the date of payment of
interest or principal or fees, or reduction of
principal (without a corresponding payment with
respect thereto), or reduction in the rate of
interest or fees due to the Lenders hereunder, and
(iv) any amendment of this Section 10.12 or of the
definition of "Majority Lenders" or "Super-
Majority Lenders", and, in the case of an
amendment with respect to any of the foregoing,
the consent of the Borrower.
(b) Each Lender grants to the Agent the
right to purchase all (but not less than all) of
such Lender's Commitment, Letter of Credit
Commitment, the Loans and Letter of Credit
Obligations owing to it and the Notes held by it
and all of its rights and obligations hereunder
and under the other Loan Documents at a price
equal to the aggregate amount of outstanding Loans
and Letter of Credit Obligations owed to such
Lender (together with all accrued and unpaid
interest and fees owed to such Lender), which
right may be exercised by the Agent if such Lender
refuses to execute any amendment, waiver or
consent which requires the written consent of all
of the Lenders and to which the Majority Lenders,
the Agent and the Borrower have agreed. Each
Lender agrees that if the Agent exercises its
option hereunder, it shall promptly execute and
deliver an Assignment and Assumption Agreement and
other agreements and documentation necessary to
effectuate such assignment. The Agent may assign
its purchase rights hereunder to any assignee if
such assignment complies with the requirements of
Section 10.5(b)(i), (ii), (vi), (vii) and (ix).
ARTICLE 9Section .13 Other Relationships.
No relationship created hereunder or under any
other Loan Document shall in any way affect the
ability of the Agent, each Issuing Bank and each
Lender to enter into or maintain business
relationships with the Borrower, or any of its
Affiliates, beyond the relationships specifically
contemplated by this Agreement and the other Loan
Documents.
ARTICLE 9Section .14 Pronouns. The
pronouns used herein shall include, when
appropriate, either gender and both singular and
plural, and the grammatical construction of
sentences shall conform thereto.
ARTICLE 9Section .15 Disclosure. Subject
to Section 10.16 hereof, the Borrower agrees that
the Agent shall have the right to issue press
releases regarding the making of the Loans to the
Borrower pursuant to the terms of this Agreement.
ARTICLE 9Section .16 Replacement of
Lender. In the event that a Replacement Event
occurs and is continuing with respect to any
Lender, the Borrower may designate another
financial institution (such financial institution
being herein called a "Replacement Lender")
acceptable to the Agent, and which is not the
Borrower or an Affiliate of the Borrower, to
assume such Lender's Commitment hereunder, to
purchase the Loans and participations of such
Lender and such Lender's rights hereunder and (if
such Lender is an Issuing Bank) to issue Letters
of Credit in substitution for all outstanding
Letters of Credit issued by such Lender, without
recourse to or representation or warranty by, or
expense to, such Lender for a purchase price equal
to the outstanding principal amount of the Loans
payable to such Lender plus any accrued but unpaid
interest on such Loans and accrued but unpaid
commitment fees and letter of credit fees owing to
such Lender, and upon such assumption, purchase
and substitution, and subject to the execution and
delivery to the Agent by the Replacement Lender of
documentation satisfactory to the Agent (pursuant
to which such Replacement Lender shall assume the
obligations of such original Lender under this
Agreement), the Replacement Lender shall succeed
to the rights and obligations of such Lender
hereunder and such Lender shall no longer be a
party hereto or have any rights hereunder provided
that the obligations of the Borrower to indemnify
such Lender with respect to event occurring or
obligations arising before such replacement shall
survive such replacement. "Replacement Event"
means, with respect to any Lender, the
commencement of or the talking of possession by, a
receiver, custodian, conservator, trustee or
liquidator of such Lender, or the declaration by
the appropriate regulatory authority that such
Lender is insolvent.
ARTICLE 10
YIELD PROTECTION
ARTICLE 10Section .1 Eurodollar Rate
Basis Determination. Notwithstanding anything
contained herein which may be construed to the
contrary, if with respect to any proposed
Eurodollar Rate Advance for any Eurodollar Advance
Period, the Agent determines that deposits in
dollars (in the applicable amount) are not being
offered to the Agent in the relevant market for
such Eurodollar Advance Period, the Agent shall
forthwith give notice thereof to the Borrower and
the Lenders, whereupon until the Agent notifies
the Borrower that the circumstances giving rise to
such situation no longer exist, the obligations of
the Lenders to make such types of Eurodollar Rate
Advances shall be suspended.
ARTICLE 10Section .2 Illegality. If any
applicable law, rule, or regulation, or any change
therein, or any interpretation or change in
interpretation or administration thereof by any
governmental authority, central bank, or
comparable agency charged with the interpretation
or administration thereof, or compliance by any
Lender with any request or directive (whether or
not having the force of law) of any such
authority, central bank, or comparable agency,
shall make it unlawful or impossible for any
Lender to make, maintain, or fund its Eurodollar
Rate Advances, such Lender shall so notify the
Agent, and the Agent shall forthwith give notice
thereof to the other Lenders and the Borrower.
Before giving any notice to the Agent pursuant to
this Section 11.2, such Lender shall designate a
different lending office if such designation will
avoid the need for giving such notice and will
not, in the judgment of such Lender, be otherwise
disadvantageous to such Lender. Upon receipt of
such notice, notwithstanding anything contained in
Article 2 hereof, the Borrower shall repay in full
the then outstanding principal amount of each
affected Eurodollar Rate Advance of such Lender,
together with accrued interest thereon, either (a)
on the last day of the then current Eurodollar
Advance Period applicable to such Eurodollar Rate
Advance if such Lender may lawfully continue to
maintain and fund such Eurodollar Rate Advance to
such day or (b) immediately if such Lender may not
lawfully continue to fund and maintain such
Eurodollar Rate Advance to such day. Concurrently
with repaying each affected Eurodollar Rate
Advance of such Lender, notwithstanding anything
contained in Article 2 hereof, the Borrower shall
borrow a Base Rate Advance (or the other type of
Eurodollar Rate Advance, if available) from such
Lender, and such Lender shall make such Advance in
an amount such that the outstanding principal
amount of the Note held by such Lender shall equal
the outstanding principal amount of such Note
immediately prior to such repayment.
ARTICLE 10Section .3 Increased Costs.
(a) If after the Agreement Date any
applicable law, rule, or regulation, or any change
therein, or any interpretation or change in
interpretation or administration thereof by any
governmental authority, central bank, or
comparable agency charged with the interpretation
or administration thereof or compliance by any
Lender with any request or directive (whether or
not having the any such authority, central bank,
or comparable agency:
(i) Shall subject any Lender to
any tax, duty, or other charge with respect
to its obligation to make Eurodollar Rate
Advances, or its Eurodollar Rate Advances, or
shall change the basis of taxation of
payments to any Lender of the principal of or
interest on its Eurodollar Rate Advances or
in respect of any other amounts due under
this Agreement in respect of its Eurodollar
Rate Advances or its obligation to make
Eurodollar Rate Advances (except for changes
in the rate of tax on the overall net income
of such Lender imposed by the jurisdiction in
which such Lender's principal executive
office is located); or
(ii) Shall impose, modify, or deem
applicable any reserve (including, without
limitation, any imposed by the Board of
Governors of the Federal Reserve System, but
excluding any included in an applicable
Eurodollar Reserve Percentage), special
deposit, capital adequacy, assessment, or
other requirement or condition against assets
of, deposits with or for the account of, or
commitments or credit extended by any Lender,
or shall impose on any Lender or the
eurodollar interbank borrowing market any
other condition affecting its obligation to
make such Eurodollar Rate Advances or its
Eurodollar Rate Advances; and the result of
any of the foregoing is to increase the cost
to such Lender of making or maintaining any
such Eurodollar Rate Advances, or to reduce
the amount of any sum received or receivable
by the Lender under this Agreement or under
its Notes with respect thereto, and such
increase is not given effect in the
determination of the Eurodollar Rate then,
on the earlier of demand by such Lender or the
Maturity Date, the Borrower agrees to pay to such
Lender such additional amount or amounts as will
compensate such Lender for such increased costs.
Each Lender will promptly notify the Borrower and
the Agent of any event of which it has knowledge,
occurring after the date hereof, which will
entitle such Lender to compensation pursuant to
this Section 11.3 and will designate a different
lending office if such designation will avoid the
need for, or reduce the amount of, such
compensation and will not, in the sole judgment of
such Lender, be otherwise disadvantageous to such
Lender.
(b) A certificate of any Lender
claiming compensation under this Section 11.3 and
setting forth the additional amount or amounts to
be paid to it hereunder and calculations therefor
shall be conclusive in the absence of manifest
error. In determining such amount, such Lender
may use any reasonable averaging and attribution
methods. If any Lender demands compensation under
this Section 11.3, the Borrower may at any time,
upon at least five (5) Business Days' prior notice
to such Lender, prepay in full the then
outstanding affected Eurodollar Rate Advances of
such Lender, together with accrued interest
thereon to the date of prepayment, along with any
reimbursement required under Section 2.9 hereof.
Concurrently with prepaying such Eurodollar Rate
Advances the Borrower shall borrow a Base Rate
Advance, or a Eurodollar Rate Advance not so
affected, from such Lender, and such Lender shall
make such Advance in an amount such that the
outstanding principal amount of the Notes held by
such Lender shall equal the outstanding principal
amount of such Notes immediately prior to such
prepayment.
ARTICLE 10Section .4 Effect On Other
Advances. If notice has been given pursuant to
Section 11.1, 11.2 or 11.3 suspending the
obligation of any Lender to make any type of
Eurodollar Rate Advance, or requiring Eurodollar
Rate Advances of any Lender to be repaid or
prepaid, then, unless and until such Lender
notifies the Borrower that the circumstances
giving rise to such repayment no longer apply, all
Advances which would otherwise be made by such
Lender as to the type of Eurodollar Rate Advances
affected shall, at the option of the Borrower, be
made instead as Base Rate Advances.
ARTICLE 10Section .5 Capital Adequacy.
If after the date hereof, any Lender or Issuing
Bank (or any affiliate of the foregoing) shall
have reasonably determined that the adoption of
any applicable law, governmental rule, regulation
or order regarding the capital adequacy of banks
or bank holding companies, or any change therein,
or any change in the interpretation or
administration thereof by any governmental
authority, central bank or comparable agency
charged with the interpretation or administration
thereof, or compliance by such Lender or Issuing
Bank (or any affiliate of the foregoing) with any
request or directive regarding capital adequacy
(whether or not having the force of law) of any
such governmental authority, central bank or
comparable agency, has or would have the effect of
reducing the rate of return on such Lender's or
Issuing Bank's (or any affiliate of the foregoing)
capital as a consequence of such Lender's or
Issuing Bank's Commitment or Obligations hereunder
to a level below that which it could have achieved
but for such adoption, change or compliance
(taking into consideration such Lender's or
Issuing Bank's (or any affiliate of the foregoing)
policies with respect to capital adequacy
immediately before such adoption, change or
compliance and assuming that such Lender's or
Issuing Bank's (or any affiliate of the foregoing)
capital was fully utilized prior to such adoption,
change or compliance), then, upon demand by such
Lender or Issuing Bank, the Borrower shall
immediately pay to such Lender or Issuing Bank
such additional amounts as shall be sufficient to
compensate such Lender or Issuing Bank for any
such reduction actually suffered; provided,
however, that there shall be no duplication of
amounts paid to a Lender pursuant to this sentence
and Section 11.3 hereof. A certificate of such
Lender or Issuing Bank setting forth the amount to
be paid to such Lender or Issuing Bank by the
Borrower as a result of any event referred to in
this paragraph shall, absent manifest error, be
conclusive.
ARTICLE 11
JURISDICTION, VENUE AND
WAIVER OF JURY TRIAL
ARTICLE 11Section .1 Jurisdiction and
Service of Process. For purposes of any legal
action or proceeding brought by the Agent or the
Lenders with respect to this Agreement or any
other Loan Document, the Borrower hereby
irrevocably submits to the personal jurisdiction
of the federal and state courts sitting in the
state of New York and hereby irrevocably
designates and appoints, as its authorized agent
for service of process in the State of New York,
CT Corporation System, whose address is [1633
Broadway, New York, New York 10019,] or such other
person as the Borrower shall designate hereafter
by written notice given to the Agent. The consent
to jurisdiction herein shall not be exclusive.
The Agent, the Lenders and the Issuing Banks shall
for all purposes automatically, and without any
act on their part, be entitled to treat such
designee of the Borrower as the authorized agent
to receive for and on behalf of the Borrower
service of writs, or summons or other legal
process in the State of New York, which service
shall be deemed effective personal service on the
Borrower served when delivered, whether or not
such agent gives notice to the Borrower; and
delivery of such service to its authorized agent
shall be deemed to be made when personally
delivered or four (4) Business Days after mailing
by registered or certified mail addressed to such
authorized agent. The Borrower further
irrevocably consents to service of process in any
such action or proceeding by the mailing of copies
thereof by registered or certified mail to the
Borrower at the address set forth above, such
service to become effective four (4) Business Days
after such mailing. In the event that, for any
reason, such agent or his or her successors shall
no longer serve as agent of the Borrower to
receive service of process in the State of New
York, the Borrower shall serve and advise the
Agent thereof so that at all times the Borrower
will maintain an agent to receive service of
process in the State of New York on behalf of the
Borrower with respect to this Agreement and all
other Loan Documents. In the event that, for any
reason, service of legal process cannot be made in
the manner described above, such service may be
made in such manner as permitted by law.
ARTICLE 11Section .2 Consent to Venue.
The Borrower hereby irrevocably waives any
objection it would make now or hereafter for the
laying of venue of any suit, action, or proceeding
arising out of or relating to this Agreement or
any other Loan Document brought in the federal
courts of the United States of America sitting in
New York, New York, and hereby irrevocably waives
any claim that any such suit, action, or
proceeding has been brought in an inconvenient
forum.
ARTICLE 11Section .3 Waiver of Jury
Trial. THE BORROWER AND EACH OF THE AGENT, THE
LENDERS AND THE ISSUING BANKS TO THE EXTENT
PERMITTED BY APPLICABLE LAW WAIVE, AND OTHERWISE
AGREE NOT TO REQUEST, A TRIAL BY JURY IN ANY COURT
AND IN ANY ACTION, PROCEEDING OR COUNTERCLAIM OF
ANY TYPE IN WHICH THE BORROWER, ANY OF THE
LENDERS, THE ISSUING BANKS, THE AGENT, OR ANY OF
THEIR RESPECTIVE SUCCESSORS OR ASSIGNS IS A PARTY,
AS TO ALL MATTERS AND THINGS ARISING DIRECTLY OR
INDIRECTLY OUT OF THIS AGREEMENT, ANY OF THE NOTES
OR THE OTHER LOAN DOCUMENTS AND THE RELATIONS
AMONG THE PARTIES LISTED IN THIS ARTICLE 12.
[remainder of page intentionally left blank]
IN WITNESS WHEREOF, the parties hereto have
caused this Agreement to be executed under seal by
their duly authorized officers, all as of the day
and year first above written.
BORROWER: ZENITH ELECTRONICS CORPORATION
By:
Its:
(SEAL)
AGENT: CITICORP NORTH AMERICA, INC.
By:
Its:
ISSUING BANK: CITIBANK, N.A.
By:
Its:
Address: 399 Park Avenue
6th Floor
Zone 4
New York, New York 10043
LENDERS: CITICORP USA, INC.
By:
Its:
Address: 399 Park Avenue
6th Floor
Zone 4
New York, New York 10043
CONGRESS FINANCIAL CORPORATION
By:
Its: Vice President
Address: 1133 Avenue of the Americas
New York, New York 10036
THE FIRST NATIONAL BANK OF BOSTON
By:
Its:
Address: 100 Federal Street
Mail Stop 01-09-06
Boston, Massachusetts 02110
HELLER FINANCIAL, INC.
By:
Its:
Address: 101 Park Avenue
10th Floor
New York, New York 10178
THE BANK OF NEW YORK COMMERCIAL CORPORATION
By:
Its:
Address: 1290 Avenue of the Americas
New York, New York 10104
SANWA BUSINESS CREDIT CORPORATION
By:
Its:
Address: 500 Glenpointe Centre West
4th Floor
Teaneck, New Jersey 07666
TRANSAMERICA BUSINESS CREDIT CORPORATION
By:
Its:
Address: 555 Theodore Fremd Avenue
Rye, New York 10580
WELLS FARGO BANK, NATIONAL ASSOCIATION
By:
Its:
Address: 245 S. Los Robles Avenue
Suite 600
Pasadena, California 91101
EXECUTION COPY
RECEIVABLES PURCHASE AGREEMENT
Dated as of March 31, 1997
Among
ZENITH ELECTRONICS CORPORATION
as Seller
and
ZENITH FINANCE CORPORATION
as Purchaser
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions 1
SECTION 1.02. Other Definitional Provisions 4
SECTION 1.03. Computation of Time Periods 4
ARTICLE II
PURCHASE AND SALE OF RECEIVABLES
SECTION 2.01. Purchase and Sale of Receivables 5
SECTION 2.02. Payment of Purchase Price 5
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01. Representations and Warranties of the Seller 6
SECTION 3.02. Representations and Warranties of the Purchaser 12
SECTION 3.03. Obligations Unaffected 13
ARTICLE IV
COVENANTS
SECTION 4.01. Affirmative Covenants of the Seller 14
SECTION 4.02. Reporting Requirements of the Seller 17
SECTION 4.03. Negative Covenants of the Seller 19
SECTION 4.04. Affirmative Mutual Covenant 21
ARTICLE V
EVENTS OF TERMINATION
SECTION 5.01. Termination 22
ARTICLE VI
INDEMNIFICATION
SECTION 6.01. Indemnification 23
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. Further Assurances 26
SECTION 7.02. Payments 27
SECTION 7.03. Costs, Expenses and Taxes 27
SECTION 7.04. Binding Effect; Assignability 27
SECTION 7.05. No Waiver; Cumulative Remedies 28
SECTION 7.06. Amendment 28
SECTION 7.07. Severability 29
SECTION 7.08. Notices 29
SECTION 7.09. Counterparts 30
SECTION 7.10. Construction of Agreement as Security Agreement 30
SECTION 7.11. Third-Party Beneficiaries 31
SECTION 7.12. The Seller's Obligations 31
SECTION 7.13. Governing Law, Jurisdiction, Consent to
Service of Process 31
EXHIBIT
Exhibit A Form of Subordinated Note
RECEIVABLES PURCHASE AGREEMENT, dated as of
March 31, 1997, among ZENITH ELECTRONICS CORPORATION
("Zenith"), as seller hereunder (the "Seller" or the "Originator"), and
ZENITH FINANCE CORPORATION, a Delaware corporation, as
purchaser (the "Purchaser").
PRELIMINARY STATEMENTS
1. The Seller desires to sell to the Purchaser, and the
Purchaser desires to buy from the Seller, on the date hereof and from time
to time hereafter, all of the Seller's right, title and interest in, to and
under the Receivables and Seller Related Security existing on the date
hereof or hereafter created.
2. All of the shares of the Purchaser are owned by
Zenith.
3. Pursuant to that certain Pooling and Servicing
Agreement, dated as of the date hereof (as amended, supplemented or
otherwise modified from time to time, the "Pooling and Servicing
Agreement"), among the Purchaser, Zenith, as servicer (the "Servicer"),
and Bankers Trust Company, a New York banking corporation, as trustee
(the "Trustee"), the Purchaser has agreed to transfer to the Trust created
pursuant to the Pooling and Servicing Agreement, for the benefit of the
Holders referred to therein, all of its right, title and interest in, to and
under the Receivables and Seller Related Security.
NOW, THEREFORE, in consideration of the premises and
the mutual covenants herein contained, the parties hereto hereby agree as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. Capitalized terms used herein
but not otherwise defined herein shall have the meanings set forth in the
Pooling and Servicing Agreement. In addition, the term "Agreement" shall
mean this Receivables Purchase Agreement, as the same may from time to
time be amended, supplemented or otherwise modified. The following
capitalized terms shall have the following meanings:
"Early Termination" has the meaning specified in
Section 5.01.
"Effective Period" means the period beginning on the
Transfer Date and terminating on (i) the earliest of (a) the close of business
on the Business Day on which a Termination Event occurs, (b) the close of
business on the Business Day immediately following the day on which any
Early Amortization Event occurs and (c) the close of business on the
Business Day immediately preceding the day on which the Amortization
Period for the last outstanding Series begins or (ii) such other date as is
specified in a written notice from either the Seller or the Purchaser to the
other and to the Trustee.
"ERISA Affiliate" means any Person that for purposes of
Title IV of ERISA is a member of the controlled group of the Seller, or
under common control with the Seller, within the meaning of Section 414
of the Internal Revenue Code and the regulations promulgated thereunder.
"Multiemployer Plan" means a "multiemployer plan", as
defined in Section 4001(a)(3) of ERISA, to which the Seller or any ERISA
Affiliate is making or accruing an obligation to make contributions, or has
within any of the preceding five plan years made or accrued an obligation
to make contributions.
"Multiple Employer Plan" means a "single employer plan",
as defined in Section 4001(a)(15) of ERISA, that (a) is maintained for
employees of the Seller or any ERISA Affiliate and at least one Person
other than the Seller and the ERISA Affiliates or (b) was so maintained and
in respect of which the Seller or any ERISA Affiliate could have liability
under Section 4064 or 4069 of ERISA in the event such plan has been or
were to be terminated.
"Plan" means a Single Employer Plan or Multiple Employer
Plan.
"Plan Event" means (a) (i) the occurrence of a reportable
event, within the meaning of Section 4043 of ERISA, with respect to any
Plan unless the 30-day notice requirement with respect to such event has
been waived by the PBGC, or (ii) the requirements of subsection (1) of
Section 4043(b) of ERISA are met with respect to a contributing sponsor,
as defined in Section 4001(a)(13) or ERISA, of a Plan, and an event
described in paragraph (9), (10), (11), (12) or (13) of Section 4043(c) of
ERISA is reasonably expected to occur with respect to such Plan within
the following 30 days; (b) the application for a minimum funding waiver
with respect to a Plan; (c) the provision by the administrator of any Plan of
a notice of intent to terminate such Plan, pursuant to Section 4041(a)(2) of
ERISA (including any such notice with respect to a plan amendment
referred to in Section 4041(e) of ERISA); (d) the cessation of operations at
a facility of the Seller or any ERISA Affiliate in the circumstances
described in Section 4062(e) of ERISA; (e) the withdrawal by the Seller or
any ERISA Affiliate from a Multiple Employer Plan during a plan year for
which it was a substantial employer, as defined in Section 4001(a)(2) of
ERISA; (f) the conditions for imposition of a lien under Section 302(f) of
ERISA shall have been met with respect to any Plan; (g) the adoption of an
amendment to a Plan requiring the provision of security to such Plan
pursuant to Section 307 of ERISA; or (h) the institution by the PBGC of
proceedings to terminate a Plan pursuant to Section 4042 of ERISA, or the
occurrence of any event or condition described in Section 4042 of ERISA
that constitutes grounds for the termination of, or the appointment of a
trustee to administer, such Plan.
"Purchase Date" has the meaning specified in
Section 2.02(b).
"Purchase Percentage" means (i) for the period from the
Transfer Date until the first Distribution Date on which payment is made by
the Purchaser after the Transfer Date, 98.71% and (ii) for each day on and
after such first Distribution Date an amount (expressed as a percentage)
determined in accordance with the following formula:
100% - (LD + PDRR)
where:
LD = the amount (expressed as a percentage)
equal to the greater of (i) one-fourth of one
percent and (ii) 1.5 times the average of the
Loss to Liquidation Ratios for the three
Collection Periods most recently ended on or
before such date, provided that such amount
shall in no event exceed the sum of (x) one-
half of one percent plus (y) the average of
the Loss to Liquidation Ratios for such three
Collection Periods.
PDRR = the amount (expressed as a percentage) equal to:
TR x 30 x DR
360
where:
TR = the Turnover Rate as of the
most recent Distribution Date
on or before such date.
DR = the amount (expressed as a
percentage) equal to the sum
of the Trustee's publicly
announced "prime" rate as of
the most recent Distribution
Date plus the amount
(expressed as a percentage), if
any, by which the per annum
rate in effect on such
Distribution Date for
computing the Servicing Fee
(as set forth in all applicable
Supplements) exceeds one
percent.
"Purchase Price" has the meaning specified in
Section 2.02(c).
"Seller Related Security" means with respect to any
Receivable owed to the Seller (i) all of the Seller's interest in the
merchandise (including returned merchandise), if any, relating to the sale
which gave rise to such Receivable, (ii) all other Liens and property subject
to such Liens from time to time purporting to secure payment of such
Receivable, whether pursuant to the Contract related to such Receivable or
otherwise, together with all financing statements signed by an Obligor
describing any collateral securing such Receivable; and (iii) all guarantees,
letters of credit, insurance and other agreements or arrangements of
whatever character from time to time supporting or securing payment of
such Receivable, whether pursuant to the Contract related to such
Receivable or otherwise.
"Single Employer Plan" means a "single employer plan", as
defined in Section 4001(a)(15) of ERISA, that (a) is maintained for
employees of the Seller or any ERISA Affiliate or (b) was so maintained
and in respect of which the Seller or any ERISA Affiliate could have
liability under Section 4069 of ERISA in the event such plan has been or
were to be terminated.
"Termination Event" has the meaning specified in
Section 5.01.
SECTION 1.02. Other Definitional Provisions. (a) All
accounting terms not defined in this Agreement, and accounting terms
partly defined in this Agreement to the extent not completely defined, shall
have the respective meanings given to them under GAAP or regulatory
accounting principles, as applicable and in effect from time to time. To the
extent that the definitions of accounting terms herein are inconsistent with
the meanings of such terms under GAAP or regulatory accounting
principles, the definitions contained herein shall control.
(b) The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this
Agreement; Section, Schedule and Exhibit references contained in this
Agreement are references to Sections, Schedules and Exhibits in or to this
Agreement unless otherwise specified; and the term "including" shall mean
"including without limitation".
(c) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms and
to the masculine as well as to the feminine and neuter genders of such
terms.
SECTION 1.03. 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" shall mean
"from and including" and the words "to" and "until" shall mean "to but
excluding".
ARTICLE II
PURCHASE AND SALE OF RECEIVABLES
SECTION 2.01. Purchase and Sale of Receivables. By
execution of this Agreement, the Seller does hereby transfer, assign, set-
over and otherwise convey without recourse, except as expressly provided
herein, to the Purchaser all of the Seller's right, title and interest in, to
and under all Receivables existing at the close of business on the Transfer
Date and thereafter created from time to time, and all monies due or to
become due and all Collections in respect of such Receivables and other amounts
received or receivable from time to time with respect to such Receivables
and all proceeds thereof, and all of the Seller's right, title and interest
in, to and under the Seller Related Security.
SECTION 2.02. Payment of Purchase Price. (a) On the
Transfer Date, the Purchaser shall pay to the Seller, with respect to all of
the Seller's right, title and interest in, to and under all Receivables and all
Seller Related Security existing at the close of business on the Transfer
Date, a payment consisting of $164,543,866 multiplied by the Purchase
Percentage.
(b) On each Business Day during the Effective Period
(each, a "Purchase Date"), the Seller shall determine the Receivables and
the Seller Related Security with respect thereto arising since the close of
business on the preceding Business Day, which Receivables and Seller
Related Security shall be deemed available for purchase by the Purchaser
on such Purchase Date. To the extent that any sale of Receivables is not
reflected in the Daily Report, such Receivables and the Seller Related
Security with respect thereto will nevertheless be deemed sold to such
Purchaser in every respect and all of the Seller's rights, title and interest
in, to and under such Receivables and Seller Related Security will be deemed
to have been sold to the Purchaser.
(c) The purchase price payable to the Seller for the
Receivables and Seller Related Security to be purchased on any Purchase
Date shall be an amount equal to the product of (i) the aggregate
Outstanding Balance of all Receivables deemed available for purchase
pursuant to paragraph (b) above and (ii) the Purchase Percentage for such
Purchase Date (such amount, the "Purchase Price"), provided, however,
that such Purchase Price shall not be less than the reasonably equivalent
value of the Receivables to which such Purchase Price relates, and in the
event that, in the reasonable judgment of either the Seller or the Purchaser,
such Purchase Price is less than such reasonably equivalent value or does
not reflect the fair market value of such Receivables, within five Business
Days after such Purchase Date, each of the Seller and the Purchaser (after
notice to the other party) shall appoint a Person (other than an Affiliate of
the Purchaser or Seller) in the business of purchasing trade receivables, and
such Persons shall appoint a third Person (other than an Affiliate of the
Purchaser or Seller) in such business, and such Persons shall make an
independent appraisal of the value of such Receivables and shall determine
a Purchase Price which reasonably reflects the fair market value of such
Receivables. The Purchase Percentage with respect to each Determination
Date shall be calculated in the Determination Date Certificate with respect
to such Determination Date and such calculation shall be used in the
calculation of the Purchase Price owed under this Agreement for all
Purchases occurring from and including such Determination Date to but
excluding the next Determination Date.
(d) The Purchase Price shall be paid to the Seller on the
applicable Purchase Date in immediately available funds to the extent of
funds available to the Purchaser. The excess, if any, of the Purchase Price
over the payment therefor set forth in clauses (a) and (c) above shall be
deemed to be either (i) a loan by the Seller to the Purchaser (a
"Subordinated Loan") evidenced by the Subordinated Note of the
Purchaser substantially in the form attached hereto as Exhibit A or (ii) to
the extent such loan would cause the unpaid principal amount of the
Subordinated Loan, together with all accrued and unpaid interest thereon,
to exceed ten percent (10%) of the excess of the Net Receivables Balance
over the Trust Invested Amount, a contribution by the Seller to the
Purchaser's capital, and the Purchase Price shall be considered paid in full
by reflecting such contribution as an addition to the surplus of the
Purchaser at an appropriate value. In addition, the Seller may otherwise
make capital contributions to the Purchaser.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01. Representations and Warranties of the
Seller. The Seller represents and warrants to the Purchaser as of the
Transfer Date and each Purchase Date that:
(a) Due Organization, Qualification and Authorization.
The Seller (i) is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its
incorporation, (ii) is duly qualified and in good standing as a foreign
corporation in each other jurisdiction in which it owns or leases
property or in which the conduct of its business requires it to so
qualify or be licensed, except where the failure to do so could not
reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect, and (iii) has all requisite corporate power
and authority (including all governmental licenses, permits and
other approvals) to own or lease and operate its properties and to
carry on its business as now conducted and as proposed to be
conducted, except where the failure to do so could not reasonably
be expected, individually or in the aggregate, to have a Material
Adverse Effect.
(b) Corporate Powers and No Conflicts. The execution,
delivery and performance by the Seller of the Transaction
Documents to which it is or is to be a party, the making of each
purchase and sale of Receivables hereunder and the consummation
of the transactions contemplated hereby are within the Seller's
corporate powers, have been duly authorized by all necessary
corporate action, and do not (i) contravene the Seller's charter or
bylaws, (ii) violate any Requirement of Law, (iii) conflict with or
result in the breach of, or constitute a default under, any contract,
loan agreement, indenture, mortgage, deed of trust, lease or other
instrument binding on or affecting the Seller or any of its properties
or (iv) except for the Liens created under the Transaction
Documents, result in or require the creation or imposition of any
Lien upon or with respect to any of the properties of the Seller.
The Seller is not in violation of any Requirement of Law or in
breach of any such contract, loan agreement, indenture, mortgage,
deed of trust, lease or other instrument, the violation or breach of
which could have a Material Adverse Effect.
(c) Government Authorization and Approval. No
authorization or approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body or any
other third party is required with respect to the Seller for (i) the due
execution, delivery or performance by the Seller of any of the
Transaction Documents to which it is or is to be a party, the making
of each purchase and sale of Receivables hereunder or the
consummation of the other transactions contemplated hereby or
thereby, (ii) the grant by the Seller of the transfers made or Liens
granted by it pursuant to this Agreement, (iii) the perfection or
maintenance of the transfers made or Liens created by this
Agreement (including the first priority nature thereof) or (iv) the
exercise by the Purchaser and its assigns of its rights under this
Agreement or its remedies granted under the Transaction
Documents, except for (A) the financing statements and other
documents required to have been filed on or prior to the Transfer
Date pursuant to Article IV of the applicable Certificate Purchase
Agreement, all of which have already been duly filed and are in full
force and effect, (B) the filing from time to time of any
amendments, assignments, continuation statements or other
documents which may become required or applicable pursuant to
Section 7.01 hereof or Sections 2.05(i) or 3.04(i) of the Pooling
and Servicing Agreement and (C) any properly completed and
executed UCC-3 termination statements which shall have been
delivered to the Program Agent on or before the Transfer Date.
(d) Enforceability. Each Transaction Document to
which the Seller is or is to be a party constitutes a legal, valid and
binding obligation of the Seller enforceable against the Seller in
accordance with its terms (except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights
generally and except as such enforceability may be limited by
general principles of equity, whether considered in a suit at law or
in equity). Each Transaction Document is in full force and effect,
and is not subject, as to the Seller, to any specific dispute, offset,
counterclaim or defense of the Seller.
(e) No Litigation. There is no action, suit,
investigation, litigation or proceeding affecting the Seller, pending
or threatened before any Governmental Authority or arbitrator that
(i) could have a Material Adverse Effect, (ii) purports to affect the
legality, validity or enforceability of any Transaction Document or
the consummation of the transactions contemplated hereby,
including the prevention of the issuance of the Certificates or (iii)
could have an adverse effect on the income or franchise tax
classifications or liabilities of the Trust under the United States
federal or States of Illinois or New York income or franchise tax
systems.
(f) Liens on Properties. Except for Permitted Liens
and except for Liens that will be terminated prior to the Transfer
Date, there are no Liens of any nature whatsoever on any
Receivable or Seller Related Security or Collections. The Seller is
not a party to any contract, agreement, lease or instrument (other
than this Agreement or as contemplated by this Agreement) the
performance of which, either unconditionally or upon the happening
of an event, will result in or require the creation of any Lien on any
Receivable or Seller Related Security or Collections, or otherwise
result in a violation of any Transaction Document.
(g) Contractual Obligations. (i) The Seller is not a
party to any indenture, loan or credit agreement or any lease or
other agreement or instrument, or subject to any Requirement of
Law, that would have a material adverse effect on the ability of the
Seller to carry out its obligations under this Agreement or any
Transaction Document to which it is a party, and (ii) neither the
Seller nor, to the best Knowledge of the Seller, any other party is in
default in any respect under or with respect to any Transaction
Document or any other material contract, agreement, lease or
instrument to which the Seller is a party.
(h) Investment Company Act, Etc. The Seller is not an
"investment company", or an "affiliated person" of, or "promoter"
or "principal underwriter" for, or a company controlled by, an
"investment company" within the meaning of and as such terms are
defined in the Investment Company Act. Each purchase and sale of
Receivables to the Purchaser hereunder constitutes a purchase or
other acquisition of notes, drafts, acceptances, open accounts
receivable or other obligations representing part or all of the sales
price of merchandise, insurance or services within the meaning of
Section 3(c)(5) of the Investment Company Act. The acquisition
by the Purchaser of each Receivable constitutes a "current
transaction" within the meaning of Section 3(a)(3) of the Act.
(i) Locations. The chief place of business and chief
executive office of the Seller, and the office where the Seller keeps
the originals of its books, records and documents regarding the
Receivables and the Seller Related Security are located at the
address of the Seller specified in Section 7.08. During the four
months prior to the Transfer Date and prior to any Purchase Date,
the chief place of business and chief executive office of the Seller,
and the offices where the Seller kept the originals of its books,
records and documents regarding the Receivables and Seller
Related Security were located at the address of the Seller specified
in Section 7.08.
(j) Tradenames. The legal name of the Seller is as set
forth on the signature page of this Agreement and the Seller has no
tradenames, fictitious names, assumed names or "doing business as"
names, except for "Zenith".
(k) Accuracy of Information. Each certificate,
information, exhibit, financial statement, document, book, record or
report furnished by a Responsible Official of the Seller to the
Purchaser in connection with this Agreement and in connection
with each Receivable and the Seller Related Security is accurate in
all material respects as of its date and no such document contains
any misstatement of material fact.
(l) Solvency. The Seller is Solvent and will be Solvent
after giving effect to the transactions contemplated by the
Transaction Documents.
(m) Collection Accounts. Schedule 3.03(f) to the
Pooling and Servicing Agreement (as such Schedule may be
amended from time to time pursuant thereto) is a complete and
accurate list of each Lock Box and Collection Account as of each
Purchase Date. The Collection Account Banks are the only
institutions holding Collection Accounts for the receipt of payments
from Lock Boxes in respect of Receivables (subject to such changes
as may be made from time to time in accordance with Section
4.02(b) of the Pooling and Servicing Agreement), and all Obligors,
and only such Obligors, have been instructed or, upon the creation
of Receivables, will be instructed to make payments only to Lock
Boxes or Collection Accounts and such instructions have not been
modified or revoked by the Seller (except as permitted under
Section 4.02 of the Pooling and Servicing Agreement) and such
instructions that have been given are in full force and effect.
(n) Compliance. The Seller has complied, and will
comply on each Purchase Date, with each Requirement of Law with
respect to all Receivables and Seller Related Security sold
hereunder and the Contracts related thereto and with respect to its
business or properties, in each case except where the failure to do
so could not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect. The Seller has
maintained all applicable permits, certifications and licenses
necessary with respect to all Receivables and Seller Related
Security sold hereunder and the Contracts related thereto, except
where the failure to do so could not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect.
The Seller has performed and complied with its obligations under
the Contracts and invoices giving rise to the Receivables, except
where the failure to do so could not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect.
(o) Taxes. The Seller has filed all tax returns (federal,
state and local) which it reasonably believes are required to be filed
and has paid or made adequate provision for the payment of all
taxes, assessments and other governmental charges due from the
Seller or is contesting any such tax, assessment or other
governmental charge in good faith through appropriate proceedings
as to which adequate reserves are being maintained and no Lien
with respect thereto has attached to its property and become
enforceable against its other creditors. The Seller knows of no
reasonable basis for any additional tax assessment for any calendar
year for which adequate reserves have not been established.
(p) Use of Proceeds. The proceeds of each Purchase
will be used by the Seller solely for working capital purposes. No
proceeds of any Purchase will be used by the Seller to acquire any
security in a transaction that is subject to Sections 13 and 14 of the
Securities Exchange Act of 1934, as amended, or to purchase or
carry any margin security in violation of any applicable law or
regulation.
(q) No Rescission. No Contract giving rise to any
Receivable sold hereunder has been amended, satisfied,
subordinated or rescinded, except as disclosed in writing to the
Purchaser on or before the date of purchase and sale of such
Receivable or as otherwise permitted under the Pooling and
Servicing Agreement. Subsequent to such sale no such Receivable
has been compromised, adjusted, extended, satisfied, subordinated,
rescinded or modified, except as permitted under the Pooling and
Servicing Agreement.
(r) No Payment. The Seller has no Knowledge of any
fact which would lead it to reasonably expect that, when billed, any
Receivable sold hereunder would not be paid in accordance with its
terms when due.
(s) No Insolvency Event. No Insolvency Event has
occurred with respect to the Seller.
(t) Fraudulent Conveyance. The Seller is not entering
into the transactions contemplated hereby with the intent of
hindering, delaying or defrauding creditors.
(u) Valid Sale and Transfer. This Agreement creates a
valid sale, transfer and assignment to the Purchaser of, and, subject
to the interest of the Trust under the Pooling and Servicing
Agreement, the Purchaser is the legal and beneficial owner of, all
right, title and interest of the Seller in and to the Receivables and
Seller Related Security now existing and hereafter created during
the Effective Period and in the Collections and other proceeds
thereof. Upon the filing of the appropriate financing statements, the
Purchaser shall have a first priority perfected ownership or security
interest in the Receivables, the Seller Related Security and the
proceeds thereof, in each case in which a security interest may be
perfected by filing appropriate financing statements. Except as
otherwise provided in the Pooling and Servicing Agreement, the
Seller has clearly and unambiguously marked all its master data
processing and computer records and all its microfiche storage files,
if any, in a manner reasonably calculated to indicate that the
Receivables, Seller Related Security and proceeds thereof are the
property of the Purchaser and shall cause the Purchaser to maintain
such records in a manner such that the Purchaser's perfected first
priority interest in the Receivables shall not be adversely affected.
(v) No Claim or Interest. Except for Permitted Liens
and as otherwise provided in this Agreement or any applicable
Supplement, neither the Seller nor any Person claiming through or
under the Seller has any claim to or interest in the Concentration
Account, the Collection Accounts, the Lock Boxes or any Series
Account. Each Receivable, the Seller Related Security and the
Collections with respect thereto have been or will be transferred to
the Purchaser free and clear of any Lien or interest of any other
Person (other than Permitted Liens and disputes with Obligors in
the ordinary course of business or in connection with an Insolvency
Event of the related Obligor) not holding through the Trust.
(w) Eligibility. Each Receivable classified as an "Eligible
Receivable" by the Seller in any document or report delivered
hereunder satisfied, at the time of such classification, the
requirements of eligibility contained in the definition of Eligible
Receivable except where, after giving effect to all improper
classifications, no Pool Non-compliance Date shall have occurred.
(x) Invoices. The Seller has submitted all necessary
documents, if any, to each Obligor with respect to any payments
due on each of such Obligor's Receivables.
(y) ERISA. No Plan has any accumulated funding
deficiency, as defined in Section 302(a) of ERISA, whether or not
waived. The Seller and each ERISA Affiliate has timely made all
contributions required to be made by it to any Plan, except where a
failure to contribute could not reasonably be expected to give rise
to a Lien under Section 302(f) of ERISA. No Plan Event with
respect to any Plan has occurred or could reasonably be expected to
occur that could result, directly or indirectly, in any Lien being
imposed on the property of the Seller. Neither the Seller nor any
ERISA Affiliate has incurred, or could reasonably be expected to
incur, withdrawal liability to, or liability in connection with, the
reorganization, termination or insolvency of any Multiemployer
Plan which liability could reasonably be expected to have a Material
Adverse Effect.
(z) Termination Event. No event or condition has
occurred and is continuing that is, or with the giving of notice or
the passage of time or both would constitute, a Termination Event.
SECTION 3.02. Representations and Warranties of the
Purchaser. The Purchaser represents and warrants to the Seller as of the
Transfer Date and each Purchase Date that:
(a) Due Organization, Qualification and Authorization.
The Purchaser (i) is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its
incorporation, (ii) is duly qualified and in good standing as a foreign
corporation in each other jurisdiction in which it owns or leases
property or in which the conduct of its business requires it to so
qualify or be licensed, except where the failure to do so could not
reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect, and (iii) has all requisite corporate power
and authority (including all governmental licenses, permits and
other approvals) to own or lease and operate its properties and to
carry on its business as now conducted and as proposed to be
conducted, except where the failure to do so could not reasonably
be expected, individually or in the aggregate, to have a Material
Adverse Effect.
(b) Corporate Powers and No Conflicts. The execution,
delivery and performance by the Purchaser of the Transaction
Documents to which it is or is to be a party, the making of each
purchase and sale of the Receivables and Seller Related Security
pursuant to this Agreement and the consummation of the
transactions contemplated hereby are within the Purchaser's
corporate powers, have been duly authorized by all necessary
corporate action, and do not (i) contravene the Purchaser's charter
or bylaws, (ii) violate any Requirement of Law, (iii) conflict with or
result in the breach of, or constitute a default under, any contract,
loan agreement, indenture, mortgage, deed of trust, lease or other
instrument binding on or affecting the Purchaser or any of its
properties or (iv) except for the Liens created under the
Transaction Documents, result in or require the creation or
imposition of any Lien upon or with respect to any of the properties
of the Purchaser. The Purchaser is not in violation of any
Requirement of Law or in breach of any such contract, loan
agreement, indenture, mortgage, deed of trust, lease or other
instrument, the violation or breach of which could have a Material
Adverse Effect.
(c) Government Authorization and Approval. No
authorization or approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body or any
other third party is required for the due execution, delivery,
recordation, filing or performance by the Purchaser of any of the
Transaction Documents to which it is or is to be a party, the making
of each purchase and sale of Receivables hereunder or the
consummation of the other transactions contemplated hereby or
thereby.
(d) Enforceability. Each Transaction Document to
which the Purchaser is or is to be a party constitutes a legal, valid
and binding obligation of the Purchaser enforceable against the
Purchaser in accordance with its terms (except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors'
rights generally and except as such enforceability may be limited by
general principles of equity, whether considered in a suit at law or
in equity). Each Transaction Document is in full force and effect,
and is not subject, as to the Purchaser, to any specific dispute,
offset, counterclaim or defense of the Purchaser.
SECTION 3.03. Obligations Unaffected. The obligations
of the Seller to the Purchaser under this Agreement shall not be affected by
reason of any invalidity, illegality or irregularity of any Receivable or
Seller Related Security or the sale of any Receivable or Seller Related
Security.
ARTICLE IV
COVENANTS
SECTION 4.01. Affirmative Covenants of the Seller. The
Seller hereby covenants that, until the last Termination Date of any Series:
(a) Compliance with Law. The Seller shall duly satisfy
all obligations on its part to be fulfilled under or in connection with
the Receivables and the Seller Related Security, will maintain in
effect all qualifications required under any Requirement of Law in
order to properly convey the Receivables and Seller Related
Security to the Purchaser and will comply in all respects with all
Requirements of Law applicable to the Seller, its business and
properties and the Receivables, Seller Related Security and the
proceeds thereof, in each case where the failure to do so would,
individually or in the aggregate, have a Material Adverse Effect.
(b) Preservation of Legal Existence. The Seller will
preserve and maintain its existence, legal structure, legal name and,
except where the failure to do so could not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect,
its rights (charter and statutory), permits, licenses, approvals,
franchises and privileges in the jurisdiction of its formation, and
qualify and remain qualified in each jurisdiction where the failure to
maintain such qualification could have a Material Adverse Effect.
(c) Audits. At the Seller's expense (only, so long as no
Early Amortization Event has occurred and is continuing, for the
first two examinations and/or visits in any twelve-month period), at
any time during the Seller's regular business hours and on
reasonable prior notice and for a purpose reasonably related to this
Agreement, the Seller shall, in response to any reasonable request
of the Purchaser, permit the Purchaser, or its agents or
representatives, (i) to examine and make copies of and abstracts
from all books, records and documents (including computer tapes,
microfiche and disks) in the possession or under the control of the
Seller relating to the Receivables, Seller Related Security and
related Contracts and (ii) to visit the offices and properties of the
Seller for the purpose of examining such materials and to discuss
matters relating to the Receivables, Seller Related Security and
related Contracts or the Seller's performance hereunder with any of
the officers or (after consultation with a Responsible Official)
employees of the Seller having knowledge thereof.
(d) Keeping of Records and Books of Account. The
Seller will (i) keep proper books of record and account, which shall
be maintained or caused to be maintained by the Seller and shall be
separate and apart from those of any Affiliate of the Seller, in which
full and correct entries shall be made of all financial transactions
and the assets and business of the Seller in accordance with GAAP
consistently applied, (ii) maintain and implement administrative and
operating procedures (including the ability to recreate records
evidencing the Receivables and the Seller Related Security in the
event of the destruction of the originals thereof) and (iii) keep and
maintain all documents, books, records and other information
necessary or reasonably advisable for the collection of all
Receivables and Seller Related Security (including records adequate
to permit the daily identification of each new Receivable and all
Collections of and adjustments to each existing Receivable).
(e) Performance and Compliance with Receivables. The
Seller will, at its expense, timely and fully perform and comply with
all provisions, covenants and other promises required to be
observed by it hereunder including complying with its material
obligations under all Contracts and invoices giving rise to the
Receivables.
(f) Payment of Taxes, Etc. The Seller will pay
promptly when due all taxes, assessments and governmental
charges or levies imposed upon it, the Receivables and any Seller
Related Security, or in respect of its receipts, income or profits
therefrom, and any and all claims of any kind, except that no such
amount need be paid if (i) such nonpayment could not reasonably
be expected to subject any Beneficiary to civil or criminal penalty or
liability or involve any risk of the sale, forfeiture or loss of any of
the property, rights or interests covered under any Transaction
Document and (ii) the charge or levy is being contested in good
faith through appropriate proceedings as to which adequate
reserves are being maintained and no Lien with respect thereto has
attached to its property and become enforceable against its
creditors.
(g) Credit Policy Manual. The Seller shall comply with
the Credit Policy Manual, except where the failure to do so could
not reasonably be expected to have a Material Adverse Effect.
(h) Collections. (i) The Seller will instruct all Obligors
to cause all Collections of Receivables to be deposited directly into
a Collection Account or a Lock Box, and the Seller shall deposit
any Collections received by it directly into a Collection Account in
the manner and within the time period required by Section 4.02(a)
of the Pooling and Servicing Agreement.
(ii) If the Seller accepts payment of a Receivable
from any Obligor in a currency other than U.S. Dollars, then the
Seller will, on the date of such acceptance, deposit directly into a
Collection Account in U.S. Dollars an amount equal to the
Outstanding Balance of such Receivable.
(iii) In the event that the Seller receives any
Collections, the Seller agrees to hold all such Collections in trust
and to mail such Collections to a Lock Box or deposit such
Collections to the appropriate Collection Account as soon as
practicable, but in no event later than two Business Days after
receipt thereof.
(iv) In the event that any Affiliate of the Seller
(other than the Transferor) receives any Collections, the Seller
agrees to cause such Affiliate to hold all such Collections in trust
and to cause such Affiliate to mail such Collections to a Lock Box
or deposit such Collections to the appropriate Collection Account
as soon as practicable, but in no event later than five Business Days
after receipt thereof.
(i) UCC Opinion. The Seller shall deliver to the
Purchaser within 90 days after the end of each calendar year,
beginning with the calendar year ending on or about December 31,
1998, an Opinion of Counsel to the Seller (who may be counsel
employed by an Affiliate of the Seller), dated as of a date during
such 90-day period, substantially to the effect that, in the opinion of
such counsel, either (A) such action has been taken as is necessary
to continue the perfection of the interests of the Purchaser in and to
the Receivables and the Seller Related Security conveyed hereunder
and the proceeds thereof (to the same extent as such interest was
perfected on the Transfer Date with respect to the Receivables and
the Seller Related Security then owned by the Seller and the
proceeds thereof) and reciting the details of such action or referring
to prior Opinions of Counsel in which such details are given or (B)
no such action is necessary to continue the perfection of such
interests.
(j) Deemed Collections. If on any day the Outstanding
Balance of a Receivable transferred hereunder is either (a) reduced
as a result of any defective, rejected or returned merchandise,
insurance or services, any cash discount or rebate, or any
adjustment by the Seller or any Affiliate thereof (other than the
Purchaser) or (b) reduced or cancelled as a result of a setoff in
respect of any claim by the Obligor thereof against the Seller or any
Affiliate thereof (other than the Purchaser) (whether such claim
arises out of the same or a related transaction or an unrelated
transaction), then the Seller shall be deemed to have received on
such day a Collection of such Receivable in the amount of such
reduction or cancellation. If Collections are reduced as a result of
an Obligor failing to pay any Receivable transferred hereunder free
and clear of, and without deduction for, any and all present or
future taxes, levies, imposts, deductions, charges or withholdings,
and all liabilities with respect thereto, then the Seller shall be
deemed to have received on such day an additional Collection of
such Receivable in the amount of such reduction. The Seller will
deposit all such deemed Collections into a Collection Account
within two Business Days following the Business Day on which
such Collections are deemed to have been received.
(k) Maintenance of Separate Existence and Directors.
Seller shall take all actions as are necessary to comply with, and to
cause the Purchaser to comply with, Section 2.05(d) and Section
2.06(j) of the Pooling and Servicing Agreement.
(l) Modification of Systems. The Seller agrees,
promptly after the replacement or any material modification of any
computer, automation or other operating systems (in respect of
hardware or software) used to make any calculations or reports
hereunder, to give written notice of any such replacement or
modification to the Purchaser.
(m) Seller Business Days. No later than December 1 of
each year, the Seller shall furnish the Trustee with a list of days
other than Saturday and Sunday, on which the Seller shall be closed
during the immediately succeeding calendar year, except that with
respect to the calendar year 1997, the Seller shall furnish such list
to the Purchaser on or before the Transfer Date.
(n) Maintenance of Insurance. The Seller shall use its
best efforts to maintain with a responsible company, and at its own
expense, its current commercial crime insurance (including
commercial fraud insurance) as is commercially available at a cost
that is not generally regarded as excessive by industry standards,
with coverage on all officers, employees or other Persons acting in
any capacity requiring such Persons to handle funds, money,
documents or papers relating to the Receivables and the Seller
Related Security.
SECTION 4.02. Reporting Requirements of the
Seller. The Seller hereby covenants that, until the last Termination Date of
any Series:
(a) Termination Events, Etc. The Seller shall (i) within
one Business Day after a Responsible Official of the Seller obtains
knowledge of the occurrence of any Termination Event or event
which, with the giving of notice or lapse of time or both, would
constitute a Termination Event, notify the Purchaser of such
occurrence; (ii) as soon as possible and in any event within three
Business Days after a Responsible Official of the Seller obtains
knowledge of the occurrence of any Termination Event or event
which, with the giving of notice or lapse of time or both, would
constitute a Termination Event, deliver to the Purchaser a statement
of a Financial Officer of the Seller setting forth details of such
Termination Event or such event and the action that the Seller has
taken and proposes to take with respect thereto; and (iii) within
three Business Days after a Responsible Official of the Seller makes
a determination that any other event, development or information is
reasonably likely, individually or in the aggregate, to have a
Material Adverse Effect, give written notice thereof to the
Purchaser and the Trustee.
(b) Litigation. As soon as possible and in any event
within 10 Business Days after a Responsible Official of the Seller
obtains Knowledge thereof, the Seller shall notify the Purchaser of
any litigation, investigation or proceeding which could be expected
to impair the ability of the Seller to perform its obligations under
this Agreement.
(c) ERISA. As soon as possible and in any event within
30 days after a Responsible Official of the Seller obtains Knowledge
that one of the following events has occurred or is reasonably
expected to occur: (i) the occurrence of any Plan Event with
respect to any Plan or (ii) the withdrawal by the Seller or any of its
ERISA Affiliates from, or the termination, reorganization or
insolvency of, any Multiemployer Plan which could reasonably be
expected to have a Material Adverse Effect.
(d) Liens. The Seller will advise the Purchaser and the
Trustee promptly, in reasonable detail, (A) of any Lien or claim
asserted against any of the Receivables, Seller Related Security or
proceeds thereof, other than Permitted Liens, (B) of the occurrence
of any breach in any material respect by the Seller of any of its
representations, warranties and covenants contained herein and (C)
of the occurrence of any other event which in the cases of clauses
(A) and (B) would have an adverse effect on the value of the
Receivables, the Seller Related Security or the proceeds thereof.
(e) Monthly Financials. Within thirty (30) (or, after the
last Statistical Month in each calendar year, forty-five (45)) days
after the end of each Statistical Month in each calendar year, deliver
to the Purchaser, each Rating Agency and each Enhancement
Provider the balance sheet of the Seller as at the end of such period
and the related statement of income and cash flow of the Seller for
such Statistical Month and for the period from the beginning of the
then current calendar year to the end of such Statistical Month, and
for the corresponding period during the previous calendar year, and
a comparison of the statement of the year to date earnings and cash
flow to the corresponding statement for the corresponding period
from the previous calendar year certified by a Financial Officer of
the Seller as fairly presenting the financial position of the Seller as
at the date indicated and the results of its operations and cash flow
for the period indicated in accordance with GAAP, subject to
normal year end adjustments;
(f) Annual Financials. Within ninety (90) days after the
end of each calendar year deliver to the Purchaser and each Rating
Agency audited financial statements of the Seller, including therein
a balance sheet of the Seller as at the end of such calendar year and
statements of income and cash flow of the Seller for each calendar
year, reported on by Independent Public Accountants and
accompanied by their related audit letter, which report and letter
shall be unqualified as to scope and shall state that such financial
statements fairly present the financial position of the Seller as at the
dates indicated in conformity with GAAP applied on a basis
consistent with prior years and that the examination by such
accountants in connection with such financial statements has been
made in accordance with generally accepted auditing standards; and
(g) Other Information. The Seller shall promptly, from
time to time, furnish to the Purchaser such other information,
documents, records or reports regarding the Receivables or the
Seller Related Security or the condition or operations, financial or
otherwise, of the Seller, as the Purchaser may from time to time
reasonably request.
SECTION 4.03. Negative Covenants of the Seller. The
Seller hereby covenants that, until the last Termination Date of any Series,
it will not:
(a) Sales, Liens, Etc. Except for Permitted Liens and as
otherwise contemplated herein, or pursuant to or as contemplated
by the Pooling and Servicing Agreement, sell, pledge, assign or
transfer any Receivable, the Seller Related Security or any interest
therein to any other Person, or grant, create, incur, assume or suffer
to exist any Lien on any Receivable or Seller Related Security or
any other property or asset of the Seller, whether now existing or
hereafter created, or any interest therein, and the Seller shall defend
the right, title and interest of the Purchaser in and to the
Receivables, the Seller Related Security and the proceeds thereof,
whether now existing or hereafter created, against all claims of third
parties claiming through or under the Seller.
(b) Extension or Amendment of Receivables. Extend,
amend or otherwise modify, except as permitted in Section 3.01(c)
of the Pooling and Servicing Agreement, the terms of any
Receivable, or amend, modify or waive any payment term or
condition of any invoice related thereto (other than as provided in
the Credit Policy Manual) if the effect of such amendment,
modification or waiver would impair the collectibility or delay the
payment of any then existing Receivable beyond 90 days from the
date of the invoice. The Seller will not rescind or cancel, or permit
the rescission or cancellation of, any Receivable except as ordered
by a court of competent jurisdiction or other Governmental
Authority. Notwithstanding the foregoing provisions of this
Section 4.03(b), the Seller may extend, amend, modify, cancel or
rescind any Diluted Receivable in connection with a valid dispute;
provided, however, that such amendment, modification,
cancellation or rescission shall not have a material adverse effect on
the interests of any Beneficiary.
(c) Change in Business or Credit Policy Manual. Make
any change in the nature of its business as carried out on the date
hereof or in the Credit Policy Manual, which change would, in
either case, materially impair the collectibility of the Receivables,
except as permitted under the terms of the Pooling and Servicing
Agreement.
(d) Change in Collection Account Banks. (i) Make any
changes to Schedule 3.03(f) to the Pooling and Servicing
Agreement or (ii) amend any instruction to any Obligor, Person
holding a Lock Box or any Collection Account Bank with respect
to any Lock Box or Collection Account, as applicable, or
(iii) terminate or substitute any Cure Account, in any case
(A) except as otherwise required or permitted pursuant to
Section 4.02 or the applicable Supplement and (B) unless the
Purchaser shall have received written notice of such change,
amendment, termination or substitution and, if applicable, executed
copies of Collection Account Letters with each new Collection
Account Bank or Lock Box Letters with each new Person holding a
Lock Box.
(e) Change in Legal Name. (i) Make any change to its
legal name, identity or business structure in any manner or chief
executive office (including the address thereof) or use any trade
names, fictitious names, assumed names or "doing business as"
names or (ii) change its jurisdiction of organization unless, prior to
the effective date of any such name change, change in chief
executive office, use or change of jurisdiction, the Seller delivers to
the Purchaser (A) written notice of such change at least 30 days
prior to the effective date thereof, (B) such financing statements
(Forms UCC-1 and UCC-3) executed by the Seller required to
reflect such name change, change in chief executive office, use or
change of jurisdiction, together with such other documents and
instruments required in connection therewith to maintain the
continued perfection of the interests of the Purchaser in the
Receivables, the Seller Related Security and the proceeds thereof
and (C) prior to the effective date thereof, an Opinion of Counsel,
in form and substance satisfactory to the Purchaser, as to the
Seller's due organization, valid existence and good standing and the
continued perfection of the interests of the Purchaser in and to the
Receivables and the Seller Related Security conveyed hereby and
the proceeds thereof (to the same extent as such interest was
perfected on the Transfer Date with respect to the Receivables then
owned by the Seller). Furthermore, the Seller shall give 30 days
prior written notice to the Purchaser of any change in the location
of the office where it keeps the books, records and documents
regarding the Receivables, the Seller Related Security and the other
Trust Assets from the address of the Seller referred to in Section
7.08.
(f) Deposits to Collection Accounts. Deposit or
otherwise credit, or cause to be so deposited or credited, or consent
or fail to object to any such deposit or credit Known to it, cash or
cash proceeds other than Collections to the Concentration Account,
any Collection Account, the Lock Boxes or any Series Account.
(g) No Actions Against Obligors. Except in accordance
with the Credit Policy Manual and the Pooling and Servicing
Agreement, commence or settle any legal action to enforce
collection of any Receivable.
(h) No Bankruptcy Filing Against the Purchaser or the
Trust. Commence, institute or cause to be commenced or instituted
any proceeding of the type referred to in the definition of
"Insolvency Event" against the Purchaser or the Trust.
(i) Locations of Subsidiaries. Permit any of the
Originators to have or maintain its jurisdiction of organization or
principal place of business in any of the States of Colorado, Kansas,
New Mexico, Oklahoma, Utah or Wyoming.
(j) Subordinated Note. Transfer or pledge the
Subordinated Note to any Person, other than as permitted under the
Intercreditor Agreement.
(k) Protection of Holders' Rights. Take action which
would impair the rights of any Beneficiary in any Receivable, the
Seller Related Security or any proceeds thereof, except as provided
in this Agreement and the Pooling and Servicing Agreement.
(l) Receivables Not to Be Evidenced by Promissory
Notes. Take action to cause any Receivable to be evidenced by any
"instrument" (as defined in the UCC of the jurisdiction the law of
which governs the perfection of the interest in such Receivable
created hereunder), except in connection with its enforcement, in
which event the Seller shall deliver such instrument to the Purchaser
as soon as reasonably practicable but in no event more than three
Business Days after execution thereof.
SECTION 4.04. Affirmative Mutual Covenant. The
Purchaser and Seller shall record each Purchase as a purchase and sale,
respectively, on its books and records and reflect each Purchase in its
financial statements as a purchase and sale, respectively.
ARTICLE V
EVENTS OF TERMINATION
SECTION 5.01. Termination. If any of the following
events (each, a "Termination Event") shall have occurred:
(a) any failure by the Seller to make any payment,
transfer or deposit required to be paid, effected or made by it
hereunder within two Business Days after the same shall become
due; or
(b) any representation or warranty, certification or
written statement made or deemed made by the Seller under or in
connection with this Agreement or in any statement, record,
certificate, financial statement or other document delivered
pursuant hereto or in connection herewith shall prove to have been
incorrect in any material respect on or as of the date made or
deemed made; or
(c) the Seller shall fail to observe or perform any
covenant or agreement applicable to it contained herein (other than
as specified in clause (a) above) which has a material adverse effect
on any Beneficiary of any Series if such failure shall remain
unremedied for ten days after the first date on which any
Responsible Official of the Seller knew or should have known of
such failure; or
(d) any Receivables transferred hereunder whose
aggregate Outstanding Balances constitute more than 1% of the
aggregate Outstanding Balance of all Eligible Receivables shall for
any reason cease to be the subject of the valid and perfected first
priority ownership and security interest created by this Agreement;
or any Receivables transferred hereunder whose aggregate
Outstanding Balances constitute more than 1% of the aggregate
Outstanding Balance of all Eligible Receivables shall cease to be
free and clear of any Lien except as provided for herein; or
(e) an Insolvency Event shall occur with respect to the
Seller or the Purchaser; or
(f) the Internal Revenue Service shall file notice of a
Lien pursuant to Section 6323 of the Internal Revenue Code with
regard to any of the Receivables or the Pension Benefit Guaranty
Corporation shall file notice of a Lien pursuant to Section 4068 of
ERISA with regard to any of the Receivables; or
(g) there shall have occurred an Early Amortization
Event; or
(h) (i) any Plan Event shall have occurred, (ii) the Seller
or any ERISA Affiliate shall have withdrawn from a Multiemployer
Plan, or (iii) any Multiemployer Plan shall have been terminated or
reorganized or become insolvent, and as a result of one or more
such events the Seller or any ERISA Affiliate has incurred or is
reasonably expected to incur liability in excess of $1,000,000;
then, if any of the events set forth in paragraph (e) above shall have
occurred, a "Termination Event" shall occur without any notice, demand,
protest or other requirement of any kind immediately upon the occurrence
of such event and, if any of the events set forth in any other
paragraph above shall have occurred, the Purchaser may, by notice to the
Seller, declare that a "Termination Event" shall occur as of the date set
forth in such notice. Upon the occurrence of a Termination Event, the
Effective Period shall terminate (any termination of the Effective Period
pursuant to this Section 5.01 is herein referred to as an "Early
Termination"). Upon any Early Termination the Purchaser shall have, in
addition to all other rights and remedies under this Agreement or
otherwise, all other rights and remedies with respect to the Receivables
provided under the UCC of the applicable jurisdiction and under other
applicable laws, which rights and remedies shall be cumulative.
The Purchaser may, with the prior written consent of a
Majority in Interest of each outstanding Series (or, if so specified in the
related supplement, each Enhancement Provider for such Series) on behalf
of all Holders, waive any default by the Seller in the performance of its
obligations hereunder and its consequences, except the failure to make any
distributions or payments required to be made to the Purchaser or to make
any required deposits of any amounts to be so distributed or paid. No such
waiver shall extend to any subsequent or other default or impair any right
consequent thereon except to the extent expressly so waived.
ARTICLE VI
INDEMNIFICATION
SECTION 6.01. Indemnification. Without limiting any
other rights which the Purchaser, the Trustee, any Program Agent, any
Enhancement Provider and their respective assignees (which shall not be
deemed to include any of the Holders as such) and their respective officers,
directors, employees, agents and affiliates (each, an "Originator
Indemnified Party" and collectively the "Originator Indemnified Parties")
may have hereunder or under applicable law, the Seller hereby agrees to
indemnify the Purchaser and any of its assignees hereunder (including each
other Originator Indemnified Party) from and against any and all claims,
damages, losses and liabilities and related costs and expenses (including
reasonable attorneys' fees and disbursements) (all of the foregoing being
collectively referred to as "Originator Indemnified Amounts") awarded
against or incurred by any of them arising out of or resulting from this
Agreement, the activities of the Seller in connection herewith or with any
Transaction Document to which the Seller is a party in its capacity as Seller
or the use of proceeds of purchases hereunder or the ownership of any
Receivable or Seller Related Security (excluding however (a) Originator
Indemnified Amounts to the extent resulting from gross negligence or
willful misconduct on the part of such Originator Indemnified Party, (b)
recourse (except as otherwise specifically provided in any Transaction
Document) for uncollectible Receivables or (c) except with respect to
clause (x) below, any federal, state, foreign or local income or franchise
taxes or any other tax imposed on or measured by income (or any interest,
penalty, or addition to tax with respect thereto or arising from a failure to
comply therewith) incurred by such Originator Indemnified Party arising
out of or as a result of this Agreement or the interest conveyed hereunder
in Receivables, Seller Related Security or any Contract). Without limiting
or being limited by the foregoing, the Seller shall pay on demand to the
Purchaser or any of its assignees (including each other Originator
Indemnified Party) any and all amounts necessary to indemnify the
Purchaser or any such assignee from and against any and all Originator
Indemnified Amounts relating to or resulting from:
(i) reliance on any representation, warranty or covenant
made or statement made or deemed made by the Seller (or any of
its Responsible Officials) under or in connection with any
Transaction Document which shall have been incorrect in any
material respect when made or deemed made or which the Seller
shall have failed to perform;
(ii) the failure by the Seller to comply with any
Transaction Document or any applicable Requirement of Law with
respect to any Receivable, Seller Related Security or related
Contract, or the failure of any Receivable or the Seller Related
Security or related Contract to conform to any requirement with
respect thereto under any Transaction Document or any
Requirement of Law;
(iii) the failure to vest in the Purchaser absolute
ownership of the Receivables free and clear of any Lien;
(iv) the failure to have filed, or any delay in filing, any
financing statements or other similar instruments or documents
under the UCC of any applicable jurisdiction or other applicable
laws that are necessary for perfection or first priority of the
ownership interests created by this Agreement;
(v) any dispute, claim, offset or defense (other than
discharge in bankruptcy of the Obligor) of the Obligor to the
payment of any Receivable (including a defense based on such
Receivable or the related Seller Related Security or the related
Contract not being a legal, valid and binding obligation of such
Obligor enforceable against it in accordance with its terms), or any
other claim resulting from the sale of the merchandise, insurance or
services related to such Receivable or the furnishing or failure to
furnish such merchandise, insurance or services;
(vi) any products liability claim or other claim allegedly
arising out of or in connection with merchandise, insurance or
services which are the subject of any Contract;
(vii) any failure by the Seller or any Affiliate of the Seller
(other than the Purchaser) to perform its duties or obligations in
accordance with the provisions of any Transaction Document,
including any failure to so perform in connection with servicing,
administering or collecting any Receivable;
(viii) any commingling by an act or omission of the Seller
of Collections at any time with other funds;
(ix) any investigation, litigation or proceeding related to
any Receivable, any Contract or this Agreement or any other
Transaction Document to which the Seller is or is to be a party or
the use of proceeds of purchases hereunder or the ownership of
Receivables, Seller Related Security, related Contracts or
Collections or proceeds with respect thereto or in respect of any
Receivable or Contract;
(x) any taxes, including sales, excise, intangibles, value
added, personal property and similar taxes, payable with respect to
the Receivables;
(xi) any reduction in the Outstanding Balance of a
Receivable by reason of any defective, rejected, returned,
repossessed or foreclosed merchandise, insurance or services or any
cash discount or other adjustment made by the Seller;
(xii) any breach by the Seller of any obligation under any
Receivable or any Contract;
(xiii) the acceptance by the Seller as payment of any
Receivable of funds denominated in a currency other than U.S.
Dollars; or
(xiv) Any Receivable classified as an "Eligible Receivable"
by the Seller in any document or report delivered hereunder failing
to satisfy, at the time of such classification, the requirements of
eligibility contained in the definition of Eligible Receivable.
Any Originator Indemnified Amounts due hereunder shall be
payable within fifteen Business Days of submission of a claim by the
Originator Indemnified Party which describes in reasonable detail the basis
for such claim.
The agreement contained in this Section 6.01 shall survive
the collection of all Receivables, the termination of this Agreement and the
Trust and the payment of all amounts otherwise payable hereunder.
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. Further Assurances. (a) The Seller agrees
that from time to time, at its own expense, the Seller will promptly execute
and deliver all further instruments and documents, and take all further
action, that may be necessary or desirable, or that the Purchaser may
reasonably request, in order to perfect and protect any pledge, assignment
or security interest granted or purported to be granted hereby or to enable
the Purchaser to exercise and enforce its rights and remedies hereunder
with respect to any Receivable and Seller Related Security and to enable
the Trustee to exercise its rights and remedies under the Transaction
Documents with respect to any of the Trust Assets. Without limiting the
generality of the foregoing, the Seller will: (i) mark its master data
processing and computer records in a manner reasonably calculated to
indicate that the Receivables and Seller Related Security have been sold to
the Purchaser in accordance with this Agreement and the other Transaction
Documents; (ii) if any Receivable or Seller Related Security shall be
evidenced by a promissory note, other instrument or chattel paper, deliver
and pledge to the Purchaser such note, instrument or chattel paper duly
indorsed and accompanied by duly executed instruments of transfer or
assignment, all in form and substance satisfactory to the Purchaser; and
(iii) execute and file such financing or continuation statements, or
amendments thereto, and such other instruments or notices, as may be
necessary or desirable, or as the Purchaser may reasonably request, in order
to perfect and preserve the valid and perfected first priority ownership and
security interests granted or purported to be granted hereunder or under
any Transaction Document.
(b) The Seller hereby authorizes the Purchaser to file
one or more financing or continuation statements, and amendments thereto,
relating to all or any part of the Receivables and Seller Related Security
without the signature of the Seller where permitted by law. A photocopy
or other reproduction of this Agreement or any financing statement
covering the Receivables and Seller Related Security or any part thereof
shall be sufficient as a financing statement where permitted by law.
(c) The Seller will furnish to the Purchaser from time to
time statements and schedules further identifying and describing the
Receivables and Seller Related Security and such other reports in
connection with the Receivables and Seller Related Security as the
Purchaser may reasonably request, all in reasonable detail.
(d) The Seller shall, from time to time, execute and
deliver to the Obligors any bills, statements and letters or other writings
necessary to carry out the terms and provisions of any Transaction
Document and to facilitate the collection of the Receivables in a manner
consistent with the Credit Policy Manual.
SECTION 7.02. Payments. Each payment to be made by
either of the Purchaser or the Seller hereunder shall be made on the
required payment date, or on the next succeeding Business Day if the
required payment date is not a Business Day, in U.S. Dollars and in
immediately available funds at the office of the payee set forth in
Section 7.08 below or to such other office as may be specified by either
party in a written notice to the other party hereto.
SECTION 7.03. Costs, Expenses and Taxes. (a) In
addition to the rights of indemnification granted to the Purchaser pursuant
to Article VI hereof, the Seller agrees to pay on demand (i) all reasonable
costs and expenses of the Purchaser in connection with the preparation,
execution, delivery, modification and amendment of this Agreement and
the other documents to be delivered by the Seller in connection with this
Agreement, including the reasonable fees and expenses of counsel for the
Purchaser with respect thereto and with respect to advising the Purchaser
as to its rights and remedies under this Agreement, and (ii) all reasonable
costs and expenses (including reasonable counsel fees and expenses) of the
Purchaser in connection with the enforcement (whether through
negotiations, legal proceedings or otherwise) of this Agreement and the
other documents to be delivered by the Seller in connection herewith,
including reasonable counsel fees and expenses in connection with the
enforcement of rights under this Section 7.03, excluding, however, any
costs of enforcement or collection of any Receivables.
(b) In addition, the Seller agrees to pay any present or
future stamp, documentary, excise, property or similar taxes, charges or
levies that arise from any payment or deposit made hereunder or from the
execution, delivery or registration of, performing under, or otherwise with
respect to, this Agreement, and the Seller agrees to indemnify the
Purchaser against any liabilities with respect to or resulting from any delay
in paying or omission to pay such taxes, charges or levies.
SECTION 7.04. Binding Effect; Assignability. (a) This
Agreement shall be binding upon and inure to the benefit of the Seller and
the Purchaser and their respective successors (whether by merger,
consolidation or otherwise) and assigns. Except as otherwise permitted
herein, the Seller agrees that it will not assign or transfer all or any
portion of its rights or obligations hereunder to any Person without the prior
written consent of the Parent, the Purchaser and a Majority in Interest of
each outstanding Series. In connection with any sale or assignment by the
Purchaser of all or a portion of the Receivables and Seller Related Security,
the buyer or assignee, as the case may be, shall, to the extent of its
purchase or assignment, have all rights of the Purchaser under this
Agreement (as if such buyer or assignee, as the case may be, were the
Purchaser hereunder) except to the extent specifically provided in the
agreement between the Purchaser and such buyer or assignee.
(b) The Seller acknowledges that the Purchaser shall
assign to the Trust, as collateral security for the Purchaser's obligations
under the Pooling and Servicing Agreement, all of the Purchaser's rights,
remedies, powers and privileges hereunder (including the right to give any
notice which the Purchaser may provide to the Seller hereunder), provided
that the Purchaser shall not assign or delegate any of its duties or
obligations hereunder to the Trust.
(c) This Agreement shall create and constitute the
continuing obligations of the parties hereto in accordance with its terms,
and shall remain in full force and effect until such time, after the last
Termination Date of any Series; provided, however, that rights and
remedies with respect to any breach of any representation and warranty
made by the Seller pursuant to Article III and the provisions of Article VI
and Sections 4.03(h), 7.03, 7.04 and 7.12 shall be continuing and shall
survive any termination of this Agreement; and provided further that the
Purchaser shall remain entitled to receive any collections on Receivables
sold hereunder which have become Defaulted Receivables after it shall have
completed its collection efforts in respect thereof.
SECTION 7.05. No Waiver; Cumulative Remedies. No
failure to exercise and no delay in exercising, on the part of the Purchaser,
any right, remedy, power or privilege hereunder, shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, remedy, power
or privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege. The rights,
remedies, powers and privileges herein provided are cumulative and not
exhaustive of any rights, remedies, powers and privileges provided by law.
SECTION 7.06. Amendment. (a) This Agreement may be
amended from time to time by the Seller and the Purchaser without the
consent of any Beneficiary (i) to cure any ambiguity, (ii) to correct or
supplement any provision herein which may be inconsistent with any other
provision herein or (iii) to add any other provisions with respect to matters
or questions arising under this Agreement which are not inconsistent with
the provisions of this Agreement; provided that any amendment pursuant to
this clause (a) shall not, as evidenced by an Opinion of Counsel, adversely
affect in any material respect the interests of any Beneficiary.
(b) This Agreement may be amended from time to time
by the Seller and the Purchaser, so long as the Rating Agency Condition is
satisfied, with the consent of the Parent and a Majority in Interest of each
adversely affected Series for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this
Agreement or of modifying in any manner the rights of the Holders;
provided, however, that no such amendment shall (i) reduce in any manner
the amount of, or delay the timing of, any payment to be made hereunder
without the consent of each such Holder or (ii) reduce the aforesaid
percentage required to consent to any such amendment without the consent
of each Investor Certificateholder. The Trustee may request an Officer's
Certificate and Opinion of Counsel in each case to the effect that such
amendment does not adversely affect any Series and is otherwise in
compliance with the requirements of this Agreement. Any amendment to
be effected pursuant to this paragraph shall be deemed to adversely affect
all outstanding Series, other than any Series with respect to which such
action shall not, as evidenced by an Opinion of Counsel (which counsel
shall not be an employee of, or counsel for, Zenith, the Seller or the
Purchaser), addressed and delivered to the Trustee, adversely affect the
interests of such Series.
SECTION 7.07. Severability. If any provision hereof is
deemed void or unenforceable in any jurisdiction, such voiding or
unenforceability shall not affect the validity or enforceability of such
provision in any other jurisdiction or any other provision hereof in such or
any other jurisdiction.
SECTION 7.08. Notices. All notices and other
communications provided for hereunder shall, unless otherwise stated
herein, be in writing (including telex and facsimile communication) and
shall be personally delivered or sent by certified mail, postage prepaid, or
overnight courier or facsimile, to the intended party at the address or
facsimile number of such party set forth below or at such other address or
facsimile number as shall be designated by such party in a written notice to
the other parties hereto. All such notices and communications shall be
effective (a) if personally delivered, when received, (b) if sent by certified
mail, four Business Days after having been deposited in the mail, postage
prepaid, (c) if sent by overnight courier, two Business Days after having
been given to such courier, unless sooner received by the addressee and
(d) if transmitted by facsimile, when sent, upon receipt confirmed by
telephone or electronic means. Notices and communications sent
hereunder on a day that is not a Business Day shall be deemed to have been
sent on the following Business Day.
(a) If to the Seller,
Zenith Electronics Corporation
1000 Milwaukee Avenue
Glenview, Illinois 60025
Tel.: (847) 391-7286
Fax: (847) 391-8876
Attn.: Manager Banking and Finance
with a copy to:
Tel.: (847) 391-8064
Fax.: (847) 391-8584
Attn.: General Counsel
(b) If to the Purchaser,
Zenith Finance Corporation
1000 Milwaukee Avenue
Glenview, Illinois 60025
Tel.: (847) 391-7400
Fax: (847) 391-8876
Attn.: Treasurer
with a copy to:
Tel.: (847) 391-8066
Fax.: (847) 391-8584
Attn.: Secretary
SECTION 7.09. Counterparts. This Agreement may be
executed in any number of counterparts and by the different parties hereto
in separate counterparts, each of which when so executed shall be deemed
to be an original, and all of which taken together shall constitute one and
the same agreement. Delivery of an executed counterpart of a signature
page to this Agreement by telecopier shall be effective as delivery of a
manually executed counterpart of this Agreement.
SECTION 7.10. Construction of Agreement as Security
Agreement. It is the intent of the parties that the transactions contemplated
herein constitute sales of the Receivables and Seller Related Security to the
Purchaser. If, however, such transactions are deemed to be loans, (a) the
Seller hereby grants to the Purchaser a first priority security interest in all
of the Seller's right, title and interest in and to the Receivables and Seller
Related Security now existing and hereafter created, all monies due or to
become due and all amounts and other proceeds received with respect
thereto, to secure all of the Seller's obligations hereunder, and (b) this
Agreement shall constitute a security agreement under applicable law.
SECTION 7.11. Third-Party Beneficiaries. The Originator
Indemnified Parties are third-party beneficiaries of all provisions of this
Agreement and are entitled to enforce the provisions of Section 6.01 of this
Agreement to the extent any Originator Indemnified Amounts are due such
parties.
SECTION 7.12. The Seller's Obligations. It is expressly
agreed that, anything contained in this Agreement to the contrary
notwithstanding, the Seller shall be obligated to perform all of its
obligations under the Receivables to the same extent as if the Purchaser
had no interest therein and the Purchaser shall have no obligations or
liability under Receivables to any Obligor thereunder by reason of or
arising out of this Agreement, nor shall the Purchaser be required or
obligated in any manner to perform or fulfill any of the obligations of the
Seller under or pursuant to any Receivable.
SECTION 7.13. Governing Law, Jurisdiction, Consent to
Service of Process.
(a) Governing Law. THIS AGREEMENT,
INCLUDING THE RIGHTS AND DUTIES OF THE PARTIES
HERETO, SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK,
EXCEPT TO THE EXTENT THAT THE PERFECTION OF THE
INTERESTS OF THE PURCHASER IN THE RECEIVABLES AND
SELLER RELATED SECURITY IS GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK.
(b) Jurisdiction. (i) Each of the parties hereto hereby
irrevocably and unconditionally submits, for itself and its property, to the
nonexclusive jurisdiction of any New York State court or federal court of
the United States of America sitting in New York City, and any appellate
court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or any of the other Transaction Documents to
which it is a party, or for recognition or enforcement of any judgment, and
each of the parties hereto hereby irrevocably and unconditionally agrees
that all claims in respect of any such action or proceeding may be heard and
determined in any such New York State court or, to the extent permitted
by law, in such federal court. Each of the parties hereto agrees that a final
judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law. Nothing in this Agreement shall affect any right
that any party may otherwise have to bring any action or proceeding
relating to this Agreement or any of the other Transaction Documents in
the courts of any jurisdiction.
(ii) Each of the parties hereto irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively
do so, any objection that it may now or hereafter have to the laying of
venue of any suit, action or proceeding arising out of or relating to this
Agreement or any of the other Transaction Documents to which it is a
party in any New York State or federal court. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by law, the
defense of an inconvenient forum to the maintenance of such action or
proceeding in any such court.
(c) Consent to Service of Process. Each party to this
Agreement irrevocably consents to service of process by personal delivery,
certified mail (postage prepaid) or overnight courier. Nothing in this
Agreement will affect the right of any party to this Agreement to serve
process in any other manner permitted by law.
(d) Waiver of Jury Trial. Each party to this Agreement
waives any right to a trial by jury in any action, proceeding or counterclaim
(whether based on contract, tort or otherwise) arising out of or relating to
this Agreement or any other Transaction Document or any amendment,
instrument, document or agreement delivered or which may in the future be
delivered in connection herewith or therewith or arising from any course of
conduct, course of dealing, statements (whether oral or written), actions of
any of the parties hereto or any Beneficiary or any other relationship
existing in connection with this Agreement or any other Transaction
Document, and agrees that any such action or proceeding shall be tried
before a court and not before a jury.
IN WITNESS WHEREOF, the parties hereto have caused
this Receivables Purchase Agreement to be duly executed by their
respective officers thereunto duly authorized as of the day and year first
above written.
ZENITH ELECTRONICS
CORPORATION, as Seller
By:
Name:
Title:
ZENITH FINANCE CORPORATION,
as Purchaser
By:
Name:
Title:
EXECUTION COPY
RECEIVABLES PURCHASE AGREEMENT
Dated as of March 31, 1997
Among
ZENITH MICROCIRCUITS CORPORATION
as Seller
and
ZENITH FINANCE CORPORATION
as Purchaser
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions 1
SECTION 1.02. Other Definitional Provisions 4
SECTION 1.03. Computation of Time Periods 4
ARTICLE II
PURCHASE AND SALE OF RECEIVABLES
SECTION 2.01. Purchase and Sale of Receivables 5
SECTION 2.02. Payment of Purchase Price 5
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01. Representations and Warranties of the Seller 6
SECTION 3.02. Representations and Warranties of the Purchaser 12
SECTION 3.03. Obligations Unaffected 13
ARTICLE IV
COVENANTS
SECTION 4.01. Affirmative Covenants of the Seller 13
SECTION 4.02. Reporting Requirements of the Seller 17
SECTION 4.03. Negative Covenants of the Seller 19
SECTION 4.04. Affirmative Mutual Covenant 21
ARTICLE V
EVENTS OF TERMINATION
SECTION 5.01. Termination 21
ARTICLE VI
INDEMNIFICATION
SECTION 6.01. Indemnification 23
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. Further Assurances 26
SECTION 7.02. Payments 27
SECTION 7.03. Costs, Expenses and Taxes 27
SECTION 7.04. Binding Effect; Assignability 27
SECTION 7.05. No Waiver; Cumulative Remedies 28
SECTION 7.06. Amendment 28
SECTION 7.07. Severability 29
SECTION 7.08. Notices 29
SECTION 7.09. Counterparts 30
SECTION 7.10. Construction of Agreement as Security Agreement 30
SECTION 7.11. Third-Party Beneficiaries 30
SECTION 7.12. The Seller's Obligations 31
SECTION 7.13. Governing Law, Jurisdiction, Consent to
Service of Process 31
EXHIBIT
Exhibit A Form of Subordinated Note
RECEIVABLES PURCHASE AGREEMENT, dated as of
March 31, 1997, among ZENITH MICROCIRCUITS CORPORATION
("Zenith"), as seller hereunder (the "Seller" or the "Originator"), and
ZENITH FINANCE CORPORATION, a Delaware corporation, as
purchaser (the "Purchaser").
PRELIMINARY STATEMENTS
1. The Seller desires to sell to the Purchaser, and the
Purchaser desires to buy from the Seller, on the date hereof and from time
to time hereafter, all of the Seller's right, title and interest in, to and
under the Receivables and Seller Related Security existing on the date
hereof or hereafter created.
2. All of the shares of the Purchaser are owned by
Zenith.
3. Pursuant to that certain Pooling and Servicing
Agreement, dated as of the date hereof (as amended, supplemented or
otherwise modified from time to time, the "Pooling and Servicing
Agreement"), among the Purchaser, Zenith, as servicer (the "Servicer"),
and Bankers Trust Company, a New York banking corporation, as trustee
(the "Trustee"), the Purchaser has agreed to transfer to the Trust created
pursuant to the Pooling and Servicing Agreement, for the benefit of the
Holders referred to therein, all of its right, title and interest in, to and
under the Receivables and Seller Related Security.
NOW, THEREFORE, in consideration of the premises and
the mutual covenants herein contained, the parties hereto hereby agree as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. Capitalized terms used herein
but not otherwise defined herein shall have the meanings set forth in the
Pooling and Servicing Agreement. In addition, the term "Agreement" shall
mean this Receivables Purchase Agreement, as the same may from time to
time be amended, supplemented or otherwise modified. The following
capitalized terms shall have the following meanings:
"Early Termination" has the meaning specified in
Section 5.01.
"Effective Period" means the period beginning on the
Transfer Date and terminating on (i) the earliest of (a) the close of business
on the Business Day on which a Termination Event occurs, (b) the close of
business on the Business Day immediately following the day on which any
Early Amortization Event occurs and (c) the close of business on the
Business Day immediately preceding the day on which the Amortization
Period for the last outstanding Series begins or (ii) such other date as is
specified in a written notice from either the Seller or the Purchaser to the
other and to the Trustee.
"ERISA Affiliate" means any Person that for purposes of
Title IV of ERISA is a member of the controlled group of the Seller, or
under common control with the Seller, within the meaning of Section 414
of the Internal Revenue Code and the regulations promulgated thereunder.
"Multiemployer Plan" means a "multiemployer plan", as
defined in Section 4001(a)(3) of ERISA, to which the Seller or any ERISA
Affiliate is making or accruing an obligation to make contributions, or has
within any of the preceding five plan years made or accrued an obligation
to make contributions.
"Multiple Employer Plan" means a "single employer plan",
as defined in Section 4001(a)(15) of ERISA, that (a) is maintained for
employees of the Seller or any ERISA Affiliate and at least one Person
other than the Seller and the ERISA Affiliates or (b) was so maintained and
in respect of which the Seller or any ERISA Affiliate could have liability
under Section 4064 or 4069 of ERISA in the event such plan has been or
were to be terminated.
"Plan" means a Single Employer Plan or Multiple Employer
Plan.
"Plan Event" means (a) (i) the occurrence of a reportable
event, within the meaning of Section 4043 of ERISA, with respect to any
Plan unless the 30-day notice requirement with respect to such event has
been waived by the PBGC, or (ii) the requirements of subsection (1) of
Section 4043(b) of ERISA are met with respect to a contributing sponsor,
as defined in Section 4001(a)(13) or ERISA, of a Plan, and an event
described in paragraph (9), (10), (11), (12) or (13) of Section 4043(c) of
ERISA is reasonably expected to occur with respect to such Plan within
the following 30 days; (b) the application for a minimum funding waiver
with respect to a Plan; (c) the provision by the administrator of any Plan of
a notice of intent to terminate such Plan, pursuant to Section 4041(a)(2) of
ERISA (including any such notice with respect to a plan amendment
referred to in Section 4041(e) of ERISA); (d) the cessation of operations at
a facility of the Seller or any ERISA Affiliate in the circumstances
described in Section 4062(e) of ERISA; (e) the withdrawal by the Seller or
any ERISA Affiliate from a Multiple Employer Plan during a plan year for
which it was a substantial employer, as defined in Section 4001(a)(2) of
ERISA; (f) the conditions for imposition of a lien under Section 302(f) of
ERISA shall have been met with respect to any Plan; (g) the adoption of an
amendment to a Plan requiring the provision of security to such Plan
pursuant to Section 307 of ERISA; or (h) the institution by the PBGC of
proceedings to terminate a Plan pursuant to Section 4042 of ERISA, or the
occurrence of any event or condition described in Section 4042 of ERISA
that constitutes grounds for the termination of, or the appointment of a
trustee to administer, such Plan.
"Purchase Date" has the meaning specified in
Section 2.02(b).
"Purchase Percentage" means (i) for the period from the
Transfer Date until the first Distribution Date on which payment is made by
the Purchaser after the Transfer Date, 98.71% and (ii) for each day on and
after such first Distribution Date an amount (expressed as a percentage)
determined in accordance with the following formula:
100% - (LD + PDRR)
where:
LD = the amount (expressed as a percentage)
equal to the greater of (i) one-fourth of one
percent and (ii) 1.5 times the average of the
Loss to Liquidation Ratios for the three
Collection Periods most recently ended on or
before such date, provided that such amount
shall in no event exceed the sum of (x) one-
half of one percent plus (y) the average of
the Loss to Liquidation Ratios for such three
Collection Periods.
PDRR = the amount (expressed as a percentage) equal to:
TR x 30 x DR
360
where:
TR = the Turnover Rate as of the
most recent Distribution Date
on or before such date.
DR = the amount (expressed as a
percentage) equal to the sum
of the Trustee's publicly
announced "prime" rate as of
the most recent Distribution
Date plus the amount
(expressed as a percentage), if
any, by which the per annum
rate in effect on such
Distribution Date for
computing the Servicing Fee
(as set forth in all applicable
Supplements) exceeds one
percent.
"Purchase Price" has the meaning specified in
Section 2.02(c).
"Seller Related Security" means with respect to any
Receivable owed to the Seller (i) all of the Seller's interest in the
merchandise (including returned merchandise), if any, relating to the sale
which gave rise to such Receivable, (ii) all other Liens and property subject
to such Liens from time to time purporting to secure payment of such
Receivable, whether pursuant to the Contract related to such Receivable or
otherwise, together with all financing statements signed by an Obligor
describing any collateral securing such Receivable; and (iii) all guarantees,
letters of credit, insurance and other agreements or arrangements of
whatever character from time to time supporting or securing payment of
such Receivable, whether pursuant to the Contract related to such
Receivable or otherwise.
"Single Employer Plan" means a "single employer plan", as
defined in Section 4001(a)(15) of ERISA, that (a) is maintained for
employees of the Seller or any ERISA Affiliate or (b) was so maintained
and in respect of which the Seller or any ERISA Affiliate could have
liability under Section 4069 of ERISA in the event such plan has been or
were to be terminated.
"Termination Event" has the meaning specified in
Section 5.01.
SECTION 1.02. Other Definitional Provisions. (a) All
accounting terms not defined in this Agreement, and accounting terms
partly defined in this Agreement to the extent not completely defined, shall
have the respective meanings given to them under GAAP or regulatory
accounting principles, as applicable and in effect from time to time. To the
extent that the definitions of accounting terms herein are inconsistent with
the meanings of such terms under GAAP or regulatory accounting
principles, the definitions contained herein shall control.
(b) The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this
Agreement; Section, Schedule and Exhibit references contained in this
Agreement are references to Sections, Schedules and Exhibits in or to this
Agreement unless otherwise specified; and the term "including" shall mean
"including without limitation".
(c) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms and
to the masculine as well as to the feminine and neuter genders of such
terms.
SECTION 1.03. 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" shall mean
"from and including" and the words "to" and "until" shall mean "to but
excluding".
ARTICLE II
PURCHASE AND SALE OF RECEIVABLES
SECTION 2.01. Purchase and Sale of Receivables. By
execution of this Agreement, the Seller does hereby transfer, assign, set-
over and otherwise convey without recourse, except as expressly provided
herein, to the Purchaser all of the Seller's right, title and interest in, to
and under all Receivables existing at the close of business on the Transfer
Date and thereafter created from time to time, and all monies due or to become
due and all Collections in respect of such Receivables and other amounts
received or receivable from time to time with respect to such Receivables
and all proceeds thereof, and all of the Seller's right, title and interest
in, to and under the Seller Related Security.
SECTION 2.02. Payment of Purchase Price. (a) On the
Transfer Date, the Purchaser shall pay to the Seller, with respect to all of
the Seller's right, title and interest in, to and under all Receivables and all
Seller Related Security existing at the close of business on the Transfer
Date, a payment consisting of $82,650 multiplied by the Purchase
Percentage.
(b) On each Business Day during the Effective Period
(each, a "Purchase Date"), the Seller shall determine the Receivables and
the Seller Related Security with respect thereto arising since the close of
business on the preceding Business Day, which Receivables and Seller
Related Security shall be deemed available for purchase by the Purchaser
on such Purchase Date. To the extent that any sale of Receivables is not
reflected in the Daily Report, such Receivables and the Seller Related
Security with respect thereto will nevertheless be deemed sold to such
Purchaser in every respect and all of the Seller's rights, title and interest
in, to and under such Receivables and Seller Related Security will be deemed
to have been sold to the Purchaser.
(c) The purchase price payable to the Seller for the
Receivables and Seller Related Security to be purchased on any Purchase
Date shall be an amount equal to the product of (i) the aggregate
Outstanding Balance of all Receivables deemed available for purchase
pursuant to paragraph (b) above and (ii) the Purchase Percentage for such
Purchase Date (such amount, the "Purchase Price"), provided, however,
that such Purchase Price shall not be less than the reasonably equivalent
value of the Receivables to which such Purchase Price relates, and in the
event that, in the reasonable judgment of either the Seller or the Purchaser,
such Purchase Price is less than such reasonably equivalent value or does
not reflect the fair market value of such Receivables, within five Business
Days after such Purchase Date, each of the Seller and the Purchaser (after
notice to the other party) shall appoint a Person (other than an Affiliate of
the Purchaser or Seller) in the business of purchasing trade receivables, and
such Persons shall appoint a third Person (other than an Affiliate of the
Purchaser or Seller) in such business, and such Persons shall make an
independent appraisal of the value of such Receivables and shall determine
a Purchase Price which reasonably reflects the fair market value of such
Receivables. The Purchase Percentage with respect to each Determination
Date shall be calculated in the Determination Date Certificate with respect
to such Determination Date and such calculation shall be used in the
calculation of the Purchase Price owed under this Agreement for all
Purchases occurring from and including such Determination Date to but
excluding the next Determination Date.
(d) The Purchase Price shall be paid to the Seller on the
applicable Purchase Date in immediately available funds to the extent of
funds available to the Purchaser. The excess, if any, of the Purchase Price
over the payment therefor set forth in clauses (a) and (c) above shall be
deemed to be a loan by the Seller to the Purchaser (a "Subordinated Loan")
evidenced by the Subordinated Note of the Purchaser substantially in the
form attached hereto as Exhibit A.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01. Representations and Warranties of the
Seller. The Seller represents and warrants to the Purchaser as of the
Transfer Date and each Purchase Date that:
(a) Due Organization, Qualification and Authorization.
The Seller (i) is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its
incorporation, (ii) is duly qualified and in good standing as a foreign
corporation in each other jurisdiction in which it owns or leases
property or in which the conduct of its business requires it to so
qualify or be licensed, except where the failure to do so could not
reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect, and (iii) has all requisite corporate power
and authority (including all governmental licenses, permits and
other approvals) to own or lease and operate its properties and to
carry on its business as now conducted and as proposed to be
conducted, except where the failure to do so could not reasonably
be expected, individually or in the aggregate, to have a Material
Adverse Effect.
(b) Corporate Powers and No Conflicts. The execution,
delivery and performance by the Seller of the Transaction
Documents to which it is or is to be a party, the making of each
purchase and sale of Receivables hereunder and the consummation
of the transactions contemplated hereby are within the Seller's
corporate powers, have been duly authorized by all necessary
corporate action, and do not (i) contravene the Seller's charter or
bylaws, (ii) violate any Requirement of Law, (iii) conflict with or
result in the breach of, or constitute a default under, any contract,
loan agreement, indenture, mortgage, deed of trust, lease or other
instrument binding on or affecting the Seller or any of its properties
or (iv) except for the Liens created under the Transaction
Documents, result in or require the creation or imposition of any
Lien upon or with respect to any of the properties of the Seller.
The Seller is not in violation of any Requirement of Law or in
breach of any such contract, loan agreement, indenture, mortgage,
deed of trust, lease or other instrument, the violation or breach of
which could have a Material Adverse Effect.
(c) Government Authorization and Approval. No
authorization or approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body or any
other third party is required with respect to the Seller for (i) the due
execution, delivery or performance by the Seller of any of the
Transaction Documents to which it is or is to be a party, the making
of each purchase and sale of Receivables hereunder or the
consummation of the other transactions contemplated hereby or
thereby, (ii) the grant by the Seller of the transfers made or Liens
granted by it pursuant to this Agreement, (iii) the perfection or
maintenance of the transfers made or Liens created by this
Agreement (including the first priority nature thereof) or (iv) the
exercise by the Purchaser and its assigns of its rights under this
Agreement or its remedies granted under the Transaction
Documents, except for (A) the financing statements and other
documents required to have been filed on or prior to the Transfer
Date pursuant to Article IV of the applicable Certificate Purchase
Agreement, all of which have already been duly filed and are in full
force and effect, (B) the filing from time to time of any
amendments, assignments, continuation statements or other
documents which may become required or applicable pursuant to
Section 7.01 hereof or Sections 2.05(i) or 3.04(i) of the Pooling
and Servicing Agreement and (C) any properly completed and
executed UCC-3 termination statements which shall have been
delivered to the Program Agent on or before the Transfer Date.
(d) Enforceability. Each Transaction Document to
which the Seller is or is to be a party constitutes a legal, valid and
binding obligation of the Seller enforceable against the Seller in
accordance with its terms (except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights
generally and except as such enforceability may be limited by
general principles of equity, whether considered in a suit at law or
in equity). Each Transaction Document is in full force and effect,
and is not subject, as to the Seller, to any specific dispute, offset,
counterclaim or defense of the Seller.
(e) No Litigation. There is no action, suit,
investigation, litigation or proceeding affecting the Seller, pending
or threatened before any Governmental Authority or arbitrator that
(i) could have a Material Adverse Effect, (ii) purports to affect the
legality, validity or enforceability of any Transaction Document or
the consummation of the transactions contemplated hereby,
including the prevention of the issuance of the Certificates or (iii)
could have an adverse effect on the income or franchise tax
classifications or liabilities of the Trust under the United States
federal or States of Illinois or New York income or franchise tax
systems.
(f) Liens on Properties. Except for Permitted Liens
and except for Liens that will be terminated prior to the Transfer
Date, there are no Liens of any nature whatsoever on any
Receivable or Seller Related Security or Collections. The Seller is
not a party to any contract, agreement, lease or instrument (other
than this Agreement or as contemplated by this Agreement) the
performance of which, either unconditionally or upon the happening
of an event, will result in or require the creation of any Lien on any
Receivable or Seller Related Security or Collections, or otherwise
result in a violation of any Transaction Document.
(g) Contractual Obligations. (i) The Seller is not a
party to any indenture, loan or credit agreement or any lease or
other agreement or instrument, or subject to any Requirement of
Law, that would have a material adverse effect on the ability of the
Seller to carry out its obligations under this Agreement or any
Transaction Document to which it is a party, and (ii) neither the
Seller nor, to the best Knowledge of the Seller, any other party is in
default in any respect under or with respect to any Transaction
Document or any other material contract, agreement, lease or
instrument to which the Seller is a party.
(h) Investment Company Act, Etc. The Seller is not an
"investment company", or an "affiliated person" of, or "promoter"
or "principal underwriter" for, or a company controlled by, an
"investment company" within the meaning of and as such terms are
defined in the Investment Company Act. Each purchase and sale of
Receivables to the Purchaser hereunder constitutes a purchase or
other acquisition of notes, drafts, acceptances, open accounts
receivable or other obligations representing part or all of the sales
price of merchandise, insurance or services within the meaning of
Section 3(c)(5) of the Investment Company Act. The acquisition
by the Purchaser of each Receivable constitutes a "current
transaction" within the meaning of Section 3(a)(3) of the Act.
(i) Locations. The chief place of business and chief
executive office of the Seller, and the office where the Seller keeps
the originals of its books, records and documents regarding the
Receivables and the Seller Related Security are located at the
address of the Seller specified in Section 7.08. During the four
months prior to the Transfer Date and prior to any Purchase Date,
the chief place of business and chief executive office of the Seller,
and the offices where the Seller kept the originals of its books,
records and documents regarding the Receivables and Seller
Related Security were located at the address of the Seller specified
in Section 7.08.
(j) Tradenames. The legal name of the Seller is as set
forth on the signature page of this Agreement and the Seller has no
tradenames, fictitious names, assumed names or "doing business as"
names, except for "Zenith".
(k) Accuracy of Information. Each certificate,
information, exhibit, financial statement, document, book, record or
report furnished by a Responsible Official of the Seller to the
Purchaser in connection with this Agreement and in connection
with each Receivable and the Seller Related Security is accurate in
all material respects as of its date and no such document contains
any misstatement of material fact.
(l) Solvency. The Seller is Solvent and will be Solvent
after giving effect to the transactions contemplated by the
Transaction Documents.
(m) Collection Accounts. Schedule 3.03(f) to the
Pooling and Servicing Agreement (as such Schedule may be
amended from time to time pursuant thereto) is a complete and
accurate list of each Lock Box and Collection Account as of each
Purchase Date. The Collection Account Banks are the only
institutions holding Collection Accounts for the receipt of payments
from Lock Boxes in respect of Receivables (subject to such changes
as may be made from time to time in accordance with Section
4.02(b) of the Pooling and Servicing Agreement), and all Obligors,
and only such Obligors, have been instructed or, upon the creation
of Receivables, will be instructed to make payments only to Lock
Boxes or Collection Accounts and such instructions have not been
modified or revoked by the Seller (except as permitted under
Section 4.02 of the Pooling and Servicing Agreement) and such
instructions that have been given are in full force and effect.
(n) Compliance. The Seller has complied, and will
comply on each Purchase Date, with each Requirement of Law with
respect to all Receivables and Seller Related Security sold
hereunder and the Contracts related thereto and with respect to its
business or properties, in each case except where the failure to do
so could not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect. The Seller has
maintained all applicable permits, certifications and licenses
necessary with respect to all Receivables and Seller Related
Security sold hereunder and the Contracts related thereto, except
where the failure to do so could not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect.
The Seller has performed and complied with its obligations under
the Contracts and invoices giving rise to the Receivables, except
where the failure to do so could not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect.
(o) Taxes. The Seller has filed all tax returns (federal,
state and local) which it reasonably believes are required to be filed
and has paid or made adequate provision for the payment of all
taxes, assessments and other governmental charges due from the
Seller or is contesting any such tax, assessment or other
governmental charge in good faith through appropriate proceedings
as to which adequate reserves are being maintained and no Lien
with respect thereto has attached to its property and become
enforceable against its other creditors. The Seller knows of no
reasonable basis for any additional tax assessment for any calendar
year for which adequate reserves have not been established.
(p) Use of Proceeds. The proceeds of each Purchase
will be used by the Seller solely for working capital purposes. No
proceeds of any Purchase will be used by the Seller to acquire any
security in a transaction that is subject to Sections 13 and 14 of the
Securities Exchange Act of 1934, as amended, or to purchase or
carry any margin security in violation of any applicable law or
regulation.
(q) No Rescission. No Contract giving rise to any
Receivable sold hereunder has been amended, satisfied,
subordinated or rescinded, except as disclosed in writing to the
Purchaser on or before the date of purchase and sale of such
Receivable or as otherwise permitted under the Pooling and
Servicing Agreement. Subsequent to such sale no such Receivable
has been compromised, adjusted, extended, satisfied, subordinated,
rescinded or modified, except as permitted under the Pooling and
Servicing Agreement.
(r) No Payment. The Seller has no Knowledge of any
fact which would lead it to reasonably expect that, when billed, any
Receivable sold hereunder would not be paid in accordance with its
terms when due.
(s) No Insolvency Event. No Insolvency Event has
occurred with respect to the Seller.
(t) Fraudulent Conveyance. The Seller is not entering
into the transactions contemplated hereby with the intent of
hindering, delaying or defrauding creditors.
(u) Valid Sale and Transfer. This Agreement creates a
valid sale, transfer and assignment to the Purchaser of, and, subject
to the interest of the Trust under the Pooling and Servicing
Agreement, the Purchaser is the legal and beneficial owner of, all
right, title and interest of the Seller in and to the Receivables and
Seller Related Security now existing and hereafter created during
the Effective Period and in the Collections and other proceeds
thereof. Upon the filing of the appropriate financing statements, the
Purchaser shall have a first priority perfected ownership or security
interest in the Receivables, the Seller Related Security and the
proceeds thereof, in each case in which a security interest may be
perfected by filing appropriate financing statements. Except as
otherwise provided in the Pooling and Servicing Agreement, the
Seller has clearly and unambiguously marked all its master data
processing and computer records and all its microfiche storage files,
if any, in a manner reasonably calculated to indicate that the
Receivables, Seller Related Security and proceeds thereof are the
property of the Purchaser and shall cause the Purchaser to maintain
such records in a manner such that the Purchaser's perfected first
priority interest in the Receivables shall not be adversely affected.
(v) No Claim or Interest. Except for Permitted Liens
and as otherwise provided in this Agreement or any applicable
Supplement, neither the Seller nor any Person claiming through or
under the Seller has any claim to or interest in the Concentration
Account, the Collection Accounts, the Lock Boxes or any Series
Account. Each Receivable, the Seller Related Security and the
Collections with respect thereto have been or will be transferred to
the Purchaser free and clear of any Lien or interest of any other
Person (other than Permitted Liens and disputes with Obligors in
the ordinary course of business or in connection with an Insolvency
Event of the related Obligor) not holding through the Trust.
(w) Eligibility. Each Receivable classified as an "Eligible
Receivable" by the Seller in any document or report delivered
hereunder satisfied, at the time of such classification, the
requirements of eligibility contained in the definition of Eligible
Receivable except where, after giving effect to all improper
classifications, no Pool Non-compliance Date shall have occurred.
(x) Invoices. The Seller has submitted all necessary
documents, if any, to each Obligor with respect to any payments
due on each of such Obligor's Receivables.
(y) ERISA. No Plan has any accumulated funding
deficiency, as defined in Section 302(a) of ERISA, whether or not
waived. The Seller and each ERISA Affiliate has timely made all
contributions required to be made by it to any Plan, except where a
failure to contribute could not reasonably be expected to give rise
to a Lien under Section 302(f) of ERISA. No Plan Event with
respect to any Plan has occurred or could reasonably be expected to
occur that could result, directly or indirectly, in any Lien being
imposed on the property of the Seller. Neither the Seller nor any
ERISA Affiliate has incurred, or could reasonably be expected to
incur, withdrawal liability to, or liability in connection with, the
reorganization, termination or insolvency of any Multiemployer
Plan which liability could reasonably be expected to have a Material
Adverse Effect.
(z) Termination Event. No event or condition has
occurred and is continuing that is, or with the giving of notice or
the passage of time or both would constitute, a Termination Event.
SECTION 3.02. Representations and Warranties of the
Purchaser. The Purchaser represents and warrants to the Seller as of the
Transfer Date and each Purchase Date that:
(a) Due Organization, Qualification and Authorization.
The Purchaser (i) is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its
incorporation, (ii) is duly qualified and in good standing as a foreign
corporation in each other jurisdiction in which it owns or leases
property or in which the conduct of its business requires it to so
qualify or be licensed, except where the failure to do so could not
reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect, and (iii) has all requisite corporate power
and authority (including all governmental licenses, permits and
other approvals) to own or lease and operate its properties and to
carry on its business as now conducted and as proposed to be
conducted, except where the failure to do so could not reasonably
be expected, individually or in the aggregate, to have a Material
Adverse Effect.
(b) Corporate Powers and No Conflicts. The execution,
delivery and performance by the Purchaser of the Transaction
Documents to which it is or is to be a party, the making of each
purchase and sale of the Receivables and Seller Related Security
pursuant to this Agreement and the consummation of the
transactions contemplated hereby are within the Purchaser's
corporate powers, have been duly authorized by all necessary
corporate action, and do not (i) contravene the Purchaser's charter
or bylaws, (ii) violate any Requirement of Law, (iii) conflict with or
result in the breach of, or constitute a default under, any contract,
loan agreement, indenture, mortgage, deed of trust, lease or other
instrument binding on or affecting the Purchaser or any of its
properties or (iv) except for the Liens created under the
Transaction Documents, result in or require the creation or
imposition of any Lien upon or with respect to any of the properties
of the Purchaser. The Purchaser is not in violation of any
Requirement of Law or in breach of any such contract, loan
agreement, indenture, mortgage, deed of trust, lease or other
instrument, the violation or breach of which could have a Material
Adverse Effect.
(c) Government Authorization and Approval. No
authorization or approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body or any
other third party is required for the due execution, delivery,
recordation, filing or performance by the Purchaser of any of the
Transaction Documents to which it is or is to be a party, the making
of each purchase and sale of Receivables hereunder or the
consummation of the other transactions contemplated hereby or
thereby.
(d) Enforceability. Each Transaction Document to
which the Purchaser is or is to be a party constitutes a legal, valid
and binding obligation of the Purchaser enforceable against the
Purchaser in accordance with its terms (except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors'
rights generally and except as such enforceability may be limited by
general principles of equity, whether considered in a suit at law or
in equity). Each Transaction Document is in full force and effect,
and is not subject, as to the Purchaser, to any specific dispute,
offset, counterclaim or defense of the Purchaser.
SECTION 3.03. Obligations Unaffected. The obligations
of the Seller to the Purchaser under this Agreement shall not be affected by
reason of any invalidity, illegality or irregularity of any Receivable or
Seller Related Security or the sale of any Receivable or Seller Related
Security.
ARTICLE IV
COVENANTS
SECTION 4.01. Affirmative Covenants of the Seller. The
Seller hereby covenants that, until the last Termination Date of any Series:
(a) Compliance with Law. The Seller shall duly satisfy
all obligations on its part to be fulfilled under or in connection with
the Receivables and the Seller Related Security, will maintain in
effect all qualifications required under any Requirement of Law in
order to properly convey the Receivables and Seller Related
Security to the Purchaser and will comply in all respects with all
Requirements of Law applicable to the Seller, its business and
properties and the Receivables, Seller Related Security and the
proceeds thereof, in each case where the failure to do so would,
individually or in the aggregate, have a Material Adverse Effect.
(b) Preservation of Legal Existence. The Seller will
preserve and maintain its existence, legal structure, legal name and,
except where the failure to do so could not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect,
its rights (charter and statutory), permits, licenses, approvals,
franchises and privileges in the jurisdiction of its formation, and
qualify and remain qualified in each jurisdiction where the failure to
maintain such qualification could have a Material Adverse Effect.
(c) Audits. At the Seller's expense (only, so long as no
Early Amortization Event has occurred and is continuing, for the
first two examinations and/or visits in any twelve-month period), at
any time during the Seller's regular business hours and on
reasonable prior notice and for a purpose reasonably related to this
Agreement, the Seller shall, in response to any reasonable request
of the Purchaser, permit the Purchaser, or its agents or
representatives, (i) to examine and make copies of and abstracts
from all books, records and documents (including computer tapes,
microfiche and disks) in the possession or under the control of the
Seller relating to the Receivables, Seller Related Security and
related Contracts and (ii) to visit the offices and properties of the
Seller for the purpose of examining such materials and to discuss
matters relating to the Receivables, Seller Related Security and
related Contracts or the Seller's performance hereunder with any of
the officers or (after consultation with a Responsible Official)
employees of the Seller having knowledge thereof.
(d) Keeping of Records and Books of Account. The
Seller will (i) keep proper books of record and account, which shall
be maintained or caused to be maintained by the Seller and shall be
separate and apart from those of any Affiliate of the Seller, in which
full and correct entries shall be made of all financial transactions
and the assets and business of the Seller in accordance with GAAP
consistently applied, (ii) maintain and implement administrative and
operating procedures (including the ability to recreate records
evidencing the Receivables and the Seller Related Security in the
event of the destruction of the originals thereof) and (iii) keep and
maintain all documents, books, records and other information
necessary or reasonably advisable for the collection of all
Receivables and Seller Related Security (including records adequate
to permit the daily identification of each new Receivable and all
Collections of and adjustments to each existing Receivable).
(e) Performance and Compliance with Receivables. The
Seller will, at its expense, timely and fully perform and comply with
all provisions, covenants and other promises required to be
observed by it hereunder including complying with its material
obligations under all Contracts and invoices giving rise to the
Receivables.
(f) Payment of Taxes, Etc. The Seller will pay
promptly when due all taxes, assessments and governmental
charges or levies imposed upon it, the Receivables and any Seller
Related Security, or in respect of its receipts, income or profits
therefrom, and any and all claims of any kind, except that no such
amount need be paid if (i) such nonpayment could not reasonably
be expected to subject any Beneficiary to civil or criminal penalty or
liability or involve any risk of the sale, forfeiture or loss of any of
the property, rights or interests covered under any Transaction
Document and (ii) the charge or levy is being contested in good
faith through appropriate proceedings as to which adequate
reserves are being maintained and no Lien with respect thereto has
attached to its property and become enforceable against its
creditors.
(g) Credit Policy Manual. The Seller shall comply with
the Credit Policy Manual, except where the failure to do so could
not reasonably be expected to have a Material Adverse Effect.
(h) Collections. (i) The Seller will instruct all Obligors
to cause all Collections of Receivables to be deposited directly into
a Collection Account or a Lock Box, and the Seller shall deposit
any Collections received by it directly into a Collection Account in
the manner and within the time period required by Section 4.02(a)
of the Pooling and Servicing Agreement.
(ii) If the Seller accepts payment of a Receivable
from any Obligor in a currency other than U.S. Dollars, then the
Seller will, on the date of such acceptance, deposit directly into a
Collection Account in U.S. Dollars an amount equal to the
Outstanding Balance of such Receivable.
(iii) In the event that the Seller receives any
Collections, the Seller agrees to hold all such Collections in trust
and to mail such Collections to a Lock Box or deposit such
Collections to the appropriate Collection Account as soon as
practicable, but in no event later than two Business Days after
receipt thereof.
(iv) In the event that any Affiliate of the Seller
(other than the Transferor) receives any Collections, the Seller
agrees to cause such Affiliate to hold all such Collections in trust
and to cause such Affiliate to mail such Collections to a Lock Box
or deposit such Collections to the appropriate Collection Account
as soon as practicable, but in no event later than five Business Days
after receipt thereof.
(i) UCC Opinion. The Seller shall deliver to the
Purchaser within 90 days after the end of each calendar year,
beginning with the calendar year ending on or about December 31,
1998, an Opinion of Counsel to the Seller (who may be counsel
employed by an Affiliate of the Seller), dated as of a date during
such 90-day period, substantially to the effect that, in the opinion of
such counsel, either (A) such action has been taken as is necessary
to continue the perfection of the interests of the Purchaser in and to
the Receivables and the Seller Related Security conveyed hereunder
and the proceeds thereof (to the same extent as such interest was
perfected on the Transfer Date with respect to the Receivables and
the Seller Related Security then owned by the Seller and the
proceeds thereof) and reciting the details of such action or referring
to prior Opinions of Counsel in which such details are given or (B)
no such action is necessary to continue the perfection of such
interests.
(j) Deemed Collections. If on any day the Outstanding
Balance of a Receivable transferred hereunder is either (a) reduced
as a result of any defective, rejected or returned merchandise,
insurance or services, any cash discount or rebate, or any
adjustment by the Seller or any Affiliate thereof (other than the
Purchaser) or (b) reduced or cancelled as a result of a setoff in
respect of any claim by the Obligor thereof against the Seller or any
Affiliate thereof (other than the Purchaser) (whether such claim
arises out of the same or a related transaction or an unrelated
transaction), then the Seller shall be deemed to have received on
such day a Collection of such Receivable in the amount of such
reduction or cancellation. If Collections are reduced as a result of
an Obligor failing to pay any Receivable transferred hereunder free
and clear of, and without deduction for, any and all present or
future taxes, levies, imposts, deductions, charges or withholdings,
and all liabilities with respect thereto, then the Seller shall be
deemed to have received on such day an additional Collection of
such Receivable in the amount of such reduction. The Seller will
deposit all such deemed Collections into a Collection Account
within two Business Days following the Business Day on which
such Collections are deemed to have been received.
(k) Maintenance of Separate Existence and Directors.
Seller shall take all actions as are necessary to comply with, and to
cause the Purchaser to comply with, Section 2.05(d) and Section
2.06(j) of the Pooling and Servicing Agreement.
(l) Modification of Systems. The Seller agrees,
promptly after the replacement or any material modification of any
computer, automation or other operating systems (in respect of
hardware or software) used to make any calculations or reports
hereunder, to give written notice of any such replacement or
modification to the Purchaser.
(m) Seller Business Days. No later than December 1 of
each year, the Seller shall furnish the Trustee with a list of days
other than Saturday and Sunday, on which the Seller shall be closed
during the immediately succeeding calendar year, except that with
respect to the calendar year 1997, the Seller shall furnish such list
to the Purchaser on or before the Transfer Date.
(n) Maintenance of Insurance. The Seller shall use its
best efforts to maintain with a responsible company, and at its own
expense, its current commercial crime insurance (including
commercial fraud insurance) as is commercially available at a cost
that is not generally regarded as excessive by industry standards,
with coverage on all officers, employees or other Persons acting in
any capacity requiring such Persons to handle funds, money,
documents or papers relating to the Receivables and the Seller
Related Security.
SECTION 4.02. Reporting Requirements of the
Seller. The Seller hereby covenants that, until the last Termination Date of
any Series:
(a) Termination Events, Etc. The Seller shall (i) within
one Business Day after a Responsible Official of the Seller obtains
knowledge of the occurrence of any Termination Event or event
which, with the giving of notice or lapse of time or both, would
constitute a Termination Event, notify the Purchaser of such
occurrence; (ii) as soon as possible and in any event within three
Business Days after a Responsible Official of the Seller obtains
knowledge of the occurrence of any Termination Event or event
which, with the giving of notice or lapse of time or both, would
constitute a Termination Event, deliver to the Purchaser a statement
of a Financial Officer of the Seller setting forth details of such
Termination Event or such event and the action that the Seller has
taken and proposes to take with respect thereto; and (iii) within
three Business Days after a Responsible Official of the Seller makes
a determination that any other event, development or information is
reasonably likely, individually or in the aggregate, to have a
Material Adverse Effect, give written notice thereof to the
Purchaser and the Trustee.
(b) Litigation. As soon as possible and in any event
within 10 Business Days after a Responsible Official of the Seller
obtains Knowledge thereof, the Seller shall notify the Purchaser of
any litigation, investigation or proceeding which could be expected
to impair the ability of the Seller to perform its obligations under
this Agreement.
(c) ERISA. As soon as possible and in any event within
30 days after a Responsible Official of the Seller obtains Knowledge
that one of the following events has occurred or is reasonably
expected to occur: (i) the occurrence of any Plan Event with
respect to any Plan or (ii) the withdrawal by the Seller or any of its
ERISA Affiliates from, or the termination, reorganization or
insolvency of, any Multiemployer Plan which could reasonably be
expected to have a Material Adverse Effect.
(d) Liens. The Seller will advise the Purchaser and the
Trustee promptly, in reasonable detail, (A) of any Lien or claim
asserted against any of the Receivables, Seller Related Security or
proceeds thereof, other than Permitted Liens, (B) of the occurrence
of any breach in any material respect by the Seller of any of its
representations, warranties and covenants contained herein and (C)
of the occurrence of any other event which in the cases of clauses
(A) and (B) would have an adverse effect on the value of the
Receivables, the Seller Related Security or the proceeds thereof.
(e) Monthly Financials. Within thirty (30) (or, after the
last Statistical Month in each calendar year, forty-five (45)) days
after the end of each Statistical Month in each calendar year, deliver
to the Purchaser, each Rating Agency and each Enhancement
Provider the balance sheet of the Seller as at the end of such period
and the related statement of income and cash flow of the Seller for
such Statistical Month and for the period from the beginning of the
then current calendar year to the end of such Statistical Month, and
for the corresponding period during the previous calendar year, and
a comparison of the statement of the year to date earnings and cash
flow to the corresponding statement for the corresponding period
from the previous calendar year certified by a Financial Officer of
the Seller as fairly presenting the financial position of the Seller as
at the date indicated and the results of its operations and cash flow
for the period indicated in accordance with GAAP, subject to
normal year end adjustments;
(f) Annual Financials. Within ninety (90) days after the
end of each calendar year deliver to the Purchaser and each Rating
Agency audited financial statements of the Seller, including therein
a balance sheet of the Seller as at the end of such calendar year and
statements of income and cash flow of the Seller for each calendar
year, reported on by Independent Public Accountants and
accompanied by their related audit letter, which report and letter
shall be unqualified as to scope and shall state that such financial
statements fairly present the financial position of the Seller as at the
dates indicated in conformity with GAAP applied on a basis
consistent with prior years and that the examination by such
accountants in connection with such financial statements has been
made in accordance with generally accepted auditing standards; and
(g) Other Information. The Seller shall promptly, from
time to time, furnish to the Purchaser such other information,
documents, records or reports regarding the Receivables or the
Seller Related Security or the condition or operations, financial or
otherwise, of the Seller, as the Purchaser may from time to time
reasonably request.
SECTION 4.03. Negative Covenants of the Seller. The
Seller hereby covenants that, until the last Termination Date of any Series,
it will not:
(a) Sales, Liens, Etc. Except for Permitted Liens and as
otherwise contemplated herein, or pursuant to or as contemplated
by the Pooling and Servicing Agreement, sell, pledge, assign or
transfer any Receivable, the Seller Related Security or any interest
therein to any other Person, or grant, create, incur, assume or suffer
to exist any Lien on any Receivable or Seller Related Security or
any other property or asset of the Seller, whether now existing or
hereafter created, or any interest therein, and the Seller shall defend
the right, title and interest of the Purchaser in and to the
Receivables, the Seller Related Security and the proceeds thereof,
whether now existing or hereafter created, against all claims of third
parties claiming through or under the Seller.
(b) Extension or Amendment of Receivables. Extend,
amend or otherwise modify, except as permitted in Section 3.01(c)
of the Pooling and Servicing Agreement, the terms of any
Receivable, or amend, modify or waive any payment term or
condition of any invoice related thereto (other than as provided in
the Credit Policy Manual) if the effect of such amendment,
modification or waiver would impair the collectibility or delay the
payment of any then existing Receivable beyond 90 days from the
date of the invoice. The Seller will not rescind or cancel, or permit
the rescission or cancellation of, any Receivable except as ordered
by a court of competent jurisdiction or other Governmental
Authority. Notwithstanding the foregoing provisions of this
Section 4.03(b), the Seller may extend, amend, modify, cancel or
rescind any Diluted Receivable in connection with a valid dispute;
provided, however, that such amendment, modification,
cancellation or rescission shall not have a material adverse effect on
the interests of any Beneficiary.
(c) Change in Business or Credit Policy Manual. Make
any change in the nature of its business as carried out on the date
hereof or in the Credit Policy Manual, which change would, in
either case, materially impair the collectibility of the Receivables,
except as permitted under the terms of the Pooling and Servicing
Agreement.
(d) Change in Collection Account Banks. (i) Make any
changes to Schedule 3.03(f) to the Pooling and Servicing
Agreement or (ii) amend any instruction to any Obligor, Person
holding a Lock Box or any Collection Account Bank with respect
to any Lock Box or Collection Account, as applicable, or
(iii) terminate or substitute any Cure Account, in any case
(A) except as otherwise required or permitted pursuant to
Section 4.02 or the applicable Supplement and (B) unless the
Purchaser shall have received written notice of such change,
amendment, termination or substitution and, if applicable, executed
copies of Collection Account Letters with each new Collection
Account Bank or Lock Box Letters with each new Person holding a
Lock Box.
(e) Change in Legal Name. (i) Make any change to its
legal name, identity or business structure in any manner or chief
executive office (including the address thereof) or use any trade
names, fictitious names, assumed names or "doing business as"
names or (ii) change its jurisdiction of organization unless, prior to
the effective date of any such name change, change in chief
executive office, use or change of jurisdiction, the Seller delivers to
the Purchaser (A) written notice of such change at least 30 days
prior to the effective date thereof, (B) such financing statements
(Forms UCC-1 and UCC-3) executed by the Seller required to
reflect such name change, change in chief executive office, use or
change of jurisdiction, together with such other documents and
instruments required in connection therewith to maintain the
continued perfection of the interests of the Purchaser in the
Receivables, the Seller Related Security and the proceeds thereof
and (C) prior to the effective date thereof, an Opinion of Counsel,
in form and substance satisfactory to the Purchaser, as to the
Seller's due organization, valid existence and good standing and the
continued perfection of the interests of the Purchaser in and to the
Receivables and the Seller Related Security conveyed hereby and
the proceeds thereof (to the same extent as such interest was
perfected on the Transfer Date with respect to the Receivables then
owned by the Seller). Furthermore, the Seller shall give 30 days
prior written notice to the Purchaser of any change in the location
of the office where it keeps the books, records and documents
regarding the Receivables, the Seller Related Security and the other
Trust Assets from the address of the Seller referred to in Section
7.08.
(f) Deposits to Collection Accounts. Deposit or
otherwise credit, or cause to be so deposited or credited, or consent
or fail to object to any such deposit or credit Known to it, cash or
cash proceeds other than Collections to the Concentration Account,
any Collection Account, the Lock Boxes or any Series Account.
(g) No Actions Against Obligors. Except in accordance
with the Credit Policy Manual and the Pooling and Servicing
Agreement, commence or settle any legal action to enforce
collection of any Receivable.
(h) No Bankruptcy Filing Against the Purchaser or the
Trust. Commence, institute or cause to be commenced or instituted
any proceeding of the type referred to in the definition of
"Insolvency Event" against the Purchaser or the Trust.
(i) Locations of Subsidiaries. Permit any of the
Originators to have or maintain its jurisdiction of organization or
principal place of business in any of the States of Colorado, Kansas,
New Mexico, Oklahoma, Utah or Wyoming.
(j) Subordinated Note. Transfer or pledge the
Subordinated Note to any Person, other than as permitted under the
Intercreditor Agreement.
(k) Protection of Holders' Rights. Take action which
would impair the rights of any Beneficiary in any Receivable, the
Seller Related Security or any proceeds thereof, except as provided
in this Agreement and the Pooling and Servicing Agreement.
(l) Receivables Not to Be Evidenced by Promissory
Notes. Take action to cause any Receivable to be evidenced by any
"instrument" (as defined in the UCC of the jurisdiction the law of
which governs the perfection of the interest in such Receivable
created hereunder), except in connection with its enforcement, in
which event the Seller shall deliver such instrument to the Purchaser
as soon as reasonably practicable but in no event more than three
Business Days after execution thereof.
SECTION 4.04. Affirmative Mutual Covenant. The
Purchaser and Seller shall record each Purchase as a purchase and sale,
respectively, on its books and records and reflect each Purchase in its
financial statements as a purchase and sale, respectively.
ARTICLE V
EVENTS OF TERMINATION
SECTION 5.01. Termination. If any of the following
events (each, a "Termination Event") shall have occurred:
(a) any failure by the Seller to make any payment,
transfer or deposit required to be paid, effected or made by it
hereunder within two Business Days after the same shall become
due; or
(b) any representation or warranty, certification or
written statement made or deemed made by the Seller under or in
connection with this Agreement or in any statement, record,
certificate, financial statement or other document delivered
pursuant hereto or in connection herewith shall prove to have been
incorrect in any material respect on or as of the date made or
deemed made; or
(c) the Seller shall fail to observe or perform any
covenant or agreement applicable to it contained herein (other than
as specified in clause (a) above) which has a material adverse effect
on any Beneficiary of any Series if such failure shall remain
unremedied for ten days after the first date on which any
Responsible Official of the Seller knew or should have known of
such failure; or
(d) any Receivables transferred hereunder whose
aggregate Outstanding Balances constitute more than 1% of the
aggregate Outstanding Balance of all Eligible Receivables shall for
any reason cease to be the subject of the valid and perfected first
priority ownership and security interest created by this Agreement;
or any Receivables transferred hereunder whose aggregate
Outstanding Balances constitute more than 1% of the aggregate
Outstanding Balance of all Eligible Receivables shall cease to be
free and clear of any Lien except as provided for herein; or
(e) an Insolvency Event shall occur with respect to the
Seller or the Purchaser; or
(f) the Internal Revenue Service shall file notice of a
Lien pursuant to Section 6323 of the Internal Revenue Code with
regard to any of the Receivables or the Pension Benefit Guaranty
Corporation shall file notice of a Lien pursuant to Section 4068 of
ERISA with regard to any of the Receivables; or
(g) there shall have occurred an Early Amortization
Event; or
(h) (i) any Plan Event shall have occurred, (ii) the Seller
or any ERISA Affiliate shall have withdrawn from a Multiemployer
Plan, or (iii) any Multiemployer Plan shall have been terminated or
reorganized or become insolvent, and as a result of one or more
such events the Seller or any ERISA Affiliate has incurred or is
reasonably expected to incur liability in excess of $1,000,000;
then, if any of the events set forth in paragraph (e) above shall have
occurred, a "Termination Event" shall occur without any notice, demand,
protest or other requirement of any kind immediately upon the occurrence
of such event and, if any of the events set forth in any other
paragraph above shall have occurred, the Purchaser may, by notice to the
Seller, declare that a "Termination Event" shall occur as of the date set
forth in such notice. Upon the occurrence of a Termination Event, the
Effective Period shall terminate (any termination of the Effective Period
pursuant to this Section 5.01 is herein referred to as an "Early
Termination"). Upon any Early Termination the Purchaser shall have, in
addition to all other rights and remedies under this Agreement or
otherwise, all other rights and remedies with respect to the Receivables
provided under the UCC of the applicable jurisdiction and under other
applicable laws, which rights and remedies shall be cumulative.
The Purchaser may, with the prior written consent of a
Majority in Interest of each outstanding Series (or, if so specified in the
related supplement, each Enhancement Provider for such Series) on behalf
of all Holders, waive any default by the Seller in the performance of its
obligations hereunder and its consequences, except the failure to make any
distributions or payments required to be made to the Purchaser or to make
any required deposits of any amounts to be so distributed or paid. No such
waiver shall extend to any subsequent or other default or impair any right
consequent thereon except to the extent expressly so waived.
ARTICLE VI
INDEMNIFICATION
SECTION 6.01. Indemnification. Without limiting any
other rights which the Purchaser, the Trustee, any Program Agent, any
Enhancement Provider and their respective assignees (which shall not be
deemed to include any of the Holders as such) and their respective officers,
directors, employees, agents and affiliates (each, an "Originator
Indemnified Party" and collectively the "Originator Indemnified Parties")
may have hereunder or under applicable law, the Seller hereby agrees to
indemnify the Purchaser and any of its assignees hereunder (including each
other Originator Indemnified Party) from and against any and all claims,
damages, losses and liabilities and related costs and expenses (including
reasonable attorneys' fees and disbursements) (all of the foregoing being
collectively referred to as "Originator Indemnified Amounts") awarded
against or incurred by any of them arising out of or resulting from this
Agreement, the activities of the Seller in connection herewith or with any
Transaction Document to which the Seller is a party in its capacity as Seller
or the use of proceeds of purchases hereunder or the ownership of any
Receivable or Seller Related Security (excluding however (a) Originator
Indemnified Amounts to the extent resulting from gross negligence or
willful misconduct on the part of such Originator Indemnified Party, (b)
recourse (except as otherwise specifically provided in any Transaction
Document) for uncollectible Receivables or (c) except with respect to
clause (x) below, any federal, state, foreign or local income or franchise
taxes or any other tax imposed on or measured by income (or any interest,
penalty, or addition to tax with respect thereto or arising from a failure to
comply therewith) incurred by such Originator Indemnified Party arising
out of or as a result of this Agreement or the interest conveyed hereunder
in Receivables, Seller Related Security or any Contract). Without limiting
or being limited by the foregoing, the Seller shall pay on demand to the
Purchaser or any of its assignees (including each other Originator
Indemnified Party) any and all amounts necessary to indemnify the
Purchaser or any such assignee from and against any and all Originator
Indemnified Amounts relating to or resulting from:
(i) reliance on any representation, warranty or covenant
made or statement made or deemed made by the Seller (or any of
its Responsible Officials) under or in connection with any
Transaction Document which shall have been incorrect in any
material respect when made or deemed made or which the Seller
shall have failed to perform;
(ii) the failure by the Seller to comply with any
Transaction Document or any applicable Requirement of Law with
respect to any Receivable, Seller Related Security or related
Contract, or the failure of any Receivable or the Seller Related
Security or related Contract to conform to any requirement with
respect thereto under any Transaction Document or any
Requirement of Law;
(iii) the failure to vest in the Purchaser absolute
ownership of the Receivables free and clear of any Lien;
(iv) the failure to have filed, or any delay in filing, any
financing statements or other similar instruments or documents
under the UCC of any applicable jurisdiction or other applicable
laws that are necessary for perfection or first priority of the
ownership interests created by this Agreement;
(v) any dispute, claim, offset or defense (other than
discharge in bankruptcy of the Obligor) of the Obligor to the
payment of any Receivable (including a defense based on such
Receivable or the related Seller Related Security or the related
Contract not being a legal, valid and binding obligation of such
Obligor enforceable against it in accordance with its terms), or any
other claim resulting from the sale of the merchandise, insurance or
services related to such Receivable or the furnishing or failure to
furnish such merchandise, insurance or services;
(vi) any products liability claim or other claim allegedly
arising out of or in connection with merchandise, insurance or
services which are the subject of any Contract;
(vii) any failure by the Seller or any Affiliate of the Seller
(other than the Purchaser) to perform its duties or obligations in
accordance with the provisions of any Transaction Document,
including any failure to so perform in connection with servicing,
administering or collecting any Receivable;
(viii) any commingling by an act or omission of the Seller
of Collections at any time with other funds;
(ix) any investigation, litigation or proceeding related to
any Receivable, any Contract or this Agreement or any other
Transaction Document to which the Seller is or is to be a party or
the use of proceeds of purchases hereunder or the ownership of
Receivables, Seller Related Security, related Contracts or
Collections or proceeds with respect thereto or in respect of any
Receivable or Contract;
(x) any taxes, including sales, excise, intangibles, value
added, personal property and similar taxes, payable with respect to
the Receivables;
(xi) any reduction in the Outstanding Balance of a
Receivable by reason of any defective, rejected, returned,
repossessed or foreclosed merchandise, insurance or services or any
cash discount or other adjustment made by the Seller;
(xii) any breach by the Seller of any obligation under any
Receivable or any Contract;
(xiii) the acceptance by the Seller as payment of any
Receivable of funds denominated in a currency other than U.S.
Dollars; or
(xiv) Any Receivable classified as an "Eligible Receivable"
by the Seller in any document or report delivered hereunder failing
to satisfy, at the time of such classification, the requirements of
eligibility contained in the definition of Eligible Receivable.
Any Originator Indemnified Amounts due hereunder shall be
payable within fifteen Business Days of submission of a claim by the
Originator Indemnified Party which describes in reasonable detail the basis
for such claim.
The agreement contained in this Section 6.01 shall survive
the collection of all Receivables, the termination of this Agreement and the
Trust and the payment of all amounts otherwise payable hereunder.
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. Further Assurances. (a) The Seller agrees
that from time to time, at its own expense, the Seller will promptly execute
and deliver all further instruments and documents, and take all further
action, that may be necessary or desirable, or that the Purchaser may
reasonably request, in order to perfect and protect any pledge, assignment
or security interest granted or purported to be granted hereby or to enable
the Purchaser to exercise and enforce its rights and remedies hereunder
with respect to any Receivable and Seller Related Security and to enable
the Trustee to exercise its rights and remedies under the Transaction
Documents with respect to any of the Trust Assets. Without limiting the
generality of the foregoing, the Seller will: (i) mark its master data
processing and computer records in a manner reasonably calculated to
indicate that the Receivables and Seller Related Security have been sold to
the Purchaser in accordance with this Agreement and the other Transaction
Documents; (ii) if any Receivable or Seller Related Security shall be
evidenced by a promissory note, other instrument or chattel paper, deliver
and pledge to the Purchaser such note, instrument or chattel paper duly
indorsed and accompanied by duly executed instruments of transfer or
assignment, all in form and substance satisfactory to the Purchaser; and
(iii) execute and file such financing or continuation statements, or
amendments thereto, and such other instruments or notices, as may be
necessary or desirable, or as the Purchaser may reasonably request, in order
to perfect and preserve the valid and perfected first priority ownership and
security interests granted or purported to be granted hereunder or under
any Transaction Document.
(b) The Seller hereby authorizes the Purchaser to file
one or more financing or continuation statements, and amendments thereto,
relating to all or any part of the Receivables and Seller Related Security
without the signature of the Seller where permitted by law. A photocopy
or other reproduction of this Agreement or any financing statement
covering the Receivables and Seller Related Security or any part thereof
shall be sufficient as a financing statement where permitted by law.
(c) The Seller will furnish to the Purchaser from time to
time statements and schedules further identifying and describing the
Receivables and Seller Related Security and such other reports in
connection with the Receivables and Seller Related Security as the
Purchaser may reasonably request, all in reasonable detail.
(d) The Seller shall, from time to time, execute and
deliver to the Obligors any bills, statements and letters or other writings
necessary to carry out the terms and provisions of any Transaction
Document and to facilitate the collection of the Receivables in a manner
consistent with the Credit Policy Manual.
SECTION 7.02. Payments. Each payment to be made by
either of the Purchaser or the Seller hereunder shall be made on the
required payment date, or on the next succeeding Business Day if the
required payment date is not a Business Day, in U.S. Dollars and in
immediately available funds at the office of the payee set forth in
Section 7.08 below or to such other office as may be specified by either
party in a written notice to the other party hereto.
SECTION 7.03. Costs, Expenses and Taxes. (a) In
addition to the rights of indemnification granted to the Purchaser pursuant
to Article VI hereof, the Seller agrees to pay on demand (i) all reasonable
costs and expenses of the Purchaser in connection with the preparation,
execution, delivery, modification and amendment of this Agreement and
the other documents to be delivered by the Seller in connection with this
Agreement, including the reasonable fees and expenses of counsel for the
Purchaser with respect thereto and with respect to advising the Purchaser
as to its rights and remedies under this Agreement, and (ii) all reasonable
costs and expenses (including reasonable counsel fees and expenses) of the
Purchaser in connection with the enforcement (whether through
negotiations, legal proceedings or otherwise) of this Agreement and the
other documents to be delivered by the Seller in connection herewith,
including reasonable counsel fees and expenses in connection with the
enforcement of rights under this Section 7.03, excluding, however, any
costs of enforcement or collection of any Receivables.
(b) In addition, the Seller agrees to pay any present or
future stamp, documentary, excise, property or similar taxes, charges or
levies that arise from any payment or deposit made hereunder or from the
execution, delivery or registration of, performing under, or otherwise with
respect to, this Agreement, and the Seller agrees to indemnify the
Purchaser against any liabilities with respect to or resulting from any delay
in paying or omission to pay such taxes, charges or levies.
SECTION 7.04. Binding Effect; Assignability. (a) This
Agreement shall be binding upon and inure to the benefit of the Seller and
the Purchaser and their respective successors (whether by merger,
consolidation or otherwise) and assigns. Except as otherwise permitted
herein, the Seller agrees that it will not assign or transfer all or any
portion of its rights or obligations hereunder to any Person without the prior
written consent of the Parent, the Purchaser and a Majority in Interest of
each outstanding Series. In connection with any sale or assignment by the
Purchaser of all or a portion of the Receivables and Seller Related Security,
the buyer or assignee, as the case may be, shall, to the extent of its
purchase or assignment, have all rights of the Purchaser under this
Agreement (as if such buyer or assignee, as the case may be, were the
Purchaser hereunder) except to the extent specifically provided in the
agreement between the Purchaser and such buyer or assignee.
(b) The Seller acknowledges that the Purchaser shall
assign to the Trust, as collateral security for the Purchaser's obligations
under the Pooling and Servicing Agreement, all of the Purchaser's rights,
remedies, powers and privileges hereunder (including the right to give any
notice which the Purchaser may provide to the Seller hereunder), provided
that the Purchaser shall not assign or delegate any of its duties or
obligations hereunder to the Trust.
(c) This Agreement shall create and constitute the
continuing obligations of the parties hereto in accordance with its terms,
and shall remain in full force and effect until such time, after the last
Termination Date of any Series; provided, however, that rights and
remedies with respect to any breach of any representation and warranty
made by the Seller pursuant to Article III and the provisions of Article VI
and Sections 4.03(h), 7.03, 7.04 and 7.12 shall be continuing and shall
survive any termination of this Agreement; and provided further that the
Purchaser shall remain entitled to receive any collections on Receivables
sold hereunder which have become Defaulted Receivables after it shall have
completed its collection efforts in respect thereof.
SECTION 7.05. No Waiver; Cumulative Remedies. No
failure to exercise and no delay in exercising, on the part of the Purchaser,
any right, remedy, power or privilege hereunder, shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, remedy, power
or privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege. The rights,
remedies, powers and privileges herein provided are cumulative and not
exhaustive of any rights, remedies, powers and privileges provided by law.
SECTION 7.06. Amendment. (a) This Agreement may be
amended from time to time by the Seller and the Purchaser without the
consent of any Beneficiary (i) to cure any ambiguity, (ii) to correct or
supplement any provision herein which may be inconsistent with any other
provision herein or (iii) to add any other provisions with respect to matters
or questions arising under this Agreement which are not inconsistent with
the provisions of this Agreement; provided that any amendment pursuant to
this clause (a) shall not, as evidenced by an Opinion of Counsel, adversely
affect in any material respect the interests of any Beneficiary.
(b) This Agreement may be amended from time to time
by the Seller and the Purchaser, so long as the Rating Agency Condition is
satisfied, with the consent of the Parent and a Majority in Interest of each
adversely affected Series for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this
Agreement or of modifying in any manner the rights of the Holders;
provided, however, that no such amendment shall (i) reduce in any manner
the amount of, or delay the timing of, any payment to be made hereunder
without the consent of each such Holder or (ii) reduce the aforesaid
percentage required to consent to any such amendment without the consent
of each Investor Certificateholder. The Trustee may request an Officer's
Certificate and Opinion of Counsel in each case to the effect that such
amendment does not adversely affect any Series and is otherwise in
compliance with the requirements of this Agreement. Any amendment to
be effected pursuant to this paragraph shall be deemed to adversely affect
all outstanding Series, other than any Series with respect to which such
action shall not, as evidenced by an Opinion of Counsel (which counsel
shall not be an employee of, or counsel for, Zenith, the Seller or the
Purchaser), addressed and delivered to the Trustee, adversely affect the
interests of such Series.
SECTION 7.07. Severability. If any provision hereof is
deemed void or unenforceable in any jurisdiction, such voiding or
unenforceability shall not affect the validity or enforceability of such
provision in any other jurisdiction or any other provision hereof in such or
any other jurisdiction.
SECTION 7.08. Notices. All notices and other
communications provided for hereunder shall, unless otherwise stated
herein, be in writing (including telex and facsimile communication) and
shall be personally delivered or sent by certified mail, postage prepaid, or
overnight courier or facsimile, to the intended party at the address or
facsimile number of such party set forth below or at such other address or
facsimile number as shall be designated by such party in a written notice to
the other parties hereto. All such notices and communications shall be
effective (a) if personally delivered, when received, (b) if sent by certified
mail, four Business Days after having been deposited in the mail, postage
prepaid, (c) if sent by overnight courier, two Business Days after having
been given to such courier, unless sooner received by the addressee and
(d) if transmitted by facsimile, when sent, upon receipt confirmed by
telephone or electronic means. Notices and communications sent
hereunder on a day that is not a Business Day shall be deemed to have been
sent on the following Business Day.
(a) If to the Seller,
Zenith Microcircuits Corporation
1000 Milwaukee Avenue
Glenview, Illinois 60025
Tel.: (847) 391-7286
Fax: (847) 391-8876
Attn.: Manager Banking and Finance
with a copy to:
Tel.: (847) 391-8064
Fax.: (847) 391-8584
Attn.: General Counsel
(b) If to the Purchaser,
Zenith Finance Corporation
1000 Milwaukee Avenue
Glenview, Illinois 60025
Tel.: (847) 391-7400
Fax: (847) 391-8876
Attn.: Treasurer
with a copy to:
Tel.: (847) 391-8066
Fax.: (847) 391-8584
Attn.: Secretary
SECTION 7.09. Counterparts. This Agreement may be
executed in any number of counterparts and by the different parties hereto
in separate counterparts, each of which when so executed shall be deemed
to be an original, and all of which taken together shall constitute one and
the same agreement. Delivery of an executed counterpart of a signature
page to this Agreement by telecopier shall be effective as delivery of a
manually executed counterpart of this Agreement.
SECTION 7.10. Construction of Agreement as Security
Agreement. It is the intent of the parties that the transactions contemplated
herein constitute sales of the Receivables and Seller Related Security to the
Purchaser. If, however, such transactions are deemed to be loans, (a) the
Seller hereby grants to the Purchaser a first priority security interest in all
of the Seller's right, title and interest in and to the Receivables and Seller
Related Security now existing and hereafter created, all monies due or to
become due and all amounts and other proceeds received with respect
thereto, to secure all of the Seller's obligations hereunder, and (b) this
Agreement shall constitute a security agreement under applicable law.
SECTION 7.11. Third-Party Beneficiaries. The Originator
Indemnified Parties are third-party beneficiaries of all provisions of this
Agreement and are entitled to enforce the provisions of Section 6.01 of this
Agreement to the extent any Originator Indemnified Amounts are due such
parties.
SECTION 7.12. The Seller's Obligations. It is expressly
agreed that, anything contained in this Agreement to the contrary
notwithstanding, the Seller shall be obligated to perform all of its
obligations under the Receivables to the same extent as if the Purchaser
had no interest therein and the Purchaser shall have no obligations or
liability under Receivables to any Obligor thereunder by reason of or
arising out of this Agreement, nor shall the Purchaser be required or
obligated in any manner to perform or fulfill any of the obligations of the
Seller under or pursuant to any Receivable.
SECTION 7.13. Governing Law, Jurisdiction, Consent to
Service of Process.
(a) Governing Law. THIS AGREEMENT,
INCLUDING THE RIGHTS AND DUTIES OF THE PARTIES
HERETO, SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK,
EXCEPT TO THE EXTENT THAT THE PERFECTION OF THE
INTERESTS OF THE PURCHASER IN THE RECEIVABLES AND
SELLER RELATED SECURITY IS GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK.
(b) Jurisdiction. (i) Each of the parties hereto hereby
irrevocably and unconditionally submits, for itself and its property, to the
nonexclusive jurisdiction of any New York State court or federal court of
the United States of America sitting in New York City, and any appellate
court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or any of the other Transaction Documents to
which it is a party, or for recognition or enforcement of any judgment, and
each of the parties hereto hereby irrevocably and unconditionally agrees
that all claims in respect of any such action or proceeding may be heard and
determined in any such New York State court or, to the extent permitted
by law, in such federal court. Each of the parties hereto agrees that a final
judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law. Nothing in this Agreement shall affect any right
that any party may otherwise have to bring any action or proceeding
relating to this Agreement or any of the other Transaction Documents in
the courts of any jurisdiction.
(ii) Each of the parties hereto irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively
do so, any objection that it may now or hereafter have to the laying of
venue of any suit, action or proceeding arising out of or relating to this
Agreement or any of the other Transaction Documents to which it is a
party in any New York State or federal court. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by law, the
defense of an inconvenient forum to the maintenance of such action or
proceeding in any such court.
(c) Consent to Service of Process. Each party to this
Agreement irrevocably consents to service of process by personal delivery,
certified mail (postage prepaid) or overnight courier. Nothing in this
Agreement will affect the right of any party to this Agreement to serve
process in any other manner permitted by law.
(d) Waiver of Jury Trial. Each party to this Agreement
waives any right to a trial by jury in any action, proceeding or counterclaim
(whether based on contract, tort or otherwise) arising out of or relating to
this Agreement or any other Transaction Document or any amendment,
instrument, document or agreement delivered or which may in the future be
delivered in connection herewith or therewith or arising from any course of
conduct, course of dealing, statements (whether oral or written), actions of
any of the parties hereto or any Beneficiary or any other relationship
existing in connection with this Agreement or any other Transaction
Document, and agrees that any such action or proceeding shall be tried
before a court and not before a jury.
IN WITNESS WHEREOF, the parties hereto have caused
this Receivables Purchase Agreement to be duly executed by their
respective officers thereunto duly authorized as of the day and year first
above written.
ZENITH MICROCIRCUITS
CORPORATION, as Seller
By:
Name:
Title:
ZENITH FINANCE CORPORATION,
as Purchaser
By:
Name:
Title:
[COVER PAGE AND TABLE OF CONTENTS AT END OF DOCUMENT]
POOLING AND SERVICING AGREEMENT, dated as of
March 31, 1997, among ZENITH FINANCE CORPORATION, as
Transferor, ZENITH ELECTRONICS CORPORATION, as Servicer, and
BANKERS TRUST COMPANY, a New York banking corporation, as
Trustee.
In consideration of the mutual agreements herein contained,
each party agrees as follows for the benefit of the other parties, the Holders
and the Enhancement Providers to the extent provided herein:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. Whenever used in this
Agreement, the following words and phrases shall have the following
meanings, and the definitions of such terms are applicable to the singular as
well as the plural forms of such terms and to the masculine as well as to the
feminine and neuter genders of such terms. Capitalized terms not
otherwise defined in this Agreement have the same meanings as specified in
the related Supplement.
"Act" means the Securities Act of 1933, as amended from
time to time.
"Additional Originator" has the meaning specified in Section
2.07(a).
"Affiliate" means, as to any Person, any other Person that,
directly or indirectly, controls, is controlled by or is under common control
with such Person or is a director or officer of such Person. For purposes
of this definition, the term "control" (including the terms "controlling",
"controlled by" and "under common control with") of a Person means the
possession, direct or indirect, of the power to vote 10% or more of the
Voting Stock of such Person or to direct or cause the direction of the
management and policies of such Person, whether through the ownership
of Voting Stock, by contract or otherwise.
"Aggregate Holders' Interest" has the meaning specified in
Section 4.01(a).
"Agreement" means this Pooling and Servicing Agreement,
as the same may from time to time be amended, supplemented or otherwise
modified, including, with respect to any Series, the related Supplement.
"Amortization Date" means, with respect to any Series, the
amortization date specified in the related Supplement.
"Amortization Period" means, with respect to any Series,
unless otherwise specified in the related Supplement, the period beginning
on the related Amortization Date and ending upon the payment in full to
the Investor Certificateholders of such Series of the Invested Amount with
respect to such Series, all accrued and unpaid interest thereon and all other
amounts owed to the Investor Certificateholders under any Transaction
Document.
"Beneficiary" means, as of any date of determination, any of
the Trustee, the then holders of the Investor Certificates, the Program
Agent and any Enhancement Provider.
"Business Day" means (a) a day of the year on which banks
are not required or authorized by law to close in New York City or the city
in which the Corporate Trust Office is located, (b) with respect to non-
financial reporting requirements of the Servicer or the Transferor, any day
on which the Servicer or the Transferor is not closed, (c) if during any
applicable interest period an interest rate or certificate rate is calculated
by reference to a eurodollar rate, a day on which dealings are carried on in
the London interbank market and (d) any other day specified in a Supplement
as a "Business Day".
"Certificate" means any Investor Certificate or the
Transferor Certificate.
"Certificate Purchase Agreement" means, with respect to
any Series, a certificate purchase agreement, executed and delivered in
connection with the original issuance of the Investor Certificates of such
Series pursuant to Article VI, and all amendments, supplements and other
modifications from time to time thereto.
"Certificate Rate" means, with respect to any Series, the
certificate rate specified therefor in the related Supplement.
"Certificate Register" has the meaning specified in Section
6.03(a).
"Change in Tax Law" means any amendment to, or change
in, the laws (or any regulations thereunder) of the United States of America
or any political subdivision or taxing authority thereof or therein affecting
taxation or any amendment to, or change in, an interpretation or
application of, such laws or regulations by any legislative body, court,
governmental agency or regulatory authority (including the enactment of
any legislation and the publication of any judicial decision or regulatory
determination).
"Collection Account" has the meaning specified in
Section 4.02(b).
"Collection Account Bank" has the meaning specified in
Section 4.02(b).
"Collection Account Letter" has the meaning specified in
Section 4.02(b).
"Collection Period" means a Statistical Month (or, in the
case of the Statistical Month in which the Closing Date occurs, the portion
of such Statistical Month following the Closing Date). When used in
respect of any Distribution Date, the term "Collection Period" refers to the
full Collection Period immediately preceding such Distribution Date.
"Collections" means (a) all payments by or on behalf of the
Obligors deposited to any Collection Account or the Concentration
Account, or received by the Servicer, in respect of Receivables in whatever
form and (b) all interest and other investment earnings (net of losses and
investment expenses) on Collections (including funds on deposit in the
Cure Accounts) as a result of the investment thereof pursuant to Section
4.02(a).
"Concentration Account" has the meaning specified in
Section 4.02(a).
"Concentration Account Bank" shall initially be Bankers
Trust Company and has the meaning specified in Section 4.02(a).
"Confidential Information" means any written information
delivered or made available by or on behalf of Zenith (or its Affiliates or
Subsidiaries), the Servicer or the Transferor to any Person in connection
with or pursuant to this Agreement or the transactions contemplated
hereby which is proprietary in nature and clearly marked or identified in
writing as being confidential information on the cover page thereof or in
any other conspicuous manner, other than information (i) which was
publicly known, or otherwise known to such Person (other than from any
party to a Transaction Document or any other Person not entitled to
disclose the same free of any confidentiality requirements), at the time of
disclosure or (ii) which subsequently becomes publicly known through no
act or omission by such Person.
"Consolidated Tangible Net Worth" means, with respect to
any Person, at any time, (i) total consolidated tangible assets of such
Person and its subsidiaries, minus (ii) total consolidated liabilities of such
Person and its subsidiaries
"Contract" means an agreement between an Originator and
an Obligor, containing terms pursuant to or under which such Obligor shall
be obligated to pay from time to time for merchandise, insurance or
services (other than royalty payments arising under a license of intellectual
property).
"Controlled Affiliate" means, as to any Person, any other
Person that, directly or indirectly, is controlled by such Person. For
purposes of this definition, the term "controlled" with respect to a Person
means the possession, direct or indirect, of the power either (a) to vote
more than 50% of the Voting Stock of such Person or (b) to direct or
cause the direction of the management and policies of such Person,
whether through the ownership of Voting Stock, by contract or otherwise.
"Corporate Trust Office" has the meaning specified in
Section 11.16.
"Credit Agreement" means the Credit Agreement dated as
of March 31, 1997 among Zenith, the lenders party thereto, Citibank, N.A.
as issuing bank and Citicorp North America, Inc. as agent, as amended,
supplemented, modified, restated, replaced or refinanced from time to time.
"Credit Policy Manual" means those credit and collection
policies and practices of the Servicer described in the credit policy and
procedures manual, substantially in the form of Exhibit H hereto, in effect
on the date hereof relating to Receivables, as the same may be amended or
modified from time to time in compliance with Section 3.04(j).
"Cure Account" with respect to any Series has the meaning
specified in the related Supplement, and "Cure Accounts" shall refer to all
the Cure Accounts established for outstanding Series in accordance with
the terms of the related Supplements.
"Cure Funds" means Collections which, from time to time,
are deposited by the Transferor into a Cure Account.
"Cure Period" means, if the Transferor has elected to begin
depositing Cure Funds into the Cure Accounts, the period beginning on
and including a Pool Non-compliance Date and ending on but excluding the
earlier of (a) the first date thereafter on which the Net Receivables Balance
equals or exceeds the Required Net Receivables Balance and (b) the fifth
consecutive Business Day following the occurrence of such Pool Non--
compliance Date.
"Daily Report" means an Officer's Certificate of the Servicer
substantially in the form of Exhibit E hereto.
"Defaulted Receivable" means a Receivable (i) as to which
an Insolvency Event has occurred with respect to the Obligor thereof, (ii)
as to which any payment, or part thereof, remains unpaid by the Obligor
thereof for 61 (or, after the Report Delivery, 91) days or more from the
original due date for such payment (iii) which, consistent with the Credit
Policy Manual, would be or has been written off as uncollectible or (iv)
which is subject to any dispute, offset, counterclaim or defense whatsoever
asserted (except the discharge in bankruptcy of the Obligor thereof).
"Deposit Date" means each Business Day on which any
Collections are deposited in the Concentration Account.
"Designated Obligor" means, at any time, each Obligor,
provided, however, that any Obligor shall cease to be a Designated Obligor
upon three Business Days' notice by any Program Agent to the Transferor
that such Program Agent has determined, in its reasonable credit judgment,
that such Obligor shall not be considered a Designated Obligor.
"Determination Date" means, with respect to any
Distribution Date, the third Business Day preceding such Distribution Date.
"Determination Date Certificate" means, with respect to any
Determination Date and any Series, a report prepared by an officer of the
Servicer for such Determination Date as of the end of the most recently
completed Statistical Month, substantially in the form set forth in the
related Supplement.
"Diluted Receivable" means that portion (and only that
portion) of any Receivable which is reduced or cancelled as a result of (i)
any failure by any Originator to deliver any merchandise or provide any
services or otherwise to perform under the underlying Contract or invoice,
(ii) any change in the terms of, or cancellation of, a Contract or invoice or
any other adjustment by the Servicer which reduces the amount payable by
the Obligor on the related Receivable or (iii) any set-off by an Obligor in
respect of any claim by such Obligor as to amounts owed by it on the
related Receivable; provided that Diluted Receivables are calculated
assuming that all chargebacks are resolved in the Obligor's favor and do not
include contractual adjustments to the amount payable by an Obligor that
are eliminated from the Receivables balance sold to the Trust through a
reduction in the Purchase Price for the related Receivable.
"Discount Amount" means, with respect to any Series, the
amount set forth in the related Supplement.
"Distribution Date" means, with respect to any Collection
Period, the twenty-first day of the calendar month immediately following
such Collection Period, or, if such day is not a Business Day, the next
succeeding Business Day or such other day as set forth in the Supplement
for any Series.
"Early Amortization Event" has the meaning specified in
Section 9.01 and, with respect to any Series, shall also mean any Early
Amortization Event specified in the related Supplement.
"Early Amortization Period" means, with respect to any
Series, unless otherwise specified in the related Supplement, the period
beginning at the close of business on the Business Day immediately
preceding the day on which an Early Amortization Event is deemed to have
occurred, and ending upon the Termination Date with respect to such
Series.
"Eligible Institution" means a depository institution
organized under the laws of the United States of America or any state
thereof, or the District of Columbia (or any domestic branch of a foreign
bank authorized under any such laws), (a) whose senior long-term
unsecured debt obligations are rated at least (i) if S&P is a Rating Agency,
A- or better, and (ii) if Moody's is a Rating Agency, A3 or better, and (b)
which is subject to regulation regarding fiduciary funds on deposit
substantially similar to 12 C.F.R. Section 9.10(b) and (c) which has a
combined capital and surplus of at least $500,000,000.
"Eligible Investments" means book-entry securities entered
on the books of the registrar of such securities and held in the name or on
behalf of the Trustee, negotiable instruments or securities represented by
instruments in bearer or registered form (registered in the name of the
Trustee or its nominee) which evidence:
(a) readily marketable direct obligations of the
Government of the United States or any agency or instrumentality
thereof or obligations unconditionally guaranteed by the full faith
and credit of the United States;
(b) insured demand deposits, time deposits or
certificates of deposit (having original maturities which mature no
later than the Business Day prior to the next Distribution Date) of
any commercial bank that (i) is a member of the Federal Reserve
System, (ii) issues (or the parent of which issues) commercial paper
rated at the time of the Trust's investment or contractual
commitment to invest therein, as described in clause (d), (iii) is
organized under the laws of the United States or any state thereof
and (iv) has combined capital and surplus of at least $500,000,000;
(c) repurchase obligations with a term of not more than
ten days for underlying securities of the types described in clauses
(a) and (b) above entered into with any bank of the type described
in clause (b) above;
(d) commercial paper (having original maturities of no
more than 270 days) having, at the time of the Trust's investment or
contractual commitment to invest therein, the highest short-term
rating from each Rating Agency;
(e) investments in no-load money market funds having a
rating from each rating agency rating such fund in its highest
investment category (including such funds for which the Trustee or
any of its Affiliates is investment manager or advisor).
"Eligible Receivable" means, at any time, each Receivable
(or, with respect to clause (b) below, the portion thereof) satisfying the
following criteria:
(a) as to which the Transferor or the Trust has good and
marketable title thereto free and clear from any and all Liens except
Permitted Liens, and which has been the subject of either a valid
transfer and assignment from the Transferor to the Trust of all the
Transferor's right, title and interest therein (and in the proceeds
thereof), or the grant of a first priority perfected "security interest"
(within the meaning of the UCC of the State of New York and of
the jurisdiction the law of which governs the perfection of the
interest in such Receivable created hereunder) therein (and in the
proceeds thereof);
(b) which is not a Defaulted Receivable or the portion
of a Receivable constituting a Diluted Receivable;
(c) which arose in the ordinary course of business of any
Originator and is an account receivable representing all or part of
the sales price of merchandise, insurance or services within the
meaning of Section 3(c)(5) of the Investment Company Act, the
Obligor of which is primarily liable with respect thereto;
(d) which is an "account" and is not evidenced by an
"instrument" or "chattel paper" (in each case within the meaning of
Section 9-106 of the UCC of the State of New York and of the
jurisdiction the law of which governs the perfection of the interest
in such Receivable created hereunder);
(e) the transfer of which constitutes a "current
transaction" within the meaning of Section 3(a)(3) of the Act;
(f) which is denominated and payable only in U.S.
Dollars to a location within the United States of America;
(g) which arises under a Contract which, together with
such Receivable, is in full force and effect and constitutes the legal,
valid and binding obligation of the Obligor of such Receivable
enforceable against such Obligor in accordance with its terms
(except as such enforceability may be limited by applicable
bankruptcy, reorganization, insolvency, moratorium or other laws
affecting creditors' rights generally, and except as such
enforceability may be limited by general principles of equity,
whether considered in a suit at law or in equity) and the full
principal amount of which is not subject to any dispute, offset,
counterclaim or defense whatsoever (except the discharge in
bankruptcy of such Obligor);
(h) which, together with the Contract related thereto,
was created in compliance with and does not contravene any
applicable Requirement of Law and with respect to which no party
to the Contract related thereto is in violation of any such
Requirement of Law, in each case except where the non-
compliance, contravention or violation of which could not
reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect;
(i) which satisfies all applicable requirements of the
Credit Policy Manual in all material respects;
(j) with respect to which all consents, licenses,
approvals or authorizations of, or registrations or declarations with,
any Governmental Authority required to be obtained, effected or
given in connection with the creation of such Receivable have been
duly obtained, effected or given and are in full force and effect,
except where the failure to do so could not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect;
(k) which is not subject to any provision prohibiting the
transfer or assignment by any Originator of such payment
obligation;
(l) which, according to the Contract related thereto, is
required to be paid in full within 180 days after the original invoice
date therefor;
(m) (i) the Obligor of which Receivable is a resident of a
Listed OECD Country, (ii) the Originator to whom such Receivable
is owed is entitled to obtain the entire principal balance of such
Receivable, upon the due date or default in payment thereof, by
drawing under an irrevocable letter of credit in favor of such
Originator that has been (A) issued by a commercial bank organized
under the laws of the United States of America or any political
subdivision thereof (a "US Bank") or any country in Western
Europe that is a member of the OECD (an "OECD Bank") and (B)
except for such a letter of credit issued by a US Bank, confirmed by
a US Bank or a branch located in the United States of America of
an OECD Bank or (iii) the Obligor of which Receivable is a
resident of the United States of America or Canada;
(n) the Obligor of which is not Zenith, a Subsidiary of
Zenith or a Governmental Authority;
(o) the Obligor of which, at the time of the Transfer of
such Receivable to the Trust, is a Designated Obligor;
(p) the Obligor of which has been directed to remit
payments with respect thereto to a Lock Box or a Collection
Account; and
(q) no more than 20% of the Receivables of the related
Obligor and its Affiliates constitute Defaulted Receivables.
"Eligible Servicer" means Zenith, Citibank, N.A., the
Trustee, the Parent (to the extent requested by the Program Agent), or
another entity which, at the time of its appointment as Servicer, (a) is
servicing a portfolio of trade receivables and has demonstrated the ability
to service professionally and competently
a portfolio of similar trade receivables with reasonable standards of skill
and care, (b) is legally qualified and has the capacity to service the
Receivables and (c) has been approved by each Program Agent.
"Enhancement" means, with respect to any Series, any letter
of credit, surety bond, cash collateral account, spread account, guaranteed
rate agreement, maturity liquidity facility, tax protection agreement,
interest rate swap agreement or other similar arrangement for the benefit of
the Holders of such Series.
"Enhancement Agreement" means any agreement,
instrument or document governing the terms of any Enhancement of any
Series or pursuant to which any Enhancement of any Series is issued or
outstanding, as the same may from time to time be amended, supplemented
or otherwise modified.
"Enhancement Provider" means, for any Series, the Person,
if any, identified as such in the applicable Supplement.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended from time to time, any successor statute, and the
regulations promulgated and rulings issued thereunder.
"ERISA Affiliate" means any Person that for purposes of
Title IV of ERISA is a member of the controlled group of the Transferor,
or under common control with the Transferor, within the meaning of
Section 414 of the Internal Revenue Code and the regulations promulgated
thereunder.
"Fee Letter" means, for each Series, that certain letter
entered into by the Transferor and the Program Agent for such Series
regarding fees payable with respect to such Series, as such letter may from
time to time be amended, supplemented or otherwise modified.
"Financial Officer" means, with respect to any Person, the
chief financial officer, treasurer, controller or other officer or member of
management of such Person with significant responsibility for the financial
affairs of such Person.
"Floating Allocation Percentage" means, with respect to
each Series, the floating allocation percentage specified in the related
Supplement.
"GAAP" means United States generally accepted
accounting principles.
"Government Receivable" means a Receivable with respect
to which the Obligor is a Governmental Authority.
"Governmental Authority" means any country or nation, any
political subdivision, state or municipality of such country or nation, and
any entity exercising executive, legislative, judicial, regulatory or
administrative functions of any country or nation or political subdivision
thereof.
"Holder" means an Investor Certificateholder or the Person
in whose name the Transferor Certificate is registered in the Certificate
Register.
"Holders' Interest" has the meaning specified in Section
4.01(a).
"Indebtedness" of any Person, at any time, means without
duplication, (a) all indebtedness of such Person for borrowed money, (b) all
obligations of such Person for the deferred purchase price of property or
services, (c) all obligations of such Person evidenced by notes, bonds,
debentures or other similar instruments, (d) all obligations of such Person
created or arising under any conditional sale or other title retention
agreement with respect to property acquired by such Person (even though
the rights and remedies of the seller or lender under such agreement in the
event of default are limited to repossession or sale of such property), (e) all
obligations of such Person as lessee under any lease of any property which,
in accordance with GAAP, is or should be accounted for as a capital lease
on the balance sheet of such Person, (f) all obligations, contingent or
otherwise, of such Person under acceptance, letter of credit or similar
facilities, (g) all obligations of such Person to purchase, redeem, retire,
defease or otherwise make any payment in respect of any capital stock of
or other ownership or profit interest in such Person or any other Person or
any warrants, rights or options to acquire such capital stock, valued, in the
case of redeemable preferred stock, at the greater of its voluntary or
involuntary liquidation preference plus accrued and unpaid dividends,
(h) all Indebtedness of others referred to in clauses (a) through (g) above
or clause (i) below guaranteed directly or indirectly in any manner by such
Person, or in effect guaranteed directly or indirectly by such Person
through an agreement (i) to pay or purchase such Indebtedness or to
advance or supply funds for the payment or purchase of such Indebtedness,
(ii) to purchase, sell or lease (as lessee or lessor) property, or to purchase
or sell services, primarily for the purpose of enabling the debtor to make
payment of such Indebtedness or to assure the holder of such Indebtedness
against loss, (iii) to supply funds to or in any other manner invest in the
debtor (including any agreement to pay for property or services irrespective
of whether such property is received or such services are rendered) or
(iv) otherwise to assure a creditor against loss, and (i) all Indebtedness
referred to in clauses (a) through (g) above of another Person secured by
(or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien on property (including
accounts and contract rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such
Indebtedness.
"Indemnified Amounts" has the meaning specified in Section
7.03.
"Indemnified Party" has the meaning specified in Section
7.03.
"Independent Public Accountants" means any of (a) Arthur
Andersen & Co., (b) Deloitte & Touche LLP, (c) Coopers & Lybrand, (d)
Ernst & Young, (e) KPMG Peat Marwick and (f) Price Waterhouse or any
of their respective successors so long as such successor is one of the six
largest United States accounting firms; provided that such firm is
independent with respect to the Servicer within the meaning of the Act.
"Initial Invested Amount" means, with respect to any Series
and for any date, an amount equal to the initial invested amount specified in
the related Supplement.
"Initial Issuance Date" means, with respect to any Series,
the "Closing Date" specified in the related Supplement.
"Insolvency Event" means, with respect to any Person, any
of the following: (i) such Person shall generally not pay its debts as such
debts become due, or shall admit in writing its inability to pay its debts
generally, or shall make a general assignment for the benefit of creditors; or
any proceeding shall be instituted by or against such Person seeking to
adjudicate it a 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,
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 for any substantial part of its property and, in the case of any such
proceeding instituted against it (but not instituted by it), either such
proceeding shall remain undismissed or unstayed for a period of 60 days or
any of the relief sought in such proceeding (including the entry of an order
for relief against, or the appointment of a receiver, trustee, custodian or
another similar official for, it or for any substantial part of its property)
shall be granted; or (ii) such Person shall take any corporate, partnership,
trust or similar action to authorize any of the actions set forth in clause (i)
above.
"Intercreditor Agreement" means the agreement among
Citicorp North America, Inc. as Program Agent, Zenith Finance
Corporation, a Delaware corporation, as Purchaser and Transferor, Zenith
as Borrower (as defined in the Credit Agreement), Originator and Servicer,
Zenith Microcircuits as Originator, Bankers Trust Company as Trustee and
Citicorp North America, Inc. as Bank Agent (as defined therein), dated as
of the date hereof, as the same may from time to time be amended,
supplemented or otherwise modified.
"Internal Revenue Code" means the Internal Revenue Code
of 1986, as amended from time to time.
"Invested Amount" means, with respect to any Series and
for any date, an amount equal to the invested amount specified in the
related Supplement.
"Investment Company Act" means the Investment Company
Act of 1940, as amended from time to time.
"Investor Certificate" means any certificate executed by the
Transferor and authenticated by or on behalf of the Trustee, in substantially
the form attached to the related Supplement, other than the Transferor
Certificate.
"Investor Certificateholder" means the Person in whose
name an Investor Certificate is registered in the Certificate Register.
"Investor Collections" means, with respect to each Series,
investor collections for such Series specified in the related Supplement.
"IRS" means the Internal Revenue Service and any Person
succeeding to the functions thereof.
"Knowledge" (and the related term "Know") means, with
respect to a Person's knowledge, the actual knowledge of a Responsible
Official of such Person.
"Letter of Credit" means the irrevocable letter of credit
issued by Citibank, N.A. in substantially the form of Exhibit D to the
Certificate Purchase Agreement with respect to Series 1997-1.
"Lien" means any mortgage, deed of trust, pledge,
hypothecation, assignment, encumbrance, lien (statutory or other),
preference, participation interest, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever resulting in an
encumbrance against real or personal property of a Person, including 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 or comparable law of
any jurisdiction to evidence any of the foregoing.
"Listed OECD Country" means any country that is a
member of the OECD on the date hereof, excluding the following: the
United States of America, Canada, The Netherlands, Denmark, Norway,
Finland and Sweden.
"Lock Box" has the meaning specified in Section 4.02(b).
"Lock Box Letter" has the meaning specified in Section
4.02(b).
"Loss and Dilution Reserve" means, with respect to any
Series, the amount set forth in the related Supplement as the loss and
dilution reserve for such Series.
"Majority in Interest" means the Holders of Certificates
evidencing 51% or more of the Aggregate Holders' Interest or, if in respect
of any Series, the Holders of Certificates evidencing 51% or more of the
aggregate Holders' Interest in such Series or in relation to any Series which
has an Enhancement as otherwise specified in the Supplement related to
such Series.
"Material Adverse Effect" means a material adverse effect
on (a) the business, condition (financial or otherwise), operations,
performance, properties or prospects of the Transferor, Zenith, Zenith and
its Subsidiaries taken as a whole or the Parent, (b) the rights and remedies
of any Beneficiary under any Transaction Document, (c) the interests of
any Beneficiary in the Trust Assets, (d) the collectibility of any Receivable
or (e) the ability of the Servicer, the Transferor, Zenith, any Originator or
the Parent to perform its obligations under any Transaction Document to
which it is or is to be a party.
"Moody's" means Moody's Investors Service, Inc., or its
successor.
"Multiemployer Plan" means a "multiemployer plan", as
defined in Section 4001(a)(3) of ERISA, to which the Transferor or any
ERISA Affiliate is making or accruing an obligation to make contributions,
or has within any of the preceding five plan years made or accrued an
obligation to make contributions.
"Multiple Employer Plan" means a "single employer plan",
as defined in Section 4001(a)(15) of ERISA, that (a) is maintained for
employees of the Transferor or any ERISA Affiliate and at least one Person
other than the Transferor and the ERISA Affiliates or (b) was so
maintained and in respect of which the Transferor or any ERISA Affiliate
could have liability under Section 4064 or 4069 of ERISA in the event such
plan has been or were to be terminated.
"Net Receivables Balance" means at any time the
Outstanding Balance of all Receivables then included in the Trust Assets
which are then Eligible Receivables (whether or not any such Receivable
was an Eligible Receivable when acquired or thereafter) reduced, without
duplication, by the sum of (i) the aggregate amount by which the then
Outstanding Balance of all such Eligible Receivables of any Obligor and its
Affiliates taken together exceeds the sum of (x) the product of (A) the
Obligor Concentration Limit, or, if applicable, the Special Obligor
Concentration Limit, for such Obligor and (B) the Outstanding Balance of
all Receivables included in the Trust Assets plus (y) if applicable, the
Special Obligor Concentration Limit Adjustment, (ii) the aggregate amount
by which the then Outstanding Balance of all such Eligible Receivables of
all Obligors, and their Affiliates, resident in Canada taken together exceeds
the product of (A) 10% and (B) the Outstanding Balance of all Receivables
included in the Trust Assets, (iii) the aggregate amount by which the then
Outstanding Balance of all such Eligible Receivables of all Obligors, and
their Affiliates, resident in any Listed OECD Country taken together
exceeds the product of (A) 5% and (B) the Outstanding Balance of all
Receivables included in the Trust Assets, (iv) the aggregate amount by
which the then Outstanding Balance of all such Eligible Receivables of all
Obligors, and their Affiliates, resident in any location other than the United
States of America and those listed in the immediately preceding clauses (ii)
and (iii) taken together exceeds the product of (A) 10% and (B) the
Outstanding Balance of all Receivables included in the Trust Assets, (v) the
aggregate amount by which the then Outstanding Balance of all
Receivables of any Obligor and its Affiliates exceeds $50,000,000 and
(vi) the aggregate amount by which (1) the then Outstanding Balance of
Eligible Receivables on which payment is due 90 days or more after the
original invoice date therefor taken together minus the Unapplied Cash
Portion exceeds (2) the product of (A) 20% and (B) the Outstanding
Balance of all Receivables included in the Trust Assets.
"Obligor" means each Person who is obligated to make
payments pursuant to a Contract, including any guarantor of such Person's
obligations.
"Obligor Concentration Limit" means, on any date with
respect to any Obligor (other than any Obligor subject to a Special Obligor
Concentration Limit), 3% or such different percentage as shall be selected
by the Transferor and approved by each Program Agent; provided that the
Rating Agency Condition shall have first been satisfied with respect to such
different percentage, provided further that in the case of an Obligor with
any Affiliate that is also an Obligor, the Obligor Concentration Limit shall
be applicable as if such Obligor and such Affiliate were one Obligor.
"OECD" means the Organization for Economic
Cooperation and Development.
"Officer's Certificate" means, unless otherwise specified in
this Agreement, a certificate signed by a Financial Officer of the Transferor,
Servicer or any Successor Servicer, or any Responsible Official of the
Trustee in the event the Trustee is acting as Successor Servicer, as the case
may be, and delivered to the Trustee, each Rating Agency and each
Enhancement Provider.
"Opinion of Counsel" means a written opinion of counsel,
who may be counsel for, or an employee of, the Person providing the
opinion and who shall be reasonably acceptable to the Trustee.
"Originator" means Zenith, Zenith Microcircuits and any
other Person or division of any Person designated from time to time as an
Originator pursuant to the terms of Section 2.07 and any Receivables
Purchase Agreement.
"Other Taxes" has the meaning specified in any Supplement
or any Certificate Purchase Agreement.
"Outstanding Balance" of any Receivable or designated
class of Receivables at any time shall mean the then outstanding principal
balance thereof, whether or not written-off as uncollectible, converted to
an "instrument" or transferred to a "suspense" account and whether or not
payment thereon has been deferred.
"Parent" means LG Electronics Inc., a corporation
organized under the laws of Korea.
"Parent Undertaking Agreement" means the agreement
between the Parent and the Trustee, dated as of the date hereof, governing
the terms and conditions upon which Parent shall undertake the
performance of certain nonpayment obligations of each Originator, the
Transferor and the Servicer (so long as Zenith or any of its Affiliates is
Servicer), as the same may from time to time be amended, supplemented or
otherwise modified.
"Partial Amortization Period" shall mean a period beginning
on and including either (i) a Pool Non-compliance Date or (ii) if a Cure
Period shall have commenced on such Pool Non-compliance Date and shall
not have ended pursuant to clause (a) of the definition of "Cure Period",
the fifth Business Day following such Pool Non-compliance Date and
ending on but excluding the earlier of (a) the first date thereafter on which
the Net Receivables Balance equals or exceeds the Required Net
Receivables Balance and (b) the fifth consecutive Business Day following
such beginning.
"PBGC" means the Pension Benefit Guaranty Corporation
(or any successor).
"Permitted Liens" means (a) unperfected Liens for taxes,
assessments or charges of any governmental authority for amounts not yet
due or which are being contested in good faith by appropriate proceedings
and for which adequate reserves or other appropriate provisions are being
maintained, (b) statutory Liens of landlords, carriers, warehousemen,
mechanics and materialmen incurred in the ordinary course of business for
amounts not yet due or which are being contested in good faith by
appropriate proceedings and for which adequate reserves or other
appropriate provisions are being maintained, (c) Liens of a collecting bank
under Section 4-208 of the UCC, (d) Liens consisting of any right of offset,
or statutory bankers' lien on the Collection Accounts and (e) Liens created
under the Transaction Documents and under the Security Documents (as
defined in the Credit Agreement), except that Liens of the types described
in clauses (a) and (b) above shall be Permitted Liens only until such time as
any enforcement, collection, execution, levy or foreclosure proceeding shall
have been commenced.
"Person" means any individual, corporation, trust (including
a business trust), partnership, limited liability company, joint venture,
association, joint-stock company, unincorporated organization,
Governmental Authority or any other entity.
"Plan" means a Single Employer Plan or Multiple Employer
Plan.
"Plan Event" means (a) (i) the occurrence of a reportable
event, within the meaning of Section 4043 of ERISA, with respect to any
Plan unless the 30-day notice requirement with respect to such event has
been waived by the PBGC, or (ii) the requirements of subsection (1) of
Section 4043(b) of ERISA are met with respect to a contributing sponsor,
as defined in Section 4001(a)(13) or ERISA, of a Plan, and an event
described in paragraph (9), (10), (11), (12) or (13) of Section 4043(c) of
ERISA is reasonably expected to occur with respect to such Plan within
the following 30 days; (b) the application for a minimum funding waiver
with respect to a Plan; (c) the provision by the administrator of any Plan of
a notice of intent to terminate such Plan, pursuant to Section 4041(a)(2) of
ERISA (including any such notice with respect to a plan amendment
referred to in Section 4041(e) of ERISA); (d) the cessation of operations at
a facility of the Transferor or any ERISA Affiliate in the circumstances
described in Section 4062(e) of ERISA; (e) the withdrawal by the
Transferor or any ERISA Affiliate from a Multiple Employer Plan during a
plan year for which it was a substantial employer, as defined in Section
4001(a)(2) of ERISA; (f) the conditions for imposition of a lien under
Section 302(f) of ERISA shall have been met with respect to any Plan; (g)
the adoption of an amendment to a Plan requiring the provision of security
to such Plan pursuant to Section 307 of ERISA; or (h) the institution by
the PBGC of proceedings to terminate a Plan pursuant to Section 4042 of
ERISA, or the occurrence of any event or condition described in Section
4042 of ERISA that constitutes grounds for the termination of, or the
appointment of a trustee to administer, such Plan.
"Pool Non-compliance Date" means any day on which the
Net Receivables Balance falls below the Required Net Receivables Balance.
"Principal Terms" means, with respect to any Series: (a) the
name or designation; (b) the initial principal amount (or method for
calculating such amount); (c) the Certificate Rate (or method for the
determination thereof); (d) the payment date or dates and the date or dates
from which interest shall accrue; (e) the method for allocating Collections
to Investor Certificateholders of such Series; (f) the designation of any
Series Accounts and the terms governing the operation of any such Series
Accounts; (g) the issuer and terms of any form of Enhancement with
respect thereto; (h) the terms, if any, on which the Investor Certificates of
such Series may be exchanged for Investor Certificates of another Series,
repurchased or redeemed by the Transferor or remarketed to other
investors; (i) the Series Servicing Fee and the Series Trustee's Fee; and (j)
the Amortization Date and the Termination Date for such Series.
"Program Agent" means any Person designated as a
program agent in any Supplement.
"Purchase Price" means, with respect to any Receivable, the
purchase price therefor specified in each Receivables Purchase Agreement
applicable to such Receivable.
"Rating Agency" means each such nationally recognized
statistical rating organization which has rated any Series of Certificates at
the request of the Transferor.
"Rating Agency Condition" means, with respect to any
specified action, that each Rating Agency, upon the written request of the
Transferor, the Servicer or the Trustee, shall have notified all of such
parties in writing that such action in and of itself will not result in a
reduction or withdrawal of the rating of any outstanding Series with
respect to which it is a Rating Agency and, in relation to a Series with
respect to which an Enhancement is in effect, the Enhancement Provider
has given its prior written consent thereto.
"Receivable" means an account receivable or other
indebtedness shown on the records of any Originator as of the Transfer
Date, and as of each date from time to time thereafter, arising from the sale
or delivery of merchandise or insurance or providing of services by any
Originator (whether constituting an account, contract right, chattel paper,
instrument, general intangible or otherwise) and including all monies due or
to become due (whether as payment of purchase price, interest, finance
charges or otherwise) and all Collections and other amounts received or
receivable from time to time with respect to such indebtedness and all
proceeds (including all cash collections and all "proceeds" as defined in the
UCC of the State of New York and of the jurisdiction the law of which
governs the perfection of all rights, titles, interests, remedies, powers and
privileges purported to be transferred by or pursuant to this Agreement)
thereof, including all amounts on deposit in any Collection Accounts, and
"Receivables" shall mean all such Receivables. For the avoidance of doubt,
a Receivable does not include royalty payments (or the obligation to make
such royalty payments) arising under a license of intellectual property.
"Receivables Purchase Agreement" means each of the
agreements between an Originator, as seller, and the Transferor, as
purchaser, which govern terms and conditions upon which the Transferor
shall have acquired and shall acquire the Receivables transferred to the
Trust, as the same may from time to time be amended, supplemented or
otherwise modified.
"Record Date" means, with respect to any Distribution
Date, the last day of the preceding calendar month.
"Related Security" means with respect to any Transferor
Receivable (i) all of the Transferor's interest in the merchandise (including
returned merchandise), if any, relating to the sale which gave rise to such
Receivable; (ii) all other Liens and property subject to such Liens from time
to time purporting to secure payment of such Receivable, whether pursuant
to the Contract related to such Receivable or otherwise, together with all
financing statements signed by an Obligor describing any collateral securing
such Receivable; and (iii) all guarantees, letters of credit, insurance and
other agreements or arrangements of whatever character from time to time
supporting or securing payment of such Receivable, whether pursuant to
the Contract related to such Receivable or otherwise.
"Removed Originator" has the meaning specified in Section
2.07(b).
"Report Delivery" shall mean the delivery by Zenith to the
Program Agent of a report containing a history of Receivables with respect
to which payment is due 91 to 120 days after the original invoice date
therefor, covering at least 15 consecutive Statistical Months and otherwise
in form and substance satisfactory to the Program Agent.
"Required Net Receivables Balance" means, as of any day
of determination, the sum of (i) the aggregate of the Loss and Dilution
Reserves for all outstanding Series, plus (ii) the aggregate of the Yield/Fee
Reserves for all outstanding Series plus (iii) the aggregate of all Invested
Amounts for all outstanding Series (computed as if reduced by (A) the
aggregate amount of Cure Funds held in the Cure Account for each Series
and (B) the cumulative amount of funds held at such time in the
Concentration Account as all or a portion of the Trust Partial Amortization
Amount allocable to each such Series).
"Requirement of Law" means any law, treaty, rule or
regulation, or final determination of an arbitrator or Governmental
Authority, and, when used with respect to any Person, the certificate of
incorporation and by-laws or other organizational or governing documents
of such Person.
"Responsible Official" means, (i) when used with respect to
the Trustee, any officer within the Corporate Trust Office of the Trustee
including any Managing Director, Vice-President, Assistant Vice-President,
Secretary, Assistant Secretary, Treasurer, Assistant Treasurer or any other
officer of the Trustee who customarily performs functions similar to those
performed by the Persons who at the time shall be such officers,
respectively, or to whom any matter is referred because of such officer's
knowledge of and familiarity with the particular subject, and (ii) when used
with respect to the Transferor, the Servicer or Zenith, any President, Vice-
President, Assistant Vice-President, Secretary, Assistant Secretary,
Treasurer, Assistant Treasurer or any other of its officers or employees
involved in the day to day operation or supervision of the performance of
the Transaction Documents.
"Revolving Period" means, with respect to any Series, the
period specified as such in the related Supplement.
"S&P" means Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc., or its successor.
"Series" means any series of Investor Certificates.
"Series Account" means any deposit, trust, escrow, reserve
or similar account maintained for the benefit of the Investor
Certificateholders of any Series, as specified in any Supplement.
"Series Allocation Percentage" means, with respect to any
Series, the percentage equivalent of a fraction, the numerator of which is
the sum of (a) the Invested Amount for such Series (computed as if
reduced by (A) the amount of Cure Funds held in the Cure Account for
such Series and (B) the cumulative amount of funds held at such time in the
Concentration Account allocated to the portion of the Trust Partial
Amortization Amount allocable to such Series) plus (b) the Yield/Fee
Reserve for such Series, plus (c) the Loss and Dilution Reserve for such
Series, and the denominator of which is the aggregate of the amounts
specified in clauses (a), (b) and (c) for all outstanding Series.
"Series Servicing Fee" means, with respect to any Series,
the amount of the servicing fee specified in the applicable Supplement.
"Series Trustee's Fee" means, with respect to any Series, the
amount of the Trustee's fee specified in the applicable Supplement.
"Service Transfer" has the meaning specified in Section
10.01.
"Servicer" initially means Zenith and, after any Service
Transfer, the Successor Servicer.
"Servicer Default" has the meaning specified in Section
10.01.
"Servicing Fee" has the meaning specified in Section
3.02(a).
"Single Employer Plan" means a "single employer plan", as
defined in Section 4001(a)(15) of ERISA, that (a) is maintained for
employees of the Transferor or any ERISA Affiliate or (b) was so
maintained and in respect of which the Transferor or any ERISA Affiliate
could have liability under Section 4069 of ERISA in the event such plan
has been or were to be terminated.
"Solvent" and "Solvency" mean, with respect to any Person
on a particular date, that on such date (a) the fair value of the property of
such Person is greater than the total amount of liabilities, including
contingent liabilities, of such Person, (b) the present fair salable value of
the assets of such Person is not less than the amount that will be required
to pay the probable liability of such Person on its debts as they become
absolute and matured, (c) such Person does not intend to, and does not
believe that it will, incur debts or liabilities beyond such Person's ability
to pay such debts and liabilities as they mature and (d) such Person is not
engaged in business or a transaction, and is not about to engage in business
or a transaction, for which such Person's property would constitute an
unreasonably small capital. The amount of contingent liabilities at any time
shall be computed as the amount that, in the light of all the facts and
circumstances existing at such time, represents the amount that can
reasonably be expected to become an actual or matured liability.
"Special Obligor Concentration Limit" means, on any date,
with respect to Sears, Circuit City and Lowes, each as Obligors, 4.5% or
such different percentage as shall be selected by the Transferor and
approved by each Program Agent; provided that the Rating Agency
Condition shall have first been satisfied with respect to such different
percentage; and provided further that in the case of such an Obligor with
any Affiliate that is also such an Obligor, the Special Obligor Concentration
Limit shall be applicable as if such Obligor and such Affiliate were one
Obligor.
"Special Obligor Concentration Limit Adjustment" means,
with respect to Sears, $29,813,480 and, with respect to Circuit City,
$27,709,480; provided that in the case of such an Obligor with any Affiliate
that is also such an Obligor, the Special Obligor Concentration Limit
Adjustment shall be applicable as if such Obligor and such Affiliate were
one Obligor.
"Statistical Month" has the meaning specified in Section
3.04(p), or, absent the identification referred to in such Section, a calendar
month.
"Subordinated Note" means any note issued pursuant to a
Receivables Purchase Agreement which evidences a loan for the excess, if
any, of the Purchase Price over the actual payment therefor, which loan is
deemed to be made by the Originator of the Receivables to the Transferor.
"Subsidiary" of any Person means any corporation,
partnership, joint venture, limited liability company, trust or estate of which
(or in which) more than 50% of (a) the issued and outstanding capital stock
having ordinary voting power to elect a majority of the Board of Directors
of such corporation (irrespective of whether at the time capital stock of any
other class or classes of such corporation shall or might have voting power
upon the occurrence of any contingency), (b) the interest in the capital or
profits of such partnership, joint venture or limited liability company or
(c) the beneficial interest in such trust or estate is at the time directly or
indirectly owned or controlled by such Person, by such Person and one or
more of its other Subsidiaries or by one or more of such Person's other
Subsidiaries.
"Successor Servicer" has the meaning specified in Section
10.02(a).
"Supplement" means, with respect to any Series, a
supplement to this Agreement, executed and delivered in connection with
the original issuance of the Investor Certificates of such Series pursuant to
Article VI, and all amendments, supplements and other modifications from
time to time to such supplement or this Agreement.
"Supplemental Certificate" has the meaning specified in
Section 6.08(c).
"Taxes" has the meaning specified in any Supplement or any
Certificate Purchase Agreement.
"Tax Opinion" means, with respect to any action, an
Opinion of Counsel who is not an employee of the Servicer or any Affiliate
of the Servicer to the effect that, for Federal income tax purposes and for
New York and Illinois (and any other State where substantial servicing
activities in respect of Receivables or Trust administration activities are
conducted by the Transferor or the Servicer if there is a substantial change
from present servicing or administration activities) state income and
franchise tax purposes, (a) such action will not adversely affect the
characterization of the Investor Certificates of any outstanding Series as
debt of the Transferor, (b) such action will not cause a taxable event to any
Investor Certificateholder, (c) following such action the Trust should not
be treated as an association (or publicly traded partnership) taxable as a
corporation, and (d) in the case of the original issuance of Certificates and
the issuance of any new Series of Investor Certificates pursuant to Section
6.08, the Investor Certificates should properly be characterized as either
debt of the Transferor, or if not debt, as an interest in a partnership and not
in an association (or a publicly traded partnership) taxable as a corporation.
"Termination Date" means, with respect to any Series, the
termination date specified in the related Supplement.
"Termination Event" has the meaning specified in any
Receivables Purchase Agreement.
"Termination Notice" has the meaning specified in Section
10.01.
"Transaction Documents" means the collective reference to
this Agreement, each Supplement, each Certificate, each Receivables
Purchase Agreement, each Enhancement Agreement, the Parent
Undertaking Agreement, the Intercreditor Agreement, each Certificate
Purchase Agreement, the Letter of Credit, the Zenith Undertaking
Agreement and the Fee Letter for each Series and the other agreements and
instruments executed or to be executed in connection with any of the
foregoing.
"Transfer" has the meaning specified in Section 2.01(a), it
being understood that the date of Transfer of any Receivable or other Trust
Asset shall be (i) for each Receivable and Trust Asset in existence on the
Transfer Date, the Transfer Date and (ii) for each other Receivable and
Trust Asset, the date on which such Receivable or other Trust Asset shall
be created or otherwise arise and, in the case of such Receivable, be
acquired by the Transferor under the applicable Receivables Purchase
Agreement.
"Transfer Agent and Registrar" has the meaning specified in
Section 6.03(a).
"Transfer Date" means April 1, 1997, the initial date of
Transfer of Receivables into the Trust.
"Transferor" means Zenith Finance Corporation, a Delaware
corporation.
"Transferor Certificate" means the certificate executed by
the Transferor and authenticated by or on behalf of the Trustee, in
substantially the form of Exhibit A hereto.
"Transferor Interest" has the meaning specified in Section
4.01(a).
"Transferor Percentage" means at any time 100% minus the
aggregate of the Floating Allocation Percentages of all outstanding Series
at such time.
"Transferor Receivable" means a Receivable acquired by the
Transferor pursuant to a Receivables Purchase Agreement.
"Transferor's Account" means the special account
designated under the account name "Zenith Finance Corporation", under
the dominion and control of the Transferor, for deposits by the Servicer
pursuant to the applicable Supplement, maintained at Citibank, N.A. in
New York, New York or such other account at such other bank, under the
dominion and control of the Transferor, as the Transferor may designate
for such purpose from time to time.
"Trust" means the Zenith Trade Receivables Master Trust
created by this Agreement, the corpus of which shall consist of the Trust
Assets.
"Trust Assets" has the meaning specified in Section 2.01(a).
"Trust Invested Amount" means, at any time, the sum of the
Invested Amounts for all outstanding Series at such time.
"Trust Partial Amortization Amount" means, with respect to
any date of determination during a Partial Amortization Period, the amount
by which the Net Receivables Balance is less than the Required Net
Receivables Balance.
"Trustee" means Bankers Trust Company, a New York
banking corporation, not in its individual capacity but solely in its capacity
as trustee on behalf of the Trust, or its successor in interest, or any
successor trustee appointed as herein provided.
"Trustee's Account" with respect to each Series, has the
meaning specified in the related Supplement.
"Trustee's Fee" has the meaning specified in Section
11.05(a).
"UCC" shall mean the Uniform Commercial Code, as
amended from time to time, as in effect in any applicable or specified
jurisdiction.
"Unapplied Cash Portion" means as of any date that portion
of unapplied cash reflected on the books of the Servicer as of such date
multiplied by a percentage equal to the percentage of such unapplied cash
which over a historical period (acceptable to the Program Agent) was
allocated to (i) with respect to clause (vi) of the definition of "Net
Receivables Balance", Eligible Receivables on which payment is due 90
days or more after the original invoice date therefor or (ii) with respect to
clause (A) of the definition of "Default Ratio" in the Series 1997-1
Supplement, any Defaulted Receivable which remains unpaid by the
Obligor thereof for more than 90 (or, after the Report Delivery, 120) days
from the original due date for such payment.
"Undivided Fractional Interest" with respect to each Series
has the meaning specified in the related Supplement.
"U.S. Dollars" means the lawful currency of the United
States of America.
"Voting Stock" means capital stock issued by a corporation,
or equivalent interests in any other Person, the holders of which are
ordinarily, in the absence of contingencies, entitled to vote for the election
of directors (or persons performing similar functions) of such Person, even
if the right so to vote has been suspended by the happening of such a
contingency.
"Yield/Fee Reserve" shall mean, with respect to each Series,
the amount set forth in the related Supplement as the yield/fee reserve for
such Series.
"Zenith" means Zenith Electronics Corporation, a Delaware
corporation.
"Zenith Microcircuits" means Zenith Microcircuits
Corporation, a Delaware corporation.
"Zenith Undertaking Agreement" means the agreement
between Zenith and the Trustee, dated as of the date hereof, governing the
terms and conditions upon which Zenith shall undertake the performance of
all of the obligations of each other Originator, as the same may from time
to time be amended, supplemented or otherwise modified.
SECTION 1.02. Other Definitional Provisions. (a) All
accounting terms not defined in this Agreement, and accounting terms
partly defined in this Agreement to the extent not completely defined, shall
have the respective meanings given to them under GAAP or regulatory
accounting principles, as applicable and in effect from time to time. To the
extent that the definitions of accounting terms herein are inconsistent with
the meanings of such terms under GAAP or regulatory accounting
principles, the definitions contained herein shall control.
(b) The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this
Agreement; Section, Schedule and Exhibit references contained in this
Agreement are references to Sections, Schedules and Exhibits in or to this
Agreement unless otherwise specified; and the term "including" means
"including without limitation".
SECTION 1.03. 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" shall mean
"from and including" and the words "to" and "until" shall mean "to but
excluding".
ARTICLE II
TRANSFER OF RECEIVABLES
SECTION 2.01. Transfer of Receivables. (a) By
execution of this Agreement, the Transferor does hereby transfer, assign,
set-over and otherwise convey without recourse, except as expressly
provided herein (the making of such transfer, assignment, set-over and
conveyance being a "Transfer", and so to transfer, assign, set-over and
otherwise convey being to "Transfer"), to the Trust for the benefit of the
Beneficiaries:
(i) all of the Transferor's right, title and interest in, to
and under all Transferor Receivables existing at the close of
business on the Transfer Date and thereafter created from time to
time, and conveyed to the Transferor under the Receivables
Purchase Agreements from time to time, until the termination of the
Revolving Period of the last outstanding Series, and all monies due
or to become due and all Collections in respect of such Transferor
Receivables and other amounts received or receivable from time to
time with respect to such Transferor Receivables and all proceeds
(including "proceeds" as defined in the UCC of the State of New
York and of the jurisdiction the law of which governs the perfection
of the interest in the Transferor Receivables transferred hereunder)
thereof;
(ii) all of the Transferor's rights, remedies, powers and
privileges under the Receivables Purchase Agreements existing at
the close of business on the Transfer Date and thereafter created
from time to time; and
(iii) all of the Transferor's right, title and interest in, to
and under the Related Security.
Such property described in the preceding sentence, together with all monies
from time to time on deposit in, and all Eligible Investments and other
securities, instruments and other investments purchased from funds on
deposit in, the Concentration Account, the Collection Accounts and any
Series Account, and any Enhancement issued with respect to any Series
(the drawing on or payment of such Enhancement not being available to
Holders of any other Series) and all of the Transferor's rights, remedies,
powers, and privileges under the Receivables Purchase Agreements shall
constitute the assets of the Trust (collectively the "Trust Assets").
The foregoing Transfer does not constitute and is not
intended to result in an assumption by the Trust, the Trustee or any Holder
of any obligation of the Servicer, Zenith, the Transferor or any other
Person in connection with the Receivables or under any Receivables
Purchase Agreement or under any agreement or instrument relating
thereto, including any obligation to any Obligor. The foregoing Transfer to
the Trust is and shall be made to the Trustee, on behalf of the Trust, and
each reference in this Agreement to such Transfer shall be construed
accordingly.
The Trustee shall be under no obligation whatsoever to file
any such financing statements, documents, amendments, assignments or
continuation statements or to make any other filing under the UCC in
connection with such Transfer or to monitor the status of the perfection
evidenced by such filings.
(b) The Trustee agrees to use its best efforts, and shall
cause its agents or representatives to use their best efforts, to hold in
confidence all Confidential Information; provided that nothing herein shall
prevent the Trustee from delivering copies of any financial statements and
other documents constituting Confidential Information, or disclosing any
other Confidential Information, (i) to a Successor Servicer or as required
by a Requirement of Law applicable to the Trustee, (ii) as required in the
performance of the Trustee's duties hereunder, (iii) as required in enforcing
the rights of the Holders hereunder, (iv) to each Enhancement Provider,
(v) as provided in any Supplement or (vi) to any affiliate, independent or
internal auditor, agent, employee or attorney of the Trustee having a need
to know the same, provided that the Trustee advises such recipient of the
confidential nature of the information being disclosed and each such
recipient agrees to be bound by the terms of this Section. The Trustee will
allow the Transferor to inspect the Trustee's security and confidentiality
arrangements upon prior written notice from time to time during normal
business hours and agrees to provide reasonable advance notice to the
Transferor of any permitted disclosure. The Trustee shall provide
reasonable prior written notice to the Transferor whenever any disclosure
not otherwise permitted by this Section 2.01(b) is to be made.
SECTION 2.02. Acceptance by Trustee. (a) There is
hereby created the Zenith Trade Receivables Master Trust. The Trustee
hereby acknowledges its acceptance on behalf of the Trust of all right, title
and interest in and to the Trust Assets now existing and hereafter created
and transferred to the Trust pursuant to Section 2.01 and the Trustee
declares that it shall maintain such right, title and interest upon the trust
herein set forth for the benefit of all Beneficiaries.
(b) The Trustee shall have no power to create, assume
or incur indebtedness or other liabilities in the name of the Trust or to
transfer or place Liens on Trust Assets other than as contemplated in this
Agreement.
(c) The Trustee is hereby authorized and directed to
execute and deliver to the other parties thereto each Transaction Document
to which the Trustee is a party.
SECTION 2.03. Representations and Warranties of the
Transferor Relating to the Transferor. The Transferor hereby represents
and warrants to the Trustee for the benefit of the Trust (i) as of the date
hereof, (ii) by accepting on the Transfer Date the proceeds of such
Transfer, as of the Transfer Date, (iii) with respect to any Series, as of the
date of the related Supplement and the related Initial Issuance Date, and
(iv) by accepting on each date during the Revolving Period for any Series
the proceeds of each Transfer of Receivables, as of such date, that:
(a) Due Organization, Qualification and Authorization.
The Transferor (i) is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its
incorporation, (ii) is duly qualified and in good standing as a foreign
corporation in each other jurisdiction in which it owns or leases
property or in which the conduct of its business requires it to so
qualify or be licensed, except where the failure to do so could not
reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect and (iii) has all requisite corporate power
and authority (including all governmental licenses, permits and
other approvals) to own or lease and operate its properties and to
carry on its business as now conducted and as proposed to be
conducted, except where the failure to do so could not reasonably
be expected, individually or in the aggregate, to have a Material
Adverse Effect
(b) Corporate Powers and No Conflicts. The execution,
delivery and performance by the Transferor of the Transaction
Documents to which it is or is to be a party, the consummation of
the transactions contemplated hereby and the making of each
Transfer, are within the Transferor's corporate powers, have been
duly authorized by all necessary corporate action, and do not
(i) contravene the Transferor's charter or bylaws, (ii) violate any
Requirement of Law, (iii) conflict with or result in the breach of, or
constitute a default under, any contract, loan agreement, indenture,
mortgage, deed of trust, lease or other instrument binding on or
affecting the Transferor or any of its properties or (iv) except for
the Liens created under the Transaction Documents, result in or
require the creation or imposition of any Lien upon or with respect
to any of the properties of the Transferor. The Transferor is not in
violation of any Requirement of Law or in breach of any such
contract, loan agreement, indenture, mortgage, deed of trust, lease
or other instrument, the violation or breach of which could have a
Material Adverse Effect.
(c) Government Authorization and Approval. No
authorization or approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body or any
other third party is required for (i) the due execution, delivery or
performance by the Transferor of any of the Transaction
Documents to which it is or is to be a party, any Transfer or the
consummation of the other transactions contemplated hereby or
thereby, (ii) the grant by the Transferor of the Liens granted by it
pursuant to the Transaction Documents, (iii) the perfection or
maintenance of the Liens created by the Transaction Documents
(including the first priority nature thereof) or (iv) the exercise by
the Trustee of its rights under the Transaction Documents or the
remedies granted under the Transaction Documents, except for (A)
the financing statements and other documents required to have been
filed on or prior to the Transfer Date pursuant to Section 2.05(i),
all of which have already been duly filed and are in full force and
effect, (B) the filing from time to time of any amendments,
assignments, continuation statements or other documents which
may become required pursuant to Section 2.05(i) and (C) any
properly completed and executed UCC-3 termination statements
which shall have been delivered to the Program Agent on or before
the Transfer Date.
(d) Enforceability. Each Transaction Document to
which the Transferor is or is to be a party constitutes a legal, valid
and binding obligation of the Transferor enforceable against the
Transferor in accordance with its terms (except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors'
rights generally and except as such enforceability may be limited by
general principles of equity, whether considered in a suit at law or
in equity). Each Transaction Document is in full force and effect,
and is not subject, as to the Transferor, to any specific dispute,
offset, counterclaim or defense of the Transferor.
(e) No Litigation. There is no action, suit,
investigation, litigation or proceeding affecting the Transferor,
pending or threatened before any Governmental Authority or
arbitrator that (i) could have a Material Adverse Effect or
(ii) purports to affect the legality, validity or enforceability of any
Transaction Document or the consummation of the transactions
contemplated hereby.
(f) Liens on Properties. Except for Permitted Liens,
and except for Liens that will be terminated prior to the Transfer
Date, there are no Liens of any nature whatsoever on any
Receivable. The Transferor is not a party to any contract,
agreement, lease or instrument (other than this Agreement or as
contemplated by this Agreement) the performance of which, either
unconditionally or upon the happening of an event, will result in or
require the creation of any Lien on any Receivable, or otherwise
result in a violation of this Agreement.
(g) Contractual Obligations. (i) The Transferor is not a
party to any indenture, loan or credit agreement or any lease or
other agreement or instrument, or subject to any Requirement of
Law, that would have an adverse effect on the ability of the
Transferor to carry out its obligations under this Agreement or any
Transaction Documents to which it is a party, and (ii) neither the
Transferor nor, to the best Knowledge of the Transferor, any other
party is in default in any respect under or with respect to the
Receivables Purchase Agreements or any other contract,
agreement, lease or instrument to which the Transferor is a party.
(h) Investment Company Act. The Transferor is not an
"investment company", or an "affiliated person" of, or "promoter"
or "principal underwriter" for, or a company controlled by, an
"investment company", within the meaning of and as such terms are
defined in the Investment Company Act.
(i) Locations. The chief place of business and chief
executive office of the Transferor, and the office where the
Transferor keeps the originals of its books, records and documents
regarding the Receivables and the other Trust Assets of the
Transferor are located at the address of the Transferor specified in
Section 13.03. The Transferor maintains no other business
locations.
(j) Tradenames. The legal name of the Transferor is as
set forth on the signature page of this Agreement and the
Transferor has no tradenames, fictitious names, assumed names or
"doing business as" names.
(k) Subsidiaries. The Transferor has no Subsidiaries.
(l) Accuracy of Information. Each certificate,
information, exhibit, financial statement, document, book, record or
report furnished by a Responsible Official of the Transferor to the
Trustee, any Enhancement Provider or the Servicer in connection
with this Agreement is accurate in all material respects as of its date
and no such document contains any misstatement of material fact.
(m) Solvency. The Transferor is Solvent and will be
Solvent after giving effect to the transactions contemplated by the
Transaction Documents.
(n) Compliance. The Transferor has complied, and will
comply on each Initial Issuance Date, with each Requirement of
Law with respect to all Receivables transferred to the Trust
hereunder and the Contracts related thereto and with respect to its
business or properties, in each case except where the failure to do
so could not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect.
(o) Taxes. The Transferor has filed all tax returns
(federal, state and local) which it reasonably believes are required to
be filed and has paid or made adequate provision for the payment of
all taxes, assessments and other governmental charges due from the
Transferor or is contesting any such tax, assessment or other
governmental charge in good faith through appropriate proceedings
as to which adequate reserves are being maintained and no Lien
with respect thereto has attached to its property and become
enforceable against its other creditors. The Transferor knows of no
reasonable basis for any additional tax assessment for any year for
which adequate reserves have not been established.
(p) Use of Proceeds. No proceeds of the issuance of
any Certificate will be used by the Transferor to acquire any
security in a transaction that is subject to Sections 13 and 14 of the
Securities Exchange Act of 1934, as amended, or to purchase or
carry any margin security in violation of any applicable law or
regulation.
(q) Collection Accounts. The Collection Account
Banks are the only institutions holding Collection Accounts for the
receipt of payments from Lock Boxes in respect of Receivables
(subject to such changes as may be made from time to time in
accordance with Section 4.02(b)), and all Obligors, and only such
Obligors, have been instructed or, upon the creation of Receivables,
will be instructed to make payments only to Collection Accounts
and such instructions have not been modified or revoked by the
Transferor and such instructions that have been given are in full
force and effect.
(r) Early Amortization Event. As of the Initial Issuance
Date for any Series, no event or condition has occurred and is
continuing that is, or with the giving of notice, the passage of time
or both would constitute, an Early Amortization Event.
(s) ERISA. No Plan has any accumulated funding
deficiency, as defined in Section 302(a) of ERISA, whether or not
waived. The Transferor and each ERISA Affiliate has timely made
all contributions required to be made by it to any Plan, except
where a failure to contribute could not reasonably be expected to
give rise to a Lien under Section 302(f) of ERISA. No Plan Event
with respect to any Plan has occurred or could reasonably be
expected to occur that could result, directly or indirectly, in any
Lien being imposed on the property of the Transferor. Neither the
Transferor nor any ERISA Affiliate has incurred, or could
reasonably be expected to incur, withdrawal liability to, or liability
in connection with, the reorganization, termination or insolvency of
any Multiemployer Plan which liability could reasonably be
expected to have a Material Adverse Effect.
(t) Fraudulent Conveyance. The Transferor is not
entering into the transactions contemplated hereby with the intent
of hindering, delaying or defrauding any creditor.
(u) Limited Purpose. The Transferor engages in no
activities other than those contemplated by the Transaction
Documents.
(v) Certificates. Each Certificate, when executed and
authenticated by the Trustee in accordance with the terms of
Section 6.01 and delivered to and paid for by the Investor
Certificateholder pursuant to the related Supplement, will be validly
issued and outstanding and entitled to the benefits of this
Agreement and the related Supplement.
The representations and warranties set forth in this Section
2.03 shall survive the Transfer of the Receivables to the Trust and the
issuance of the Certificates, and shall cease and be of no effect upon the
indefeasible repayment in full of the Invested Amount of the last
outstanding Series and all other obligations of the Transferor hereunder.
Upon discovery by the Transferor, the Servicer or a Responsible Official of
the Trustee of a breach of any of the foregoing representations and
warranties, the party discovering such breach shall give prompt written
notice to the other parties and to any Enhancement Provider. The
Trustee's obligations in respect of any such breach are limited as provided
in Section 11.02(g).
SECTION 2.04. Representations and Warranties of the
Transferor Relating to the Trust Assets. The Transferor hereby represents
and warrants to the Trustee for the benefit of the Trust (i) as of the date
hereof, (ii) by accepting on the Transfer Date the proceeds of such
Transfer, as of the Transfer Date and (iii) except for the representation and
warranty contained in subparagraph (i), by accepting on each date during
the Revolving Period for any Series the proceeds of each Transfer of
Receivables, as of such date, that:
(a) Valid Transfer. Each of the Receivables Purchase
Agreements creates a valid sale, transfer and assignment to the
Transferor of, and, subject to the interest of the Trust hereunder,
the Transferor is the legal and beneficial owner of, all right, title and
interest of the Originators in and to the Receivables and Related
Security now existing and hereafter created during each Revolving
Period and the proceeds thereof. This Agreement constitutes either
(i) a valid transfer and assignment to the Trust of all right, title and
interest of the Transferor in and to the Receivables now existing
and hereafter created and purchased by the Transferor pursuant to
the Receivables Purchase Agreements, and in and to all other Trust
Assets and the proceeds thereof and such funds as are deposited
pursuant to this Agreement from time to time in the Concentration
Account, the Collection Accounts and any Series Account, or (ii) a
valid grant to the Trust of a first priority perfected security interest
in all right, title and interest of the Transferor in and to the
Receivables now existing and hereafter created and purchased by
the Transferor pursuant to the Receivables Purchase Agreements,
and in and to all other Trust Assets and the proceeds thereof which,
in the case of existing Receivables and the other existing Trust
Assets and the proceeds thereof, is enforceable by the Trustee upon
execution and delivery of this Agreement, and which, in the case of
the Receivables and all other Trust Assets hereafter created and the
proceeds thereof, will be enforceable by the Trustee upon such
creation. Upon the filing of the appropriate financing statements,
the Trust shall have a first priority perfected ownership or security
interest in those Trust Assets and the proceeds thereof in which a
security interest may be perfected by filing appropriate financing
statements. The Transferor has caused the Servicer to clearly and
unambiguously mark all its computer records and all its microfiche
storage files, if any, in a manner reasonably calculated to indicate
the Trust's interest in the Trust Assets and shall cause the Servicer
to maintain such records in a manner such that the Trust's perfected
first priority interest in the Receivables shall not be adversely
affected.
(b) No Claim or Interest. Except for Permitted Liens
and as otherwise provided in this Agreement or any applicable
Supplement, neither the Transferor nor any Person claiming
through or under the Transferor has any claim to or interest in the
Concentration Account, the Collection Accounts or any Series
Account. Each Receivable and the Collections with respect thereto
and all other Trust Assets have been or will be transferred to the
Trust free and clear of any Lien or interest of any other Person
(other than Permitted Liens and disputes with Obligors in the
ordinary course of business or in connection with an Insolvency
Event of the related Obligor) not holding through the Trust.
(c) Outstanding Balance; Net Receivables Balance. As
of the Initial Issuance Date for any Series, the Net Receivables
Balance is at least equal to the Required Net Receivables Balance.
(d) Eligibility. (i) Each Receivable was purchased in
accordance with the terms of a Receivables Purchase Agreement
and (ii) each Receivable that was classified as an "Eligible
Receivable" by the Transferor in any document or report delivered
hereunder satisfied, at the time of such classification, the
requirements of eligibility contained in the definition of Eligible
Receivable except where, after giving effect to all improper
classifications, no Pool Non-compliance Date shall have occurred.
(e) Investment Company Act, Etc. Each Transfer of
Receivables to the Trust hereunder constitutes a purchase or other
acquisition of notes, drafts, acceptances, open accounts receivable
or other obligations representing part or all of the sales price of
merchandise, insurance or services within the meaning of
Section 3(c)(5) of the Investment Company Act. The acquisition
by the Trust of each Receivable constitutes a "current transaction"
within the meaning of Section 3(a)(3) of the Act.
(f) Collection Accounts and Lock Boxes. The
Collection Account Banks are the only institutions holding
Collection Accounts for the receipt of payments from Lock Boxes
in respect of Receivables and all Obligors, and only such Obligors,
have been instructed or, upon the creation of Receivables owed by
them, will be instructed to make payments only to Collection
Accounts and Lock Boxes and such instructions have not been
modified or revoked by the Transferor and such instructions that
have been given are in full force and effect.
(g) No Rescission. No Contract giving rise to any
Receivable transferred hereunder has been amended, satisfied,
subordinated or rescinded, except as disclosed in writing to the
Trustee on or before the Transfer of such Receivable or as
otherwise permitted hereunder. Subsequent to such transfer no
such Receivable has, except as permitted hereunder, been
compromised, adjusted, extended, satisfied, subordinated, rescinded
or modified.
(h) No Payment. The Transferor has no Knowledge of
any fact which would lead it to reasonably expect that, when billed,
any Receivable transferred hereunder would not be paid in
accordance with its terms when due.
(i) Offering of Certificates. Neither the Transferor nor
any agent acting on its behalf has, directly or indirectly, offered any
Certificate or any similar security of the Transferor for sale to, or
solicited any offer to buy any Certificate or any similar security of
the Transferor from, or otherwise approached or negotiated with
respect thereto, with any Person which, and neither the Transferor
nor any agent acting on its behalf has taken or will take any action
which, would subject the issuance or sale of any Certificate to the
provisions of Section 5 of the Act or to the qualification provisions
of any securities or blue sky law of any applicable jurisdiction.
The representations and warranties set forth in this Section
2.04 shall survive the Transfer of the Receivables to the Trust and the
issuance of the Certificates, and shall cease and be of no effect upon the
indefeasible repayment in full of the Invested Amount of the last
outstanding Series and all other obligations of the Transferor hereunder.
Upon discovery by the Transferor, the Servicer or the Trustee of a breach
of any of the foregoing representations and warranties, the party
discovering such breach shall give prompt written notice to the other
parties and to each Enhancement Provider, if any. The Trustee's
obligations in respect of any such breach are limited as provided in
Section 11.02(g).
SECTION 2.05. Affirmative Covenants of the Transferor.
The Transferor hereby covenants and agrees that, until termination of the
Trust:
(a) Compliance with Law. The Transferor shall duly
satisfy all obligations on its part to be fulfilled under or in
connection with the Receivables, will maintain in effect all
qualifications required under Requirements of Law in order to
properly purchase and convey the Receivables and other Trust
Assets to the Trust and will comply in all respects with all
Requirements of Law applicable to the Transferor, its business and
properties and the Trust Assets, in each case where the failure to do
so would, individually or in the aggregate, have a Material Adverse
Effect.
(b) Preservation of Legal Existence. The Transferor
will preserve and maintain its existence, legal structure, legal name,
and, except where the failure to do so could not reasonably be
expected, individually or in the aggregate, to have a Material
Adverse Effect, its rights (charter and statutory), franchises,
permits, licenses, approvals and privileges in the jurisdiction of its
formation, and qualify and remain qualified in each jurisdiction
where the failure to maintain such qualification could have a
Material Adverse Effect.
(c) Keeping of Records and Books of Account. The
Transferor will (i) keep proper books of record and account, which
shall be maintained or caused to be maintained by the Transferor
and shall be separate and apart from those of any Affiliate of the
Transferor, in which full and correct entries shall be made of all
financial transactions and the assets and business of the Transferor
in accordance with GAAP consistently applied, (ii) maintain and
implement administrative and operating procedures (including the
ability to recreate records evidencing the Receivables in the event of
the destruction of the originals thereof) and (iii) keep and maintain
all documents, books, records and other information necessary or
reasonably advisable for the collection of all Receivables (including
records adequate to permit the daily identification of each new
Receivable and all Collections of and adjustments to each existing
Receivable).
The Transferor shall provide to the Trustee access to the
documentation regarding the Receivables in such cases where the
Trustee requires such access in connection with the enforcement of
the rights of Holders or is required by applicable statutes or
regulations to review such documentation, such access being
afforded without charge and at the sole cost of the Transferor but
only (i) upon reasonable written request, (ii) during normal business
hours, (iii) subject to the Transferor's normal security and
confidentiality procedures and (iv) at reasonably accessible offices
in the continental United States designated by the Transferor.
(d) Maintenance of Separate Directors. The Transferor
will maintain at least two independent directors who are not
officers, directors, shareholders or employees of (i) Zenith or the
Transferor or (ii) any Affiliate of Zenith or the Transferor, or a
parent, child, spouse or sibling of any such Person; provided,
however, that if either such independent director dies or resigns, the
Transferor shall have 30 Business Days to replace that Person with
another independent director. The Transferor will not, without the
consent of the two independent directors, so long as there shall not
have elapsed one year and one day after the termination of the
Trust, institute against the Trust or the Transferor any proceeding
of the type referred to in the definition of "Insolvency Event".
(e) Payment of Taxes, Etc. The Transferor will pay
promptly when due all taxes, assessments and governmental
charges or levies imposed upon it or any Trust Asset, or in respect
of its income or profits therefrom, and any and all claims of any
kind, except that no such amount need be paid if (i) such
nonpayment could not reasonably be expected to subject any
Beneficiary to civil or criminal penalty or liability or involve any risk
of the sale, forfeiture or loss of any of the property, rights or
interests covered under any Transaction Document and (ii) the
charge or levy is being contested in good faith through appropriate
proceedings as to which adequate reserves are being maintained and
no Lien with respect thereto has attached to its property and
become enforceable against its creditors.
(f) Reporting Requirements. The Transferor will:
(i) within one Business Day after a Responsible
Official of the Transferor obtains knowledge of the
occurrence of any Early Amortization Event, the
commencement of a Partial Amortization Period or Cure
Period or any event which, with the giving of notice or lapse
of time or both, would constitute an Early Amortization
Event, notify the Trustee and the Parent of such occurrence;
(ii) as soon as possible and in any event (A)
within three Business Days after a Responsible Official of
the Transferor obtains knowledge of the occurrence of any
Early Amortization Event, the commencement of a Partial
Amortization Period or Cure Period, or any event which,
with the giving of notice or lapse of time or both, would
constitute an Early Amortization Event, furnish to the
Trustee, each Rating Agency and each Enhancement
Provider the written statement of a Financial Officer of the
Transferor setting forth details of such Early Amortization
Event, the commencement of such Partial Amortization
Period or Cure Period or such event and the action which
the Transferor has taken and proposes to take with respect
thereto, and (B) within three Business Days after a
Responsible Official of the Transferor makes a
determination that any other event, development or
information is reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect, give written
notice thereof to the Trustee, the Parent, each Rating
Agency and each Enhancement Provider;
(iii) promptly, from time to time, furnish to the
Trustee such other information, documents, records or
reports regarding the Receivables, the other Trust Assets or
the condition or operations, financial or otherwise, of the
Transferor as the Trustee may from time to time reasonably
request;
(iv) within thirty (30) (or, after the last Statistical
Month in each calendar year, forty-five (45)) days after the
end of each Statistical Month in each calendar year, deliver
to the Trustee, each Rating Agency and each Enhancement
Provider the balance sheet of the Transferor as at the end of
such period and the related statement of income and cash
flow of the Transferor for such Statistical Month and for the
period from the beginning of the then current calendar year
to the end of such Statistical Month, and for the
corresponding period during the previous calendar year, and
a comparison of the statement of the year to date earnings
and cash flow to the corresponding statement for the
corresponding period from the previous calendar year, if
applicable, certified by a Financial Officer of the Transferor
as fairly presenting the financial position of the Transferor
as at the date indicated and the results of its operations and
cash flow for the period indicated in accordance with
GAAP, subject to normal year end adjustments;
(v) within ninety (90) days after the end of each
calendar year deliver to the Trustee and each Rating Agency
audited financial statements of the Transferor, including
therein a balance sheet of the Transferor as at the end of
such calendar year and statements of income and cash flow
of the Transferor for each calendar year, reported on by
Independent Public Accountants and accompanied by their
related audit letter, which report and letter shall be
unqualified as to scope (or, if qualified, only as to non-
material matters) and shall state that such financial
statements fairly present the financial position of the
Transferor as at the dates indicated in conformity with
GAAP applied on a basis consistent with prior years, if
applicable (except for changes with which such independent
certified public accountants shall concur and which shall
have been disclosed in the notes to the financial statements),
and that the examination by such accountants in connection
with such financial statements has been made in accordance
with generally accepted auditing standards; and
(vi) as soon as possible and in any event within
30 days after a Responsible Official of the Transferor
obtains Knowledge that one of the following events has
occurred or is reasonably expected to occur: (i) the
occurrence of any Plan Event with respect to any Plan or (ii)
the withdrawal by the Transferor or any of its ERISA
Affiliates from, or the termination, reorganization or
insolvency of, any Multiemployer Plan which could
reasonably be expected to have a Material Adverse Effect.
(g) Receivables Purchase Agreements. The Transferor
will at its expense timely perform and comply with all provisions,
covenants and other promises required to be observed by it under
the Receivables Purchase Agreements, maintain the Receivables
Purchase Agreements in full force and effect, enforce its rights
under the Receivables Purchase Agreements substantially in
accordance with the terms thereof and comply with its obligations
under all contracts and invoices giving rise to Receivables. The
Transferor shall, within one Business Day after a Responsible
Official obtains knowledge of the occurrence of any Termination
Event or any event which, with the giving of notice or lapse of time
or both, would constitute a Termination Event, notify the Trustee in
writing of such occurrence. The Transferor shall promptly furnish
to the Trustee copies of any notices, reports or certificates given or
delivered to the Transferor under the Receivables Purchase
Agreements.
(h) UCC Opinion. The Transferor shall deliver to the
Trustee within 90 days after the end of each calendar year,
beginning with the calendar year ending on or about December 31,
1998, an Opinion of Counsel to the Transferor (who may be
counsel employed by an Affiliate of the Transferor), dated as of a
date during such 90-day period, substantially to the effect that, in
the opinion of such counsel, either (A) such action has been taken
as is necessary to continue the perfection of the interests of the
Trustee in and to the Receivables conveyed hereby and the other
Trust Assets conveyed hereunder (to the same extent as such
interest was perfected on the Transfer Date with respect to the
Receivables and other Trust Assets then owned by the Transferor)
and reciting the details of such action or referring to prior Opinions
of Counsel in which such details are given or (B) no such action is
necessary to continue the perfection of such interests.
(i) Further Assurances. (A) The Transferor agrees that
from time to time, at its own expense, the Transferor will promptly
execute and deliver all further instruments and documents, and take
all further action, that may be necessary or desirable, or that the
Trustee may reasonably request, in order to perfect and protect any
pledge, assignment or security interest granted or purported to be
granted hereby or to enable the Trustee to exercise and enforce its
rights and remedies hereunder with respect to any Receivable and
the Trust Assets. Without limiting the generality of the foregoing,
the Transferor will: (i) mark its master data processing and
computer records in a manner reasonably calculated to indicate that
the Trust Assets have been sold, in the case of any Originator, to
the Transferor in accordance with the Receivables Purchase
Agreements and have been transferred, in the case of the
Transferor, to the Trust in accordance with the Transaction
Documents for the benefit of the Beneficiaries; (ii) if any Trust
Assets shall be evidenced by a promissory note, other instrument or
chattel paper, deliver and pledge to the Trustee hereunder such
note, instrument or chattel paper duly indorsed and accompanied by
duly executed instruments of transfer or assignment, all in form and
substance satisfactory to the Trustee; and (iii) execute and file such
financing or continuation statements, or amendments thereto, and
such other instruments or notices, as may be necessary or desirable,
or as the Trustee may reasonably request, in order to perfect and
preserve the valid and perfected first priority ownership or security
interest granted or purported to be granted under any Transaction
Document.
(B) The Transferor hereby authorizes the Trustee to file
one or more financing or continuation statements, and amendments
thereto, relating to all or any part of the Trust Assets without the
signature of the Transferor where permitted by law. A photocopy
or other reproduction of any Transaction Document or any
financing statement covering the Trust Assets or any part thereof
shall be sufficient as a financing statement where permitted by law.
(C) The Transferor will furnish to the Trustee from time
to time statements and schedules further identifying and describing
the Trust Assets and such other reports in connection with the
Trust Assets as the Trustee may reasonably request, all in
reasonable detail.
(D) The Transferor shall, from time to time, execute and
deliver to the Obligors any bills, statements and letters or other
writings necessary to carry out the terms and provisions of any
Transaction Document and to facilitate the collection of the
Receivables in a manner consistent with the Credit Policy Manual.
SECTION 2.06. Negative Covenants of the Transferor.
The Transferor hereby further covenants that, unless it shall have received
the written consent of a Majority in Interest of each outstanding Series and
the Rating Agency Condition shall have been satisfied, until termination of
the Trust:
(a) No Liens. Except for Permitted Liens and the
Transfer hereunder the Transferor will not sell, pledge, assign or
transfer any Receivable or any interest therein or any other Trust
Asset to any other Person, or grant, create, incur, assume or suffer
to exist any Lien on, any Trust Asset or any other property or asset
of the Transferor (other than the Transferor Certificate, any
Supplemental Certificate and funds deposited to the Transferor's
Account pursuant to the applicable Supplement or the Transferor
Certificate), whether now existing or hereafter created, or any
interest therein, and the Transferor shall defend the right, title and
interest of the Trust in and to the Trust Assets, whether now
existing or hereafter created, against all claims of third parties
claiming through or under the Transferor.
(b) Activities of the Transferor. The Transferor will not
engage in, enter into or be a party to any business, activity or
transaction of any kind other than the businesses, activities and
transactions contemplated and authorized for it by the Transaction
Documents or incidental to its ability to carry out its obligations
under such agreements.
(c) Indebtedness. Except for the Subordinated Notes,
the Transferor will not create, incur or assume any Indebtedness
(other than Indebtedness related to operating expenses incurred in
the performance of or incidental to its obligations under this
Agreement which shall not exceed $150,000 per annum) or sell or
transfer any Receivable to a trust or other Person which issues
securities in respect of any such Receivables, other than as
contemplated by the Transaction Documents.
(d) Guarantees. Except as provided herein, the
Transferor will not become or remain liable, directly or indirectly, in
connection with any Indebtedness or other liability of any other
Person, whether by guarantee, endorsement (other than
endorsements of negotiable instruments for deposit or collection in
the ordinary course of business), agreement to purchase or
repurchase, agreement to supply or advance funds, or otherwise.
(e) Investments. The Transferor will not make or suffer
to exist any loans or advances to, or extend any credit to, or make
any investments (by way of transfer of property, contributions to
capital, purchase of stock or securities or evidences of
indebtedness, acquisition of the business or assets, or otherwise) in,
any of its Affiliates or any other Person except for (i) purchases of
Receivables pursuant to the terms of the Receivables Purchase
Agreements, (ii) investments in Eligible Investments in accordance
with the terms of this Agreement and (iii) holding the Transferor
Certificate.
(f) Extension or Amendment of Receivables. Except
for consents or failures to object by the Transferor to actions of the
Servicer permitted by Section 3.01(c), the Transferor will not
extend, amend or otherwise modify (or consent or fail to object to
any such extension, amendment or modification by the Servicer),
the terms of any Receivable, or amend, modify or waive (or consent
or fail to object to any such amendment, modification or waiver by
the Servicer) any payment term or condition of any invoice related
thereto (other than as provided in the Credit Policy Manual). The
Transferor will not rescind or cancel, or permit the rescission or
cancellation of, any Receivable except as ordered by a court of
competent jurisdiction or other Governmental Authority.
(g) Change in Legal Name. The Transferor will not
(i) make any change to its legal name, identity or business structure
in any manner or chief executive office (including the address
thereof) or use any trade names, fictitious names, assumed names or
"doing business as" names or (ii) change its jurisdiction of
organization unless, prior to the effective date of any such name
change, change in chief executive office, use or change of
jurisdiction, the Transferor delivers to the Trustee (A) written
notice of such change at least 30 days prior to the effective date
thereof, (B) such financing statements (Forms UCC-1 and UCC-3)
executed by the Transferor required to reflect such name change,
change in chief executive office, use or change of jurisdiction,
together with such other documents and instruments required in
connection therewith to maintain the continued perfection of the
interests of the Trustee in the Trust Assets and (C) prior to the
effective date thereof, an Opinion of Counsel, in form and
substance satisfactory to the Trustee, as to the Transferor's due
organization, valid existence and good standing and the continued
perfection of the interests of the Trustee in and to the Receivables
and other Trust Assets conveyed hereby (to the same extent as such
interest was perfected on the Transfer Date with respect to the
Receivables then owned by the Transferor). Furthermore, the
Transferor shall give 30 days prior written notice to the Trustee of
any change in the location of the office where it keeps the books,
records and documents regarding the Receivables and the other
Trust Assets from the address of the Transferor referred to in
Section 13.03.
(h) Receivables Purchase Agreements. The Transferor
will not (i) cancel or terminate the Receivables Purchase
Agreements or consent to or accept any cancellation or termination
thereof, (ii) amend or otherwise modify any term or condition of the
Receivables Purchase Agreements or give any consent, waiver or
approval thereunder, (iii) waive any default under or breach of the
Receivables Purchase Agreements or (iv) take any other action
under the Receivables Purchase Agreements not contemplated or
required by the terms thereof.
(i) Organization. The Transferor will not amend any
provision of its certificate of incorporation or bylaws relating to or
affecting (i) voting rights of, actions by, appointment of, criteria for
or qualifications of any independent director or (ii) the requirement
that the Transferor maintain at all times two independent directors,
including Articles Third, Fifth, Seventh, Tenth, Eleventh, Twelfth
and Thirteenth of such certificate of incorporation, and Sections 1,
7 and 10 of Article III and Section 1 of Article VII of such bylaws.
(j) Maintenance of Separate Existence. The Transferor
will not (i) fail to do all things necessary to maintain its existence as
a corporation separate and apart from the Servicer, Zenith, any
Affiliate of Zenith, and any Affiliate of the Transferor including
conducting business correspondence in its own name and
maintaining appropriate and separate books, records and financial
statements; (ii) except as provided under any Transaction
Document, suffer any limitation on the authority of its own
directors and officers to conduct its business and affairs in
accordance with their independent business judgment, or authorize
or suffer any Person other than its own directors and officers to act
on its behalf with respect to matters (other than matters customarily
delegated to others under powers of attorney) for which a
corporation's own directors and officers would customarily be
responsible; (iii) fail to (A) maintain or cause to be maintained by an
agent of the Transferor under the Transferor's control physical
possession of all its books and records, (B) maintain capitalization
adequate for the conduct of its business, (C) account for and
manage its liabilities separately from those of any other Person,
including payment of all payroll and other administrative expenses
and taxes from its own assets, (D) segregate and identify separately
all of its money and assets from those of any other Person
(including, but not limited to, maintaining separate bank accounts in
its own name), and (E) maintain offices through which its business
is conducted separate from those of the Servicer, Zenith, any
Affiliate of Zenith and any Affiliate of the Transferor (which offices
may be leased or sub-leased from any such Person, provided that,
to the extent that the Transferor and any of its Affiliates have
offices in the same location, there shall be a fair and appropriate
allocation of overhead costs and expenses among them, and each
such entity shall bear its fair share of such costs and expenses and
each such office shall be conspicuously identified as the office of
such entity); (iv) commingle its money or other assets with those of
the Servicer, Zenith, any Affiliate of Zenith or any Affiliate of the
Transferor, or use its funds for other than the Transferor's uses;
(v) fail to (A) maintain its books, financial statements, accounting
records and other business documents and records separate from
those of the Servicer, Zenith and each other Person, (B) act solely
in its legal name and through its own authorized officers and
agents, (C) make investments directly or by brokers engaged and
paid by the Transferor or its agents (provided that if any such agent
is an Affiliate of the Transferor it shall be compensated at a fair
market rate for its services), (D) separately manage its liabilities
from those of the Servicer, Zenith or any Affiliate of Zenith and pay
its own liabilities, including all administrative expenses, from its
own separate assets (provided that, to the extent the employees of
the Transferor participate in pension, insurance and other benefit
plans of Zenith or any Affiliate thereof, the Transferor will
reimburse Zenith or such Affiliate, as the case may be, for an
appropriate share of the costs thereof), (E) pay from its assets all
obligations and indebtedness of any kind incurred by it and
(F) abide by all corporate legal formalities, including the
maintenance of current corporate records; (vi) assume the liabilities
of the Servicer, Zenith or any Affiliate of Zenith; (vii) guarantee the
liabilities of the Servicer, Zenith or any Affiliate of Zenith; (viii) be
involved in the day-to-day management of the Servicer or Zenith;
(ix) act as agent of the Servicer, Zenith or any Affiliate of Zenith or
allow the Servicer, Zenith or any Affiliate of Zenith to act as its
agent (other than as Servicer hereunder or pursuant to a contract
on terms no less favorable to the Transferor than it would have
obtained in a similar contract with a Person not an Affiliate of the
Transferor); (x) make any advances to the Servicer, Zenith or any
Affiliate of Zenith; (xi) have insufficient officers and personnel to
conduct its business and operations; (xii) enter into business
transactions with any of its Affiliates unless the terms are not more
or less favorable to the Transferor than terms and conditions
available at the time to the Transferor for comparable transactions
with unaffiliated persons and a majority of the board of directors of
the Transferor including each director who is an independent
director approve the transaction; (xiii) if the Transferor is included
within the consolidated financial statements of Zenith or any
Affiliate thereof, fail to disclose in a note in the financial reports
required to be delivered quarterly and annually the existence of the
Transferor as a separate legal entity and the participation of the
Transferor in the transactions contemplated by the Transaction
Documents; (xiv) fail to establish investment guidelines and criteria
by a majority of the board of directors including at least two
directors who are independent directors; or (xv) conduct its affairs
in a manner at any time inconsistent with the assumptions set forth
in the opinions delivered pursuant to Article IV of each Certificate
Purchase Agreement.
(k) Ownership; Merger. The Transferor will not (i) sell
any shares of any class of its capital stock to any Person (other than
Zenith or any of its Affiliates that are Subsidiaries of Zenith), or
enter into any transaction of merger or consolidation, or convey or
otherwise dispose of all or substantially all of its assets (except as
contemplated herein), or (ii) terminate, liquidate or dissolve itself
(or suffer any termination, liquidation or dissolution), or (iii)
acquire or be acquired by any Person.
(l) Transfer of Transferor Certificate. The Transferor
agrees that, without the prior written consent of the Majority in
Interest, it shall not transfer the Transferor Certificate to any Person
or surrender the Transferor Certificate for the issuance of a
Supplemental Certificate and new Transferor Certificate pursuant to
Section 6.08(c) hereof.
SECTION 2.07. Addition and Removal of Originators. (a)
At any time following the Transfer Date, the Transferor may designate any
Affiliate of Zenith as an Originator (an "Additional Originator"); provided
that the following conditions are satisfied: (A) either (i) the average of the
aggregate Outstanding Balance of all Receivables generated by such
Additional Originator as of the last day of each of the immediately
preceding twelve months does not exceed 5% of the average of the
aggregate Outstanding Balance of Eligible Receivables owned by the Trust
as of the last day of each of such twelve months or (ii) the Rating Agency
Condition shall have been satisfied, (B) such Additional Originator shall be
subject to the provisions of the Parent Undertaking Agreement and shall
become a party to such Transaction Documents as the Trustee shall
reasonably request and (C) Zenith shall guarantee all obligations of such
Additional Originator pursuant to the Transaction Documents pursuant to a
guaranty acceptable in form and substance to the Majority in Interest of
each outstanding Series.
(b) The Transferor may cause any Originator to no
longer be designated as an Originator (being a "Removed Originator"), and
the Transferor shall cease purchasing Receivables from such Removed
Originator, provided that (i) the average of the aggregate Outstanding
Balance of Receivables generated by such Removed Originator as of the
last day of each of the immediately preceding twelve months does not
exceed 5% of the average of the aggregate Outstanding Balance of Eligible
Receivables owned by the Trust as of the last day of each of such twelve
months, (ii) the Transferor provides timely written notice of such change in
designation to each Rating Agency, (iii) the Rating Agency Condition shall
have been satisfied and (iv) the Transferor shall have delivered to the
Trustee and any Enhancement Provider an Officer's Certificate stating that
the Transferor reasonably believes that the removal of such Removed
Originator will not result in the occurrence of an Early Amortization Event.
(c) Notwithstanding anything in this Section 2.07 to the
contrary, a consent by the Majority in Interest of each outstanding Series to
changes in the foregoing subsections (a) and (b) hereof shall be effective
only if (i) the Rating Agency Condition shall be satisfied and (ii) written
notice thereof shall have been given to the Trustee.
SECTION 2.08. Deemed Collections for Dilution. If on
any day the Outstanding Balance of a Receivable included in the Trust
Assets is either (a) reduced as a result of any defective, rejected or returned
merchandise, insurance or services, any cash discount or rebate, or any
adjustment by the Originator therefor or by the Transferor or (b) reduced
or cancelled as a result of a setoff in respect of any claim by the Obligor
thereof against the Originator therefor or the Transferor (whether such
claim arises out of the same or a related transaction or an unrelated
transaction), then the Transferor shall be deemed to have received on such
day a Collection of such Receivable in the amount of such reduction or
cancellation. If Collections are reduced as a result of an Obligor failing to
pay any Receivable free and clear of, and without deduction for, any and all
present or future taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, then the Transferor
shall be deemed to have received on such day an additional Collection of
such Receivable in the amount of such reduction. The Transferor will
deposit, or cause the Originator for such Receivable to deposit, all such
deemed Collections into a Collection Account within two Business Days
following the Business Day on which such Collections are deemed to have
been received.
ARTICLE III
ADMINISTRATION AND SERVICING OF RECEIVABLES
SECTION 3.01. Acceptance of Appointment and Other
Matters Relating to the Servicer. (a) Zenith agrees to act as the Servicer
for the benefit of the Beneficiaries under this Agreement (subject to Article
X) and the Holders by their acceptance of the Certificates consent to
Zenith so acting as Servicer.
(b) The Servicer shall (subject to Article X) enforce its
respective rights and interests in, to and under the Receivables and the
other Trust Assets on behalf of the Trust. The Servicer shall service,
administer and collect the Receivables and, in connection therewith, the
Servicer shall take or cause to be taken all such actions 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 Policy Manual;
provided, however, that in the event the Trustee is acting as Servicer
hereunder, it shall service the Receivables in accordance with customary
industry standards in effect from time to time.
(c) Provided that no Early Amortization Event or
Servicer Default shall have occurred and be continuing, and no Partial
Amortization Period shall have commenced and be continuing, the Servicer
may, in accordance with the Credit Policy Manual, extend the maturity,
adjust the Outstanding Balance, or otherwise modify the terms of any
Defaulted Receivable or amend, modify or waive any payment term or
condition of any invoice related thereto, all as it may determine to be
appropriate to maximize Collections thereof; provided that, for all purposes
hereunder, any such Receivable shall remain a "Defaulted Receivable" in
the amount of its Outstanding Balance (without giving effect to any such
extension, adjustment, amendment, modification or waiver) until paid in
full. The Servicer will not extend, amend or otherwise modify the terms of
any Receivable, or amend, modify or waive any payment term or condition
of any invoice related thereto (other than as provided in the Credit Policy
Manual or herein) if the effect of such amendment, modification or waiver
would impair the collectibility or delay the payment of any then existing
Receivable beyond 90 days from the date of the invoice.
(d) The Servicer shall have full power and authority,
acting alone or through any party properly designated by it hereunder, to
do any and all things in connection with such servicing and administration
which it may deem necessary or desirable, subject to the terms and
conditions of this Agreement and the applicable Supplement. Without
limiting the generality of the foregoing and subject to Section 10.01 and
any limitations provided in any Supplement, the Servicer or its designee is
hereby authorized and empowered (i) to instruct the Trustee to make
withdrawals and payments from the Concentration Account, subject to the
limitations set forth in Section 4.02(a) and as otherwise set forth in this
Agreement, (ii) to instruct the Trustee to make withdrawals and payments
from the Series Accounts, subject to the limitations set forth in the related
Supplement and as otherwise set forth in this Agreement, (iii) to instruct
the Trustee to take any action required or permitted under any
Enhancement, (iv) to make any filings, reports, notices, applications and
registrations with, and to seek any consents or authorizations from, the
Securities and Exchange Commission and any state securities authority on
behalf of the Trust as may be necessary or advisable to comply with any
federal or state securities laws or reporting requirements, and (v) only
(A) with the prior consent of a Majority in Interest of each outstanding
Series and (B) upon satisfaction of the Rating Agency Condition, to
subcontract with any other Person (at the Servicer's expense) for servicing,
administering or collecting the Receivables; provided that such Person shall
not become Servicer hereunder and the Servicer shall remain liable for the
performance of the duties and obligations of the Servicer pursuant to the
terms hereof. The Trustee shall execute any documents furnished by the
Servicer which are necessary or appropriate to enable the Servicer to carry
out its servicing administrative duties hereunder and acceptable in form and
substance to the Trustee. The Trustee shall, upon the written request of
the Servicer, furnish the Servicer with any documents then in the Trustee's
possession which are necessary or appropriate to enable the Servicer to
carry out its servicing and administrative duties hereunder.
(e) The Servicer shall not, and no Successor Servicer
shall be obligated to, use servicing procedures, offices, employees or
accounts for servicing the Receivables which differ in any material respect
from the procedures, offices, employees and accounts used by the Servicer
or such Successor Servicer, as the case may be, in connection with
servicing other trade receivables or its business in general.
(f) The relationship of the Servicer (and of any
Successor Servicer under this Agreement) to the Trustee under this
Agreement is intended by the parties to be that of an independent
contractor to or with the Trust and shall not be construed to be that of a
joint venturer, partner, or agent, such that the acts of the Servicer (or any
Successor Servicer) are in any way vicariously attributable to the Trustee in
its individual capacity prior to such time as the Trustee may serve as
Servicer pursuant to the provisions of Article X.
SECTION 3.02. Servicing Compensation; Servicer's
Expenses. (a) Compensation. As full compensation for its servicing
activities hereunder, the Servicer shall be entitled to receive a monthly
servicing fee (the "Servicing Fee") for each Collection Period (or portion
thereof) from the Initial Issuance Date for each Series until the termination
of the Amortization Period, payable in arrears on the Distribution Date
with respect to such Collection Period (or portion thereof), in an amount
equal to the aggregate of the Series Servicing Fees specified in the
Supplements. The Servicing Fee shall be payable only from Investor
Collections pursuant to, and subject to the priority of payment set forth in,
the Supplements.
(b) Expenses. The Servicer's expenses include the
Trustee's Fee (to the extent not paid from Collections) and all documented
reasonable expenses and liabilities (other than any liability of the Trust with
respect to any amount payable solely out of Collections or any personal
liability of the Trust to repay the Certificates) of the Trust not expressly
stated herein to be for the account of the Holders, including reasonable
expenses related to enforcement of the Receivables and the other amounts
due to the Trustee pursuant to Section 11.05, the reasonable fees and
disbursements of the Independent Public Accountants in connection with
the Transaction Documents, and other reasonable fees and documented
expenses including but not limited to the costs of filing UCC continuation
statements; provided that in no event shall the Servicer be liable for any
federal, state, foreign or local income or franchise tax, or any other tax
imposed on or measured by reference to income, or any interest, penalty or
addition to tax with respect thereto or arising from a failure to comply
therewith, assessed on the Trust, the Trustee or the Holders except as
expressly provided in Section 8.04. Such expenses shall be payable, first,
by the Servicer out of the Servicing Fee, second, to the extent not paid by
the Servicer, by the Transferor for its own account, and third, to the extent
the Transferor shall fail to pay any of such expenses, by the Servicer for its
own account, and the Servicer shall not be entitled to any payment for any
such expenses other than the Servicing Fee and reimbursement from the
Transferor. In addition, to the extent not paid from the Servicing Fee, the
Transferor shall pay for its own account, and, if the Transferor fails to do
so, the Servicer will pay, all fees and expenses incurred by or on behalf of
the Servicer in connection with its servicing activities hereunder (including
expenses related to enforcement of the Receivables and the costs of a
Service Transfer) or otherwise in connection herewith (including the fees
and expenses set forth above), and the Servicer will not be entitled to any
fee or other payment from, or claim on, any of the Trust Assets (other than
the Servicing Fee and reimbursement from the Transferor). The
Transferor's and Servicer's covenant to pay the expenses and disbursements
provided in this Section 3.02(b) shall survive the termination of the Trust.
SECTION 3.03. Representations and Warranties of the
Servicer. Zenith, as initial Servicer, hereby represents and warrants, and
each Successor Servicer (except for the Trustee in such capacity) by
acceptance of its appointment hereunder shall represent and warrant, (i) in
the case of the initial Servicer (x) as of the date hereof and as of the
Transfer Date, (y) with respect to any Series, as of the date of the related
Supplement and the related Initial Issuance Date and (z) as of the date of
acceptance by the Transferor during the Revolving Period for any Series of
the proceeds of each Transfer of Receivables, as of such date or (ii) in the
case of any Successor Servicer, (x) as of the date of such appointment and
(y) with respect to any Series issued after such date, as of the date of the
related Supplement and the related Initial Issuance Date, in each case
unless otherwise stated in such Supplement:
(a) Due Organization, Qualification and Authorization.
The Servicer (i) is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its
incorporation, (ii) is duly qualified and in good standing as a foreign
corporation in each other jurisdiction in which it owns or leases
property or in which the conduct of its business requires it to so
qualify or be licensed, except where the failure to do so could not
reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect and (iii) has all requisite corporate power
and authority (including all governmental licenses, permits and
other approvals) to own or lease and operate its properties and to
carry on its business as now conducted and as proposed to be
conducted, except where the failure to do so could not reasonably
be expected, individually or in the aggregate, to have a Material
Adverse Effect.
(b) Corporate Powers and No Conflicts. The execution,
delivery and performance by the Servicer of the Transaction
Documents to which it is or is to be a party, the consummation of
the transactions contemplated hereby and the making of each
Transfer, are within the Servicer's corporate powers, have been
duly authorized by all necessary corporate action, and do not
(i) contravene the Servicer's charter or bylaws, (ii) violate any
Requirement of Law, (iii) conflict with or result in the breach of, or
constitute a default under, any contract, loan agreement, indenture,
mortgage, deed of trust, lease or other instrument binding on or
affecting the Servicer or any of its properties or (iv) except for the
Liens created under the Transaction Documents, result in or require
the creation or imposition of any Lien upon or with respect to any
of the properties of the Servicer. The Servicer is not in violation of
any Requirement of Law or in breach of any such contract, loan
agreement, indenture, mortgage, deed of trust, lease or other
instrument, the violation or breach of which could have a Material
Adverse Effect.
(c) Government Authorization and Approval. No
authorization or approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body or any
other third party is required with respect to the Servicer for (i) the
due execution, delivery or performance by the Servicer of any of
the Transaction Documents to which it is or is to be a party, any
Transfer or the consummation of the other transactions
contemplated hereby, or (ii) the exercise by the Servicer of its rights
under the Transaction Documents or its remedies granted under the
Transaction Documents.
(d) Enforceability. Each Transaction Document to
which the Servicer is or is to be a party constitutes a legal, valid and
binding obligation of the Servicer enforceable against the Servicer
in accordance with its terms (except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights
generally and except as such enforceability may be limited by
general principles of equity, whether considered in a suit at law or
in equity).
(e) No Litigation. There is no action, suit,
investigation, litigation or proceeding affecting the Servicer,
pending or threatened before any Governmental Authority or
arbitrator that (i) could have a Material Adverse Effect or
(ii) purports to affect the legality, validity or enforceability of any
Transaction Document or the consummation of the transactions
contemplated hereby.
(f) Lock Boxes, Collection Accounts and the
Concentration Account. Specified on Schedule 3.03(f) hereto (as
amended by the Servicer from time to time in accordance with
Section 4.02(b)) are (i) the Lock Box numbers, (ii) the names,
addresses and ABA numbers of all the Collection Account Banks,
together with the account numbers of the Collection Accounts and
the name of a contact person at each Collection Account Bank and
(iii) the name, address and ABA number of the Concentration
Account Bank, together with the account number and the name of a
contact person for the Concentration Account.
(g) Payment Instructions. The Servicer has notified the
Obligor on each Receivable to make payments on such Receivable
to either one of the Lock Boxes or one of the Collection Accounts.
(h) Periodic Reports and Determination Date
Certificates. Each Daily Report and Determination Date Certificate
delivered by the Servicer pursuant to this Agreement shall be true
and correct in all material respects as of the date such report or
certificate is delivered.
(i) Servicer Default. No Servicer Default has occurred
and is continuing.
(j) Early Amortization Event. No Early Amortization
Event has occurred and is continuing.
The representations and warranties set forth in this
Section 3.03 shall survive the Transfer of the Receivables to the Trust and
the issuance of the Certificates, and shall cease and be of no effect upon the
indefeasible repayment in full of the Invested Amount of the last
outstanding Series and all other obligations of the Transferor hereunder.
Upon a discovery by the Transferor, the Servicer or the Trustee of a breach
of any of the foregoing representations and warranties, the party
discovering such breach shall give prompt written notice to the other
parties and to each Enhancement Provider, if any. The Trustee's
obligations in respect of any such breach are limited as provided in
Section 11.02(g).
SECTION 3.04. Covenants of the Servicer. The Servicer
hereby covenants and agrees that, until termination of the Trust:
(a) Change in Accounts. The Servicer will not (i) make
any changes to Schedule 3.03(f) hereto or (ii) amend any
instruction to any Obligor or any Collection Account Bank with
respect to any Lock Box or Collection Account or (iii) terminate or
substitute any Cure Account, in any case (A) except as otherwise
required or permitted pursuant to Section 4.02 or the applicable
Supplement and (B) unless the Trustee shall have received written
notice of such change, amendment, termination or substitution and,
if applicable, executed copies of Collection Account Letters with
each new Collection Account Bank or Lock Box Letters with each
new Person holding a Lock Box.
(b) Collections. (i) In the event that the Servicer
receives any Collections, the Servicer agrees to hold all such
Collections in trust and to mail such Collections to a Lock Box or
deposit such Collections to the appropriate Collection Account as
soon as practicable, but in no event later than two Business Days
after receipt thereof.
(ii) In the event that any Affiliate of the Servicer
receives any Collections, the Servicer agrees to cause such Affiliate
to hold all such Collections in trust and to cause such Affiliate to
mail such Collections to a Lock Box or deposit such Collections to
the appropriate Collection Account as soon as practicable, but in no
event later than five Business Days after receipt thereof.
(c) Compliance with Requirement of Law. The Servicer
will (i) duly satisfy all obligations on its part to be fulfilled under or
in connection with each Receivable in accordance with the Credit
Policy Manual, (ii) maintain in effect all qualifications required
under any Requirement of Law in order to service properly each
Receivable in accordance with the Credit Policy Manual and the
Transaction Documents, except where the failure to do so could
not reasonably be expected, individually or in the aggregate, to
have a Material Adverse Effect, and (iii) comply with all other
Requirements of Law in connection with servicing each Receivable,
except where the failure to do so could not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect.
(d) Extension or Amendment of Receivables. The
Servicer will not extend, amend or otherwise modify (or consent or
fail to object to any such extension, amendment or modification by
the Transferor), except as permitted in Section 3.01(c), the terms of
any Receivable, or amend, modify or waive (or consent or fail to
object to any such amendment, modification or waiver by the
Transferor) any payment term or condition of any invoice related
thereto (other than as provided in the Credit Policy Manual) if the
effect of such amendment, modification or waiver would impair the
collectibility or delay the payment of any then existing Receivable
beyond 90 days from the date of the invoice; except that the
Servicer may extend, amend or otherwise modify the date of
payment of any Receivable beyond 90 days from the date of invoice
if such extension, amendment or modification is reasonably
calculated to enhance the collectibility of such Receivable. The
Servicer will not rescind or cancel, or permit the rescission or
cancellation of, any Receivable except as ordered by a court of
competent jurisdiction or other Governmental Authority.
Notwithstanding the foregoing provisions of this Section 3.04(d),
each of the Servicer and the Transferor may extend, amend, modify,
cancel or rescind (and the Servicer need not object to any such
action by the Transferor) any Diluted Receivable in connection with
a valid dispute; provided, however, that such amendment,
modification, cancellation or rescission shall not have a material
adverse effect on the interests of any Beneficiary.
(e) Protection of Holders' Rights. The Servicer will
take no action which would impair the rights of any Beneficiary in
any Receivable or Trust Asset, except as provided in this
Agreement.
(f) Deposits to Concentration Account, any Collection
Account or any Series Account. The Servicer will not deposit or
otherwise credit, or cause to be so deposited or credited, or consent
or fail to object to any such deposit or credit known to it, cash or
cash proceeds other than Collections to the Concentration Account,
any Collection Account or any Series Account.
(g) Receivables Not to Be Evidenced by Promissory
Notes. The Servicer will take no action to cause any Receivable to
be evidenced by any "instrument" (as defined in the UCC of the
jurisdiction the law of which governs the perfection of the interest
in such Receivable created hereunder), except in connection with its
enforcement, in which event the Transferor shall deliver such
instrument to the Trustee as soon as reasonably practicable but in
no event more than three Business Days after execution thereof.
(h) Reporting Requirements. The Servicer will:
(i) within one Business Day after a Responsible
Official of the Servicer obtains knowledge of the occurrence
of a Servicer Default or an Early Amortization Event, or the
commencement of a Partial Amortization Period or Cure
Period, or any event which, with the giving of notice or
lapse of time or both, would constitute a Servicer Default or
Early Amortization Event, notify the Trustee and, so long as
Zenith or any of its Affiliates is the Servicer, the Parent of
such occurrence;
(ii) as soon as possible and in any event within
three Business Days after a Responsible Official of the
Servicer obtains knowledge of the occurrence of a Servicer
Default or any Early Amortization Event, or the
commencement of a Partial Amortization Period or Cure
Period, or any event which, with the giving of notice or
lapse of time or both, would constitute a Servicer Default or
an Early Amortization Event, furnish to the Trustee and to
each Enhancement Provider and, so long as Zenith or any of
its Affiliates is the Servicer, the Parent the written statement
of a Financial Officer of the Servicer setting forth details of
such Servicer Default or Early Amortization Event, the
commencement of such Partial Amortization Period or Cure
Period or such event and the action which the Servicer has
taken and proposes to take with respect thereto;
(iii) as soon as possible and in any event within
three Business Days after a Responsible Official of the
Servicer makes a determination that any other event,
development or information is reasonably likely, individually
or in the aggregate, to have a Material Adverse Effect, give
written notice thereof to the Trustee, each Rating Agency
and each Enhancement Provider and, so long as Zenith or
any of its Affiliates is the Servicer, the Parent;
(iv) promptly, from time to time, furnish to the
Trustee and each Enhancement Provider such other
information, documents, records or reports regarding the
Receivables, the other Trust Assets or the condition or
operations, financial or otherwise, of the Servicer as the
Trustee and each Enhancement Provider may from time to
time reasonably request;
(v) within thirty (30) (or, after the last Statistical
Month in each calendar year, forty-five (45)) days after the
end of each Statistical Month in each calendar year, deliver
to the Trustee, each Rating Agency and each Enhancement
Provider the consolidated balance sheets of the Servicer and
its Subsidiaries as at the end of such period and the related
consolidated statements of income and cash flow of the
Servicer and its Subsidiaries for such Statistical Month and
for the period from the beginning of the then current
calendar year to the end of such Statistical Month, and for
the corresponding period during the previous calendar year,
and a comparison of the statement of the year to date
earnings and cash flow to the corresponding statement for
the corresponding period from the previous calendar year,
and the most recently prepared forecasted consolidated
balance sheet and consolidated statement of earnings and
cash flow of the Servicer and its Subsidiaries for and as of
the end of such calendar year, certified by a Financial
Officer of the Servicer as fairly presenting the consolidated
financial position of the Servicer and its Subsidiaries as at
the dates indicated and the results of their operations and
cash flow for the periods indicated in accordance with
GAAP, subject to normal year end adjustments; and
(vi) within ninety (90) days after the end of each
calendar year deliver to the Trustee, each Rating Agency
and each Enhancement Provider audited consolidated
financial statements of the Servicer and its Subsidiaries,
including therein a consolidated balance sheet of the
Servicer and its Subsidiaries as at the end of such calendar
year and consolidated statements of income and cash flow
of the Servicer and its Subsidiaries for such calendar year,
reported on by Independent Public Accountants and
accompanied by their related audit letter, which report and
letter shall be unqualified as to scope and shall state that
such financial statements fairly present the consolidated
position of the Servicer and its Subsidiaries as at the dates
indicated in conformity with GAAP applied on a basis
consistent with prior years and that the examination by such
accountants in connection with such consolidated financial
statements has been made in accordance with generally
accepted auditing standards.
The Servicer shall provide to the Trustee access to the
documentation regarding the Receivables in such cases where the
Trustee requires such access in connection with the enforcement of
the rights of Holders or is required by applicable statute or
regulations to review such documentation, such access being
afforded without charge and at the sole cost and expense of the
Servicer but only (i) upon reasonable written request, (ii) during
normal business hours, (iii) subject to the Servicer's normal security
and confidentiality procedures and (iv) at reasonably accessible
offices in the continental United States designated by the Servicer.
(i) Further Assurances. (A) The Servicer agrees that
from time to time, at its own expense, the Servicer will promptly
execute and deliver all further instruments and documents, and take
all further action, that may be necessary or desirable, or that the
Trustee may reasonably request, in order to perfect and protect any
pledge, assignment or security interest granted or purported to be
granted hereby or to enable the Trustee to exercise and enforce its
rights and remedies hereunder with respect to any Receivable and
the Trust Assets. Without limiting the generality of the foregoing,
the Servicer will: (i) mark its computer records in a manner
reasonably calculated to indicate that the Trust Assets have been
conveyed, in the case of any Originator, to the Transferor in
accordance with the Receivables Purchase Agreements and, in the
case of the Transferor, to the Trust in accordance with the
Transaction Documents for the benefit of the Beneficiaries; and
(ii) execute and file such financing or continuation statements, or
amendments thereto, and such other instruments, or notices, or
deliver to the Trustee such other documents, as may be necessary
or desirable, or as the Trustee may reasonably request, in order to
perfect and preserve the valid and perfected first priority ownership
or security interest granted or purported to be granted under any
Transaction Document.
(B) The Servicer hereby authorizes the Trustee to file
one or more financing or continuation statements, and amendments
thereto, relating to all or any part of the Trust Assets without the
signature of the Servicer where permitted by law. A photocopy or
other reproduction of any Transaction Document or any financing
statement covering the Trust Assets or any part thereof shall be
sufficient as a financing statement where permitted by law.
(C) The Servicer will furnish to the Trustee from time to
time statements and schedules further identifying and describing the
Trust Assets and such other reports in connection with the Trust
Assets as the Trustee may reasonably request, all in reasonable
detail.
(D) The Servicer shall, from time to time, execute and
deliver to the Obligors any bills, statements and letters or other
writings necessary to carry out the terms and provisions of any
Transaction Document and to facilitate the collection of the
Receivables in a manner consistent with the Credit Policy Manual.
(j) Change the Credit Policy Manual. The Servicer
shall comply with and perform its servicing obligations with respect
to the Receivables in accordance with the Credit Policy Manual,
except insofar as any failure to so comply or perform would not
materially adversely affect the Holders. Subject to compliance with
all Requirements of Law, the Transferor or the Servicer, as
applicable, may change the terms and provisions of the Credit
Policy Manual; provided, however, that (i) with respect to a
material change of collection policies, the Rating Agency Condition
is satisfied with respect thereto and (ii) with respect to a change of
collection procedures, no material adverse effect on any Series
would result.
(k) Notification of Obligors. The Servicer will notify
the Obligor on each Receivable purchased by the Trust on or after
the Transfer Date to make payments on such Receivable to a Lock
Box or one of the Collection Accounts.
(l) Modification of Systems. The Servicer agrees,
promptly after the replacement or any material modification of any
computer, automation or other operating systems (in respect of
hardware or software) used to provide the Servicer's services as
Servicer or to make any calculations or reports hereunder, to give
written notice of any such replacement or modification to the
Trustee.
(m) Servicer Business Days. No later than December 1
of each year, the Servicer shall furnish the Trustee with a list of
days other than Saturday and Sunday, on which the Servicer shall
be closed during the immediately succeeding calendar year, except
that with respect to the calendar year 1997, the Servicer shall
furnish such list to the Trustee on or before the Transfer Date.
(n) Keeping of Records and Books of Account. The
Servicer shall maintain and implement administrative and operating
procedures (including the ability to recreate records evidencing the
Receivables in the event of the destruction of the originals thereof),
and keep and maintain all documents, books, microfiche, computer
records and other information necessary or reasonably advisable for
the collection of all the Receivables. Such documents, books,
microfiche, and computer records shall reflect all customary facts
giving rise to the Receivables, all payments and credits with respect
thereto, and the computer records shall be clearly marked to show
the interests of the Trust in the Receivables. The Servicer shall
hold on behalf of the Trust (to the extent of its interest therein) any
document evidencing or securing a Receivable and any Contract
related to such Receivable and necessary to the servicing of such
Receivable and the collection thereof in accordance with the terms
of this Agreement. Such holding by the Servicer shall be in trust
and shall be deemed to be the holding thereof by the Trustee for
purposes of perfecting the Trust's rights therein as provided in the
UCC.
(o) Maintenance of Insurance. The Servicer shall use its
best efforts to maintain with a responsible company, and at its own
expense, its current commercial crime insurance (including
commercial fraud insurance) as is commercially available at a cost
that is not generally regarded as excessive by industry standards,
with coverage on all officers, employees or other Persons acting in
any capacity requiring such Persons to handle funds, money,
documents or papers relating to the Receivables.
(p) Statistical Months. Prior to the commencement of
each calendar year, the Servicer shall identify to the Trustee in
writing each four to five week period approximating one month
(corresponding to the "statistical months" used by the Servicer) for
such calendar year, provided the last day of the last such period in
any calendar year shall be December 31 (each such period being a
"Statistical Month").
Notwithstanding anything herein to the contrary and in accordance with
Section 3.01(b), if the Trustee is acting as Successor Servicer hereunder it
will not be bound to follow the Credit Policy Manual but shall service the
Receivables in accordance with customary industry standards in effect from
time to time.
SECTION 3.05. Reports and Records for the Trustee. (a)
Periodic Records. On each Business Day, the Servicer shall provide by
telecopy to the Trustee, and upon request to any Enhancement Provider,
the Daily Report and, to the extent not covered in the Daily Report, a
record setting forth (x) the Collections in respect of the Receivables
processed by the Servicer on the immediately preceding Business Day, (y)
the amount of Eligible Receivables as of the close of business on the
immediately preceding Business Day and (z) the Floating Allocation
Percentage for each Series at the close of business on the immediately
preceding Business Day; except that to the extent the information required
to be included in such Daily Report or record is not available on such
Business Day, such information shall be determined as of the most recent
date on which such information is available, but in no event prior to the
most recent Determination Date.
(b) Determination Date Certificate. On or before each
Determination Date with respect to each outstanding Series, the Servicer
shall deliver by telecopy to the Trustee, each Rating Agency and each
Enhancement Provider and the Trustee shall deliver to each Investor
Certificateholder a Determination Date Certificate for such Determination
Date.
SECTION 3.06. Annual Certificate of Servicer. On or
before April 30 of each calendar year, beginning with April 30, 1998, the
Servicer shall deliver to the Trustee, each Rating Agency and each
Enhancement Provider an Officer's Certificate, executed by the chief
financial officer of the Servicer, substantially in the form of Exhibit B
hereto. A copy of each such certificate will be sent to each Investor
Certificateholder by the Trustee.
SECTION 3.07. Annual Servicing Report of Independent
Public Accountants. Within 90 days after the Transfer Date and on an
annual basis on or before March 31 of each calendar year, beginning with
March 31, 1998, the Servicer shall at the Transferor's expense cause the
Independent Public Accountants to furnish a report (addressed to the
Trustee) to the Trustee, the Servicer, each Rating Agency and each
Enhancement Provider substantially to the effect set forth in Exhibit I;
provided, however, that all such Persons and a Majority in Interest may
approve an alternative arrangement.
SECTION 3.08. Tax Treatment. The Transferor, the
Servicer and the Trustee have entered into this Agreement, and the
Investor Certificates have been (or will be) issued to and acquired by the
Investor Certificateholders, with the intention that, for federal, state and
local income and franchise tax law purposes, the Investor Certificates will
be indebtedness of the Transferor secured by the Receivables. The
Transferor, the Servicer and the Trustee, by entering into this Agreement,
and each Holder, by the acceptance of its Certificate, agree to treat and
report the Certificates for purposes of federal, state and local income and
franchise taxes as indebtedness of the Transferor. Unless either (i) the
Trustee or the Servicer shall receive an Opinion of Counsel, based on a
Change in Tax Law occurring after the date hereof, that such Change in
Tax Law requires a different characterization or (ii) there shall be a final
determination that a different characterization is required, the Transferor
agrees that it will report its income for such federal, state and local income
or franchise taxes on the basis that it is the owner of the Receivables.
SECTION 3.09. Notices to Zenith. In the event that
Zenith is no longer acting as Servicer, any Successor Servicer shall deliver
or make available to Zenith and the Transferor each certificate and report
required to be delivered thereafter pursuant to Sections 3.05, 3.06 and
3.07.
SECTION 3.10. Adjustments. If the Servicer makes a
mistake with respect to the amount of any Collection and deposits or pays
an amount that is less than or more than the actual amount of such
Collection, the Servicer shall appropriately adjust the amount subsequently
deposited into the Trustee's Account or Transferor's Account or paid to
reflect such mistake and send written notice thereof to the Trustee. Any
Receivable in respect of which a dishonored check is received shall be
deemed not to have been paid.
SECTION 3.11. Securities and Exchange Commission
Filings. For so long as Zenith or any of its Affiliates is the Servicer, the
Servicer shall deliver or cause to be delivered to the Trustee, the Investor
Certificateholders and each Rating Agency copies of each report of Zenith,
the Transferor and any other Affiliate of Zenith which is a party to any
Transaction Document filed with the Securities and Exchange Commission
on Forms 10-K and 10-Q promptly after any such filing has been made.
ARTICLE IV
RIGHTS OF HOLDERS AND
ALLOCATION AND APPLICATION OF COLLECTIONS
SECTION 4.01. Rights of Holders. (a) The Investor
Certificates shall represent fractional undivided beneficial interests in the
Trust (with respect to each Series, the "Holders' Interest"), which shall
consist of the right to receive, to the extent necessary to make the required
payments with respect to the Investor Certificates of such Series at the
times and in the amounts specified in the related Supplement, the portion of
Collections allocable to Investor Certificateholders of such Series pursuant
to this Agreement and the related Supplement from funds on deposit in the
Concentration Account allocable to Holders of such Series and funds on
deposit in any related Series Account and funds available pursuant to any
related Enhancement (collectively with respect to all Series, the "Aggregate
Holders' Interest"), it being understood that the Investor Certificates of any
Series shall not represent any interest in any Series Account or
Enhancement for the benefit of any other Series. The Transferor
Certificate shall represent the fractional undivided beneficial interest in the
remainder of the Trust Assets not allocated pursuant to this Agreement or
any Supplement to the Aggregate Holders' Interest, including the right to
receive Collections with respect to the Receivables and other amounts at
the times and in the amounts specified in this Agreement or in any
Supplement to be paid to the Holder of the Transferor Certificate (the
"Transferor Interest"); provided, however, that the Transferor Certificate
shall not represent any interest in the Concentration Account, any
Collection Account, any Series Account or any Enhancement, except as
specifically provided in this Agreement or any Supplement.
(b) The Floating Allocation Percentage for each Series
and the Transferor Percentage shall be initially computed by the Servicer as
of the opening of business of the Servicer on the Initial Issuance Date for
each Series. Thereafter the Floating Allocation Percentage for each Series
and the Transferor Percentage shall be recomputed by the Servicer as of
the close of business of the Servicer on each Business Day until and
including the Business Day immediately preceding the commencement of
an Amortization Period for a Series, an Early Amortization Period for a
Series or a Partial Amortization Period. Each of the Floating Allocation
Percentage for each Series and the Transferor Percentage (i) 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 and (ii) as computed as of the close of business of the Servicer on
the Business Day immediately preceding the commencement of an
Amortization Period for a Series, an Early Amortization Period for a Series
or a Partial Amortization Period, shall remain constant at all times during
such Amortization Period, Early Amortization Period or such Partial
Amortization Period.
SECTION 4.02. Establishment of Concentration Account
and Collection Accounts. (a) Concentration Account. On or prior to the
Transfer Date, the Servicer, for the benefit of the Beneficiaries, shall
establish and maintain or cause to be established and maintained in the
name of the Trustee, on behalf of the Trust, with an Eligible Institution a
segregated trust account accessible by the Trustee (such account being the
"Concentration Account" and such institution holding such account being
the "Concentration Account Bank"), such account bearing a designation
clearly indicating that the funds deposited therein are held for the benefit of
the Beneficiaries. The Trustee shall possess all right, title and interest in
and to all funds from time to time on deposit in the Concentration Account
and in all proceeds thereof. The Concentration Account shall be under the
sole dominion and control of the Trustee for the benefit of the
Beneficiaries. Except as expressly provided in this Agreement, the Servicer
agrees that it shall have no right of set-off or banker's lien against, and no
right to otherwise deduct from, any funds held in the Concentration
Account for any amount owed to it by the Trustee, the Trust or any
Beneficiary. The Servicer shall cause Collections to be deposited into the
Concentration Account on each Business Day as promptly as is reasonably
practicable after receipt in a Collection Account. The Transferor will
require the Originators to mail any Collections received by them to a Lock
Box or deposit any Collections received by any of them into a Collection
Account within five Business Days following the Business Day on which
such Collections are so received. Notwithstanding the foregoing, if and to
the extent that funds that are not Collections are deposited into the
Concentration Account, the Servicer may direct in writing the Trustee to
withdraw such funds from the Concentration Account and deposit them in
the Transferor's Account.
If, at any time, the institution holding the Concentration
Account ceases to be an Eligible Institution, the Servicer, upon obtaining
actual Knowledge thereof, for the benefit of the Beneficiaries, shall within
15 Business Days (i) establish a new Concentration Account meeting the
conditions specified above with an Eligible Institution, (ii) transfer any cash
and/or any investments held therein or with respect thereto to such new
Concentration Account and (iii) in the case of any new Concentration
Account, deliver to all Collection Account Banks new Collection Account
Letters (with copies thereof to the Trustee) referring to such new
Concentration Account, and from the date such new Concentration
Account is established, it shall be the "Concentration Account". Pursuant
to the authority granted to the Servicer in Section 3.01, the Servicer shall
have the power to instruct the Trustee to make withdrawals and payments
from the Concentration Account for the purposes of carrying out the
Servicer's or the Trustee's duties specified in this Agreement.
Funds on deposit in the Concentration Account, shall at the
direction of the Servicer be invested by the Trustee or the Eligible
Institution maintaining such accounts in Eligible Investments as instructed
by the Servicer in writing (which may be a standing instruction) (or if not
so instructed, then invested by the Trustee or the Eligible Institution
maintaining such accounts in any Eligible Investments listed in clause (b) of
the definition of Eligible Investments). All such Eligible Investments shall
be held by the Trustee or the Eligible Institution maintaining such accounts
for the benefit of the Beneficiaries. Such funds shall be invested in Eligible
Investments that will mature so that funds will be available in amounts
sufficient for the Servicer to make each distribution required under the
applicable Supplement on the Distribution Date with respect to such
Collection Period. Funds deposited in the Concentration Account on a
Determination Date with respect to the next following Distribution Date
are required to be invested overnight. On each Distribution Date, all
interest and other investment earnings (net of losses and investment
expenses) received on funds on deposit in the Concentration Account, to
the extent such investment income is not needed to pay the Holders on
such Distribution Date, shall be paid to the Transferor, except as otherwise
specified in any Supplement. The Trustee is hereby authorized, unless
otherwise directed by the Servicer, to effect transactions in Eligible
Investments through a capital markets affiliate of the Trustee.
(b) Collection Accounts. On or prior to the Transfer
Date, the Servicer, for the benefit of the Beneficiaries, shall establish and
maintain or cause to be established and maintained (i) lock boxes to which
Obligors will remit payments with respect to any Receivable (each such
lock box, a "Lock Box") and (ii) in the name of the Trustee, on behalf of
the Trust, with an Eligible Institution, segregated accounts accessible by
the Trustee (each such account, a "Collection Account"). Obligors will be
directed to remit payments with respect to their Receivables to a Lock Box
or a Collection Account. The Lock Boxes and Collection Accounts shall
be under the sole dominion and control of the Trustee for the benefit of the
Beneficiaries. The Servicer shall cause the Trustee to transfer Collections
to the Concentration Account in the manner set forth in Section 4.02(a).
Each Collection Account shall be maintained with documentation and
instructions in form and substance satisfactory to the Trustee. Such
documentation shall provide, among other things, that available amounts
shall be promptly transferred to the Concentration Account. The Servicer
will not (i) make any change in any Lock Box numbers, the name, address
or ABA number of any Collection Account Bank, the account number of
any Collection Account, the name, address or ABA number of any
Concentration Account Bank, or the account number for any
Concentration Account from that set forth in Schedule 3.03(f) hereto or (ii)
amend any instruction to any Obligor or any instruction to or agreement
with any Collection Account Bank with respect to any Lock Box or
Collection Account (other than to (A) redirect payments of Obligors to a
different Lock Box or Collection Account or to the Concentration
Account, (B) to close unused Lock Boxes and Collection Accounts and
(C) open new Lock Boxes and Collection Accounts if the Trustee shall
have received executed copies of the Collection Account Letters with each
new Collection Account Bank or Lock Box Letters with each new Person
holding a Lock Box, as applicable) unless the Trustee (if directed to do so
by a Majority in Interest of each outstanding Series or, if the related
Supplement so provides, the Enhancement Provider for such Series) shall
have given its prior consent to such change or amendment.
The Servicer hereby agrees and acknowledges that (i) it has
executed and delivered to the Trustee a letter and executed
acknowledgement thereto substantially in the form of Exhibit C hereto
(each, a "Collection Account Letter" or a "Lock Box Letter", as the case
may be), addressed to and executed by each banking institution or other
Person with which a Collection Account or a Lock Box, as the case may
be, is maintained (each such banking institution with which a Collection
Account is maintained being a "Collection Account Bank") and (ii) it shall
execute and deliver a substantially similar executed Collection Account
Letter or Lock Box Letter, as the case may be, prior to the establishment
by it of any additional or alternative Collection Account or Lock Box, as
the case may be. The Servicer hereby agrees, and the Trustee hereby
acknowledges, that the execution and delivery of each Collection Account
Letter and each Lock Box Letter transfers all right, title and interest in all
monies, securities and instruments in the applicable Collection Account or
Lock Box to the Trustee. The Servicer agrees, and is hereby granted the
authority, to amend Schedule 3.03(f) hereto to reflect any change made in
compliance with this Agreement in the Collection Account Banks or the
Persons holding Lock Boxes and to execute such further documents and
take such other actions as may be reasonably requested by the Trustee in
order to effect such transfer.
SECTION 4.03. Allocation of Collections. Collections will
be allocated to each Series as specified in the related Supplement, and
amounts so allocated to any Series will not, except as specified in the
related Supplement, be available to the Investor Certificateholders of any
other Series. Allocations thereof between the Holders' Interest and the
Transferor Interest, among the Series or to any Enhancement Agreement
and to any Enhancement Provider shall be set forth in the related
Supplement or Supplements. If, on any day, the sum of the Floating
Allocation Percentages for all outstanding Series exceeds 100%, as set
forth on the applicable Daily Report, then the aggregate of the Investor
Collections for all outstanding Series shall be allocated pro rata among all
outstanding Series on the basis of the Series Allocation Percentage for each
such Series; provided, however, that if on any day the amount of Investor
Collections for any Series is not sufficient to pay the full amount of interest
due and payable on such day to the Investor Certificateholders of each
Series on such day, then the aggregate of the Investor Collections for all
outstanding Series shall be allocated pro rata among all outstanding Series
on the basis of a fraction, for each Series, the numerator of which is the
Invested Amount of such Series and the denominator of which is the Trust
Invested Amount.
ARTICLE V
DISTRIBUTIONS AND REPORTS TO HOLDERS
SECTION 5.01. Distributions and Reports to Holders.
Distributions shall be made to, and reports shall be provided to, Holders as
set forth in the applicable Supplement.
ARTICLE VI
THE CERTIFICATES
SECTION 6.01. The Certificates. The Investor Certificates
of any Series shall be issued in registered form (for purposes of Section
163(f) of the Internal Revenue Code and otherwise) and shall be in
substantially the form set forth as an exhibit to the applicable Supplement
and shall upon issue be executed and delivered by the Transferor to the
Trustee for authentication and redelivery as provided in Section 6.02. The
Investor Certificates shall be issued in minimum denominations of
$1,000,000 and in integral multiples of $1,000 in excess thereof (except
that one Certificate may be issued in a denomination that includes any
residual amount), and shall be issued upon initial issuance as one or more
Investor Certificates in an aggregate original principal amount equal to the
Initial Invested Amount. The Transferor Certificate shall be a single
certificate, substantially in the form of Exhibit A hereto, and shall represent
the entire Transferor Interest. Each Certificate shall be executed by manual
or facsimile signature on behalf of the Transferor by the President, any Vice
President, the Chief Administrative and Credit Officer, Treasurer or the
Secretary of the Transferor, or by any other officer or assistant officer duly
authorized to execute such Certificate on behalf of the Transferor.
Certificates bearing the manual or facsimile signature of the individual who
was, at the time when such signature was affixed, authorized to sign on
behalf of the Transferor shall not be rendered invalid, notwithstanding that
such individual ceased to be so authorized prior to the authentication and
delivery of such Certificates or does not hold such office at the date of such
Certificates. No Certificates shall be entitled to any benefit under this
Agreement or the applicable Supplement or be valid for any purpose,
unless there appears on such Certificate a certificate of authentication in
substantially the form provided in Exhibit A hereto executed by or on
behalf of the Trustee by the manual signature of a duly authorized
signatory, and such certificate upon any Certificate shall be conclusive
evidence that such Certificate has been duly authenticated and delivered
hereunder. All Certificates shall be dated the date of their authentication.
SECTION 6.02. Authentication of Certificates. The
Trustee shall authenticate and deliver the Investor Certificates of each
Series to, and upon the written order of, the Transferor against payment to
the Transferor of the purchase price therefor. The Trustee shall
authenticate and deliver the Transferor Certificate to the Transferor
simultaneously with its delivery of the first Series of Investor Certificates
to be issued hereunder. The Certificates of any Series shall be duly
authenticated by or on behalf of the Trustee, in authorized denominations
equal to (in the aggregate), in the case of the Investor Certificates, the
Initial Invested Amount, and, in the case of the Transferor Certificate equal
to the Transferor Interest from time to time, and together evidencing the
entire ownership of the Trust.
SECTION 6.03. Registration of Transfer and Exchange of
Certificates. (a) The Trustee shall cause to be kept at its Corporate Trust
Office a register (the "Certificate Register") in which, subject to such
reasonable regulations as it may prescribe, a transfer agent and registrar
(which may be the Trustee) (the "Transfer Agent and Registrar") shall
provide for the registration of the Certificates and of transfers and
exchanges of the Certificates as herein provided. The Transfer Agent and
Registrar shall initially be the Trustee, and any co-transfer agent and co-
registrar chosen by the Trustee and acceptable to the Servicer. Any
reference in this Agreement to the Transfer Agent and Registrar shall
include any co-transfer agent and co-registrar unless the context requires
otherwise.
The Trustee shall be permitted to resign as Transfer Agent
and Registrar upon 30 days' (60 days' during an Amortization Period)
written notice to the Transferor and the Servicer; provided, however, that
such resignation shall not be effective and the Trustee shall continue to
perform its duties as Transfer Agent and Registrar until the Servicer has
appointed a Successor Trustee pursuant to Section 11.07, which Successor
Trustee shall act as the successor Transfer Agent and Registrar hereunder.
Upon surrender for registration of transfer of any Investor
Certificate at any office or agency of the Transfer Agent and Registrar
maintained for such purpose and receipt of a representation letter described
in Section 6.03(c) and a certificate or letter from the transferring Person to
the effect that such transfer is in compliance with all applicable
requirements of the applicable Supplement or Certificate Purchase
Agreement, the Transferor shall execute, and the Trustee shall authenticate
and deliver, in the name of the designated transferee or transferees, one or
more new Investor Certificates (of the same Series) in authorized
denominations of like aggregate Undivided Fractional Interests in the
Aggregate Holders' Interest.
At the option of an Investor Certificateholder, Investor
Certificates may be exchanged for other Investor Certificates (of the same
Series) in authorized denominations of like aggregate Undivided Fractional
Interests in the Holders' Interest, upon surrender of the Investor
Certificates to be exchanged at any such office or agency. Whenever any
Investor Certificates are so surrendered for exchange, the Transferor shall
execute, and the Trustee shall authenticate and deliver, the Investor
Certificates which the Holder making the exchange is entitled to receive.
Every Investor Certificate presented or surrendered for
registration of transfer or exchange shall be accompanied by a written
instrument of transfer in a form satisfactory to the Trustee or the Transfer
Agent and Registrar duly executed by the Holder thereof or his attorney-in-
fact duly authorized in writing. Each Holder must satisfy all transfer
restrictions set forth herein, in the Certificates and in the related
Supplement or Certificate Purchase Agreement.
Each Investor Certificate shall be registered at all times as
herein provided, and any transfer or exchange of such Investor Certificate
will be valid for purposes hereunder only upon registration of such transfer
or exchange by the Trustee or the Transfer Agent and Registrar as
provided herein. Payments on any Distribution Date shall be made to
Holders of record on the immediately preceding Record Date.
No service charge shall be made for any registration of
transfer or exchange of Investor Certificates, but the Transfer Agent and
Registrar or any co-transfer agent and co-registrar may require payment of
a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any transfer or exchange of Investor
Certificates.
All Investor Certificates surrendered for registration of
transfer or exchange, or for payment, shall be cancelled and disposed of in
a manner reasonably satisfactory to the Trustee.
(b) The Transfer Agent and Registrar will maintain at its
expense in New York, New York an office or offices or agency or agencies
where Investor Certificates may be surrendered for registration of transfer
or exchange.
(c) Notwithstanding any other provision of this Section
6.03, no registration of transfer of any Investor Certificate shall be made
unless the Transferor or the transferee shall deliver, at its expense, to the
Transferor, the Servicer and the Trustee a representation letter,
substantially in the form attached as Exhibit D to this Agreement, stating,
among other things, that such transferee is not (i) an employee benefit plan
(as defined in Section 3(3) of ERISA) subject to Title I of ERISA, (ii) a
plan (as defined in Section 4975(e)(1) of the Code) or (iii) an entity whose
underlying assets include "plan assets" under Department of Labor
Regulation 29 C.F.R. Section 2510.3-101.
SECTION 6.04. Mutilated, Destroyed, Lost or Stolen
Certificates. If (a) any mutilated Certificate is surrendered to the Transfer
Agent and Registrar, or the Transfer Agent and Registrar receives evidence
to its satisfaction of the destruction, loss or theft of any Certificate and
(b) there is delivered to the Transfer Agent and Registrar, the Trustee, the
Transferor and the Servicer such indemnity (provided that a letter of
indemnity from (i) an insurance company or (ii) an institutional investor, in
either case, of investment grade credit rating shall satisfy such requirement)
as may be required by them to save each of them harmless, then, in the
absence of notice to the Trustee that such Certificate has been acquired by
a bona fide purchaser, the Transferor shall execute and the Trustee shall
authenticate and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Certificate, a new Certificate of like tenor and (in
the case of any new Investor Certificate) Undivided Fractional Interest. In
connection with the issuance of any new Certificate under this Section
6.04, the Trustee or the Transfer Agent and Registrar may require the
payment by the Holder of a sum sufficient to pay any tax or other
governmental charge that may be imposed in relation thereto. Any
duplicate Certificate issued pursuant to this Section 6.04 shall constitute
complete and indefeasible evidence of ownership in the Trust, as if
originally issued, whether or not the lost, stolen or destroyed Certificate
shall be found at any time.
SECTION 6.05. Persons Deemed Owners. At all times
prior to due presentation of a Certificate for registration of transfer, the
Trustee, the Transfer Agent and Registrar and any agent of any of them
shall treat the Person in whose name any Certificate is registered as the
owner of such Certificate for the purpose of receiving distributions
pursuant to the terms of the applicable Supplement and for all other
purposes whatsoever and neither the Trustee, the Transfer Agent and
Registrar nor any agent of any of them shall be affected by any notice to
the contrary. Notwithstanding the foregoing, in determining whether the
requisite Holders have given any request, demand, authorization, direction,
notice, consent or waiver hereunder, Certificates owned by the Transferor,
the Servicer or any Affiliate thereof shall be disregarded and deemed not to
be outstanding, except that, in determining whether the Trustee shall be
protected in relying upon any such request, demand, authorization,
direction, notice, consent or waiver, only Certificates which a Responsible
Official of the Trustee actually knows to be so owned shall be so
disregarded. Certificates (other than a Transferor Certificate) so owned
which have been pledged in good faith shall not be disregarded and may be
regarded as outstanding if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to such Certificates and
that the pledgee is not the Transferor, the Servicer or an Affiliate thereof or
if a Responsible Official of the Trustee has received written notice thereof.
SECTION 6.06. Access to List of Holders' Names and
Addresses. The Trustee will furnish or cause to be furnished by the
Transfer Agent and Registrar to the Servicer, the Transferor or any
Investor Certificateholder, within five Business Days after receipt by the
Trustee of a written request therefor from the Servicer, the Transferor or
any Investor Certificateholder, respectively, a list of the names and
addresses of the Holders.
Every Holder, by receiving and holding a Certificate, agrees
that neither the Trustee, the Transfer Agent and Registrar, the Transferor,
the Servicer, Zenith, nor any of their respective agents, shall be held
accountable by reason of the disclosure of any such information as to the
names and addresses of the Holders hereunder, regardless of the sources
from which such information was derived.
SECTION 6.07. Authenticating Agent. (a) The Trustee
may appoint one or more authenticating agents with respect to the
Certificates which shall be authorized to act on behalf of the Trustee in
authenticating the Certificates in connection with the issuance, delivery,
registration of transfer, exchange or repayment of the Certificates.
Whenever reference is made in this Agreement to the authentication of
Certificates by the Trustee or the Trustee's certificate of authentication,
such reference shall be deemed to include authentication on behalf of the
Trustee by an authenticating agent and a certificate of authentication
executed on behalf of the Trustee by an authenticating agent. Each
authenticating agent must be acceptable to the Transferor and the Servicer.
(b) Any institution succeeding to the corporate agency
business of an authenticating agent shall continue to be an authenticating
agent without the execution or filing of any power or any further act on the
part of the Trustee or such authenticating agent.
(c) An authenticating agent may at any time resign by
giving written notice of resignation to the Trustee and to the Transferor.
The Trustee may at any time terminate the agency of an authenticating
agent by giving notice of termination to such authenticating agent and to
the Transferor. Upon receiving such a notice of resignation or upon such a
termination, or in case at any time an authenticating agent shall cease to be
acceptable to the Trustee or the Transferor, the Trustee may promptly
appoint a successor authenticating agent. Any successor authenticating
agent upon acceptance of its appointment hereunder shall become vested
with all the rights, powers and duties of its predecessor hereunder, with
like effect as if originally named as an authenticating agent. No successor
authenticating agent shall be appointed unless acceptable to the Trustee
and the Transferor.
(d) The Transferor agrees to pay to each authenticating
agent, from time to time, reasonable compensation for its services under
this Section 6.07.
(e) The provisions of Sections 7.03, 8.04, 11.01, 11.02
and 11.03 shall be applicable to any authenticating agent.
(f) Pursuant to an appointment made under this Section
6.07, the Certificates may have endorsed thereon, in lieu of or in addition
to the Trustee's certificate of authentication, an alternate certificate of
authentication in substantially the following form:
This is one of the Certificates described in the Pooling and
Servicing Agreement among Zenith Finance Corporation,
Zenith Electronics Corporation and Bankers Trust
Company, dated as of March 31, 1997.
as Authenticating
Agent for the Trustee
By:
Authorized
Signer
SECTION 6.08. New Issuances. (a) The Transferor may
from time to time direct the Trustee, on behalf of the Trust, to issue one or
more new Series of Investor Certificates pursuant to a Supplement. The
Investor Certificates of all outstanding Series shall be equally and ratably
entitled as provided herein to the benefits of this Agreement without
preference, priority or distinction, all in accordance with the terms and
provisions of this Agreement and the applicable Supplement except, with
respect to any Series, as provided in the related Supplement.
(b) On or before the Initial Issuance Date relating to any
new Series, the parties hereto will execute and deliver a Supplement which
will specify the Principal Terms of such new Series. The terms of such
Supplement may modify or amend the terms of this Agreement solely as
applied to such new Series. The obligation of the Trustee to issue the
Investor Certificates of such new Series and to execute and deliver the
related Supplement is subject to the satisfaction of the following
conditions:
(i) on or before the tenth Business Day immediately
preceding the Initial Issuance Date for such Series, the Transferor
shall have given the Trustee, the Servicer, each Rating Agency and
any Enhancement Provider written notice of such issuance and the
Initial Issuance Date for such Series;
(ii) the Transferor shall have delivered to the Trustee
the related Supplement, in form satisfactory to the Trustee,
executed by each party thereto other than the Trustee;
(iii) the Transferor shall have delivered to the Trustee
any related Enhancement Agreement executed by each party
thereto other than the Trustee;
(iv) each Rating Agency shall have notified the
Transferor, the Servicer, the Trustee and any Enhancement
Provider in writing that the issuance of such new Series of Investor
Certificates will not result in a reduction or withdrawal of the rating
of any outstanding Series with respect to which it is a Rating
Agency;
(v) such issuance will not result in the occurrence of an
Early Amortization Event and the Transferor shall have delivered to
the Trustee and any Enhancement Provider an Officer's Certificate,
dated the Initial Issuance Date for such Series (upon which the
Trustee may conclusively rely), to the effect that the Transferor
reasonably believes that such issuance will not result in the
occurrence of an Early Amortization Event and is not reasonably
expected to result in the occurrence of an Early Amortization Event
at any time in the future;
(vi) the Transferor shall have delivered to the Trustee
and any Enhancement Provider an Opinion of Counsel to the effect
that the issuance of the Investor Certificates of such Series (A) has
been, or need not be, registered under the Act and will not result in
the requirement that any other Series not registered under the Act
be so registered (unless the Transferor has elected, in its sole
discretion, to register such Certificates), (B) will not result in the
Trust becoming subject to registration as an investment company
under the Investment Company Act and (C) will not require this
Agreement or the related Supplement to be qualified under the
Trust Indenture Act of 1939, as amended (unless the Transferor has
elected, in its sole discretion, to so qualify the Agreement or the
related Supplement);
(vii) the Transferor shall have delivered to the Trustee
and any Enhancement Provider a Tax Opinion, dated the Initial
Issuance Date for such Series, with respect to such issuance;
(viii) such issuance will not result in the aggregate of the
Floating Allocation Percentages for all outstanding Series (after
giving effect to such new issuance) exceeding 100%;
(ix) to the extent required in the related Supplement or
Certificate Purchase Agreement, the Transferor shall have provided
each letter of credit or other credit enhancement required by such
Supplement or Certificate Purchase Agreement; and
(x) the Receivables Purchase Agreements and the Parent
Undertaking Agreement shall be in full force and effect.
Upon satisfaction of the above conditions, the Trustee shall execute the
Supplement and the Transferor shall execute and deliver to the Trustee the
Investor Certificates of such Series for authentication and redelivery to or
upon the written order of the Transferor. Notwithstanding the provisions
of this section 6.08(b), prior to the execution of any Supplement, the
Trustee shall be entitled to receive and rely upon an Opinion of Counsel
stating that the execution of such Supplement is authorized or permitted by
this Agreement and any Supplement related to any outstanding Series. The
Trustee may, but shall not be obligated to, enter into any such Supplement
which adversely affects the rights, duties or immunities under this
Agreement of the Person, solely in its individual capacity then serving as
Trustee (but not its rights, duties or immunities as Trustee).
(c) The Transferor may surrender the Transferor
Certificate to the Trustee in exchange for a newly issued Transferor
Certificate and a second certificate (a "Supplemental Certificate"), the
terms of which shall be subject to Section 13.01 to the extent that it
amends any of the terms of this Agreement, to be delivered to or upon the
order of the Transferor (or the holder of a Supplemental Certificate, in the
case of the transfer or exchange thereof, as provided below), upon
satisfaction of the following conditions:
(i) the Transferor shall have delivered to the Trustee an
Officer's Certificate certifying that the result obtained by multiplying
(x) an amount equal to the excess of the Net Receivables Balance
over the Trust Invested Amount by (y) the percentage equivalent of
the portion of the Transferor Interest represented by the Transferor
Certificate, shall not be less than 2% of the Outstanding Balance of
all Receivables owned by the Trust, in each case as of the date of,
and after giving effect to, such exchange;
(ii) the Rating Agency Condition shall have been
satisfied with respect to such exchange (or transfer or exchange as
provided below); and
(iii) the Transferor shall have delivered to the Trustee
and any Enhancement Provider a Tax Opinion, dated the date of
such exchange (or transfer or exchange as provided below), with
respect thereto.
The Transferor Certificate will at all times be beneficially owned by
the Transferor. Any Supplemental Certificate may be transferred or
exchanged only upon satisfaction of the conditions set forth in clauses (ii)
and (iii) above.
ARTICLE VII
OTHER MATTERS RELATING TO THE TRANSFEROR
SECTION 7.01. Obligations Not Assignable. The
obligations of the Transferor hereunder shall not be assignable nor shall any
Person succeed to the obligations of the Transferor hereunder.
SECTION 7.02. Limitations on Liability. None of the
directors, officers, employees or agents of the Transferor, past, present or
future, shall be under any liability to the Trust, the Trustee, the Holders,
any Enhancement Provider or any other Person for any action taken or for
refraining from the taking of such action in such capacities pursuant to this
Agreement or for any obligation or covenant under this Agreement;
provided, however, that this provision shall not protect any such Person
against any liability which would otherwise be imposed by reason of willful
misconduct or gross negligence or the reckless disregard by such Person of
any of his, her or its obligations and duties hereunder. The Transferor and
any director, officer, employee or agent of the Transferor may rely in good
faith on any document of any kind prima facie properly executed and
submitted by any Person (other than the Transferor or any Affiliate thereof)
respecting any matters arising hereunder or under any Supplement or the
Receivables Purchase Agreements.
SECTION 7.03. Indemnification of the Trustee, the
Holders, any Program Agent and any Enhancement Provider. Without
limiting any other rights which the Trustee, the Holders (other than the
Transferor and its Affiliates), any Program Agent or any Enhancement
Provider and their respective assignees and their respective officers,
directors, employees, agents and affiliates (each, an "Indemnified Party"
and collectively the "Indemnified Parties") may have hereunder or under
applicable law, the Transferor hereby agrees to indemnify each Indemnified
Party from and against any and all claims, damages, losses and liabilities
and related costs and expenses (including reasonable attorneys' fees and
disbursements) (all of the foregoing being collectively referred to as
"Indemnified Amounts") awarded against or incurred by any of them
arising out of or resulting from any Transaction Document, the activities of
the Trustee in connection herewith, the Transferor's use of proceeds of
Transfers of Receivables or reinvestments of Collections, the interest
conveyed hereunder in Trust Assets, or in respect of any Receivable or any
Contract (excluding however (a) Indemnified Amounts to the extent
resulting from gross negligence or willful misconduct on the part of such
Indemnified Party, (b) recourse (except as otherwise specifically provided
in any Transaction Document) for uncollectible Receivables or (c) except
with respect to clause (xi) below, any federal, state, foreign or local income
or franchise taxes or any other tax imposed on or measured by income (or
any interest, penalty, or addition to tax with respect thereto or arising from
a failure to comply therewith) incurred by such Indemnified Party arising
out of or as a result of this Agreement or the interest conveyed hereunder
in Trust Assets). Without limiting or being limited by the foregoing, the
Transferor shall pay on demand to each Indemnified Party any and all
amounts necessary to indemnify such Indemnified Party from and against
any and all Indemnified Amounts relating to or resulting from:
(i) reliance on any representation, warranty or covenant
made or statement made or deemed made by the Transferor or the
Parent (or any of their respective Responsible Officials) under or in
connection with any Transaction Document which shall have been
incorrect in any material respect when made or deemed made or
which the Transferor shall have failed to perform;
(ii) the failure by the Transferor to comply with any
Transaction Document or any applicable Requirement of Law with
respect to any Trust Asset or related Contract, or the failure of any
Receivable or the Related Security or related Contract to conform
to any requirement with respect thereto under any Transaction
Document or any Requirement of Law;
(iii) the failure to vest in the Trustee on behalf of the
Trust for the benefit of the Beneficiaries either a perfected first
priority undivided percentage ownership interest, to the extent of
the Aggregate Holders' Interest, or a perfected first priority security
interest in the Receivables and the other Trust Assets, free and clear
of any Lien;
(iv) the failure to have filed, or any delay in filing, any
financing statements or other similar instruments or documents
under the UCC of any applicable jurisdiction or other applicable
laws that are necessary for perfection or first priority of the
ownership or security interest created by this Agreement or any
Receivables Purchase Agreement;
(v) any dispute, claim, offset or defense (other than
discharge in bankruptcy of the Obligor) of the Obligor to the
payment of any Receivable in, or purporting to be in, the Trust
Assets (including a defense based on such Receivable or the related
Contract not being a legal, valid and binding obligation of such
Obligor enforceable against it in accordance with its terms), or any
other claim resulting from the sale of the merchandise, insurance or
services related to such Receivable or the furnishing or failure to
furnish such merchandise, insurance or services;
(vi) any products liability claim or other claim allegedly
arising out of or in connection with merchandise, insurance or
services which are the subject of any Contract;
(vii) any failure by the Transferor or any Affiliate of the
Transferor to perform its duties or obligations in accordance with
the provisions of any Transaction Document, including any failure
to so perform in connection with servicing, administering or
collecting any Receivable;
(viii) any commingling of Collections at any time with
other funds;
(ix) any investigation, litigation or proceeding related to
any Transaction Document or the use of proceeds or reinvestments
of proceeds by the Transferor or Zenith of Transfers of Receivables
or the ownership of or security interest in Trust Assets or in respect
of any Receivable or Contract;
(x) any taxes, including sales, excise, intangibles, value
added, personal property and similar taxes, payable with respect to
the Receivables;
(xi) any federal, state, foreign or local income or
franchise tax, or any other tax imposed on or measured by reference
to income, or any interest, penalty or addition to tax with respect
thereto or arising from a failure to comply therewith, imposed upon
the Trust, the assets of the Trust or the Trustee as a result of its
acting in its capacity as trustee hereunder, except with respect to
fees or other compensation received by the Trustee; or
(xii) Any Receivable classified as an "Eligible Receivable"
by the Transferor or the Servicer in any document or report
delivered hereunder failing to satisfy, at the time of such
classification, the requirements of eligibility contained in the
definition of Eligible Receivable.
Any Indemnified Amounts due hereunder shall be payable
within fifteen Business Days of submission of a claim by the Indemnified
Party which describes in reasonable detail the basis for such claim.
Indemnification pursuant to this Section 7.03 shall only be
payable from assets of the Transferor, except that the Holder of the
Transferor Certificate and any Supplemental Certificate (and any corporate
successor thereof whether by merger, consolidation or otherwise, and any
parent corporation of any thereof) shall also be liable with respect to such
indemnification to the extent of any payments made with respect to the
Transferor Certificate or any Supplemental Certificate after the
commencement of the Amortization Period or an Early Amortization
Period (or, if more than one Early Amortization Period occurs, the latest
such Early Amortization Period), which payments are received by such
Holder, corporate successor or parent (whether by dividend, distribution or
otherwise). The rights of the Indemnified Parties under this Section 7.03
shall survive the collection of Receivables, the termination of the Trust and
the payment of all amounts otherwise payable hereunder.
ARTICLE VIII
OTHER MATTERS RELATING TO THE SERVICER
SECTION 8.01. Liability of the Servicer. The Servicer
shall be liable under this Agreement only to the extent of the obligations
specifically undertaken by the Servicer in its capacity as Servicer. No
implied duties or covenants shall be read into this Agreement against the
Servicer.
SECTION 8.02. Merger or Consolidation of, or
Assumption of the Obligations of, the Servicer. The Servicer shall not
consolidate with or merge into any other Person or convey or transfer its
properties and assets substantially as an entirety to any Person unless:
(a) (i) the Person formed by such consolidation or into
which the Servicer is merged or the Person which acquires by
conveyance or transfer the properties and assets of the Servicer
substantially as an entirety shall be, if the Servicer is not the
surviving entity, a corporation organized and existing under the
laws of the United States of America or any State or the District of
Columbia, and such corporation shall have expressly assumed, by
an agreement supplemental hereto, executed and delivered to the
Trustee in form satisfactory to the Trustee the performance of
every covenant and obligation of the Servicer hereunder; (ii) the
Servicer shall have delivered to the Trustee an Officer's Certificate
and an Opinion of Counsel each in form satisfactory to the Trustee
and stating that such consolidation, merger, conveyance or transfer
complies with this Section 8.02 and that all conditions precedent
provided for in this Section 8.02(a) relating to such transaction
have been complied with; and (iii) the Rating Agency Condition
shall have been satisfied; and
(b) the corporation formed by such consolidation or into
which the Servicer is merged or which acquires by conveyance or
transfer the properties and assets of the Servicer substantially as an
entirety shall have all licenses and approvals of Governmental
Authorities required to service the Receivables, except where the
failure to do so could not reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect.
SECTION 8.03. Limitations on Liability. None of the
directors, officers, employees or agents of the Servicer, past, present or
future, shall be under any liability to the Trust, the Trustee, the Holders or
any other Person for any action taken or for refraining from the taking of
any action in such capacities pursuant to this Agreement or for any
obligation or covenant under this Agreement, it being understood that, with
respect to the Servicer, this Agreement and the obligations created
hereunder are solely the obligations of the Servicer; provided, however,
that this provision shall not protect the Servicer or any such Person against
any liability which would otherwise be imposed by reason of willful
misconduct or gross negligence by such Person. The Servicer and any
partner, director, officer, employee or agent of the Servicer may rely in
good faith on any document of any kind prima facie properly executed and
submitted by any Person (other than the Servicer or any Affiliate thereof)
respecting any matters arising hereunder. The Servicer shall not be under
any obligation to appear in, prosecute or defend any legal action which is
not reasonably related to its duties as Servicer in accordance with this
Agreement and which may involve it in any expense or liability.
SECTION 8.04. Servicer Indemnification. The Servicer
hereby agrees to indemnify each Indemnified Party from and against
Indemnified Amounts awarded against or incurred by any of them
(excluding however (a) Indemnified Amounts to the extent resulting from
gross negligence or willful misconduct on the part of such Indemnified
Party and (b) recourse (except as otherwise specifically provided in any
Transaction Document) for uncollectible Receivables) relating to or
resulting from:
(i) reliance on any representation, warranty or covenant
made or statement made or deemed made by the Servicer (or any of
its Responsible Officials) under or in connection with any
Transaction Document which shall have been incorrect in any
material respect when made or deemed made or which the Servicer
shall have failed to perform;
(ii) the failure by the Servicer to comply with any
Transaction Document or any applicable Requirement of Law with
respect to any Trust Asset or related Contract;
(iii) any failure by the Servicer to perform its duties or
obligations in accordance with the provisions of any Transaction
Document, including any failure to so perform in connection with
servicing, administering or collecting any Receivable; or
(iv) any commingling of Collections at any time with
other funds.
The initial Servicer further agrees (whether or not it is the
Servicer at the time any claim is made under this sentence) to indemnify (a)
each Indemnified Party from and against all reasonable costs and expenses
(including reasonable fees and expenses of counsel for such Indemnified
Party) incurred by such Indemnified Party in connection with the
enforcement (whether through negotiations, legal proceedings or
otherwise) of this Agreement and the other Transaction Documents and (b)
the Trustee from and against all losses, costs and expenses incurred by the
Trustee, but in each case under clause (a) and (b) of this sentence only to
the extent that such costs and expenses were incurred or arose during or
with respect to any period in which Zenith (or any of its Affiliates other
than the Transferor) is or shall be the Servicer.
Indemnification pursuant to this Section 8.04 shall only be
payable from the assets of the Servicer. The agreement contained in this
Section 8.04 shall survive the collection of all Receivables, the termination
of the Trust and the payment of all amounts otherwise due hereunder.
Any Indemnified Amounts due hereunder shall be payable
within fifteen Business Days of submission of a claim by the Indemnified
Party which describes in reasonable detail the basis for such claim.
SECTION 8.05. The Servicer Not to Resign. The Servicer
shall not resign from the obligations and duties hereby imposed on it except
upon determination that (i) its performance of its duties hereunder is no
longer permissible under applicable law and (ii) there is no reasonable
action which the Servicer could take without incurring material liabilities to
make its performance of its duties hereunder permissible under applicable
law. Any determination permitting the resignation of the Servicer shall be
evidenced by an Opinion of Counsel who is not an employee of the
Servicer or any Affiliate of the Servicer with respect to clause (i) above,
delivered to, and in form reasonably satisfactory to, the Trustee. No
resignation shall become effective until the Trustee or a Successor Servicer
shall have assumed the responsibilities and obligations of the Servicer in
accordance with Section 10.02.
SECTION 8.06. Examination of Records. The Servicer
shall mark its computer records to give proper notice that the Receivables
and other Trust Assets have been transferred to the Trustee, on behalf of
the Trust, pursuant to this Agreement for the benefit of the Beneficiaries.
The Servicer (and the Transferor) shall, prior to the sale or transfer to a
party other than the Transferor of any receivable held in its custody,
examine its records to determine that such receivable is not a Receivable.
SECTION 8.07. Confidentiality. The Servicer agrees to use its
best efforts, and shall cause its agents or representatives to use their best
efforts, to hold in confidence all Confidential Information; provided
that nothing herein shall prevent the Servicer from delivering copies of any
financial statements and other documents constituting Confidential
Information or disclosing any other Confidential Information (i) to a
Successor Servicer or as required by a Requirement of Law applicable to
the Servicer, (ii) as required in the performance of the Servicer's duties
hereunder, (iii) as required in enforcing the rights of the Holders hereunder
or (iv) as provided in any Supplement. The Servicer agrees to take such
measures as shall be reasonably requested by the Transferor to protect and
maintain the security and confidentiality of all Confidential Information
and, in connection therewith, will allow the Transferor to inspect the
Servicer's security and confidentiality arrangements from time to time
during normal business hours. The Servicer shall use its best efforts to
provide the Transferor written notice at least five Business Days prior to
any disclosure pursuant to this Section 8.07 and in any event will provide
written notice whenever any such disclosure is made.
ARTICLE IX
EARLY AMORTIZATION EVENTS
SECTION 9.01. Early Amortization Events. If any one of
the following events shall occur:
(a) any failure by the Transferor or the Servicer to make
any payment, transfer or deposit required to be paid, effected or
made by it hereunder (including pursuant to Section 3.04(b)) within
two Business Days after the same shall become due; or
(b) any representation or warranty, certification or
written statement made or deemed made by the Transferor or the
Servicer under or in connection with this Agreement, or by the
Parent under or in connection with the Parent Undertaking
Agreement, or in any statement, record, certificate, financial
statement or other document delivered pursuant to this Agreement
or the Parent Undertaking Agreement, or in connection with this
Agreement or the Parent Undertaking Agreement, shall prove to
have been incorrect in any material respect on or as of the date
made or deemed made; or
(c) the Transferor or the Servicer shall fail to observe or
perform any covenant or agreement applicable to it contained
herein which has a material adverse effect on any Beneficiary if such
failure shall remain unremedied for ten days after the first date on
which any Responsible Official of the Transferor or the Servicer
knew or should have known of such failure; or
(d) any Receivables Purchase Agreement shall for any
reason cease to be in full force and effect or an Early Termination
(as defined therein) shall occur; or
(e) the Net Receivables Balance is less than the
Required Net Receivables Balance upon the termination of a Partial
Amortization Period; or
(f) an Insolvency Event shall occur with respect to any
Originator, the Transferor, the Servicer, Zenith, the Parent or the
Trust; or
(g) the Securities and Exchange Commission or other
regulatory body having jurisdiction shall reach a final determination
that the Trust is an "investment company" within the meaning of the
Investment Company Act; or
(h) (i) any purchase of any Receivables by the
Transferor under any Receivables Purchase Agreement shall cease
to create a valid sale, transfer and assignment to the Transferor of
all right, title and interest of the Originator in and to such Receiv-
ables and the proceeds thereof, or (ii) any Transfer of any
Receivables on any date shall for any reason cease to create a valid
and perfected first priority sale, transfer and assignment to the Trust
of all right, title and interest of the Transferor in and to such
Receivables and the proceeds thereof or, if such Transfer does not
constitute such a sale, transfer and assignment, cease to create a
valid and perfected first priority security interest in such
Receivables and the proceeds thereof, or (iii) the Investor Certifi-
cates delivered hereunder shall for any reason (other than due to the
acts or omissions of the Investor Certificateholders) cease to
evidence the transfer to the Investor Certificateholders of, or the
Investor Certificateholders shall otherwise cease to have, a
beneficial interest in a trust owning, or the Trustee on behalf of the
Trust having a perfected first priority security interest in, the
Receivables and the other Trust Assets now existing and hereafter
arising and the proceeds thereof to the extent of their respective
Undivided Fractional Interests; or
(i) the Trust at any time receives a final determination
that the Trust will be treated as an association (or publicly traded
partnership) taxable as a corporation for federal income tax
purposes; or
(j) a Servicer Default shall have occurred and be
continuing; or
(k) the Servicer shall have resigned in accordance with
the terms of this Agreement; or
(l) the Parent shall fail to observe or perform any
covenant or agreement (within any applicable cure period)
applicable to it contained in the Parent Undertaking Agreement, or
the Parent Undertaking Agreement shall cease to be in effect or the
Parent shall so assert in writing; or
(m) any material adverse change shall occur in the
collectibility of the Receivables taken as a whole or in the financial
condition of the Transferor, Zenith, Zenith and its Subsidiaries
taken as a whole or the Parent, or in the ability of any of them or
any Originator to perform its obligations under any Transaction
Document; or
(n) any of Zenith, the Transferor, the Servicer or any
Originator shall fail to pay principal in respect of any Indebtedness
of Zenith, the Transferor, the Servicer or any Originator (as the
case may be) that is outstanding (i) in a principal amount, either
individually or in the aggregate, of at least $500,000 or (ii) in the
case of the Transferor, in any amount (but excluding, in each case,
Indebtedness outstanding under any Transaction Document), when
the full amount of such Indebtedness becomes due and payable; or
any other event shall occur or condition shall exist under any
agreement or instrument relating to any such Indebtedness, if the
effect of such event or condition is to accelerate the maturity of
such Indebtedness or otherwise to cause such Indebtedness to
mature; or any such Indebtedness shall be declared to be due and
payable or required to be prepaid or redeemed (other than by a
regularly scheduled required prepayment or redemption), purchased
or defeased, or an offer to prepay, redeem, purchase or defease
such Indebtedness shall be required to be made, in each case prior
to the stated maturity thereof; or
(o) the Intercreditor Agreement shall cease to be in full
force and effect; or
(p) (i) any Plan Event shall have occurred, (ii) the
Transferor or any ERISA Affiliate shall have withdrawn from a
Multiemployer Plan, or (iii) any Multiemployer Plan shall have been
terminated or reorganized or become insolvent, and as a result of
one or more such events the Transferor or any ERISA Affiliate has
incurred or is reasonably expected to incur liability in excess of
$1,000,000; or
(q) a Termination Event (other than a Termination
Event based upon an Insolvency Event) under any Receivables
Purchase Agreement shall occur; or
(r) the Parent and its Controlled Affiliates as a group
shall cease to be the beneficial owners of at least a majority of the
Voting Stock of Zenith, or Zenith shall cease to be the beneficial
owner of at least a majority of the outstanding Voting Stock of the
Transferor.
then, if any of the events set forth in paragraph (f) above shall have
occurred, an "Early Amortization Event" shall occur without any notice,
demand, protest or other requirement of any kind immediately upon the
occurrence of such event, and, if any of the events set forth in any other
paragraph above shall have occurred, the Trustee may (and, if directed to
do so by a Majority in Interest of any outstanding Series or, if the related
Supplement so provides, the Enhancement Provider for such Series, shall),
by notice to the Transferor, the Servicer, and each Enhancement Provider,
declare that an "Early Amortization Event" shall occur as of the date set
forth in such notice. Upon the occurrence of an Early Amortization Event,
additional Receivables will not be transferred to the Trust. The Trustee
shall be deemed to have knowledge of an Early Amortization Event only if
a Responsible Official of the Trustee has actual knowledge or if a
Responsible Official of the Trustee has received written notice thereof.
A Majority in Interest of each outstanding Series (or, if so
specified in the related Supplement, each Enhancement Provider for such
Series) may, on behalf of all Holders, waive any default (other than a
default described in paragraph (e) above) by the Transferor or the Servicer
in the performance of their obligations hereunder and its consequences,
except the failure to make any distributions or payments required to be
made to Holders or to make any required deposits of any amounts to be so
distributed or paid. Holders of Certificates evidencing 67% or more of the
aggregate Holders' Interest of each outstanding Series (or, if so specified in
the related Supplement, each Enhancement Provider for such Series) may,
on behalf of all Holders, waive any default described in paragraph (e) above
and its consequences. No such waiver shall extend to any subsequent or
other default or impair any right consequent thereon except to the extent
expressly so waived.
SECTION 9.02. Additional Rights upon the Occurrence of
Any Early Amortization Event. (a) Upon the occurrence and during the
continuance of
any Early Amortization Event, in addition to all other rights and remedies
under this Agreement or otherwise and all other rights and remedies
provided under the UCC of the State of New York and other applicable
laws (which rights shall be cumulative), each of the Servicer, at the
direction of the Trustee, and the Trustee may exercise any and all rights
and remedies of the Transferor under or in connection with the Receivables
Purchase Agreements, including any and all rights of the Transferor to
demand or otherwise require payment of any amount under, or
performance of any provision of, the Receivables Purchase Agreements.
Further, the Trustee may exercise any and all rights and remedies under the
Parent Undertaking Agreement.
(b) If an Insolvency Event with respect to the
Transferor occurs, the Transferor shall immediately cease to transfer
Receivables to the Trust and shall promptly give written notice to the
Trustee, who shall, within two Business Days, forward such notice to the
Holders, each Rating Agency, each Program Agent, each Enhancement
Provider and the Servicer of such event. Receivables transferred to the
Trust prior to the occurrence of such Insolvency Event and collections
relating to such Receivables shall continue to be part of the Trust. Unless,
within 10 Business Days of the date of the notice provided for above, the
Trustee receives written instructions from a Majority in Interest of each
outstanding Series (or, if so specified in the related Supplement, the
Enhancement Provider for the Series) instructing the Trustee not to sell,
dispose of or liquidate the Receivables, the Trustee or its agent shall
promptly proceed to sell, dispose of, or otherwise liquidate the Receivables
in a commercially reasonable manner and on commercially reasonable
terms; provided, however, that, if the amount available to the Trust for
distribution after such sale, disposition or liquidation would be less than the
aggregate unpaid Invested Amount of the Investor Certificates plus any
unpaid Discount Amount thereon through the Distribution Date next
succeeding the date of such sale, the Trustee or its agent shall not proceed
with such sale, disposition or liquidation unless a Majority in Interest of
each outstanding Series (or, if so specified in the related Supplement, the
Enhancement Provider for such Series) shall have consented in writing
thereto. The proceeds from such sale, disposition or liquidation of the
Receivables shall be treated as Collections on the Receivables and shall be
distributed in accordance with the terms of this Agreement after being
deposited in the Concentration Account.
ARTICLE X
SERVICER DEFAULTS
SECTION 10.01. Servicer Defaults. If any one of the
following events (each being a "Servicer Default") shall occur and be
continuing:
(a) any failure by the Servicer to make any payment,
transfer or deposit (including pursuant to Section 3.04(b)), or, if
applicable, to give instructions or notice to the Trustee to make
such payment, transfer or deposit, or to give notice to the Trustee
as to any action to be taken under any Enhancement Agreement, or
any failure to provide a Determination Date Certificate to the
Trustee, in each case, within two Business Days after the same
shall become due; or
(b) the Servicer shall fail to observe or perform any
other covenant or agreement applicable to it contained herein which
has a material adverse effect on any Beneficiary if such failure shall
remain unremedied for ten days after the first date on which any
Responsible Official of the Servicer knew or should have known of
such failure; or
(c) any representation, warranty or certification made or
deemed made by the Servicer under or in connection with this
Agreement, or in any certificate or information delivered pursuant
to or in connection with this Agreement, shall prove to have been
incorrect in any material respect on or as of the date made or
deemed made; or
(d) an Insolvency Event shall occur with respect to the
Servicer; or
(e) the Servicer assigns its duties under this Agreement,
except as specifically permitted by Section 8.02; or
(f) The Servicer shall at any time fail to have
Consolidated Tangible Net Worth of at least $1,000,000;
then, as long as such Servicer Default shall not have been remedied and is
continuing, either the Trustee (unless otherwise directed by a Majority in
Interest of each outstanding Series or, if so specified in the related
Supplement, the Enhancement Provider for such Series) or the Majority in
Interest of each Series (or, if so specified in the related Supplement, the
Enhancement Provider for such Series), by notice then given in writing to
the Servicer (and to the Trustee if given by such Investor
Certificateholders) (each such being a "Termination Notice"), may
terminate all but not less than all the rights and obligations of the Servicer
as Servicer under this Agreement. The Trustee shall be deemed to have
knowledge of a Servicer Default only if a Responsible Official of the
Trustee has actual knowledge or if a Responsible Official of the Trustee
has received written notice thereof.
Notwithstanding the foregoing, a delay in or failure of
performance referred to in Section 10.01(a) or (b) for a period of five
Business Days shall not constitute a Servicer Default if such delay or failure
could not have been prevented by the exercise of reasonable diligence by
the Servicer and such delay or failure was caused by an act of God or the
public enemy, acts of declared or undeclared war, public disorder, rebellion
or sabotage, epidemics, landslides, lightning, fire, hurricanes, earthquakes,
floods, union strikes, work stoppages or similar causes. The preceding
sentence shall not relieve the Servicer from using its best efforts to perform
its obligations in a timely manner in accordance with the terms of this
Agreement, and the Servicer shall provide the Trustee, the Transferor, any
Enhancement Provider and the Investor Certificateholders with an Officer's
Certificate giving prompt notice of such failure or delay by it, together with
a description of its efforts so to perform its obligations.
A Majority in Interest of each outstanding Series (or, if so
specified in the related Supplement, the Enhancement Provider for such
Series) may, on behalf of all Holders, waive any default by the Servicer in
the performance of its obligations hereunder and its consequences, except
the failure to make any distributions or payments required to be made to
Holders or to make any required deposits of any amounts to be so
distributed or paid. No such waiver shall extend to any subsequent or
other default or impair any right consequent thereon except to the extent
expressly so waived.
After receipt by the Servicer of a Termination Notice, and
on the date that a Successor Servicer shall have been appointed by the
Trustee pursuant to Section 10.02, all authority and power of the Servicer
under this Agreement shall pass to and be vested in such Successor
Servicer (a "Service Transfer") and, without limitation, the Trustee is
hereby authorized, empowered and instructed (upon the failure of the
Servicer to cooperate) to execute and deliver, on behalf of the Servicer, as
attorney-in-fact or otherwise, all documents and other instruments upon the
failure of the Servicer to execute or deliver such documents or instruments,
and to do and accomplish all other acts or things necessary or appropriate
to effect the purposes of such Service Transfer. The Servicer agrees to
cooperate, at its expense, with the Trustee and such Successor Servicer in
(i) effecting the termination of the responsibilities and rights of the
Servicer to conduct servicing hereunder, including the transfer to such
Successor Servicer of all authority of the Servicer to service the Receivables
as provided under this Agreement, including all authority over all Collections
which shall on the date of such Service Transfer be held by the Servicer for
deposit to the Concentration Account, any Collection Account, the
Trustee's Account or the Transferor's Account, or which have been
deposited by the Servicer to the Concentration Account, any Collection
Account, or any other account, or which shall thereafter be received with
respect to the Receivables, (ii) taking such measures as shall be reasonably
requested by the Transferor to protect and maintain the security and
confidentiality of all Confidential Information in accordance with Section
8.07 and (iii) assisting the Successor Servicer until all servicing activities
have been transferred to such Successor Servicer, such assistance to
include (x) assisting any accountants selected by the Successor Servicer to
verify collection records and reports made prior to the Service Transfer and
(y) assisting to make the computer systems of the Servicer and the
Successor Servicer compatible to the extent necessary to effect the
Servicer Transfer. The Servicer shall, at its expense, within five Business
Days of such Service Transfer, (A) assemble such documents, instruments
and other records (including computer tapes and disks), which evidence the
Receivables and the other Trust Assets, and which are necessary or
desirable to collect the Receivables, and shall make the same available to
the Successor Servicer or the Trustee or its designee at a place selected by
the Successor Servicer or the Trustee and in such form as the Successor
Servicer or the Trustee may reasonably request, and (B) segregate all cash,
checks and other instruments received by it from time to time constituting
Collections of Receivables in a manner acceptable to the Successor
Servicer and the Trustee, and, promptly upon receipt, remit all such cash,
checks and instruments to the Successor Servicer or the Trustee or its
designee.
At any time following a Termination Notice:
(1) the Servicer shall, at the Trustee's request and at the
Servicer's expense, give notice of the Trust's interest in the
Receivables to the related Obligors and direct that payments be
made directly to the Trustee or its designee;
(2) if the Servicer fails to provide the notice to the
Obligors required in paragraph (1) above, the Trustee may direct
the Obligors of Receivables, or any of them, that payment of all
amounts payable under any such Receivables be made directly to
the Trustee or its designee; and
(3) each of the Transferor and each Holder hereby
authorizes the Trustee to take any and all steps in the Transferor's
name and on behalf of the Transferor and the Holders necessary or
desirable, in the determination of the Trustee, to collect all amounts
due under any and all Receivables, including endorsing the
Transferor's name on checks and other instruments representing
Collections in respect of such Receivables and enforcing such
Receivables.
SECTION 10.02. Trustee to Act; Appointment of
Successor Servicer. (a) On and after the receipt by the Servicer of a
Termination Notice pursuant to Section 10.01 or upon a resignation by the
Servicer pursuant to Section 8.05, the Servicer shall continue to perform all
servicing functions under this Agreement until (i) in the case of any such
receipt, the date specified in such Termination Notice or otherwise
specified by the Trustee in writing or, if no such date is specified in such
Termination Notice or otherwise specified by the Trustee, until the earlier
of a date agreed upon by the Servicer and the Trustee and a date specified
by the Trustee in a written notice to the Servicer and (ii) in the case of any
such resignation, until the Trustee or a Successor Servicer shall have
assumed the responsibilities and obligations of the Servicer pursuant to this
Section 10.02. The Trustee shall as promptly as possible after the giving of
a Termination Notice or such a resignation pursuant to Section 8.05 hereof
appoint an Eligible Servicer (which may be Citibank, N.A.) as a successor
servicer (the "Successor Servicer") subject, if specified in any Supplement,
to the consent of a Majority in Interest of such Series, which consent shall
not be unreasonably withheld or delayed, and such Successor Servicer shall
accept its appointment by a written assumption in a form acceptable to the
Trustee. In the event that a Successor Servicer has not been appointed or
has not accepted its appointment by the earlier of 30 days after the date of
such Termination Notice or resignation or at the time when the Servicer
ceases to act as Servicer, the Trustee without further action shall
automatically be appointed the Successor Servicer. The Trustee may
delegate any of its servicing obligations to an affiliate or agent of the
Trustee in accordance with the terms of this Agreement. Notwithstanding
the foregoing, the Trustee shall, if it is unable or unwilling so to act as
Successor Servicer, petition a court of competent jurisdiction to appoint
any established institution that is an Eligible Servicer (other than the
Trustee) as the Successor Servicer hereunder.
(b) Upon its appointment, the Successor Servicer shall be the
successor in all respects to the Servicer with respect to servicing functions
under this Agreement and shall be subject to all the responsibilities,
duties and liabilities relating thereto placed on the Servicer
by the terms and provisions hereof, and all references in this Agreement to
the Servicer shall be deemed to refer to such Successor Servicer; provided,
however, that neither the Trustee (solely in its capacity as such) nor any
Successor Servicer shall be deemed in default hereunder as a result of the
predecessor Servicer's failure to deliver necessary Trust Assets, documents,
or records to the Trustee (solely in its capacity as such) or to such
Successor Servicer; and provided further that the Successor Servicer shall
not be liable for any acts or omissions of the Servicer occurring prior to
such succession or for any breach by the Servicer of any of its
representations and warranties contained herein or in any related document
or agreement. The Successor Servicer shall be reimbursed by the
Transferor for any reasonable transition fees, costs and out-of-pocket
expenses incurred in connection with a Service Transfer in accordance with
Section 3.02(b). Any Successor Servicer, by its acceptance of its
appointment, will automatically agree to be bound by the terms and
provisions of any Enhancement Agreement.
(c) In connection with any Termination Notice, the
Trustee shall be permitted to appoint any Eligible Servicer as a Successor
Servicer for servicing compensation not in excess of the Servicing Fee,
unless the Trustee shall agree to pay the excess over the Servicing Fee of
the compensation of any such Successor Servicer but in no event shall such
compensation exceed a per annum fee equal to the lesser of (i) the product
of 1% and the average of the aggregate Invested Amounts with respect to
all Series on each day in the immediately preceding Interest Period, and (ii)
the product of 110% and an amount equal to the aggregate amount of such
Servicer's actual costs.
(d) All authority and power granted to the Successor
Servicer under this Agreement shall automatically terminate upon
termination of the Trust and shall pass to and be vested in the Transferor,
and, without limitation, the Transferor is hereby authorized and
empowered to execute and deliver, on behalf of the Successor Servicer, as
attorney-in-fact or otherwise, all documents and other instruments, and to
do and accomplish all other acts or things, necessary or appropriate to
effect the purposes of such transfer of servicing rights. The Successor
Servicer agrees to cooperate with the Transferor in effecting the
termination of the responsibilities and rights of the Successor Servicer to
conduct servicing of the Receivables. Upon such termination of the Trust,
the Successor Servicer shall transfer its electronic records relating to the
Receivables to the Transferor in such electronic form as the Transferor may
reasonably request and shall transfer all other records, correspondence and
documents to the Transferor in the manner and at such times as the
Transferor shall reasonably request.
SECTION 10.03. Notification to Holders. Promptly and in
any event within two Business Days after a Responsible Official of the
Servicer obtains knowledge of any Servicer Default, the Servicer shall give
written notice thereof to a Responsible Official of the Trustee, and the
Trustee shall promptly deliver a copy of such notice to the Holders, each
Enhancement Provider and each Rating Agency. Upon any termination or
appointment of a Successor Servicer pursuant to this Article X, the Trustee
shall give prompt written notice thereof to the Transferor and the Holders.
ARTICLE XI
THE TRUSTEE
SECTION 11.01. Duties of the Trustee. (a) Other than
while acting in its capacity as Successor Servicer, the Trustee, prior to the
occurrence of a Servicer Default of which a Responsible Official of the
Trustee has actual knowledge and after the curing of all Servicer Defaults
which may have occurred, undertakes to perform such duties and only such
duties as are specifically set forth in this Agreement, and no implied duties
or covenants shall be read into this Agreement against the Trustee. If a
Responsible Official of the Trustee has actual knowledge that a Servicer
Default has occurred (which has not been cured or waived), the Trustee
shall exercise such of the rights and powers vested in it by this Agreement
and use the same degree of care and skill in their exercise, as a prudent
person would exercise or use under the circumstances in the conduct of his
or her own affairs.
(b) The Trustee, upon receipt of any resolutions,
certificates, statements, opinions, reports, documents, orders or other
instruments furnished to the Trustee which are specifically required to be
furnished pursuant to any provision of this Agreement or any Supplement,
shall examine them to determine whether they substantially conform to the
requirements of this Agreement or any Supplement. The Trustee shall give
prompt written notice to the Transferor, the Holders, any Enhancement
Provider and each Rating Agency of any material lack of conformity of any
such instrument to the applicable requirements of this Agreement or any
Supplement discovered by the Trustee which would entitle any
Enhancement Provider or a specified percentage of the Investor
Certificateholders to take any action pursuant to this Agreement or any
Supplement.
(c) Subject to Section 11.01(a), no provision of this
Agreement shall be construed to relieve the Trustee from liability for its
own grossly negligent action, its own grossly negligent failure to act or its
own willful misconduct; provided, however, that:
(i) the Trustee shall not be personally liable for an error
of judgment made in good faith by any Responsible Official of the
Trustee, unless it shall be proved that the Trustee was grossly
negligent in ascertaining the pertinent facts;
(ii) the Trustee shall not be personally liable with
respect to any action taken, suffered or omitted to be taken by it in
good faith in accordance with the direction of a Majority in Interest
of each outstanding Series relating to the time, method and place of
conducting any proceeding for any remedy available to the Trustee
in accordance with the terms of this Agreement, or exercising any
trust or power conferred upon the Trustee, under this Agreement;
and
(iii) the Trustee shall not be charged with knowledge of
any failure by the Servicer to comply with the obligations of the
Servicer referred to in Section 10.01 or of any Early Amortization
Event unless a Responsible Official of the Trustee obtains actual
knowledge of such failure or such event or the Trustee receives
written notice of such failure or such event from the Servicer, each
Enhancement Provider or the Holders of any outstanding Series
evidencing not less than 20% of the Invested Amount for such
Series.
(d) The Trustee shall not be required to expend or risk
its own funds or otherwise incur financial liability in the performance of any
of its duties hereunder or under any Supplement or in the exercise of any of
its rights or powers if there is reasonable grounds for believing that the
repayment of such funds or indemnity satisfactory to it against such risk or
liability is not reasonably assured to it, and none of the provisions
contained in this Agreement shall in any event require the Trustee to
perform, or be responsible for the manner of performance of, any
obligations of the Servicer under this Agreement except during such time,
if any, as the Trustee shall be the successor to, and be vested with the
rights, duties, powers and privileges of, the Servicer in accordance with the
terms of this Agreement.
(e) Except for actions expressly authorized by this
Agreement, the Trustee shall take no action reasonably likely to impair the
interests of the Trust in any Receivable now existing or hereafter created or
to impair the value of any Receivable now existing or hereafter created.
(f) Except as expressly provided in this Agreement, the
Trustee shall have no power to vary the corpus of the Trust including by (i)
accepting any substitute obligation for a Receivable initially Transferred to
the Trust under Section 2.01, (ii) adding any other investment, obligation
or security to the Trust or (iii) withdrawing from the Trust any Receivable.
(g) In the event that the Transfer Agent and Registrar
shall fail to perform any obligation, duty or agreement in the manner or on
the day required to be performed by the Transfer Agent and Registrar, as
the case may be, under this Agreement or under any Supplement, the
Trustee shall be obligated promptly upon its actual knowledge thereof to
perform such obligation, duty or agreement in the manner so required.
(h) The Trustee shall have no responsibility or liability
for the selection of, or investment losses on, Eligible Investments.
(i) Notwithstanding any other provision contained
herein, the Trustee is not acting as, and shall not be deemed to be, a
fiduciary for any Enhancement Provider in its capacity as such or as a
Beneficiary, and the Trustee's sole responsibility with respect to any such
Enhancement Provider shall be to perform those duties with respect to any
such Enhancement Provider as are specifically set forth herein, and no
implied duties or obligations shall be read into this Agreement against the
Trustee with respect to any such Enhancement Provider.
(j) The Trustee shall notify each Rating Agency and
each Enhancement Provider (i) of any notice which the Trustee receives
pursuant to Section 2.05(f)(i), 2.05(g) or 3.04(h)(i), (ii) of any change in
any rating of the Certificates of any other Rating Agency and (iii)
immediately of the occurrence of any Early Amortization Event under
Article IX.
(k) The Trustee shall, with respect to each Daily Report
(upon which the Trustee may conclusively rely), (A) compare the
Collections reported that day by the Servicer to the actual Collections
deposited to the Collection Account, (B) with respect to the reconciliation
of each of the trust accounts, compare the beginning balance as reported by
the Servicer to the amount on deposit in the trust accounts per the
accounting records of the Trustee and (C) perform each of the account
transfers set forth in the Daily Report, as directed by the Servicer.
(l) The Trustee shall follow the following procedures
with respect to each Determination Date Certificate (upon which the
Trustee may conclusively rely):
(i) with respect to the reconciliation of each of the trust
accounts, compare the beginning and ending balances to the
amounts which were on deposit in the trust accounts per the
accounting records of the Trustee as of the applicable date; and
(ii) examine potential Early Amortization Events for
positive indications of actual Early Amortization Events pursuant to
any such requirement in any applicable Supplement.
(m) Notwithstanding any other provision of this
Agreement or any Supplement, upon discovery by the Trustee of any
material discrepancy between the amounts reported by the Servicer and the
amounts calculated as provided above, the Trustee shall promptly notify
the Servicer thereof and the Servicer shall thereupon have ten days to
resolve such discrepancy before the Trustee shall be obligated to give
notice to the Holders, each Enhancement Provider and each Rating
Agency.
SECTION 11.02. Certain Matters Affecting the Trustee.
Except as otherwise provided in Section 11.01:
(a) the Trustee may conclusively rely on and shall be
fully protected in acting on, or in refraining from acting in accord
with, any resolution, Officer's Certificate, certificate of auditors or
any other certificate, statement, instrument, opinion, report, notice,
request, consent, order, appraisal, bond or other paper or document
believed by it in good faith to be genuine and to have been signed
or presented to it pursuant to this Agreement by the proper party or
parties;
(b) the Trustee may consult with counsel and, as a
condition to taking, suffering or omitting to take any action, may
demand an Opinion of Counsel, and any advice or opinion of
counsel shall be full and complete authorization and protection in
respect of any action taken or suffered or omitted by it hereunder in
good faith and in accordance with such advice or opinion of
counsel;
(c) the Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Agreement, or to
institute, conduct or defend any litigation hereunder or in relation
hereto, at the request, order or direction of any of the Holders,
unless such Holders shall have offered to the Trustee security or
indemnity satisfactory to it against the costs, expenses and liabilities
which may be incurred therein or thereby; provided, however, that
nothing contained herein shall relieve the Trustee of the obligations,
upon the occurrence of a Servicer Default (which has not been
cured or waived), to exercise such of the rights and powers vested
in it by this Agreement, and to use the same degree of care and skill
in their exercise as a prudent person would exercise or use under
the circumstances in the conduct of his or her own affairs;
(d) subject to Section 11.01(c), the Trustee shall not be
personally liable for any action taken, suffered or omitted by it in
good faith and believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Agreement;
(e) the Trustee shall not be bound to make any in-
vestigation into the facts of matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
consent, order, appraisal, approval, bond or other paper or
document, unless requested in writing so to do by Holders of any
outstanding Series evidencing not less than 20% of the Invested
Amount for such Series or, if so specified in any Supplement, the
Enhancement Provider therefor;
(f) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys or a custodian, and the Trustee shall
not be responsible for any misconduct or negligence on the part of,
or for the supervision of any such agent, attorney or custodian
appointed with due care by it hereunder;
(g) except as required by Section 11.01, the Trustee
shall not be required to make any initial or periodic examination of
any documents or records related to the Receivables for the
purpose of establishing the presence or absence of defects, the
compliance by the Transferor with its representations and
warranties or for any other purpose; and
(h) nothing in this Agreement shall be construed to
require the Trustee to monitor the performance of the Servicer or
act as a guarantor of the Servicer's performance.
SECTION 11.03. Trustee Not Liable for Recitals in
Certificates or Receivables. The Trustee assumes no responsibility for the
correctness of the recitals contained herein and in the Certificates (other
than the certificate of authentication on the Certificates). Except as set
forth in Section 11.15, the Trustee makes no representations as to the
validity or sufficiency of this Agreement or of the Certificates (other than
the certificate of authentication on the Certificates) or of any Receivable or
related document. The Trustee shall not be accountable for the use or
application by the Transferor of any of the Certificates or of the proceeds
of such Certificates, or for the use or application of any funds paid to the
Transferor in respect of the Receivables or deposited in or withdrawn from
the Concentration Account, any Collection Account, the Transferor's
Account, the Trustee's Account or any other account hereafter established
in accordance with the terms of this Agreement and any Supplement. The
Trustee shall at no time have any responsibility or liability for or with
respect to the legality, validity and enforceability of any security interest
in any Receivable, or the perfection and priority of such security interest or
the maintenance of any such perfection and priority or the accuracy,
content or completeness of any offering documents used in connection with
the sale of the Certificates.
SECTION 11.04. Trustee May Own Certificates. The
Trustee in its individual or any other capacity may become the owner or
pledgee of Investor Certificates and may otherwise deal, and transact
banking business, with the Servicer and the Transferor with the same rights
as it would have if it were not the Trustee.
SECTION 11.05. Compensation; Trustee's Expenses. (a)
The Trustee shall be entitled to receive a monthly Trustee's fee (which fee,
to the extent permitted by applicable law, shall not be limited by any
provision of law, such fee being the "Trustee's Fee") in respect of each
Collection Period (or portion thereof) from the date hereof until the
termination of the Amortization Period, payable in arrears on each
Distribution Date in an amount agreed upon in writing by the Trustee and
the Transferor. The Trustee's Fee shall be the aggregate of the Series
Trustee's Fees specified in the Supplements. The Trustee's Fee shall be
payable, first, from Investor Collections pursuant to, and subject to the
priority of payment set forth in, the applicable Supplement, second, to the
extent not paid from Investor Collections, by the Transferor, and third, to
the extent not paid from Investor Collections or by the Transferor, by the
Servicer pursuant to Section 3.02(b). When the Trustee incurs expenses or
renders services in connection with an Insolvency Event such expenses
(including the reasonable fees and expenses of its counsel) and the
compensation for such services are intended to constitute expenses of
administration under any bankruptcy law or law relating to creditors rights
generally.
(b) Expenses. The Transferor will pay or reimburse the
Trustee upon its request on at least 5 Business Days' notice providing
reasonable detail, and if the Transferor shall fail to do so, the Servicer will
so pay or reimburse the Trustee (with a right to reimbursement from the
Transferor) pursuant to Section 3.02(b), and if both the Transferor and the
Servicer shall fail to do so, the Program Agent will have the right, but not
the obligation, to so pay or reimburse the Trustee (with a right to
reimbursement from the Transferor), for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in accordance
with any of the provisions of this Agreement or any Supplement or in
connection with any amendment hereto (including the reasonable fees and
expenses of its agents, any co-trustee and counsel and fees incurred in
connection with a Servicer Default or an Early Amortization Event) except
any such expense, disbursement or advance as may arise from its gross
negligence or willful misconduct and except as provided in the following
sentence. If the Trustee is appointed Successor Servicer pursuant to
Section 10.02, the provision of this Section 11.05 shall not apply to
expenses, disbursements and advances made or incurred by the Trustee in
its capacity as Successor Servicer, which shall be paid, first, out of the
Servicing Fee and, second, to the extent not paid out of the Servicing Fee,
by the Transferor pursuant to Section 3.02(b). The Transferor's and
Servicer's covenant provided in this Section 11.05 shall survive the
termination of the Trust.
SECTION 11.06. Eligibility Requirements for Trustee.
The Trustee hereunder shall at all times be an Eligible Institution. If the
Trustee publishes reports of condition at least annually, pursuant to law or
to the requirements of any supervising or examining authority, then, for the
purpose of this Section 11.06, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set
forth in its most recent report of condition so published. In case at any
time the Trustee shall cease to be eligible in accordance with the provisions
of this Section 11.06, the Trustee shall resign immediately in the manner
and with the effect specified in Section 11.07.
SECTION 11.07. Resignation or Removal of Trustee. (a)
The Trustee may at any time resign and be discharged from the trust hereby
created by giving 30 days' written notice thereof to the Transferor, the
Parent and the Servicer. Upon receiving such notice of resignation, the
Servicer shall promptly appoint a successor trustee acceptable to each
Enhancement Provider and a Majority in Interest of each outstanding
Series by written instrument, in duplicate, one copy of which instrument
shall be delivered to the resigning Trustee and one copy to the successor
trustee. If no successor trustee shall have been so appointed and have
accepted appointment within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor trustee.
(b) If at any time the Trustee shall cease to be eligible in
accordance with the provisions of Section 11.06 and shall fail to resign
after written request therefor by the Servicer, or if at any time the Trustee
shall be legally unable to act, or shall be adjudged as bankrupt or insolvent,
or if a receiver of the Trustee or of its property shall be appointed, or any
public officer shall take charge or control of the Trustee or of its property
or affairs for the purpose of rehabilitation, conservation or liquidation, then
the Servicer may remove the Trustee and promptly appoint a successor
trustee acceptable to each Enhancement Provider and to a Majority in
Interest of each outstanding Series by written instrument, in duplicate, one
copy of which instrument shall be delivered to the Trustee so removed and
one copy to the successor trustee.
(c) If at any time the Trustee shall fail to perform its
obligations under this Agreement, a Majority in Interest of each
outstanding Series may remove the Trustee and direct the Servicer to
promptly appoint a successor trustee acceptable to each Enhancement
Provider and to a Majority in Interest of each outstanding Series by written
instrument, in duplicate, one copy of which instrument shall be delivered to
the Trustee so removed and one copy to the successor trustee; provided
that if all other procedures fail and a successor trustee has not accepted an
appointment pursuant to this Section 11.07(c) within 30 days after the
Trustee shall have received notice from the Majority in Interest of each
outstanding Series of their intention to remove such Trustee, the Trustee
may petition any court of competent jurisdiction for the appointment of a
successor trustee.
(d) Notwithstanding anything herein to the contrary, any
resignation or removal of the Trustee and appointment of successor trustee
pursuant to any of the provisions of this Section 11.07 shall not become
effective until acceptance of appointment by the successor trustee as
provided in Section 11.08.
SECTION 11.08. Successor Trustee. (a) Any successor
trustee appointed as provided in Section 11.07 shall execute, acknowledge
and deliver to the Transferor, the Servicer and its predecessor Trustee an
instrument accepting such appointment hereunder, and thereupon the
resignation or removal of the predecessor Trustee shall become effective,
and such successor trustee, without any further act, deed or conveyance,
shall become fully vested with all the rights, powers, duties and obligations
of its predecessor hereunder, with like effect as if originally named as
Trustee herein. The predecessor Trustee shall deliver (with the expense
therefor payable out of the Trustee's Fee, and by the Transferor and the
Servicer, pursuant to Sections 3.02(b) and 11.05(b)) to the successor
trustee all documents or copies thereof and statements held by it hereunder,
and the Transferor and the predecessor Trustee shall execute and deliver
such instruments and do such other things as may reasonably be required
for fully and certainly vesting and confirming in the successor trustee all
such rights, powers, duties and obligations.
(b) No successor trustee shall accept appointment as
provided in this Section 11.08 unless at the time of such acceptance such
successor trustee shall be eligible under the provisions of Section 11.06.
(c) Upon acceptance of appointment by a successor
trustee as provided in this Section 11.08, such successor trustee shall mail
notice of such succession hereunder to all Investor Certificateholders, each
Enhancement Provider and to and each Rating Agency.
SECTION 11.09. Merger or Consolidation of Trustee.
Any Person into which the Trustee may be merged or converted or with
which it may be consolidated, or any Person resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
Person succeeding to the corporate trust business of the Trustee, shall be
the successor of the Trustee hereunder, provided that such corporation
shall be eligible under the provisions of Section 11.06.
SECTION 11.10. Appointment of Co-Trustee or Separate
Trustee. (a) Notwithstanding any other provisions of this Agreement, at
any time, for the purpose of meeting any legal requirements of any
jurisdiction in which any part of the Trust may at the time be located, the
Trustee shall have the power and may execute and deliver all instruments
to appoint one or more Persons to act as a co-trustee or co-trustees, or
separate trustee or separate trustees, of all or any part of the Trust, and to
vest in such Person or Persons, in such capacity and for the benefit of the
Beneficiaries, such title to the Trust, or any part thereof, and, subject to
the other provisions of this Section 11.10, such powers, duties, obligations,
rights and trusts as the Trustee may consider necessary or desirable. No
co-trustee or separate trustee hereunder shall be required to meet the terms
of eligibility as a successor trustee under Section 11.06 and no notice to
Holders of the appointment of any co-trustee or separate trustee shall he
required under Section 11.08.
(b) Every separate trustee and co-trustee shall, to the
extent permitted by law, be appointed and act subject to the following
provisions and conditions:
(i) all rights, powers, duties and obligations conferred
or imposed upon the Trustee shall be conferred or imposed upon
and exercised or performed by the Trustee and such separate
trustee or co-trustee jointly (it being understood that such separate
trustee or co-trustee is not authorized to act separately without the
Trustee joining in such act), except to the extent that, under any
law of any jurisdiction in which any particular act or acts are to be
performed (whether as Trustee hereunder or as Successor Servicer
hereunder), the Trustee shall be incompetent or unqualified to
perform such act or acts, in which event such rights, powers, duties
and obligations (including the holding of title to the Trust or any
portion thereof in any such jurisdiction) shall be exercised and
performed singly by such separate trustee or co-trustee, but solely
at the direction of the Trustee;
(ii) no separate trustee or co-trustee hereunder shall be
personally liable by reason of any act or omission of any other
trustee or co-trustee hereunder; and
(iii) the Trustee may at any time accept the resignation
of or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the
Trustee shall be deemed to have been given to each of the then separate
trustees and co-trustees, as effectively as if given to each of them. Every
instrument appointing any separate trustee or co-trustee shall refer to this
Agreement and the conditions of this Article XI. Each separate trustee and
co-trustee, upon its acceptance of the trusts conferred, shall be vested with
the estates or property specified in its instrument of appointment, either
jointly with the Trustee or separately, as may be provided therein, subject
to all the provisions of this Agreement, specifically including every
provision of this Agreement relating to the conduct of, affecting the liability
of, or affording protection to, the Trustee. Every such instrument shall be
filed with the Trustee and a copy thereof given to the Servicer.
(d) Any separate trustee or co-trustee may at any time
appoint the Trustee, its agent or attorney-in-fact with full power and
authority, to the extent not prohibited by law, to do any lawful act under or
in respect of this Agreement on its behalf and in its name. If any separate
trustee or co-trustee shall die, become incapable of acting, resign or be
removed, all its estates, properties, rights, remedies and trusts shall vest in
and be exercised by the Trustee, to the extent permitted by law, without
the appointment of a new or successor trustee.
SECTION 11.11. Tax Returns. In the event the Trust shall
be required to file any tax returns, the Servicer shall prepare or shall cause
to be prepared any tax returns required to be filed by the Trust and shall
remit such returns to the Trustee for signature at least five days before such
returns are due to be filed, and the Servicer shall cause the Trust not to
elect to be taxed under the Internal Revenue Code as a corporation or as an
association taxable as a corporation. The Trustee shall promptly sign such
returns and deliver such returns after signature to the Servicer, and such
returns shall be filed by the Servicer. The Servicer in accordance with the
Supplements shall also prepare or shall cause to be prepared all tax
information required by law to be distributed to Investor Certificateholders
and shall deliver such information to the Trustee at least five days prior to
the date it is required by law to be distributed to the Holders. The Trustee,
upon request, will furnish the Servicer with all such information known to
the Trustee as may be reasonably required in connection with the
preparation of all tax returns of the Trust, and shall, upon request, execute
such returns. In no event shall the Trustee be liable for any liabilities,
costs or expenses of the Trust or the Investor Certificateholders arising out
of the application of any tax law, including federal, state, foreign or local
income or franchise taxes or any other tax imposed on or measured by
income (or any interest, penalty or addition to tax with respect thereto or
arising from a failure to comply therewith).
SECTION 11.12. Trustee May Enforce Claims Without
Possession of Certificates. All rights of action and claims under this
Agreement or the Certificates may be prosecuted and enforced by the
Trustee without the possession of any of the Certificates or the production
thereof in any proceeding relating thereto, and any such proceeding
instituted by the Trustee shall be brought in its own name as Trustee. Any
recovery of judgment shall, after provision for the payment of the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, be for the benefit of the Beneficiaries in
respect of which such judgment has been obtained.
SECTION 11.13. Suits for Enforcement. (a) If a Servicer
Default shall occur and be continuing, the Trustee, in its discretion may,
subject to the provisions of Sections 11.01 and 11.14, proceed to protect
and enforce its rights and the rights of the Holders under this Agreement by
suit, action or proceeding in equity or at law or otherwise, whether for the
specific performance of any covenant or agreement contained in this
Agreement or in aid of the execution of any power granted in this
Agreement or for the enforcement of any other legal, equitable or other
remedy as the Trustee, being advised by counsel, shall deem most effectual
to protect and enforce any of the rights of the Trustee or the Holders.
(b) Nothing herein contained shall be deemed to
authorize the Trustee to authorize, consent to, accept or adopt on behalf of
any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Certificates or the rights of any Holder, or to
authorize the Trustee to vote in respect of the claim of any Holder in any
such proceeding.
SECTION 11.14. Rights of Holders to Direct Trustee. A
Majority in Interest of any outstanding Series (or, if so specified in the
related Supplement, the Enhancement Provider for such Series or, in the
event of conflicting instructions from the Majority in Interest of two or
more separate Series, the Majority in Interest for all Series) shall have the
right to direct the time, method, and place of conducting any proceeding
for any remedy available to the Trustee under any Transaction Document,
or exercising any trust or power conferred on the Trustee under any
Transaction Document; provided, however, that, subject to Section 11.01,
the Trustee shall have the right to decline to follow any such direction if the
Trustee after being advised by counsel determines that the action so
directed may not lawfully be taken, or if the Trustee in good faith shall, by
any Responsible Official of the Trustee, determine that the proceedings so
directed would be illegal or involve it in personal liability or be unduly
prejudicial to the rights of Holders not parties to such direction.
SECTION 11.15. Representations and Warranties of
Trustee. The Trustee represents and warrants that:
(a) the Trustee is a banking corporation duly organized,
validly existing and in good standing under the laws of the State of
New York, and has the power to own its assets and to transact the
business in which it is presently engaged;
(b) the Trustee has full power, authority and right to
execute, deliver and perform this Agreement, and has taken all
necessary action to authorize the execution, delivery and
performance by it of this Agreement; and
(c) this Agreement has been duly executed and
delivered by the Trustee and constitutes a legal, valid and binding
obligation of the Trustee enforceable against the Trustee in
accordance with its terms (except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights
generally and except as such enforceability may be limited by
general principles of equity, whether considered in a suit at law or
in equity).
SECTION 11.16. Maintenance of Office or Agency. The
Trustee will maintain at its expense in New York, New York an office or
agency (the "Corporate Trust Office") where notices and demands to or
upon the Trustee in respect of the Certificates and this Agreement may be
served. The Trustee initially designates its office or agency at Four Albany
Street, New York, New York 10006, Attention: Corporate Trust and
Agency Group/Structured Finance, as such office. The Trustee will give
prompt written notice to the Transferor, the Servicer and to the Holders of
any change in the location of the Certificate Register or any such office or
agency.
ARTICLE XII
TERMINATION
SECTION 12.01. Termination of Trust. The Trust and the
respective obligations and responsibilities of the Transferor, the Servicer
and the Trustee created hereby (other than the obligation of the Trustee to
make payments to Holders as hereinafter set forth) shall terminate, except
with respect to the duties described in Sections 2.01(b), 3.02(b), 7.03,
8.04, 8.07, 11.05 and 12.02(b), upon the earlier to occur of (i) the
Termination Date of the last outstanding Series of Certificates and (ii)
December 31, 2017.
SECTION 12.02. Final Distribution. (a) The Servicer
shall give the Parent and the Trustee, and the Trustee shall give each
Holder, at least 30 days' prior written notice of the date on which (i) the
Trust is expected to terminate in accordance with Section 12.01 and (ii) the
Holders may surrender their Certificates for payment of the final
distribution on and cancellation of such Certificates. Such notice shall be
accompanied by an Officer's Certificate setting forth the information
specified in Section 3.06 covering the period during the then-current
calendar year through the date of such notice. Not later than five days
after the Trustee shall receive such notice, the Trustee shall mail notice to
the Holders specifying (i) the date upon which such final distribution will
be made upon presentation and surrender of such Certificates at the office
or offices therein designated, (ii) the amount of any such final distribution
and (iii) that the Distribution Date otherwise applicable to such final
distribution is not applicable, payments being made only upon presentation
and surrender of such Certificates at the office or offices therein specified.
Each such Holder shall surrender its Certificate to the Trustee following
receipt of the final distribution thereon. The Trustee shall give such notice
to the Transfer Agent and Registrar at the time such notice is given to the
Holders.
(b) Notwithstanding the Servicer's delivery to the
Trustee, or the Trustee's delivery to the Holders, of the notices required
under Section 12.02(a), all funds then on deposit in the Concentration
Account, any Collection Account, any Series Account, the Transferor's
Account or the Trustee's Account shall continue to be held in trust for the
benefit of the Beneficiaries, and the Trustee shall pay such funds to the
Holders upon surrender of their Certificates pursuant to, and subject to the
priorities set forth in, the applicable Supplement, as if such surrender date
were on a Distribution Date. In the event that all Holders do not surrender
their Certificates for cancellation within six months after the date specified
in the above-mentioned written notice from the Trustee, the Trustee shall
give a second written notice to the remaining Holders to surrender their
Certificates for cancellation and receive the final distribution with respect
thereto and no further interest shall be payable with respect to any such
Certificate for any period after such specified date. If within one year after
the second notice all the Certificates shall not have been surrendered for
cancellation, the Trustee may take appropriate steps, or may appoint an
agent to take appropriate steps, to contact the remaining Holders
concerning surrender of their Certificates, and the cost thereof shall be paid
out of the funds in the Trustee's Account (if such Holders are Investor
Certificateholders) or the Transferor's Account (if any such Holder is the
Holder of the Transferor Certificate) held for the benefit of such Holders.
The Trustee shall pay to the Transferor any monies held by it for the
payment of principal or interest that remains unclaimed for two years after
the date specified in the initial above-mentioned written notice from the
Trustee. After payment to the Transferor, Investor Certificateholders
entitled to any monies must look to the Transferor for payment as general
creditors unless an applicable abandoned property law designates another
Person.
SECTION 12.03. Transferor's Termination Rights. Upon
the termination of the Trust, the indefeasible payment in full of all amounts
due to the Investor Certificateholders, payment of Trustee's fees and
expenses and the surrender of the Transferor Certificate, the Trustee shall
assign and convey to the Holder of the Transferor Certificate or its
designee, without recourse, representation or warranty (except for the
representation that each Receivable and all other Trust Assets will be free
and clear of all Liens which arose as a result of any claim against or
affecting, or any act or omission of, the Trustee in its individual capacity
not related to the transactions contemplated by the Transaction
Documents), all right, title and interest of the Trust in and to the
Receivables, whether then existing or thereafter created, and all other Trust
Assets, and all proceeds thereof except for amounts held in any account by
the Trustee pursuant to Section 12.02(b). The Trustee at the expense of
the Transferor shall execute and deliver such instruments of transfer and
assignment, in each case without recourse, representation or warranty, as
shall be prepared by the Transferor for execution by the Trustee which are
reasonably requested by the Transferor to vest in the Transferor all right,
title and interest which the Trust had in the Receivables and all other Trust
Assets.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
SECTION 13.01. Amendment. (a) This Agreement or any
Supplement may be amended from time to time by the Servicer, the
Transferor, the Parent and the Trustee without the consent of any of the
Investor Certificateholders (i) to cure any ambiguity or (ii) to correct or
supplement any provision herein which may be inconsistent with any other
provision herein; provided that any amendment pursuant to this clause (a)
shall not, as evidenced by an Opinion of Counsel, adversely affect in any
material respect the interests of any Beneficiary.
(b) This Agreement or any Supplement may be amended
from time to time by the Servicer, the Transferor, the Parent and the
Trustee, so long as the Rating Agency Condition is satisfied, with the
consent of a Majority in Interest of each adversely affected Series (or, if so
specified in the related Supplement, the Enhancement Provider for such
Series), for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of this Agreement or of
modifying in any manner the rights of the Holders; provided, however, that
no such amendment shall (i) reduce in any manner the amount of, or delay
the timing of, distributions to be made to any Holder or deposits of
amounts to be so distributed or the amount available under any
Enhancement without the consent of each such Holder, (ii) change the
definition of or the manner of calculating the Holders' Interest or the
Aggregate Holders' Interest or any Investor Certificateholder's interest
therein without the consent of each affected Investor Certificateholder or
(iii) reduce the aforesaid percentage required to consent to any such
amendment without the consent of each Investor Certificateholder. The
Trustee may request an Officer's Certificate and Opinion of Counsel with
respect to an amendment entered into pursuant to this Section 13.01(b)
concerning compliance with the requirements of this Agreement. Any
amendment to be effected pursuant to this paragraph shall be deemed to
adversely affect all outstanding Series, other than any Series with respect to
which such action shall not, as evidenced by an Opinion of Counsel (which
counsel shall not be an employee of, or counsel for, Zenith, the Servicer or
the Transferor), addressed and delivered to the Trustee, adversely affect
the interests of any Investor Certificateholder of such Series.
(c) Promptly after the execution of any such amendment
or consent (other than an amendment pursuant to Section 13.01(a)), the
Trustee shall furnish written notification of the substance of such
amendment to the Parent, each Rating Agency, Investor Certificateholder
and Enhancement Provider.
(d) It shall not be necessary for the consent of Investor
Certificateholders under this Section 13.01 to approve the particular form
of any proposed amendment, but it shall be sufficient if such consent shall
approve the substance thereof. The manner of obtaining such consents and
of evidencing the authorization of the execution thereof by Investor
Certificateholders shall be subject to such reasonable requirements as the
Trustee may prescribe.
(e) Notwithstanding anything in this Section 13.01 to
the contrary, no amendment may be made to this Agreement or any
Supplement which would adversely affect the interests of any
Enhancement Provider without the consent of such Enhancement Provider.
(f) Any supplement executed in accordance with the
provisions of Section 6.08 shall not be considered an amendment to this
Agreement for the purposes of this Section 13.01.
(g) Prior to the execution of any amendment to this
Agreement or any Supplement, the Trustee and any Enhancement Provider
shall be entitled to receive and rely upon an Opinion of Counsel stating that
the execution of such amendment is authorized or permitted by this
Agreement. The Trustee may, but shall not be obligated to, enter into any
such amendment which adversely affects its own rights, duties, indemnities
or immunities in its individual capacity under this Agreement, any
Supplement or otherwise.
SECTION 13.02. Limitation on Rights of Holders.
(a) The death or incapacity of any Investor Certificateholder shall not
operate to terminate this Agreement or the Trust, nor shall such death or
incapacity entitle such Investor Certificateholders' legal representatives or
heirs to claim an accounting or to take any action or commence any
proceeding in any court for a partition or winding up of the Trust, nor
otherwise affect the rights, obligations and liabilities of the parties hereto
or any of them.
(b) No Holder shall have the right to vote (except as
expressly provided in this Agreement, including under Section 11.14) or in
any manner otherwise control the operation and management of the Trust,
or the obligations of the parties hereto, nor shall anything herein set forth,
or contained in the terms of the Certificates, be construed so as to
constitute the Holders from time to time as partners or members of an
association for any reason, nor shall any Investor Certificateholder be under
any liability to any third person by reason of any action taken by the parties
to this Agreement pursuant to any provision hereof.
(c) No Investor Certificateholder shall have any right
by virtue of any provisions of this Agreement to file or otherwise institute
any suit, action or proceeding in equity or at law upon or under or with
respect to this Agreement, unless such Investor Certificateholder
previously shall have made, and unless a Majority in Interest of each
outstanding Series shall have made, a written request to the Trustee to
institute such action, suit or proceeding in its own name as Trustee
hereunder and shall have offered to the Trustee such reasonable indemnity
as it may require against the costs, expenses and liabilities to be incurred
therein or thereby, and the Trustee, for 60 days after such request and offer
of indemnity, shall have failed to file or otherwise refused to institute any
such action, suit or proceeding. No one or more Holders shall have any
right in any manner whatever by virtue or by availing itself or themselves of
any provisions of this Agreement to affect, disturb or prejudice the rights of
the Holders of any of the Investor Certificates, or to obtain or seek to
obtain priority over or preference to any such Investor Certificateholder, or
to enforce any right under this Agreement, except in the manner herein
provided. For the protection and enforcement of the provisions of this
Section 13.02, each and every Investor Certificateholder and the Trustee
shall be entitled to such relief as can be given either at law or in equity.
Notwithstanding any other provision of this Agreement, the Certificates or
any Supplement, each Investor Certificateholder shall have the right to
receive the payments of all amounts due hereunder under the Certificates
held by such Holder and under the Supplement relating to the Series of
Certificates held by such Holder and the right to institute suit for the
enforcement of any such payment without the consent of the Trustee or
any other Holder.
(d) By its acceptance of the Transferor Certificate, the
Holder thereof agrees that it will take no action with respect to such
Holder's rights under this Agreement that is inconsistent with, or adverse
to, the interests of any Beneficiary.
SECTION 13.03. Notices; Payments. (a) All notices and
other communications provided for hereunder shall, unless otherwise stated
herein, be in writing (including telex and facsimile communication) and
shall be personally delivered or sent by certified mail, postage prepaid, or
overnight courier or facsimile, to the intended party at the address or
facsimile number of such party set forth below or at such other address or
facsimile number as shall be designated by such party in a written notice to
the other parties hereto. All such notices and communications shall be
effective (i) if personally delivered, when received, (ii) if sent by certified
mail, four Business Days after having been deposited in the mail, postage
prepaid, (iii) if sent by overnight courier, two Business Days after having
been given to such courier, unless sooner received by the addressee and
(iv) if transmitted by facsimile, when sent, upon receipt confirmed by
telephone or electronic means. Notices and communications sent
hereunder on a day that is not a Business Day shall be deemed to have been
sent on the following Business Day.
If to the Transferor,
Zenith Finance Corporation
1000 Milwaukee Avenue
Glenview, Illinois 60025
Tel.: (847) 391-7400
Fax: (847) 391-8876
Attn.: Treasurer
with a copy to:
Tel.: (847) 391-8066
Fax.: (847) 391-8584
Attn.: Secretary
If to the Servicer,
Zenith Electronics Corporation
1000 Milwaukee Avenue
Glenview, Illinois 60025
Tel.: (847) 391-7286
Fax: (847) 391-8876
Attn.: Manager Banking and Finance
with a copy to:
Tel.: (847) 391-8064
Fax.: (847) 391-8584
Attn.: General Counsel
If to the Parent,
LG Electronics Inc.
20 Yoido-dong
Youngdungpo-gu
Seoul, Korea 150-721
Tel.: 011 822 3777 3454
Fax: 011 822 3777 5303
Attn.: Director of Finance
If to the Trustee,
Bankers Trust Company
Four Albany Street
New York, New York 10006
Tel.: (212) 250-2601
Fax: (212) 250-6439
Attn.: Corporate Trust and Agency Group/Structured
Finance
If to the Transfer Agent and Registrar,
Bankers Trust Company
Four Albany Street
New York, New York 10006
Tel.: (212) 250-2601
Fax: (212) 250-6439
Attn.: Corporate Trust and Agency Group/Structured
Finance
If to an Enhancement Provider or to a Program Agent, to
the address of such Person specified in the related
Supplement.
If the Servicer is not Zenith, notices shall be given to the
Servicer at the address designated by such Servicer, with a copy to Zenith
at the address designated above.
(b) Any notice required or permitted to be mailed to an
Investor Certificateholder shall be given by first-class mail, postage
prepaid, at the address of such Holder as shown in the Certificate Register.
Notice so mailed within the time prescribed in this Agreement shall be
conclusively presumed to have been duly given, whether or not the Holder
receives such notice.
(c) If the Transferor is not the Holder of the Transferor
Certificate, the Holder of the Transferor Certificate shall be entitled to
receive all notices which the Investor Certificateholders receive.
SECTION 13.04. Rule 144A Information. For so long as
any of the Investor Certificates of any Series are "restricted securities"
within the meaning of Rule 144(a)(3) under the Act, the Transferor, the
Servicer and any Enhancement Provider agree to cooperate with each other
to provide to each Investor Certificateholder of such Series and to each
prospective purchaser of Investor Certificates designated by such an
Investor Certificateholder, upon the request of such Investor
Certificateholder or prospective purchaser, any information required to be
provided to such holder or prospective purchaser to satisfy the condition
set forth in Rule 144A(d)(4) under the Act (or any successor provision).
SECTION 13.05. 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
covenants, agreements, provisions or terms of this Agreement or of the
Certificates or rights of the Holders.
SECTION 13.06. Assignment. Notwithstanding anything
to the contrary contained herein, (i) this Agreement may not be assigned by
the Transferor and (ii) except as provided in Section 8.02, this Agreement
may not be assigned by the Servicer without the prior consent of a Majority
in Interest of each outstanding Series.
SECTION 13.07. Certificates Nonassessable and Fully
Paid. It is the intention of the parties to this Agreement that the Holders
shall not be personally liable for obligations of the Trust, that the interests
in the Trust represented by the Certificates shall be nonassessable for any
losses or expenses of the Trust or for any reason whatsoever and that
Certificates upon authentication thereof by the Trustee pursuant to Section
6.02 are and shall be deemed fully paid.
SECTION 13.08. No Proceedings. Notwithstanding any
prior termination of the Trust, the Servicer, each Program Agent, each
Enhancement Provider, the Trustee and the Holders shall not, so long as
there shall not have elapsed one year and one day after the termination of
the Trust, institute against the Trust or the Transferor any proceeding of
the type referred to in the definition of "Insolvency Event" and the
Transferor shall not institute any such proceeding against the Trust.
SECTION 13.09. No Waiver; Cumulative Remedies. No
failure to exercise and no delay in exercising, on the part of any Person, 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 under this Agreement preclude any other or further exercise
thereof or the exercise of any other right, remedy, power or privilege. The
rights, remedies, powers and privileges herein provided are cumulative and
not exhaustive of any rights, remedies, powers and privileges provided by
law.
SECTION 13.10. Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to
be an original and all of which taken together shall constitute one and the
same agreement. Delivery of an executed counterpart of a signature page
to this Agreement by telecopier shall be effective as delivery of a manually
executed counterpart of this Agreement.
SECTION 13.11. Third-Party Beneficiaries. This
Agreement will inure to the benefit of and be binding upon the parties
hereto, each Beneficiary and their respective successors and permitted
assigns. Except as otherwise provided in this Agreement, no other Person
will have any right or obligation hereunder.
SECTION 13.12. Actions by Holders. (a) Whenever in
this Agreement a provision is made that an action may be taken or a notice
given by Investor Certificateholders, such action or notice may be taken or
given by any Investor Certificateholder, unless such provision requires a
specific percentage of Investor Certificateholders.
(b) Any notice, consent, waiver or other act by the
Holder of a Certificate shall bind such Holder and every subsequent Holder
of such Certificate and of any Certificate issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done or omitted to be done by the Trustee or the Servicer in
reliance thereon, whether or not notation of such action is made upon such
Certificate.
SECTION 13.13. Merger and Integration. Except as
specifically stated otherwise herein, this Agreement and the other
Transaction Documents set forth the entire understanding of the parties
relating to the subject matter hereof and thereof, and all prior
understandings, written or oral, are superseded by the Transaction
Documents. This Agreement may not be modified, amended, waived or
supplemented except as provided herein.
SECTION 13.14. Headings. The headings herein are for
purposes of reference only and shall not otherwise affect the meaning or
interpretation of any provision hereof.
SECTION 13.15. Construction of Agreement. The
Transferor hereby grants to the Trustee on behalf of the Trust a security
interest in all of the Transferor's right, title and interest in, to and under
the Receivables now existing and hereafter created, all monies due or to
become due and all amounts received with respect thereto, and all other
Trust Assets, and all "proceeds" thereof, to secure all the Transferor's and
Servicer's obligations hereunder, including the Transferor's obligation to
sell or transfer to the Trust all Receivables existing on the date hereof or
hereafter created and transferred to the Transferor from time to time under
the Receivables Purchase Agreements. This Agreement shall constitute a
security agreement under applicable law.
SECTION 13.16. Governing Law; Jurisdiction; Consent to
Service of Process. (a) Governing Law. THIS AGREEMENT,
INCLUDING THE RIGHTS AND DUTIES OF THE PARTIES
HERETO, SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK,
EXCEPT TO THE EXTENT THAT THE PERFECTION OF THE
INTERESTS OF THE TRUSTEE ON BEHALF OF THE TRUST IN
THE TRUST ASSETS IS GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK.
(b) Jurisdiction. (i) Each of the parties hereto hereby
irrevocably and unconditionally submits, for itself and its property, to the
nonexclusive general jurisdiction of any New York State court or federal
court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of
or relating to this Agreement or any of the other Transaction Documents to
which it is a party, or for recognition or enforcement of any judgment, and
each of the parties hereto hereby irrevocably and unconditionally agrees
that all claims in respect of any such action or proceeding may be heard and
determined in any such New York State court or, to the extent permitted
by law, in such federal court. Each of the parties hereto agrees that a final
judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law. Nothing in this Agreement shall affect any right
that any party may otherwise have to bring any action or proceeding
relating to this Agreement or any of the other Transaction Documents in
the courts of any jurisdiction.
(ii) Each of the parties hereto irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively
do so, any objection that it may now or hereafter have to the laying of
venue of any suit, action or proceeding arising out of or relating to this
Agreement or any of the other Transaction Documents to which it is a
party in any New York State or federal court. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by law, the
defense of an inconvenient forum to the maintenance of such action or
proceeding in any such court.
(c) Consent to Service of Process. Each party to this
Agreement irrevocably consents to service of process by personal delivery,
certified mail, postage prepaid or overnight courier. Nothing in this
Agreement will affect the right of any party to this Agreement to serve
process in any other manner permitted by law.
(d) Waiver of Jury Trial. Each party to this Agreement
waives any right to a trial by jury in any action or proceeding to enforce or
defend any rights under or relating to this Agreement, any other
Transaction Document or any amendment, instrument, document or
agreement delivered or which may in the future be delivered in connection
herewith or therewith or arising from any course of conduct, course of
dealing, statements (whether oral or written), actions of any of the parties
hereto and the liquidity providers or any other relationship existing in
connection with this Agreement or any other Transaction Document, and
agrees that any such action or proceeding shall be tried before a court and
not before a jury.
IN WITNESS WHEREOF, the parties hereto have caused
this Pooling and Servicing Agreement to be duly executed by their
respective officers thereunto duly authorized as of the day and year first
above written.
ZENITH FINANCE CORPORATION,
as Transferor
By:
Name:
Title:
ZENITH ELECTRONICS CORPORATION,
and as Servicer
By:
Name:
Title:
BANKERS TRUST COMPANY,
not in its individual capacity
but solely as Trustee
By:
Name:
Title:
[BELONGS IN THE BEGINNING OF DOCUMENT]
EXECUTION COPY
ZENITH TRADE RECEIVABLES MASTER TRUST
POOLING AND SERVICING AGREEMENT
Dated as of March 31, 1997
Among
ZENITH FINANCE CORPORATION,
as Transferor
ZENITH ELECTRONICS CORPORATION,
as Servicer
and
BANKERS TRUST COMPANY,
as Trustee
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions 1
SECTION 1.02. Other Definitional Provisions 24
SECTION 1.03. Computation of Time Periods 24
ARTICLE II
TRANSFER OF RECEIVABLES
SECTION 2.01. Transfer of Receivables 24
SECTION 2.02. Acceptance by Trustee 26
SECTION 2.03. Representations and Warranties of the
Transferor Relating to the Transferor. 26
SECTION 2.04. Representations and Warranties of the
Transferor Relating to the Trust Assets 31
SECTION 2.05. Affirmative Covenants of the Transferor 33
SECTION 2.06. Negative Covenants of the Transferor 38
SECTION 2.07. Addition and Removal of Originators 42
SECTION 2.08. Deemed Collections for Dilution 43
ARTICLE III
ADMINISTRATION AND SERVICING OF RECEIVABLES
SECTION 3.01. Acceptance of Appointment and Other
Matters Relating to the Servicer 43
SECTION 3.02. Servicing Compensation; Servicer's Expenses 45
SECTION 3.03. Representations and Warranties of the Servicer 46
SECTION 3.04. Covenants of the Servicer 48
SECTION 3.05. Reports and Records for the Trustee 54
SECTION 3.06. Annual Certificate of Servicer 54
SECTION 3.07. Annual Servicing Report of Independent
Public Accountants 54
SECTION 3.08. Tax Treatment 54
SECTION 3.09. Notices to Zenith. 55
SECTION 3.10. Adjustments 55
SECTION 3.11. Securities and Exchange Commission Filings 55
ARTICLE IV
RIGHTS OF HOLDERS AND
ALLOCATION AND APPLICATION OF COLLECTIONS
SECTION 4.01. Rights of Holders 55
SECTION 4.02. Establishment of Concentration Account
and Collection Accounts 56
SECTION 4.03. Allocation of Collections 59
ARTICLE V
DISTRIBUTIONS AND REPORTS TO HOLDERS
SECTION 5.01. Distributions and Reports to Holders 59
ARTICLE VI
THE CERTIFICATES
SECTION 6.01. The Certificates 59
SECTION 6.02. Authentication of Certificates 60
SECTION 6.03. Registration of Transfer and Exchange of
Certificates 60
SECTION 6.04. Mutilated, Destroyed, Lost or Stolen
Certificates 62
SECTION 6.05. Persons Deemed Owners 62
SECTION 6.06. Access to List of Holders' Names and
Addresses 63
SECTION 6.07. Authenticating Agent 63
SECTION 6.08. New Issuances 64
ARTICLE VII
OTHER MATTERS RELATING TO THE TRANSFEROR
SECTION 7.01. Obligations Not Assignable 67
SECTION 7.02. Limitations on Liability 67
SECTION 7.03. Indemnification of the Trustee, the
Holders, any Program Agent and any Enhancement Provider 67
ARTICLE VIII
OTHER MATTERS RELATING TO THE SERVICER
SECTION 8.01. Liability of the Servicer 70
SECTION 8.02. Merger or Consolidation of, or
Assumption of the Obligations of, the Servicer 70
SECTION 8.03. Limitations on Liability 71
SECTION 8.04. Servicer Indemnification 71
SECTION 8.05. The Servicer Not to Resign 72
SECTION 8.06. Examination of Records 72
SECTION 8.07. Confidentiality 72
ARTICLE IX
EARLY AMORTIZATION EVENTS
SECTION 9.01. Early Amortization Events 73
SECTION 9.02. Additional Rights upon the Occurrence of
Any Early Amortization Event 76
ARTICLE X
SERVICER DEFAULTS
SECTION 10.01. Servicer Defaults 77
SECTION 10.02. Trustee to Act; Appointment of Successor Servicer 80
SECTION 10.03. Notification to Holders 81
ARTICLE XI
THE TRUSTEE
SECTION 11.01. Duties of the Trustee 82
SECTION 11.02. Certain Matters Affecting the Trustee 84
SECTION 11.03. Trustee Not Liable for Recitals in
Certificates or Receivables 86
SECTION 11.04. Trustee May Own Certificates 86
SECTION 11.05. Compensation; Trustee's Expenses 86
SECTION 11.06. Eligibility Requirements for Trustee 87
SECTION 11.07. Resignation or Removal of Trustee 87
SECTION 11.08. Successor Trustee 88
SECTION 11.09. Merger or Consolidation of Trustee 89
SECTION 11.10. Appointment of Co-Trustee or Separate
Trustee 89
SECTION 11.11. Tax Returns 90
SECTION 11.12. Trustee May Enforce Claims Without
Possession of Certificates 91
SECTION 11.13. Suits for Enforcement 91
SECTION 11.14. Rights of Holders to Direct Trustee 91
SECTION 11.15. Representations and Warranties of
Trustee 92
SECTION 11.16. Maintenance of Office or Agency 92
ARTICLE XII
TERMINATION
SECTION 12.01. Termination of Trust 92
SECTION 12.02. Final Distribution 93
SECTION 12.03. Transferor's Termination Rights 94
ARTICLE XIII
MISCELLANEOUS PROVISIONS
SECTION 13.01. Amendment 94
SECTION 13.02. Limitation on Rights of Holders 95
SECTION 13.03. Notices; Payments 96
SECTION 13.04. Rule 144A Information 99
SECTION 13.05. Severability of Provisions 99
SECTION 13.06. Assignment 99
SECTION 13.07. Certificates Nonassessable and Fully Paid 99
SECTION 13.08. No Proceedings 99
SECTION 13.09. No Waiver; Cumulative Remedies 100
SECTION 13.10. Counterparts 100
SECTION 13.11. Third-Party Beneficiaries 100
SECTION 13.12. Actions by Holders 100
SECTION 13.13. Merger and Integration 100
SECTION 13.14. Headings 100
SECTION 13.15. Construction of Agreement 101
SECTION 13.16. Governing Law; Jurisdiction; Consent to
Service of Process 101
SCHEDULES
Schedule 3.03(f) Lock Boxes, Collection Accounts and Concentration
Account
EXHIBITS
Exhibit A Form of Transferor Certificate
Exhibit B Form of Annual Servicer's Certificate
Exhibit C Form of Collection Account/Lock Box Letter
Exhibit D Form of Rule 144A and Non-Rule 144A Letters
Exhibit E Form of Daily Report
Exhibit F Credit Policy Manual
Exhibit G Form of Annual Servicing Report of Independent
Public Accountants
LEASE AGREEMENT
dated as of March 26, 1997
by and among
FLEET NATIONAL BANK,
not in its individual capacity but solely
in its capacity as Owner Trustee for
ZENITH ELECTRONICS EQUIPMENT OWNER TRUST 1997-I,
as Lessor,
and
ZENITH ELECTRONICS CORPORATION,
as Lessee,
Leveraged Lease of
certain Television Picture Tube, Computer Monitor Tube
and Other Television Related Manufacturing Equipment
NOTE: CERTAIN RIGHTS OF THE LESSOR UNDER THIS
LEASE AGREEMENT AND IN THE EQUIPMENT LEASED
HEREUNDER HAVE BEEN ASSIGNED TO AND ARE SUBJECT TO
A SECURITY INTEREST IN FAVOR OF FIRST SECURITY
BANK, NATIONAL ASSOCIATION, IN ITS CAPACITY AS
INDENTURE TRUSTEE, UNDER AND TO THE EXTENT SET
FORTH IN THE TRUST INDENTURE AND SECURITY
AGREEMENT DATED AS OF MARCH 26, 1997, BETWEEN
FLEET NATIONAL BANK, IN ITS CAPACITY AS OWNER
TRUSTEE FOR THE OWNER TRUST, AND FIRST SECURITY
BANK, NATIONAL ASSOCIATION, IN ITS CAPACITY AS
INDENTURE TRUSTEE, AS SUCH TRUST INDENTURE AND
SECURITY AGREEMENT MAY BE AMENDED, MODIFIED OR
SUPPLEMENTED FROM TIME TO TIME IN ACCORDANCE WITH
THE PROVISIONS THEREOF. THIS LEASE AGREEMENT HAS
BEEN EXECUTED IN SEVERAL COUNTERPARTS. NO
SECURITY INTEREST IN THE LESSOR'S RIGHT, TITLE AND
INTEREST IN AND TO THIS LEASE AGREEMENT AND THE
EQUIPMENT LEASED HEREUNDER MAY BE CREATED THROUGH
THE TRANSFER OR POSSESSION OF ANY COUNTERPART
OTHER THAN THE ORIGINAL COUNTERPART OF THIS LEASE
AGREEMENT CONTAINING THE RECEIPT THEREFOR EXECUTED
BY FIRST SECURITY BANK, NATIONAL ASSOCIATION, IN
ITS CAPACITY AS INDENTURE TRUSTEE, ON THE
SIGNATURE PAGE THEREOF.
[TABLE OF CONTENTS IN BACK OF DOCUMENT]
LEASE AGREEMENT
This LEASE AGREEMENT (this "Lease") is
entered into as of March 26, 1997, by and among
FLEET NATIONAL BANK, a national banking
association, not in its individual capacity,
except as otherwise specified herein, but solely
in its capacity as Owner Trustee for THE ZENITH
ELECTRONICS EQUIPMENT OWNER TRUST 1997-I under a
Trust Agreement dated as of March 26, 1997, for
the benefit of the Owner Participant named
therein, as Lessor, and ZENITH ELECTRONICS
CORPORATION, a Delaware corporation, as Lessee.
I. ARTICLE
Definitions and Usage
A. SECTION Definitions and Usage. Unless
the context otherwise requires, capitalized terms
used herein shall have the respective meanings
assigned to them, whether directly or indirectly
by reference, in Appendix A to the Participation
Agreement, and the rules of usage set forth in
such Appendix A shall likewise govern this Lease.
I. ARTICLE
Lease of Equipment
A. SECTION Lease of Equipment; Lease
Supplements. Subject to the terms and conditions
hereof, on the Equipment Closing Date, the Lessor
hereby agrees (subject to the terms and conditions
set forth in the Participation Agreement) to
purchase from the Lessee pursuant to a Bill of
Sale and simultaneously to lease to the Lessee,
and the Lessee hereby agrees to sell to the Lessor
pursuant to a Bill of Sale and to lease from the
Lessor, for the term referred to in Section 2.2
hereof, the Items of Equipment specified on
Schedule V to the Participation Agreement, on the
terms more particularly set forth in the Lease
Supplement and Schedule of Equipment, the forms of
which are attached hereto as Schedule A and
Schedule B, delivered on the Equipment Closing
Date, the execution and delivery of which shall
constitute acceptance of the Items of Equipment
described therein for all purposes of this Lease
and such Items of Equipment shall be subject to
the terms of this Lease from the date thereof.
A. SECTION Lease Term. Immediately upon
satisfaction of all applicable conditions
described in Article III of the Participation
Agreement on the Equipment Closing Date, without
necessity of any further act or evidence by any
party hereto, each Item of Equipment specified on
the Schedule of Equipment attached to the Lease
Supplement delivered on the Equipment Closing Date
shall be deemed delivered to the Lessor and leased
by the Lessor to the Lessee for the Base Term and,
if the Lessee elects to exercise its renewal
option pursuant to Article XVI hereof, for any
Renewal Term, in either case, all pursuant to the
terms of this Lease, unless this Lease shall have
been earlier terminated in accordance with its
terms.
I. ARTICLE
Rent
A. SECTION Basic Rent. With respect to
each Item of Equipment, the Lessee shall pay to
the Lessor Basic Rent commencing on the first Rent
Payment Date specified in the Lease Supplement and
related Schedule of Equipment and continuing on
each Rent Payment Date thereafter for the duration
of the Base Term for such Schedule of Equipment in
an amount equal to the product of (a) the
applicable percentage specified for such Rent
Payment Date in the Lease Supplement and (b) the
Lessor's Cost for such Item. The Lease Supplement
shall indicate whether an installment of Basic
Rent is payable in advance or in arrears. The
Lessor and the Lessee agree that for tax purposes
each installment of Basic Rent that is indicated
as payable in advance will be allocated for tax
purposes over the six-month period beginning on
the Rent Payment Date on which such advance
payment is scheduled to be made, and each
installment of Basic Rent that is indicated as
payable in arrears will be accrued over the six-
month period ending on the Rent Payment Date on
which such arrears payment is scheduled to be
made.
A. SECTION Supplemental Rent. The Lessee
shall pay promptly to the Lessor, or to the Person
entitled thereto as expressly provided herein or
in any other Operative Document, any and all
Supplemental Rent as the same shall become due and
payable, including any interest payable at the
Overdue Rate as provided in Section 3.5 hereof.
The Lessee shall also pay as Supplemental Rent
amounts equal to all amounts payable by the Owner
Trustee under the Trust Indenture as Make Whole
Premium Amounts, as well as fees and expenses,
indemnities or expense reimbursements (other than
those resulting from the gross negligence or
willful misconduct of the Owner Trustee).
A. SECTION Minimum Amount of Basic Rent
Payments. The amount of Basic Rent payable on
each Rent Payment Date shall in no event be less
than the amount required to pay the amount of
principal of, and interest on, the Notes scheduled
to be paid on such Rent Payment Date. The
Casualty Value and Termination Value for each Item
of Equipment payable on any date in accordance
with the terms hereof, whether or not adjusted
pursuant to Section 3.7 hereof and Article IX of
the Participation Agreement, shall in no event be
less than the principal amount of the Notes equal
to the Loan Value of such Items plus any accrued
and unpaid interest (other than, in the case of
any such date which is also a Rent Payment Date,
interest due on such Rent Payment Date). The EBO
Price payable on the EBO Date for the Items of
Equipment described in any Lease Supplement and
related Schedule of Equipment, whether or not
adjusted pursuant to Section 3.7 hereof and
Article IX of the Participation Agreement, shall
in no event be less than the principal amount of
the Notes plus any accrued and unpaid interest.
A. SECTION Method of Payment. All Rent
(other than Excluded Payments) payable to the
Lessor at any time prior to termination of the
Indenture shall be paid by the Lessee on behalf of
the Lessor directly to the Indenture Trustee at
the Indenture Trustee Office or such other place
in the U.S. as the Indenture Trustee shall specify
in a written notice to the Lessee at least five
(5) Business Days prior to the date such payment
is due; provided, that all Rent (other than
Excluded Payments) payable to the Lessor after
receipt by the Lessee of notice from the Indenture
Trustee stating that the Indenture has been
terminated following full satisfaction of the
Notes and all other amounts due thereunder and
under the Indenture shall be paid to the Lessor at
its office set forth in Schedule I to the
Participation Agreement or at such other place in
the U.S. as the Lessor shall specify in a written
notice to the Lessee at least five (5) Business
Days prior to the date such payment is due. All
Excluded Payments shall be made at all applicable
times (and whether or not the Lien of the
Indenture shall have been discharged) to the
Person entitled thereto as provided herein or in
the applicable Operative Document, at the office
of such Person as set forth in Schedule I to the
Participation Agreement or at such other office in
the U.S. as such Person entitled thereto shall
specify in a written notice to the Lessee. All
payments of Supplemental Rent shall be paid to the
Person entitled thereto at the office of such
Person set forth in Schedule I to the
Participation Agreement or at such other office in
the U.S. as such Person entitled thereto shall
specify in a written notice to the Lessee at least
five (5) Business Days prior to the date such
payment is due. Each payment of Rent shall be
made by the Lessee in immediately available funds
prior to 11:30 a.m., New York time at the place of
payment, on the date when such payment shall be
due.
A. SECTION Late Payment. In the event
any Rent shall not be paid on its due date to any
Person, the Lessee shall pay to the appropriate
Person on demand, as Supplemental Rent, interest
(to the extent permitted by Applicable Law) on
such overdue amount from the due date thereof
(without regard to any grace period) to the date
of payment thereof at the Overdue Rate.
A. SECTION Net Lease; No Set-off,
Counterclaims, etc. THIS LEASE IS A NET LEASE, AND
NOTWITHSTANDING ANY PROVISION OF THIS LEASE OR OF
ANY OTHER OPERATIVE DOCUMENT TO THE CONTRARY, THE
LESSEE'S OBLIGATION TO PAY ALL PAYMENTS OF RENT AS
AND WHEN THE SAME SHALL BECOME DUE AND PAYABLE IN
ACCORDANCE WITH THE TERMS OF THIS LEASE AND ANY
OTHER OPERATIVE DOCUMENT SHALL BE ABSOLUTE AND
UNCONDITIONAL AND SHALL NOT BE SUBJECT TO ANY
ABATEMENT OR DIMINUTION BY SET-OFF, DEDUCTION,
COUNTERCLAIM, RECOUPMENT, AGREEMENT, DEFENSE,
SUSPENSION, DEFERMENT, INTERRUPTION OR OTHERWISE,
AND UNTIL SUCH TIME AS ALL RENT REQUIRED TO BE
PAID UNDER THIS LEASE OR ANY OTHER OPERATIVE
DOCUMENT SHALL HAVE BEEN PAID, THE LESSEE SHALL
NOT HAVE ANY RIGHT TO TERMINATE THIS LEASE, OR TO
BE RELEASED, RELIEVED OR DISCHARGED FROM ITS
OBLIGATION TO MAKE, AND SHALL NOT SUSPEND, REDUCE
OR DISCONTINUE, ANY PAYMENT OF RENT, FOR ANY
REASON WHATSOEVER (EXCEPT AS MAY BE EXPRESSLY
PROVIDED HEREIN), including, without limitation:
1. any default,
misrepresentation, negligence, misconduct or other
action or inaction of any kind by any Lessor
Party, the Lessee, the Guarantor or any other
Person, whether under or in connection with this
Lease, any other Operative Document or any other
agreement relating to this Lease or in connection
with any unrelated transaction;
1. the insolvency, bankruptcy,
reorganization or cessation of existence, or
discharge or forgiveness of indebtedness of any
Person referred to in clause (a) above;
1. the invalidity,
unenforceability or impossibility of performance
of this Lease or any other Operative Document for
any reason;
1. any defect in the title,
condition, design, operation or fitness for use
of, or any Lien or other restriction of any kind
upon, all or any part of any Item of Equipment,
any loss or destruction of, or damage to, any Item
of Equipment or any interruption in or cessation
of the ownership, possession, operation or use of
any Item of Equipment for any reason whatsoever;
1. any restriction, prevention or
curtailment of or interference with any Item of
Equipment or the use thereof or any part thereof
for any reason whatsoever, including, without
limitation, by any Governmental Authority;
1. any Applicable Law now or
hereafter in force;
1. any failure to obtain any
required Governmental Action for a transfer of
rights or title to the Lessor, the Lessee or any
other Person;
1. any amendment or other change
of, or any assignment of any rights under, any
Operative Document, or any waiver or other action
or inaction under or in respect of any Operative
Document, or any exercise or nonexercise of any
right or remedy under or in respect of any
Operative Document, including, without limitation,
the exercise of any foreclosure or other remedy
under the Indenture or this Lease or the sale of
any Item of Equipment or any portion thereof or
interest therein; or
1. any other cause, circumstance,
happening or event whatsoever, foreseen or
unforeseen, whether similar or dissimilar to any
of the foregoing.
The Lessee hereby waives and hereby agrees to
waive at any future time at the request of the
Lessor, to the extent now or then permitted by
Applicable Law, any and all rights that the Lessee
may have or that at any time hereafter may be
conferred upon either of them, by statute,
regulation or otherwise, to terminate, cancel,
quit or surrender this Lease other than in
accordance with the express terms hereof. If for
any reason whatsoever this Lease shall be
terminated other than in accordance with the
express terms hereof in whole or in part, by
operation of law or otherwise, the Lessee
nonetheless agrees to the extent permitted by
Applicable Law or unless the Lessor has
repossessed, retaken or required redelivery of the
Equipment, to pay to the Lessor (or, in the case
of Supplemental Rent, to the Person entitled
thereto as provided herein or in the applicable
Operative Document) an amount equal to each Rent
payment at the time and in the manner such payment
would have become due and payable in accordance
with the terms hereof had this Lease not been
terminated in whole or in part. Each Rent payment
shall be final and the Lessee agrees not to seek
to recover all or any part of any such payment
(except for amounts paid to a Lessor Party which
such Lessor Party in good faith agrees have been
paid in error) from any Lessor Party for any
reason under any circumstance whatsoever.
A. SECTION Adjustments to Basic Rent,
Casualty Value, Termination Value and EBO Price.
Basic Rent, Casualty Value, Termination Value, and
the EBO Price shall be adjusted when required by
and in accordance with Article IX of the
Participation Agreement, and an appropriate Lease
Supplement shall be executed and delivered to
reflect all such adjustments.
A. SECTION Accrued Basic Rent. Subject
to Section 3.3 hereof, on any date that, pursuant
to the terms of any Operative Document, the Lessee
is obligated to pay Accrued Basic Rent, the Lessee
shall not be obligated to pay that portion, if
any, of Accrued Basic Rent that has already been
paid by the Lessee in connection with a payment of
Casualty Value or Termination Value on or before
such date.
I. ARTICLE
Representations, Warranties and Agreements as to
Equipment
A. SECTION Disclaimer of Warranties. AS
BETWEEN THE LESSOR AND THE LESSEE, DELIVERY OF A
LEASE SUPPLEMENT PURSUANT TO ARTICLE II HEREOF
SHALL BE CONCLUSIVE PROOF OF ACCEPTANCE BY THE
LESSEE OF EACH ITEM OF EQUIPMENT SPECIFIED ON THE
RELATED SCHEDULE OF EQUIPMENT AS BEING IN
COMPLIANCE WITH ALL REQUIREMENTS OF THIS LEASE.
THE LESSOR LEASES AND THE LESSEE TAKES EACH SUCH
ITEM OF EQUIPMENT AND EACH COMPONENT PART THEREOF
"AS IS" AND "WHERE IS", AND THE LESSEE
ACKNOWLEDGES THAT NONE OF THE LESSOR PARTIES HAS
MADE, NOR SHALL BE DEEMED TO HAVE MADE, ANY
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS
TO THE TITLE, VALUE, COMPLIANCE WITH
SPECIFICATIONS, CONDITION, MERCHANTABILITY,
DESIGN, QUALITY, DURABILITY, OPERATION OR FITNESS
FOR USE OR PURPOSE OF EACH SUCH ITEM OF EQUIPMENT
OR ANY COMPONENT PART THEREOF OR ANY OTHER
REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR
IMPLIED, WITH RESPECT TO EACH SUCH ITEM OF
EQUIPMENT OR ANY COMPONENT PART THEREOF OR
OTHERWISE, IT BEING AGREED THAT ALL RISKS INCIDENT
THERETO ARE TO BE BORNE, AS BETWEEN THE LESSOR AND
THE LESSEE, BY THE LESSEE IN THE EVENT OF ANY
DEFECT OR DEFICIENCY IN ANY SUCH ITEM OF EQUIPMENT
OR ANY COMPONENT PART THEREOF, OF ANY NATURE
WHETHER PATENT OR LATENT, AND THAT NONE OF THE
LESSOR PARTIES SHALL HAVE ANY RESPONSIBILITY OR
LIABILITY WITH RESPECT THERETO, except that the
Lessor hereby represents, warrants and covenants
that each such Item of Equipment shall be free of
Lessor Liens on the Equipment Closing Date. The
provisions of this Section 4.1 have been
negotiated, and the foregoing provisions are
intended to be a complete exclusion and negation
of any other warranties made by any Lessor Party,
express or implied, with respect to any Item of
Equipment or any component part thereof, whether
arising pursuant to the UCC or any other
Applicable Law now or hereafter in effect or
otherwise. Nothing contained in this Section 4.1
shall in any way diminish or otherwise affect any
right the Lessee may have with respect to any Item
of Equipment against any third Person. None of
the Lessor Parties shall at any time be required
to inspect any Item of Equipment or any component
part thereof, and any actual inspection by any
Lessor Party shall not be deemed to affect or
modify the provisions of this Section 4.1.
A. SECTION Lessee To Exercise Certain
Rights. The Lessor hereby authorizes the Lessee,
at the Lessee's expense, to exercise in the name
of and on behalf of the Lessor and the Lessee, as
their interests may appear, the right and power to
deal with any Seller or manufacturer (including
agents and consultants thereof) of any Item of
Equipment or any component part thereof and the
right to enforce (by legal action or otherwise)
against such Seller or manufacturer all rights,
powers and privileges of the Lessor and to receive
all benefits of the Lessor with respect to such
Seller or manufacturer, under any express or
implied warranty or indemnity or otherwise;
provided, that the Lessee shall indemnify each
Indemnified Person and hold each such Indemnified
Person harmless from and against any and all
claims, costs, expenses, damages, losses and
liability incurred or suffered by such Indemnified
Person in connection with, as a result of, or
incidental to, any action or inaction by the
Lessee pursuant to the above authorization;
provided, further, that if a Material Default or
an Event of Default shall have occurred and be
continuing the Lessor may terminate the authority
of the Lessee under this Section 4.2. Any amount
paid under any such warranty or other such claim
or in lieu of performance of any such warranty or
claim shall be paid over, held and applied as set
forth in Section 9.2 or 9.3, as applicable. After
the end of the Lease Term with respect to any Item
of Equipment (except with respect to any Item of
Equipment that the Lessee shall have purchased
pursuant to Article X or XVII hereof) or after the
termination of this Lease with respect to such
Item of Equipment pursuant to Article XIV, (a) the
Lessee shall have no further rights, powers,
privileges or benefits under this Section 4.2 and
(b) all amounts payable by any Seller or
manufacturer referred to above paid thereafter
shall be paid to, and retained by, the Lessor or
any other Person as shall then be the owner of the
Item of Equipment as to which such payment is
made.
I. ARTICLE
Liens; Quiet Enjoyment
A. SECTION Liens. The Lessee shall not
directly or indirectly create, incur, assume or
suffer to exist any Lien (other than Permitted
Liens) on any Item of Equipment or the Trust
Estate or the Trust Indenture Estate. The Lessee
will promptly, at its own expense, take such
action as may be necessary duly to discharge any
such Lien. The Lessee's obligations under this
Section 5.1 with respect to any such Lien on any
Item of Equipment resulting from a claim arising
prior to the termination of this Lease with
respect to such Item of Equipment shall survive
such termination.
A. SECTION Quiet Enjoyment.
Notwithstanding any other provision of this Lease,
so long as no Event of Default shall have occurred
and be continuing, as between the Lessee and the
Lessor, the Lessee shall have the exclusive rights
to possession and control of all Items of
Equipment and neither the Lessor nor any Person
acting or claiming through the Lessor will take
any action that shall interfere with the peaceful
and quiet enjoyment or the possession and use or
non-use of any Item of Equipment by the Lessee,
and the Lessee shall have the right to possess and
use or not use such Item of Equipment in its sole
discretion, subject always to the terms and
conditions of this Lease. The foregoing is not
intended to limit the inspection rights of the
Items of Equipment granted by the Lessee pursuant
to Sections 8.3 and 12.1 hereof.
A. SECTION Personal Property. The Lessee
and the Lessor agree for the purposes of this
Lease that each Item of Equipment and every part
thereof and title thereto is and shall be
considered as and shall remain personal and not
real property to all Persons and for all purposes.
The Lessee and the Lessor agree that each Item of
Equipment and every part thereof and title thereto
is severed and shall be and shall remain severed
from any real property and is readily movable and,
even if physically attached to such property, it
is the intention of the Lessee and the Lessor that
each Item of Equipment and every part thereof and
title thereto (a) shall retain the character of
personal property, (b) shall be removable, (c)
shall be treated as personal property with respect
to the rights of all Persons whomsoever, (d) shall
not become part of any real property and (e) by
virtue of its nature as personal property, shall
not be affected in any way by any instrument
dealing with any real property.
I. ARTICLE
Operation; Maintenance
A. SECTION Operation and Maintenance.
The Lessee shall at all times at its own expense
during the Lease Term applicable to each Item of
Equipment:
1. use each Item of Equipment for
its intended purpose and purposes incidental or
reasonably related thereto and permit each such
Item to be used or operated only by qualified
personnel and in accordance with good business
practice;
1. keep and maintain in proper
order all appropriate books, records and title
documents relating to each Item of Equipment, all
services rendered and all funds expended for
operation and maintenance of each such Item and
the acquisition, construction and installation of
Modifications thereto and the payment of the
purchase price of such Modifications, all in
accordance with the standards applied by the
Lessee with respect to similar equipment owned or
leased by it in the U.S.;
1. operate the Equipment on a
continuous basis, in a manner consistent with the
Lessee's normal operating procedures, and maintain
each such Item in good operating condition in
accordance with (i) the standards applied by
Lessee with respect to similar equipment owned or
leased by it in the U.S., (ii) industry practice,
(iii) prudent operating and maintenance standards
and (iv) the manufacturer's required maintenance
procedures and in accordance with all warranties
and required insurance policies;
1. inspect, service, maintain,
store, use, operate, repair, replace, modify and
improve each Item of Equipment in compliance in
all material respects with Applicable Law
(including all applicable environmental and
occupational safety laws) and in a manner which
would not subject any Lessor Party to any criminal
liability, and in compliance in all material
respects with all applicable Governmental Actions
and in compliance with all insurance required by
this Lease and the other Operative Documents;
provided, that as long as no Material Default or
Event of Default shall have occurred and be
continuing, the Lessee may in good faith by
appropriate proceedings contest the validity or
application of any such Applicable Law in any
reasonable manner which does not involve any risk
of the imposition of criminal liability on any
Lessor Party or any material risk of the sale,
forfeiture or loss of the Equipment or any part or
interest therein or title thereto, or any material
risk of any fine, penalty, or other imposition
upon the Lessor Parties for which the Lessee has
not acknowledged its obligation to indemnify the
Lessor Parties pursuant to the Operative
Documents; provided, that the Lessee shall
promptly give the Lessor notice of any contest
relating to any Item or group of Items of
Equipment having a Lessor's Cost equal to or
greater than $1,000,000; and
1. in case of any damage to any
Item of Equipment, other than damage constituting
an Event of Loss, whether or not any insurance
proceeds on account of such damage shall be
sufficient for the purpose, the Lessee shall at
its own expense, promptly commence and complete
the repair of such Item of Equipment (and in any
event complete such repair before the end of the
Lease Term or any earlier termination) so as to
restore such Item to its fair market value,
residual value, condition, remaining useful life,
and utility immediately prior to such
damage(assuming such Item was then in the
condition and state of repair required to be
maintained by the terms of this Lease), with such
alterations and additions as may be made at the
Lessee's election pursuant to and subject to the
conditions of Section 6.4 hereof.
A. SECTION Replacement of Parts;
Substitution of Items. (a) If any part that was
originally incorporated or installed in or
attached to any Item of Equipment at the time such
Item was accepted hereunder, or any part
thereafter incorporated or installed in or
attached to such Item of Equipment in replacement
of or substitution for such original part or any
such replacement part shall become worn out, lost,
stolen, destroyed, seized, confiscated, damaged
beyond repair or otherwise permanently rendered
unfit for use, the Lessee, at its own expense,
shall promptly replace such part, or cause the
same to be replaced, by a replacement part which
is free and clear of all Liens and of such
quality, and in such manner that such Item of
Equipment shall be in as good an operating
condition as, and have a fair market value,
residual value, condition, remaining useful life
and utility at least equivalent to the fair market
value, residual value, condition, remaining useful
life and utility of, such Item of Equipment
immediately prior to such replacement of such part
(assuming such Item of Equipment was, at the time
of such replacement, in the condition and state of
repair required by the terms hereof); provided
that such replacement or substitution does not
cause any Item of Equipment to constitute "limited
use property" within the meaning of Rev. Procs.
75-21 and 79-48, as amended. Any such part
removed from an Item of Equipment shall remain the
property of the Lessor, no matter where located,
until such part shall be replaced by a part which
has been incorporated or installed in or attached
to such Item of Equipment and which meets the
requirements for replacement specified in the
preceding sentence. Immediately upon a
replacement part becoming incorporated or
installed in or attached to an Item of Equipment
as above provided, without further act, (a) title
to the replaced part shall thereupon vest in the
Lessee, free and clear of all rights of the
Lessor, and shall no longer be part of such Item
of Equipment hereunder, (b) title to such
replacement part shall thereupon vest in the
Lessor, free and clear of all Liens (except for
Permitted Liens), (c) such replacement part shall
become subject to this Lease and to the Lien of
the Indenture and be deemed part of such Item of
Equipment for all purposes to the same extent as
the parts originally incorporated or installed in
or attached to such Item of Equipment and (d) the
Lessor shall assign to the Lessee all claims it
may have against any other Person arising from the
event which gave rise to the replacement. The
Lessee shall provide the Lessor with a Bill of
Sale or other conveyance document for each
replacement part the cost of which exceeds
$100,000. In all events, all replacement parts
with respect to an Item of Equipment shall be so
replaced at or before the required time of return
of such Item of Equipment in accordance with the
terms of Section 8.2 hereof.
(b) So long as no Material Default or
Event of Default has occurred and is continuing
the Lessee shall have the right at any time, with
respect to any Item of Equipment that has become
obsolete or surplus to the Lessee's operating
requirements as determined by the Lessee in its
reasonable business judgment, upon giving at least
ninety (90) days' prior written notice (which
notice shall specify the Item to be replaced and
the date of such replacement and shall contain a
certification signed by a Responsible Officer of
the Lessee on behalf of the Lessee that such Item
has become obsolete or surplus to the Lessee's
operating requirements as determined by the Lessee
in its reasonable business judgment, other than as
a result of an Event of Loss), to substitute
equipment of substantially like kind and of equal
or greater value, utility, economic life and
residual value, for such Item or Items of
Equipment hereunder assuming that such Item or
Items of Equipment to be replaced was then in the
condition and state of repair required to be
maintained under the terms of this Lease, provided
that the aggregate Lessor's Cost of all Items
substituted for pursuant to this Section 6.2(b)
shall not exceed $10,000,000. The Lessee's right
to so replace any Item shall be subject to the
fulfillment, at the Lessee's cost and expense, of
the conditions set forth in Section 9.1(b)
(including, without limitation, Section 9.1(b)(v))
and to the further condition that the Item or
Items of Equipment being replaced is being
disposed of to a Person other than a Non-Bidding
Party (as defined in Section 7.3). Upon
satisfaction of such conditions, (i) this Lease
shall continue with respect to any replacement
Item, and (ii) the Lessor shall convey "as is"
"where is", without recourse or warranty (except
as to the ability and authority of the Lessor to
transfer and convey such Item free and clear of
Lessor Liens).
A. SECTION Relocation. So long as such
relocation would not of itself result in a Default
or an Event of Default, the Lessee may relocate
any Item of Equipment to any location within the
U.S. of (1) the Lessee, or (2) any sublessee
pursuant to a sublease permitted hereunder without
the prior consent of the Lessor and the Indenture
Trustee; provided, that in any event the Lessee
shall have provided to each of the Lessor Parties
(a) written notice of the intention to relocate
such Item of Equipment in accordance with the
terms hereof at least thirty (30) days prior to
the date such relocation is commenced, (b) such
UCC financing statements and other documents as
may be necessary or advisable to maintain and
perfect the interest of the Lessor therein and the
Lien of the Indenture thereon, (c) evidence that
such Item is covered by the insurance required by
Section 20.1 hereof at such new location, (d) an
acknowledgment from the owner of the facility to
which such Item is relocated to the effect that
such owner shall acquire no interest in such Item
by virtue of such Item being installed in such
facility, (e) an opinion of counsel that such
relocation does not impair or adversely affect the
ownership of such Item by the Lessor and that the
financing statements and other documents described
in clause (b) above have been duly filed or
recorded in all public offices wherein such
filings or recordings are necessary to protect the
validity and effectiveness of this Lease and the
Indenture, including the maintenance of the
perfection of the Lien of the Indenture Trustee
thereon, and (f) evidence satisfactory to the
Lessor Parties that such relocation shall have no
adverse tax consequences to them. All reasonable
costs and expenses (including Fees and Expenses)
incurred by the Lessor Parties in connection with
any relocation shall be paid by the Lessee.
A. SECTION Modification.
1. The Lessee shall at its
expense make any Modification to any Item of
Equipment required (i) by Applicable Law or in
order to operate, maintain, service, store, or use
(or, if applicable, to dispose of or transport)
such Item in accordance with Applicable Law, as
soon as practicable after any such requirement may
arise or (ii) in order for the Lessee to comply
with the provisions of this Lease, any insurance
required by this Lease or any other Operative
Document or the requirements of the manufacturer
of such Item (all such Modifications being
referred to herein as "Required Modifications");
provided, that the Lessee may, so long as no
Material Default or Event of Default shall have
occurred and be continuing, in good faith by
appropriate proceedings contest the validity or
application of any Applicable Law in any
reasonable manner which does not involve any risk
of the imposition of criminal liability on any
Lessor Party, or any risk of the sale, forfeiture
or loss of such Item or any part or interest
therein or title thereto, or any material risk of
any fine, penalty or other imposition upon any of
the Lessor Parties not involving criminal
liability for which the Lessee has not
acknowledged its obligation to indemnify the
Lessor Parties pursuant to the Operative
Documents, but only so long as the Lessee
simultaneously contests the validity or
application of such Applicable Law with respect to
all other similarly affected Items of Equipment
operated by the Lessee and located at the same
location. The Lessee shall promptly give the
Lessor notice of any contest relating to any Item
or group of Items of Equipment having a Lessor's
Cost equal to or greater than $1,000,000. All
Required Modifications shall be completed in a
good and workmanlike manner and in all events
prior to the termination of the Lease with respect
to any such Item or group of Items of Equipment.
So long as no Material Default or Event of Default
has occurred and is continuing, the Lessee at its
expense, from time to time, may make any
Modification to any Item that the Lessee in its
reasonable discretion may deem desirable in the
proper conduct of the Lessee's business (all such
Modifications which are not Required Modifications
being referred to herein as "Optional
Modifications"); provided, that the Lessee shall
not have the right to make any such Optional
Modification (i) that would diminish the then fair
market value, residual value, condition, remaining
useful life or utility of such Item immediately
prior to such Optional Modification, assuming the
applicable Item was then in the condition and
state of repair required to be maintained by the
terms of this Lease or (ii) would result in the
Item of Equipment, becoming "limited use property"
within the meaning of Rev. Procs. 75-21 and 79-48,
as amended. All Optional Modifications shall be
completed in a good and workmanlike manner, with
reasonable dispatch.
If requested by the Lessee, the Lessor
will be given the opportunity to consider
financing the cost of any Modification, but will
not be obligated in any manner to finance the cost
of any Modification. If the Lessor does provide
any such financing, the Lessee and the Lessor
shall execute a Lease Supplement covering such
Modification and adjusting the Basic Rent,
Casualty Value, Termination Value, and EBO Price
to reflect such financing in accordance with the
terms of Section 9.4 of the Participation
Agreement.
1. Title to each Modification
shall vest as follows:
a) in the case of (A) each
Required Modification or other Nonseverable
Modification, whether or not the Lessor shall have
financed or provided financing (in whole or in
part) for such Modification, and (B) each
Modification which shall have been financed by the
Lessor, the Lessor shall, without further act,
effective on the date such Modification shall have
been incorporated into the modified Item of
Equipment, acquire title to such Modification free
and clear of all Liens other than Permitted Liens;
or
a) in the case of each
Severable Modification not financed by the Lessor
and not a Required Modification, the Lessee shall
retain title to such Modification and the Lessee
may (subject to the provisions of Section 6.4(c))
remove such Modification at its expense at any
time so long as the modified Item of Equipment
remains in or is restored by the Lessee to the
condition required by this Lease.
Immediately upon title to a Modification
vesting in the Lessor pursuant to this Section
6.4(b), such Modification shall, without further
act, become subject to this Lease and to the Lien
of the Indenture and be deemed part of the
applicable Item for all purposes. In the case of
clause (ii) of this Section 6.4(b), if the Lessee
has not elected to exercise its Purchase Option,
the Lessor shall have the right, upon sixty (60)
days' written notice to the Lessee, to purchase
any such Severable Modification (other than a
Severable Modification which may not be so sold
without breach of an existing contract or license
to which the Lessee or such Modification,
respectively, is a party or subject) at its Fair
Market Sales Value, determined if necessary by the
Appraisal Procedure, upon termination of this
Lease with respect to such Item.
1. Subject to compliance with
Applicable Law, the Lessee may remove, at its
expense, any Severable Modification not purchased
by the Lessor; provided, that the Lessee, at its
expense shall repair any damage to such Item
caused by such removal so as not to diminish the
fair market value, residual value, condition,
remaining useful life or utility of such Item
immediately prior to the Modification (assuming
such Item was then in the condition and state of
repair required by this Lease); provided, further,
that in the event the Lessee shall not have
removed any Severable Modification to which the
Lessee shall have title as provided in
Section 6.4(b)(ii) prior to the end of the Lease
Term applicable to the modified Item of Equipment,
title to such Severable Modification shall vest in
the Lessor upon the expiration of such Lease Term.
I. ARTICLE
Obsolescence Termination
A. SECTION Item Obsolescence. Unless a
Material Default or an Event of Default shall have
occurred and be continuing, the Lessee shall have
the right to terminate the Lease with respect to
any Item or Items of Equipment having a minimum
aggregate Lessor's Cost of $1,000,000 at any time
during the Base Term after the third anniversary
of the Equipment Closing Date, on a Rent Payment
Date for such Item (an "Obsolescence Termination
Date") upon giving at least ninety (90) days'
prior written notice (subject to revocation as
described below) to the Lessor and the Indenture
Trustee (which notice shall specify the Item to be
terminated and the Obsolescence Termination Date
and shall be accompanied by the written consent of
the Guarantor to such termination) (the
"Termination Notice"), which Termination Notice
shall contain a certification signed by a
Responsible Officer of the Lessee on behalf of the
Lessee that such Item has become (a) obsolete or
surplus to the Lessee's operating requirements as
determined by the Lessee in its reasonable
business judgment, other than as a result of an
Event of Loss, or (b) uneconomic to operate due to
burdensome governmental regulations, and the
Lessee has provided an Officer's Certificate to
the Lessor and the Indenture Trustee to such
effect in each case. The Lessee may, with the
written consent of the Guarantor, rescind its
Termination Notice as to any Item of Equipment no
later than forty-five (45) days prior to the
scheduled Obsolescence Termination Date so long as
no binding contract for the sale of such Item
exists; provided, that the Lessor has not
exercised its election to retain such Item of
Equipment pursuant to Section 7.2 hereof. The
total number of such rescissions during the Lease
Term shall not exceed two (2).
A. SECTION Retention by Lessor. At any
time within thirty (30) days after receipt by the
Lessor and the Indenture Trustee of a Termination
Notice, the Lessor may give the Lessee notice of
its irrevocable election to retain any such Item.
If the Lessor shall have elected to retain any
such Item in accordance with the preceding
sentence, on the Obsolescence Termination Date for
such Item (a) the Lessee shall deliver to the
Lessor such Item of Equipment in accordance with
the conditions for return set forth in Section 8.2
hereof, (b) the Lessee shall pay to the Lessor or,
so long as the Indenture has not been discharged
in accordance with its terms, the Indenture
Trustee, by EFT (i) if such Obsolescence
Termination Date is also a Rent Payment Date, any
Accrued Basic Rent due on or prior to such
Obsolescence Termination Date with respect to such
Item of Equipment, and (ii) any other unpaid
Supplemental Rent (including the Make Whole
Premium Amount payable on such date under the
Indenture on the aggregate amount of Notes related
to Items of Equipment subject to such termination,
but not including any Casualty Value or
Termination Value) due on or prior to such
Obsolescence Termination Date with respect to such
Item of Equipment plus all other sums due and
payable on such Obsolescence Termination Date to
the Lenders by the Lessor under the Indenture, the
Participation Agreement or the Notes, but not
including the principal amount of any such Notes,
and (c) the Lessor shall pay to the Indenture
Trustee by EFT an amount sufficient to pay a
principal amount of the Notes equal to the Loan
Value for such Item of Equipment. Subject to the
receipt by the Indenture Trustee of such funds,
upon return by the Lessee of such Item of
Equipment to the Lessor pursuant to clause (a)
above, such Item of Equipment shall cease to be
leased hereunder or subject to the provisions of
any other Operative Document. If the Lessor fails
to make the full amount of such payment to the
Indenture Trustee, (i) the Lessee may make such
payment on the Obsolescence Termination Date
(together with all other amounts payable by the
Lessee under this Section 7.2) plus an amount
equal to the equity portion of the Termination
Value as of such date for such terminated Items,
in which event all liability of the Lessee to pay
Rent for such Item of Equipment following such
Obsolescence Termination Date shall cease, the
Lease Term with respect to such Item of Equipment
shall cease and the Lessor will be obligated to
convey title to such Item of Equipment to the
Lessee (without representation or warranty except
as to the Lessor's ability and authority to
conduct such transfer and convey title to such
Item free and clear of Lessor Liens) and (ii) if
the Lessee elects not to make the payment
described in clause (i) on the Obsolescence
Termination Date, the Lessor shall thereafter no
longer be entitled to exercise its election to
retain such Item of Equipment. If the Lessee
elects not to make the payment contemplated in
clause (i) of the preceding sentence, this Lease
shall continue in full force and effect with
respect to such Item of Equipment, and the Lessor
shall retain its rights under this Section 7.2
with respect to any future Termination Notices.
Notwithstanding any election by the Lessor to
retain an Item of Equipment, the Lessee shall pay
all reasonable costs and expenses (including Fees
and Expenses) of all Lessor Parties relating to
the termination of the obligation of the Lessee to
lease such Item of Equipment or any revocation
thereof; provided, that the Lessee shall not be
liable for any costs and expenses incurred by the
Lessor after such termination or to modify such
Equipment for any purpose other than to ensure
that the condition of such Equipment complies with
that required hereunder or, except as set forth in
clause (i) above, as a result of the Lessor's
failure to make any payment to the Indenture
Trustee.
B. SECTION Bids for Terminated Items.
During the period from the giving of such
Termination Notice for any Item of Equipment until
ten (10) days prior to the Obsolescence
Termination Date and so long as the Lessor shall
not have exercised its option pursuant to
Section 7.2 to retain such Item, the Lessee, as
non-exclusive agent for the Lessor and at the
Lessee's expense, shall use its best efforts to
obtain the highest possible bids from Persons
other than the Lessee, the Guarantor, any of their
respective Affiliates or Tax Affiliates or any
Person acting on behalf of or in conjunction with
such parties in connection with such bid
(collectively, the "Non-Bidding Parties") to
purchase such Item of Equipment on the
Obsolescence Termination Date, and the Lessee
shall during such period, from time to time at the
request of the Lessor, inform the Lessor in
writing of the results of its efforts and shall
notify the Lessor in writing, at least ten (10)
days prior to the scheduled Obsolescence
Termination Date, of the amount of each such bid
(which may include bids to purchase such Item of
Equipment for scrap or salvage only) that has
theretofore been submitted and the name and
address of the party submitting such bid. Each
such bid (a "Qualifying Bid") (a) shall be a bona
fide bid for payment in full in cash, and
(b) shall not involve any consideration to be
received by any of the Non-Bidding Parties from
the purchaser or be connected, directly or
indirectly, with any transaction between the
purchaser and any of the Non-Bidding Parties. The
Lessor and the Owner Participant shall have the
right, directly or through agents or brokers, to
solicit bids, to inspect any bid received by the
Lessee or to submit a bid itself, but shall be
under no duty to make or solicit bids or to
inquire into the efforts of the Lessee to obtain
bids.
If, other than as a result of the Lessor's
election to retain such Item of Equipment as
provided in Section 7.2 hereof, neither the Lessor
nor the Lessee shall have received any Qualifying
Bid as to any Item of Equipment on or prior to the
tenth day before the scheduled Obsolescence
Termination Date, the Termination Notice as to
such Item of Equipment shall be deemed to be
rescinded and such Item of Equipment shall remain
subject to this Lease. If the Termination Notice
is deemed rescinded pursuant to the preceding
sentence, this Lease shall continue as to such
Item in full force and effect, without in any way
prejudicing the right of the Lessee to terminate
the Lease at a later date with respect thereto;
provided, that such continuation shall constitute
a rescission for purposes of Section 7.1 hereof.
In such event, the Lessee shall reimburse the
Lessor Parties for all reasonable fees and
expenses (including Fees and Expenses) incurred in
connection with any such rescission of a
Termination Notice.
If the Lessor or the Lessee shall have
received a Qualifying Bid on or prior to the tenth
day before the Obsolescence Termination Date, the
Lessor shall on the Obsolescence Termination Date,
provided the conditions of Section 7.4 hereof
shall have been met, transfer the Item of
Equipment to which such bid relates to the bidder
that shall have submitted the highest Qualifying
Bid for such Item of Equipment upon receipt in
immediately available funds of the amount
specified in such bid. For so long as the
Indenture has not been discharged in accordance
with its terms, such funds shall be paid directly
to the Indenture Trustee for application as
provided in Section 3.02(c) of the Indenture and,
thereafter, shall be paid to the Lessor. The
Lessee shall certify to the Lessor and the Owner
Participant that the conditions of the first
paragraph of this Section 7.3 with respect to the
Qualifying Bid have been met, including that the
bidder is not a Non-Bidding Party. Such transfer
and assignment shall be without any
representation, warranty or recourse whatsoever
except as to the Lessor's ability and authority to
conduct the transaction and convey title to such
Item of Equipment free and clear of Lessor Liens.
The Lessor shall execute and deliver such
documents evidencing such transfer and take such
further action as the purchaser shall reasonably
request. All out-of-pocket costs and expenses
(including Fees and Expenses, any sales
commissions, and any sales, transfer or similar
taxes) of the Lessor Parties incurred in
connection with any sale and transfer of any Item
of Equipment pursuant to this Article VII shall be
paid by the Lessee.
A. SECTION Conditions of Termination;
Effect of Termination. As conditions to the
transfer by the Lessor of any Item on the
applicable Obsolescence Termination Date to the
successful bidder pursuant to the last paragraph
of Section 7.3 hereof, (a) any necessary
Governmental Actions in connection therewith shall
have been obtained by and at the expense of the
Lessee, (b) the Lessee shall on such Obsolescence
Termination Date pay to the Lessor or, so long as
the Indenture has not been discharged in
accordance with its terms, the Indenture Trustee
the sum of (i) if such Obsolescence Termination
Date is also a Rent Payment Date, any Accrued
Basic Rent due with respect to such Item of
Equipment as of such Obsolescence Termination Date
and (ii) the excess, if any, of the Termination
Value for such Item of Equipment, computed as of
such Obsolescence Termination Date, over (x) the
net proceeds actually realized by the Lessor from
any sale thereof or, (y) so long as the Indenture
has not been discharged in accordance with its
terms, the funds actually received by the
Indenture Trustee, and (c) the Lessee shall on
such Obsolescence Termination Date pay to the
Lessor or, so long as the Indenture has not been
discharged in accordance with its terms, the
Indenture Trustee the sum of (i) any Make Whole
Premium Amount payable on such Obsolescence
Termination Date pursuant to the Indenture, (ii)
any other Rent (including any amounts for costs
and expenses payable by the Lessee as required in
the immediately preceding paragraph) with respect
to such Item of Equipment due and unpaid as of
such Obsolescence Termination Date and (iii) any
penalties, premium or other amounts payable under
the Indenture or the Notes in connection with the
principal amount of the Notes being prepaid on
such date (the amounts payable pursuant to
clauses (b) and (c) collectively, the
"Obsolescence Termination Payment"). Upon payment
by the Lessee of all Obsolescence Termination
Payments as to any terminated Item of Equipment,
the obligation of the Lessee to pay Basic Rent
with respect to such Item of Equipment shall
terminate, such Item of Equipment shall no longer
be subject to this Lease and the Lease Term with
respect to such Item of Equipment shall end. If,
other than as a result of the Lessor's election to
retain such Item of Equipment as provided for in
Section 7.2 and the compliance by the Lessor and
the Lessee with their respective obligations in
connection therewith, on or as of the Obsolescence
Termination Date no sale of such Item of Equipment
shall have occurred or the Lessee shall not have
complied in full with this Section 7.4, this Lease
shall continue in full force and effect with
respect to such Item of Equipment in accordance
with the terms hereof without prejudice to the
Lessee's right to exercise its termination right
under Section 7.1 hereof thereafter and the Lessee
shall pay the expenses (including Fees and
Expenses) incurred by the Lessor Parties in
connection with the proposed sale.
I. ARTICLE
Return of Equipment
A. SECTION Notice of Return. Unless the
Lessee exercises its renewal option under
Article XVI or its purchase options under Article
X or XVII the Lessee shall provide the Lessor with
irrevocable written notice of its decision to
return, and shall return, all Items of Equipment
to the Lessor at the end of the Lease Term thereof
at least three hundred sixty (360) days prior to
the expiration of the Lease Term.
A. SECTION Return of Equipment.
1. Upon termination of this Lease
with respect to an Item of Equipment pursuant to
Article VII or in connection with the exercise by
the Lessor of its remedies under Article XIV
hereof, or at such other time as required under
this Lease, the Lessee shall, at the Lessee's
risk, cost and expense, dismantle each affected
Item of Equipment in accordance with appropriate
methods and procedures for de-installation,
identify such Item with appropriate tags and
markings, crate (in a manner appropriate for the
safe and proper shipment of such Equipment) and
catalogue all such Items, and deliver such Items
to the Lessor at an agreed upon Return Location in
the manner appropriate for handling Items of
Equipment of that type.
1. At the time of return, each
Item of Equipment shall be, at the cost and
expense of the Lessee (i) free and clear of all
Liens other than Owner Participant Liens and
Lessor Liens, (ii) cleaned to the reasonable
satisfaction of the Lessor, (iii) in the condition
originally delivered to the Lessor (subject to
normal wear and tear permitted by the terms
hereof), (iv) in compliance with the maintenance
and operations provisions of this Lease,
(v) detoxified or decontaminated, if applicable,
to allow for subsequent use in full compliance
with Applicable Law, (vi) properly identified with
labels, tags, plates or by any other method
providing clear identification, and (vii) properly
assembled except to the extent disassembly is
necessary or appropriate for the purposes of
crating and delivering the Equipment in accordance
with appropriate methods and procedures for
de-installation. Simultaneously with the return
of any Item or part thereof, the Lessee shall
deliver to the Lessor the plans and specifications
with respect to such Item, all operating,
maintenance, repair and inspection software,
records, manuals, logs, plans, specifications,
drawings, schedules and similar papers (and any
documents and Governmental Actions relating to
environmental matters) relating to such Item
necessary or useful for the continued operation
and maintenance of such Item, and title documents
and copies of operating permits with respect to
such Item; provided, that the Lessee shall not be
required to provide any of the foregoing
documents, Governmental Actions and records unless
(i) the Lessee either actually has possession of
or reasonable access to the foregoing documents,
Governmental Actions and records, (ii) the
foregoing documents, Governmental Actions and
records are necessary for the normal use,
operation or maintenance of such Item in full
compliance with Applicable Law, or (iii) the
foregoing documents, Governmental Actions and
records should have been retained in accordance
with the Lessee's normal document retention
policies or as otherwise expressly required under
the terms of this Lease.
If for any reason the Lessee shall not have
returned the applicable Item of Equipment as
required by the provisions of this Article VIII on
the required day, the Lessee shall pay to the
Lessor on demand additional Basic Rent for such
Item of Equipment on a per diem basis for each day
after such day until full compliance with this
Article VIII, which Basic Rent shall be in an
amount per diem equal to the greater of (1) the
average daily rate of Basic Rent for such Item of
Equipment payable during the Base Term and (2) the
Fair Market Rental Value for such Item of
Equipment. The rights set forth in the preceding
sentence shall not limit the Lessor's rights to
exercise any remedy permitted to be exercised
under Article XIV hereof with respect to any
continuing Event of Default, including the Event
of Default resulting from the Lessee's failure to
deliver the Equipment as required by the
provisions of this Article VIII. Without limiting
the generality of any of the other terms of this
Lease or the Participation Agreement, the Lessee
shall be liable for any costs and expenses
(including Fees and Expenses) incurred by the
Lessor Parties as a result of the failure of the
Lessee duly to perform and comply with any of the
terms of this Article VIII.
A. SECTION Marketing of Returned Item.
The Lessee agrees that during the last twelve (12)
months of the Lease Term with respect to each Item
of Equipment, it will cooperate in all reasonable
respects with efforts of the Lessor to lease or
sell such Item of Equipment, including aiding
qualified potential lessees or purchasers by
providing reasonable access at the location where
the relevant Equipment is then located to the
applicable Item of Equipment as then being used
and to the records relating to maintenance and
performance thereof for inspection thereof during
normal business hours upon prior written notice to
the Lessee; provided, that such cooperation shall
be subject to the Clean Room Operating Procedures
and Section 22.1 hereof, and provided further,
that it is understood that Lessee's obligation
hereunder to provide such access shall be only at
such times and under such circumstances as are
reasonably appropriate in connection with Lessor's
marketing efforts.
A. SECTION Governmental Approvals. The
Lessee shall use its best efforts, at the expense
of the Lessor, in transferring or obtaining all
Governmental Actions which may be necessary for
the Lessor or its designee, as the case may be, to
operate, lease or purchase any returned Item of
Equipment.
A. SECTION Additional Parts. At any time
after the Lessee has notified the Lessor that it
has determined not to renew this Lease pursuant to
Article XVI or purchase the Equipment pursuant to
Article X or XVII, or the Equipment is otherwise
to be returned to the Lessor, the Lessee shall at
the Lessor's request, advise the Lessor of the
nature and condition of all Severable
Modifications owned by the Lessee pursuant to
Section 6.4(b)(ii) hereof which the Lessee has
removed or intends to remove from the Equipment in
accordance with Section 6.4(c) hereof. The Lessee
may elect to retain any Severable Modification not
purchased or purchasable by Lessor pursuant to the
last paragraph of Section 6.4(b). The Lessee may
(and shall, if so directed by Lessor), at its sole
cost and expense, remove from any Item any other
Severable Modification which is not owned by the
Lessor in accordance with the provisions of
Section 6.4(b)(ii) hereof and which is not
purchased by the Lessor pursuant to Section
6.4(b); provided, that any such Modification not
removed pursuant to this Section 8.5 shall be
deemed to be part of the Item to which it relates
for all purposes hereof and title to such
Modification shall thereupon vest in the Lessor
free and clear of all Liens, other than Lessor
Liens and Owner Participant Liens.
I. ARTICLE
Loss, Destruction, Condemnation, Damage, etc.
A. SECTION Replacement; Payment of
Casualty Value.
1. Upon the occurrence of an
Event of Loss, or an event which with the passage
of time would become an Event of Loss, with
respect to any Item of Equipment, the Lessee shall
promptly give the Lessor and the Indenture Trustee
notice thereof and notify the Lessor and the
Indenture Trustee within forty-five (45) days
thereafter which of the following options the
Lessee shall perform with respect thereto:
a) the Lessee shall
replace the Item of Equipment which suffered the
Event of Loss as soon as practicable, but in any
event within one (1) year from the date of such
Event of Loss, with a replacement Item of
Equipment which has a then fair market value,
residual value, condition, remaining useful life
and utility at least equal to the fair market
value, residual value, condition, remaining useful
life and utility of the Item of Equipment which
suffered the Event of Loss immediately prior to
such Event of Loss (assuming such Item of
Equipment was then in the condition and state of
repair required by this Lease); provided, that
(A) in the case of any replacement which cannot
practicably be effected within ninety (90) days
from the occurrence of such Event of Loss, the
Lessee shall provide to the Lessor and the
Indenture Trustee an Officer's Certificate setting
forth in reasonable detail the date on which such
replacement Item is expected to become available
and the reasons that such replacement cannot be
effected within such ninety (90) day period, and
(B) the Lessee agrees to indemnify the Owner
Participant, in a manner satisfactory to such
Owner Participant in its sole discretion exercised
in good faith (including, without limitation, with
respect to collateral arrangements, if any), for
any adverse tax consequences from such replacement
and provide to the Owner Participant an Officer's
Certificate to such effect; or
a) the Lessee shall pay
to the Lessor or, so long as the Indenture has not
been discharged in accordance with its terms, the
Indenture Trustee on a date as of which monthly
Casualty Values are determined (a "Loss Payment
Date") and specified by the Lessee, which shall be
a Loss Payment Date within the earlier of (A) the
later of (1) forty five (45) days after the
occurrence of the Event of Loss and (2) three (3)
Business Days after receipt of insurance proceeds,
and (B) ninety (90) days after the occurrence of
the Event of Loss, the amounts required to be paid
by Section 9.1(d) hereof;
provided, that if a Material Default or an Event
of Default shall have occurred and be continuing,
the Lessee may elect only the option set forth in
clause (ii) above, and failure of the Lessee to
make an election within the time period specified
above shall be deemed an election of the option
set forth in clause (ii) above.
1. The Lessee's right to replace
any Item as provided in Section 9.1(a) above shall
be subject to the fulfillment, at the Lessee's
cost and expense, of the following conditions
precedent:
a) each of the Lessor
Parties shall have received an Officer's
Certificate of the Lessee to the effect that as of
the date of such replacement no Material Default
or Event of Default shall have occurred and be
continuing;
a) on the date of such
replacement, the following documents shall have
been duly authorized, executed and delivered by
the respective party or parties thereto and shall
be in full force and effect, and an executed
counterpart of each thereof shall have been
delivered to each of the Lessor Parties:
(A) a Lease Supplement with a
Schedule of Equipment covering the replacement
Item;
(B) so long as the Indenture
shall not have been discharged and satisfied, an
Indenture Supplement covering the replacement
Item;
(C) a full warranty (as to
title) bill of sale, in substantially the same
form as the Bill of Sale delivered with respect to
the Item being replaced, covering the replacement
Item, executed by the Seller thereof or the
Lessee, if it then owns such replacement Item, in
favor of the Lessor;
(D) evidence of the filing in
such places as are deemed reasonably necessary by
the Lessor and the Indenture Trustee of (1) so
long as the Indenture shall not have been
discharged, such UCC financing statements and
fixture filings covering the security interests
created by the Indenture, and (2) such
"precautionary" UCC financing statements and
fixture filings covering the leasehold interests
created by this Lease, as are deemed necessary and
desirable by the Lessor and the Indenture Trustee
to protect the ownership interest of the Lessor
and the Lien and security interest of the
Indenture Trustee in the replacement Item;
(E) an opinion, satisfactory
in form and substance to each of the Lessor
Parties, of the Lessee's independent outside
counsel (or other counsel satisfactory to the
Lessor Parties) (1) as to the effectiveness,
validity and enforceability of the documents
referred to in clauses (A) through (D) above and
the filing and recordation of the documents
described in clause (D) above;
a) on such replacement date,
the Lessor shall receive good title to the
replacement Item, free and clear of Liens (other
than Permitted Liens described in clauses (a)-(c)
in the definition thereof);
a) each of the Lessor
Parties shall have received upon reasonable
request certain information with respect to the
replacement Item, with such information to include
descriptions of the fair market value, residual
value, condition, remaining useful life and
utility of such Item (including an appraisal if
requested by any Lessor Party); and
a) either (A) the Owner
Participant shall have received an opinion of
independent tax counsel (selected by the Owner
Participant and reasonably acceptable to the
Lessee) reasonably satisfactory to the Owner
Participant to the effect that there shall be no
adverse tax consequences resulting from such
replacement, or (B) the Lessee shall have agreed
to indemnify the Owner Participant, in a manner in
form and substance satisfactory to the Owner
Participant in its sole discretion exercised in
good faith, which determination shall include the
adequacy of the collateral therefor, if any, for
any such adverse tax consequence, provided, that
the Owner Participant shall be obligated to accept
such an indemnity only if the Owner Participant
shall have determined that it is more likely than
not that no such adverse tax consequences will
occur.
1. Upon satisfaction of the
conditions set forth in Section 9.1(b), (i) this
Lease shall continue with respect to any
replacement Item as though no Event of Loss had
occurred, (ii) the Lessor shall convey "as is"
"where is", without recourse or warranty (except
as to the ability and authority of the Lessor to
transfer and convey such Item free and clear of
Lessor Liens and Owner Participant Liens), to the
Lessee all right, title and interest of the Lessor
in and to the Item being replaced by executing and
delivering to the Lessee such bills of sale and
other documents and instruments as the Lessee may
reasonably request to evidence such conveyance,
and (iii) the Lessor shall assign to the Lessee
all claims it may have against any other Person
arising from the event which gave rise to the
replacement.
1. If an Event of Loss occurs
with respect to any Item of Equipment and the
Lessee has elected not to replace or does not
replace (or is not entitled pursuant to this
Section 9.1 to replace) such Item as provided
in Section 9.1(a)(i), the Lessee shall pay or
cause to be paid to the Lessor or, so long as the
Indenture has not been discharged in accordance
with its terms, the Indenture Trustee in
immediately available funds on the Loss Payment
Date specified by the Lessee pursuant to Section
9.1(a)(ii), an amount equal to (A) if such Loss
Payment Date is also a Rent Payment Date, any
Accrued Basic Rent payable on such Loss Payment
Date with respect to the Item suffering the Event
of Loss, together with all unpaid Basic Rent, if
any, payable on or before such Loss Payment Date,
plus (B) all unpaid Supplemental Rent (except for
Casualty Value) due on or before such Loss Payment
Date, plus (C) the Casualty Value for the Item
suffering the Event of Loss as of such Loss
Payment Date, plus (D) in the case of an Event of
Loss described in clause (h) of the definition
thereof, any Make Whole Premium Amount payable on
such date pursuant to the Indenture. Upon
compliance by the Lessee with this paragraph (d)
and receipt of a discharge of the Lien of the
Indenture with respect to the Item suffering such
Event of Loss, the Lessor shall transfer such Item
to the Lessee on an "as is" "where is" basis, free
and clear of all Lessor Liens and Owner
Participant Liens, without any other recourse to,
or representation or warranty (except as to the
ability and authority of the Lessor to convey and
transfer such Item free and clear of Lessor Liens
and Owner Participant Liens), expressed or
implied, by the Lessor or the Owner Participant by
executing and delivering to the Lessee such bills
of sale and other documents or instruments that
the Lessee may reasonably request to evidence such
conveyance. Upon the compliance with the
provisions of this paragraph (d) with respect to
such Item, the Lessee's obligation to pay Basic
Rent with respect to such Item shall cease, but
the Lessee's obligation to pay any applicable
Supplemental Rent, before, on or after such date
shall remain unchanged.
A. SECTION Application of Payments Upon
an Event of Loss. Subject to the provisions of
Section 9.4 hereof, any payments received at any
time by the Lessor or by the Lessee with respect
to an Item of Equipment (including insurance
proceeds or warranty payments but excluding
Excluded Payments) from any Governmental Authority
or other Person as a result of the occurrence of
an Event of Loss with respect to such Item of
Equipment shall be applied as follows:
1. any such payment received at
any time by the Lessee shall be promptly paid to
the Lessor or, so long as the Indenture has not
been discharged in accordance with its terms, the
Indenture Trustee for application pursuant to the
following provisions of this Section 9.2, except
that the Lessee may retain any amounts which the
Lessor shall at such time be obligated to pay to
the Lessee under such provisions;
1. (i) if the Lessee has elected
to replace such Item of Equipment pursuant
to Section 9.1(a)(i), such payments shall be held
by the Lessor or, so long as the Indenture has not
been discharged in accordance with its terms, the
Indenture Trustee and applied to pay, or reimburse
the Lessee for the payment of, the cost of
replacing such Item of Equipment, upon
satisfaction of the conditions set forth in
Section 9.1(b), or (ii) if the Lessee has elected
or is deemed to have elected the option set forth
in Section 9.1(a)(ii), so much of such payments as
shall not exceed all amounts required to be paid
by the Lessee pursuant to Section 9.1(d) hereof
shall be held by the Lessor or, so long as the
Indenture shall not have been discharged in
accordance with its terms, the Indenture Trustee
and shall be applied in reduction of the Lessee's
obligation to pay such amounts if not already paid
by the Lessee, or, if already paid by the Lessee,
shall be applied to reimburse the Lessee for its
payment of such amounts; and
1. the balance, if any, of such
payments remaining thereafter, shall be allocated
among the Lessor, the Lessee and other Persons
having a claim thereto as their respective
interests may appear.
A. SECTION Seizure, Requisition,
Application of Payments Not Relating to an Event
of Loss. In the event of a loss, condemnation,
confiscation, theft or seizure of, or requisition
of title to or use of, or damage to, any Item of
Equipment or any part thereof not resulting in an
Event of Loss, the Lessee shall promptly notify
the Lessor and the Indenture Trustee thereof and
all obligations of the Lessee under this Lease
with respect to such Item of Equipment shall
continue to the same extent as if such event had
not occurred. Subject to the provisions of
Section 9.4 hereof and the obligations of the
Lessee under Article VI hereof, insurance
proceeds, governmental awards, warranty payments
or other payments received at any time by the
Lessor or the Lessee from any insurer under
insurance carried by the Lessee, any Governmental
Authority or other Person with respect to any
loss, condemnation, confiscation, theft or seizure
of, or requisition of title to or use of, or
damage to any Item of Equipment or any part
thereof not constituting an Event of Loss shall be
paid to the Lessor or, so long as the Indenture
has not been discharged in accordance with its
terms, the Indenture Trustee, and applied to pay,
or reimburse the Lessee for (a) the payment of the
cost of repairing or replacing such Item of
Equipment, upon receipt of evidence reasonably
satisfactory to the Lessor and the Indenture
Trustee that such Item has been restored to the
condition required by the terms of this Lease, and
(b) any Rent accruing during the period for which
such Item was lost, condemned, confiscated,
stolen, seized or requisitioned, with the balance
to be retained by the Lessor.
A. SECTION Applications During Default or
Event of Default. Any amount that shall be
payable to the Lessee pursuant to this Lease
arising out of any insurance, warranty,
governmental award or otherwise received in
respect of the Equipment shall not be paid to the
Lessee or, if it shall have been previously paid
to the Lessee, shall not be retained by the Lessee
but shall be paid to the Lessor or, so long as the
Indenture has not been discharged in accordance
with its terms, the Indenture Trustee, if at the
time of such payment any Default or Event of
Default shall have occurred and be continuing. In
such event, all such amounts shall be paid to and
held by the Lessor or the Indenture Trustee, as
the case may be, in trust as security for the
obligations of the Lessee to make payments under
any other Operative Document or to pay Rent
hereunder or applied by the Lessor or the
Indenture Trustee, as the case may be, toward
payment of any of such obligations of the Lessee
at the time due hereunder or under such other
Operative Document. At such time as there shall
not be continuing any Default or Event of Default,
all such amounts at the time held by the Lessor or
the Indenture Trustee, as the case may be, in
excess of the amount, if any, that the Lessor or
the Indenture Trustee, as the case may be, shall
have elected to apply as above provided shall be
paid to the Lessee.
A. SECTION Application of Article VI.
Article VI shall not apply to any Item of
Equipment after an Event of Loss has occurred with
respect to such Item of Equipment; provided, that
the foregoing shall not limit the obligation of
the Lessee under Article VI hereof with respect to
any replacement Item of Equipment.
I. ARTICLE
Early Buy-Out Option
A. SECTION Early Buy-Out.
1. So long as no Material Default
or Event of Default shall have occurred and be
continuing, and so long as Zenith of Texas
simultaneously gives notice of its intent to
exercise its early buy-out option under the
Mexican Lease, the Lessee shall have the right,
with the written consent of the Guarantor, upon
not more than three hundred sixty (360) days' nor
less than one hundred eighty (180) days'
irrevocable notice to the Lessor prior to the EBO
Date(the "EBO Notice Date"), to purchase on the
EBO Date either (i) all, but not less than all,
Items of Equipment at the EBO Price applicable to
each such Item or (ii) the Owner Participant's
interest in the Trust Estate, at a price equal to
the EBO Price applicable to each such Item less
the amount of such EBO Price comprising the amount
allocated for the prepayment of the Notes. If the
Lessee has elected to purchase the Equipment, the
Lessee may elect to pay the EBO Price for the
Equipment either by (i) paying such amount to the
Lessor by EFT or (ii) (A) paying to the Lessor by
EFT an amount equal to the aggregate EBO Price for
all Equipment less the amount of each EBO Price
comprising the amount allocated for the prepayment
of the Notes and (B) assuming the Lessor's
liability under the Notes in accordance with and
subject to Section 2.17 of the Indenture. If the
Lessee has elected to acquire the Owner
Participant's interest in the Trust Estate, the
Lessee shall do so by paying to the Owner
Participant by EFT the amount specified in clause
(ii) (A) above. In addition, the Lessee shall be
obligated (i) to pay on the EBO Date with respect
to each such Item (A) Accrued Basic Rent as of the
applicable EBO Date, and (B) all other Rent due
and payable on or prior to such EBO Date
including, without limitation, if the Notes are to
be prepaid, the Make Whole Premium Amount, if any,
with respect to the Notes being prepaid on such
EBO Date, and (ii) pay all amounts due with
respect to the exercise of the early buy-out
option under the Mexican Lease.
1. If the Lessee shall have
elected the EBO Option as set forth in
Section 10.1(a), payment by the Lessee of the
amounts payable pursuant to Section 10.1(a) hereof
shall be made by EFT on the EBO Date against
delivery (after payment by the Lessee of such
amounts) of (i) in the case of a purchase of the
Equipment rather than the Owner Participant's
interest in the Trust Estate, (A) a bill of sale
transferring and assigning to the Lessee all
right, title and interest of the Lessor in and to
the Items of Equipment being purchased on such EBO
Date free and clear of Lessor Liens, Owner
Participant Liens and (unless the Lessee has
elected to assume the Lessor's liability under the
Notes) the Lien of the Indenture, without other
recourse, representation or warranty (except as to
the Lessor's ability to conduct such transfer and
convey such Items free and clear of such Liens)
and, on an "as is" "where is" basis and (B) unless
the Lessee has elected to assume the Lessor's
liability under the Notes, an instrument executed
by the Lessor and the Indenture Trustee (in
recordable form) terminating its respective
interests in the Items of Equipment; and (ii) in
the case of a purchase of the Owner Participant's
interest in the Trust Estate, an agreement
executed by the Owner Participant transferring
such interest to the Lessee, either in
substantially the form set forth as Appendix F to
the Participation Agreement or in such other form
agreed upon by the Owner Participant and the
Lessee.
1. After the Lessee has timely
given the notice described in Section 10.1(a) but
before the EBO Date, the Lessee shall be entitled
to all of its rights set forth in Article IX upon
the occurrence of an Event of Loss with respect to
any Item.
I. ARTICLE
Assignment and Sublease
A. SECTION Lessee Assignments and
Subleases. Lessee shall not assign or transfer
any Item of Equipment or its interest therein
without the prior written consent of the Lessor
and the Indenture Trustee. Notwithstanding the
foregoing, provided that no Material Default or
Event of Default exists at the commencement of
such sublease, the Lessee may sublease some or all
of the Items of Equipment pursuant to a sublease
which (a) shall be for a term not extending beyond
the Lease Term, and (b) shall be made expressly
subordinate to the rights of the Owner-Trustee and
the Indenture Trustee; provided, (i) that the
terms of the sublease or the location of the
Equipment pursuant to such sublease would not
result in an Event of Default hereunder, and (ii)
the sublease would not result in adverse tax
consequences to the Lessor and (iii) the Lessee
shall assign to the Lessor the Lessee's rights
under any sublease to secure its obligations
hereunder in a manner reasonably satisfactory to
the Lessor. The rights of any sublessee who
receives possession by reason of a sublease
permitted by this Section 11.1 shall be subject
and subordinate to, and any sublease permitted by
this Section 11.1 shall be made expressly subject
and subordinate to the terms of this Lease,
including, but not limited to, the Lessor's rights
to repossession pursuant to Section 14 of this
Lease and to avoid such sublease upon such
repossession. No such sublease shall in any way
discharge or diminish any of the Lessee's
obligations hereunder, and the Lessee shall remain
primarily liable hereunder for the performance of
all the terms of this Lease to the same extent as
if such sublease had not occurred.
A. SECTION Lessor Assignments. Except
for transfers pursuant to the terms of the
Operative Documents, the Lessor shall not transfer
or assign any part of its right, title and
interest in this Lease or any Item of Equipment
leased hereunder without the prior written consent
of the Indenture Trustee and, so long as no
Material Default or Event of Default has occurred
and is continuing, the Lessee and the Guarantor;
provided, that the Lessor may transfer or assign
any part of its right, title and interest in this
Lease or any Item of Equipment leased hereunder to
(a) the Indenture Trustee pursuant to the
Indenture and (b) a successor owner trustee
permitted by the Operative Documents, in each case
without consent; provided, further, that any such
permitted transfer or assignment shall be subject
to all of the terms and conditions of this Lease
and the other Operative Documents.
I. ARTICLE
Inspection
A. SECTION Inspection. So long as no
Default or Event of Default has occurred and is
continuing, each of the Lessor Parties may at its
own expense, upon reasonable prior notice to the
Lessee during the normal business hours of the
Lessee, no more frequently than once in any
calendar year, inspect (subject to the Clean Room
Operating Procedures and Section 22.1 hereof) the
Items of Equipment and the books and records of
the Lessee relating to the maintenance and
performance of such Items of Equipment and make
copies and extracts therefrom, and may discuss
such matters with the Lessee's officers; provided,
that the rights of the Lenders and Indenture
Trustee under this Section may only be exercised
by them in a group visit; provided, further, that
the rights of the Owner Participant (and if there
shall be more than one Owner Participant, the
rights of such Owner Participants) and the Owner
Trustee under this Section may only be exercised
by them in a group visit. Upon the occurrence and
during the continuance of a Default or Event of
Default, each of the Lessor Parties may inspect
the Items of Equipment and such books and records
at any time, which inspections shall be at the
expense of the Lessee; provided, that (a) Lessee
is notified at least twenty-four (24) hours prior
to any such inspection, (b) each of the Lessor
Parties agrees to comply with the Clean Room
Operating Procedures, and (c) each of the Lessor
Parties agrees to maintain the confidentiality of
all nonpublic information disclosed to such Person
in the course of any such visit or inspection in
accordance with Section 22.1 hereof. The Lessor
and the Indenture Trustee also shall have the
right to obtain information regarding the
condition and state of repair of any Item of
Equipment, compliance by the Lessee with
Article VI hereof and the absence of a Default or
an Event of Default (including all information
necessary duly to determine the Fair Market Sales
Value and the Fair Market Rental Value of each
Item of Equipment as and when required to be
determined under this Lease). None of the Lessor
Parties shall have any duty to make any inspection
or inquiry or shall incur any liability or
obligation by reason of not making any such
inspection or inquiry nor shall any such
inspection or inquiry reduce the Lessee's
liabilities under the Operative Documents.
I. ARTICLE
Events of Default
A. SECTION Events of Default. Each of
the following events shall constitute an Event of
Default:
1. the Lessee shall fail to make
any payment of (i) Casualty Value, Termination
Value, EBO Price, Purchase Option Price, Accrued
Basic Rent or, to the extent not included in such
foregoing amounts, any Make-Whole Premium Amount
payable concurrently therewith pursuant to the
terms hereof when due, (ii) Basic Rent when due
and such failure shall continue unremedied for a
period of five (5) Business Days after the date
due and (iii) Supplemental Rent (other than in
respect of Casualty Value, Termination Value, EBO
Price, Purchase Option Price or Make Whole Premium
Amount or payments under the Tax Indemnity
Agreement) for a period of ten (10) Business Days
after the Lessee has received notice demanding
payment of such Supplemental Rent which is due; or
2. the Lessee shall fail to
perform or observe any covenant, condition or
agreement set forth in Article VIII (Return of
Equipment), Section 9.1(a) (replacement following
Event of Loss), Section 11.1 (Lessee Assignments),
Article XX (Insurance) or Section 18.2 (Notice of
Default) hereof, or Section 5.3(g) of the
Participation Agreement (Mergers), the Guarantor
shall fail to perform or observe any covenant,
condition or agreement set forth in Section 8(b)
and 8(c) of the Guaranty (and in the case of a
failure of the Guarantor to perform or observe its
obligations under Section 8(b) of the Guaranty, to
the extent such failure is solely the result of a
dilution of the Guarantor's ownership or voting
control of the Lessee by virtue of the exercise of
options, warrants or conversion rights to acquire
common stock of the Lessee, such failure shall
continue unremedied or a period of five (5)
Business Days or, if approval of the Bank of Korea
is required for the Guarantors to purchase
additional common stock of the Lessee, thirty (30)
days); or
1. the Lessee or the Guarantor
shall fail to perform or observe any other
covenant, condition or agreement to be performed
or observed by it under any of the Operative
Documents to which it is a party (other than any
such covenant, condition or agreement in the Tax
Indemnity Agreement) to which it is a party and
such failure shall continue unremedied for a
period of thirty (30) days after notice thereof
shall have been given to the Lessee or the
Guarantor, as applicable, by either the Lessor,
or, so long as the Indenture shall be in effect,
the Indenture Trustee; provided, that the
continuation of any such failure (other than a
failure curable by payment of money or a failure
of the Guarantor to perform or observe any
covenant, condition or agreement set forth in
Section 8(a) of the Guaranty) for a period longer
than such thirty (30) day period shall not
constitute an Event of Default if (i) such default
is curable but cannot be cured within such thirty
(30) day period and (ii) the Lessee or the
Guarantor is diligently pursuing the cure of such
default; provided, further, that any such failure
(other than a failure curable by payment of money)
shall constitute an Event of Default if such
failure is not cured within the earlier of the
last day of the Lease Term and ninety (90) days
from the date notice thereof has been given to the
Lessee or the Guarantor, as applicable; or
1. any representation or warranty
made by the Lessee or the Guarantor in any of the
Operative Documents to which it is a party (other
than any such representation and warranty
contained in the Tax Indemnity Agreement) or in
any statement, report, schedule, notice or other
writing furnished by the Lessee or the Guarantor
in connection therewith shall prove to have been
false or incorrect in any material respect at the
time made or given and remains a misrepresentation
or breach of warranty which is adverse to the
Lessor Parties at the time discovered; provided,
that no such misrepresentation or breach of
warranty shall constitute an Event of Default if
(i) such misrepresentation or breach of warranty
was not intentional and is curable and (ii) the
Lessee or the Guarantor is diligently pursuing the
cure of such misrepresentation or breach of
warranty within ninety (90) days after such Person
has received notice thereof and upon such cure the
original misrepresentation shall not remain
material and adverse; or
1. the Lessee or the Guarantor
(i) shall commence a voluntary Insolvency
Proceeding, (ii) shall seek the appointment of a
trustee, receiver, liquidator, sequestrator,
custodian or other similar official of the Lessee
or the Guarantor or any substantial part of its
property, (iii) shall acquiesce in or consent to
any such relief or to the appointment of or taking
possession by any such official in an involuntary
Insolvency Proceeding commenced against it, (iv)
shall make a general assignment for the benefit of
creditors, or (v) shall fail generally to pay its
undisputed debts as they become due; or
1. an involuntary Insolvency
Proceeding shall be commenced against the Lessee
or the Guarantor seeking liquidation,
reorganization or other relief with respect to
such Person or its debts under any bankruptcy,
insolvency or other similar law now or hereafter
in effect or seeking the appointment of a trustee,
receiver, liquidator, assignee, sequestrator,
custodian or other similar official of it or any
substantial part of its property, and such
involuntary case or other proceeding shall remain
undismissed or unstayed for a period of sixty (60)
consecutive days; or
1. the Guaranty shall for any
reason become invalid, not binding or
unenforceable or repudiated in any manner by the
Guarantor thereunder; or
1. an "Event of Default" under
and as defined in the Mexican Lease shall have
occurred and be continuing.
I. ARTICLE
Remedies
A. SECTION Remedies. Upon the occurrence
of any Event of Default and at any time thereafter
so long as the same shall be continuing, the
Lessor may, at its option, by notice to the
Lessee, declare this Lease to be in default;
provided, that upon the occurrence of an Event of
Default described in Section 13.1(e) or (f), this
Lease shall automatically be in default without
notice thereof to the Lessee or the Guarantor, and
at any time thereafter the Lessor may do one or
more of the following with respect to each Item of
Equipment as the Lessor in its sole discretion
shall elect, to the full extent permitted by
Applicable Law:
1. The Lessor may, by notice to
the Lessee, terminate this Lease.
1. The Lessor may (i) make
written demand that the Lessee shall, at the
Lessee's expense, return all Items of Equipment to
the Lessor in the manner and condition required by
Article VIII as if such Items of Equipment were
being returned at the end of the Lease Term, and
the Lessor shall not be liable for the
reimbursement of the Lessee for any costs and
expenses incurred by the Lessee in connection
therewith or (ii) at the Lessee's expense, but
subject to the Clean Room Operating Procedures and
to the procedures set forth below, enter upon the
site where such Items of Equipment are located and
take immediate possession of any or all of such
Items of Equipment or any part thereof (to the
exclusion of the Lessee) and remove such Items of
Equipment from the site without liability accruing
to the Lessor for or by reason of such entry or
taking of possession or removal, and the Lessee
hereby grants to the Lessor such access to the
facilities of the Lessee where the Items of
Equipment are or may be located (including,
without limitation, any "clean room") as may be
necessary for the Lessor properly to package and
prepare the Items of Equipment for removal.
During the existence and continuation of any Event
of Default, the Lessee shall cause the Equipment
to be operated or not to be operated as may be
agreed with the Lessor, the Lessee shall cooperate
with the Lessor in effecting an orderly
disposition of the Equipment and the Lessor shall
not be entitled to remove Equipment other than in
connection with a reasonable orderly progression
of dismantlement set out and agreed to by the
Lessor and effectuated by the Lessee.
1. The Lessor (whether or not the
Lessor shall have exercised or shall thereafter at
any time exercise its rights under paragraphs (b)
and (d) of this Section 14.1), by notice to the
Lessee specifying a payment date not earlier than
ten (10) days nor more than thirty (30) days from
the date of such notice, may require the Lessee to
pay to the Lessor and the Lessee hereby agrees
that it will pay to the Lessor, on the payment
date specified in such notice, which date shall be
a date on which monthly Casualty Values are
determined (the "Determination Date"), as
liquidated damages for loss of a bargain, and not
as a penalty, and in lieu of any further payments
of Basic Rent and Renewal Rent hereunder in
respect of the Items of Equipment specified by
Lessor (which may be all or only part of such
Items), an amount (reduced by any amounts
previously paid by the Lessee pursuant to
paragraph (e) below in respect of such Items)
equal to the sum of (i) all unpaid Accrued Basic
Rent as of the Determination Date, plus (ii) an
amount equal to the Casualty Value for all such
Items calculated as of the Determination Date,
together with interest, if any, at the Overdue
Rate on the amount of such Accrued Basic Rent and
Casualty Value from the Determination Date as of
which Accrued Basic Rent and Casualty Value is
computed until the date of actual payment; and
upon such payment of liquidated damages and all
other Rent then due and payable hereunder, the
Lessor shall transfer all such Items of Equipment
(without any representation, recourse or warranty
whatsoever other than the ability and authority of
the Lessor to conduct such transfer and convey
title to such Items free and clear of Owner
Participant Liens and Lessor Liens) to the Lessee
and the Lessor shall execute and deliver such
documents evidencing such transfer and take such
further action as the Lessee shall reasonably
request.
1. The Lessor or any agent may
sell any Item of Equipment at public or private
sale, as the Lessor may determine, or may
otherwise dispose of, hold, use, operate, lease
(whether for a period greater or less than the
balance of what would have been the Base Term or
any Renewal Term applicable to such Item of
Equipment, as the case may be) to any third party
or keep idle such Item of Equipment, all on such
terms and conditions and at such place or places
as the Lessor may determine in its sole discretion
and free and clear of all rights of the Lessee and
without any duty to account to the Lessee with
respect to such action or inaction or any proceeds
with respect thereto except as hereinafter set
forth in this Section 14.1. If the Lessor shall
have effected a disposition for value of any such
Item of Equipment pursuant to this paragraph (d)
(and prior thereto shall not have exercised its
rights under paragraph (e) below with respect to
such Item unless the Lessor has not been paid
thereunder and has rescinded such exercise), the
Lessor may demand that the Lessee pay the Lessor
on a Determination Date, and the Lessee hereby
agrees to pay to the Lessor, as liquidated damages
for the loss of a bargain and not as a penalty, in
lieu of all Basic Rent and Renewal Rent with
respect to such Item of Equipment due after the
date on which such disposition shall occur, an
amount equal to the sum of (A) all unpaid Accrued
Basic Rent as of such Determination Date, plus (B)
the amount, if any, by which the Casualty Value of
such Item of Equipment, computed as of the
Determination Date, shall exceed the net proceeds
of such disposition, plus (C) interest at the
Overdue Rate on the amount of such Accrued Basic
Rent and deficiency from the Determination Date as
of which the Casualty Value shall have been
computed until the date of actual payment plus
(D) all other Rent then due and payable hereunder.
1. Whether or not the Lessor
shall have exercised, or shall thereafter at any
time exercise, any of its rights under paragraph
(d) above with respect to an Item of Equipment,
the Lessor may, at any time prior to the time that
such Item of Equipment shall have been transferred
to the Lessee pursuant to paragraph (c) above or
sold by the Lessor pursuant to paragraph (d)
above, demand that the Lessee pay to the Lessor,
and the Lessee hereby agrees to pay to the Lessor
on the first Business Day occurring at least ten
(10) days after, in the case of clause (A) or (B)
below, the determination of the Fair Market Sales
Value or Fair Market Rental Value, as the case may
be, or in the case of clause (C) below, the later
of the date of such demand and the date of
determination of the amount due thereunder, as
liquidated damages for loss of a bargain and not
as a penalty (in lieu of all payments of Basic
Rent becoming due after the payment date), an
amount with respect to each specified Item of
Equipment equal to the sum of (i) all unpaid
Accrued Basic Rent with respect to such Item due
as of the relevant date set forth above plus (ii)
whichever of the following amounts the Lessor, in
its sole discretion, shall specify in such notice
(together with interest on such amount at the
Overdue Rate from the scheduled payment date to
the date of actual payment): (A) an amount equal
to the excess, if any, of the Casualty Value for
such Item, computed as of the Rent Payment Date
applicable to such Item next preceding the date on
which such payment is due, over the Fair Market
Rental Value of such Item of Equipment for the
remainder of the Base Term or the Renewal Term
applicable to such Item, as the case may be, after
discounting such Fair Market Rental Value
semiannually (effective on the applicable Rent
Payment Dates) to present worth as of the
scheduled payment date at the Debt Rate, or if no
Notes shall be outstanding, the Reference Rate, or
(B) an amount equal to the excess, if any, of the
Casualty Value for such Item of Equipment as of
such Rent Payment Date over the Fair Market Sales
Value of such Item of Equipment, or (C) an amount
equal to the excess of (1) the present value as of
such Rent Payment Date specified in such notice of
all installments of Basic Rent with respect to
such Item until the end of the Base Term (or the
Renewal Term, as the case may be, if such demand
for payment is made during a Renewal Term)
applicable to such Item, discounting semi-annually
at the applicable rate specified in clause (A),
over (2) the present value as of such Rent Payment
Date of the Fair Market Rental Value of such Item
of Equipment until the end of the applicable Base
Term or the Renewal Term, as the case may be,
discounted semi-annually at such applicable rate,
plus (iii) all other Rent then due and payable
hereunder.
1. The Lessor may exercise any
other right or remedy which may be available to it
under Applicable Law or proceed by appropriate
court action to enforce the terms hereof or to
recover damages for the breach hereof or to
rescind this Lease.
The Lessor may exercise one or more
remedies in respect of some Items of Equipment and
one or more other remedies in respect of other
Items of Equipment, and that the total amounts
specified to be paid by Lessee under this Section
14.1 shall be aggregate amounts determined by
adding the specified amounts individually
determined in the case of each Item of Equipment.
No termination of this Lease, in whole or in
part, or exercise of any remedy under this
Article XIV shall, except as specifically provided
herein, relieve the Lessee of any of its
liabilities and obligations hereunder, all of
which then outstanding shall survive such
termination, repossession or exercise of remedy.
In addition, the Lessee shall be liable for any
and all unpaid Supplemental Rent (including Make
Whole Premium Amount) due hereunder before, after
or during the exercise of any of the foregoing
remedies, including all Fees and Expenses and
other costs and expenses incurred by any Lessor
Party by reason of the occurrence of any Event of
Default or the exercise of the remedies of the
Lessor with respect thereto. At any sale of any
Item of Equipment or any part thereof pursuant to
this Article XIV, any Lessor Party may bid for and
purchase such property.
A. SECTION Lessor Rights. To the fullest
extent permitted by Applicable Law, each and every
right, power and remedy herein specifically given
to the Lessor or otherwise in this Lease shall be
cumulative and shall be in addition to every other
right, power and remedy herein specifically given
or now or hereafter existing at law, in equity or
by statute, and each and every right, power and
remedy whether specifically given herein or
otherwise existing may be exercised from time to
time and as often and in such order as may be
deemed expedient by the Lessor, and the exercise
or the beginning of the exercise of any power or
remedy shall not be construed to be a waiver of
the right to exercise at the same time or
thereafter any other right, power or remedy. No
delay or omission by the Lessor in the exercise of
any right, power or remedy or in the pursuit of
any remedy shall impair any such right, power or
remedy or be construed to be a waiver of any
default on the part of the Lessee or to be an
acquiescence therein. No express or implied
waiver by the Lessor of any Event of Default shall
in any way be, or be construed to be, a waiver of
any future or subsequent Event of Default.
I. ARTICLE
Right to Perform for Lessee
A. SECTION Right To Perform. If the
Lessee or the Guarantor shall fail to make any
payment of Rent required to be made by them
hereunder or shall fail to perform or comply with
any of their other agreements contained herein or
in any other Operative Document or in any other
agreement entered into in connection therewith,
the Lessor may (but shall have no duty to do so)
make such payment or perform or comply with such
agreement, and the amount of such payment and the
amount of all expenses of the Lessor (including
Fees and Expenses) incurred in connection with
such payment or the performance of or compliance
with such agreement, as the case may be, together
with interest thereon at the Overdue Rate, shall
be deemed Supplemental Rent, payable by the Lessee
upon demand. This Section 15.1 is not, however,
intended in any way, as between the Owner
Participant and the Lessor, on the one hand, and
the Indenture Trustee and the Lenders, on the
other hand, to expand or otherwise vary the cure
rights of the Owner Participant and the Lessor as
set forth in Section 4.03 of the Indenture, or the
limitations on the exercise thereof therein set
forth. Further, no such payment or performance by
the Lessor shall be deemed to waive any Event of
Default or relieve the Lessee of their respective
obligations hereunder.
A. SECTION Lessor as Lessee's Agent and
Attorney. Without in any way limiting the
obligations of the Lessee or the Lessor hereunder,
the Lessee hereby irrevocably appoints the Lessor
as its agent and attorney-in-fact hereunder, with
full power of substitution and authority solely to
the extent necessary to permit the Lessor, at any
time at which the Lessee is obligated to deliver
any Item of Equipment to the Lessor, to demand and
take such Item of Equipment in the name and on
behalf of the Lessee from whomsoever shall be in
control thereof at that time.
I. ARTICLE
Renewal Options
A. SECTION Renewal Notice.
1. Not less than three hundred
sixty (360) days before expiration of the Base
Term or an existing Renewal Term (each such date a
"Renewal Notice Date"), so long as Zenith of Texas
simultaneously gives notice of its intent to
exercise its renewal option under the Mexican
Lease, the Lessee may deliver to the Lessor a
notice (the "Renewal Notice") of the Lessee's
election to renew this Lease in respect of all,
but not less than all, Items of Equipment for a
renewal period of two (2) years, or such other
period of time as the Lessor and the Lessee shall
mutually agree (the "Renewal Term"); provided,
however, that the Lessee shall be entitled to
elect no more than two Renewal Terms.
1. The Lessee shall pay Rent (the
"Renewal Rent") during each Renewal Term equal to
the aggregate Fair Market Rental Value of such
Items of Equipment, determined as set forth in
Section 16.3.
1. In the event the Lessee elects
to renew this Lease, the Renewal Term for each
Schedule of Equipment will commence on the day
immediately following the expiration of the Base
Term or the then current Renewal Term and continue
until the end of the Renewal Term.
2. A Renewal Notice, once given,
shall be irrevocable and any option to renew this
Lease shall expire if the Lessee does not deliver
a Renewal Notice by the applicable Renewal Notice
Date.
1. Notwithstanding the foregoing,
the Lessee shall have no right to renew this Lease
if (i) any Material Default or Event of Default
exists on the Renewal Notice Date or the
commencement of the Renewal Term or (ii) the
Lessee has already given irrevocable notice
pursuant to Article X or XVII to purchase such
Items of Equipment.
A. SECTION Lease Supplement; Renewal
Rent. If the Lessee shall have elected to renew
this Lease with regard to the Equipment, the
Lessee and the Lessor shall execute a Lease
Supplement for each Schedule of Equipment
specifying the Renewal Rent and Casualty Values
with respect to each Item; provided, that the
Lessee shall be obligated to pay Renewal Rent at
the Fair Market Rental Value even if a Lease
Supplement is not executed. Casualty Values for
each Item of Equipment during each Renewal Term
shall be equal initially to the Fair Market Sales
Value for each such Item on the last day of the
Base Term or the preceding Renewal Term, as
applicable, decreasing on the last day of each
month during the Renewal Term by an amount equal
to the quotient of (a) the excess of the Fair
Market Sales Value for each Item on the last day
of the Base Term or the preceding Renewal Term, as
applicable, over the Fair Market Sale Value of
such Item on the last day of the Renewal Term
divided by (b) the number of months in the Renewal
Term.
A. SECTION Determination of Fair Market
Rental Value. The Fair Market Rental Value and
Fair Market Sales Value for each Item of Equipment
during each Renewal Term, shall be mutually agreed
by the Lessor and the Lessee or, failing such
agreement, determined by the Appraisal Procedure,
in either case determined at least sixty (60)
Business Days prior to commencement of such
Renewal Term. Renewal Rent shall be payable in
semi-annual installments in arrears. All other
terms of this Lease and the other Operative
Documents shall continue in full force and effect
during each such Renewal Term in accordance with
the provisions hereof and thereof.
I. ARTICLE
Purchase Options
A. SECTION Purchase Notice.
1. Not less than three hundred
sixty (360) days before expiration of the Base
Term or, any Renewal Term (any such date a
"Purchase Notice Date"), so long as Zenith of
Texas simultaneously gives notice of its intent to
exercise its purchase option under the Mexican
Lease and the Guarantor consents in writing to
such election to purchase, the Lessee may deliver
to the Lessor a notice of the Lessee's election to
purchase all, but not less than all, Items of
Equipment at a purchase price equal to (i) in the
case of a purchase at the end of the Base Term,
the aggregate Fair Market Sales Value of such
Items of Equipment at the end of the Base Term,
and (ii) in the case of a purchase at the end of
any Renewal Term, the aggregate Fair Market Sales
Value of such Items of Equipment at the end of
such Renewal Term.
1. The notice of the Lessee to
purchase all Items of Equipment shall be
irrevocable and the option to purchase shall
expire if the Lessee does not deliver a purchase
notice before the date three hundred sixty (360)
before the end of the Lease Term.
1. Notwithstanding the foregoing,
the Lessee shall have no right to purchase the
Equipment if (i) any Material Default or Event of
Default exists on the applicable Purchase Notice
Date or any Material Default or Event of Default
exists on the applicable purchase date or (ii) on
or prior to such Purchase Notice date the Lessee
has already given irrevocable notice pursuant to
Article XVI to renew this Lease at the end of the
Base Term or the then effective Renewal Term;
provided, however, that the Lessee' election to
renew the Lease shall not preclude the Lessee from
exercising the Purchase Option as of the end of
the Renewal Term so elected, subject to the
foregoing conditions.
A. SECTION Transfer of Item. At the
expiration of the Lease Term, if the Lessee shall
have elected to purchase the Items of Equipment
pursuant to Section 17.1 hereof and shall have
paid all Rent then due and payable hereunder, the
Lessor shall transfer (without any representation,
recourse or warranty whatsoever except as to the
ability and authority of the Lessor to conduct
such transfer and convey title to such Items free
and clear of Lessor Liens) all such Items of
Equipment to the Lessee against payment by the
Lessee of the applicable purchase price in
immediately available funds and the Lessor shall
execute and deliver such documents evidencing such
transfer and take such further action as the
Lessee shall reasonably request.
A. SECTION Determination of Fair Market
Sales Value. In the event the Lessee elects to
purchase the Equipment under this Article XVII,
the Fair Market Sales Value of each Item of
Equipment shall be mutually agreed to by the
Lessee and the Lessor or, failing such agreement,
determined in accordance with the Appraisal
Procedure, in either case determined at least
sixty (60) Business Days prior to the end of the
Base Term or the then effective Renewal Term, as
applicable.
I. ARTICLE
Further Assurances
A. SECTION Further Action by Lessee. The
Lessee, at its expense, shall promptly and duly
execute and deliver to each of the Lessor Parties
such documents and assurances and take such
further action as the Lessor (and, for so long as
the Indenture shall be in effect, the Indenture
Trustee) may from time to time reasonably request
in order to carry out more effectively the intent
and purpose of this Lease and the other Operative
Documents and to establish and protect the rights
and remedies created or intended to be created in
favor of the Lessor hereunder and thereunder, to
establish, perfect and maintain the right, title
and interest of the Lessor in and to the Items of
Equipment and the Lien and security interest in
the Trust Indenture Estate provided for in the
Indenture, subject to no Lien other than Permitted
Liens, including, if reasonably requested by any
of the Lessor Parties, the recording or filing of
counterparts or appropriate memoranda hereof, or
of such financing statements or other documents
with respect to the Equipment and the Lessor
agrees to execute and deliver promptly such of the
foregoing financing statements or other documents
as may require execution by the Lessor. The
Lessee agrees to cause the timely execution,
delivery and filing of continuation statements as
to the financing statements theretofore filed so
as to preserve the security interest in the Trust
Indenture Estate. To the extent permitted by
Applicable Law, the Lessee hereby authorizes any
such financing statements to be filed without the
necessity of the signature of the Lessee or copies
of this Lease to be filed in lieu of any such
financing statements, without the necessity of
notice to the Lessee.
A. SECTION Notice of Default or Event of
Default. Promptly after learning of the
occurrence or existence of any Default or Event of
Default, the Lessee shall so notify the Lessor
and, for so long as the Indenture shall be in
effect, the Indenture Trustee and set forth in
reasonable detail the circumstances surrounding
such Default or Event of Default and shall specify
what actions the Lessee have taken or intend to
take to cure such Default or Event of Default.
A. SECTION Information Regarding Items.
The Lessee shall promptly furnish the Lessor and,
for so long as the Indenture shall be in effect,
the Indenture Trustee information at such times
and in such format as is regularly produced by the
Lessee concerning the condition, maintenance and
use of the Items of Equipment as the Lessor or the
Indenture Trustee may reasonably request.
I. ARTICLE
Trust Indenture Estate as Security for Lessor's
Obligations to Lenders
A. SECTION Assignment to Indenture
Trustee. In order to secure the indebtedness
evidenced by the Notes issued or to be issued by
the Lessor pursuant to the Indenture, the
Indenture, among other things, provides for the
assignment (to the extent provided therein) by the
Lessor to the Indenture Trustee of its right,
title and interest to the Equipment, the Guaranty
and this Lease and for the creation of a Lien and
security interest in favor of the Indenture
Trustee for the benefit of the holders of the
Notes in and to the Trust Indenture Estate as
described in the Granting Clauses of the
Indenture. The Lessee hereby (a) acknowledges and
consents to such assignment pursuant to the terms
of the Indenture and (b) agrees to pay directly to
the Indenture Trustee all amounts of Rent (other
than Excluded Payments) due to the Lessor
hereunder or under any other Operative Document
that shall be required to be paid to the Indenture
Trustee pursuant to the Indenture or any other
Operative Document. Any payment by the Lessee to
the Indenture Trustee, as aforesaid, of any amount
payable hereunder shall constitute payment of such
amount for all purposes of this Lease. The Lessee
agrees that the right of the Indenture Trustee to
receive such payments hereunder shall not be
subject to any defense, counterclaim, set-off or
other right or defense or claim which the Lessee
may be able to assert against the Lessor or any
other Person in an action brought on this Lease.
Without limiting the generality of the foregoing,
unless and until the Lessee shall have received
written notice from the Indenture Trustee that the
Indenture has been discharged, subject to the
provisions of Section 6.10 of the Indenture, the
Lessee hereby agrees that the Indenture Trustee
shall have the right to exercise the rights of the
Lessor under this Lease to give consents,
approvals, waivers, notices or the like, to make
elections, demands or the like and to take any
other discretionary action under this Lease as
though named as the Lessor herein and, except as
specifically permitted by said Section 6.10, no
amendment or modification of, or waiver by or
consent of the Lessor in respect of, any of the
provisions of this Lease shall be effective unless
the Indenture Trustee shall have joined in such
amendment, modification, waiver or consent or
shall have given its prior written consent
thereto. Notwithstanding such assignment of this
Lease and the Guaranty, the obligations of the
Lessor to the Lessee to perform the terms and
conditions of this Lease in accordance with the
terms hereof shall remain in full force and
effect.
I. ARTICLE
Insurance
A. SECTION Insurance.
1. Obligation to Insure. The
Lessee shall at all times carry and maintain, at
its expense, (i) "all-risk" property insurance on
the Equipment including, without limitation,
flood, earthquake, windstorm and boiler and
machinery perils (and business interruption
coverage) in a minimum amount equal to the greater
of replacement value or the Casualty Value
thereof, and (ii) commercial general liability
insurance including, without limitation, broad
form property damage, bodily injury, premise and
operations, blanket contractual for oral and
written contracts, sudden and accidental pollution
caused by a hostile fire and products/completed
operations in accordance with industry standards
in an amount no less than $40,000,000.
1. Terms of Insurance Policies.
Any insurance policies carried in accordance with
Section 20.1(a) hereof covering the Equipment, and
any policies taken out in substitution or
replacement for any such policies, as applicable,
(i) in the case of property insurance, shall name
the Indenture Trustee as the loss payee with
respect to the Equipment so long as the Indenture
has not been discharged in accordance with its
terms and, if the Indenture has been so
discharged, shall name the Owner Trustee as the
loss payee with respect to the Equipment, (ii) in
the case of liability insurance, shall name the
Lessor Parties as additional insureds (the
"Additional Insureds"), (iii) may provide for
self-insurance to the extent permitted in
Section 20.1(c) hereof, (iv) shall be primary
without any right of contribution from any other
insurance which is carried by or may be available
to protect the Additional Insureds, (v) shall
provide that in respect of the Additional
Insureds' interest in such policies the insurance
shall not be invalidated by any action or inaction
of the Lessee and shall insure the respective
interests of the Additional Insureds regardless of
any breach or violation by the Lessee of any
warranty, declaration or condition contained in
such policy (except for nonpayment of premiums),
(vi) shall provide that the Additional Insureds
are not liable for any insurance premiums,
(vii) shall provide that if the insurers cancel
such insurance for any reason whatsoever, or if
any material change is made in such insurance
which adversely affects the interests of any
Additional Insured, or if such insurance lapses,
such cancellation, change or lapse shall not be
effective as to the Additional Insureds for thirty
(30) days (or 10 days in the case of cancellation
or lapse for nonpayment of premiums) after receipt
by the Additional Insureds of written notice by
such insurers of such cancellation, change or
lapse, (viii) shall otherwise contain terms and
conditions, including without limitation, the
payment of deductible in connection with any such
insurance, that are reasonably satisfactory to the
Lessor Parties, (ix) shall provide for each
insurer's waiver of its right of subrogation
against the Lessor, and (x) shall provide for
liability insurance having "cross-liability" and
"severability of interest" endorsements.
1. Self-Insurance by Lessee. The
Lessee may self-insure under a program applicable
to all similarly situated equipment operated by
the Lessee, but in no case shall the
self-insurance with respect to the Equipment
exceed (i) $1,000,000 with respect to all-risk
property insurance, (ii) $1,000,000 with respect
to general liability insurance and (iii)
$5,000,000 with respect to product liability
insurance.
1. Reports, Notices, Etc. The
Lessee shall provide to the Lessor and the
Indenture Trustee (i) on the Equipment Closing
Date, the insurance certificates to be provided on
the Equipment Closing Date, (ii) annually and at
least five (5) days prior to the expiration or any
modification of the Lessee's relevant insurance
policies (A) no-default insurance certificates and
(B) a signed report of an insurance broker or
insurer reasonably acceptable in form and
substance to the Lessor and the Indenture Trustee,
stating in reasonable detail the types of coverage
and limits carried and maintained on the Equipment
and certifying that such insurance complies with
the terms and conditions of this Lease. The
Lessee will cause such insurance broker or insurer
to advise the Lessor Parties in writing promptly
of any default in the payment of any premium and
of any other act or omission on the part of the
Lessee of which it has knowledge and which might
invalidate, cause cancellation of or render
unenforceable all or any part of any insurance
carried by the Lessee Party with respect to the
Equipment or the any Item thereof.
(e) Payment of Proceeds. All insurance
proceeds received by or payable to the Lessor on
account of any damage to or destruction of the
equipment or any part thereof (less the actual
costs, fees and expenses incurred in the
collection thereof), other than any damage or
destruction constituting an Event of Loss, shall
be paid over to Lessee or as it may direct from
time to time as repair and restoration progresses
to pay (or reimburse the Lessee for) the cost of
repair and restoration of the Equipment, but only
upon the written request of the Lessee accompanied
by appropriate evidence reasonably satisfactory to
the Lessor that the sum requested is a proper item
for such cost and has been paid or will be applied
to the payment of a sum then due and payable;
provided, however, that if a Material Default or
Event of Default shall have occurred and be
continuing any such amount shall not be paid over
to the Lessee, but shall be applied as provided in
Section 9.4 hereof. Upon receipt by the Lessor of
evidence reasonably satisfactory to it that repair
and restoration has been completed and the cost
thereof paid in full, the balance, if any, or such
proceeds shall be promptly paid over or assigned
to the Lessee or as it may direct unless a Default
shall have occurred and be continuing, in which
case such balance shall be applied as provided in
Section 9.4 hereof.
(f) Additional Insurance by Lessor. At
any time, any Lessor Party may at its own expense
and for its own account carry insurance with
respect to the Equipment; provided, that such
insurance does not increase the cost of or
interfere with the Lessee's ability to obtain
insurance with respect to the Equipment. Any
insurance payments received from policies
maintained by such Lessor Party pursuant to the
previous sentence shall be retained by such Lessor
Party without reducing or otherwise affecting the
Lessee's obligations hereunder.
(g) Right of Lessor to Provide
Insurance. If the Lessee does not procure any
insurance required by this Section 20.1, then the
Lessor may, but shall not be obligated to, procure
such insurance, and the Lessee shall pay the
premiums thereon to the Lessor promptly upon
demand. The Lessor shall not, by the fact of
approving, disapproving, accepting, preventing,
obtaining, or failing to obtain any such
insurance, incur any liability for the form or
legal sufficiency of insurance policies, or
solvency of insurers with respect to payment of
losses, and the Lessee shall assume full
responsibility therefor and all liability with
respect thereto.
I. ARTICLE
Owner Trustee
A. SECTION Successor Trustee; Co-Trustee.
In the case of the appointment of any successor
trustee pursuant to the terms of the Trust
Agreement, such successor trustee (in its capacity
as Owner Trustee on behalf of the Owner Trust)
shall, upon written notice by such successor
trustee to the Lessee, succeed to all the rights,
duties, powers, obligations and title of the
Lessor hereunder and under the other Operative
Documents and shall be deemed to be the Lessor and
the legal owner (in each case, on behalf of the
Owner Trust) of the Equipment for all purposes
hereof and each reference herein and in the
Operative Documents to the "Lessor" shall mean any
such successor trustee. The Lessor or any
successor trustee from time to time serving as the
Lessor hereunder may from time to time appoint one
or more trustees or separate trustees pursuant to
the terms of the Trust Agreement to exercise or
hold any of or all the rights, powers and title of
the Lessor hereunder. No such appointment of any
successor trustee, trustee or separate trustee
shall require any consent or approval by the
Lessee or shall in any way alter the terms of this
Lease or the obligations of the Lessee or the
Lessor hereunder. The appointment of one
successor trustee, trustee or separate trustee
shall not exhaust the right to appoint further
successor trustees, trustees and separate trustees
pursuant to the Trust Agreement, but such right
may be exercised repeatedly so long as this Lease
may be in effect.
I. ARTICLE
Confidentiality
A. SECTION Confidentiality. The Lessor
Parties agree to take normal and reasonable
precautions in accordance with their normal
procedures and exercise due care to maintain the
confidentiality of all information relating to the
Lessee, the Guarantor and their respective
Affiliates, which has been identified as
confidential by the Lessee or the Guarantor, and
neither the Lessor Parties nor any of their
Affiliates shall use any such information for any
purpose or in any manner other than pursuant to
the terms contemplated by this Lease; except to
the extent such information (a) was or becomes
generally available to the public other than as a
result of a disclosure by the Lessor Parties, or
(b) was or becomes available on a non-confidential
basis from a source other than the Lessee or the
Guarantor; provided, that such source is not bound
by a confidentiality agreement with either the
Lessee or the Guarantor known to the Lessor
Parties; and provided, further, that any Lessor
Party may disclose such information (i) at the
request or pursuant to any requirement of any
Governmental Authority to which such Lessor Party
is subject or in connection with an examination of
such Lessor Party by any such Governmental
Authority including, without limitation, the
National Association of Insurance Commissioners
and any other industry regulators, (ii) pursuant
to subpoena or other court process, (iii) when
required to do so in accordance with the
provisions of any Applicable Law, (iv) to each
Lessor Party's independent auditors and other
professional advisors and (v) to any Person and in
any proceeding necessary in any Lessor Party's
judgment to protect such Lessor Party's interests
in connection with any claim or dispute involving
the Lessor Party. Notwithstanding the foregoing,
the Lessee authorizes the Lessor Parties to
disclose to any participant or assignee or
purchaser of Equipment (each, a "Transferee"), to
any prospective Transferee and to any Affiliate,
such financial and other information in the Lessor
Parties' possession concerning the Lessee, the
Guarantor or their respective Affiliates which has
been delivered to the Lessor Parties pursuant to
this Lease or the Participation Agreement;
provided, that unless otherwise agreed by the
Lessee or the Guarantor, as applicable, the
Transferee agrees in writing to such Lessor
Parties to keep such information confidential to
the same extent required of the Lessor Parties
hereunder.
I. ARTICLE
Miscellaneous
A. SECTION Documentary Conventions. This
Lease shall be governed by, and construed in
accordance with, all the Documentary Conventions;
provided, however, that no amendment, supplement,
or modification of this Lease which would have the
effect of (a) increasing the amount of, or
bringing forward in time the due date for any
payment obligation of the Lessee, (b) amending the
Guarantor's express rights of consent set forth in
Articles VII and X, (c) amending this Section 23.1
or (d) reducing any period of time set forth in
Section 13.1 for the cure or remedy of any Default
described therein, shall be effective as against
the Guarantor unless made by an instrument in
writing signed by the Guarantor.
A. SECTION Effective Upon Delivery. This
Lease shall take effect upon delivery hereof.
A. SECTION Intent to Treat as a Lease.
This Lease constitutes an agreement of lease as to
the Equipment, and nothing herein shall be
construed as conveying to the Lessee any right,
title or interest in or to the Equipment except as
lessee.
SECTION 23.4 Investment of Funds. Any
moneys held by the Lessor (or, so long as the Lien
of the Indenture shall remain in effect, the
Indenture Trustee) as security hereunder for
future payments to Lessee shall, until paid to the
Lessee, be invested by the Lessor (or, so long as
the Lien of the Indenture shall remain in effect,
the Indenture Trustee) as the Lessee may from time
to time direct in writing (and in absence of a
written direction by Lessee or if a Default or an
Event of Default shall have occurred and be
continuing, there shall be no obligation to invest
such moneys but such moneys may be invested as
directed by the Owner Participant in Permitted
Investments. There shall be promptly remitted to
the Lessee or its order (but no more frequently
than monthly) any gain (including interest
received) realized as a result of any such
investment (net of any fees, commissions and other
expenses, if any, incurred in connection with such
investment) unless a Default or an Event of
Default shall have occurred and be continuing.
The Lessee shall be responsible for any net loss
realized as a result of any such investment and
shall reimburse the Lessor (or, so long as the
Lien of the Indenture shall remain in effect, the
Indenture Trustee) for any such net loss on
demand.
SECTION 23.5 Limited Liability of Lessor.
It is expressly agreed and understood that all
representations, warranties and undertakings of
the Lessor hereunder shall be binding upon the
Lessor only in its capacity as Owner Trustee under
the Trust Agreement and the institutions or
Persons acting as the Lessor shall not be liable
hereunder to their individual capacity for any
breach thereof, except for their gross negligence
or willful misconduct or for breach of its
covenants, representations and warranties
contained herein, to the extent expressly
covenanted or made in their individual capacity.
Except as provided in the previous sentence
as relates solely to the liability of the
institutions or Persons acting as the Lessor for
its own gross negligence or willful misconduct,
any claims based on or in respect of any liability
of the Lessor under this Lease shall be enforced
only against the Trust Estate and not against any
other tangible or intangible assets, properties or
funds of (i) Fleet in its individual capacity (ii)
any shareholder or beneficiary of Fleet as Owner
Trustee or in its individual capacity or any
director, officer, employee or agent of Fleet as
Owner Trustee or in its individual capacity (or
any legal representative, heir, estate, successor
or assign of any thereof), (iii) any predecessor
or successor partnership or corporation (or other
entity) of Fleet in its individual capacity or any
of its shareholders or beneficiaries, either
directly or through Fleet or its shareholders or
any predecessor or successor partnership or
corporation of their shareholders, officers,
directors, employees or agents (other than entity)
or (iv) any other Affiliate of any of the
foregoing, or any director, officer, employee or
agent of any thereof.
SECTION 23.6. Identification of Equipment.
No later than September 30, 1997, the Lessee shall
(i) number and tag each Item of Equipment
identifying it as being owned by the Owner Trustee
and (ii) provide a written report confirming the
completion of such tagging and specifying the
numbers assigned to each Item of Equipment.
[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY]
IN WITNESS WHEREOF, intending to be legally
bound, the parties hereto have each caused this
Lease Agreement to be duly executed as of the date
first above written.
FLEET NATIONAL BANK,
not in its individual capacity
but solely as Owner Trustee, on behalf
of THE ZENITH ELECTRONICS EQUIPMENT OWNER
TRUST 1997-I, as LESSOR
By:
Name:
Title:
ZENITH ELECTRONICS CORPORATION,
as LESSEE
By:
Name:
Title:
[BELONGS IN FRONT PART OF DOCUMENT]
TABLE OF CONTENTS
Page
ARTICLE IDefinitions and Usage 1
SECTION 1.1 Definitions and Usage 1
ARTICLE IILease of Equipment 1
SECTION 2.1 Lease of Equipment; Lease
Supplements 1
SECTION 2.2 Lease Term 1
ARTICLE IIIRent 2
SECTION 3.1 Basic Rent. 2
SECTION 3.2 Supplemental Rent 2
SECTION 3.3 Minimum Amount of Basic Rent Payments 2
SECTION 3.4 Method of Payment 3
SECTION 3.5 Late Payment 3
SECTION 3.6 Net Lease; No Set-off, Counterclaims, etc. 3
SECTION 3.7 Adjustments to Basic Rent,
Casualty Value,Termination Value and EBO Price 5
SECTION 3.8 Accrued Basic Rent 5
ARTICLE IV
Representations, Warranties and Agreements as to
Equipment 6
SECTION 4.1 Disclaimer of Warranties. 6
SECTION 4.2 Lessee To Exercise Certain Rights 6
ARTICLE VLiens; Quiet Enjoyment 7
SECTION 5.1 Liens. 7
SECTION 5.2 Quiet Enjoyment 7
SECTION 5.3 Personal Property. 8
ARTICLE VIOperation; Maintenance 8
SECTION 6.1 Operation and Maintenance. 8
SECTION 6.2 Replacement of Parts 9
SECTION 6.3 Relocation. 11
SECTION 6.4 Modification. 12
ARTICLE VIIObsolescence Termination 14
SECTION 7.1 Item Obsolescence 14
SECTION 7.2 Retention by Lessor 14
SECTION 7.3 Bids for Terminated Items 16
SECTION 7.4 Conditions of Termination;
Effect of Termination 17
ARTICLE VIIIReturn of Equipment 18
SECTION 8.1 Notice of Return 18
SECTION 8.2 Return of Equipment 18
SECTION 8.3 Marketing of Returned Item. 20
SECTION 8.4 Governmental Approvals 20
SECTION 8.5 Additional Parts 20
ARTICLE IXLoss, Destruction, Condemnation, Damage, etc. 21
SECTION 9.1 Replacement; Payment of Casualty Value. 21
SECTION 9.2 Application of Payments Upon an Event of Loss. 24
SECTION 9.3 Seizure, Requisition,
Application of Payments Not Relating to an Event of Loss. 25
SECTION 9.4 Applications During Default or Event of Default 25
SECTION 9.5 Application of Article VI 26
ARTICLE XEarly Buy-Out Option 26
SECTION 10.1 Early Buy-Out. 26
ARTICLE XIAssignment and Sublease 27
SECTION 11.1 Lessee Assignments and Subleases. 27
SECTION 11.2 Lessor Assignments. 28
ARTICLE XIIInspection 28
SECTION 12.1 Inspection. 28
ARTICLE XIIIEvents of Default 29
SECTION 13.1 Events of Default. 29
ARTICLE XIVRemedies 31
SECTION 14.1 Remedies. 31
SECTION 14.2 Lessor Rights. 35
ARTICLE XVRight to Perform for Lessee 35
SECTION 15.1 Right To Perform. 35
SECTION 15.2 Lessor as Lessee's Agent and Attorney 36
ARTICLE XVIRenewal Option 36
SECTION 16.1 Renewal Notice. 36
SECTION 16.2 Lease Supplement; Renewal Rent 37
SECTION 16.3 Determination of Fair Market Rental Value 37
ARTICLE XVIIPurchase Options 37
SECTION 17.1 Purchase Notice 37
SECTION 17.2 Transfer of Item. 38
SECTION 17.3 Determination of Fair Market Sales Value 38
ARTICLE XVIIIFurther Assurances 39
SECTION 18.1 Further Action by Lessee 39
SECTION 18.2 Notice of Default or Event of Default 39
SECTION 18.3 Information Regarding Items. 39
ARTICLE XIXTrust Indenture Estate as Security for
Lessor's Obligations to Lenders 40
SECTION 19.1 Assignment to Indenture Trustee. 40
ARTICLE XXInsurance 41
SECTION 20.1 Insurance 41
ARTICLE XXIOwner Trustee 43
SECTION 21.1 Successor Trustee; Co-Trustee 43
ARTICLE XXIIConfidentiality 44
SECTION 22.1 Confidentiality. 44
ARTICLE XXIIIMiscellaneous 45
SECTION 23.1 Documentary Conventions. 45
SECTION 23.2 Effective Upon Delivery. 45
SECTION 23.3 Intent to Treat as a Lease. 45
SECTION 23.4 Investment of Funds. 45
SECTION 23.5 Limited Liability of Lessor. 45
SECTION 23.6 Identification of Equipment. 46
List of Schedules
Schedule A: Form of Lease Supplement
Schedule B: Form of Schedule of Equipment
LEASE AGREEMENT
dated as of March 26, 1997
by and among
FLEET NATIONAL BANK,
not in its individual capacity but solely
in its capacity as Owner Trustee for
ZENITH ELECTRONICS EQUIPMENT OWNER TRUST 1997-II,
as Lessor,
and
ZENITH ELECTRONICS CORPORATION OF TEXAS,
as Lessee,
Leveraged Lease of
certain Television Picture Tube and Other
Television Related Manufacturing Equipment
NOTE: CERTAIN RIGHTS OF THE LESSOR UNDER THIS
LEASE AGREEMENT AND IN THE EQUIPMENT LEASED
HEREUNDER HAVE BEEN ASSIGNED TO AND ARE SUBJECT TO
A SECURITY INTEREST IN FAVOR OF FIRST SECURITY
BANK, NATIONAL ASSOCIATION, IN ITS CAPACITY AS
INDENTURE TRUSTEE, UNDER AND TO THE EXTENT SET
FORTH IN THE TRUST INDENTURE AND SECURITY
AGREEMENT DATED AS OF MARCH 26, 1997, BETWEEN
FLEET NATIONAL BANK, IN ITS CAPACITY AS OWNER
TRUSTEE FOR THE OWNER TRUST, AND FIRST SECURITY
BANK, NATIONAL ASSOCIATION, IN ITS CAPACITY AS
INDENTURE TRUSTEE, AS SUCH TRUST INDENTURE AND
SECURITY AGREEMENT MAY BE AMENDED, MODIFIED OR
SUPPLEMENTED FROM TIME TO TIME IN ACCORDANCE WITH
THE PROVISIONS THEREOF. THIS LEASE AGREEMENT HAS
BEEN EXECUTED IN SEVERAL COUNTERPARTS. NO
SECURITY INTEREST IN THE LESSOR'S RIGHT, TITLE AND
INTEREST IN AND TO THIS LEASE AGREEMENT AND THE
EQUIPMENT LEASED HEREUNDER MAY BE CREATED THROUGH
THE TRANSFER OR POSSESSION OF ANY COUNTERPART
OTHER THAN THE ORIGINAL COUNTERPART OF THIS LEASE
AGREEMENT CONTAINING THE RECEIPT THEREFOR EXECUTED
BY FIRST SECURITY BANK, NATIONAL ASSOCIATION, IN
ITS CAPACITY AS INDENTURE TRUSTEE, ON THE
SIGNATURE PAGE THEREOF.
[Mexican Sited Equipment]
TABLE OF CONTENTS
PAGE
ARTICLE IDefinitions and Usage 1
SECTION 1.1 Definitions and Usage 1
ARTICLE IILease of Equipment 1
SECTION 2.1 Lease of Equipment; Lease Supplements 1
SECTION 2.2 Lease Term 1
ARTICLE IIIRent 2
SECTION 3.1 Basic Rent 2
SECTION 3.2 Supplemental Rent 2
SECTION 3.3 Minimum Amount of Basic Rent Payments 2
SECTION 3.4 Method of Payment 3
SECTION 3.5 Late Payment 3
SECTION 3.6 Net Lease; No Set-off, Counterclaims, etc. 4
SECTION 3.7 Adjustments to Basic Rent, Casualty Value,
Termination Value and EBO Price 5
SECTION 3.8 Accrued Basic Rent 5
ARTICLE IVRepresentations, Warranties and Agreements as to Equipment 6
SECTION 4.1 Disclaimer of Warranties 6
SECTION 4.2 Lessee To Exercise Certain Rights 6
ARTICLE VLiens; Quiet Enjoyment 7
SECTION 5.1 Liens 7
SECTION 5.2 Quiet Enjoyment 7
SECTION 5.3 Personal Property 8
ARTICLE VIOperation; Maintenance 8
SECTION 6.1 Operation and Maintenance 8
SECTION 6.2 Replacement of Parts; Substitution of Items 9
SECTION 6.3 Relocation 11
SECTION 6.4 Modification 12
ARTICLE VIIObsolescence Termination 14
SECTION 7.1 Item Obsolescence 14
SECTION 7.2 Retention by Lessor 14
SECTION 7.3 Bids for Terminated Items 16
SECTION 7.4 Conditions of Termination; Effect of Termination 17
ARTICLE VIIIReturn of Equipment 18
SECTION 8.1 Notice of Return 18
SECTION 8.2 Return of Equipment 18
SECTION 8.3 Marketing of Returned Item 20
SECTION 8.4 Governmental Approvals 20
SECTION 8.5 Additional Parts 20
ARTICLE IXLoss, Destruction, Condemnation, Damage, etc. 21
SECTION 9.1 Replacement; Payment of Casualty Value 21
SECTION 9.2 Application of Payments Upon an Event of
Loss 24
SECTION 9.3 Seizure, Requisition, Application of
Payments Not Relating to an Event of Loss 25
SECTION 9.4 Applications During Default or Event of
Default 25
SECTION 9.5 Application of Article VI 26
ARTICLE X
Early Buy-Out Option 26
SECTION 10.1 Early Buy-Out 26
ARTICLE XIAssignment and Sublease 27
SECTION 11.1 Lessee Assignments and Subleases 27
SECTION 11.2 Lessor Assignments 28
ARTICLE XIIInspection 28
SECTION 12.1 Inspection 28
ARTICLE XIIIEvents of Default 29
SECTION 13.1 Events of Default 29
ARTICLE XIVRemedies 32
SECTION 14.1 Remedies 32
SECTION 14.2 Lessor Rights 35
ARTICLE XVRight to Perform for Lessee 36
SECTION 15.1 Right To Perform 36
SECTION 15.2 Lessor as Lessee's Agent and Attorney 36
ARTICLE XVIRenewal Option 36
SECTION 16.1 Renewal Notice 36
SECTION 16.2 Lease Supplement; Renewal Rent 37
SECTION 16.3 Determination of Fair Market Rental Value 37
ARTICLE XVIIPurchase Options 38
SECTION 17.1 Purchase Notice 38
SECTION 17.2 Transfer of Item 38
SECTION 17.3 Determination of Fair Market Sales Value 39
ARTICLE XVIII
Further Assurances 39
SECTION 18.1 Further Action by Lessee 39
SECTION 18.2 Notice of Default or Event of Default 39
SECTION 18.3 Information Regarding Items 40
ARTICLE XIXTrust Indenture Estate as Security for
Lessor's Obligations to Lenders 40
SECTION 19.1 Assignment to Indenture Trustee 40
ARTICLE XXInsurance 41
SECTION 20.1 Insurance 41
ARTICLE XXIOwner Trustee 43
SECTION 21.1 Successor Trustee; Co-Trustee 43
ARTICLE XXIIConfidentiality 44
SECTION 22.1 Confidentiality 44
ARTICLE XXIIIMiscellaneous 45
SECTION 23.1 Documentary Conventions 45
SECTION 23.2 Effective Upon Delivery 45
SECTION 23.3 Intent to Treat as a
Lease 45
SECTION 23.4 Investment of Funds 45
SECTION 23.5 Limited Liability of Lessor 46
SECTION 23.6 Identification of Equipment 46
LEASE AGREEMENT
This LEASE AGREEMENT (this "Lease") is
entered into as of March 26, 1997, by and among
FLEET NATIONAL BANK, a national banking
association, not in its individual capacity,
except as otherwise specified herein, but solely
in its capacity as Owner Trustee for THE ZENITH
ELECTRONICS EQUIPMENT OWNER TRUST 1997-I under a
Trust Agreement dated as of March 26, 1997, for
the benefit of the Owner Participant named
therein, as Lessor, and ZENITH ELECTRONICS
CORPORATION OF TEXAS, a Texas corporation, as
Lessee.
I. ARTICLE
Definitions and Usage
A. SECTION Definitions and Usage. Unless
the context otherwise requires, capitalized terms
used herein shall have the respective meanings
assigned to them, whether directly or indirectly
by reference, in Appendix A to the Participation
Agreement, and the rules of usage set forth in
such Appendix A shall likewise govern this Lease.
I. ARTICLE
Lease of Equipment
A. SECTION Lease of Equipment; Lease
Supplements. Subject to the terms and conditions
hereof, on the Equipment Closing Date, the Lessor
hereby agrees (subject to the terms and conditions
set forth in the Participation Agreement) to
purchase from the Lessee pursuant to a Bill of
Sale and simultaneously to lease to the Lessee,
and the Lessee hereby agrees to sell to the Lessor
pursuant to a Bill of Sale and to lease from the
Lessor, for the term referred to in Section 2.2
hereof, the Items of Equipment specified on
Schedule V to the Participation Agreement, on the
terms more particularly set forth in the Lease
Supplement and Schedule of Equipment, the forms of
which are attached hereto as Schedule A and
Schedule B, delivered on the Equipment Closing
Date, the execution and delivery of which shall
constitute acceptance of the Items of Equipment
described therein for all purposes of this Lease
and such Items of Equipment shall be subject to
the terms of this Lease from the date thereof.
A. SECTION Lease Term. Immediately upon
satisfaction of all applicable conditions
described in Article III of the Participation
Agreement on the Equipment Closing Date, without
necessity of any further act or evidence by any
party hereto, each Item of Equipment specified on
the Schedule of Equipment attached to the Lease
Supplement delivered on the Equipment Closing Date
shall be deemed delivered to the Lessor and leased
by the Lessor to the Lessee for the Base Term and,
if the Lessee elects to exercise its renewal
option pursuant to Article XVI hereof, for any
Renewal Term, in either case, all pursuant to the
terms of this Lease, unless this Lease shall have
been earlier terminated in accordance with its
terms.
I. ARTICLE
Rent
A. SECTION Basic Rent. With respect to
each Item of Equipment, the Lessee shall pay to
the Lessor Basic Rent commencing on the first Rent
Payment Date specified in the Lease Supplement and
related Schedule of Equipment and continuing on
each Rent Payment Date thereafter for the duration
of the Base Term for such Schedule of Equipment in
an amount equal to the product of (a) the
applicable percentage specified for such Rent
Payment Date in the Lease Supplement and (b) the
Lessor's Cost for such Item. The Lease Supplement
shall indicate whether an installment of Basic
Rent is payable in advance or in arrears. The
Lessor and the Lessee agree that for tax purposes
each installment of Basic Rent that is indicated
as payable in advance will be allocated for tax
purposes over the six-month period beginning on
the Rent Payment Date on which such advance
payment is scheduled to be made, and each
installment of Basic Rent that is indicated as
payable in arrears will be accrued over the six-
month period ending on the Rent Payment Date on
which such arrears payment is scheduled to be
made.
A. SECTION Supplemental Rent. The Lessee
shall pay promptly to the Lessor, or to the Person
entitled thereto as expressly provided herein or
in any other Operative Document, any and all
Supplemental Rent as the same shall become due and
payable, including any interest payable at the
Overdue Rate as provided in Section 3.5 hereof.
The Lessee shall also pay as Supplemental Rent
amounts equal to all amounts payable by the Owner
Trustee under the Trust Indenture as Make Whole
Premium Amounts, as well as fees and expenses,
indemnities or expense reimbursements (other than
those resulting from the gross negligence or
willful misconduct of the Owner Trustee).
A. SECTION Minimum Amount of Basic Rent
Payments. The amount of Basic Rent payable on
each Rent Payment Date shall in no event be less
than the amount required to pay the amount of
principal of, and interest on, the Notes scheduled
to be paid on such Rent Payment Date. The
Casualty Value and Termination Value for each Item
of Equipment payable on any date in accordance
with the terms hereof, whether or not adjusted
pursuant to Section 3.7 hereof and Article IX of
the Participation Agreement, shall in no event be
less than the principal amount of the Notes equal
to the Loan Value of such Items plus any accrued
and unpaid interest (other than, in the case of
any such date which is also a Rent Payment Date,
interest due on such Rent Payment Date). The EBO
Price payable on the EBO Date for the Items of
Equipment described in any Lease Supplement and
related Schedule of Equipment, whether or not
adjusted pursuant to Section 3.7 hereof and
Article IX of the Participation Agreement, shall
in no event be less than the principal amount of
the Notes plus any accrued and unpaid interest.
A. SECTION Method of Payment. All Rent
(other than Excluded Payments) payable to the
Lessor at any time prior to termination of the
Indenture shall be paid by the Lessee on behalf of
the Lessor directly to the Indenture Trustee at
the Indenture Trustee Office or such other place
in the U.S. as the Indenture Trustee shall specify
in a written notice to the Lessee at least five
(5) Business Days prior to the date such payment
is due; provided, that all Rent (other than
Excluded Payments) payable to the Lessor after
receipt by the Lessee of notice from the Indenture
Trustee stating that the Indenture has been
terminated following full satisfaction of the
Notes and all other amounts due thereunder and
under the Indenture shall be paid to the Lessor at
its office set forth in Schedule I to the
Participation Agreement or at such other place in
the U.S. as the Lessor shall specify in a written
notice to the Lessee at least five (5) Business
Days prior to the date such payment is due. All
Excluded Payments shall be made at all applicable
times (and whether or not the Lien of the
Indenture shall have been discharged) to the
Person entitled thereto as provided herein or in
the applicable Operative Document, at the office
of such Person as set forth in Schedule I to the
Participation Agreement or at such other office in
the U.S. as such Person entitled thereto shall
specify in a written notice to the Lessee. All
payments of Supplemental Rent shall be paid to the
Person entitled thereto at the office of such
Person set forth in Schedule I to the
Participation Agreement or at such other office in
the U.S. as such Person entitled thereto shall
specify in a written notice to the Lessee at least
five (5) Business Days prior to the date such
payment is due. Each payment of Rent shall be
made by the Lessee in immediately available funds
prior to 11:30 a.m., New York time at the place of
payment, on the date when such payment shall be
due.
A. SECTION Late Payment. In the event
any Rent shall not be paid on its due date to any
Person, the Lessee shall pay to the appropriate
Person on demand, as Supplemental Rent, interest
(to the extent permitted by Applicable Law) on
such overdue amount from the due date thereof
(without regard to any grace period) to the date
of payment thereof at the Overdue Rate.
A. SECTION Net Lease; No Set-off,
Counterclaims, etc. THIS LEASE IS A NET LEASE, AND
NOTWITHSTANDING ANY PROVISION OF THIS LEASE OR OF
ANY OTHER OPERATIVE DOCUMENT TO THE CONTRARY, THE
LESSEE'S OBLIGATION TO PAY ALL PAYMENTS OF RENT AS
AND WHEN THE SAME SHALL BECOME DUE AND PAYABLE IN
ACCORDANCE WITH THE TERMS OF THIS LEASE AND ANY
OTHER OPERATIVE DOCUMENT SHALL BE ABSOLUTE AND
UNCONDITIONAL AND SHALL NOT BE SUBJECT TO ANY
ABATEMENT OR DIMINUTION BY SET-OFF, DEDUCTION,
COUNTERCLAIM, RECOUPMENT, AGREEMENT, DEFENSE,
SUSPENSION, DEFERMENT, INTERRUPTION OR OTHERWISE,
AND UNTIL SUCH TIME AS ALL RENT REQUIRED TO BE
PAID UNDER THIS LEASE OR ANY OTHER OPERATIVE
DOCUMENT SHALL HAVE BEEN PAID, THE LESSEE SHALL
NOT HAVE ANY RIGHT TO TERMINATE THIS LEASE, OR TO
BE RELEASED, RELIEVED OR DISCHARGED FROM ITS
OBLIGATION TO MAKE, AND SHALL NOT SUSPEND, REDUCE
OR DISCONTINUE, ANY PAYMENT OF RENT, FOR ANY
REASON WHATSOEVER (EXCEPT AS MAY BE EXPRESSLY
PROVIDED HEREIN), including, without limitation:
1. any default,
misrepresentation, negligence, misconduct or other
action or inaction of any kind by any Lessor
Party, the Lessee, the Guarantor or any other
Person, whether under or in connection with this
Lease, any other Operative Document or any other
agreement relating to this Lease or in connection
with any unrelated transaction;
1. the insolvency, bankruptcy,
reorganization or cessation of existence, or
discharge or forgiveness of indebtedness of any
Person referred to in clause (a) above;
1. the invalidity,
unenforceability or impossibility of performance
of this Lease or any other Operative Document for
any reason;
1. any defect in the title,
condition, design, operation or fitness for use
of, or any Lien or other restriction of any kind
upon, all or any part of any Item of Equipment,
any loss or destruction of, or damage to, any Item
of Equipment or any interruption in or cessation
of the ownership, possession, operation or use of
any Item of Equipment for any reason whatsoever;
1. any restriction, prevention or
curtailment of or interference with any Item of
Equipment or the use thereof or any part thereof
for any reason whatsoever, including, without
limitation, by any Governmental Authority;
1. any Applicable Law now or
hereafter in force;
1. any failure to obtain any
required Governmental Action for a transfer of
rights or title to the Lessor, the Lessee or any
other Person;
1. any amendment or other change
of, or any assignment of any rights under, any
Operative Document, or any waiver or other action
or inaction under or in respect of any Operative
Document, or any exercise or nonexercise of any
right or remedy under or in respect of any
Operative Document, including, without limitation,
the exercise of any foreclosure or other remedy
under the Indenture or this Lease or the sale of
any Item of Equipment or any portion thereof or
interest therein; or
1. any other cause, circumstance,
happening or event whatsoever, foreseen or
unforeseen, whether similar or dissimilar to any
of the foregoing.
The Lessee hereby waives and hereby agrees to
waive at any future time at the request of the
Lessor, to the extent now or then permitted by
Applicable Law, any and all rights that the Lessee
may have or that at any time hereafter may be
conferred upon either of them, by statute,
regulation or otherwise, to terminate, cancel,
quit or surrender this Lease other than in
accordance with the express terms hereof. If for
any reason whatsoever this Lease shall be
terminated other than in accordance with the
express terms hereof in whole or in part, by
operation of law or otherwise, the Lessee
nonetheless agrees to the extent permitted by
Applicable Law or unless the Lessor has
repossessed, retaken or required redelivery of the
Equipment, to pay to the Lessor (or, in the case
of Supplemental Rent, to the Person entitled
thereto as provided herein or in the applicable
Operative Document) an amount equal to each Rent
payment at the time and in the manner such payment
would have become due and payable in accordance
with the terms hereof had this Lease not been
terminated in whole or in part. Each Rent payment
shall be final and the Lessee agrees not to seek
to recover all or any part of any such payment
(except for amounts paid to a Lessor Party which
such Lessor Party in good faith agrees have been
paid in error) from any Lessor Party for any
reason under any circumstance whatsoever.
A. SECTION Adjustments to Basic Rent,
Casualty Value, Termination Value and EBO Price.
Basic Rent, Casualty Value, Termination Value, and
the EBO Price shall be adjusted when required by
and in accordance with Article IX of the
Participation Agreement, and an appropriate Lease
Supplement shall be executed and delivered to
reflect all such adjustments.
A. SECTION Accrued Basic Rent. Subject
to Section 3.3 hereof, on any date that, pursuant
to the terms of any Operative Document, the Lessee
is obligated to pay Accrued Basic Rent, the Lessee
shall not be obligated to pay that portion, if
any, of Accrued Basic Rent that has already been
paid by the Lessee in connection with a payment of
Casualty Value or Termination Value on or before
such date.
I. ARTICLE
Representations, Warranties and Agreements as to
Equipment
A. SECTION Disclaimer of Warranties. AS
BETWEEN THE LESSOR AND THE LESSEE, DELIVERY OF A
LEASE SUPPLEMENT PURSUANT TO ARTICLE II HEREOF
SHALL BE CONCLUSIVE PROOF OF ACCEPTANCE BY THE
LESSEE OF EACH ITEM OF EQUIPMENT SPECIFIED ON THE
RELATED SCHEDULE OF EQUIPMENT AS BEING IN
COMPLIANCE WITH ALL REQUIREMENTS OF THIS LEASE.
THE LESSOR LEASES AND THE LESSEE TAKES EACH SUCH
ITEM OF EQUIPMENT AND EACH COMPONENT PART THEREOF
"AS IS" AND "WHERE IS", AND THE LESSEE
ACKNOWLEDGES THAT NONE OF THE LESSOR PARTIES HAS
MADE, NOR SHALL BE DEEMED TO HAVE MADE, ANY
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS
TO THE TITLE, VALUE, COMPLIANCE WITH
SPECIFICATIONS, CONDITION, MERCHANTABILITY,
DESIGN, QUALITY, DURABILITY, OPERATION OR FITNESS
FOR USE OR PURPOSE OF EACH SUCH ITEM OF EQUIPMENT
OR ANY COMPONENT PART THEREOF OR ANY OTHER
REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR
IMPLIED, WITH RESPECT TO EACH SUCH ITEM OF
EQUIPMENT OR ANY COMPONENT PART THEREOF OR
OTHERWISE, IT BEING AGREED THAT ALL RISKS INCIDENT
THERETO ARE TO BE BORNE, AS BETWEEN THE LESSOR AND
THE LESSEE, BY THE LESSEE IN THE EVENT OF ANY
DEFECT OR DEFICIENCY IN ANY SUCH ITEM OF EQUIPMENT
OR ANY COMPONENT PART THEREOF, OF ANY NATURE
WHETHER PATENT OR LATENT, AND THAT NONE OF THE
LESSOR PARTIES SHALL HAVE ANY RESPONSIBILITY OR
LIABILITY WITH RESPECT THERETO, except that the
Lessor hereby represents, warrants and covenants
that each such Item of Equipment shall be free of
Lessor Liens on the Equipment Closing Date. The
provisions of this Section 4.1 have been
negotiated, and the foregoing provisions are
intended to be a complete exclusion and negation
of any other warranties made by any Lessor Party,
express or implied, with respect to any Item of
Equipment or any component part thereof, whether
arising pursuant to the UCC or any other
Applicable Law now or hereafter in effect or
otherwise. Nothing contained in this Section 4.1
shall in any way diminish or otherwise affect any
right the Lessee may have with respect to any Item
of Equipment against any third Person. None of
the Lessor Parties shall at any time be required
to inspect any Item of Equipment or any component
part thereof, and any actual inspection by any
Lessor Party shall not be deemed to affect or
modify the provisions of this Section 4.1.
A. SECTION Lessee To Exercise Certain
Rights. The Lessor hereby authorizes the Lessee,
at the Lessee's expense, to exercise in the name
of and on behalf of the Lessor and the Lessee, as
their interests may appear, the right and power to
deal with any Seller or manufacturer (including
agents and consultants thereof) of any Item of
Equipment or any component part thereof and the
right to enforce (by legal action or otherwise)
against such Seller or manufacturer all rights,
powers and privileges of the Lessor and to receive
all benefits of the Lessor with respect to such
Seller or manufacturer, under any express or
implied warranty or indemnity or otherwise;
provided, that the Lessee shall indemnify each
Indemnified Person and hold each such Indemnified
Person harmless from and against any and all
claims, costs, expenses, damages, losses and
liability incurred or suffered by such Indemnified
Person in connection with, as a result of, or
incidental to, any action or inaction by the
Lessee pursuant to the above authorization;
provided, further, that if a Material Default or
an Event of Default shall have occurred and be
continuing the Lessor may terminate the authority
of the Lessee under this Section 4.2. Any amount
paid under any such warranty or other such claim
or in lieu of performance of any such warranty or
claim shall be paid over, held and applied as set
forth in Section 9.2 or 9.3, as applicable. After
the end of the Lease Term with respect to any Item
of Equipment (except with respect to any Item of
Equipment that the Lessee shall have purchased
pursuant to Article X or XVII hereof) or after the
termination of this Lease with respect to such
Item of Equipment pursuant to Article XIV, (a) the
Lessee shall have no further rights, powers,
privileges or benefits under this Section 4.2 and
(b) all amounts payable by any Seller or
manufacturer referred to above paid thereafter
shall be paid to, and retained by, the Lessor or
any other Person as shall then be the owner of the
Item of Equipment as to which such payment is
made.
I. ARTICLE
Liens; Quiet Enjoyment
A. SECTION Liens. The Lessee shall not
directly or indirectly create, incur, assume or
suffer to exist any Lien (other than Permitted
Liens) on any Item of Equipment or the Trust
Estate or the Trust Indenture Estate. The Lessee
will promptly, at its own expense, take such
action as may be necessary duly to discharge any
such Lien. The Lessee's obligations under this
Section 5.1 with respect to any such Lien on any
Item of Equipment resulting from a claim arising
prior to the termination of this Lease with
respect to such Item of Equipment shall survive
such termination.
A. SECTION Quiet Enjoyment.
Notwithstanding any other provision of this Lease,
so long as no Event of Default shall have occurred
and be continuing, as between the Lessee and the
Lessor, the Lessee shall have the exclusive rights
to possession and control of all Items of
Equipment and neither the Lessor nor any Person
acting or claiming through the Lessor will take
any action that shall interfere with the peaceful
and quiet enjoyment or the possession and use or
non-use of any Item of Equipment by the Lessee,
and the Lessee shall have the right to possess and
use or not use such Item of Equipment in its sole
discretion, subject always to the terms and
conditions of this Lease. The foregoing is not
intended to limit the inspection rights of the
Items of Equipment granted by the Lessee pursuant
to Sections 8.3 and 12.1 hereof.
A. SECTION Personal Property. The Lessee
and the Lessor agree for the purposes of this
Lease that each Item of Equipment and every part
thereof and title thereto is and shall be
considered as and shall remain personal and not
real property to all Persons and for all purposes.
The Lessee and the Lessor agree that each Item of
Equipment and every part thereof and title thereto
is severed and shall be and shall remain severed
from any real property and is readily movable and,
even if physically attached to such property, it
is the intention of the Lessee and the Lessor that
each Item of Equipment and every part thereof and
title thereto (a) shall retain the character of
personal property, (b) shall be removable, (c)
shall be treated as personal property with respect
to the rights of all Persons whomsoever, (d) shall
not become part of any real property and (e) by
virtue of its nature as personal property, shall
not be affected in any way by any instrument
dealing with any real property.
I. ARTICLE
Operation; Maintenance
A. SECTION Operation and Maintenance.
The Lessee shall at all times at its own expense
during the Lease Term applicable to each Item of
Equipment:
1. use each Item of Equipment for
its intended purpose and purposes incidental or
reasonably related thereto and permit each such
Item to be used or operated only by qualified
personnel and in accordance with good business
practice;
1. keep and maintain in proper
order all appropriate books, records and title
documents relating to each Item of Equipment, all
services rendered and all funds expended for
operation and maintenance of each such Item and
the acquisition, construction and installation of
Modifications thereto and the payment of the
purchase price of such Modifications, all in
accordance with the standards applied by the
Lessee with respect to similar equipment owned or
leased by it in Mexico;
1. operate the Equipment on a
continuous basis, in a manner consistent with the
Lessee's normal operating procedures, and maintain
each such Item in good operating condition in
accordance with (i) the standards applied by
Lessee or Zenith with respect to similar equipment
owned or leased by it in Mexico or the U.S., (ii)
industry practice, (iii) prudent operating and
maintenance standards and (iv) the manufacturer's
required maintenance procedures and in accordance
with all warranties and required insurance
policies;
1. inspect, service, maintain,
store, use, operate, repair, replace, modify and
improve each Item of Equipment in compliance in
all material respects with Applicable Law
(including all applicable environmental and
occupational safety laws) and in a manner which
would not subject any Lessor Party to any criminal
liability, and in compliance in all material
respects with all applicable Governmental Actions
and in compliance with all insurance required by
this Lease and the other Operative Documents;
provided, that as long as no Material Default or
Event of Default shall have occurred and be
continuing, the Lessee may in good faith by
appropriate proceedings contest the validity or
application of any such Applicable Law in any
reasonable manner which does not involve any risk
of the imposition of criminal liability on any
Lessor Party or any material risk of the sale,
forfeiture or loss of the Equipment or any part or
interest therein or title thereto, or any material
risk of any fine, penalty, or other imposition
upon the Lessor Parties for which the Lessee has
not acknowledged its obligation to indemnify the
Lessor Parties pursuant to the Operative
Documents; provided, that the Lessee shall
promptly give the Lessor notice of any contest
relating to any Item or group of Items of
Equipment having a Lessor's Cost equal to or
greater than $1,000,000; and
1. in case of any damage to any
Item of Equipment, other than damage constituting
an Event of Loss, whether or not any insurance
proceeds on account of such damage shall be
sufficient for the purpose, the Lessee shall at
its own expense, promptly commence and complete
the repair of such Item of Equipment (and in any
event complete such repair before the end of the
Lease Term or any earlier termination) so as to
restore such Item to its fair market value,
residual value, condition, remaining useful life,
and utility immediately prior to such
damage(assuming such Item was then in the
condition and state of repair required to be
maintained by the terms of this Lease), with such
alterations and additions as may be made at the
Lessee's election pursuant to and subject to the
conditions of Section 6.4 hereof.
A. SECTION Replacement of Parts;
Substitution of Items. (a) If any part that was
originally incorporated or installed in or
attached to any Item of Equipment at the time such
Item was accepted hereunder, or any part
thereafter incorporated or installed in or
attached to such Item of Equipment in replacement
of or substitution for such original part or any
such replacement part shall become worn out, lost,
stolen, destroyed, seized, confiscated, damaged
beyond repair or otherwise permanently rendered
unfit for use, the Lessee, at its own expense,
shall promptly replace such part, or cause the
same to be replaced, by a replacement part which
is free and clear of all Liens and of such
quality, and in such manner that such Item of
Equipment shall be in as good an operating
condition as, and have a fair market value,
residual value, condition, remaining useful life
and utility at least equivalent to the fair market
value, residual value, condition, remaining useful
life and utility of, such Item of Equipment
immediately prior to such replacement of such part
(assuming such Item of Equipment was, at the time
of such replacement, in the condition and state of
repair required by the terms hereof); provided
that such replacement or substitution does not
cause any Item of Equipment to constitute "limited
use property" within the meaning of Rev. Procs.
75-21 and 79-48, as amended. Any such part
removed from an Item of Equipment shall remain the
property of the Lessor, no matter where located,
until such part shall be replaced by a part which
has been incorporated or installed in or attached
to such Item of Equipment and which meets the
requirements for replacement specified in the
preceding sentence. Immediately upon a
replacement part becoming incorporated or
installed in or attached to an Item of Equipment
as above provided, without further act, (a) title
to the replaced part shall thereupon vest in the
Lessee, free and clear of all rights of the
Lessor, and shall no longer be part of such Item
of Equipment hereunder, (b) title to such
replacement part shall thereupon vest in the
Lessor, free and clear of all Liens (except for
Permitted Liens), (c) such replacement part shall
become subject to this Lease and to the Lien of
the Indenture and be deemed part of such Item of
Equipment for all purposes to the same extent as
the parts originally incorporated or installed in
or attached to such Item of Equipment and (d) the
Lessor shall assign to the Lessee all claims it
may have against any other Person arising from the
event which gave rise to the replacement. The
Lessee shall provide the Lessor with a Bill of
Sale or other conveyance document for each
replacement part the cost of which exceeds
$100,000. In all events, all replacement parts
with respect to an Item of Equipment shall be so
replaced at or before the required time of return
of such Item of Equipment in accordance with the
terms of Section 8.2 hereof.
(b) So long as no Material Default or
Event of Default has occurred and is continuing
the Lessee shall have the right at any time, with
respect to any Item of Equipment that has become
obsolete or surplus to the Lessee's operating
requirements as determined by the Lessee in its
reasonable business judgment, upon giving at least
ninety (90) days' prior written notice (which
notice shall specify the Item to be replaced and
the date of such replacement and shall contain a
certification signed by a Responsible Officer of
the Lessee on behalf of the Lessee that such Item
has become obsolete or surplus to the Lessee's
operating requirements as determined by the Lessee
in its reasonable business judgment, other than as
a result of an Event of Loss), to substitute
equipment of substantially like kind and of equal
or greater value, utility, economic life and
residual value, for such Item or Items of
Equipment hereunder assuming that such Item or
Items of Equipment to be replaced was then in the
condition and state of repair required to be
maintained under the terms of this Lease, provided
that the aggregate Lessor's Cost of all Items
substituted for pursuant to this Section 6.2(b)
shall not exceed $3,000,000. The Lessee's right
to so replace any Item shall be subject to the
fulfillment, at the Lessee's cost and expense, of
the conditions set forth in Section 9.1(b)
(including, without limitation, Section 9.1(b)(v))
and to the further condition that the Item or
Items of Equipment being replaced is being
disposed of to a Person other than a Non-Bidding
Party (as defined in Section 7.3). Upon
satisfaction of such conditions, (i) this Lease
shall continue with respect to any replacement
Item, and (ii) the Lessor shall convey "as is"
"where is", without recourse or warranty (except
as to the ability and authority of the Lessor to
transfer and convey such Item free and clear of
Lessor Liens).
A. SECTION Relocation. So long as such
relocation would not of itself result in a Default
or an Event of Default, the Lessee may relocate
any Item of Equipment to any location within the
U.S. or Mexico of (1) the Lessee, or (2) any
sublessee pursuant to a sublease permitted
hereunder without the prior consent of the Lessor
and the Indenture Trustee; provided, that in any
event the Lessee shall have provided to each of
the Lessor Parties (a) written notice of the
intention to relocate such Item of Equipment in
accordance with the terms hereof at least
thirty (30) days prior to the date such relocation
is commenced, (b) such UCC financing statements
and other documents as may be necessary or
advisable to maintain and perfect the interest of
the Lessor therein and the Lien of the Indenture
thereon, (c) evidence that such Item is covered by
the insurance required by Section 20.1 hereof at
such new location, (d) an acknowledgment from the
owner of the facility to which such Item is
relocated to the effect that such owner shall
acquire no interest in such Item by virtue of such
Item being installed in such facility, (e) an
opinion of counsel that such relocation does not
impair or adversely affect the ownership of such
Item by the Lessor and that the financing
statements and other documents described in
clause (b) above have been duly filed or recorded
in all public offices wherein such filings or
recordings are necessary to protect the validity
and effectiveness of this Lease and the Indenture,
including the maintenance of the perfection of the
Lien of the Indenture Trustee thereon, and (f)
evidence satisfactory to the Lessor Parties that
such relocation shall have no adverse tax
consequences to them. All reasonable costs and
expenses (including Fees and Expenses) incurred by
the Lessor Parties in connection with any
relocation shall be paid by the Lessee.
A. SECTION Modification.
1. The Lessee shall at its
expense make any Modification to any Item of
Equipment required (i) by Applicable Law or in
order to operate, maintain, service, store, or use
(or, if applicable, to dispose of or transport)
such Item in accordance with Applicable Law, as
soon as practicable after any such requirement may
arise or (ii) in order for the Lessee to comply
with the provisions of this Lease, any insurance
required by this Lease or any other Operative
Document or the requirements of the manufacturer
of such Item (all such Modifications being
referred to herein as "Required Modifications");
provided, that the Lessee may, so long as no
Material Default or Event of Default shall have
occurred and be continuing, in good faith by
appropriate proceedings contest the validity or
application of any Applicable Law in any
reasonable manner which does not involve any risk
of the imposition of criminal liability on any
Lessor Party, or any risk of the sale, forfeiture
or loss of such Item or any part or interest
therein or title thereto, or any material risk of
any fine, penalty or other imposition upon any of
the Lessor Parties not involving criminal
liability for which the Lessee has not
acknowledged its obligation to indemnify the
Lessor Parties pursuant to the Operative
Documents, but only so long as the Lessee
simultaneously contests the validity or
application of such Applicable Law with respect to
all other similarly affected Items of Equipment
operated by the Lessee and located at the same
location. The Lessee shall promptly give the
Lessor notice of any contest relating to any Item
or group of Items of Equipment having a Lessor's
Cost equal to or greater than $1,000,000. All
Required Modifications shall be completed in a
good and workmanlike manner and in all events
prior to the termination of the Lease with respect
to any such Item or group of Items of Equipment.
So long as no Material Default or Event of Default
has occurred and is continuing, the Lessee at its
expense, from time to time, may make any
Modification to any Item that the Lessee in its
reasonable discretion may deem desirable in the
proper conduct of the Lessee's business (all such
Modifications which are not Required Modifications
being referred to herein as "Optional
Modifications"); provided, that the Lessee shall
not have the right to make any such Optional
Modification (i) that would diminish the then fair
market value, residual value, condition, remaining
useful life or utility of such Item immediately
prior to such Optional Modification, assuming the
applicable Item was then in the condition and
state of repair required to be maintained by the
terms of this Lease or (ii) would result in the
Item of Equipment, becoming "limited use property"
within the meaning of Rev. Procs. 75-21 and 79-48,
as amended. All Optional Modifications shall be
completed in a good and workmanlike manner, with
reasonable dispatch.
If requested by the Lessee, the Lessor
will be given the opportunity to consider
financing the cost of any Modification, but will
not be obligated in any manner to finance the cost
of any Modification. If the Lessor does provide
any such financing, the Lessee and the Lessor
shall execute a Lease Supplement covering such
Modification and adjusting the Basic Rent,
Casualty Value, Termination Value, and EBO Price
to reflect such financing in accordance with the
terms of Section 9.4 of the Participation
Agreement.
1. Title to each Modification
shall vest as follows:
a) in the case of (A) each
Required Modification or other Nonseverable
Modification, whether or not the Lessor shall have
financed or provided financing (in whole or in
part) for such Modification, and (B) each
Modification which shall have been financed by the
Lessor, the Lessor shall, without further act,
effective on the date such Modification shall have
been incorporated into the modified Item of
Equipment, acquire title to such Modification free
and clear of all Liens other than Permitted Liens;
or
a) in the case of each
Severable Modification not financed by the Lessor
and not a Required Modification, the Lessee shall
retain title to such Modification and the Lessee
may (subject to the provisions of Section 6.4(c))
remove such Modification at its expense at any
time so long as the modified Item of Equipment
remains in or is restored by the Lessee to the
condition required by this Lease.
Immediately upon title to a Modification
vesting in the Lessor pursuant to this Section
6.4(b), such Modification shall, without further
act, become subject to this Lease and to the Lien
of the Indenture and be deemed part of the
applicable Item for all purposes. In the case of
clause (ii) of this Section 6.4(b), if the Lessee
has not elected to exercise its Purchase Option,
the Lessor shall have the right, upon sixty (60)
days' written notice to the Lessee, to purchase
any such Severable Modification (other than a
Severable Modification which may not be so sold
without breach of an existing contract or license
to which the Lessee or such Modification,
respectively, is a party or subject) at its Fair
Market Sales Value, determined if necessary by the
Appraisal Procedure, upon termination of this
Lease with respect to such Item.
1. Subject to compliance with
Applicable Law, the Lessee may remove, at its
expense, any Severable Modification not purchased
by the Lessor; provided, that the Lessee, at its
expense shall repair any damage to such Item
caused by such removal so as not to diminish the
fair market value, residual value, condition,
remaining useful life or utility of such Item
immediately prior to the Modification (assuming
such Item was then in the condition and state of
repair required by this Lease); provided, further,
that in the event the Lessee shall not have
removed any Severable Modification to which the
Lessee shall have title as provided in
Section 6.4(b)(ii) prior to the end of the Lease
Term applicable to the modified Item of Equipment,
title to such Severable Modification shall vest in
the Lessor upon the expiration of such Lease Term.
I. ARTICLE
Obsolescence Termination
A. SECTION Item Obsolescence. Unless a
Material Default or an Event of Default shall have
occurred and be continuing, the Lessee shall have
the right to terminate the Lease with respect to
any Item or Items of Equipment having a minimum
aggregate Lessor's Cost of $1,000,000 at any time
during the Base Term after the third anniversary
of the Equipment Closing Date, on a Rent Payment
Date for such Item (an "Obsolescence Termination
Date") upon giving at least ninety (90) days'
prior written notice (subject to revocation as
described below) to the Lessor and the Indenture
Trustee (which notice shall specify the Item to be
terminated and the Obsolescence Termination Date
and shall be accompanied by the written consent of
the Guarantor to such termination) (the
"Termination Notice"), which Termination Notice
shall contain a certification signed by a
Responsible Officer of the Lessee on behalf of the
Lessee that such Item has become (a) obsolete or
surplus to the Lessee's operating requirements as
determined by the Lessee in its reasonable
business judgment, other than as a result of an
Event of Loss, or (b) uneconomic to operate due to
burdensome governmental regulations, and the
Lessee has provided an Officer's Certificate to
the Lessor and the Indenture Trustee to such
effect in each case. The Lessee may, with the
written consent of the Guarantor, rescind its
Termination Notice as to any Item of Equipment no
later than forty-five (45) days prior to the
scheduled Obsolescence Termination Date so long as
no binding contract for the sale of such Item
exists; provided, that the Lessor has not
exercised its election to retain such Item of
Equipment pursuant to Section 7.2 hereof. The
total number of such rescissions during the Lease
Term shall not exceed two (2).
A. SECTION Retention by Lessor. At any
time within thirty (30) days after receipt by the
Lessor and the Indenture Trustee of a Termination
Notice, the Lessor may give the Lessee notice of
its irrevocable election to retain any such Item.
If the Lessor shall have elected to retain any
such Item in accordance with the preceding
sentence, on the Obsolescence Termination Date for
such Item (a) the Lessee shall deliver to the
Lessor such Item of Equipment in accordance with
the conditions for return set forth in Section 8.2
hereof, (b) the Lessee shall pay to the Lessor or,
so long as the Indenture has not been discharged
in accordance with its terms, the Indenture
Trustee, by EFT (i) if such Obsolescence
Termination Date is also a Rent Payment Date, any
Accrued Basic Rent due on or prior to such
Obsolescence Termination Date with respect to such
Item of Equipment, and (ii) any other unpaid
Supplemental Rent (including the Make Whole
Premium Amount payable on such date under the
Indenture on the aggregate amount of Notes related
to Items of Equipment subject to such termination,
but not including any Casualty Value or
Termination Value) due on or prior to such
Obsolescence Termination Date with respect to such
Item of Equipment plus all other sums due and
payable on such Obsolescence Termination Date to
the Lenders by the Lessor under the Indenture, the
Participation Agreement or the Notes, but not
including the principal amount of any such Notes,
and (c) the Lessor shall pay to the Indenture
Trustee by EFT an amount sufficient to pay a
principal amount of the Notes equal to the Loan
Value for such Item of Equipment. Subject to the
receipt by the Indenture Trustee of such funds,
upon return by the Lessee of such Item of
Equipment to the Lessor pursuant to clause (a)
above, such Item of Equipment shall cease to be
leased hereunder or subject to the provisions of
any other Operative Document. If the Lessor fails
to make the full amount of such payment to the
Indenture Trustee, (i) the Lessee may make such
payment on the Obsolescence Termination Date
(together with all other amounts payable by the
Lessee under this Section 7.2) plus an amount
equal to the equity portion of the Termination
Value as of such date for such terminated Items,
in which event all liability of the Lessee to pay
Rent for such Item of Equipment following such
Obsolescence Termination Date shall cease, the
Lease Term with respect to such Item of Equipment
shall cease and the Lessor will be obligated to
convey title to such Item of Equipment to the
Lessee (without representation or warranty except
as to the Lessor's ability and authority to
conduct such transfer and convey title to such
Item free and clear of Lessor Liens) and (ii) if
the Lessee elects not to make the payment
described in clause (i) on the Obsolescence
Termination Date, the Lessor shall thereafter no
longer be entitled to exercise its election to
retain such Item of Equipment. If the Lessee
elects not to make the payment contemplated in
clause (i) of the preceding sentence, this Lease
shall continue in full force and effect with
respect to such Item of Equipment, and the Lessor
shall retain its rights under this Section 7.2
with respect to any future Termination Notices.
Notwithstanding any election by the Lessor to
retain an Item of Equipment, the Lessee shall pay
all reasonable costs and expenses (including Fees
and Expenses) of all Lessor Parties relating to
the termination of the obligation of the Lessee to
lease such Item of Equipment or any revocation
thereof; provided, that the Lessee shall not be
liable for any costs and expenses incurred by the
Lessor after such termination or to modify such
Equipment for any purpose other than to ensure
that the condition of such Equipment complies with
that required hereunder or, except as set forth in
clause (i) above, as a result of the Lessor's
failure to make any payment to the Indenture
Trustee.
B. SECTION Bids for Terminated Items.
During the period from the giving of such
Termination Notice for any Item of Equipment until
ten (10) days prior to the Obsolescence
Termination Date and so long as the Lessor shall
not have exercised its option pursuant to
Section 7.2 to retain such Item, the Lessee, as
non-exclusive agent for the Lessor and at the
Lessee's expense, shall use its best efforts to
obtain the highest possible bids from Persons
other than the Lessee, the Guarantor, any of their
respective Affiliates or Tax Affiliates or any
Person acting on behalf of or in conjunction with
such parties in connection with such bid
(collectively, the "Non-Bidding Parties") to
purchase such Item of Equipment on the
Obsolescence Termination Date, and the Lessee
shall during such period, from time to time at the
request of the Lessor, inform the Lessor in
writing of the results of its efforts and shall
notify the Lessor in writing, at least ten (10)
days prior to the scheduled Obsolescence
Termination Date, of the amount of each such bid
(which may include bids to purchase such Item of
Equipment for scrap or salvage only) that has
theretofore been submitted and the name and
address of the party submitting such bid. Each
such bid (a "Qualifying Bid") (a) shall be a bona
fide bid for payment in full in cash, and
(b) shall not involve any consideration to be
received by any of the Non-Bidding Parties from
the purchaser or be connected, directly or
indirectly, with any transaction between the
purchaser and any of the Non-Bidding Parties. The
Lessor and the Owner Participant shall have the
right, directly or through agents or brokers, to
solicit bids, to inspect any bid received by the
Lessee or to submit a bid itself, but shall be
under no duty to make or solicit bids or to
inquire into the efforts of the Lessee to obtain
bids.
If, other than as a result of the Lessor's
election to retain such Item of Equipment as
provided in Section 7.2 hereof, neither the Lessor
nor the Lessee shall have received any Qualifying
Bid as to any Item of Equipment on or prior to the
tenth day before the scheduled Obsolescence
Termination Date, the Termination Notice as to
such Item of Equipment shall be deemed to be
rescinded and such Item of Equipment shall remain
subject to this Lease. If the Termination Notice
is deemed rescinded pursuant to the preceding
sentence, this Lease shall continue as to such
Item in full force and effect, without in any way
prejudicing the right of the Lessee to terminate
the Lease at a later date with respect thereto;
provided, that such continuation shall constitute
a rescission for purposes of Section 7.1 hereof.
In such event, the Lessee shall reimburse the
Lessor Parties for all reasonable fees and
expenses (including Fees and Expenses) incurred in
connection with any such rescission of a
Termination Notice.
If the Lessor or the Lessee shall have
received a Qualifying Bid on or prior to the tenth
day before the Obsolescence Termination Date, the
Lessor shall on the Obsolescence Termination Date,
provided the conditions of Section 7.4 hereof
shall have been met, transfer the Item of
Equipment to which such bid relates to the bidder
that shall have submitted the highest Qualifying
Bid for such Item of Equipment upon receipt in
immediately available funds of the amount
specified in such bid. For so long as the
Indenture has not been discharged in accordance
with its terms, such funds shall be paid directly
to the Indenture Trustee for application as
provided in Section 3.02(c) of the Indenture and,
thereafter, shall be paid to the Lessor. The
Lessee shall certify to the Lessor and the Owner
Participant that the conditions of the first
paragraph of this Section 7.3 with respect to the
Qualifying Bid have been met, including that the
bidder is not a Non-Bidding Party. Such transfer
and assignment shall be without any
representation, warranty or recourse whatsoever
except as to the Lessor's ability and authority to
conduct the transaction and convey title to such
Item of Equipment free and clear of Lessor Liens.
The Lessor shall execute and deliver such
documents evidencing such transfer and take such
further action as the purchaser shall reasonably
request. All out-of-pocket costs and expenses
(including Fees and Expenses, any sales
commissions, and any sales, transfer or similar
taxes) of the Lessor Parties incurred in
connection with any sale and transfer of any Item
of Equipment pursuant to this Article VII shall be
paid by the Lessee.
A. SECTION Conditions of Termination;
Effect of Termination. As conditions to the
transfer by the Lessor of any Item on the
applicable Obsolescence Termination Date to the
successful bidder pursuant to the last paragraph
of Section 7.3 hereof, (a) any necessary
Governmental Actions in connection therewith shall
have been obtained by and at the expense of the
Lessee, (b) the Lessee shall on such Obsolescence
Termination Date pay to the Lessor or, so long as
the Indenture has not been discharged in
accordance with its terms, the Indenture Trustee
the sum of (i) if such Obsolescence Termination
Date is also a Rent Payment Date, any Accrued
Basic Rent due with respect to such Item of
Equipment as of such Obsolescence Termination Date
and (ii) the excess, if any, of the Termination
Value for such Item of Equipment, computed as of
such Obsolescence Termination Date, over (x) the
net proceeds actually realized by the Lessor from
any sale thereof or, (y) so long as the Indenture
has not been discharged in accordance with its
terms, the funds actually received by the
Indenture Trustee, and (c) the Lessee shall on
such Obsolescence Termination Date pay to the
Lessor or, so long as the Indenture has not been
discharged in accordance with its terms, the
Indenture Trustee the sum of (i) any Make Whole
Premium Amount payable on such Obsolescence
Termination Date pursuant to the Indenture, (ii)
any other Rent (including any amounts for costs
and expenses payable by the Lessee as required in
the immediately preceding paragraph) with respect
to such Item of Equipment due and unpaid as of
such Obsolescence Termination Date and (iii) any
penalties, premium or other amounts payable under
the Indenture or the Notes in connection with the
principal amount of the Notes being prepaid on
such date (the amounts payable pursuant to
clauses (b) and (c) collectively, the
"Obsolescence Termination Payment"). Upon payment
by the Lessee of all Obsolescence Termination
Payments as to any terminated Item of Equipment,
the obligation of the Lessee to pay Basic Rent
with respect to such Item of Equipment shall
terminate, such Item of Equipment shall no longer
be subject to this Lease and the Lease Term with
respect to such Item of Equipment shall end. If,
other than as a result of the Lessor's election to
retain such Item of Equipment as provided for in
Section 7.2 and the compliance by the Lessor and
the Lessee with their respective obligations in
connection therewith, on or as of the Obsolescence
Termination Date no sale of such Item of Equipment
shall have occurred or the Lessee shall not have
complied in full with this Section 7.4, this Lease
shall continue in full force and effect with
respect to such Item of Equipment in accordance
with the terms hereof without prejudice to the
Lessee's right to exercise its termination right
under Section 7.1 hereof thereafter and the Lessee
shall pay the expenses (including Fees and
Expenses) incurred by the Lessor Parties in
connection with the proposed sale.
I. ARTICLE
Return of Equipment
A. SECTION Notice of Return. Unless the
Lessee exercises its renewal option under
Article XVI or its purchase options under Article
X or XVII the Lessee shall provide the Lessor with
irrevocable written notice of its decision to
return, and shall return, all Items of Equipment
to the Lessor at the end of the Lease Term thereof
at least three hundred sixty (360) days prior to
the expiration of the Lease Term.
A. SECTION Return of Equipment.
1. Upon termination of this Lease
with respect to an Item of Equipment pursuant to
Article VII or in connection with the exercise by
the Lessor of its remedies under Article XIV
hereof, or at such other time as required under
this Lease, the Lessee shall, at the Lessee's
risk, cost and expense, dismantle each affected
Item of Equipment in accordance with appropriate
methods and procedures for de-installation,
identify such Item with appropriate tags and
markings, crate (in a manner appropriate for the
safe and proper shipment of such Equipment) and
catalogue all such Items, and deliver such Items
to the Lessor at an agreed upon Return Location in
the manner appropriate for handling Items of
Equipment of that type.
1. At the time of return, each
Item of Equipment shall be, at the cost and
expense of the Lessee (i) free and clear of all
Liens other than Owner Participant Liens and
Lessor Liens, (ii) cleaned to the reasonable
satisfaction of the Lessor, (iii) in the condition
originally delivered to the Lessor (subject to
normal wear and tear permitted by the terms
hereof), (iv) in compliance with the maintenance
and operations provisions of this Lease,
(v) detoxified or decontaminated, if applicable,
to allow for subsequent use in full compliance
with Applicable Law, (vi) properly identified with
labels, tags, plates or by any other method
providing clear identification, and (vii) properly
assembled except to the extent disassembly is
necessary or appropriate for the purposes of
crating and delivering the Equipment in accordance
with appropriate methods and procedures for
de-installation. Simultaneously with the return
of any Item or part thereof, the Lessee shall
deliver to the Lessor the plans and specifications
with respect to such Item, all operating,
maintenance, repair and inspection software,
records, manuals, logs, plans, specifications,
drawings, schedules and similar papers (and any
documents and Governmental Actions relating to
environmental matters) relating to such Item
necessary or useful for the continued operation
and maintenance of such Item, and title documents
and copies of operating permits with respect to
such Item; provided, that the Lessee shall not be
required to provide any of the foregoing
documents, Governmental Actions and records unless
(i) the Lessee either actually has possession of
or reasonable access to the foregoing documents,
Governmental Actions and records, (ii) the
foregoing documents, Governmental Actions and
records are necessary for the normal use,
operation or maintenance of such Item in full
compliance with Applicable Law, or (iii) the
foregoing documents, Governmental Actions and
records should have been retained in accordance
with the Lessee's normal document retention
policies or as otherwise expressly required under
the terms of this Lease.
If for any reason the Lessee shall not have
returned the applicable Item of Equipment as
required by the provisions of this Article VIII on
the required day, the Lessee shall pay to the
Lessor on demand additional Basic Rent for such
Item of Equipment on a per diem basis for each day
after such day until full compliance with this
Article VIII, which Basic Rent shall be in an
amount per diem equal to the greater of (1) the
average daily rate of Basic Rent for such Item of
Equipment payable during the Base Term and (2) the
Fair Market Rental Value for such Item of
Equipment. The rights set forth in the preceding
sentence shall not limit the Lessor's rights to
exercise any remedy permitted to be exercised
under Article XIV hereof with respect to any
continuing Event of Default, including the Event
of Default resulting from the Lessee's failure to
deliver the Equipment as required by the
provisions of this Article VIII. Without limiting
the generality of any of the other terms of this
Lease or the Participation Agreement, the Lessee
shall be liable for any costs and expenses
(including Fees and Expenses) incurred by the
Lessor Parties as a result of the failure of the
Lessee duly to perform and comply with any of the
terms of this Article VIII.
A. SECTION Marketing of Returned Item.
The Lessee agrees that during the last twelve (12)
months of the Lease Term with respect to each Item
of Equipment, it will cooperate in all reasonable
respects with efforts of the Lessor to lease or
sell such Item of Equipment, including aiding
qualified potential lessees or purchasers by
providing reasonable access at the location where
the relevant Equipment is then located to the
applicable Item of Equipment as then being used
and to the records relating to maintenance and
performance thereof for inspection thereof during
normal business hours upon prior written notice to
the Lessee; provided, that such cooperation shall
be subject to the Clean Room Operating Procedures
and Section 22.1 hereof, and provided further,
that it is understood that Lessee's obligation
hereunder to provide such access shall be only at
such times and under such circumstances as are
reasonably appropriate in connection with Lessor's
marketing efforts.
A. SECTION Governmental Approvals. The
Lessee shall use its best efforts, at the expense
of the Lessor, in transferring or obtaining all
Governmental Actions which may be necessary for
the Lessor or its designee, as the case may be, to
operate, lease or purchase any returned Item of
Equipment.
A. SECTION Additional Parts. At any time
after the Lessee has notified the Lessor that it
has determined not to renew this Lease pursuant to
Article XVI or purchase the Equipment pursuant to
Article X or XVII, or the Equipment is otherwise
to be returned to the Lessor, the Lessee shall at
the Lessor's request, advise the Lessor of the
nature and condition of all Severable
Modifications owned by the Lessee pursuant to
Section 6.4(b)(ii) hereof which the Lessee has
removed or intends to remove from the Equipment in
accordance with Section 6.4(c) hereof. The Lessee
may elect to retain any Severable Modification not
purchased or purchasable by Lessor pursuant to the
last paragraph of Section 6.4(b). The Lessee may
(and shall, if so directed by Lessor), at its sole
cost and expense, remove from any Item any other
Severable Modification which is not owned by the
Lessor in accordance with the provisions of
Section 6.4(b)(ii) hereof and which is not
purchased by the Lessor pursuant to Section
6.4(b); provided, that any such Modification not
removed pursuant to this Section 8.5 shall be
deemed to be part of the Item to which it relates
for all purposes hereof and title to such
Modification shall thereupon vest in the Lessor
free and clear of all Liens, other than Lessor
Liens and Owner Participant Liens.
I. ARTICLE
Loss, Destruction, Condemnation, Damage, etc.
A. SECTION Replacement; Payment of
Casualty Value.
1. Upon the occurrence of an
Event of Loss, or an event which with the passage
of time would become an Event of Loss, with
respect to any Item of Equipment, the Lessee shall
promptly give the Lessor and the Indenture Trustee
notice thereof and notify the Lessor and the
Indenture Trustee within forty-five (45) days
thereafter which of the following options the
Lessee shall perform with respect thereto:
a) the Lessee shall
replace the Item of Equipment which suffered the
Event of Loss as soon as practicable, but in any
event within one (1) year from the date of such
Event of Loss, with a replacement Item of
Equipment which has a then fair market value,
residual value, condition, remaining useful life
and utility at least equal to the fair market
value, residual value, condition, remaining useful
life and utility of the Item of Equipment which
suffered the Event of Loss immediately prior to
such Event of Loss (assuming such Item of
Equipment was then in the condition and state of
repair required by this Lease); provided, that
(A) in the case of any replacement which cannot
practicably be effected within ninety (90) days
from the occurrence of such Event of Loss, the
Lessee shall provide to the Lessor and the
Indenture Trustee an Officer's Certificate setting
forth in reasonable detail the date on which such
replacement Item is expected to become available
and the reasons that such replacement cannot be
effected within such ninety (90) day period, and
(B) the Lessee agrees to indemnify the Owner
Participant, in a manner satisfactory to such
Owner Participant in its sole discretion exercised
in good faith (including, without limitation, with
respect to collateral arrangements, if any), for
any adverse tax consequences from such replacement
and provide to the Owner Participant an Officer's
Certificate to such effect; or
a) the Lessee shall pay
to the Lessor or, so long as the Indenture has not
been discharged in accordance with its terms, the
Indenture Trustee on a date as of which monthly
Casualty Values are determined (a "Loss Payment
Date") and specified by the Lessee, which shall be
a Loss Payment Date within the earlier of (A) the
later of (1) forty five (45) days after the
occurrence of the Event of Loss and (2) three (3)
Business Days after receipt of insurance proceeds,
and (B) ninety (90) days after the occurrence of
the Event of Loss, the amounts required to be paid
by Section 9.1(d) hereof;
provided, that if a Material Default or an Event
of Default shall have occurred and be continuing,
the Lessee may elect only the option set forth in
clause (ii) above, and failure of the Lessee to
make an election within the time period specified
above shall be deemed an election of the option
set forth in clause (ii) above.
1. The Lessee's right to replace
any Item as provided in Section 9.1(a) above shall
be subject to the fulfillment, at the Lessee's
cost and expense, of the following conditions
precedent:
a) each of the Lessor
Parties shall have received an Officer's
Certificate of the Lessee to the effect that as of
the date of such replacement no Material Default
or Event of Default shall have occurred and be
continuing;
a) on the date of such
replacement, the following documents shall have
been duly authorized, executed and delivered by
the respective party or parties thereto and shall
be in full force and effect, and an executed
counterpart of each thereof shall have been
delivered to each of the Lessor Parties:
(A) a Lease Supplement with a
Schedule of Equipment covering the replacement
Item;
(B) so long as the Indenture
shall not have been discharged and satisfied, an
Indenture Supplement covering the replacement
Item;
(C) a full warranty (as to
title) bill of sale, in substantially the same
form as the Bill of Sale delivered with respect to
the Item being replaced, covering the replacement
Item, executed by the Seller thereof or the
Lessee, if it then owns such replacement Item, in
favor of the Lessor;
(D) evidence of the filing in
such places as are deemed reasonably necessary by
the Lessor and the Indenture Trustee of (1) so
long as the Indenture shall not have been
discharged, such UCC financing statements and
fixture filings covering the security interests
created by the Indenture, and (2) such
"precautionary" UCC financing statements and
fixture filings covering the leasehold interests
created by this Lease, as are deemed necessary and
desirable by the Lessor and the Indenture Trustee
to protect the ownership interest of the Lessor
and the Lien and security interest of the
Indenture Trustee in the replacement Item;
(E) an opinion, satisfactory
in form and substance to each of the Lessor
Parties, of the Lessee's independent outside
counsel (or other counsel satisfactory to the
Lessor Parties) (1) as to the effectiveness,
validity and enforceability of the documents
referred to in clauses (A) through (D) above and
the filing and recordation of the documents
described in clause (D) above;
a) on such replacement date,
the Lessor shall receive good title to the
replacement Item, free and clear of Liens (other
than Permitted Liens described in clauses (a)-(c)
in the definition thereof);
a) each of the Lessor
Parties shall have received upon reasonable
request certain information with respect to the
replacement Item, with such information to include
descriptions of the fair market value, residual
value, condition, remaining useful life and
utility of such Item (including an appraisal if
requested by any Lessor Party); and
a) either (A) the Owner
Participant shall have received an opinion of
independent tax counsel (selected by the Owner
Participant and reasonably acceptable to the
Lessee) reasonably satisfactory to the Owner
Participant to the effect that there shall be no
adverse tax consequences resulting from such
replacement, or (B) the Lessee shall have agreed
to indemnify the Owner Participant, in a manner in
form and substance satisfactory to the Owner
Participant in its sole discretion exercised in
good faith, which determination shall include the
adequacy of the collateral therefor, if any, for
any such adverse tax consequence, provided, that
the Owner Participant shall be obligated to accept
such an indemnity only if the Owner Participant
shall have determined that it is more likely than
not that no such adverse tax consequences will
occur.
1. Upon satisfaction of the
conditions set forth in Section 9.1(b), (i) this
Lease shall continue with respect to any
replacement Item as though no Event of Loss had
occurred, (ii) the Lessor shall convey "as is"
"where is", without recourse or warranty (except
as to the ability and authority of the Lessor to
transfer and convey such Item free and clear of
Lessor Liens and Owner Participant Liens), to the
Lessee all right, title and interest of the Lessor
in and to the Item being replaced by executing and
delivering to the Lessee such bills of sale and
other documents and instruments as the Lessee may
reasonably request to evidence such conveyance,
and (iii) the Lessor shall assign to the Lessee
all claims it may have against any other Person
arising from the event which gave rise to the
replacement.
1. If an Event of Loss occurs
with respect to any Item of Equipment and the
Lessee has elected not to replace or does not
replace (or is not entitled pursuant to this
Section 9.1 to replace) such Item as provided
in Section 9.1(a)(i), the Lessee shall pay or
cause to be paid to the Lessor or, so long as the
Indenture has not been discharged in accordance
with its terms, the Indenture Trustee in
immediately available funds on the Loss Payment
Date specified by the Lessee pursuant to Section
9.1(a)(ii), an amount equal to (A) if such Loss
Payment Date is also a Rent Payment Date, any
Accrued Basic Rent payable on such Loss Payment
Date with respect to the Item suffering the Event
of Loss, together with all unpaid Basic Rent, if
any, payable on or before such Loss Payment Date,
plus (B) all unpaid Supplemental Rent (except for
Casualty Value) due on or before such Loss Payment
Date, plus (C) the Casualty Value for the Item
suffering the Event of Loss as of such Loss
Payment Date, plus (D) in the case of an Event of
Loss described in clause (h) of the definition
thereof, any Make Whole Premium Amount payable on
such date pursuant to the Indenture. Upon
compliance by the Lessee with this paragraph (d)
and receipt of a discharge of the Lien of the
Indenture with respect to the Item suffering such
Event of Loss, the Lessor shall transfer such Item
to the Lessee on an "as is" "where is" basis, free
and clear of all Lessor Liens and Owner
Participant Liens, without any other recourse to,
or representation or warranty (except as to the
ability and authority of the Lessor to convey and
transfer such Item free and clear of Lessor Liens
and Owner Participant Liens), expressed or
implied, by the Lessor or the Owner Participant by
executing and delivering to the Lessee such bills
of sale and other documents or instruments that
the Lessee may reasonably request to evidence such
conveyance. Upon the compliance with the
provisions of this paragraph (d) with respect to
such Item, the Lessee's obligation to pay Basic
Rent with respect to such Item shall cease, but
the Lessee's obligation to pay any applicable
Supplemental Rent, before, on or after such date
shall remain unchanged.
A. SECTION Application of Payments Upon
an Event of Loss. Subject to the provisions of
Section 9.4 hereof, any payments received at any
time by the Lessor or by the Lessee with respect
to an Item of Equipment (including insurance
proceeds or warranty payments but excluding
Excluded Payments) from any Governmental Authority
or other Person as a result of the occurrence of
an Event of Loss with respect to such Item of
Equipment shall be applied as follows:
1. any such payment received at
any time by the Lessee shall be promptly paid to
the Lessor or, so long as the Indenture has not
been discharged in accordance with its terms, the
Indenture Trustee for application pursuant to the
following provisions of this Section 9.2, except
that the Lessee may retain any amounts which the
Lessor shall at such time be obligated to pay to
the Lessee under such provisions;
1. (i) if the Lessee has elected
to replace such Item of Equipment pursuant
to Section 9.1(a)(i), such payments shall be held
by the Lessor or, so long as the Indenture has not
been discharged in accordance with its terms, the
Indenture Trustee and applied to pay, or reimburse
the Lessee for the payment of, the cost of
replacing such Item of Equipment, upon
satisfaction of the conditions set forth in
Section 9.1(b), or (ii) if the Lessee has elected
or is deemed to have elected the option set forth
in Section 9.1(a)(ii), so much of such payments as
shall not exceed all amounts required to be paid
by the Lessee pursuant to Section 9.1(d) hereof
shall be held by the Lessor or, so long as the
Indenture shall not have been discharged in
accordance with its terms, the Indenture Trustee
and shall be applied in reduction of the Lessee's
obligation to pay such amounts if not already paid
by the Lessee, or, if already paid by the Lessee,
shall be applied to reimburse the Lessee for its
payment of such amounts; and
1. the balance, if any, of such
payments remaining thereafter, shall be allocated
among the Lessor, the Lessee and other Persons
having a claim thereto as their respective
interests may appear.
A. SECTION Seizure, Requisition,
Application of Payments Not Relating to an Event
of Loss. In the event of a loss, condemnation,
confiscation, theft or seizure of, or requisition
of title to or use of, or damage to, any Item of
Equipment or any part thereof not resulting in an
Event of Loss, the Lessee shall promptly notify
the Lessor and the Indenture Trustee thereof and
all obligations of the Lessee under this Lease
with respect to such Item of Equipment shall
continue to the same extent as if such event had
not occurred. Subject to the provisions of
Section 9.4 hereof and the obligations of the
Lessee under Article VI hereof, insurance
proceeds, governmental awards, warranty payments
or other payments received at any time by the
Lessor or the Lessee from any insurer under
insurance carried by the Lessee, any Governmental
Authority or other Person with respect to any
loss, condemnation, confiscation, theft or seizure
of, or requisition of title to or use of, or
damage to any Item of Equipment or any part
thereof not constituting an Event of Loss shall be
paid to the Lessor or, so long as the Indenture
has not been discharged in accordance with its
terms, the Indenture Trustee, and applied to pay,
or reimburse the Lessee for (a) the payment of the
cost of repairing or replacing such Item of
Equipment, upon receipt of evidence reasonably
satisfactory to the Lessor and the Indenture
Trustee that such Item has been restored to the
condition required by the terms of this Lease, and
(b) any Rent accruing during the period for which
such Item was lost, condemned, confiscated,
stolen, seized or requisitioned, with the balance
to be retained by the Lessor.
A. SECTION Applications During Default or
Event of Default. Any amount that shall be
payable to the Lessee pursuant to this Lease
arising out of any insurance, warranty,
governmental award or otherwise received in
respect of the Equipment shall not be paid to the
Lessee or, if it shall have been previously paid
to the Lessee, shall not be retained by the Lessee
but shall be paid to the Lessor or, so long as the
Indenture has not been discharged in accordance
with its terms, the Indenture Trustee, if at the
time of such payment any Default or Event of
Default shall have occurred and be continuing. In
such event, all such amounts shall be paid to and
held by the Lessor or the Indenture Trustee, as
the case may be, in trust as security for the
obligations of the Lessee to make payments under
any other Operative Document or to pay Rent
hereunder or applied by the Lessor or the
Indenture Trustee, as the case may be, toward
payment of any of such obligations of the Lessee
at the time due hereunder or under such other
Operative Document. At such time as there shall
not be continuing any Default or Event of Default,
all such amounts at the time held by the Lessor or
the Indenture Trustee, as the case may be, in
excess of the amount, if any, that the Lessor or
the Indenture Trustee, as the case may be, shall
have elected to apply as above provided shall be
paid to the Lessee.
A. SECTION Application of Article VI.
Article VI shall not apply to any Item of
Equipment after an Event of Loss has occurred with
respect to such Item of Equipment; provided, that
the foregoing shall not limit the obligation of
the Lessee under Article VI hereof with respect to
any replacement Item of Equipment.
I. ARTICLE
Early Buy-Out Option
A. SECTION Early Buy-Out.
1. So long as no Material Default
or Event of Default shall have occurred and be
continuing, and so long as Zenith simultaneously
gives notice of its intent to exercise its early
buy-out option under the U.S. Lease, the Lessee
shall have the right, with the written consent of
the Guarantor, upon not more than three hundred
sixty (360) days' nor less than one hundred eighty
(180) days' irrevocable notice to the Lessor prior
to the EBO Date(the "EBO Notice Date"), to
purchase on the EBO Date either (i) all, but not
less than all, Items of Equipment at the EBO Price
applicable to each such Item or (ii) the Owner,
Participant's interest in the Trust Estate, at a
price equal to the EBO Price applicable to each
such Item less the amount of such EBO Price
comprising the amount allocated for the prepayment
of the Notes. If the Lessee has elected to
purchase the Equipment, the Lessee may elect to
pay the EBO Price for the Equipment either by (i)
paying such amount to the Lessor by EFT or (ii)
(A) paying to the Lessor by EFT an amount equal to
the aggregate EBO Price for all Equipment less the
amount of each EBO Price comprising the amount
allocated for the prepayment of the Notes and (B)
assuming the Lessor's liability under the Notes in
accordance with and subject to Section 2.17 of the
Indenture. If the Lessee has elected to acquire
the Owner Participant's interest in the Trust
Estate, the Lessee shall do so by paying to the
Owner Participant by EFT the amount specified in
clause (ii) (A) above. In addition, the Lessee
shall be obligated (i) to pay on the EBO Date with
respect to each such Item (A) Accrued Basic Rent
as of the applicable EBO Date, and (B) all other
Rent due and payable on or prior to such EBO Date
including, without limitation, if the Notes are to
be prepaid, the Make Whole Premium Amount, if any,
with respect to the Notes being prepaid on such
EBO Date, and (ii) pay all amounts due with
respect to the exercise of the early buy-out
option under the U.S. Lease.
1. If the Lessee shall have
elected the EBO Option as set forth in
Section 10.1(a), payment by the Lessee of the
amounts payable pursuant to Section 10.1(a) hereof
shall be made by EFT on the EBO Date against
delivery (after payment by the Lessee of such
amounts) of (i) in the case of a purchase of the
Equipment rather than the Owner Participant's
interest in the Trust Estate, (A) a bill of sale
transferring and assigning to the Lessee all
right, title and interest of the Lessor in and to
the Items of Equipment being purchased on such EBO
Date free and clear of Lessor Liens, Owner
Participant Liens and (unless the Lessee has
elected to assume the Lessor's liability under the
Notes) the Lien of the Indenture, without other
recourse, representation or warranty (except as to
the Lessor's ability to conduct such transfer and
convey such Items free and clear of such Liens)
and, on an "as is" "where is" basis and (B) unless
the Lessee has elected to assume the Lessor's
liability under the Notes, an instrument executed
by the Lessor and the Indenture Trustee (in
recordable form) terminating its respective
interests in the Items of Equipment; and (ii) in
the case of a purchase of the Owner Participant's
interest in the Trust Estate, an agreement
executed by the Owner Participant transferring
such interest to the Lessee, either in
substantially the form set forth as Appendix F to
the Participation Agreement or in such other form
agreed upon by the Owner Participant and the
Lessee.
1. After the Lessee has timely
given the notice described in Section 10.1(a) but
before the EBO Date, the Lessee shall be entitled
to all of its rights set forth in Article IX upon
the occurrence of an Event of Loss with respect to
any Item.
I. ARTICLE
Assignment and Sublease
A. SECTION Lessee Assignments and
Subleases. Lessee shall not assign or transfer
any Item of Equipment or its interest therein
(other than pursuant to bailment arrangements with
Postes de Television de Reynosa S.A. de C.V and
Zenco de Chihuahua S.A. de C.V., both of which are
Affiliates of Lessee) without the prior written
consent of the Lessor and the Indenture Trustee.
Notwithstanding the foregoing, provided that no
Material Default or Event of Default exists at the
commencement of such sublease, the Lessee may
sublease some or all of the Items of Equipment
pursuant to a sublease which (a) shall be for a
term not extending beyond the Lease Term, and (b)
shall be made expressly subordinate to the rights
of the Owner-Trustee and the Indenture Trustee;
provided, (i) that the terms of the sublease or
the location of the Equipment pursuant to such
sublease would not result in an Event of Default
hereunder, and (ii) the sublease would not result
in adverse tax consequences to the Lessor and
(iii) the Lessee shall assign to the Lessor the
Lessee's rights under any sublease to secure its
obligations hereunder in a manner reasonably
satisfactory to the Lessor. The rights of any
sublessee who receives possession by reason of a
sublease permitted by this Section 11.1 shall be
subject and subordinate to, and any sublease
permitted by this Section 11.1 shall be made
expressly subject and subordinate to the terms of
this Lease, including, but not limited to, the
Lessor's rights to repossession pursuant to
Section 14 of this Lease and to avoid such
sublease upon such repossession. No such sublease
shall in any way discharge or diminish any of the
Lessee's obligations hereunder, and the Lessee
shall remain primarily liable hereunder for the
performance of all the terms of this Lease to the
same extent as if such sublease had not occurred.
A. SECTION Lessor Assignments. Except
for transfers pursuant to the terms of the
Operative Documents, the Lessor shall not transfer
or assign any part of its right, title and
interest in this Lease or any Item of Equipment
leased hereunder without the prior written consent
of the Indenture Trustee and, so long as no
Material Default or Event of Default has occurred
and is continuing, the Lessee and the Guarantor;
provided, that the Lessor may transfer or assign
any part of its right, title and interest in this
Lease or any Item of Equipment leased hereunder to
(a) the Indenture Trustee pursuant to the
Indenture and (b) a successor owner trustee
permitted by the Operative Documents, in each case
without consent; provided, further, that any such
permitted transfer or assignment shall be subject
to all of the terms and conditions of this Lease
and the other Operative Documents.
I. ARTICLE
Inspection
A. SECTION Inspection. So long as no
Default or Event of Default has occurred and is
continuing, each of the Lessor Parties may at its
own expense, upon reasonable prior notice to the
Lessee during the normal business hours of the
Lessee, no more frequently than once in any
calendar year, inspect (subject to the Clean Room
Operating Procedures and Section 22.1 hereof) the
Items of Equipment and the books and records of
the Lessee relating to the maintenance and
performance of such Items of Equipment and make
copies and extracts therefrom, and may discuss
such matters with the Lessee's officers; provided,
that the rights of the Lenders and Indenture
Trustee under this Section may only be exercised
by them in a group visit; provided, further, that
the rights of the Owner Participant (and if there
shall be more than one Owner Participant, the
rights of such Owner Participants) and the Owner
Trustee under this Section may only be exercised
by them in a group visit. Upon the occurrence and
during the continuance of a Default or Event of
Default, each of the Lessor Parties may inspect
the Items of Equipment and such books and records
at any time, which inspections shall be at the
expense of the Lessee; provided, that (a) Lessee
is notified at least twenty-four (24) hours prior
to any such inspection, (b) each of the Lessor
Parties agrees to comply with the Clean Room
Operating Procedures, and (c) each of the Lessor
Parties agrees to maintain the confidentiality of
all nonpublic information disclosed to such Person
in the course of any such visit or inspection in
accordance with Section 22.1 hereof. The Lessor
and the Indenture Trustee also shall have the
right to obtain information regarding the
condition and state of repair of any Item of
Equipment, compliance by the Lessee with
Article VI hereof and the absence of a Default or
an Event of Default (including all information
necessary duly to determine the Fair Market Sales
Value and the Fair Market Rental Value of each
Item of Equipment as and when required to be
determined under this Lease). None of the Lessor
Parties shall have any duty to make any inspection
or inquiry or shall incur any liability or
obligation by reason of not making any such
inspection or inquiry nor shall any such
inspection or inquiry reduce the Lessee's
liabilities under the Operative Documents.
I. ARTICLE
Events of Default
A. SECTION Events of Default. Each of
the following events shall constitute an Event of
Default:
1. the Lessee shall fail to make
any payment of (i) Casualty Value, Termination
Value, EBO Price, Purchase Option Price, Accrued
Basic Rent or, to the extent not included in such
foregoing amounts, any Make-Whole Premium Amount
payable concurrently therewith pursuant to the
terms hereof when due, (ii) Basic Rent when due
and such failure shall continue unremedied for a
period of five (5) Business Days after the date
due and (iii) Supplemental Rent (other than in
respect of Casualty Value, Termination Value, EBO
Price, Purchase Option Price or Make Whole Premium
Amount or payments under the Tax Indemnity
Agreement) for a period of ten (10) Business Days
after the Lessee has received notice demanding
payment of such Supplemental Rent which is due; or
1. the Lessee shall fail to
perform or observe any covenant, condition or
agreement set forth in Article VIII (Return of
Equipment), Section 9.1(a) (replacement following
Event of Loss), Section 11.1 (Lessee Assignments),
Article XX (Insurance) or Section 18.2 (Notice of
Default) hereof, or Section 5.3(g) of the
Participation Agreement (Mergers) the Guarantor
shall fail to perform or observe any covenant,
condition or agreement set forth in Section 8(b)
and 8(c) of the Guaranty (and in the case of a
failure of the Guarantor to perform or observe its
obligations under Section 8(b) of the Guaranty, to
the extent such failure is solely the result of a
dilution of the Guarantor's ownership or voting
control of the Lessee by virtue of the exercise of
options, warrants or conversion rights to acquire
common stock of the Lessee, such failure shall
continue unremedied for a period of five (5)
Business Days or, if approval of the Bank of Korea
is required for the Guarantor to purchase
additional common stock of the Lessee, thirty (30)
days) or Zenith shall fail to perform or observe
any covenant, condition or agreement set forth in
Section 8(b) of the Parent Guaranty; or
1. the Lessee, Zenith or the
Guarantor shall fail to perform or observe any
other covenant, condition or agreement to be
performed or observed by it under any of the
Operative Documents to which it is a party (other
than any such covenant, condition or agreement in
the Tax Indemnity Agreement) to which it is a
party and such failure shall continue unremedied
for a period of thirty (30) days after notice
thereof shall have been given to the Lessee,
Zenith or the Guarantor, as applicable, by either
the Lessor, or, so long as the Indenture shall be
in effect, the Indenture Trustee; provided, that
the continuation of any such failure (other than a
failure curable by payment of money or a failure
of the Guarantor to perform or observe any
covenant, condition or agreement set forth in
Section 8(a) of the Guaranty) for a period longer
than such thirty (30) day period shall not
constitute an Event of Default if (i) such default
is curable but cannot be cured within such thirty
(30) day period and (ii) the Lessee, Zenith or the
Guarantor is diligently pursuing the cure of such
default; provided, further, that any such failure
(other than a failure curable by payment of money)
shall constitute an Event of Default if such
failure is not cured within the earlier of the
last day of the Lease Term and ninety (90) days
from the date notice thereof has been given to the
Lessee, Zenith or the Guarantor, as applicable; or
1. any representation or warranty
made by the Lessee, Zenith or the Guarantor in any
of the Operative Documents to which it is a party
(other than any such representation and warranty
contained in the Tax Indemnity Agreement) or in
any statement, report, schedule, notice or other
writing furnished by the Lessee, Zenith or the
Guarantor in connection therewith shall prove to
have been false or incorrect in any material
respect at the time made or given and remains a
misrepresentation or breach of warranty which is
adverse to the Lessor Parties at the time
discovered; provided, that no such
misrepresentation or breach of warranty shall
constitute an Event of Default if (i) such
misrepresentation or breach of warranty was not
intentional and is curable and (ii) the Lessee,
Zenith or the Guarantor is diligently pursuing the
cure of such misrepresentation or breach of
warranty within ninety (90) days after such Person
has received notice thereof and upon such cure the
original misrepresentation shall not remain
material and adverse; or
1. the Lessee, Zenith or the
Guarantor (i) shall commence a voluntary
Insolvency Proceeding, (ii) shall seek the
appointment of a trustee, receiver, liquidator,
sequestrator, custodian or other similar official
of the Lessee, Zenith or the Guarantor or any
substantial part of its property, (iii) shall
acquiesce in or consent to any such relief or to
the appointment of or taking possession by any
such official in an involuntary Insolvency
Proceeding commenced against it, (iv) shall make a
general assignment for the benefit of creditors,
or (v) shall fail generally to pay its undisputed
debts as they become due; or
1. an involuntary Insolvency
Proceeding shall be commenced against the Lessee,
Zenith or the Guarantor seeking liquidation,
reorganization or other relief with respect to
such Person or its debts under any bankruptcy,
insolvency or other similar law now or hereafter
in effect or seeking the appointment of a trustee,
receiver, liquidator, assignee, sequestrator,
custodian or other similar official of it or any
substantial part of its property, and such
involuntary case or other proceeding shall remain
undismissed or unstayed for a period of sixty (60)
consecutive days; or
1. the Guaranty or the Parent
Guaranty shall for any reason become invalid, not
binding or unenforceable or repudiated in any
manner by the Guarantor or Zenith, as applicable;
or
1. an "Event of Default" under
and as defined in the U.S. Lease shall have
occurred and be continuing.
I. ARTICLE
Remedies
A. SECTION Remedies. Upon the occurrence
of any Event of Default and at any time thereafter
so long as the same shall be continuing, the
Lessor may, at its option, by notice to the
Lessee, declare this Lease to be in default;
provided, that upon the occurrence of an Event of
Default described in Section 13.1(e) or (f), this
Lease shall automatically be in default without
notice thereof to the Lessee, Zenith or the
Guarantor, and at any time thereafter the Lessor
may do one or more of the following with respect
to each Item of Equipment as the Lessor in its
sole discretion shall elect, to the full extent
permitted by Applicable Law:
1. The Lessor may, by notice to
the Lessee, terminate this Lease.
1. The Lessor may (i) make
written demand that the Lessee shall, at the
Lessee's expense, return all Items of Equipment to
the Lessor in the manner and condition required by
Article VIII as if such Items of Equipment were
being returned at the end of the Lease Term, and
the Lessor shall not be liable for the
reimbursement of the Lessee for any costs and
expenses incurred by the Lessee in connection
therewith or (ii) at the Lessee's expense, but
subject to the Clean Room Operating Procedures and
to the procedures set forth below, enter upon the
site where such Items of Equipment are located and
take immediate possession of any or all of such
Items of Equipment or any part thereof (to the
exclusion of the Lessee) and remove such Items of
Equipment from the site without liability accruing
to the Lessor for or by reason of such entry or
taking of possession or removal, and the Lessee
hereby grants to the Lessor such access to the
facilities of the Lessee where the Items of
Equipment are or may be located (including,
without limitation, any "clean room") as may be
necessary for the Lessor properly to package and
prepare the Items of Equipment for removal.
During the existence and continuation of any Event
of Default, the Lessee shall cause the Equipment
to be operated or not to be operated as may be
agreed with the Lessor, the Lessee shall cooperate
with the Lessor in effecting an orderly
disposition of the Equipment and the Lessor shall
not be entitled to remove Equipment other than in
connection with a reasonable orderly progression
of dismantlement set out and agreed to by the
Lessor and effectuated by the Lessee.
1. The Lessor (whether or not the
Lessor shall have exercised or shall thereafter at
any time exercise its rights under paragraphs (b)
and (d) of this Section 14.1), by notice to the
Lessee specifying a payment date not earlier than
ten (10) days nor more than thirty (30) days from
the date of such notice, may require the Lessee to
pay to the Lessor and the Lessee hereby agrees
that it will pay to the Lessor, on the payment
date specified in such notice, which date shall be
a date on which monthly Casualty Values are
determined (the "Determination Date"), as
liquidated damages for loss of a bargain, and not
as a penalty, and in lieu of any further payments
of Basic Rent and Renewal Rent hereunder in
respect of the Items of Equipment specified by
Lessor (which may be all or only part of such
Items), an amount (reduced by any amounts
previously paid by the Lessee pursuant to
paragraph (e) below in respect of such Items)
equal to the sum of (i) all unpaid Accrued Basic
Rent as of the Determination Date, plus (ii) an
amount equal to the Casualty Value for all such
Items calculated as of the Determination Date,
together with interest, if any, at the Overdue
Rate on the amount of such Accrued Basic Rent and
Casualty Value from the Determination Date as of
which Accrued Basic Rent and Casualty Value is
computed until the date of actual payment; and
upon such payment of liquidated damages and all
other Rent then due and payable hereunder, the
Lessor shall transfer all such Items of Equipment
(without any representation, recourse or warranty
whatsoever other than the ability and authority of
the Lessor to conduct such transfer and convey
title to such Items free and clear of Owner
Participant Liens and Lessor Liens) to the Lessee
and the Lessor shall execute and deliver such
documents evidencing such transfer and take such
further action as the Lessee shall reasonably
request.
1. The Lessor or any agent may
sell any Item of Equipment at public or private
sale, as the Lessor may determine, or may
otherwise dispose of, hold, use, operate, lease
(whether for a period greater or less than the
balance of what would have been the Base Term or
any Renewal Term applicable to such Item of
Equipment, as the case may be) to any third party
or keep idle such Item of Equipment, all on such
terms and conditions and at such place or places
as the Lessor may determine in its sole discretion
and free and clear of all rights of the Lessee and
without any duty to account to the Lessee with
respect to such action or inaction or any proceeds
with respect thereto except as hereinafter set
forth in this Section 14.1. If the Lessor shall
have effected a disposition for value of any such
Item of Equipment pursuant to this paragraph (d)
(and prior thereto shall not have exercised its
rights under paragraph (e) below with respect to
such Item unless the Lessor has not been paid
thereunder and has rescinded such exercise), the
Lessor may demand that the Lessee pay the Lessor
on a Determination Date, and the Lessee hereby
agrees to pay to the Lessor, as liquidated damages
for the loss of a bargain and not as a penalty, in
lieu of all Basic Rent and Renewal Rent with
respect to such Item of Equipment due after the
date on which such disposition shall occur, an
amount equal to the sum of (A) all unpaid Accrued
Basic Rent as of such Determination Date, plus (B)
the amount, if any, by which the Casualty Value of
such Item of Equipment, computed as of the
Determination Date, shall exceed the net proceeds
of such disposition, plus (C) interest at the
Overdue Rate on the amount of such Accrued Basic
Rent and deficiency from the Determination Date as
of which the Casualty Value shall have been
computed until the date of actual payment plus
(D) all other Rent then due and payable hereunder.
1. Whether or not the Lessor
shall have exercised, or shall thereafter at any
time exercise, any of its rights under paragraph
(d) above with respect to an Item of Equipment,
the Lessor may, at any time prior to the time that
such Item of Equipment shall have been transferred
to the Lessee pursuant to paragraph (c) above or
sold by the Lessor pursuant to paragraph (d)
above, demand that the Lessee pay to the Lessor,
and the Lessee hereby agrees to pay to the Lessor
on the first Business Day occurring at least ten
(10) days after, in the case of clause (A) or (B)
below, the determination of the Fair Market Sales
Value or Fair Market Rental Value, as the case may
be, or in the case of clause (C) below, the later
of the date of such demand and the date of
determination of the amount due thereunder, as
liquidated damages for loss of a bargain and not
as a penalty (in lieu of all payments of Basic
Rent becoming due after the payment date), an
amount with respect to each specified Item of
Equipment equal to the sum of (i) all unpaid
Accrued Basic Rent with respect to such Item due
as of the relevant date set forth above plus (ii)
whichever of the following amounts the Lessor, in
its sole discretion, shall specify in such notice
(together with interest on such amount at the
Overdue Rate from the scheduled payment date to
the date of actual payment): (A) an amount equal
to the excess, if any, of the Casualty Value for
such Item, computed as of the Rent Payment Date
applicable to such Item next preceding the date on
which such payment is due, over the Fair Market
Rental Value of such Item of Equipment for the
remainder of the Base Term or the Renewal Term
applicable to such Item, as the case may be, after
discounting such Fair Market Rental Value
semiannually (effective on the applicable Rent
Payment Dates) to present worth as of the
scheduled payment date at the Debt Rate, or if no
Notes shall be outstanding, the Reference Rate, or
(B) an amount equal to the excess, if any, of the
Casualty Value for such Item of Equipment as of
such Rent Payment Date over the Fair Market Sales
Value of such Item of Equipment, or (C) an amount
equal to the excess of (1) the present value as of
such Rent Payment Date specified in such notice of
all installments of Basic Rent with respect to
such Item until the end of the Base Term (or the
Renewal Term, as the case may be, if such demand
for payment is made during a Renewal Term)
applicable to such Item, discounting semi-annually
at the applicable rate specified in clause (A),
over (2) the present value as of such Rent Payment
Date of the Fair Market Rental Value of such Item
of Equipment until the end of the applicable Base
Term or the Renewal Term, as the case may be,
discounted semi-annually at such applicable rate,
plus (iii) all other Rent then due and payable
hereunder.
2. The Lessor may exercise any
other right or remedy which may be available to it
under Applicable Law or proceed by appropriate
court action to enforce the terms hereof or to
recover damages for the breach hereof or to
rescind this Lease.
The Lessor may exercise one or more
remedies in respect of some Items of Equipment and
one or more other remedies in respect of other
Items of Equipment, and that the total amounts
specified to be paid by Lessee under this Section
14.1 shall be aggregate amounts determined by
adding the specified amounts individually
determined in the case of each Item of Equipment.
No termination of this Lease, in whole or in
part, or exercise of any remedy under this
Article XIV shall, except as specifically provided
herein, relieve the Lessee of any of its
liabilities and obligations hereunder, all of
which then outstanding shall survive such
termination, repossession or exercise of remedy.
In addition, the Lessee shall be liable for any
and all unpaid Supplemental Rent (including Make
Whole Premium Amount) due hereunder before, after
or during the exercise of any of the foregoing
remedies, including all Fees and Expenses and
other costs and expenses incurred by any Lessor
Party by reason of the occurrence of any Event of
Default or the exercise of the remedies of the
Lessor with respect thereto. At any sale of any
Item of Equipment or any part thereof pursuant to
this Article XIV, any Lessor Party may bid for and
purchase such property.
A. SECTION Lessor Rights. To the fullest
extent permitted by Applicable Law, each and every
right, power and remedy herein specifically given
to the Lessor or otherwise in this Lease shall be
cumulative and shall be in addition to every other
right, power and remedy herein specifically given
or now or hereafter existing at law, in equity or
by statute, and each and every right, power and
remedy whether specifically given herein or
otherwise existing may be exercised from time to
time and as often and in such order as may be
deemed expedient by the Lessor, and the exercise
or the beginning of the exercise of any power or
remedy shall not be construed to be a waiver of
the right to exercise at the same time or
thereafter any other right, power or remedy. No
delay or omission by the Lessor in the exercise of
any right, power or remedy or in the pursuit of
any remedy shall impair any such right, power or
remedy or be construed to be a waiver of any
default on the part of the Lessee or to be an
acquiescence therein. No express or implied
waiver by the Lessor of any Event of Default shall
in any way be, or be construed to be, a waiver of
any future or subsequent Event of Default.
I. ARTICLE
Right to Perform for Lessee
A. SECTION Right To Perform. If the
Lessee, Zenith or the Guarantor shall fail to make
any payment of Rent required to be made by them
hereunder or shall fail to perform or comply with
any of their other agreements contained herein or
in any other Operative Document or in any other
agreement entered into in connection therewith,
the Lessor may (but shall have no duty to do so)
make such payment or perform or comply with such
agreement, and the amount of such payment and the
amount of all expenses of the Lessor (including
Fees and Expenses) incurred in connection with
such payment or the performance of or compliance
with such agreement, as the case may be, together
with interest thereon at the Overdue Rate, shall
be deemed Supplemental Rent, payable by the Lessee
upon demand. This Section 15.1 is not, however,
intended in any way, as between the Owner
Participant and the Lessor, on the one hand, and
the Indenture Trustee and the Lenders, on the
other hand, to expand or otherwise vary the cure
rights of the Owner Participant and the Lessor as
set forth in Section 4.03 of the Indenture, or the
limitations on the exercise thereof therein set
forth. Further, no such payment or performance by
the Lessor shall be deemed to waive any Event of
Default or relieve the Lessee of their respective
obligations hereunder.
A. SECTION Lessor as Lessee's Agent and
Attorney. Without in any way limiting the
obligations of the Lessee or the Lessor hereunder,
the Lessee hereby irrevocably appoints the Lessor
as its agent and attorney-in-fact hereunder, with
full power of substitution and authority solely to
the extent necessary to permit the Lessor, at any
time at which the Lessee is obligated to deliver
any Item of Equipment to the Lessor, to demand and
take such Item of Equipment in the name and on
behalf of the Lessee from whomsoever shall be in
control thereof at that time.
I. ARTICLE
Renewal Options
A. SECTION Renewal Notice.
1. Not less than three hundred
sixty (360) days before expiration of the Base
Term or an existing Renewal Term (each such date a
"Renewal Notice Date"), so long as Zenith
simultaneously gives notice of its intent to
exercise its renewal option under the U.S. Lease,
the Lessee may deliver to the Lessor a notice (the
"Renewal Notice") of the Lessee's election to
renew this Lease in respect of all, but not less
than all, Items of Equipment for a renewal period
of two (2) years, or such other period of time as
the Lessor and the Lessee shall mutually agree
(the "Renewal Term"); provided, however, that the
Lessee shall be entitled to elect no more than two
Renewal Terms.
1. The Lessee shall pay Rent (the
"Renewal Rent") during each Renewal Term equal to
the aggregate Fair Market Rental Value of such
Items of Equipment, determined as set forth in
Section 16.3.
1. In the event the Lessee elects
to renew this Lease, the Renewal Term for each
Schedule of Equipment will commence on the day
immediately following the expiration of the Base
Term or the then current Renewal Term and continue
until the end of the Renewal Term.
1. A Renewal Notice, once given,
shall be irrevocable and any option to renew this
Lease shall expire if the Lessee does not deliver
a Renewal Notice by the applicable Renewal Notice
Date.
1. Notwithstanding the foregoing,
the Lessee shall have no right to renew this Lease
if (i) any Material Default or Event of Default
exists on the Renewal Notice Date or the
commencement of the Renewal Term or (ii) the
Lessee has already given irrevocable notice
pursuant to Article X or XVII to purchase such
Items of Equipment.
A. SECTION Lease Supplement; Renewal
Rent. If the Lessee shall have elected to renew
this Lease with regard to the Equipment, the
Lessee and the Lessor shall execute a Lease
Supplement for each Schedule of Equipment
specifying the Renewal Rent and Casualty Values
with respect to each Item; provided, that the
Lessee shall be obligated to pay Renewal Rent at
the Fair Market Rental Value even if a Lease
Supplement is not executed. Casualty Values for
each Item of Equipment during each Renewal Term
shall be equal initially to the Fair Market Sales
Value for each such Item on the last day of the
Base Term or the preceding Renewal Term, as
applicable, decreasing on the last day of each
month during the Renewal Term by an amount equal
to the quotient of (a) the excess of the Fair
Market Sales Value for each Item on the last day
of the Base Term or the preceding Renewal Term, as
applicable, over the Fair Market Sale Value of
such Item on the last day of the Renewal Term
divided by (b) the number of months in the Renewal
Term.
A. SECTION Determination of Fair Market
Rental Value. The Fair Market Rental Value and
Fair Market Sales Value for each Item of Equipment
during each Renewal Term, shall be mutually agreed
by the Lessor and the Lessee or, failing such
agreement, determined by the Appraisal Procedure,
in either case determined at least sixty (60)
Business Days prior to commencement of such
Renewal Term. Renewal Rent shall be payable in
semi-annual installments in arrears. All other
terms of this Lease and the other Operative
Documents shall continue in full force and effect
during each such Renewal Term in accordance with
the provisions hereof and thereof.
I. ARTICLE
Purchase Options
A. SECTION Purchase Notice.
1. Not less than three hundred
sixty (360) days before expiration of the Base
Term or, any Renewal Term (any such date a
"Purchase Notice Date"), so long as Zenith
simultaneously gives notice of its intent to
exercise its purchase option under the U.S. Lease
and the Guarantor consents in writing to such
election to purchase, the Lessee may deliver to
the Lessor a notice of the Lessee's election to
purchase all, but not less than all, Items of
Equipment at a purchase price equal to (i) in the
case of a purchase at the end of the Base Term,
the aggregate Fair Market Sales Value of such
Items of Equipment at the end of the Base Term,
and (ii) in the case of a purchase at the end of
any Renewal Term, the aggregate Fair Market Sales
Value of such Items of Equipment at the end of
such Renewal Term.
1. The notice of the Lessee to
purchase all Items of Equipment shall be
irrevocable and the option to purchase shall
expire if the Lessee does not deliver a purchase
notice before the date three hundred sixty (360)
before the end of the Lease Term.
1. Notwithstanding the foregoing,
the Lessee shall have no right to purchase the
Equipment if (i) any Material Default or Event of
Default exists on the applicable Purchase Notice
Date or any Material Default or Event of Default
exists on the applicable purchase date or (ii) on
or prior to such Purchase Notice date the Lessee
has already given irrevocable notice pursuant to
Article XVI to renew this Lease at the end of the
Base Term or the then effective Renewal Term;
provided, however, that the Lessee' election to
renew the Lease shall not preclude the Lessee from
exercising the Purchase Option as of the end of
the Renewal Term so elected, subject to the
foregoing conditions.
A. SECTION Transfer of Item. At the
expiration of the Lease Term, if the Lessee shall
have elected to purchase the Items of Equipment
pursuant to Section 17.1 hereof and shall have
paid all Rent then due and payable hereunder, the
Lessor shall transfer (without any representation,
recourse or warranty whatsoever except as to the
ability and authority of the Lessor to conduct
such transfer and convey title to such Items free
and clear of Lessor Liens) all such Items of
Equipment to the Lessee against payment by the
Lessee of the applicable purchase price in
immediately available funds and the Lessor shall
execute and deliver such documents evidencing such
transfer and take such further action as the
Lessee shall reasonably request.
A. SECTION Determination of Fair Market
Sales Value. In the event the Lessee elects to
purchase the Equipment under this Article XVII,
the Fair Market Sales Value of each Item of
Equipment shall be mutually agreed to by the
Lessee and the Lessor or, failing such agreement,
determined in accordance with the Appraisal
Procedure, in either case determined at least
sixty (60) Business Days prior to the end of the
Base Term or the then effective Renewal Term, as
applicable.
I. ARTICLE
Further Assurances
A. SECTION Further Action by Lessee. The
Lessee, at its expense, shall promptly and duly
execute and deliver to each of the Lessor Parties
such documents and assurances and take such
further action as the Lessor (and, for so long as
the Indenture shall be in effect, the Indenture
Trustee) may from time to time reasonably request
in order to carry out more effectively the intent
and purpose of this Lease and the other Operative
Documents and to establish and protect the rights
and remedies created or intended to be created in
favor of the Lessor hereunder and thereunder, to
establish, perfect and maintain the right, title
and interest of the Lessor in and to the Items of
Equipment and the Lien and security interest in
the Trust Indenture Estate provided for in the
Indenture, subject to no Lien other than Permitted
Liens, including, if reasonably requested by any
of the Lessor Parties, the recording or filing of
counterparts or appropriate memoranda hereof, or
of such financing statements or other documents
with respect to the Equipment and the Lessor
agrees to execute and deliver promptly such of the
foregoing financing statements or other documents
as may require execution by the Lessor. The
Lessee agrees to cause the timely execution,
delivery and filing of continuation statements as
to the financing statements theretofore filed so
as to preserve the security interest in the Trust
Indenture Estate. To the extent permitted by
Applicable Law, the Lessee hereby authorizes any
such financing statements to be filed without the
necessity of the signature of the Lessee or copies
of this Lease to be filed in lieu of any such
financing statements, without the necessity of
notice to the Lessee.
A. SECTION Notice of Default or Event of
Default. Promptly after learning of the
occurrence or existence of any Default or Event of
Default, the Lessee shall so notify the Lessor
and, for so long as the Indenture shall be in
effect, the Indenture Trustee and set forth in
reasonable detail the circumstances surrounding
such Default or Event of Default and shall specify
what actions the Lessee have taken or intend to
take to cure such Default or Event of Default.
A. SECTION Information Regarding Items.
The Lessee shall promptly furnish the Lessor and,
for so long as the Indenture shall be in effect,
the Indenture Trustee information at such times
and in such format as is regularly produced by the
Lessee concerning the condition, maintenance and
use of the Items of Equipment as the Lessor or the
Indenture Trustee may reasonably request.
I. ARTICLE
Trust Indenture Estate as Security for Lessor's
Obligations to Lenders
A. SECTION Assignment to Indenture
Trustee. In order to secure the indebtedness
evidenced by the Notes issued or to be issued by
the Lessor pursuant to the Indenture, the
Indenture, among other things, provides for the
assignment (to the extent provided therein) by the
Lessor to the Indenture Trustee of its right,
title and interest to the Equipment, the Guaranty
and this Lease and for the creation of a Lien and
security interest in favor of the Indenture
Trustee for the benefit of the holders of the
Notes in and to the Trust Indenture Estate as
described in the Granting Clauses of the
Indenture. The Lessee hereby (a) acknowledges and
consents to such assignment pursuant to the terms
of the Indenture and (b) agrees to pay directly to
the Indenture Trustee all amounts of Rent (other
than Excluded Payments) due to the Lessor
hereunder or under any other Operative Document
that shall be required to be paid to the Indenture
Trustee pursuant to the Indenture or any other
Operative Document. Any payment by the Lessee to
the Indenture Trustee, as aforesaid, of any amount
payable hereunder shall constitute payment of such
amount for all purposes of this Lease. The Lessee
agrees that the right of the Indenture Trustee to
receive such payments hereunder shall not be
subject to any defense, counterclaim, set-off or
other right or defense or claim which the Lessee
may be able to assert against the Lessor or any
other Person in an action brought on this Lease.
Without limiting the generality of the foregoing,
unless and until the Lessee shall have received
written notice from the Indenture Trustee that the
Indenture has been discharged, subject to the
provisions of Section 6.10 of the Indenture, the
Lessee hereby agrees that the Indenture Trustee
shall have the right to exercise the rights of the
Lessor under this Lease to give consents,
approvals, waivers, notices or the like, to make
elections, demands or the like and to take any
other discretionary action under this Lease as
though named as the Lessor herein and, except as
specifically permitted by said Section 6.10, no
amendment or modification of, or waiver by or
consent of the Lessor in respect of, any of the
provisions of this Lease shall be effective unless
the Indenture Trustee shall have joined in such
amendment, modification, waiver or consent or
shall have given its prior written consent
thereto. Notwithstanding such assignment of this
Lease and the Guaranty, the obligations of the
Lessor to the Lessee to perform the terms and
conditions of this Lease in accordance with the
terms hereof shall remain in full force and
effect.
I. ARTICLE
Insurance
A. SECTION Insurance.
1. Obligation to Insure. The
Lessee shall at all times carry and maintain, at
its expense, (i) "all-risk" property insurance on
the Equipment including, without limitation,
flood, earthquake, windstorm and boiler and
machinery perils (and business interruption
coverage) in a minimum amount equal to the greater
of replacement value or the Casualty Value
thereof, and (ii) commercial general liability
insurance including, without limitation, broad
form property damage, bodily injury, premise and
operations, blanket contractual for oral and
written contracts, sudden and accidental pollution
caused by a hostile fire and products/completed
operations in accordance with industry standards
in an amount no less than $40,000,000.
1. Terms of Insurance Policies.
Any insurance policies carried in accordance with
Section 20.1(a) hereof covering the Equipment, and
any policies taken out in substitution or
replacement for any such policies, as applicable,
(i) in the case of property insurance, shall name
the Indenture Trustee as the loss payee with
respect to the Equipment so long as the Indenture
has not been discharged in accordance with its
terms and, if the Indenture has been so
discharged, shall name the Owner Trustee as the
loss payee with respect to the Equipment, (ii) in
the case of liability insurance, shall name the
Lessor Parties as additional insureds (the
"Additional Insureds"), (iii) may provide for
self-insurance to the extent permitted in
Section 20.1(c) hereof, (iv) shall be primary
without any right of contribution from any other
insurance which is carried by or may be available
to protect the Additional Insureds, (v) shall
provide that in respect of the Additional
Insureds' interest in such policies the insurance
shall not be invalidated by any action or inaction
of the Lessee and shall insure the respective
interests of the Additional Insureds regardless of
any breach or violation by the Lessee of any
warranty, declaration or condition contained in
such policy (except for nonpayment of premiums),
(vi) shall provide that the Additional Insureds
are not liable for any insurance premiums,
(vii) shall provide that if the insurers cancel
such insurance for any reason whatsoever, or if
any material change is made in such insurance
which adversely affects the interests of any
Additional Insured, or if such insurance lapses,
such cancellation, change or lapse shall not be
effective as to the Additional Insureds for thirty
(30) days (or 10 days in the case of cancellation
or lapse for nonpayment of premiums) after receipt
by the Additional Insureds of written notice by
such insurers of such cancellation, change or
lapse, (viii) shall otherwise contain terms and
conditions, including without limitation, the
payment of deductible in connection with any such
insurance, that are reasonably satisfactory to the
Lessor Parties, (ix) shall provide for each
insurer's waiver of its right of subrogation
against the Lessor, and (x) shall provide for
liability insurance having "cross-liability" and
"severability of interest" endorsements.
1. Self-Insurance by Lessee. The
Lessee may self-insure under a program applicable
to all similarly situated equipment operated by
the Lessee, but in no case shall the
self-insurance with respect to the Equipment
exceed (i) $1,000,000 with respect to all-risk
property insurance, (ii) $1,000,000 with respect
to general liability insurance and (iii)
$5,000,000 with respect to product liability
insurance.
1. Reports, Notices, Etc. The
Lessee shall provide to the Lessor and the
Indenture Trustee (i) on the Equipment Closing
Date, the insurance certificates to be provided on
the Equipment Closing Date, (ii) annually and at
least five (5) days prior to the expiration or any
modification of the Lessee's relevant insurance
policies (A) no-default insurance certificates and
(B) a signed report of an insurance broker or
insurer reasonably acceptable in form and
substance to the Lessor and the Indenture Trustee,
stating in reasonable detail the types of coverage
and limits carried and maintained on the Equipment
and certifying that such insurance complies with
the terms and conditions of this Lease. The
Lessee will cause such insurance broker or insurer
to advise the Lessor Parties in writing promptly
of any default in the payment of any premium and
of any other act or omission on the part of the
Lessee of which it has knowledge and which might
invalidate, cause cancellation of or render
unenforceable all or any part of any insurance
carried by the Lessee Party with respect to the
Equipment or the any Item thereof.
(e) Payment of Proceeds. All insurance
proceeds received by or payable to the Lessor on
account of any damage to or destruction of the
equipment or any part thereof (less the actual
costs, fees and expenses incurred in the
collection thereof), other than any damage or
destruction constituting an Event of Loss, shall
be paid over to Lessee or as it may direct from
time to time as repair and restoration progresses
to pay (or reimburse the Lessee for) the cost of
repair and restoration of the Equipment, but only
upon the written request of the Lessee accompanied
by appropriate evidence reasonably satisfactory to
the Lessor that the sum requested is a proper item
for such cost and has been paid or will be applied
to the payment of a sum then due and payable;
provided, however, that if a Material Default or
Event of Default shall have occurred and be
continuing any such amount shall not be paid over
to the Lessee, but shall be applied as provided in
Section 9.4 hereof. Upon receipt by the Lessor of
evidence reasonably satisfactory to it that repair
and restoration has been completed and the cost
thereof paid in full, the balance, if any, or such
proceeds shall be promptly paid over or assigned
to the Lessee or as it may direct unless a Default
shall have occurred and be continuing, in which
case such balance shall be applied as provided in
Section 9.4 hereof.
(f) Additional Insurance by Lessor. At
any time, any Lessor Party may at its own expense
and for its own account carry insurance with
respect to the Equipment; provided, that such
insurance does not increase the cost of or
interfere with the Lessee's ability to obtain
insurance with respect to the Equipment. Any
insurance payments received from policies
maintained by such Lessor Party pursuant to the
previous sentence shall be retained by such Lessor
Party without reducing or otherwise affecting the
Lessee's obligations hereunder.
(g) Right of Lessor to Provide
Insurance. If the Lessee does not procure any
insurance required by this Section 20.1, then the
Lessor may, but shall not be obligated to, procure
such insurance, and the Lessee shall pay the
premiums thereon to the Lessor promptly upon
demand. The Lessor shall not, by the fact of
approving, disapproving, accepting, preventing,
obtaining, or failing to obtain any such
insurance, incur any liability for the form or
legal sufficiency of insurance policies, or
solvency of insurers with respect to payment of
losses, and the Lessee shall assume full
responsibility therefor and all liability with
respect thereto.
I. ARTICLE
Owner Trustee
A. SECTION Successor Trustee; Co-Trustee.
In the case of the appointment of any successor
trustee pursuant to the terms of the Trust
Agreement, such successor trustee (in its capacity
as Owner Trustee on behalf of the Owner Trust)
shall, upon written notice by such successor
trustee to the Lessee, succeed to all the rights,
duties, powers, obligations and title of the
Lessor hereunder and under the other Operative
Documents and shall be deemed to be the Lessor and
the legal owner (in each case, on behalf of the
Owner Trust) of the Equipment for all purposes
hereof and each reference herein and in the
Operative Documents to the "Lessor" shall mean any
such successor trustee. The Lessor or any
successor trustee from time to time serving as the
Lessor hereunder may from time to time appoint one
or more trustees or separate trustees pursuant to
the terms of the Trust Agreement to exercise or
hold any of or all the rights, powers and title of
the Lessor hereunder. No such appointment of any
successor trustee, trustee or separate trustee
shall require any consent or approval by the
Lessee or shall in any way alter the terms of this
Lease or the obligations of the Lessee or the
Lessor hereunder. The appointment of one
successor trustee, trustee or separate trustee
shall not exhaust the right to appoint further
successor trustees, trustees and separate trustees
pursuant to the Trust Agreement, but such right
may be exercised repeatedly so long as this Lease
may be in effect.
I. ARTICLE
Confidentiality
A. SECTION Confidentiality. The Lessor
Parties agree to take normal and reasonable
precautions in accordance with their normal
procedures and exercise due care to maintain the
confidentiality of all information relating to the
Lessee, the Guarantor and their respective
Affiliates, which has been identified as
confidential by the Lessee or the Guarantor, and
neither the Lessor Parties nor any of their
Affiliates shall use any such information for any
purpose or in any manner other than pursuant to
the terms contemplated by this Lease; except to
the extent such information (a) was or becomes
generally available to the public other than as a
result of a disclosure by the Lessor Parties, or
(b) was or becomes available on a non-confidential
basis from a source other than the Lessee or the
Guarantor; provided, that such source is not bound
by a confidentiality agreement with either the
Lessee or the Guarantor known to the Lessor
Parties; and provided, further, that any Lessor
Party may disclose such information (i) at the
request or pursuant to any requirement of any
Governmental Authority to which such Lessor Party
is subject or in connection with an examination of
such Lessor Party by any such Governmental
Authority including, without limitation, the
National Association of Insurance Commissioners
and any other industry regulators, (ii) pursuant
to subpoena or other court process, (iii) when
required to do so in accordance with the
provisions of any Applicable Law, (iv) to each
Lessor Party's independent auditors and other
professional advisors and (v) to any Person and in
any proceeding necessary in any Lessor Party's
judgment to protect such Lessor Party's interests
in connection with any claim or dispute involving
the Lessor Party. Notwithstanding the foregoing,
the Lessee authorizes the Lessor Parties to
disclose to any participant or assignee or
purchaser of Equipment (each, a "Transferee"), to
any prospective Transferee and to any Affiliate,
such financial and other information in the Lessor
Parties' possession concerning the Lessee, Zenith,
the Guarantor or their respective Affiliates which
has been delivered to the Lessor Parties pursuant
to this Lease or the Participation Agreement;
provided, that unless otherwise agreed by the
Lessee or the Guarantor, as applicable, the
Transferee agrees in writing to such Lessor
Parties to keep such information confidential to
the same extent required of the Lessor Parties
hereunder.
I. ARTICLE
Miscellaneous
A. SECTION Documentary Conventions. This
Lease shall be governed by, and construed in
accordance with, all the Documentary Conventions;
provided, however, that no amendment, supplement,
or modification of this Lease which would have the
effect of (a) increasing the amount of, or
bringing forward in time the due date for payment
of, any obligation of the Lessee, (b) amending the
Guarantor's express rights of consent set forth in
Articles VII and X, (c) amending this Section 23.1
or (d) reducing any period of time set forth in
Section 13.1 for the cure or remedy of any Default
described therein, shall be effective as against
the Guarantor unless made by an instrument in
writing signed by the Guarantor.
A. SECTION Effective Upon Delivery. This
Lease shall take effect upon delivery hereof.
A. SECTION Intent to Treat as a Lease.
This Lease constitutes an agreement of lease as to
the Equipment, and nothing herein shall be
construed as conveying to the Lessee any right,
title or interest in or to the Equipment except as
lessee.
SECTION 23.4 Investment of Funds. Any
moneys held by the Lessor (or, so long as the Lien
of the Indenture shall remain in effect, the
Indenture Trustee) as security hereunder for
future payments to Lessee shall, until paid to the
Lessee, be invested by the Lessor (or, so long as
the Lien of the Indenture shall remain in effect,
the Indenture Trustee) as the Lessee may from time
to time direct in writing (and in absence of a
written direction by Lessee or if a Default or an
Event of Default shall have occurred and be
continuing, there shall be no obligation to invest
such moneys but such moneys may be invested as
directed by the Owner Participant in Permitted
Investments. There shall be promptly remitted to
the Lessee or its order (but no more frequently
than monthly) any gain (including interest
received) realized as a result of any such
investment (net of any fees, commissions and other
expenses, if any, incurred in connection with such
investment) unless a Default or an Event of
Default shall have occurred and be continuing.
The Lessee shall be responsible for any net loss
realized as a result of any such investment and
shall reimburse the Lessor (or, so long as the
Lien of the Indenture shall remain in effect, the
Indenture Trustee) for any such net loss on
demand.
SECTION 23.5 Limited Liability of Lessor.
It is expressly agreed and understood that all
representations, warranties and undertakings of
the Lessor hereunder shall be binding upon the
Lessor only in its capacity as Owner Trustee under
the Trust Agreement and the institutions or
Persons acting as the Lessor shall not be liable
hereunder to their individual capacity for any
breach thereof, except for their gross negligence
or willful misconduct or for breach of its
covenants, representations and warranties
contained herein, to the extent expressly
covenanted or made in their individual capacity.
Except as provided in the previous sentence
as relates solely to the liability of the
institutions or Persons acting as the Lessor for
its own gross negligence or willful misconduct,
any claims based on or in respect of any liability
of the Lessor under this Lease shall be enforced
only against the Trust Estate and not against any
other tangible or intangible assets, properties or
funds of (i) Fleet in its individual capacity (ii)
any shareholder or beneficiary of Fleet as Owner
Trustee or in its individual capacity or any
director, officer, employee or agent of Fleet as
Owner Trustee or in its individual capacity (or
any legal representative, heir, estate, successor
or assign of any thereof), (iii) any predecessor
or successor partnership or corporation (or other
entity) of Fleet in its individual capacity or any
of its shareholders or beneficiaries, either
directly or through Fleet or its shareholders or
any predecessor or successor partnership or
corporation of their shareholders, officers,
directors, employees or agents (other than entity)
or (iv) any other Affiliate of any of the
foregoing, or any director, officer, employee or
agent of any thereof.
SECTION 23.6 Identification of Equipment.
No later than September 30, 1997, the Lessee shall
(i) number and tag each Item of Equipment
identifying it as being owned by the Owner Trustee
and (ii) provide a written report confirming the
completion of such tagging and specifying the
numbers assigned to each Item of Equipment.
[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY]
IN WITNESS WHEREOF, intending to be legally
bound, the parties hereto have each caused this
Lease Agreement to be duly executed as of the date
first above written.
FLEET NATIONAL BANK,
not in its individual capacity
but solely as Owner Trustee, on behalf
of THE ZENITH ELECTRONICS
EQUIPMENT OWNER TRUST 1997-II, as LESSOR
By:
Name:
Title:
ZENITH ELECTRONICS CORPORATION OF
TEXAS, as LESSEE
By:
Name:
Title:
PARTICIPATION AGREEMENT
dated as of March 26, 1997
by and among
ZENITH ELECTRONICS CORPORATION
as Lessee,
GENERAL FOODS CREDIT CORPORATION
as Owner Participant,
FLEET NATIONAL BANK
as Owner Trustee,
the institutions listed on Schedule I hereto
as Lenders
and
FIRST SECURITY BANK, NATIONAL ASSOCIATION
as Indenture Trustee
Leveraged Lease of
Television Picture Tube, Computer Monitor Tube,
and Other Television Manufacturing Equipment
TABLE OF CONTENTS
Page
ARTICLE I Definitions and Rules of Usage -2-
ARTICLE II Fundings -2-
2.1 Equipment Closing Date -2-
2.2 Funding Request -4-
2.3 Acquisition and Leasing of the Equipment -5-
ARTICLE III Funding Conditions -5-
3.1 Conditions Precedent to the Obligations
of the Participants and Agents on the
Equipment ClosingDate -5-
3.2 Additional Conditions to Obligations of
Lenders -11-
3.3 Conditions Precedent to the Obligations
of the Lessee on the Equipment Closing
Date -11-
ARTICLE IVRepresentations and Warranties -12-
4.1 Representations and Warranties of the
Lessee -12-
4.2 Representations and Warranties of the
Owner Participant -19-
4.3 Representations and Warranties of the
Indenture Trustee -21-
4.4 Representations and Warranties of the
Lenders -22-
4.5 Representations and Warranties of Fleet
and the Owner Trustee -24-
ARTICLE VCovenants -26-
5.1 Covenants of the Owner Participant,
Fleet and the Owner Trustee -26-
5.2 Covenants of the Indenture Trustee -27-
5.3 Covenants of the Lessee -27-
5.4 Transfers of Notes -33-
5.5 Advertising; Trademarks -34-
ARTICLE VIIndemnities -34-
6.1 General Indemnity -34-
6.2 Payment of Taxes; General Tax Indemnity
. . . . . -39-
ARTICLE VIITax Withholding -50-
ARTICLE VIIIExpenses -51-
8.1 Transaction Expenses Payable by the
Owner
Participant -51-
8.2 Transaction Expenses Payable by the
Lessee -51-
8.3 Amendments, Waivers, etc -52-
8.4 Fees of Agents -52-
ARTICLE IXRecomputation of Basic Rent, EBO
Prices,Fixed Purchase Option Prices,Casualty
Values and Termination Values -53-
9.1 Making of Adjustments -53-
9.2 Limitations -53-
9.3 Computation of Adjustments -54-
9.4 Adjustments Certificate; Lease
Supplement -55-
9.5 Average Life of Notes -55-
9.6 Rent Adjustment Indemnity -56-
ARTICLE XTransfer of Owner Participant's Interests -56-
10.1 Transfers -56-
ARTICLE XIRefunding -58-
11.1 Refunding -58-
11.2 Notice -61-
ARTICLE XIIMiscellaneous -61-
ARTICLE XIIINo Recourse to Owner Participant; No
Implied Obligations -62-
ARTICLE XIVTax Treatment -62-
ARTICLE XVQuiet Enjoyment -62-
ARTICLE XVILessee's Right to Assume Liability
under Notes -63-
ARTICLE XVIIConfidentiality -63-
ARTICLE XVIIILiability of Owner Trustee -64-
List of Schedules and Appendices
Schedule I Parties and Addresses; Account
Information
Schedule II Commitments
Schedule III Pricing Assumptions
Schedule IV Filings and Recordings
Schedule V Equipment
Appendix A Definitions and Rules of Usage
Appendix B Form of Bill of Sale
Appendix C Form of Funding Request
Appendix C-1 Form of Final Acceptance Notice
Appendices D-1 Forms of Opinion of Lessee's Counsel
and D-2
Appendix D-3 Forms of Opinions of Owner
Participant's Counsel
Appendix D-4 Form of Opinion of Owner
Trustee's Counsel
Appendix D-5 Form of Opinion of Indenture
Trustee's Counsel
Appendices D-6 Forms of
Opinions of Guarantor's
Counsel
and D-7
Appendix E Form of Acceptance Certificate
Appendix F Form of Owner Participant
Transfer Agreement
Appendix F-1 Form of Guaranty of
Prospective Owner
Participant's Parent
Appendix G Form of Officer's Certificate
of Guarantor
Appendix H Form of
Certificate from Chief
Financial Officer of Lessee
Appendix I Form of Escrow Agreement
PARTICIPATION AGREEMENT
This PARTICIPATION AGREEMENT is made as
of the 26th day of March, 1997, by and among
ZENITH ELECTRONICS CORPORATION, a Delaware
corporation (the "Lessee"), as the Lessee, GENERAL
FOODS CREDIT CORPORATION, a Delaware corporation
(the "Owner Participant"), the institutions
designated as lenders on Schedule I hereto (each a
"Lender" and collectively the "Lenders"), FLEET
NATIONAL BANK, a national banking association, not
in its individual capacity, except as expressly
stated herein, but solely in its capacity as
trustee for THE ZENITH ELECTRONICS EQUIPMENT OWNER
TRUST 1997-I (the "Owner Trustee"), and FIRST
SECURITY BANK, NATIONAL ASSOCIATION, a national
banking association, not in its individual
capacity except as expressly stated herein, but
solely in its capacity as trustee under the
Indenture (the "Indenture Trustee"). Capitalized
terms used in the following recitals shall be
respectively defined as described below in
Article I.
RECITALS
A. Subject to the terms and conditions
set forth in this Participation Agreement, in the
Lease and the other Operative Documents, the Owner
Trustee has agreed to purchase from the Lessee and
to lease to the Lessee, and the Lessee has agreed
to sell to and lease from the Owner Trustee, all
of the items of Equipment listed on Schedule V
hereto.
B. Subject to the terms and conditions
set forth herein, each of the Lenders has agreed
to fund its respective Commitment Percentage of
each Series of Notes, and the Owner Participant
has agreed to fund the Equity Amount of the
Lessor's Cost of the Equipment.
C. The Owner Trustee has agreed to
serve as Owner Trustee pursuant to the Trust
Agreement and the Indenture Trustee has agreed to
serve as Indenture Trustee pursuant to the
Indenture.
NOW THEREFORE, in consideration of the
foregoing premises, and for other good and
valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
Definitions and Rules of Usage
Unless the context otherwise requires,
capitalized terms used herein without other
definition shall have the respective meanings
assigned to such terms (whether directly or
indirectly by reference) in Appendix A hereto, and
the rules of usage set forth in such Appendix A
shall likewise govern this Participation
Agreement.
ARTICLE II
Fundings
2.1 Equipment Closing Date. Subject to the
terms and conditions of this Participation
Agreement and on the basis of the representations
and warranties hereinafter set forth:
(a) (i) Each Lender severally agrees
that, if requested by Lessee, it will pay to Fleet
on April 2, 1997, in immediately available funds,
an amount equal to such Lender's Commitment
Percentage, which amount shall be held in trust by
Fleet for the benefit of such Lender and not as
part of the Trust Estate until Fleet makes
available such amount to Owner Trustee pursuant
to Section 2.1(a)(ii), or such amount is returned
to such Lender in accordance with Section
2.1(a)(iii) hereof. Fleet agrees, upon receipt in
full of each Lender's amount of its Commitment
Percentage, together with instructions from such
Lender to release such amount received from such
Lender, to transfer such funds into the Trust
Estate. Owner Trustee agrees to apply such funds
as provided in Section 2.1(a)(ii) hereof.
(ii) On the Equipment Closing Date, (A)
the Owner Participant shall make available the
Equity Amount requested in the Funding Request for
the Equipment Closing Date by EFT no later than
12:00 noon New York time on the Equipment Closing
Date to the Owner Trustee at the account specified
on Schedule I hereto, (B) the Owner Trustee shall
execute, and the Indenture Trustee shall
authenticate and deliver to each Lender and each
Lender agrees to purchase from the Owner Trustee,
a Note in an amount equal to such Lender's
Commitment Percentage (as set forth on Schedule II
hereto) of the principal amount of the Notes to be
issued on such date, the funding of such Note
purchases to occur at the time, in the manner and
into the account referred to in clause (A) above,
and (C) the Owner Trustee shall apply the proceeds
of the issuance of such Notes, together with the
Equity Amount paid by the Owner Participant, to
pay to the Lessee the Lessor's Cost of the Items
of Equipment for which settlement is being made on
such Equipment Closing Date. Immediately upon the
receipt of such proceeds, Lessee shall deposit the
Escrow Amount with respect to such Items into the
Escrow Account.
(iii) In the event the Equipment Closing
Date does not occur on or is postponed past April
2, 1997, the Lessee will reimburse each Lender on
demand for the losses, if any, occasioned by such
postponement or failure of the Equipment Closing
Date to occur in each case by paying to such
Lender on demand, as compensation in full for any
such losses, an amount equal to the sum of (x) the
excess, if any, of (A) interest at the Debt Rate
on the amount made available by each Lender
pursuant to Section 2.1(a)(i) hereof for each
calendar day from and including April 2, 1997 to
but excluding the earlier of (I) the Business Day
on which such amounts are returned to and received
by such Lender, prior to 11:00 A.M. New York City
time on such Business Day, and (II) the actual
Equipment Closing Date, over (2) the amount of
interest actually earned by such Lender (or Fleet
for the account of such Lender) on its investment
and reinvestment of the amount made available by
such Lender for such period and paid to such
Lender by Fleet (it being understood that Fleet,
on behalf of such Lender shall, unless requested
by Lessee to return such amount to each Lender,
use reasonable efforts to invest and reinvest such
amounts, upon the instructions and at the risk and
the expense of Lessee, in overnight or other
appropriate funds that are Permitted Investments)
plus (B) if such amount is returned to any Lender,
Make-Whole Premium Amount determined as if the
Equipment Notes were prepaid on the date such
amount is returned to such Lender by Fleet and the
principal amount prepaid was equal to the amount
made available by such Lender to Fleet.
All earnings in the investment and
reinvestment of each such amount shall be paid to
the relevant Lender by Fleet upon the earlier of
the date such amount is returned to the relevant
Lender or on the Equipment Closing Date.
If funds have been made available by
each Lender pursuant to Section 2.1(a)(i) hereof
and if the Equipment Closing Date is not April 2,
1997, then unless and until such funds are
redistributed to such Lender, which redistribution
shall occur no later than April 4, 1997, any
investments made or obligations purchased by Fleet
pursuant to Section 2.1(a)(iii) shall be held in
trust by Fleet and shall remain the sole property
of each Lender and not as part of the Trust Estate
unless and until released by each Lender and made
available by Fleet to the Owner Trustee and
applied as provided in Section 2.1(a)(ii) hereof.
(b) The Lessee hereby pledges the Escrow
Account and all amounts therein to the Lessor to
secure the Lessee's obligations under the Lease.
(c) The aggregate principal amount of
Notes to be issued hereunder and under the
Indenture shall not exceed $44,007,505.28. The
Notes are to be issued under the Indenture and
secured by Liens granted thereunder, to be dated
the date of the Equipment Closing Date, to bear
interest prior to maturity at the Debt Rate, such
interest to be paid semi-annually in arrears to
and including the final maturity thereof on each
Rent Payment Date, to mature on April 2, 2007, to
amortize in accordance with the applicable
amortization schedule set forth in the Pro Forma
Schedules included in Schedule III hereto, as
adjusted prior to the Equipment Closing Date in
accordance with the provisions of Article IX
hereof, and to be otherwise substantially in the
form attached to the Indenture as Exhibit C. The
Owner Trustee hereby agrees for the benefit of the
parties hereto (but subject to the terms and
conditions hereof and of the Indenture) to make
payments in respect of each Note issued by it in
accordance with the terms and conditions specified
in the Indenture and such Note.
(d) The Equity Amount shall be equal to
$22,017,710.72.
(e) The Participants' respective
commitments under this Section 2.1, and the Owner
Trustee's commitment to purchase Equipment
pursuant to the Funding Request, shall expire at
midnight (New York time) on the Cut-off Date. The
obligations of the Participants hereunder shall be
several and not joint and no Participant shall be
liable or responsible for the acts or defaults of
any other Participant.
2.2 Funding Request. The Lessee has
delivered a Funding Request in substantially the
form of Appendix C attached hereto to each
Participant and Agent. Such Funding Request is
irrevocable and specifies: (i) the date on which
such Equipment Closing Date shall occur; (ii) the
Items of Equipment to be purchased on such
Equipment Closing Date; (iii) the aggregate
Lessor's Cost of such Items; (iv) the Equity
Amount for such Equipment Closing Date; (v) the
aggregate principal amount of the Notes to be
issued on such Equipment Closing Date; and (vi)
the Items to which an Escrow Amount applies and
the amount thereof for each such Item. The Owner
Participant has delivered to the Lessee, each
other Participant and each Agent the schedules of
Basic Rent, Casualty Value, Termination Value, and
EBO Price applicable to such Items of Equipment,
the principal amounts of the Notes to be purchased
by each Lender on the Equipment Closing Date, and
the amortization schedule for the Notes to be
issued on the Equipment Closing Date, in each case
as adjusted pursuant to and in compliance with
Article IX hereof. In the event of an adjustment
pursuant to Section 9.1(a) prior to the Equipment
Closing Date, the Lessee shall also deliver such
adjusted Pro Forma Schedules to each Participant
and Agent together with the Funding Request for
the Equipment Closing Date (and effective on the
Equipment Closing Date, Schedule III to the
Participation Agreement shall be deemed to be
amended to reflect such adjusted Pro Forma
Schedules).
2.3 Acquisition and Leasing of the
Equipment. On the Equipment Closing Date, (a) the
Owner Trustee shall acquire title to each Item of
Equipment pursuant to a Bill of Sale and (b) the
Owner Trustee shall lease to the Lessee, and the
Lessee shall lease from the Owner Trustee, such
Item of Equipment pursuant to, for the Rent and in
accordance with the terms of, the Lease (including
the applicable Lease Supplement and related
Schedule of Equipment, which Lease Supplement and
related Schedule of Equipment shall include the
schedules of Basic Rent, Casualty Value,
Termination Value, and EBO Price as set forth in
the Pro Forma Schedules, as modified pursuant to
in and in accordance with Article IX hereof).
ARTICLE III
Funding Conditions
3.1 Conditions Precedent to the Obligations
of the Participants and Agents on the Equipment
Closing Date. The obligation of each of (i) the
Lenders, the Owner Participant, the Owner Trustee
and the Indenture Trustee to execute the
applicable Operative Documents to which each such
Person is party on the Equipment Closing Date,
(ii) the Lenders to disburse funds as contemplated
by Section 2.1(a) hereof and to purchase the Notes
on the Equipment Closing Date, (iii) the Owner
Participant to Fund the Equity Amount requested
for the Equipment Closing Date and (iv) the Owner
Trustee to purchase the Items of Equipment
specified in the Funding Request, shall be subject
in each case to the satisfaction, or waiver by the
Lenders, the Owner Participant, the Owner Trustee
and the Indenture Trustee, as the case may be, of
the following conditions prior to or on the
Equipment Closing Date (except that the obligation
of any party shall not be subject to such party's
own performance or compliance):
(a) Funding Request. Each Participant
and Agent shall have received in a timely manner
copies of an appropriate Funding Request in
respect of the Equipment Closing Date as required
by Section 2.2(a), and the Owner Participant shall
have delivered to each Participant and Agent the
schedules of Basic Rent, Casualty Value,
Termination Value, and EBO Price with respect to
the Items of Equipment to be settled for, and the
principal amount of the Notes to be issued and the
amortization schedules for such Notes as required
by Section 2.1(a), and such schedules and
principal amounts shall be acceptable to the
Lessee and the Lenders.
(b) Funding. The Owner Trustee shall
have duly executed, and the Indenture Trustee
shall have duly authenticated and delivered to
each Lender, a Note or Notes, dated the Equipment
Closing Date, in a principal amount equal to such
Lender's Commitment Percentage of the aggregate
principal amount of the Notes, and such Notes
shall, notwithstanding Section 2.1(d) hereof,
mature, bear interest and be payable as provided
in the Indenture, and in the Indenture Supplement
delivered on the Equipment Closing Date. The
Lenders shall have purchased such Notes and the
Owner Participant shall have made available the
Equity Amount for such Funding Date.
(c) Authorization, Execution and
Delivery of Operative Documents. The Closing Date
Documents and the following additional documents
shall have been duly authorized, executed and
delivered by each designated party thereto prior
to or on the Equipment Closing Date and shall be
in full force and effect, enforceable in
accordance with its terms, on the Equipment
Closing Date without any event or condition having
occurred or existing which constitutes, or with
the giving of notice or lapse of time or both
would constitute, a default thereunder or breach
thereof or would give any party thereto the right
to terminate any thereof or excuse any party from
performing its obligations thereunder:
(i) an original Bill of Sale to the
Owner Trustee from the Lessee conveying good
and marketable title to the Items of
Equipment to be purchased on the Equipment
Closing Date to the Owner Trustee, free and
clear of all Liens (other than in the case of
any Item subject to an Escrow Amount, any
Lien of the applicable Seller or manufacturer
of such Item in the amount of such Escrow
Amount), in form and substance satisfactory
to each Participant;
(ii) a Lease Supplement and related
Schedule of Equipment covering the Items of
Equipment delivered on the Equipment Closing
Date, with the chattel paper original of such
Lease Supplement having been delivered to the
Indenture Trustee; and
(iii) an Indenture Supplement covering
the Items of Equipment delivered on the
Equipment Closing Date.
(d) Appraisal. The Owner Participant
shall have received an Appraisal satisfactory to
it in all respects with respect to the Lease and
each Item of Equipment purchased by the Lessor on
the Equipment Closing Date, confirming that, among
other matters, (i) the fair market value of the
Equipment to be purchased on such Equipment
Closing Date is equal to the Lessor's Cost
thereof, (ii) the economic useful life of such
Equipment equals or exceeds 125% of the Base Term
applicable to such Equipment, (iii) the fair
market value of such Items of Equipment at the
Scheduled Lease Termination Date, determined
without giving effect to inflation, is expected to
be at least 20% of the Lessor's Cost of such Items
of Equipment, (iv) use of the Items of Equipment
by parties unaffiliated with the Lessee or its
Affiliates at the expiration of the Base Term will
be commercially feasible, and (v) the EBO Prices
with respect to such Items of Equipment are not
less than the respective estimated fair market
value of such Items on the EBO Date, after giving
effect to inflation, and such other matters as the
Owner Participant may reasonably request. Each
Lender shall have received a letter from the
Independent Appraiser confirming that, based on
the Appraisal, the fair market value of the
Equipment to be purchased on the Equipment Closing
Date is equal to the Lessor's Cost thereof and the
economic useful life of such Equipment exceeds the
Base Term.
(e) Filings and Recordings. All
filings, recordings and similar actions reasonably
requested by any Participant shall have been duly
made or taken in order to protect the rights of
the Owner Trustee as owner of the Items of
Equipment delivered on such Equipment Closing Date
and as Lessor under the Lease and to establish and
perfect the right, title and interest of the
Indenture Trustee therein under the Indenture, in
each case as against creditors of and purchasers
from the Owner Trustee and the Lessee.
(f) Certificates. Each Participant and
each Agent shall have received an Officer's
Certificate of:
(i) Lessee Certificate the Lessee
dated the Equipment Closing Date, the truth
and accuracy of which shall be a condition to
the obligations of such Persons hereunder
with respect to the Equipment Closing Date,
to the effect that the warranties and
representations of the Lessee set forth in
Section 4.1 hereof are true and correct on
the Equipment Closing Date with the same
effect as though made on and as of that date
(except to the extent that any such
representation or warranty expressly refers
to a specific date, in which case such
representation and warranty shall have been
true and correct on and as of such date);
(ii) Owner Participant Certificate
the Owner Participant dated the Equipment
Closing Date, the truth and accuracy of which
shall be a condition to the obligations of
such Persons hereunder with respect to the
Equipment Closing Date, to the effect that
the warranties and representations of the
Owner Participant set forth in Section 4.2
hereof are true and correct on the Equipment
Closing Date with the same effect as though
made on and as of that date (except to the
extent that any such representation or
warranty expressly refers to a specific date,
in which case such representation and
warranty shall have been true and correct on
and as of such date);
(iii) Indenture Trustee
Certificate the Indenture Trustee dated the
Equipment Closing Date, the truth and
accuracy of which shall be a condition to the
obligations of such Persons hereunder with
respect to the Equipment Closing Date, to the
effect that the warranties and
representations of the Indenture Trustee set
forth in Section 4.3 hereof are true and
correct on the Equipment Closing Date with
the same effect as though made on and as of
that date (except to the extent that any such
representation or warranty expressly refers
to a specific date, in which case such
representation and warranty shall have been
true and correct on and as of such date);
(iv) Owner Trustee Certificate the
Owner Trustee dated the Equipment Closing
Date, the truth and accuracy of which shall
be a condition to the obligations of such
Persons hereunder with respect to the
Equipment Closing Date, to the effect that
the warranties and representations of the
Owner Trustee set forth in Section 4.5 hereof
are true and correct on the Equipment Closing
Date with the same effect as though made on
and as of that date (except to the extent
that any such representation or warranty
expressly refers to a specific date, in which
case such representation and warranty shall
have been true and correct on and as of such
date); and
(v) Guarantor Certificate the
Guarantor dated the Equipment Closing Date,
the truth and accuracy of which shall be a
condition to the obligations of such Persons
hereunder with respect to the Equipment
Closing Date, in the form attached hereto as
Appendix G; and
(vi) Additional Lessee Certificate
the Lessee dated the Equipment Closing Date,
the truth and accuracy of which shall be a
condition to the obligations of such Persons
hereunder with respect to the Equipment
Closing Date, in the form attached hereto as
Appendix H.
(g) Legal Opinions.
(i) Each Participant and each
Agent shall have received the respective legal
opinions dated the Equipment Closing Date of:
(A) Lessee's Counsel,
substantially in the form of Appendices D-1
and D-2 hereto;
(B) Owner Participant's and
Owner Participant Guarantor's Counsel,
substantially in the form of Appendices D-3
and D-4 hereto;
(C) Owner Trustee's Counsel,
substantially in the form of Appendix D-5
hereto;
(D) Indenture Trustee's
Counsel, substantially in the form of
Appendix D-6 hereto; and
(E) Guarantor's Counsel,
substantially in the form of Appendices D-7
and D-8 hereto.
(ii) In addition, the Owner
Participant shall have received an opinion of
Hunton & Williams, as Owner Participant's Counsel,
addressing certain tax matters in form and
substance satisfactory to the Owner Participant,
and the Lenders shall have received an opinion of
Lenders' Counsel as to such matters as the Lenders
may request, in form and substance satisfactory to
the Lenders.
(h) Taxes. All Taxes, if any, payable
on or prior to the Equipment Closing Date in
connection with the execution, delivery, recording
and filing of the Operative Documents and in
connection with the consummation of the
transactions contemplated by the Operative
Documents shall have been paid in full.
(i) Governmental Action. All
Governmental Action required or, in the reasonable
opinion of such Participant or such Agent,
advisable as of the Equipment Closing Date for the
consummation of the transactions contemplated
hereby or by the other Operative Documents,
including all approvals, if any, of any Korean
Governmental Authority required for the Guarantor
to enter into and perform its obligations under
the Guaranty, shall have been obtained and shall
be in full force and effect and such Participant
or Agent shall have received copies of evidence of
such Governmental Action, if any.
(j) Documents. Prior to or on the
Equipment Closing Date, each Participant and each
Agent shall have received (i) certified copies of
the Organic Documents of the Lessee, the
Guarantor, the Owner Trustee, the Owner
Participant, and the Indenture Trustee, (ii) good
standing certificates relating to each such Person
certified by the appropriate agency of the
jurisdiction of such Person's organization, and in
the case of the Lessee, the State of Illinois and
(iii) such other evidence as to the due authority
of each such Person to execute, deliver and
perform its obligations under each document
executed by it or contemplated by the terms hereof
to be executed by it as such Participant and such
Agent shall reasonably request.
(k) Final Acceptance Date; Delivery
Date. The Final Acceptance Date (or, for Items of
Equipment subject to an Escrow Amount, the
Preliminary Acceptance Date) and the Delivery Date
for each Item of Equipment to be settled for on
the Equipment Closing Date shall have occurred
(and each Item of Equipment has been assembled and
is readily available for use, except as set forth
in the following-referenced Officer's
Certificate), and each Participant and each Agent
shall have received an Officer's Certificate of
the Lessee regarding the occurrence of such Final
Acceptance Date and Delivery Date.
(l) Purchase Agreements; Invoices. The
Owner Participant and the Indenture Trustee shall
have received copies of such Purchase Documents
relating to the Items of Equipment delivered on
the Equipment Closing Date and Invoices from the
respective Sellers thereof specifying the amounts
comprising the respective purchase prices of such
Items as the Owner Participant may request, in
each case certified as true, correct and complete
on the Equipment Closing Date by a Responsible
Officer of the Lessee.
(m) Transaction Expenses. The Owner
Participant or the Lessee, shall have paid or made
arrangements satisfactory to the parties entitled
thereto for the payment of all Transaction
Expenses for which invoices were received at least
two (2) Business Days prior to the Equipment
Closing Date.
(n) Illegality. In the opinion of each
Participant and Agent or its counsel, it would not
be illegal under Applicable Law for such
Participant or Agent to participate in any of the
transactions contemplated by any Operative
Document.
(o) No Default. No Default or Event of
Default shall have occurred and be continuing or
shall result from the transactions to take place
on the Equipment Closing Date.
(p) No Change in Tax Law. No change or
proposed change in federal, state or local tax law
(including, without limitation, the Code,
regulations, rulings or case law) shall have
occurred on or prior to the Equipment Closing
Date.
(q) Escrow Agreement. The Escrow
Agreement, shall have been executed and delivered
by the Lessee and the Owner Trustee.
(r) Other Matters. Each Participant
and each Agent shall have received copies of such
other documents and assurances as to such other
matters as any such Person may have reasonably
requested in connection with the transactions
contemplated hereby.
3.2 Additional Conditions to Obligations of
Lenders. The obligation of the Lenders to
purchase the Notes to be issued on the Equipment
Closing Date, shall be subject to the satisfaction
of (or waiver by the Lenders of) the additional
conditions that (a) the Notes issued on the
Equipment Closing Date shall qualify as legal
investments for each Lender under any laws
regulating investments to which it may be subject
(without recourse to provisions in any such law
permitting limited investments without restriction
as to the character of the particular investment),
and each Lender shall have received such evidence
as it may reasonably request to establish
compliance with this condition (b) no Indenture
Default or Indenture Event of Default shall have
occurred and be continuing or shall result from
the transactions to take place on the Equipment
Closing Date, and (c) prior to the Equipment
Closing Date, each Lender shall have received such
evidence as such Lender shall reasonably request
to establish compliance with Section 9.5 hereof as
of the Equipment Closing Date.
3.3 Conditions Precedent to the Obligations
of the Lessee on the Equipment Closing Date. The
obligations of the Lessee to take the actions
contemplated hereby on the Equipment Closing Date
shall be subject to the satisfaction, or waiver by
the Lessee, prior to or on the Equipment Closing
Date, of the following conditions precedent:
(a) Authorization, Execution and
Delivery of Operative Documents. Each of the
Operative Documents shall have been duly
authorized, executed and delivered by each
designated party thereto (other than the Lessee)
and shall be in full force and effect on the
Equipment Closing Date, and the Lessee shall have
received an executed counterpart of each Operative
Document and any other document of which an
executed counterpart shall have been delivered to
the Participants and a copy of each such document
of which a copy shall have been delivered to the
Participants.
(b) Certificates. The Lessee shall
have received the Officer's Certificates referred
to in Sections 3.1(f)(ii)-(iv), the truth and
accuracy of which shall be a condition to the
obligations of the Lessee hereunder with respect
to the Equipment Closing Date.
(c) Legal Opinions. The Lessee shall
have received opinions addressed to each such
Person, of the counsel respectively specified in
Sections 3.1(g)(i)(B)-(D).
(d) Funding. The Owner Trustee shall
have paid directly to the Lessee, the Lessor's
Cost for the Items of Equipment specified in the
Funding Request.
(e) Appraisal. The Lessee shall have
received a copy of the Appraisal, which it shall
maintain on a confidential basis on the terms set
forth in Article XVII.
(f) Illegality. In the opinion of the
Lessee, based on consultation with the Lessee's
Counsel, it would not be illegal under Applicable
Law for the Lessee to consummate any of the
transactions contemplated by any Operative
Document.
ARTICLE IV
Representations and Warranties
4.1 Representations and Warranties of the
Lessee. The Lessee represents and warrants as
follows:
(a) Due Incorporation, etc. The Lessee
(i) is a corporation duly organized and validly
existing under the laws of the State of Delaware,
(ii) has the power and authority to own or hold
under lease properties used in its business and to
enter into and perform its obligations under each
of the Operative Documents to which it is a party,
(iii) has all Governmental Action required to
carry on its business as presently conducted and
as contemplated, to own or hold under lease the
properties used in its business, including the
Equipment, and to enter into and perform its
obligations under this Agreement and each other
Operative Document to which it is or is to become
a party, and (iv) is duly qualified to do business
as a foreign corporation and is in good standing
in each jurisdiction where the failure to be so
qualified would reasonably be expected to have a
Material Adverse Effect.
(b) Due Authorization, Non-
Contravention, etc. The execution, delivery and
performance of the Operative Documents to which
the Lessee is a party have been duly authorized by
all necessary corporate action on its part, do not
and will not conflict with, result in any
violation of, or constitute any default under, any
provision of any Organic Document of the Lessee or
any Applicable Law and will not result in or
require the creation or imposition of any Lien
(other than Permitted Liens) on any of the
properties of the Lessee.
(c) Due Execution. This Participation
Agreement and each other Operative Document to
which the Lessee is a party have been duly
executed and delivered by, and each such Operative
Document constitutes the legal, valid and binding
obligation of, the Lessee enforceable in
accordance with its terms, except as
enforceability may be limited by applicable
bankruptcy, insolvency or similar laws affecting
the enforcement of creditors' rights generally or
by equitable principles relating to
enforceability.
(d) No Violation, etc. Neither the
execution, delivery, and performance by the Lessee
of this Participation Agreement or any other
Operative Document to which it is, or is to
become, a party, nor the consummation of the
transactions contemplated thereby will conflict
with, or result in a breach of any of the terms or
provisions of, or constitute a default under, or
result in the creation or imposition of any Lien
(other than Permitted Liens) pursuant to any
Contractual Obligation of the Lessee which could
reasonably be expected to have a material adverse
impact on the Lessee's ability to perform its
obligations under the Operative Documents to which
it is a party, nor will such actions result in any
violation of the provisions of the Organic
Documents of the Lessee.
(e) Governmental Action. No
Governmental Action by, and no notice to or filing
with, any Governmental Authority is required for
the due execution, delivery and performance by the
Lessee of the Operative Documents to which it is a
party, except for such Governmental Actions,
notices or filings identified on Schedule IV as
have been duly obtained or made and are in full
force and effect. There is no proceeding pending
or, to the best knowledge of the Lessee,
threatened which seeks, or which would reasonably
be expected, to rescind, terminate, modify or
suspend any such Governmental Action. The Lessee
is not an "investment company" or a company
"controlled" by an "investment company", within
the meaning of the Investment Company Act of 1940,
or a "holding company" or a "subsidiary company"
of a "holding company", or an "affiliate" of a
"holding company" or of a "subsidiary company" of
a "holding company", within the meaning of the
Public Utility Holding Company Act of 1935.
(f) Litigation. There is no pending
or, to the best knowledge of the Lessee,
threatened litigation, Environmental Claim,
action, arbitration or proceeding affecting the
Lessee or any of its properties, assets or
revenues which questions the validity or
enforceability of any Operative Document or which,
individually or in the aggregate, if decided
adversely to the interests of the Lessee, would
reasonably be expected to have a Material Adverse
Effect.
(g) Location and Status of Equipment.
On the Equipment Closing Date, each Item of
Equipment delivered on such date is located at the
Melrose Park Facility. The Items of Equipment
subject to each Lease Supplement are personal
property and are not, and will not be attached to
or related to the real estate in such a manner so
that any Item of Equipment constitutes, or will
constitute, a fixture. The Items of Equipment
subject to each Lease Supplement are the same
Items of Equipment identified in the copy of the
Appraisal delivered to the Lessee as being located
in Illinois. As of the Equipment Closing Date
(other than in the case of Items of Equipment sub-
ject to an Escrow Amount) and as of the Escrow
Release Date in the case of all Items of Equipment
subject to an Escrow Amount, each of the Items of
Equipment will be properly installed in a
workmanlike manner in accordance with Applicable
Law and in accordance with the plans and
specifications therefor, will contain no material,
structural or systemic defect and will be in good
operating order. With respect to each Item of
Equipment subject to an Escrow Amount, as of the
Equipment Closing Date, the Preliminary Acceptance
Date and Delivery Date shall have occurred and
each such Item shall have been assembled except as
set forth in the Officer's Certificate delivered
pursuant to Section 3.1(k) hereof.
(h) Compliance with Applicable Law and
Governmental Action. The Lessee is in compliance
with all Applicable Law (including all Applicable
Law relating to the ownership, use, operation and
lease of the Equipment) except to the extent that
the failure to comply with any such Applicable Law
could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse
Effect.
(i) ERISA. The Lessee is not entering
into this Participation Agreement or any
transaction contemplated hereby or by any other
Operative Document to which it is, or is to
become, a party, directly or indirectly in
connection with any arrangement or understanding
by it in any way involving any "employee benefit
plan" (within the meaning of Section 3(3) of
ERISA) or "plan" (within the meaning of
Section 4975(e)(1) of the Code) or any "plan
assets" of any such employee plan or plans and the
transactions contemplated by the Operative
Documents will not cause or result in any non-
exempt prohibited transactions within the meaning
of Section 406 of ERISA or Section 4975 of the
Code. The representation and warranty in the
preceding sentence is made by the Lessee in
reliance upon, and is subject to the accuracy of,
the representations and warranties made by the
Participants in Sections 4.2(f) and 4.4(d) hereof,
respectively.
(j) No Public Offering.
(i) Neither the Lessee nor Salomon
Brothers Inc (the only Person authorized or
employed by the Lessee as agent, broker,
dealer or otherwise in connection with the
offering or sale of the Notes or any similar
securities) has offered any of the Notes or
similar securities, or solicited offers to
buy any thereof from, or otherwise approached
or negotiated with respect thereto with, any
prospective purchaser, other than the Lenders
and not more than 80 other institutional
investors, each of which was offered such
Notes at private sale for investment and each
of which the Lessee or such agent had
reasonable grounds to believe, and did
believe, and as to the Lenders after
reasonable inquiry does believe, has such
knowledge and experience in financial and
business matters that it is capable of
evaluating the merits and risks of investment
in such Notes. Neither the Lessee nor any
Person authorized to act on its behalf will
take any action which would subject the
issuance or sale of any Notes or any interest
in the Lease or any other debt or other
instrument issued or to be issued to finance
the Equipment to the registration
requirements of Section 5 of the Securities
Act.
(ii) Neither the Lessee nor Salomon
Brothers Inc. (the only Person authorized or
employed by the Lessee as agent, broker,
dealer or otherwise in connection with the
offering or sale of the beneficial interest
in the Trust Estate or any similar
securities) has offered the beneficial
interest in the Trust Estate or similar
securities, or solicited offers to buy any
thereof from, or otherwise approached or
negotiated with respect thereto with, any
prospective purchaser, other than the Owner
Participant and not more than 34 other
institutional investors, each of which was
offered such beneficial interest at private
sale for investment and each of which the
Lessee or such agent had reasonable grounds
to believe, and did believe, and as to the
Owner Participant after reasonable inquiry
does believe, has such knowledge and
experience in financial business matters that
it is capable of evaluating the merits and
risks of investment in such beneficial
interest. Neither the Lessee nor any Person
authorized to act on its behalf will take any
action which would subject the issuance or
sale of any beneficial interest in the Trust
Estate, or any interest in the Lease or any
other debt or other instrument issued or to
be issued to finance the Equipment to the
registration requirements of Section 5 of the
Securities Act.
(k) Title. On the Equipment Closing
Date, all UCC financing statements, Purchase
Documents and other documents, if any necessary or
advisable to establish and protect the Lessor's
right, title and interest in and to the Equipment
to be acquired by it and to perfect for the
benefit of the Indenture Trustee and the Lenders
the Lien and security interest in the Trust
Indenture Estate created pursuant to the Indenture
will have been duly executed by all necessary and
appropriate Persons and filed or recorded and the
Indenture, together with such filings and
recordings, will on the Equipment Closing Date
create a valid and perfected first priority Lien
and security interest in the Trust Indenture
Estate effective as against creditors of and
purchasers from the Lessee and, assuming that the
representations and warranties of the Owner
Trustee herein are true and correct, the Owner
Trustee. Upon delivery of the Equipment pursuant
to a Bill of Sale, the Owner Trustee will
thereupon have good, valid and marketable title to
such Equipment free and clear of all Liens other
than Permitted Liens described in clauses (a) -
(c) in the definition of "Permitted Liens", and as
to each Item of Equipment subject to a Escrow
Amount, any Lien in favor of the applicable Seller
or manufacturer in the amount of such Escrow
Amount (such Lien to terminate on or before the
Final Acceptance Notice Date in respect of such
Equipment). On the Equipment Closing Date, the
Equipment is located on real property owned by the
Lessee, and such real property is not subject to
any mortgage.
(l) No Default, etc. The Lessee is not
in default, and no condition exists that with
notice or lapse of time or both would constitute a
default under any mortgage, deed of trust,
indenture, contract or other instrument or
agreement to which the Lessee is a party or by
which it or any of its properties or assets may be
bound which individually or in the aggregate could
reasonably be expected to have a Material Adverse
Effect with respect to the Lessee, the Indenture
Trustee or the Owner Trustee or any Participant.
(m) Taxes. The Lessee has filed or
caused to be filed all tax returns required to be
filed by it and has paid all Taxes shown to be due
and payable on such returns (other than those that
are not yet delinquent, and those Taxes that the
Lessee is contesting in good faith, none of which
contested Taxes are material).
(n) Defaults; Events of Loss. No
Default or Event of Default has occurred and is
continuing or will result from the transactions to
take place on the Equipment Closing Date. As of
the Equipment Closing Date, no Event of Loss or
event that with the passage of time or giving of
notice or both would constitute an Event of Loss
has occurred and is continuing with respect to any
Item of Equipment.
(o) Sales Tax. All sales, use,
transfer, recording and similar taxes due on the
Equipment Closing Date in connection with the
transactions contemplated by the Operative
Documents have been paid on the Equipment Closing
Date (and, in the case of Items which are subject
to a Final Acceptance Notices, all such taxes
which were not due on the Equipment Closing Date
will be paid when due) or such transactions are
exempt from such taxes.
(p) Financial Statements and Condition.
The audited consolidated balance sheets and
consolidated statements of income and retained
earnings and cash flows of the Lessee and its
subsidiaries set forth in the Lessee's annual
report on Form 10-K for the fiscal year ended
December 31, 1995 (copies of which have been
delivered to the Participants), fairly present, in
conformity with generally accepted accounting
principles, the consolidated financial position of
the Lessee and its subsidiaries as of such date
and the results of their operations for the period
then ended. The unaudited consolidated balance
sheets and consolidated statements of income and
retained earnings and cash flows of the Lessee and
its subsidiaries set forth in the Lessee's
quarterly report on Form 10-Q for the fiscal
quarter ended September 30, 1996 (copies of which
have been delivered to the Participants), fairly
present, in conformity with generally accepted
accounting principles consistently applied, the
consolidated financial position of the Lessee and
its subsidiaries as of such date and the results
of their operations for the period then ended,
subject to the absence of footnotes and normal
year-end adjustments. Since September 30, 1996,
no material adverse change has occurred in the
business or consolidated financial condition of
the Lessee and its subsidiaries which has not been
disclosed in the Lessee's reports under the
Securities Exchange Act of 1934 or otherwise
disclosed in writing. The Lessee's reports under
the Securities Exchange Act of 1934 referred to in
this Section did not contain as of their
respective dates any untrue statement of a
material fact or omit to state a material fact
necessary to make the statements therein in light
of the context in which they were made, not
misleading.
(q) Chief Executive Office. The chief
executive office (as such term is used in
Article 9 of the UCC) of the Lessee is located at
1000 Milwaukee Avenue, Glenview, Illinois 60025.
(r) Environmental Matters. The Lessee
holds and is in compliance with the terms and
conditions of all Governmental Actions required
under applicable Environmental Laws which
Governmental Actions are associated with the
Equipment; the Lessee is in compliance with all
Environmental Laws, except for such non-compliance
as would not involve the risk of any criminal
liability to any Participant or any Agent or would
not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect on
the Lessee, any Participant or any Agent and
Lessee is in compliance with all Environmental
Laws applicable to or otherwise affecting the
Equipment; no Lien has been attached to any of the
Equipment pursuant to any Environmental Law; the
Lessee has not received written notice, and to
Lessee's best knowledge the Lessee is not aware,
of any Environmental Claim or investigation, or
notice of violation, pending or threatened, based
on or related to Environmental Law relating to the
Equipment; to the Lessee's best knowledge, there
are no facts, activities, events, conditions or
circumstances involving Hazardous Substances that
could reasonably be anticipated to form the basis
of an Environmental Claim against or involving the
Lessee, except for Environmental Claims that would
not reasonably be expected to have a Material
Adverse Effect on the Lessee, any Agent or any
Participant; there are no past, pending or, to the
Lessee's best knowledge after due inquiry,
threatened Environmental Claims in any way
involving or relating to (i) the Lessee, except
for Environmental Claims that could not reasonably
be anticipated, individually or in the aggregate,
to have a Material Adverse Effect on the Lessee,
any Participant or any Agent, or (ii) the
Equipment; Hazardous Substances associated in any
way with the Equipment have not at any time been
generated, used, treated, managed, recycled,
stored, disposed of, Released or transported other
than in compliance with all applicable
Environmental Laws; no polychlorinated biphenyls
(PCBs) are used in connection with or contaminate
any part of the Equipment; the Lessee has no
knowledge of any pending or threatened
Environmental Claim at any treatment, storage or
disposal facility that has received Hazardous
Substances associated in any way with the
Equipment.
(s) Insurance. On the Equipment
Closing Date, the Equipment will be covered by the
insurance required by Article XX of the Lease.
(t) Margin Regulations. None of the
transactions contemplated by the Operative
Documents (including, without limitation, the use
of the proceeds from the sale of the Notes) will
result in a violation of Section 7 of the Exchange
Act or any regulations issued thereunder or
Regulations G, T, U or X of the Board of Governors
of the Federal Reserve System, 12 C.F.R., Chapter
II. None of the proceeds from the sale of the
Notes will be used to purchase or carry (or
refinance any borrowing the proceeds of which were
used to purchase or carry) any "margin stock"
within the meaning of any such Regulations.
(u) Broker's Fee. No broker's or
finder's or placement fee or commission will be
payable with respect to the transactions
contemplated by the Operative Documents as a
result of any action by the Lessee, except for the
fees of Salomon Brothers Inc, which shall be
included in Transaction Expenses.
4.2 Representations and Warranties of the
Owner Participant. The Owner Participant
represents and warrants as follows:
(a) Due Incorporation, etc. It is a
corporation duly organized and validly existing in
good standing under the laws of its jurisdiction
of incorporation, and has the corporate power and
authority to enter into and perform its
obligations under the Operative Documents to which
it is a party.
(b) Due Authorization, Non-
Contravention, etc. The execution, delivery and
performance of the Operative Documents to which it
is a party have been duly authorized by all
necessary corporate action, do not and will not
conflict with, result in any violation of, or
constitute any default under, any provision of any
of its Organic Documents or Contractual
Obligations or any Applicable Law (but only, in
the case of any Contractual Obligations, as to any
such conflict, violation or default which could
not reasonably be expected to have a Material
Adverse Effect with respect to the Owner
Participant) and will not result in or require the
creation of any Lien (other than Permitted Liens
that are not also Owner Participant Liens) on any
part of the Equipment or on any of its properties
and no Governmental Action by, and no notice to or
filing with, any Governmental Authority or
regulatory body is required for the due execution,
delivery and performance by such Owner Participant
of the Operative Documents to which it is a party,
except for such Governmental Actions, notices or
filings as have been duly obtained or made and are
in full force and effect.
(c) Due Execution. The Operative
Documents to which it is a party have been duly
executed and delivered by, and each such Operative
Document constitutes the legal, valid and binding
obligation of, the Owner Participant enforceable
in accordance with its terms.
(d) No Public Offering; Brokers.
Neither the Owner Participant nor any Person
acting on its behalf has directly or indirectly
offered or sold, nor will it offer or sell, the
Notes, or any interest in the Equipment or the
Lease, or any similar securities, or has otherwise
approached or negotiated, nor will it approach or
negotiate, with any Person with respect thereto,
so as to bring any of the transactions
contemplated hereby within the purview of
Section 5 of the Securities Act. It is acquiring
its interest in the Trust Estate for its own
account for investment and not with a view to, or
for sale in connection with, any distribution;
provided that the disposition of its property
shall at all times be and remain within its
control. It has not retained or employed, nor
will it retain or employ, any broker or finder to
act on its behalf in connection with the
transactions contemplated by the Operative
Documents on the Equipment Closing Date and has
not authorized, nor will it authorize any broker
or finder retained or employed by any other Person
so to act.
(e) Owner Participant Liens. The
Equipment and the Trust Estate are free of Owner
Participant Liens.
(f) ERISA. No part of the funds
constituting part of the Equity Amount or
Transaction Expenses, to be used by it to acquire
any interest in the Equipment constitutes an asset
of an "employee benefit plan" (as such term is
defined in Section 3(3) of ERISA) or any "plan"
(as such term is defined in Section 4975(e)(1) of
the Code).
(g) Litigation. There is no pending
or, to the best knowledge of such Owner
Participant, threatened litigation, action,
arbitration or proceeding affecting such Owner
Participant or any of its properties, assets or
revenues before any Governmental Authority which
questions the validity or enforceability of any
Operative Document or which, individually or in
the aggregate, if decided adversely to such Owner
Participant, would reasonably be expected to have
a material adverse effect on its ability to
perform its obligations under the Operative
Documents to which it is a party.
4.3 Representations and Warranties of the
Indenture Trustee. The Indenture Trustee in its
individual capacity represents and warrants as
follows:
(a) Due Organization. It is a national
banking association duly organized and validly
existing in good standing under the laws of the
United States and has all requisite corporate
power and authority to execute, deliver and
perform its obligations under this Participation
Agreement and the other Operative Documents to
which it is a party.
(b) Due Authorization. This
Participation Agreement and the other Operative
Documents to which it is party have been duly
authorized, executed and delivered by the
Indenture Trustee and constitute the legal, valid
and binding obligations of the Indenture Trustee
enforceable against the Indenture Trustee in
accordance with the terms hereof and thereof.
(c) Non-Contravention. Neither the
execution and delivery by the Indenture Trustee of
this Participation Agreement and the other
Operative Documents to which it is party, nor the
authentication by it of the Notes, nor the
consummation by it of the transactions
contemplated hereby or thereby, nor the compliance
by it with any of the terms or provisions thereof
will contravene any Applicable Law, or any
Connecticut or United States judgment or order
applicable to or binding on it, or contravene or
result in any breach of, or constitute any default
under, its Organic Documents or Contractual
Obligations to which it is a party or by which any
of its properties may be bound.
(d) Governmental Action. Neither the
execution and delivery by the Indenture Trustee of
this Participation Agreement and the other
Operative Documents to which it is or is to be
party, nor the performance by it of any of the
transactions contemplated hereby or thereby
requires the consent or approval of, the giving of
notice to, the registration with, or the taking of
any other action in respect of, any Governmental
Authority governing the banking or trust powers of
the Indenture Trustee.
(e) Litigation. There is no pending
or, to the best knowledge of the Indenture
Trustee, threatened litigation, action,
arbitration or proceeding affecting the Indenture
Trustee or any of its properties, assets or
revenues before any Governmental Authority which
questions the validity or enforceability of any
Operative Document or which, individually or in
the aggregate, if decided adversely to the
Indenture Trustee, would reasonably be expected to
have a material adverse effect on its ability to
perform its obligations under the Operative
Documents to which it is a party.
4.4 Representations and Warranties of the
Lenders. Each Lender severally represents and
warrants as follows:
(a) Due Organization. It is duly
organized and validly existing in good standing
under the laws of its jurisdiction of organization
and has all requisite corporate power and
authority to execute, deliver and perform its
obligations under this Participation Agreement and
the other Operative Documents to which it is a
party.
(b) Due Authorization. This
Participation Agreement and the other Operative
Documents to which it is party have been duly
authorized, executed and delivered by such Lender
and constitute the legal, valid and binding
obligations of such Lender enforceable against
such Lender in accordance with the terms hereof
and thereof.
(c) Notes for Investment Only. It is
acquiring the Notes for its own account or for one
or more separate accounts maintained by it for
investment and not with a view to, or for sale in
connection with, any distribution, provided that
the disposition of its property shall at all times
be and remain within its control.
(d) ERISA. At least one of the
following statements is an accurate representation
as to each source of funds (a "Source") to be used
by such Lender to pay the purchase price of the
Notes to be purchased by it hereunder:
(i) the Source is an insurance
company general account as such term is used
in U.S. Department of Labor Prohibited
Transaction Class Exemption ("PTCE") 95-60,
and the amount of reserves and liabilities
(as defined in the annual statement for life
insurance companies approved by the National
Association of Insurance Commissioners (the
"NAIC Annual Statement") and before reduction
for credits on account of any reinsurance
ceded on the coinsurance basis) (the
"Reserves and Liabilities"), for the general
account contract(s) held by or on behalf of
any Plan, together with the amount of the
Reserves and Liabilities for the general
account contracts(s) held by or on behalf of
any other Plans maintained by the same
employer (or any "affiliate" thereof within
the meaning of Section V(a)(1) of PTCE 95-
60), does not exceed 10% of the total
Reserves and Liabilities of such general
account plus surplus, as set forth in the
NAIC Annual Statement filed with the state of
domicile of the insurance company maintaining
such general account; or
(ii) the Source is a separate
account that is maintained solely in
connection with such Lender's fixed
contractual obligations under which the
amounts payable, or credited, to any employee
benefit plan (or its related trust) that has
any interest in such separate account (or to
any participant or beneficiary of such plan
(including any annuitant)) are not affected
in any manner by the investment performance
of the separate account; or
(iii) the Source is either (A) an
insurance company pooled separate account,
within the meaning of PTCE 90-1 (issued
January 29, 1990), or (B) a bank collective
investment fund, within the meaning of PTCE
91-38 (issued July 12, 1991) and, except as
disclosed by such Purchaser to the Lessee and
the Owner Participant in writing pursuant to
this paragraph (iii), no employee benefit
plan or group of plans maintained by the same
employer or employee organization
beneficially owns more than 10% of all assets
allocated to such pooled separate account or
collective investment fund; or
(iv) the Source constitutes assets
of an "investment fund" (within the meaning
of Part V of PTCE 84-14) managed by a
"qualified professional asset manager" or
"QPAM" (within the meaning of Part V of PTCE
84-14), no employee benefit plan's assets
that are included in such investment fund,
when combined with the assets of all other
employee benefit plans established or
maintained by the same employer or by an
affiliate (within the meaning of Section
V(c)(1) of PTCE 84-14) of such employer or by
the same employee organization and managed by
such QPAM, exceed 20% of the total client
assets managed by such QPAM, the conditions
of Part I(c) and (g) of PTCE 84-14 are
satisfied, and neither the QPAM nor a person
controlling or controlled by the QPAM
(applying the definition of "control" in
Section V(e) of PTCE 84-14) owns a 5% or more
interest in the Lessee or the Owner
Participant; or
(v) the Source constitutes assets
managed by an "in-house asset manager" or
"INHAM" (within the meaning of Part IV of
PTCE 96-23), the conditions of Part I(a) of
PTCE 96-23 are satisfied, and neither the
INHAM nor a person controlling or controlled
by the INHAM (applying the definition of
"control" in Section IV(d) of PTCE 96-23)
owns a 5% or more interest in the Lessee or
the Owner Participant; or
(vi) the Source is a governmental
plan; or
(vii) the Source is one or more
employee benefit plans, or a separate account
or trust fund comprised of one or more
employee benefit plans, each of which has
been identified to the Lessee and the Owner
Participant in writing pursuant to this
paragraph (vii); or
(viii) the Source does not include
assets of any employee benefit plan, other
than a plan exempt from the coverage of
ERISA.
As used in this Section 4.4(d), the terms
"employee benefit plan", "governmental plan" and
"separate account" shall have the respective
meanings assigned to such terms in Section 3 of
ERISA.
(e) U.S. Person. It is a "United
States Person" as defined in Section 7701(a)(30)
of the Code.
4.5 Representations and Warranties of Fleet
and the Owner Trustee. Fleet and the Owner
Trustee (where noted) represent and warrant to
each of the other parties hereto that:
(a) Due Organization. Fleet is a
national banking association duly organized and
validly existing in good standing under the laws
of the United States and has all requisite
corporate power and authority to execute, deliver
and perform its obligations under this Agreement
and the Trust Agreement and (assuming due
authorization, execution and delivery of the Trust
Agreement by the Owner Participant) has all
requisite corporate power and authority as Owner
Trustee to execute and deliver the other Operative
Documents to which it is or is to be a party.
(b) Due Authorization. This Agreement
and the Trust Agreement have been duly authorized,
executed and delivered by Fleet and the Owner
Trustee, as the case may be, and constitute the
legal, valid and binding obligations of Fleet and
the Owner Trustee, as the case may be, enforceable
against Fleet and the Owner Trustee, as the case
may be, in accordance with the terms hereof and
thereof. Assuming the due authorization,
execution and delivery of the Trust Agreement by
the Owner Participant, the Operative Documents to
which the Owner Trustee is a party have been duly
authorized, executed and delivered by it and
constitute the legal, valid and binding
obligations of the Owner Trustee enforceable
against it in accordance with the terms thereof.
(c) Non-Contravention. Neither the
execution and delivery by Fleet or the Owner
Trustee, as the case may be, of any of the
Operative Documents to which it is or is to be a
party, nor the consummation by it of the
transactions contemplated thereby nor compliance
by it with any of the terms or provisions thereof
will contravene any Applicable Law of Connecticut,
any Applicable Law of the United States governing
banking and trust powers or any judgment or order
applicable to or binding on it, or contravene or
result in any breach of, or constitute any default
under, its Organic Documents or Contractual
Obligations to which it is a party or by which any
of its properties may be bound.
(d) Governmental Action. Neither the
execution and delivery by Fleet or the Owner
Trustee, as the case may be, of each of the
Operative Documents to which it is or is to be a
party, nor the performance of its obligations
thereunder requires the consent or approval of or
the giving of notice to, the registration with, or
the taking of any other action in respect of, any
Connecticut Governmental Authority or any United
States Governmental Authority governing its
banking and trust powers.
(e) Location. The chief executive
office (as such term is used in Article 9 of the
UCC) of the Owner Trustee is located at Boston,
Massachusetts, and its principal corporate trust
office is located at Hartford, Connecticut.
(f) Title. On the Equipment Closing
Date, the Owner Trustee will have whatever title
to the Items of Equipment delivered on such
Equipment Closing Date as was conveyed to it by
the Lessee.
(g) Litigation. There is no pending
or, to the best knowledge of Fleet or the Owner
Trustee, as the case may be, threatened
litigation, action, arbitration or proceeding
affecting the Owner Trustee or any of its
properties, assets or revenues before any
Governmental Authority which questions the
validity or enforceability of any Operative
Document or which, individually or in the
aggregate, if decided adversely to Fleet or the
Owner Trustee, as the case may be, would
reasonably be expected to have a material adverse
effect on its ability to perform its obligations
under the Operative Documents to which it is a
party.
(h) Liens; Conveyances. The Trust
Estate is free and clear of any Lessor Liens
attributable to Fleet or the Owner Trustee, as the
case may be. Except as contemplated by the
Operative Documents, the Owner Trustee has not
conveyed any interest in the Trust Estate to any
Person.
ARTICLE V
Covenants
5.1 Covenants of the Owner Participant,
Fleet and the Owner Trustee.
(a) Liens. Each of the Owner
Participant, Fleet and the Owner Trustee severally
agrees that at all times the Trust Estate shall be
free of any Owner Participant Liens or Lessor
Liens, respectively, attributable to it. The
Owner Participant, Fleet and the Owner Trustee
each severally agrees that it will, at its own
cost and expense, promptly take such action as may
be necessary duly to discharge any Owner
Participant Lien or Lessor Lien, respectively,
attributable to it and will make restitution and
hold harmless each other Indemnified Person on an
After Tax Basis, from and against any costs or
expenses (including Fees and Expenses) and, any
reduction in the amount payable out of the Trust
Indenture Estate to each present or future holder
of a Note in respect of the Notes, incurred, in
each case, by such party as a result of the
imposition or enforcement of any such Owner
Participant Lien or Lessor Lien attributable to
it; provided, that the Owner Participant and Fleet
may in good faith by appropriate proceedings
contest claims or charges resulting in any such
Owner Participant Lien or Lessor Lien as long as
such proceeding does not involve any material
danger of the sale, forfeiture or loss (or loss of
use) of any Item of Equipment or any other part of
the Trust Estate or the Trust Indenture Estate, or
any interest therein.
(b) No Amendments. Each of Fleet and
the Owner Participant agrees that until expiration
or earlier termination of the Lease it will not
terminate the Trust Agreement or amend the Trust
Agreement in any manner which would be materially
adverse to the Lessee, the Lenders or the
Indenture Trustee without the prior written
consent of the Indenture Trustee and the Lessee.
(c) Change to Principal Place of
Business or Chief Executive Office, etc. Fleet
shall use its best efforts to notify the Owner
Participant, the Indenture Trustee and the Lessee
in writing at least 30 days prior to any change to
its principal place of business, chief executive
office, name or organizational structure or to the
place where the Owner Trustee maintains records
concerning the transactions contemplated hereby
and, in any event, shall so notify such parties
within 30 days after such change.
5.2 Covenants of the Indenture Trustee. The
Indenture Trustee agrees, in its individual
capacity, that:
(a) Discharge of Liens. The Indenture
Trustee shall not create or permit to exist, and
shall, at its own cost and expense, promptly take
such action as may be necessary duly to discharge
all liens and encumbrances on any part of the
Trust Indenture Estate which result from claims
against it in its individual capacity not related
to its Lien and security interest in the Trust
Indenture Estate or the administration of the
Trust Indenture Estate.
(b) Discharge of Indenture. The
Indenture Trustee shall release the Lien of the
Indenture when directed to do so pursuant to
Section 10.01 thereof.
5.3 Covenants of the Lessee.
(a) Further Assurances. The Lessee, at
its own cost and expense, shall cause to be
promptly and duly taken, executed, acknowledged
and delivered all such further acts, documents
(including Bills of Sale) and assurances as any
Participant, the Owner Trustee, the Owner
Participant or the Indenture Trustee may from time
to time reasonably request in order to carry out
more effectively the intent and purposes of this
Participation Agreement and the other Operative
Documents, and the transactions contemplated
hereby and thereby. The Lessee, at its own cost
and expense, shall cause the financing statements
(and continuation statements with respect thereto)
and documents enumerated and described in
Schedule IV to be recorded or filed at such places
and times in such manner, and shall take all such
other actions or cause such actions to be taken,
as may be necessary or requested by the Owner
Trustee, the Owner Participant or the Indenture
Trustee, in order to establish, preserve, protect
and perfect the good and marketable title of the
Owner Trustee to the Equipment, and the Owner
Trustee's and the Owner Participant's rights under
this Participation Agreement and the other
Operative Documents and, so long as any Notes are
outstanding under the Indenture, the first
priority Lien and security interest of the
Indenture Trustee in the Trust Indenture Estate
and the Indenture Trustee's rights under this
Participation Agreement and the other Operative
Documents referred to and included under the
Granting Clauses of the Indenture (including,
without limitation, the filing of financing
statements in appropriate jurisdictions and filing
offices relating to any site to which any portion
of the Equipment may be relocated and the filing
of continuation statements in appropriate
jurisdictions and filing offices). The Lessee
shall promptly from time to time furnish to the
Owner Participant or the Owner Trustee such
information as may be required to enable the Owner
Participant or the Owner Trustee, as the case may
be, to timely file any reports and obtain any
licenses or permits required to be filed or
obtained by the Owner Trustee as the lessor under
the Lease or as the owner of the Equipment or the
Owner Participant as the beneficiary of the Trust
Estate with any Governmental Authority (including
environmental and tax authorities). The Lessee
will at the Lessee's expense furnish to Owner
Trustee and the Indenture Trustee, annually and at
the time continuation statements are required to
be filed, an opinion of counsel satisfactory to
Owner Trustee and the Indenture Trustee stating
that (1) all financing statements or other notices
have been filed for record in all public offices
wherein such filing is necessary to protect the
right, title and interest of the Owner Trustee in
and to the Equipment and to perfect the Lien and
security interest in the Trust Indenture Estate
created pursuant to the Indenture under the
provisions of the UCC and (2) all continuation
statements and amendments to such financing
statements required to maintain the priority and
perfection of such Liens and security interests
have been recorded, registered and filed as
necessary in order to maintain such priority and
perfection.
(b) Maintenance of Corporate Existence,
etc. The Lessee shall at all times maintain its
existence as a corporation in good standing under
the laws of the State of Delaware. The Lessee
shall do or shall cause to be done all things
necessary to preserve and keep in full force and
effect its rights (charter and statutory) and
franchises.
(c) Change to Principal Place of
Business or Chief Executive Office, Etc. The
Lessee shall provide the Owner Trustee, the Owner
Participant and the Indenture Trustee with ten
(10) Business Days' prior written notice of any
change to its chief executive office, principal
place of business, name or corporate structure or
to the place where it maintains its business
records.
(d) Lessee to Defend Title. The Lessee
covenants that it shall, at all times, at its own
cost and expense, warrant and defend the title of
the Owner Trustee to the Trust Estate and the Lien
and security interest of the Indenture Trustee in
and to the Trust Indenture Estate against any Lien
(other than Permitted Liens), claims and demands
of or against the Lessee and all other Persons
claiming through the Lessee. The Lessee covenants
that with respect to any Item of Equipment that
has not had a Final Acceptance Date as of the
Equipment Closing Date, the Lessee shall on or
prior to September 30, 1997, either have (a)
caused a Final Acceptance Date to occur, or (b)
rejected such Item of Equipment (based upon such
Item's failure to comply with the operating
specifications therefor) after an Equipment
Closing Date has occurred with respect to such
Item of Equipment and prior to the Final
Acceptance Date for such Item.
(e) Furnishing of Information. The
Lessee agrees to furnish to each Participant and
each Agent:
(i) within 120 days after the close
of each fiscal year of the Lessee occurring
after the Initial Closing Date, its Annual
Report on Form 10-K which conforms to the
requirements therefor; provided, that if the
Lessee ceases to file reports with the SEC
pursuant to the Exchange Act, it shall
deliver instead (A) the audited consolidated
balance sheet of the Lessee and its
consolidated Subsidiaries at the end of, and
(B) the related consolidated statements of
income, statements of cash flow and
statements of shareholders' equity for such
fiscal year, each of which financial
statements shall present fairly the
consolidated financial position of the Lessee
and its consolidated Subsidiaries at December
31 of such fiscal year and the consolidated
results of operations and cash flows for such
fiscal year, all in conformity with GAAP and
be accompanied by an opinion of the Lessee's
independent certified public accountants, who
shall be independent public accountants of
recognized national standing to such effect;
(ii) within sixty (60) days after
the end of each of the first three (3)
quarters of each of its fiscal years, its
Quarterly Report on Form 10-Q which conforms
to the requirements therefor; provided, that
if the Lessee ceases to file reports with the
SEC pursuant to the Exchange Act, it shall
deliver instead (A) the unaudited
consolidated balance sheet of the Lessee and
its consolidated Subsidiaries at the end of,
and (B) the related consolidated statements
of income, shareholders' equity and cash
flows for, the interim period ending at the
end of such quarter, each of which financial
statements will present fairly in all
material respects the consolidated financial
position of the Lessee and its consolidated
Subsidiaries at the end of such quarter, and
the consolidated results of operations and
cash flows for such quarter, all in
conformity with GAAP, accompanied by a
statement of the Chief Financial Officer, the
Comptroller, Treasurer or an Assistant
Treasurer of the Lessee to such effect;
(iii) simultaneously with the
delivery of the year-end financial statements
referred to in (i) above, a certificate of
the Chief Financial Officer, the Comptroller,
Treasurer or an Assistant Treasurer of the
Lessee stating that such officer has reviewed
the activities of the Lessee during the
immediately preceding fiscal year and
whether, to the knowledge of such officer,
there exists on the date of such certificate
any Default, Event of Default, Indenture
Event of Default, or Event of Loss, and, if
any Default, Event of Default, Indenture
Event of Default or Event of Loss exists,
specifying the nature and period of existence
thereof and the action the Lessee is taking
and proposes to take with respect thereto;
(iv) immediately upon the Lessee
becoming aware of the existence of a Default
or Event of Default, a written notice
specifying the nature of such Default or
Event of Default and what action the Lessee
is taking or proposes to take with respect
thereto;
(v) all reports and permits
required under Applicable Law to be filed or
delivered by any Lessor Party with respect to
the Equipment;
(vi) promptly, all reports or
statements which the Lessee may make to, or
file with, the Securities Exchange Commission
or any successor agency thereto; and
(vii) promptly, such additional
information with respect to the financial
condition or business of the Lessee as any
Participant or the Indenture Trustee or the
Owner Trustee may reasonably request.
(f) Inspection. The Lessee will permit
each Participant, the Owner Trustee and the
Indenture Trustee, upon reasonable notice and at a
mutually convenient time and at their expense so
long as no Default or Event of Default has
occurred and is continuing (and thereafter at the
expense of the Lessee), (i) to visit the sites
where the Items of Equipment are located and
inspect such Equipment and related records and the
corporate headquarters of the Lessee and (ii) to
discuss with the relevant officers of the Lessee
the Items of Equipment and the financial affairs
and condition of the Lessee or any Subsidiary
thereof insofar as these are relevant to their
interests hereunder and subject to any legal
restrictions on disclosure.
(g) Merger, Consolidation, etc., of
Lessee. The Lessee covenants that it shall not
consolidate or merge with or into any Person, nor
sell, transfer, convey or lease all or
substantially all its properties or assets as an
entirety to any Person, unless:
(i) the successor entity formed by
such consolidation or with or into which it
is merged, or the successor entity that
acquires by conveyance, transfer or lease all
or substantially all its assets as an
entirety, shall be organized under the laws
of the U.S., a state thereof or the District
of Columbia, shall be authorized under all
Applicable Laws to operate the Equipment and
perform the obligations of the Lessee under
the Operative Documents to which it is a
party to the same extent as the Lessee, shall
have a tangible net worth (as determined in
accordance with GAAP) not less than the
tangible net worth of the Lessee immediately
prior to giving effect to such transaction,
shall execute and deliver to the Owner
Trustee, the Indenture Trustee and each
Participant an agreement in form and
substance satisfactory to the Owner Trustee,
the Indenture Trustee and each Participant,
containing an assumption by such successor
entity of the due and punctual performance of
each covenant and condition of the Operative
Documents to be performed or observed by the
Lessee;
(ii) immediately after giving
affect to such transaction, no Default or
Event of Default shall have occurred and be
continuing;
(iii) the Lessee or such successor
entity, as the case may be, shall have
delivered to the Owner Trustee, the Indenture
Trustee and each Participant an Officer's
Certificate and an opinion of counsel
satisfactory to the Owner Trustee, the
Indenture Trustee and each Participant,
stating that such consolidation, merger,
sale, conveyance, transfer or lease, and the
assumption agreement required by clause (i)
above, comply with this Section 5.3, that all
conditions precedent relating to such action
have been satisfied, that such assumption
agreement has been duly authorized, executed
and delivered by such successor entity and
constitutes the legal, valid and binding
obligation of such successor entity,
enforceable against such successor entity in
accordance with its terms and that the rights
of the Participants under the Operative
Documents will not be adversely affected
thereby, and that such transaction will not
result in adverse tax consequences for the
Owner Trustee, the Indenture Trustee or any
Participant with respect to the transactions
contemplated by the Operative Documents; and
(iv) the Guarantor shall have
delivered to the Owner Trustee, the Indenture
Trustee and each Participant a confirmation
in form and substance satisfactory to each
such Person confirming its obligations under
the Guaranty with respect to such successor
entity.
Upon any such consolidation or merger,
or any sale, conveyance, transfer or lease of
substantially all the assets of the Lessee in
accordance with this Section 5.3(g), the successor
entity formed by such consolidation or with or
into which the Lessee shall be merged, or to which
such sale, conveyance, transfer or lease shall be
made, shall succeed to, and be substituted for,
and may exercise every right and power and shall
be subject to each and every obligation of, the
Lessee under the Operative Documents to which it
is a party with the same effect as if such
successor corporation had been named as the Lessee
therein. No such sale, conveyance, transfer or
lease of all or substantially all the assets of
the Lessee shall have the effect of releasing the
Lessee or any successor entity that shall
theretofore have become such in the manner
prescribed in this Section 5.3(g) from its
liability under the Operative Documents to which
it is a party.
(h) Purchase of Notes. Other than in
connection with the exercise of the EBO Option
under the Lease, neither the Lessee nor any of its
Affiliates will purchase or otherwise acquire any
of the Notes.
(i) Environmental Matters. The Lessee
shall
(i) comply in all respects, and
cause all other Persons to comply in all
respects, with all Environmental Laws
applicable in any way to, or otherwise
affecting, the Equipment, and the Lessee
shall have sole responsibility for the
expenses (including legal, consultant and
other professional fees and expenses and
costs of investigation) associated with such
compliance;
(ii) obtain, at or prior to the
time required by applicable Environmental
Laws, all Governmental Actions necessary in
connection with the Equipment, and maintain
such Governmental Actions in full force and
effect;
(iii) not treat, recycle, manage,
generate, transport, store or Release, or
permit the treatment, recycling, management,
generation, transportation, storage or
Release of, Hazardous Substances used in
connection with the Equipment, other than in
compliance with all applicable Environmental
Laws;
(iv) conduct and complete, at its
sole cost and expense, any investigation,
study, sampling, monitoring and testing and
undertake any cleanup, removal, remedial,
corrective, mitigation, response or other
action necessary or advisable to abate,
correct, remove and clean up or remediate any
Release or threatened Release of any
Hazardous Substance associated in any way
with the Equipment, in accordance with
applicable Environmental Laws;
(v) provide reasonably detailed
written notice, within 10 days of Lessee's
discovery thereof, of any fact, circumstance,
condition, occurrence or Release relating in
any way to the Equipment that has resulted or
is reasonably likely to result in (i)
noncompliance with any applicable
Environmental Law or (ii) an Environmental
Claim; and
(vi) provide to each Participant
and each Agent copies of all written
communications relating to any alleged
violation of or noncompliance with any
Environmental Law or any Environmental Claim
relating to the Equipment simultaneously with
the giving or receiving of such written
communications.
(j) Purchase Agreement; Invoices. The
Lessee shall deliver or otherwise make available
to each of the Indenture Trustee and the Owner
Participant copies of such Purchase Documents
relating to the Items of Equipment delivered on
the Equipment Closing Date and Invoices from the
respective Sellers thereof specifying the amounts
comprising the respective purchase prices of such
Items, in each case as such Person may reasonably
request.
(k) Performance Under Lease. The
Lessee agrees that it will fully perform its
obligations under the Lease.
5.4 Transfers of Notes. Each Lender agrees
that it will not transfer any Note unless such
Note is registered under the Securities Act or an
exemption from such registration is available.
Furthermore, each Lender, solely with respect to
itself, severally covenants that, except pursuant
to Section 2.13 or 2.17 of the Trust Indenture, it
will not transfer any Note to any Person unless
such Person (the "Proposed Lender") (a) shall have
agreed in writing to be bound by this
Participation Agreement, and the other Operative
Documents to which the Lenders are a party, as
though named as a Lender herein and therein and
(b) the representations set forth in Section 4.4
hereof (other than Section 4.4(e)) are true with
respect to such Proposed Lender as of the date of
the transfer of such Notes (provided that if the
representation in Section 4.4(d) is correct with
respect to such Proposed Lender only because
clause (vii) applies, no such transfer of the
Notes to such Proposed Lender shall be made
without the prior consent of the Lessee and the
Owner Participant).
5.5 Advertising; Trademarks. Each
Participant and Agent agrees that it will not
advertise, or otherwise publish for advertising
purposes in any news medium, the fact that it has
furnished financing or lease accommodations to any
party hereto without first obtaining the written
consent of such party; provided, that such consent
shall not be required in connection with the
transfer by the Owner Participant of its right,
title and interest in the Trust Estate in
accordance with the terms of the Operative
Documents. Notwithstanding any other provision of
any Operative Document, no Participant or Agent
will have any right to use any trademark, trade
name or trade dress of, or otherwise refer to, any
party hereto in any promotion or publication in a
news medium without first obtaining the written
consent of such party, except for identifying the
Equipment as having been owned by, leased to or
used by Zenith, in connection with (a) the
repossession of or foreclosure on the Equipment,
or (b) any transfer by the Owner Participant of
its right, title and interest in the Trust Estate
in accordance with the terms of the Operative
Documents.
ARTICLE VI
Indemnities
All payments to be made by the Lessee to
any Indemnified Person under this Article VI will
be free of expense to such Indemnified Person for
collection or other charges. The Lessee's
obligations to any Indemnified Person under the
indemnities provided in this Participation
Agreement shall be those of a primary obligor
whether or not such Indemnified Person shall also
be indemnified with respect to the same matter
under the terms of any other agreement
contemplated hereby or thereby, or any other
document or instrument whether or not related to
the transactions contemplated hereby or thereby,
and the Persons seeking indemnification from the
Lessee pursuant to any provisions of this
Participation Agreement may proceed directly
against the Lessee without first seeking to
enforce any other right of indemnification.
6.1 General Indemnity. The Lessee hereby
assumes liability for, and (whether or not any of
the transactions contemplated hereby shall be
consummated and whether or not the Lease, any
Lease Supplement or other Operative Document has
expired or been terminated) agrees to defend,
indemnify, protect, release, save and hold
harmless and keep whole each Indemnified Person,
on an After-Tax Basis, from and against any and
all liabilities (including but not limited to
liabilities arising out of the doctrine of strict
liability or arising out of violation of
regulatory requirements of any kind), obligations,
losses, damages, penalties, claims (including
Environmental Claims), actions, suits, judgments,
costs, expenses, charges, fees and disbursements
(including out of pocket fees and expenses, Fees
and Expenses and costs of investigation), whether
any of the foregoing be founded or unfounded, of
whatsoever kind and nature (collectively, the
"Claims") that may be imposed on, incurred by or
asserted against any Indemnified Person or any
Equipment, in any way relating to or arising out
of (a) the Equipment or the Operative Documents
(including, without limitation, the performance or
enforcement of all obligations of the Lessee or
the Guarantor under the Operative Documents and
payments made pursuant thereto or any other
transactions contemplated thereby or the breach of
any covenant or agreement contained therein by the
Lessee or the Guarantor, or the falsity of any
representation or warranty made therein by the
Lessee or the Guarantor), or the design, manufac-
ture, construction, reassembly, purchase,
acceptance, possession, rejection, control,
financing, refinancing, modification, alteration,
testing, non-use, ownership, delivery,
nondelivery, use, operation, leasing, subleasing,
condition, maintenance, repair, sale, abandonment,
storage, substitution, insurance, redelivery or
de-installation, return or other disposition of
the Equipment or any Item thereof (whether or not
such Equipment or Item is in compliance with the
Operative Documents), (b) any other disposition
of, or the imposition of any Lien (or incurrence
of any liability to refund or pay over any amount
as a result of any Lien) on, the Equipment or any
interest therein, including, without limitation,
any claim or penalty arising out of violations of
Applicable Law, or in tort (whether creating a
strict liability or otherwise) or arising from the
active or passive negligence of an Indemnified
Person, latent or other defects, whether or not
discoverable by any Indemnified Person, or any
other Person, loss of or damage to any property or
the environment, death of or injury to any Person
and any claim for patent, trademark or copyright
infringement, (c) the offer, issuance, sale,
resale or delivery of any Note or any direct or
beneficial interest under any Operative Document,
(d) any Event of Default, any Event of Loss, any
redemption, refunding, prepayment or transfer of
the Notes made in accordance with the Operative
Documents, any amendment, modification or
supplement to any Operative Document, or any
transfer of all or any part of the right, title
and interest of the Owner Trustee or any Owner
Participant in the Trust Estate or in, to and
under any of the Operative Documents, (e) the
presence, Release or threatened Release of any
Hazardous Substance in, on, at or from any Item of
Equipment or any facility or site in or on which
any Item of Equipment is or was present, stored,
used, recycled, managed, treated, disposed of, or
located at any time, (f) any transport, treatment,
recycling, storage, Release, disposal or
arrangement therefor, of any Hazardous Substance
generated by, used in connection with or otherwise
present in or on any Item of Equipment or any
facility or site in or on which any Item of
Equipment is or was present, stored, used,
recycled, managed, treated, disposed of, or
located at any time, (g) any Environmental Law or
any published policy or guidance document issued
in connection therewith or demand of a
Governmental Authority applicable in any way
whatsoever related to any Item of Equipment or any
facility or site in or on which any Item of
Equipment is or was present, stored, used,
recycled, managed, treated, disposed of, or
located at any time, (h) any loss of or damage to
any property, natural resources or the
environment, or death of or injury to any Person,
resulting from or relating to any Hazardous
Substance that is or was present, used, generated,
treated, stored, recycled, managed, transported or
Released in connection with any Item of Equipment
or any facility or site in or on which any Item of
Equipment is or was present, stored, used,
recycled, managed, treated, disposed of or
otherwise located at any time or (i) any non-
exempt prohibited transaction under Section 406 of
ERISA or Section 4975 of the Code; provided, that
the Lessee shall not be required pursuant to this
Section 6.1 to indemnify:
(i) any Indemnified Person for any
Claim to the extent resulting or arising from
acts or events occurring after redelivery of
all of the Items of Equipment in accordance
with the Lease and payment of all Rent due
and payable but only to the extent not
resulting or arising from acts or events
occurring prior to such redelivery;
(ii) any Indemnified Person for
loss or liability to the extent resulting
from the gross negligence or wilful
misconduct of such Indemnified Person or a
Related Indemnified Person of such Person
(for purposes of this Section, the Indenture
Trustee shall not be deemed a Related
Indemnified Person of any Lender and the
Owner Trustee shall not be deemed to be a
Related Indemnified Person of the Owner
Participant), or from such Indemnified
Person's or a Related Indemnified Person's
breach of any of its representations or
warranties or covenants contained in any
Operative Document;
(iii) any Indemnified Person for
any Taxes, and any cost or expense of
contesting any such Taxes, other than any
Item referred to in clause (i) above which
constitutes a Tax provided, however, that
this clause (iii) does not affect any
payments otherwise payable hereunder on an
After-Tax Basis;
(iv) Fleet, the Owner Trustee or
the Owner Participant, as the case may be, in
connection with any claim resulting from any
Lessor Lien or any Owner Participant Lien
attributable to it;
(v) the Lenders, Fleet, the Owner
Trustee or the Owner Participant, as the case
may be, in connection with any claim
resulting from the sale, lease or other
disposition by the Lenders, Owner Trustee or
Owner Participant, as the case may be, of
their respective rights in the Notes, the
Equipment or any part thereof or any right to
or interest in the Operative Documents except
for any transfer or disposition by reason of
or pursuant to (A) any sublease, substitution
or maintenance of, or modification to, any
Item of Equipment, (B) the Lessee's exercise
of the Purchase Option or the EBO Option, or
the option to terminate the Lease with
respect to certain Items for obsolescence
pursuant to Article VII of the Lease, (C) an
Event of Loss, or a condemnation or taking
not constituting an Event of Loss, (D) after
or during the continuance of an Event of
Default, or (E) Lessee's exercise of its
rights under Article XI or XVI hereof or,
with respect to the Lenders, any transfer of
the Notes pursuant to Section 2.13 or 2.17 of
the Indenture, all as specifically
contemplated by the Operative Documents
(items described in (A)-(E) above being
defined as "Excepted Transfers");
(vi) any Indemnified Party in
connection with any claim resulting from
either Agent's failure to distribute funds
held by it in accordance with the terms of
the Operative Documents; or
(vii) the Owner Participant or any
Related Indemnified Person of such Person in
connection with any claim arising from or
related to any prohibited transaction or
other violation of Section 406 of ERISA or
Section 4975 of the Code resulting from or
attributable to an alleged breach of
fiduciary duty or any prohibited transaction
by the Owner Participant or such Related
Indemnified Party within the meaning of
Section 406 of ERISA or Section 4975 of the
Code.
The indemnities set forth in this
Section 6.1 shall not constitute a guarantee,
representation or warranty to any Indemnified
Person of, or as to the value or useful life of,
any Item of Equipment or a guarantee,
representation or warranty that any debt incurred
by the Owner Participant to finance its Equity
Amount will be paid. Upon payment in full of any
indemnity pursuant to this Section 6.1, the Lessee
shall, to the extent of such payment and so long
as no Event of Default shall have occurred and be
continuing, be subrogated to any rights of the
Indemnified Person in respect of the matter
against which such indemnity was given (other than
with respect to any insurance policies carried by
such Indemnified Person).
Subject to the provisions of the
following paragraph, the Lessee shall at its sole
cost and expense be entitled to control, and shall
assume full responsibility for, the defense of any
Claim; provided, that the Lessee shall keep the
Indemnified Person which is the subject of such
proceeding fully apprised of the status of such
proceeding and shall provide such Indemnified
Person with all information with respect to such
proceeding as such Indemnified Person shall
reasonably request.
Notwithstanding any of the foregoing to
the contrary, the Lessee shall not be entitled to
control and assume responsibility for the defense
of such Claim unless it shall have confirmed in
writing to the relevant Indemnified Person that
such Claim is covered by the terms of the
indemnity set forth herein and that it
acknowledges its liability to fully indemnify such
Indemnified Person in respect thereof or if (i) an
Event of Default shall have occurred and be
continuing, (ii) such proceeding will involve any
material danger of the sale, forfeiture or loss
of, or the creation of any Lien (other than any
Permitted Lien or a Lien which is adequately
bonded to the satisfaction of such Indemnified
Person) on any Item of Equipment, (iii) the
amounts involved, in the good faith opinion of
such Indemnified Person, are likely to have an
adverse effect on the business of such Indemnified
Person other than the ownership, leasing and
financing of the Equipment, (iv) in the good faith
opinion of such Indemnified Person, there exists
an actual or potential conflict of interest such
that it is advisable for such Indemnified Person
to retain control of such proceeding or (v) such
claim or liability involves the possibility of
criminal sanctions or liability to such
Indemnified Person. In any of the circumstances
described above, the Indemnified Person shall be
entitled to control and assume responsibility for
the defense of such claim or liability at the
expense of the Lessee. In addition, any
Indemnified Person may participate in any
proceeding controlled by the Lessee pursuant to
this Section 6.1, at its own expense in respect of
any such proceeding as to which the Lessee shall
have acknowledged in writing its obligation to
indemnify the Indemnified Person pursuant to this
Section 6.1, and at the expense of Lessee in
respect of any such proceeding as to which the
Lessee shall not have so acknowledged its
obligation to the Indemnified Person pursuant to
this Section 6.1. The Lessee may in any event
participate in all such proceedings at its own
cost. Nothing contained in this Section 6.1 shall
be deemed to require an Indemnified Person to
contest any Claim or to assume responsibility for
or control of any judicial proceeding with respect
thereto.
6.2 Payment of Taxes; General Tax
Indemnity.
(a) General Taxes. Subject to the
provisions of Section 6.2(b), the Lessee agrees to
pay and assume liability for, and does hereby
agree to indemnify, protect, defend and hold
harmless, on an After-Tax Basis, each Indemnified
Person from and against any and all Taxes imposed
upon or payable by such Indemnified Person
(including amounts payable by such Indemnified
Person solely as withholding agent) or the Lessee
or withheld from any payment pursuant to the
Operative Documents, whether imposed against the
Equipment or any Item of Equipment, any
Modification, or any part or portion thereof or
interest therein, or the Notes, or otherwise in
connection with or relating to or on or with
respect to (i) this Agreement or any of the other
Operative Documents or any amendment, supplement,
waiver or consent thereto or the execution,
delivery or performance of any thereof; (ii) the
Equipment, any Item of Equipment, any
Modification, or any interest therein; (iii) the
acquisition, construction, purchase, acceptance,
possession, rejection, ownership, delivery,
nondelivery, return, financing, refinancing,
mortgaging, repossession, transfer, control, use,
non-use, operation, leasing, subleasing,
registration, re-registration, hire, condition,
maintenance, storage, modification, importation,
exportation, repair, substitution, replacement,
insuring, improvement, sale, abandonment,
redelivery, location, transfer of title or other
application or disposition of or with respect to
the Equipment, any Item of Equipment, any part of
the Equipment, any Modification, or any interest
therein; (iv) the payment of Rent or other
amounts, receipts, income or earnings arising from
or received with respect to the Equipment or any
part thereof or interest therein or any
application, acquisition or disposition thereof;
(v) any other amount paid or payable pursuant to
the Operative Documents or any document related
thereto or the property, income or other proceeds
with respect to the property held in the Trust
Estate or the Indenture Estate; (vi) the payment
of principal of, or interest or premium on, or
other amounts payable with respect to, or the
issuance, acquisition, modification, refinancing,
reoptimization, holding, sale, assignment,
transfer or other disposition of, any Note; or
(vi) otherwise with respect to or in connection
with the transactions contemplated by the
Operative Documents.
(b) The Lessee will have no obligation
under Section 6.2(a) with respect to any one or
more of the following:
(i) Taxes imposed on an Indemnified
Person by the United States or, in the case
of the Owner Participant, any foreign taxing
authority and, in each case, that are
measured by, based on or with respect to the
net or gross income or receipts, items of tax
preference, excess profits, conduct of
business, capital or net worth of such
Indemnified Person provided, however, that
the exclusion in this subparagraph (i) (A)
shall apply to Taxes imposed by any foreign
taxing jurisdiction on the Owner Participant
only to the extent that such Taxes would have
been imposed in the absence of (v) the use,
location, registration, subleasing, leasing
or operation of the Equipment or any part
thereof in such foreign taxing jurisdiction,
(w) the execution or delivery of any
Operative Document in such foreign taxing
jurisdiction, (x) the making or receipt of
any payment pursuant to the Operative
Documents in such foreign taxing
jurisdiction, (y) the identity or activities
or presence of the Lessee, the Guarantor or
any Lessee Person in such foreign taxing
jurisdiction or (z) the performance of or
exercise of rights, powers or remedies under
the Operative Documents; and (B) shall not
apply to any Taxes that are, or are in the
nature of, sales, use, transfer, value-added,
ad valorem, property, license, stamp or
rental Taxes or similar Taxes; provided, that
this Section 6.2(b)(i) (and each other
exclusion contained in Section 6.2(b)) shall
not be interpreted to exclude any amounts
necessary to make any payment on an After-Tax
basis;
(ii) Taxes that are imposed by the
State of Illinois or any local government
authority therein that are based on or
measured by or with respect to the net income
or receipts, of such Indemnified Person
provided, that there shall not be excluded
under this subparagraph (ii) any Taxes that
are, or are in the nature of, sales, use,
transfer, value-added, ad valorem, property,
license, stamp or rental Taxes or similar
Taxes imposed by the State of Illinois or any
local government authority therein;
(iii) Taxes that are imposed by any
state of the United States or any local
government authority therein and based on or
measured by or with respect to the net or
gross income or receipts, items of tax
preference, excess profits, conduct of
business, capital or net worth; provided,
that the exclusion in this subparagraph (iii)
shall apply to Taxes imposed by any state or
local government political subdivision or
taxing authority therein only to the extent
that such Taxes would have been imposed in
the absence of the use, location,
registration, subleasing, leasing or
operation of the Equipment or any part
thereof in such state or locality and,
provided, further, that there shall not be
excluded under this subparagraph (iii) any
Taxes that are, or are in the nature of,
sales, use, transfer, value-added, ad valorem
property, license, stamp or rental Taxes or
similar Taxes;
(iv) Taxes imposed against or payable
by an Indemnified Person attributable to (A)
any voluntary sale, assignment, transfer or
other disposition (a "Transfer") by such
Indemnified Person of any interest in the
Owner Trust, the Equipment or any interest
therein, the Notes, or any interests or
obligations arising under the Operative
Documents other than (1) any Transfer
contemplated by the Operative Documents to
occur on the Equipment Closing Date, (2) any
Refunding pursuant to Article XI of the
Participation Agreement, (3) any Transfer
while a Material Default or an Event of
Default has occurred and is continuing or (4)
any Transfer in connection with the exercise
of any of the Lessee's rights or performance
of the Lessee's obligations under the
Operative Documents (including without
limitation, any sale, assignment, transfer or
disposition under Articles VI, VII, VIII, IX,
X and XI of the Lease) or (B) any involuntary
transfer by such Indemnified Person of any
interest in the Owner Trustee, the Trust
Estate, the Equipment or any part thereof or
interest therein, the Notes or any interests
or obligations arising under the Operative
Documents resulting from any bankruptcy or
other proceeding for relief of debtors in
which such Indemnified Person is the debtor
or any foreclosure by a creditor of the
Indemnified Person other than any such
transfer following a Default or an Event of
Default;
(v) with respect to the Equipment,
Taxes attributable to any period after the
expiration or earlier termination of the
Lease with respect to the Equipment and, if
the Lessee is required to return such
Equipment to the Owner Trustee, the return of
the Equipment to the Owner Trustee in
accordance with the terms of the Lease and
payment in full of all amounts then due under
the Operative Documents, unless and to the
extent such Taxes are attributable to
actions, omissions or events occurring in
connection with the exercise of remedies
following the occurrence and continuance of a
Material Default or an Event of Default;
provided, that with respect to the Equipment,
there shall not be excluded under this
subparagraph (v) any Taxes to the extent such
Taxes relate to events, acts or omissions or
circumstances occurring or matters arising
prior to or simultaneously with such
expiration or termination or, if applicable,
such return or to payments made pursuant to
the Operative Documents;
(vi) any Taxes imposed against or
payable by an Indemnified Person resulting
from the gross negligence or willful
misconduct of such Indemnified Person;
(vii) Taxes imposed on or with respect
to or payable by the Owner Trustee or the
Indenture Trustee based on, measured by or
imposed with respect to any fees paid to or
accruable by the Owner Trustee or the
Indenture Trustee, as the case may be, in its
capacity as Owner Trustee or the Indenture
Trustee, as the case may be;
(viii) with respect to the Noteholders
only, Taxes imposed against or payable by any
Noteholder by or to any jurisdiction to the
extent such Taxes would not have been imposed
but for such Noteholder being organized under
the laws of such jurisdiction or engaging in
such jurisdiction in activities unrelated to
the transactions contemplated by the
Operative Documents;
(ix) with respect to the Noteholders
only, United States federal, state and local
income Taxes which are required to be
withheld from payments hereunder (or under
the Lease) to or for the benefit of any
Noteholder;
(x) in the case of payments to or for
the benefit of the Owner Participant, Taxes
imposed, or which are required to be withheld
from payments hereunder (or under the Lease),
solely as a result of the Owner Participant
being a Non-U.S. Person;
(xi) Taxes which have been included in
Lessor's Cost to the extent actually paid on
or before the Equipment Closing Date;
(xii) Taxes imposed upon the Owner
Participant for which the Lessee is obligated
to indemnify the Owner Participant pursuant
to the Tax Indemnity Agreement; and
(xiii) Taxes imposed against a
transferee (or subsequent transferee) of an
original Indemnified Person to the extent of
the excess of such Taxes over the amount of
such Taxes which would have been imposed
against the original Indemnified Person had
there not been a transfer by such Original
Indemnified Person of its interest in the
Owner Trustee, the Trust Estate, the
Equipment or any part thereof or interest
therein, or the Notes; provided, however,
that this subparagraph (xiii) shall not apply
to any transfer following the occurrence and
continuance of a Material Default or an Event
of Default or to any amounts necessary to
make any payments hereunder on an After-Tax
Basis.
(c) Calculation of General Tax
Indemnity Payments; Tax Savings. Any payment or
indemnity to or for the benefit of any Indemnified
Person with respect to any Tax which is subject to
indemnification under Section 6.2(a) hereof shall
be made on an After-Tax Basis. If, by reason of
any payment made on an "After-Tax Basis" to or for
the account of an Indemnified Person by or on
behalf of the Lessee pursuant to Section 6.1, this
Section 6.2, Article VII, or any other Operative
Document other than the Tax Indemnity Agreement
(or the circumstances or event giving rise
thereto) such Indemnified Person or any of its
Affiliates realizes a net Tax benefit, refund,
saving, deduction or credit that results in a
reduction in Taxes for which the Lessee is not
required to indemnify such Indemnified Person
under this Agreement or the other Operative
Documents and such reduction in Taxes was not
previously taken into account in computing the
amount of the payment to such Indemnified Person,
such Indemnified Person shall pay to the Lessee on
an After-Tax Basis an amount equal to the net
reduction in Taxes, if any, as determined in good
faith by the Indemnified Person, realized by such
Indemnified Person or any of its Affiliates which
is attributable to such net Tax benefit, refund,
saving, deduction or credit. The Indemnified
Person shall make such payment within 30 days
after it or any of its Affiliates actually
realizes such reduction in Taxes. Each of the
Owner Participant, the Owner Trustee and the Trust
Estate agrees to use its reasonable efforts and to
cause its Affiliates (in a manner consistent with
its overall financial and public relations
interests) to seek and claim, and further agrees
to take such actions as the Lessee may reasonably
request, as long as such efforts or actions do not
expose such Persons to a risk of material adverse
consequences (determined in good faith judgment of
the Indemnified Person), and such Indemnified
Person is indemnified in a manner satisfactory to
such Indemnified Party, determined in its sole
discretion for any adverse consequences, to
realize any refunds, deductions or other tax
benefits that would reduce the Lessee's indemnity
obligations hereunder. Any costs incurred by an
Indemnified Person in pursuing the actions
contemplated by the preceding sentence shall be
for the account of the Lessee. Notwithstanding
the foregoing provisions of this Section 6.2(c),
(A) an Indemnified Person shall not be obligated
to make any payment pursuant to this
Section 6.2(c) if, and for so long as, a Material
Default or an Event of Default shall have occurred
and be continuing (but shall hold such amount for
the benefit of the Lessee and pay such withheld
amount to the Lessee promptly following the date
on which the Material Default or Event of Default
is no longer continuing) and (B) to the extent the
amount of such payment by the Indemnified Person
to the Lessee made pursuant to Section 6.2(c) (all
determined without regard to any amount necessary
to make such payments on an After-Tax Basis) would
exceed the excess of all payments made on an
After-Tax Basis by the Lessee to such Indemnified
Person pursuant to Section 6.1, Section 6.2(a),
Article VII or the other Operative Documents other
than the Tax Indemnity Agreement (all determined
without regard to any amount necessary to make
such payments on an After-Tax Basis) over the
amount of all prior payments by such Indemnified
Person to the Lessee of tax benefits pursuant to
this paragraph (c) (determined without regard to
any amounts necessary to make such payments on an
After-Tax Basis), such excess shall not be paid
but shall be carried forward and shall reduce the
Lessee's obligation to make subsequent payments on
an After-Tax Basis to such Indemnified Person
under Section 6.1, Section 6.2(a), Article VII or
the other Operative Documents other than the Tax
Indemnity Agreement. Any Taxes that are imposed
on any Indemnified Person (or any of its
Affiliates)as a result of the disallowance,
unavailability, recapture or reduction of any tax
benefit, savings, deduction or credit referred to
in this Section 6.2(c) as to which an Indemnified
Person has made a payment to the Lessee or which
was otherwise taken into account under
Section 6.1, Section 6.2, Article VII or the other
Operative Documents other than the Tax Indemnity
Agreement shall be treated as a Tax for which the
Lessee must indemnify such Indemnified Person
hereunder without regard to Section 6.2(b) or (d)
hereof.
Notwithstanding the preceding, the
Lessee and the Owner Participant agree that the
obligation of the Owner Participant to reimburse
the Lessee in the case of payments made by the
Lessee pursuant to Article VII which are made as a
result of the Owner Participant being a Non-U.S.
Person shall be governed by the provisions of
Article VII.
(d) Contests.
(i) Initiation. If any written claim
shall be made against any Indemnified Person
or if any proceeding shall be commenced
against any Indemnified Person for any Taxes
as to which the Lessee may have an indemnity
obligation pursuant to this Section 6.2, such
Indemnified Person shall promptly notify the
Lessee provided, however, that the failure to
notify the Lessee shall not relieve the
Lessee of any obligation to indemnify the
Indemnified Person hereunder unless such
failure precludes the Lessee from initiating
or continuing the contest of such claim. The
Indemnified Person shall not take any action
with respect to such claim, proceeding or Tax
without the consent of the Lessee (such
consent not to be unreasonably withheld or
unreasonably delayed) for 30 days after the
receipt of such notice by the Lessee, unless
the Indemnified Person shall be required by
law or regulation to take action prior to the
end of such 30-day period.
(ii) Control and Conditions. If a
contest is requested in writing by the Lessee
within 30 days after receipt by the Lessee of
the notice required by subparagraph (i) with
respect to the claim or proceeding that is
the subject of such notice (provided,
however, that if a shorter period is required
for taking actions with respect to such Tax
claim, the Lessee shall use its best efforts
to request such contest within the shorter
period of time), or, in the case of any claim
or proceeding with respect to which the
Lessee (as opposed to the Indemnified Person)
receives notice, upon the written request of
the Lessee, the Lessee may, in the case of a
Tax which may be contested (1) in the name of
the Lessee, (2) independently from any Tax
that is not subject to indemnification by the
Lessee and (3) in the Indemnified Person's
good faith determination without any adverse
effect on such Indemnified Person, contest
the validity, applicability or amount of such
Tax. If the Lessee has made the written
request described in the first sentence of
the subparagraph (ii) and the contest would
meet the requirements of clauses (1) and (2)
of such first sentence, the Lessee shall, if
requested by the Indemnified Person, in good
faith, contest the validity, applicability or
amount of such Tax. A contest described in
either of the first two sentences of this
subparagraph (ii) shall be hereinafter
referred to as a "Lessee-Controlled Contest.
If the contest requested by the Lessee
pursuant to the first sentence of this
subparagraph (ii) is not a Lessee-Controlled
Contest, the Indemnified Person shall itself,
contest in good faith the validity,
applicability or amount of such Tax. Any
contest conducted pursuant to this
subparagraph (ii) shall be conducted by (1)
resisting payment thereof, (2) not paying the
same except under protest (which protest must
be pursued using reasonable efforts in
appropriate administrative and/or judicial
proceedings) if protest shall be necessary
and proper or (3) if payment shall be made,
using reasonable efforts to obtain a refund
thereof in appropriate administrative and/or
judicial proceedings (it being understood
that no appeal to the United States Supreme
Court shall be required hereunder).
Notwithstanding the foregoing, in no
event shall an Indemnified Person be required to
commence or continue any contest unless: (1) the
amount at issue (taking into account all similar
and logically related claims) exceeds $75,000; (2)
the Lessee shall have agreed in writing to pay the
Indemnified Person and shall pay on demand on an
After-Tax Basis as incurred all reasonable out-of-
pocket costs (including computer time) and
expenses that such Indemnified Person shall incur
in connection with contesting such claim
(including, without limitation, all reasonable
costs, expenses, legal, accounting and
investigatory fees and disbursements); (3) such
Indemnified Person shall have in good faith
reasonably determined that the action to be taken
will not result in any material danger of sale,
forfeiture or loss of the Equipment or the
creation of any Lien on the Equipment, the Trust
Estate or the Indenture Estate or the security
interests of the Lenders and the Indenture Trustee
therein and that there is no risk of criminal
liability that may be imposed with respect to such
Indemnified Person or any Affiliate; (4) if such
contest shall involve payment of the claim, the
Lessee shall advance the amount thereof plus
interest, penalties and additions to tax with
respect thereto to such Indemnified Person on an
interest-free basis (with no additional net after-
tax cost to such Indemnified Person); (5) no
Material Default or Event of Default shall have
occurred and be continuing; (6) prior to
initiating the contest, if requested, the Lessee
shall have furnished the Indemnified Person with
an opinion of tax counsel selected by the Lessee
and reasonably satisfactory to the Indemnified
Person to the effect that a reasonable basis
within the meaning of ABA Formal Opinion No. 85-
352 exists for such contest and in the case of an
appeal from an adverse lower court decision, that
it is more likely than not that the lower court's
opinion would be reversed or substantially
modified; and (7) the Lessee shall have
acknowledged in writing its obligation to
indemnify the Indemnified Person in the event the
contest is unsuccessful in whole or in part unless
the contest is ultimately resolved by a court of
competent jurisdiction on a clearly articulated
basis that establishes no basis for
indemnification hereunder.
(iii) Conduct. The Lessee shall
conduct any Lessee-Controlled Contest and the
relevant Indemnified Person shall control any
contest other than a Lessee-Controlled
Contest. The party conducting the contest
("Controlling Party") shall consult in good
faith with the other party ("Noncontrolling
Party") and its counsel with respect to the
contest of such claim for Taxes (or claim for
refund) but the decisions regarding what
actions to be taken shall be made by the
Controlling Party in its sole judgment
provided, however, that the Indemnified
Person shall be entitled to reassert control
of any contest if it determines in good faith
that the Lessee's continued control of the
contest will adversely affect the Indemnified
Person. In addition, the Controlling Party
shall keep the Noncontrolling Party
reasonably informed as to the progress of the
contest, and upon request shall provide the
Noncontrolling Party with a copy of (or
appropriate excerpts from) any reports or
claims issued by the relevant auditing agents
or taxing authority to the Controlling Party
or any Affiliate thereof, in connection with,
but solely to the extent relating to, such
claim or the contest thereof. The
Controlling Party shall be responsible for
the selection of counsel, which counsel, in
the case of a Lessee-Controlled Contest, must
be reasonably satisfactory to the
Noncontrolling Party.
Notwithstanding anything contained
in this paragraph (d) to the contrary, no
Indemnified Person shall be required to contest
any Tax claim if the subject matter thereof shall
be of a continuing nature and there shall have
been a Final Determination with respect thereto,
unless there shall have been a change in facts or
the law (including, without limitation, amendments
to statues or Regulations, administrative rulings
and court decisions) and such Indemnified Person
shall have received an opinion of counsel,
selected by the Lessee and reasonably acceptable
to the Indemnified Person, which opinion shall be
furnished at the Lessee's sole expense, setting
forth the facts and legal analysis on which it is
based, to the effect that as a result of such
change in facts or the law it is more likely than
not that the Indemnified Person shall prevail in
the contest of such claim.
(iv) Waiver of Indemnity.
Notwithstanding anything contained in this
Section 6.2, an Indemnified Person shall not
be required to contest any claim or permit
the Lessee to contest any claim and may
settle any contest without the consent of the
Lessee if such Indemnified Person (A) shall
waive its right to indemnity under this
Section 6.2 with respect to such claim for
such Tax, and (B) shall pay to the Lessee any
amount previously paid or advanced by the
Lessee pursuant to clause (4) of the second
paragraph of Section 6.2(d)(ii) with respect
to such claim.
(e) Payments. Any Taxes payable
hereunder by the Lessee shall be payable by the
Lessee, to the extent allowed, directly to the
appropriate taxing authority on or before the time
due, and in the manner, prescribed by Applicable
Law, without the necessity of any prior demand by
an Indemnified Person. If direct payment is not
permitted or otherwise is not made, any amount
payable by the Lessee to an Indemnified Person
pursuant to this Section 6.2 shall be paid within
10 days after receipt by the Lessee of a written
demand therefor from such Indemnified Person
accompanied by a written statement describing in
reasonable detail the amount so payable, but shall
in no event be payable before the date such Tax is
due. Any payments to be made pursuant to this
Section 6.2 by Lessee to an Indemnified Person or
by an Indemnified Person to the Lessee shall be
made directly to the Indemnified Person entitled
thereto or the Lessee, as the case may be, in
immediately payable funds at such bank or to such
account as specified by the payee in written
directions to the payor or, if no such direction
shall have been given, by check of the payor
payable to the order of the payee and mailed to
the payee by certified mail, postage prepaid at
its address. Any amount payable under this
Section 6.2 that is not paid when due shall bear
interest at the Overdue Rate. Upon a Final
Determination of any contest pursuant to
Section 6.2(d) in respect of any Taxes for which
the Lessee has made an advance payment, the amount
of the Lessee's obligation under Section 6.2 shall
be determined as if such advance payment had not
been made. If in connection with a refund or
credit of all or part of any Taxes paid,
reimbursed or advanced by the Lessee pursuant to
this Section 6.2, an Indemnified Person receives
an amount representing interest on such refund or
credit, the Indemnified Person shall pay to the
Lessee the amount of such interest that shall be
fairly attributable to such Taxes paid, reimbursed
or advanced by the Lessee prior to the receipt of
such refund or credit. Any obligation of the
Lessee under this Section 6.2 and the Indemnified
Person's obligation to repay the advance and
interest, if any, will be satisfied first by set
off against each other, and any difference owing
by either party will be paid within 10 days of
such Final Determination.
(f) Reports. If any report, return or
statement (a "Filing") is required to be filed
with respect to any Tax that is subject to
indemnification under this Section 6.2, the Lessee
shall promptly notify the appropriate Indemnified
Person of such requirement in writing and, if
permitted by Applicable Law to do so, the Lessee
shall timely file or cause to be filed such Filing
with respect to such Tax (except for any such
Filing that an Indemnified Person has notified
Lessee in writing that such Indemnified Person
intends to file) and will (if ownership of the
Equipment or any part thereof or interest therein
is required to be shown on such Filing) show the
ownership of the Equipment in the name of the
Owner Trustee, and send a copy of such Filing to
the appropriate Indemnified Person; provided, that
such Indemnified Person shall have furnished the
Lessee, at the Lessee's request and expense, with
such information, not within the control of the
Lessee, as is in such Indemnified Person's control
or is reasonably available to such Indemnified
Person and necessary to file such Filing. If the
Lessee is not permitted by Applicable Law to file
any such Filing, the Lessee will promptly notify
the appropriate Indemnified Person of such
requirement in writing and prepare and deliver to
the appropriate Indemnified Person a proposed form
of such Filing within a reasonable time, and in
all events at least 10 days prior to the time such
Filing is required to be filed. If the Owner
Participant, the Owner Trustee, or the Trust
Estate becomes aware of any Tax due, or report,
return or filing required with respect to any Tax
indemnified hereunder, it will promptly notify the
Lessee of such requirement, it being understood
that any failure to so notify the Lessee shall not
affect any Indemnified Person's rights hereunder.
(g) Verification. At the Lessee's
request, such request to be made in writing within
15 days after the Lessee receives any computation
from the Indemnified Person, the amount of any
indemnity payment by the Lessee pursuant to this
Section 6.2 or any payment by an Indemnified
Person to the Lessee pursuant to this Section 6.2
shall be verified by a nationally recognized
independent accounting firm mutually acceptable to
the Indemnified Person and the Lessee who shall be
asked to verify, after consulting with the
Indemnified Person, whether the Indemnified
Person's computations are correct and to report
its conclusions to both the Lessee and the
Indemnified Person. Subject to acceptable
confidentiality agreements as described below,
each Indemnified Person and the Lessee hereby
agree to provide such firm with all information
and materials as shall be reasonably necessary or
desirable in connection therewith provided,
however, that in no case shall the Indemnified
Person be required to provide its books or tax
returns to such accounting firm or anybody else.
The fee of such firm shall be paid by the Lessee
unless such verification discloses an error
adverse to the Lessee equal to 5% or more of the
amount determined to be due by such firm, in which
case such fees shall be paid by such Indemnified
Person. Any information provided to such firm by
any Person shall be and remain the exclusive
property of such Person and shall be deemed by the
parties to be (and such firm will confirm in
writing in a manner satisfactory to the
Indemnified Person that they will treat such
information as) the private, proprietary and
confidential property of such Person, and no
Person other than such Person and such firm shall
be entitled thereto, and all such materials shall
be returned to such Person. Such firm shall be
requested to make its determination within 30
days. If such firm shall determine that such
computations are incorrect, then such firm shall
determine what it believes to be the correct
computations. The computations of the accounting
firm shall be final, binding and conclusive upon
the Lessee and such Indemnified Person with
respect to matters other than the interpretation
of this Agreement and the Lessee shall have no
right to inspect the books, records, tax returns
or other documents (including working papers) of
or relating to such Indemnified Person or
Affiliate to verify such computations or for any
other purpose; provided, that the Lessee and each
Indemnified Person agree that the sole
responsibility of the accounting firm shall be to
verify the amount of an indemnity payable
hereunder and that matters of interpretation of
this Agreement are not within the scope of the
accounting firm's responsibilities.
ARTICLE VII
Tax Withholding
The Lessee agrees that in the event the
Lessee, the Lessor, the Indenture Trustee or the
Owner Participant is required by law to withhold
Taxes from any payment of Rent, the Lessee shall
make such withholding and shall pay the full
amount withheld to the applicable taxing authority
or other authority in accordance with Applicable
Law, and the Lessee shall pay an additional amount
on an After-Tax Basis such that, after deduction
of all amounts required to be withheld, the net
amount actually received by the Lessor and the
Indenture Trustee on an After-Tax Basis will equal
the amount that would have been received absent
such withholding, provided that in no event shall
the net amount paid after deduction for such
withholding tax be less than the amount payable
prior to the calculation of such withholding tax
and the amount payable under this Article VII.
Upon presentment of evidence of payment of
withheld Taxes, and provided that no Material
Default or Event of Default has occurred and is
continuing, the Lessee shall be entitled to
reimbursement from the Owner Participant on an
After-Tax Basis (such reimbursement being
sufficient to place the Lessee in the same
position it would have been in if no such
withholding had been imposed) for any such
additional amount with respect to any withholding
for United States federal income Taxes required to
be withheld solely by reason of the status of the
Owner Participant as a Non-U.S. Person.
Notwithstanding any other provision of
this Article VII to the contrary, the Lessee will
indemnify the Owner Trustee, the Trust Estate and
the Owner Participant (and any Affiliate of any of
the foregoing) on an After-Tax Basis for any
obligation with respect to United States federal
withholding Taxes imposed on the Owner Trustee,
the Trust Estate or the Owner Participant (or any
Affiliate of any of the foregoing) with respect to
the Notes (or any debt issued to refinance or
refund the Notes) or as a result of a claim by the
Internal Revenue Service (the "Service") asserted
against the Trust Estate, the Owner Trustee or the
Owner Participant (or any Affiliate of any of the
foregoing) with respect to such withholding Tax;
provided, however, that (A) the Lessee shall be
subrogated to the rights and defenses of the Owner
Trustee, the Trust Estate and the Owner
Participant (and any Affiliate of any of the
foregoing) in respect of such withholding Taxes,
including the rights and defenses set forth under
the Operative Documents, and (B) the Lessee shall
have no indemnification obligation under this
sentence if such obligation of the Owner Trust,
the Owner Trustee or the Owner Participant (or any
Affiliate of any of the foregoing) results solely
from the status of the Owner Participant as a Non-
U.S. Person.
The Indenture Trustee shall comply with
Section 2.04 of the Indenture with respect to
withholding taxes on payments due on the Notes.
ARTICLE VIII
Expenses
8.1 Transaction Expenses Payable by the
Owner Participant. The Lessee shall have the
right to review all invoices for Transaction
Expenses. Subject to the Lessee's prior review,
Transaction Expenses for which invoices have been
received by the Owner Participant (with a copy to
the Lessee) shall be paid by the Owner Participant
promptly after receipt thereof. Subject to the
Lessee's prior review, Transaction Expenses for
which invoices are submitted after the Equipment
Closing Date shall be paid promptly after receipt
thereof by the Owner Participant (with a copy to
the Lessee); provided, that all invoices in
respect of Transaction Expenses incurred on or
prior to the Equipment Closing Date shall be
submitted within sixty (60) days after the
Equipment Closing Date.
8.2 Transaction Expenses Payable by the
Lessee. If the transactions contemplated hereby
are not consummated for any reason, the Lessee
will pay all Transaction Expenses promptly after
receipt of an invoice therefor; provided, that all
invoices in respect of Transaction Expenses shall
be submitted within sixty (60) days after the
scheduled Equipment Closing Date or, if no such
date has been scheduled, within sixty (60) days
after the last date of incurrence of Transaction
Expenses. If the transactions contemplated hereby
are consummated, the Owner Participant shall be
responsible for all Transaction Expenses up to the
percentages indicated in the Pricing Assumptions;
provided, however, if the Transaction Expenses
shall exceed the percentages indicated in the
Pricing Assumptions, the Lessee, at the request of
the Owner Participant, will pay the amount of
Transaction Expenses which exceeds the percentages
indicated in the Pricing Assumptions promptly
after receipt of an invoice therefor; provided,
that Lessee shall pay any Transaction Expenses not
promptly paid by, and which are required hereby to
be paid by, the Owner Participant and the Owner
Participant shall reimburse the Lessee for any
such Transaction Expenses paid by the Lessee on
behalf of the Owner Participant; provided further
that all invoices in respect of such Transaction
Expenses which are incurred on or prior to the
Equipment Closing Date shall be submitted within
sixty (60) days after the Equipment Closing Date.
8.3 Amendments, Waivers, etc. The Lessee
will pay all costs and expenses for which
appropriate bills and invoices are submitted
within nine months after the incurrence thereof
which have been incurred in connection with the
entering into or the giving or withholding of any
future amendments, supplements, waivers, consents
with respect to the Operative Documents, any
action requested by the Lessee or any action
required by the Operative Documents (other than
those required as a result of an action taken by a
Person other than Lessee or the Guarantor),
including, without limitation, any amendments,
waivers, or consents resulting from any Event of
Default, work-out, renegotiation or restructuring
relating to the non-performance by the Lessee or
the Guarantor of its respective obligations under
the Operative Documents, whether or not the same
shall become effective.
8.4 Fees of Agents. The Lessee will pay all
continuing fees and expenses of the Agents in
connection with the transactions contemplated by
the Operative Documents, other than the initial
fees of such Agents due and payable on the Initial
Closing Date and included in Transaction Expenses.
If the Owner Participant fails to pay such initial
fees when due, the Lessee shall be obligated to
pay such fees and shall be entitled to recover any
such payment from the Owner Participant.
ARTICLE IX
Recomputation of Basic Rent, EBO Prices,
Fixed Purchase Option Prices,
Casualty Values and Termination Values
9.1 Making of Adjustments.
(a) In the event that on or prior to the
Equipment Closing Date, it is determined that any
of the factors constituting Pricing Assumptions
(including but not limited to, the actual Lessor's
Cost of the Equipment to be settled for on such
Equipment Closing Date or the date of such
Equipment Closing Date) shall be different from
those reflected in the Pricing Assumptions and,
the Owner Participant shall elect to effect an
adjustment pursuant hereto; then, (x) the Pro
Forma Schedules of Basic Rent, the EBO Price,
Casualty Values and Termination Values for such
Items of Equipment to be purchased on such
Equipment Closing Date shall be adjusted by such
amounts as shall be appropriate to preserve for
the benefit of the Owner Participant its Net
Economic Return and (y) the amortization schedules
set forth in the Pro Forma Schedules for each
Series of Notes to be issued on or after such
Equipment Closing Date shall be adjusted in
compliance with Section 9.5 hereof.
(b) In the event that:
(i) a Refunding pursuant to
Article XI hereof and Section 2.12 of the
Indenture shall occur; or
(ii) Transaction Expenses paid by
the Owner Participant are different from 2% of
Lessor's Cost; or
(iii) a Modification is financed
by the Lessor pursuant to Section 6.4 of the
Lease;
and, in any such case, the Owner Participant shall
elect to effect an adjustment pursuant hereto;
then, Basic Rent, the EBO Price, Casualty Values
and Termination Values for all affected Items of
Equipment shall be adjusted from time to time by
such amounts as shall be appropriate to preserve
for the benefit of the Owner Participant its Net
Economic Return effective as of the next
succeeding Rent Payment Date for such Items of
Equipment.
9.2 Limitations. Any provision herein or in
any other Operative Document to the contrary
notwithstanding, no adjustment pursuant to Section
9.1 shall result in (a) Basic Rent payable on any
Rent Payment Date being less than the principal
amount of, and interest on, the Notes payable on
such Rent Payment Date under the Indenture, (b)
the Casualty Value and Termination Value for each
Item of Equipment payable on any date being less
than the principal amount of the Notes equal to
the Loan Value of such Item plus any accrued and
unpaid interest (other than, in the case of any
such date which is also a Rent Payment Date,
interest due on such Rent Payment Date) and (c)
the EBO Price payable on each EBO Date for the
Items of Equipment described in any Lease
Supplement and related Schedule of Equipment being
less than the principal amount of the Notes plus
any accrued and unpaid interest. Further, no
adjustment to the amortization schedules of the
Notes set forth in the Pro Forma Schedules shall
violate Section 9.5.
9.3 Computation of Adjustments. Upon the
occurrence of an event requiring an adjustment to
the Basic Rent, the EBO Price, Casualty Values or
Termination Values pursuant to this Article IX,
the Owner Participant shall make the necessary
computations and, within ninety (90) days after
the Owner Participant's knowledge of such event,
furnish to the Lessee a certificate complying with
the requirements of Section 9.4 hereof. In making
any such computations, the Owner Participant
(a) shall utilize the same methods and assumptions
(including tax constraints) originally used to
calculate the payments of Basic Rent, the EBO
Price, Casualty Values and Termination Values
(other than those assumptions changed as a result
of the event described in Section 9.1
necessitating such computations; it being agreed
that such computation shall reflect solely any
changes of assumptions or facts resulting directly
from any such event necessitating such recalcu-
lation); and (b) shall minimize to the maximum
extent possible, but subject at all times to the
preservation of Net Economic Return, the present
value (discounted semi-annually at an interest
rate per annum equal to the Debt Rate) of the
payments of Basic Rent. All Basic Rent
adjustments shall be consistent with Rev. Procs.
75-21 and 75-28 and Section 467 of the Code as in
effect at the time of the adjustment, including
any final, proposed or temporary regulation or
other administrative announcement issued
thereunder. In no event shall any such
adjustment, in the judgment of the Owner
Participant, result in the Lease being treated as
a "disqualified leaseback" or "long term
agreement" within the meaning of Section 467 of
the Code and any regulation (including any
proposed regulation) or other interpretation
regarding Section 467 of the Code, or otherwise
cause any adverse tax consequences to the Owner
Participant. If the Lessee shall disagree with
any such determinations, such determinations and
the supporting data described below shall be
reviewed and determined by an independent
accounting firm jointly chosen by the Lessee and
the Owner Participant, or, in the absence of
agreement as to such firm, by a third independent
accounting firm jointly chosen by two independent
accounting firms, one chosen by the Owner
Participant and one chosen by the Lessee. In
connection with any such review, the Owner
Participant shall make available to such
accounting firm or firms on a confidential basis
its pricing runs and its related assumptions, but
under no circumstances shall such pricing runs or
assumptions be made available to the Lessee;
provided, however, that in connection with any
such review the Owner Participant shall not be
required to disclose its tax returns or other
proprietary information. The adjustments as
determined by such accounting firm will replace
the adjustments provided by Owner Participant
unless the Lessee and the Owner Participant
otherwise agree. The costs of such verification
shall be borne by the Lessee, except that such
costs shall be borne by the Owner Participant if
such verification results in a reduction of the
amount of the present value (discounted semi-
annually at an interest rate per annum equal to
the Debt Rate) of the Basic Rent payments during
the Base Term of the affected Items of Equipment
from the amounts proposed by the Owner Participant
of more than the lesser of (a) 10 basis points or
(b) 5% of the Owner Participant's proposed
adjustments, in which case such costs shall be
borne by the Owner Participants. Notwithstanding
any provision herein to the contrary, the sole
responsibility of the accounting firm shall be to
verify the calculations hereunder, and matters of
interpretation of this Agreement or any other
Operative Document shall not be within the scope
of its duties.
9.4 Adjustments Certificate; Lease
Supplement. In connection with any adjustments
pursuant to this Article IX, the Owner Participant
shall provide to the Lessee a certificate of a
Responsible Officer of such Owner Participant
stating that all such computations were made in
good faith and were made so that any increase in
Net Economic Return was minimized consistent with
the adjustments required, and (b) stating that all
the requirements of Article IX were complied with.
In connection with any adjustment pursuant to this
Article IX, the Owner Trustee and the Lessee shall
enter into a Lease Supplement setting forth the
revised schedules of Basic Rent, Casualty Value,
Termination Value and EBO Prices, and the Lessee
shall deliver a copy of each such Lease Supplement
to the Indenture Trustee and each Participant, and
shall deliver the chattel paper original of each
such Lease Supplement to the Indenture Trustee.
9.5 Average Life of Notes. Notwithstanding
anything to the contrary contained herein or in
any other Operative Document, on the Equipment
Closing Date, the Average Life of the Notes shall
not deviate from the Average Life of the Notes as
determined in the Pro-Forma Schedules by more than
three months.
9.6 Rent Adjustment Indemnity. The Lessee
shall indemnify and hold harmless (in the manner
provided in Sections 6.1 and 6.2 hereof and
subject to the exclusions contained therein) the
Owner Trustee, the Owner Participant, the
Indenture Trustee and the Lenders on an After-Tax
Basis for all fees, costs and expenses, including,
without limitation, the reasonable and actual fees
and expenses of their respective counsel, in
connection with the transactions contemplated by
this Article IX.
ARTICLE X
Transfer of Owner Participant's Interests
10.1 Transfers.
(a) Without the prior written consent
of the Lessee or the Guarantor (in each case so
long as no Event of Default has occurred and is
continuing), and the Indenture Trustee, no Owner
Participant shall assign, convey or otherwise
transfer all or any part of its right, title and
interest in and to the Trust Estate except as
provided in this Section 10.1.
(b) An Owner Participant may assign,
convey or otherwise transfer all or any part of
its right, title and interest in the Trust Estate
to an Eligible Owner Participant pursuant to an
Owner Participant Transfer Agreement in
substantially the form of Appendix F to this
Agreement, subject to such assignment satisfying
the conditions set forth in this Section 10.1.
(c) After giving effect to any such
assignment, conveyance or transfer, the aggregate
number of Owner Participants shall not exceed four
(4).
(d) The assignment, conveyance or
transfer shall not result in a violation of the
Securities Act, and the Lessee, the Guarantor and
the Indenture Trustee shall each have received, at
the expense of the parties to such assignment,
conveyance or transfer, an opinion of counsel
(which may be the General Counsel of the Owner
Participant or the transferee) to that effect, in
form and substance satisfactory to each such
Person and to Lessee's Counsel.
(e) The transferee or assignee shall
not be a Competitor of the Lessee or the Guarantor
or an Affiliate of such a Competitor (excluding
any Person which is a passive Investor holding a
minority interest in such Competitor).
(f) The Lessee, the Guarantor and the
Indenture Trustee shall each have received, at the
expense of the parties to such assignment, (i) an
Owner Participant Transfer Agreement in
substantially the form of Appendix F, executed by
the transferor and the transferee, by which such
transferee agrees to be bound by and to undertake
on its own behalf all of the terms,
representations and warranties (to the extent
applicable) and covenants of the transferring
Owner Participant under the Operative Documents on
and after the effective date of transfer, (ii) if
applicable (pursuant to the definition of Eligible
Owner Participant), a guaranty with respect to the
obligations of such transferee in substantially
the form of Appendix F-1 and (iii) an opinion of
counsel (which may be the General Counsel of the
Owner Participant or the transferee, as the case
may be) reasonably acceptable to the Lessee, the
Lessee's Counsel and the Indenture Trustee as to
the due authorization and enforceability of such
agreements.
(g) The transferring Owner Participant
shall have given written notice to the Lessee, and
the Indenture Trustee of any such transfer or
assignment at least fifteen (15) Business Days
prior to the effective date of such transfer or
assignment, together with drafts of the
certificates, opinions and agreements to be
delivered in accordance with the foregoing
conditions and such other evidence as is necessary
to establish compliance with the foregoing
conditions.
(h) Upon any such assignment,
conveyance or transfer (including any subsequent
assignment, conveyance or transfer), (i) the
transferee shall be deemed an "Owner Participant"
for all purposes hereof, and shall be deemed to
have made all payments in respect of the right,
title and interest so transferred, and shall have
a ratable interest therein, and each reference in
any Operative Document to or encompassing such
Owner Participant shall thereafter be deemed to
include a reference to such transferee and
(ii) the transferor shall have no further rights
or interest hereunder or under any other Operative
Document, to the extent of the interest so
transferred.
(i) Notwithstanding any of the
foregoing, (i) the Owner Participant shall be
permitted and required to transfer its interest in
the Trust Estate to the Lessee in accordance with
the terms of Article X of the Lease if the Lessee
so elects in connection with its exercise of the
EBO Option and (ii) the limitations set forth in
Sections 10.1 (e) shall not apply if a Material
Default or an Event of Default has occurred and is
continuing.
ARTICLE XI
Refunding
11.1 Refunding. So long as no Material
Default or Event of Default shall be in existence
and Zenith of Texas simultaneously requests a
refunding or refinancing under the Mexican
Participation Agreement, and subject to
satisfaction of the terms and conditions set forth
in this Article XI and in Section 2.12 of the
Indenture, the Lessee shall have the right to
request the Owner Participant to effect, and the
Owner Participant, the Owner Trustee and the
Indenture Trustee agree, at the sole cost and
expense of the Lessee whether or not such
refunding is consummated, to cooperate to effect,
an optional prepayment of all, but not less than
all, of the Notes pursuant to Section 2.12 of the
Indenture as part of a refunding or refinancing,
on the terms set forth in this Article XI and such
Section 2.12 (such refunding or refinancing, a
"Refunding"); provided, that the Lessee shall have
the right to so request a Refunding and a
"Refunding" under and as defined in the Mexican
Participation Agreement only twice in the
aggregate; provided further, that a substantially
simultaneous Refunding hereunder with a
"Refunding" under the Mexican Participation
Agreement shall be deemed as one refunding request
for purposes of such limit and; provided further,
that the Owner Participant shall in any event have
the right to consent to any such Refunding, which
consent the Owner Participant may withhold in the
Owner Participant's sole good faith discretion;
except that the Owner Participant shall not have
such consent right if and to the extent Hunton &
Williams, or such other counsel selected by the
Owner Participant and reasonably acceptable to the
Lessee, delivers an opinion to the Owner
Participant (which opinion the Owner Participant
agrees to timely request at the time of such
Refunding) that, as a result of a change in or
clarification of Regulations under Section 467 of
the Code (which change or clarification occurs
after the Equipment Closing Date and before such
Refunding), the absence of such consent right
shall not adversely affect the eligibility of the
Lease for initial and continued compliance with
Section 1.467-3(c)(2)(i) of the Regulations. In
connection with a Refunding:
(a) there shall be no material
change in the Operative Documents (except to
the extent provided in clause (c) and for the
inclusion, if any, of additional covenants
upon the Lessee which are acceptable to, or
required by, the Lessee and the Owner
Participant), and specifically, there shall
be no change in the Operative Documents
adverse to the Owner Participant or the Owner
Trustee, in either of such Person's
reasonable judgment, including the provisions
of the Indenture providing the Owner Trustee
with rights in the event of an Indenture
Default or an Indenture Event of Default;
(b) the Lessee, the Owner
Participant, the Owner Trustee, the Indenture
Trustee, and any other appropriate parties
will enter into an agreement, in form and
substance satisfactory to such Persons,
providing for (i) the issuance and sale by
the Owner Trustee on the date specified in
such agreement (for the purposes of this
Article XI, the "Refunding Date") of debt
securities in an aggregate principal amount
(in the lawful currency of the U.S.) equal to
the aggregate outstanding principal amount of
all of the Notes on the Refunding Date, after
taking into account any scheduled
amortization of principal, if any, occurring
on such Refunding Date (the "Replacement
Notes"), (ii) payments by the Lessee as
Supplemental Rent to the Person or Persons
entitled thereto of all other amounts, in
respect of accrued interest, and Make Whole
Premium Amount, if any, payable on such
Refunding Date and all other amounts due and
owing to the Lenders under the Operative
Documents, and (iii) such other provisions as
are reasonably acceptable to or required by
the Owner Participant, the Owner Trustee, the
Indenture Trustee, the Lessee and the
Guarantor;
(c) the Lessee and the Owner
Trustee will amend the Lease to provide that
Rent payable in respect of the period from
and after the Refunding Date shall be
recalculated to preserve the Net Economic
Return which the Owner Participant would have
realized had such refunding or refinancing
not occurred; provided, that the net present
value of Rent shall be minimized to the
extent consistent therewith, and amounts
payable in respect of Casualty Value,
Termination Value, and the EBO Price from and
after the Refunding Date shall be
appropriately recalculated to preserve the
Net Economic Return which the Owner
Participant would have realized had such
refunding or refinancing not occurred (it
being agreed that any recalculations pursuant
to this clause (c) shall be performed in
accordance with the requirements of
Article IX);
(d) subject to subparagraph (a)
above, the Owner Trustee will enter into an
agreement not materially different from the
Indenture to provide for the securing
thereunder of the Replacement Notes issued by
the Owner Trustee pursuant to this Article XI
in like manner as the Notes refunded;
(e) on the Refunding Date and as a
condition precedent to such Refunding, the
entire principal amount of Notes, together
with accrued interest thereon, the Make Whole
Premium Amount, if any, and all other sums
due to the Lenders under the Operative
Documents shall be prepaid or paid in
accordance with Section 2.12 of the
Indenture;
(f) the Lessee shall pay or cause
to be paid to the Owner Participant a
Refunding fee in an amount equal to $150,000
(it being understood that one payment of
$150,000 will discharge the Lessee's
obligation under this Section 11.1(f) and
Zenith of Texas' obligation under Section
11.1(f) of the Mexican Participation
Agreement);
(g) such refinancing shall not
result in a violation of Applicable Law and
the Lessee, the Guarantor, the Owner
Participant, the Owner Trustee and the
Indenture Trustee shall have received
(i) such opinions of counsel as they may
reasonably request concerning compliance with
Applicable Law relating to the sale of
securities and (ii) such other opinions of
counsel and such certificates and other
documents, each in form and substance
satisfactory to them, as they may reasonably
request in connection with the terms and
conditions of this Article XI;
(h) all necessary authorizations,
Governmental Actions, approvals and consents
in connection with such Refunding shall have
been obtained;
(i) as a result of such Refunding,
the Equity Amount shall not increase or
decrease; and
(j) the Replacement Notes shall be
in the form of non-recourse loans denominated
in dollars and the final stated maturity of
the Replacement Notes for each Series shall
not extend beyond the final stated maturity
of the Notes being refunded, and the Weighted
Average Life to Maturity of the Replacement
Notes shall not exceed the Weighted Average
Life to Maturity of the Notes being refunded;
(k) the refunding shall not result
in the Lease being treated as other than an
operating lease under Statement of Financial
Accounting Standards No. 13;
provided, that (x) no Refunding of the Notes will
be permitted unless, within thirty (30) days after
receipt of a request pursuant to the first
sentence of Section 11.2 from the Lessee to effect
a refinancing pursuant to this Section 11.1 and of
all relevant information regarding the terms and
conditions of such Refunding necessary to render
the determinations referred to below, the Owner
Participant, at the expense of the Lessee, shall
have received an opinion of independent tax
counsel (selected by the Owner Participant and
reasonably acceptable to the Lessee) reasonably
satisfactory to the Owner Participant to the
effect that there shall be no adverse tax
consequences resulting from such Refunding or the
Lessee shall have agreed to indemnify the Owner
Participant in a manner in form and substance
(including with respect to any collateral
arrangement) satisfactory to the Owner Participant
in its sole discretion (exercised in good faith);
and (y) the Lessee shall (i) compensate, on a
reasonable basis, the Owner Participant for its
time and (ii) pay to or reimburse the
Participants, the Owner Trustee and the Indenture
Trustee, on an After-Tax Basis, for all reasonable
costs and expenses (including Fees and Expenses)
paid or incurred by them, in either case, in
connection with such Refunding or such proposed
Refunding.
11.2 Notice. The Lessee shall give the other
parties hereto written notice at least thirty (30)
days prior to the deposit of cash with the
Indenture Trustee in connection with any desired
refinancing or refunding pursuant to this
Article XI, which notice shall set forth to the
extent practicable the proposed terms and
conditions of such refunding or refinancing,
including the desired date therefor. The Lessee
will promptly provide to the Participants, the
Owner Trustee and the Indenture Trustee final
terms and conditions of any such refunding or
refinancing not less than three Business Days
prior to the execution and delivery of the
documents contemplated hereunder in connection
therewith.
ARTICLE XII
Miscellaneous
This Participation Agreement shall be
governed by, and construed in accordance with, all
of the Documentary Conventions; provided, however,
that no amendment, supplement or modification of
this Participation Agreement which would have the
effect of (a) increasing the amount of, or
bringing forward in time the due date for payment
of, any obligation of the Lessee or (b) amending
this Article XII shall be effective as against the
Guarantor unless made by an instrument in writing
signed by the Guarantor.
ARTICLE XIII
No Recourse to Owner Participant; No Implied
Obligations
(a) No Recourse. It is expressly
agreed and understood that no recourse may be had
to any Owner Participant, and no Owner Participant
shall have any obligation or liability, with
respect to the obligations and liabilities of the
Owner Trustee or the Trust Estate (including,
without limitation, the obligations and
liabilities of the Owner Trustee under the
Indenture with respect to the Notes); provided,
however, that the Owner Participant shall be
personally liable for amounts due under Section
2.13 of the Indenture upon an election by the
Owner Trustee to purchase the Notes as provided in
such Section.
(b) No Implied Obligations. No
Participant shall have any obligations to any
other party hereto except for the express
obligations of such Participant set forth in the
Operative Documents.
ARTICLE XIV
Tax Treatment
It is hereby agreed among the parties
hereto that for federal and state income tax
purposes the Owner Participant will treat itself
as the owner of each Item of Equipment as of the
Equipment Closing Date and the Lessee will treat
itself as the lessee of each Item of Equipment as
of such date, and that neither the Owner
Participant nor the Lessee will take a position
that is inconsistent with the foregoing.
ARTICLE XV
Quiet Enjoyment
So long as no Event of Default shall
have occurred and be continuing, as among the
Lessee and the Lessor Parties, the Lessee shall
have the exclusive rights to possession and
control of all Items of Equipment and none of the
Lessor Parties nor any Person acting or claiming
through any of them will take any action that
shall interfere with the peaceful and quiet
enjoyment or the possession and use or non-use of
any Item of Equipment by the Lessee, and the
Lessee shall have the right to possess and use or
not use such Item of Equipment in its sole
discretion, subject always to the terms and
conditions of the Lease. The foregoing is not
intended to limit the inspection rights of the
Items of Equipment granted by the Lessee pursuant
to Sections 8.3 and 12.1 of the Lease.
ARTICLE XVI
Lessee's Right to Assume Liability under Notes
Each of the Lenders acknowledges and
agrees that pursuant to Article X of the Lease,
the Lessee will have the right to assume liability
under the Notes as provided in such Article X.
Each Lender and the Lessee agree to cooperate in
amending, modifying, restating or substituting for
the Notes in the event of such an assumption, if
required or deemed advisable by the Lessee or the
Lenders, to reflect the Lessee as the obligor
under such Notes.
ARTICLE XVII
Confidentiality
The Lessor Parties agree to take normal
and reasonable precautions in accordance with
their normal procedures and exercise due care to
maintain the confidentiality of all information
relating to the Lessee, the Guarantor and their
respective Affiliates, which has been identified
as confidential by the Lessee or the Guarantor,
and neither the Lessor Parties nor any of their
Affiliates shall use any such information for any
purpose or in any manner other than pursuant to
the terms contemplated by the Operative Documents;
except to the extent such information (a) was or
becomes generally available to the public other
than as a result of a disclosure by the Lessor
Parties, or (b) was or becomes available on a non-
confidential basis from a source other than the
Lessee or the Guarantor; provided, that such
source is not bound by a confidentiality agreement
with either the Lessee or the Guarantor known to
the Lessor Parties; and provided, further, that
any Lessor Party may disclose such information (i)
at the request or pursuant to any requirement of
any Governmental Authority to which such Lessor
Party is subject or in connection with an
examination of such Lessor Party by any such
Governmental Authority including, without
limitation, the National Association of Insurance
Commissioners and any other industry regulators or
rating agencies, (ii) pursuant to subpoena or
other court process, (iii) when required to do so
in accordance with the provisions of any
Applicable Law, (iv) to each Lessor Party's
independent auditors and other professional
advisors and (v) to any Person and in any
proceeding necessary in any Lessor Party's
judgment to protect such Lessor Party's interests
in connection with any claim or dispute involving
the Lessor Party. Notwithstanding the foregoing,
the Lessee authorizes the Lessor Parties to
disclose to any Participant or assignee or
purchaser of Equipment (each, a "Transferee"), to
any prospective Transferee and to any Affiliate,
such financial and other information in the Lessor
Parties' possession concerning the Lessee, the
Guarantor or their respective Affiliates which has
been delivered to the Lessor Parties pursuant to
this Lease or the Participation Agreement;
provided, that unless otherwise agreed by the
Lessee or the Guarantor, as applicable, the
Transferee agrees in writing to such Lessor
Parties to keep such information confidential to
the same extent required of the Lessor Parties
hereunder. The Lessee agrees to keep the
Appraisal confidential on the terms set forth in,
and subject to the exceptions set forth in, the
first sentence of this Section, in each case
mutatis mutandis.
ARTICLE XVIII
Liability of Owner Trustee
The parties hereto each acknowledge that
the Owner Trustee (except as otherwise expressly
provided herein or therein) is entering into this
Agreement and the other Operative Documents to
which it is a party (other than the Trust
Agreement), solely in its capacity as trustee, as
the case may be, under the Trust Agreement and not
in its individual capacity and that Fleet shall
not be liable or accountable under any
circumstances whatsoever in its individual
capacity for or on account of any statements,
representations, warranties, covenants or
obligations stated to be those of the Owner
Trustee except for its own gross negligence or
willful misconduct and as otherwise expressly
provided herein or in the other Operative
Documents.
[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY]
IN WITNESS WHEREOF, intending to be legally
bound, the parties hereto have each caused this
Participation Agreement to be duly executed as of
the date first above written.
ZENITH ELECTRONICS CORPORATION
By:
____________________________
Name:
Title:
GENERAL FOODS CREDIT CORPORATION
By:
____________________________
Name:
Title:
FLEET NATIONAL BANK,
not in its
individual capacity
(except as expressly
set forth herein)
but solely as Owner
Trustee
By:
____________________________
Name:
Title:
FIRST SECURITY BANK,
NATIONAL
ASSOCIATION, not in
its individual
capacity (except as
expressly set forth
herein) but solely
as Indenture Trustee
By:
____________________________
Name:
Title:
PARTICIPATION AGREEMENT
dated as of March 26, 1997
by and among
ZENITH ELECTRONICS CORPORATION OF TEXAS
as Lessee,
GENERAL FOODS CREDIT CORPORATION
as Owner Participant,
FLEET NATIONAL BANK
as Owner Trustee,
the institutions listed on Schedule I hereto
as Lenders
and
FIRST SECURITY BANK, NATIONAL ASSOCIATION
as Indenture Trustee
Leveraged Lease of
Television Picture Tube
and Other Television Manufacturing Equipment
Mexican Sited Equipment
TABLE OF CONTENTS
Page
ARTICLE IDefinitions and Rules of Usage -2-
ARTICLE IIFundings -2-
2.1 Equipment Closing Date -2-
2.2 Funding Request -4-
2.3 Acquisition and Leasing of the Equipment
-4-
ARTICLE IIIFunding Conditions -5-
3.1 Conditions Precedent to the Obligations
of the Participants and Agents on the
Equipment Closing Date -5-
3.2 Additional Conditions to Obligations of
Lenders. -10-
3.3 Conditions Precedent to the Obligations
of the Lessee on the Equipment Closing
Date -11-
ARTICLE IVRepresentations and Warranties -12-
4.1 Representations and Warranties of the
Lessee -12-
4.2 Representations and Warranties of the
Owner Participant -18-
4.3 Representations and Warranties of the
Indenture Trustee -19-
4.4 Representations and Warranties of the
Lenders -20-
4.5 Representations and Warranties of Fleet
and the Owner Trustee -22-
ARTICLE VCovenants -24-
5.1 Covenants of the Owner Participant,
Fleet and the Owner Trustee -24-
5.2 Covenants of the Indenture Trustee -25-
5.3 Covenants of the Lessee -25-
5.4 Transfers of Notes. -31-
5.5 Advertising; Trademarks. -31-
ARTICLE VIIndemnities -32-
6.1 General Indemnity -32-
6.2 Payment of Taxes; General Tax Indemnity
-36-
ARTICLE VIITax Withholding -47-
ARTICLE VIIIExpenses -48-
8.1 Transaction Expenses Payable by the
Owner Participant -48-
8.2 Transaction Expenses Payable by the
Lessee -48-
8.3 Amendments, Waivers, etc. -48-
8.4 Fees of Agents -49-
ARTICLE IXRecomputation of Basic Rent, EBO
Prices,Fixed Purchase Option Prices, Casualty
Values and Termination Values -49-
9.1 Making of Adjustments -49-
9.2 Limitations -50-
9.3 Computation of Adjustments -50-
9.4 Adjustments Certificate; Lease
Supplement -51-
9.5 Average Life of Notes -52-
9.6 Rent Adjustment Indemnity -52-
ARTICLE XTransfer of Owner Participant's Interests
-52-
10.1 Transfers -52-
ARTICLE XIRefunding -54-
11.1 Refunding -54-
11.2 Notice -57-
ARTICLE XIIMiscellaneous -57-
TABLE OF CONTENTS
Page
ARTICLE XIIINo Recourse to Owner Participant; No
Implied Obligations -57-
ARTICLE XIVTax Treatment -58-
ARTICLE XV
Quiet Enjoyment -58-
ARTICLE XVI
Lessee's Right to Assume Liability under Notes
-58-
ARTICLE XVII
Confidentiality -59-
ARTICLE XVIIILiability of Owner Trustee -60-
List of Schedules and Appendices
Schedule I Parties and Addresses; Account
Information
Schedule II Commitments
Schedule III Pricing Assumptions
Schedule IV Filings and Recordings
Schedule V Equipment
Appendix A Definitions and Rules of Usage
Appendix B Form of Bill of Sale
Appendix C Form of Funding Request
Appendices D-1 Forms of Opinion of Lessee's
Counsel
and D-2
Appendices D-3 Forms of Opinions of Owner
Participant's
and D-4 Counsel
Appendix D-5 Form of Opinion of Owner
Trustee's Counsel
Appendix D-6 Form of Opinion of Indenture
Trustee's Counsel
Appendices D-7 Forms of
Opinions of Guarantor's
Counsel
and D-8
Appendix E Form of Acceptance Certificate
Appendix F Form of Owner Participant
Transfer Agreement
Appendix F-1 Form of Guaranty of
Prospective Owner
Participant's Parent
Appendix G Form of Officer's Certificate
of Guarantor
Appendix G-1 Form of Officer's Certificate
of Zenith
Appendix H Form of
Certificate from Chief
Financial Officer of Zenith
PARTICIPATION AGREEMENT
This PARTICIPATION AGREEMENT is made as
of the 26th day of March, 1997, by and among
ZENITH ELECTRONICS CORPORATION OF TEXAS, a Texas
corporation (the "Lessee"), as the Lessee, GENERAL
FOODS CREDIT CORPORATION, a Delaware corporation
(the "Owner Participant"), the institutions
designated as lenders on Schedule I hereto (each a
"Lender" and collectively the "Lenders"), FLEET
NATIONAL BANK, a national banking association, not
in its individual capacity, except as expressly
stated herein, but solely in its capacity as
trustee for THE ZENITH ELECTRONICS EQUIPMENT OWNER
TRUST 1997-II (the "Owner Trustee"), and FIRST
SECURITY BANK, NATIONAL ASSOCIATION, a national
banking association, not in its individual
capacity except as expressly stated herein, but
solely in its capacity as trustee under the
Indenture (the "Indenture Trustee"). Capitalized
terms used in the following recitals shall be
respectively defined as described below in
Article I.
RECITALS
A. Subject to the terms and conditions
set forth in this Participation Agreement, in the
Lease and the other Operative Documents, the Owner
Trustee has agreed to purchase from the Lessee and
to lease to the Lessee, and the Lessee has agreed
to sell to and lease from the Owner Trustee, all
of the items of Equipment listed on Schedule V
hereto.
B. Subject to the terms and conditions
set forth herein, each of the Lenders has agreed
to fund its respective Commitment Percentage of
each Series of Notes, and the Owner Participant
has agreed to fund the Equity Amount of the
Lessor's Cost of the Equipment.
C. The Owner Trustee has agreed to
serve as Owner Trustee pursuant to the Trust
Agreement and the Indenture Trustee has agreed to
serve as Indenture Trustee pursuant to the
Indenture.
NOW THEREFORE, in consideration of the
foregoing premises, and for other good and
valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
I. ARTICLE
Definitions and Rules of Usage
Unless the context otherwise requires,
capitalized terms used herein without other
definition shall have the respective meanings
assigned to such terms (whether directly or
indirectly by reference) in Appendix A hereto, and
the rules of usage set forth in such Appendix A
shall likewise govern this Participation
Agreement.
I. ARTICLE
Fundings
A. Equipment Closing Date. Subject to
the terms and conditions of this Participation
Agreement and on the basis of the representations
and warranties hereinafter set forth:
1. (i) Each Lender severally
agrees that, if requested by Lessee, it will pay
to Fleet on April 2, 1997, in immediately
available funds, an amount equal to such Lender's
Commitment Percentage, which amount shall be held
in trust by Fleet for the benefit of such Lender
and not as part of the Trust Estate until Fleet
makes available such amount to Owner Trustee
pursuant to Section 2.1(a)(ii), or such amount is
returned to such Lender in accordance with Section
2.1(a)(iii) hereof. Fleet agrees, upon receipt in
full of each Lender's amount of its Commitment
Percentage, together with instructions from such
Lender to release such amount received from such
Lender, to transfer such funds into the Trust
Estate. Owner Trustee agrees to apply such funds
as provided in Section 2.1(a)(ii) hereof.
(ii) On the Equipment Closing Date, (A)
the Owner Participant shall make available the
Equity Amount requested in the Funding Request for
the Equipment Closing Date by EFT no later than
12:00 noon New York time on the Equipment Closing
Date to the Owner Trustee at the account specified
on Schedule I hereto, (B) the Owner Trustee shall
execute, and the Indenture Trustee shall
authenticate and deliver to each Lender and each
Lender agrees to purchase from the Owner Trustee,
a Note in an amount equal to such Lender's
Commitment Percentage (as set forth on Schedule II
hereto) of the principal amount of the Notes to be
issued on such date, the funding of such Note
purchases to occur at the time, in the manner and
into the account referred to in clause (A) above,
and (C) the Owner Trustee shall apply the proceeds
of the issuance of such Notes, together with the
Equity Amount paid by the Owner Participant, to
pay to the Lessee the Lessor's Cost of the Items
of Equipment for which settlement is being made on
such Equipment Closing Date.
(iii) In the event the Equipment Closing
Date does not occur on or is postponed past April
2, 1997, the Lessee will reimburse each Lender on
demand for the losses, if any, occasioned by such
postponement or failure of the Equipment Closing
Date to occur in each case by paying to such
Lender on demand, as compensation in full for any
such losses, an amount equal to the sum of (x) the
excess, if any, of (A) interest at the Debt Rate
on the amount made available by each Lender
pursuant to Section 2.1(a)(i) hereof for each
calendar day from and including April 2, 1997 to
but excluding the earlier of (I) the Business Day
on which such amounts are returned to and received
by such Lender, prior to 11:00 A.M. New York City
time on such Business Day, and (II) the actual
Equipment Closing Date, over (2) the amount of
interest actually earned by such Lender (or Fleet
for the account of such Lender) on its investment
and reinvestment of the amount made available by
such Lender for such period and paid to such
Lender by Fleet (it being understood that Fleet,
on behalf of such Lender shall, unless requested
by Lessee to return such amount to each Lender,
use reasonable efforts to invest and reinvest such
amounts, upon the instructions and at the risk and
the expense of Lessee, in overnight or other
appropriate funds that are Permitted Investments)
plus (B) if such amount is returned to any Lender,
Make-Whole Premium Amount determined as if the
Equipment Notes were prepaid on the date such
amount is returned to such Lender by Fleet and the
principal amount prepaid was equal to the amount
made available by such Lender to Fleet.
All earnings in the investment and
reinvestment of each such amount shall be paid to
the relevant Lender by Fleet upon the earlier of
the date such amount is returned to the relevant
Lender or on the Equipment Closing Date.
If funds have been made available by
each Lender pursuant to Section 2.1(a)(i) hereof
and if the Equipment Closing Date is not April 2,
1997, then unless and until such funds are
redistributed to such Lender, which redistribution
shall occur no later than April 4, 1997, any
investments made or obligations purchased by Fleet
pursuant to Section 2.1(a)(iii) shall be held in
trust by Fleet and shall remain the sole property
of each Lender and not as part of the Trust Estate
unless and until released by each Lender and made
available by Fleet to the Owner Trustee and
applied as provided in Section 2.1(a)(ii) hereof.
1. The aggregate principal amount
of Notes to be issued hereunder and under the
Indenture shall not exceed $14,324,310.58. The
Notes are to be issued under the Indenture and
secured by Liens granted thereunder, to be dated
the date of the Equipment Closing Date, to bear
interest prior to maturity at the Debt Rate, such
interest to be paid semi-annually in arrears to
and including the final maturity thereof on each
Rent Payment Date, to mature on April 2, 2007, to
amortize in accordance with the applicable
amortization schedule set forth in the Pro Forma
Schedules included in Schedule III hereto, as
adjusted prior to the Equipment Closing Date in
accordance with the provisions of Article IX
hereof, and to be otherwise substantially in the
form attached to the Indenture as Exhibit C. The
Owner Trustee hereby agrees for the benefit of the
parties hereto (but subject to the terms and
conditions hereof and of the Indenture) to make
payments in respect of each Note issued by it in
accordance with the terms and conditions specified
in the Indenture and such Note.
1. The Equity Amount shall be
equal to $6,242,689.42.
1. The Participants' respective
commitments under this Section 2.1, and the Owner
Trustee's commitment to purchase Equipment
pursuant to the Funding Request, shall expire at
midnight (New York time) on the Cut-off Date. The
obligations of the Participants hereunder shall be
several and not joint and no Participant shall be
liable or responsible for the acts or defaults of
any other Participant.
A. Funding Request. The Lessee has
delivered a Funding Request in substantially the
form of Appendix C attached hereto to each
Participant and Agent. Such Funding Request is
irrevocable and specifies: (i) the date on which
such Equipment Closing Date shall occur; (ii) the
Items of Equipment to be purchased on such
Equipment Closing Date; (iii) the aggregate
Lessor's Cost of such Items; (iv) the Equity
Amount for such Equipment Closing Date; and (v)
the aggregate principal amount of the Notes to be
issued on such Equipment Closing Date. The Owner
Participant has delivered to the Lessee, each
other Participant and each Agent the schedules of
Basic Rent, Casualty Value, Termination Value, and
EBO Price applicable to such Items of Equipment,
the principal amounts of the Notes to be purchased
by each Lender on the Equipment Closing Date, and
the amortization schedule for the Notes to be
issued on the Equipment Closing Date, in each case
as adjusted pursuant to and in compliance with
Article IX hereof. In the event of an adjustment
pursuant to Section 9.1(a) prior to the Equipment
Closing Date, the Lessee shall also deliver such
adjusted Pro Forma Schedules to each Participant
and Agent together with the Funding Request for
the Equipment Closing Date (and effective on the
Equipment Closing Date, Schedule III to the
Participation Agreement shall be deemed to be
amended to reflect such adjusted Pro Forma
Schedules).
A. Acquisition and Leasing of the
Equipment. On the Equipment Closing Date, (a) the
Owner Trustee shall acquire title to each Item of
Equipment pursuant to a Bill of Sale and (b) the
Owner Trustee shall lease to the Lessee, and the
Lessee shall lease from the Owner Trustee, such
Item of Equipment pursuant to, for the Rent and in
accordance with the terms of, the Lease (including
the applicable Lease Supplement and related
Schedule of Equipment, which Lease Supplement and
related Schedule of Equipment shall include the
schedules of Basic Rent, Casualty Value,
Termination Value, and EBO Price as set forth in
the Pro Forma Schedules, as modified pursuant to
in and in accordance with Article IX hereof).
I. ARTICLE
Funding Conditions
A. Conditions Precedent to the
Obligations of the Participants and Agents on the
Equipment Closing Date. The obligation of each of
(i) the Lenders, the Owner Participant, the Owner
Trustee and the Indenture Trustee to execute the
applicable Operative Documents to which each such
Person is party on the Equipment Closing Date,
(ii) the Lenders to disburse funds as contemplated
by Section 2.1(a) hereof and to purchase the Notes
on the Equipment Closing Date, (iii) the Owner
Participant to Fund the Equity Amount requested
for the Equipment Closing Date and (iv) the Owner
Trustee to purchase the Items of Equipment
specified in the Funding Request, shall be subject
in each case to the satisfaction, or waiver by the
Lenders, the Owner Participant, the Owner Trustee
and the Indenture Trustee, as the case may be, of
the following conditions prior to or on the
Equipment Closing Date (except that the obligation
of any party shall not be subject to such party's
own performance or compliance):
1. Funding Request. Each
Participant and Agent shall have received in a
timely manner copies of an appropriate Funding
Request in respect of the Equipment Closing Date
as required by Section 2.2(a), and the Owner
Participant shall have delivered to each
Participant and Agent the schedules of Basic Rent,
Casualty Value, Termination Value, and EBO Price
with respect to the Items of Equipment to be
settled for, and the principal amount of the Notes
to be issued and the amortization schedules for
such Notes as required by Section 2.1(a), and such
schedules and principal amounts shall be
acceptable to the Lessee and the Lenders.
1. Funding. The Owner Trustee
shall have duly executed, and the Indenture
Trustee shall have duly authenticated and
delivered to each Lender, a Note or Notes, dated
the Equipment Closing Date, in a principal amount
equal to such Lender's Commitment Percentage of
the aggregate principal amount of the Notes, and
such Notes shall, notwithstanding Section 2.1(d)
hereof, mature, bear interest and be payable as
provided in the Indenture, and in the Indenture
Supplement delivered on the Equipment Closing
Date. The Lenders shall have purchased such Notes
and the Owner Participant shall have made
available the Equity Amount for such Funding Date.
1. Authorization, Execution and
Delivery of Operative Documents. The Closing Date
Documents and the following additional documents
shall have been duly authorized, executed and
delivered by each designated party thereto prior
to or on the Equipment Closing Date and shall be
in full force and effect, enforceable in
accordance with its terms, on the Equipment
Closing Date without any event or condition having
occurred or existing which constitutes, or with
the giving of notice or lapse of time or both
would constitute, a default thereunder or breach
thereof or would give any party thereto the right
to terminate any thereof or excuse any party from
performing its obligations thereunder:
a) an original Bill of Sale
to the Owner Trustee from the Lessee
conveying good and marketable title to the
Items of Equipment to be purchased on the
Equipment Closing Date to the Owner Trustee,
free and clear of all Liens, in form and
substance satisfactory to each Participant;
a) a Lease Supplement and
related Schedule of Equipment covering the
Items of Equipment delivered on the Equipment
Closing Date, with the chattel paper original
of such Lease Supplement having been
delivered to the Indenture Trustee; and
a) an Indenture Supplement
covering the Items of Equipment delivered on
the Equipment Closing Date.
1. Appraisal. The Owner
Participant shall have received an Appraisal
satisfactory to it in all respects with respect to
the Lease and each Item of Equipment purchased by
the Lessor on the Equipment Closing Date,
confirming that, among other matters, (i) the fair
market value of the Equipment to be purchased on
such Equipment Closing Date is equal to the
Lessor's Cost thereof, (ii) the economic useful
life of such Equipment equals or exceeds 125% of
the Base Term applicable to such Equipment, (iii)
the fair market value of such Items of Equipment
at the Scheduled Lease Termination Date,
determined without giving effect to inflation, is
expected to be at least 20% of the Lessor's Cost
of such Items of Equipment, (iv) use of the Items
of Equipment by parties unaffiliated with the
Lessee or its Affiliates at the expiration of the
Base Term will be commercially feasible, and (v)
the EBO Prices with respect to such Items of
Equipment are not less than the respective
estimated fair market value of such Items on the
EBO Date, after giving effect to inflation, and
such other matters as the Owner Participant may
reasonably request. Each Lender shall have
received a letter from the Independent Appraiser
confirming that, based on the Appraisal, the fair
market value of the Equipment to be purchased on
the Equipment Closing Date is equal to the
Lessor's Cost thereof and the economic useful life
of such Equipment exceeds the Base Term.
2. Filings and Recordings. All
filings, recordings and similar actions reasonably
requested by any Participant shall have been duly
made or taken in order to protect the rights of
the Owner Trustee as owner of the Items of
Equipment delivered on such Equipment Closing Date
and as Lessor under the Lease and to establish and
perfect the right, title and interest of the
Indenture Trustee therein under the Indenture, in
each case as against creditors of and purchasers
from the Owner Trustee and the Lessee.
1. Certificates. Each
Participant and each Agent shall have received an
Officer's Certificate of:
(i) Lessee Certificate the Lessee
dated the Equipment Closing Date, the truth
and accuracy of which shall be a condition to
the obligations of such Persons hereunder
with respect to the Equipment Closing Date,
to the effect that the warranties and
representations of the Lessee set forth in
Section 4.1 hereof are true and correct on
the Equipment Closing Date with the same
effect as though made on and as of that date
(except to the extent that any such
representation or warranty expressly refers
to a specific date, in which case such
representation and warranty shall have been
true and correct on and as of such date);
(ii) Owner Participant Certificate
the Owner Participant dated the Equipment
Closing Date, the truth and accuracy of which
shall be a condition to the obligations of
such Persons hereunder with respect to the
Equipment Closing Date, to the effect that
the warranties and representations of the
Owner Participant set forth in Section 4.2
hereof are true and correct on the Equipment
Closing Date with the same effect as though
made on and as of that date (except to the
extent that any such representation or
warranty expressly refers to a specific date,
in which case such representation and
warranty shall have been true and correct on
and as of such date);
(iii) Indenture Trustee
Certificate the Indenture Trustee dated the
Equipment Closing Date, the truth and
accuracy of which shall be a condition to the
obligations of such Persons hereunder with
respect to the Equipment Closing Date, to the
effect that the warranties and
representations of the Indenture Trustee set
forth in Section 4.3 hereof are true and
correct on the Equipment Closing Date with
the same effect as though made on and as of
that date (except to the extent that any such
representation or warranty expressly refers
to a specific date, in which case such
representation and warranty shall have been
true and correct on and as of such date);
(iv) Owner Trustee Certificate the
Owner Trustee dated the Equipment Closing
Date, the truth and accuracy of which shall
be a condition to the obligations of such
Persons hereunder with respect to the
Equipment Closing Date, to the effect that
the warranties and representations of the
Owner Trustee set forth in Section 4.5 hereof
are true and correct on the Equipment Closing
Date with the same effect as though made on
and as of that date (except to the extent
that any such representation or warranty
expressly refers to a specific date, in which
case such representation and warranty shall
have been true and correct on and as of such
date);
(v) Guarantor Certificate the
Guarantor dated the Equipment Closing Date,
the truth and accuracy of which shall be a
condition to the obligations of such Persons
hereunder with respect to the Equipment
Closing Date, in the form attached hereto as
Appendix G;
(vi) Zenith Certificate Zenith
dated the Equipment Closing Date, the truth
and accuracy of which shall be a condition to
the obligations of such Persons hereunder
with respect to the Equipment Closing Date,
in the form attached hereto as Appendix G-1;
and
(vii) Additional Zenith
Certificate Zenith dated the Equipment
Closing Date, the truth and accuracy of which
shall be a condition to the obligations of
such Persons hereunder with respect to the
Equipment Closing Date, in the form attached
hereto as Appendix H.
1. Legal Opinions.
a) Each Participant and each
Agent shall have received the respective
legal opinions dated the Equipment Closing
Date of:
(A) Lessee's Counsel,
substantially in the form of Appendices D-1
and D-2 hereto;
(B) Owner Participant's
Counsel, substantially in the forms of
Appendices D-3 and D-4 hereto;
(C) Owner Trustee's Counsel,
substantially in the form of Appendix D-5
hereto;
(D) Indenture Trustee's
Counsel, substantially in the form of
Appendix D-6 hereto; and
(E) Guarantor's Counsel,
substantially in the form of Appendices D-7
and D-8 hereto.
a) In addition, the Owner
Participant shall have received an opinion of
Hunton & Williams, as Owner Participant's
Counsel, addressing certain tax matters in
form and substance satisfactory to the Owner
Participant, and the Lenders shall have
received an opinion of Lenders' Counsel as to
such matters as the Lenders may request, in
form and substance satisfactory to the
Lenders.
a) In addition, the Participants
and the Agents shall have received an opinion
of Ritch, Heather Y Mueller, S.C., as to such
matters of Mexican law as the Participants
and the Agents may request, in form and
substance satisfactory to the Participants
and the Agents.
1. Taxes. All Taxes, if any,
payable on or prior to the Equipment Closing Date
in connection with the execution, delivery,
recording and filing of the Operative Documents
and in connection with the consummation of the
transactions contemplated by the Operative
Documents shall have been paid in full.
1. Governmental Action. All
Governmental Action required or, in the reasonable
opinion of such Participant or such Agent,
advisable as of the Equipment Closing Date for the
consummation of the transactions contemplated
hereby or by the other Operative Documents,
including all approvals, if any, of any Korean
Governmental Authority required for the Guarantor
to enter into and perform its obligations under
the Guaranty, shall have been obtained and shall
be in full force and effect and such Participant
or Agent shall have received copies of evidence of
such Governmental Action, if any.
1. Documents. Prior to or on the
Equipment Closing Date, each Participant and each
Agent shall have received (i) certified copies of
the Organic Documents of the Lessee, the
Guarantor, the Owner Trustee, the Owner
Participant, and the Indenture Trustee (ii) good
standing certificates relating to each such Person
certified by the appropriate agency of the
jurisdiction of such Person's organization, and in
the case of the Lessee, the State of Illinois and
(iii) such other evidence as to the due authority
of each such Person to execute, deliver and
perform its obligations under each document
executed by it or contemplated by the terms hereof
to be executed by it as such Participant and such
Agent shall reasonably request.
1. Final Acceptance Date;
Delivery Date. The Final Acceptance Date and the
Delivery Date for each Item of Equipment to be
settled for on the Equipment Closing Date shall
have occurred (and each Item of Equipment has been
assembled and is readily available for use, except
as set forth in the following-referenced Officer's
Certificate), and each Participant and each Agent
shall have received an Officer's Certificate of
the Lessee regarding the occurrence of such Final
Acceptance Date and Delivery Date.
1. Purchase Agreements; Invoices.
The Owner Participant and the Indenture Trustee
shall have received copies of such Purchase
Documents relating to the Items of Equipment
delivered on the Equipment Closing Date and
Invoices from the respective Sellers thereof
specifying the amounts comprising the respective
purchase prices of such Items as the Owner
Participant may request, in each case certified as
true, correct and complete on the Equipment
Closing Date by a Responsible Officer of the
Lessee.
1. Transaction Expenses. The
Owner Participant or the Lessee, shall have paid
or made arrangements satisfactory to the parties
entitled thereto for the payment of all
Transaction Expenses for which invoices were
received at least two (2) Business Days prior to
the Equipment Closing Date.
1. Illegality. In the opinion of
each Participant and Agent or its counsel, it
would not be illegal under Applicable Law for such
Participant or Agent to participate in any of the
transactions contemplated by any Operative
Document.
1. No Default. No Default or
Event of Default shall have occurred and be
continuing or shall result from the transactions
to take place on the Equipment Closing Date.
1. No Change in Tax Law. No
change or proposed change in federal, state or
local tax law (including, without limitation, the
Code, regulations, rulings or case law) shall have
occurred on or prior to the Equipment Closing
Date.
1. Other Matters. Each
Participant and each Agent shall have received
copies of such other documents and assurances as
to such other matters as any such Person may have
reasonably requested in connection with the
transactions contemplated hereby.
A. Additional Conditions to
Obligations of Lenders. The obligation of the
Lenders to purchase the Notes to be issued on the
Equipment Closing Date, shall be subject to the
satisfaction of (or waiver by the Lenders of) the
additional conditions that (a) the Notes issued on
the Equipment Closing Date shall qualify as legal
investments for each Lender under any laws
regulating investments to which it may be subject
(without recourse to provisions in any such law
permitting limited investments without restriction
as to the character of the particular investment),
and each Lender shall have received such evidence
as it may reasonably request to establish
compliance with this condition (b) no Indenture
Default or Indenture Event of Default shall have
occurred and be continuing or shall result from
the transactions to take place on the Equipment
Closing Date, and (c) prior to the Equipment
Closing Date, each Lender shall have received such
evidence as such Lender shall reasonably request
to establish compliance with Section 9.5 hereof as
of the Equipment Closing Date.
A. Conditions Precedent to the
Obligations of the Lessee on the Equipment Closing
Date. The obligations of the Lessee to take the
actions contemplated hereby on the Equipment
Closing Date shall be subject to the satisfaction,
or waiver by the Lessee, prior to or on the
Equipment Closing Date, of the following
conditions precedent:
1. Authorization, Execution and
Delivery of Operative Documents. Each of the
Operative Documents shall have been duly
authorized, executed and delivered by each
designated party thereto (other than the Lessee)
and shall be in full force and effect on the
Equipment Closing Date, and the Lessee shall have
received an executed counterpart of each Operative
Document and any other document of which an
executed counterpart shall have been delivered to
the Participants and a copy of each such document
of which a copy shall have been delivered to the
Participants.
1. Certificates. The Lessee
shall have received the Officer's Certificates
referred to in Sections 3.1(f)(ii)-(iv), the truth
and accuracy of which shall be a condition to the
obligations of the Lessee hereunder with respect
to the Equipment Closing Date.
1. Legal Opinions. The Lessee
shall have received opinions addressed to each
such Person, of the counsel respectively specified
in Sections 3.1(g)(i)(B)-(D).
1. Funding. The Owner Trustee
shall have paid directly to the Lessee, the
Lessor's Cost for the Items of Equipment specified
in the Funding Request.
1. Appraisal. The Lessee shall
have received a copy of the Appraisal, which it
shall maintain on a confidential basis on the
terms set forth in Article XVII.
1. Illegality. In the opinion of
the Lessee, based on consultation with the
Lessee's Counsel, it would not be illegal under
Applicable Law for the Lessee to consummate any of
the transactions contemplated by any Operative
Document.
I. ARTICLE
Representations and Warranties
A. Representations and Warranties of
the Lessee. The Lessee represents and warrants as
follows:
1. Due Incorporation, etc. The
Lessee (i) is a corporation duly organized and
validly existing under the laws of the State of
Delaware, (ii) has the power and authority to own
or hold under lease properties used in its
business and to enter into and perform its
obligations under each of the Operative Documents
to which it is a party, (iii) has all Governmental
Action required to carry on its business as
presently conducted and as contemplated, to own or
hold under lease the properties used in its
business, including the Equipment, and to enter
into and perform its obligations under this
Agreement and each other Operative Document to
which it is or is to become a party, and (iv) is
duly qualified to do business as a foreign
corporation and is in good standing in each
jurisdiction where the failure to be so qualified
would reasonably be expected to have a Material
Adverse Effect.
1. Due Authorization, Non-
Contravention, etc. The execution, delivery and
performance of the Operative Documents to which
the Lessee is a party have been duly authorized by
all necessary corporate action on its part, do not
and will not conflict with, result in any
violation of, or constitute any default under, any
provision of any Organic Document of the Lessee or
any Applicable Law and will not result in or
require the creation or imposition of any Lien
(other than Permitted Liens) on any of the
properties of the Lessee.
1. Due Execution. This
Participation Agreement and each other Operative
Document to which the Lessee is a party have been
duly executed and delivered by, and each such
Operative Document constitutes the legal, valid
and binding obligation of, the Lessee enforceable
in accordance with its terms, except as
enforceability may be limited by applicable
bankruptcy, insolvency or similar laws affecting
the enforcement of creditors' rights generally or
by equitable principles relating to
enforceability.
1. No Violation, etc. Neither
the execution, delivery, and performance by the
Lessee of this Participation Agreement or any
other Operative Document to which it is, or is to
become, a party, nor the consummation of the
transactions contemplated thereby will conflict
with, or result in a breach of any of the terms or
provisions of, or constitute a default under, or
result in the creation or imposition of any Lien
(other than Permitted Liens) pursuant to any
Contractual Obligation of the Lessee which could
reasonably be expected to have a material adverse
impact on the Lessee's ability to perform its
obligations under the Operative Documents to which
it is a party, nor will such actions result in any
violation of the provisions of the Organic
Documents of the Lessee.
1. Governmental Action. No
Governmental Action by, and no notice to or filing
with, any Governmental Authority is required for
the due execution, delivery and performance by the
Lessee of the Operative Documents to which it is a
party, except for such Governmental Actions,
notices or filings identified on Schedule IV as
have been duly obtained or made and are in full
force and effect. There is no proceeding pending
or, to the best knowledge of the Lessee,
threatened which seeks, or which would reasonably
be expected, to rescind, terminate, modify or
suspend any such Governmental Action. The Lessee
is not an "investment company" or a company
"controlled" by an "investment company", within
the meaning of the Investment Company Act of 1940,
or a "holding company" or a "subsidiary company"
of a "holding company", or an "affiliate" of a
"holding company" or of a "subsidiary company" of
a "holding company", within the meaning of the
Public Utility Holding Company Act of 1935.
1. Litigation. There is no
pending or, to the best knowledge of the Lessee,
threatened litigation, Environmental Claim,
action, arbitration or proceeding affecting the
Lessee or any of its properties, assets or
revenues which questions the validity or
enforceability of any Operative Document or which,
individually or in the aggregate, if decided
adversely to the interests of the Lessee, would
reasonably be expected to have a Material Adverse
Effect.
1. Location and Status of
Equipment. On the Equipment Closing Date, each
Item of Equipment delivered on such date is
located at either the Reynosa Facility or the
Juarez Facility. The Items of Equipment subject
to each Lease Supplement are personal property and
are not, and will not be attached to or related to
the real estate in such a manner so that any Item
of Equipment constitutes, or will constitute, a
fixture. The Items of Equipment subject to each
Lease Supplement are the same Items of Equipment
identified in the copy of the Appraisal delivered
to the Lessee as being located in Illinois. As of
the Equipment Closing Date, each of the Items of
Equipment will be properly installed in a
workmanlike manner in accordance with Applicable
Law and in accordance with the plans and
specifications therefor, will contain no material,
structural or systemic defect and will be in good
operating order.
1. Compliance with Applicable Law
and Governmental Action. The Lessee is in
compliance with all Applicable Law (including all
Applicable Law relating to the ownership, use,
operation and lease of the Equipment) except to
the extent that the failure to comply with any
such Applicable Law could not, individually or in
the aggregate, reasonably be expected to have a
Material Adverse Effect.
1. ERISA. The Lessee is not
entering into this Participation Agreement or any
transaction contemplated hereby or by any other
Operative Document to which it is, or is to
become, a party, directly or indirectly in
connection with any arrangement or understanding
by it in any way involving any "employee benefit
plan" (within the meaning of Section 3(3) of
ERISA) or "plan" (within the meaning of
Section 4975(e)(1) of the Code) or any "plan
assets" of any such employee plan or plans and the
transactions contemplated by the Operative
Documents will not cause or result in any non-
exempt prohibited transactions within the meaning
of Section 406 of ERISA or Section 4975 of the
Code. The representation and warranty in the
preceding sentence is made by the Lessee in
reliance upon, and is subject to the accuracy of,
the representations and warranties made by the
Participants in Sections 4.2(f) and 4.4(d) hereof,
respectively.
1. No Public Offering.
a) Neither the Lessee nor
Salomon Brothers Inc. (the only Person
authorized or employed by the Lessee as
agent, broker, dealer or otherwise in
connection with the offering or sale of the
Notes or any similar securities) has offered
any of the Notes or similar securities, or
solicited offers to buy any thereof from, or
otherwise approached or negotiated with
respect thereto with, any prospective
purchaser, other than the Lenders and not
more than 80 other institutional investors,
each of which was offered such Notes at
private sale for investment and each of which
the Lessee or such agent had reasonable
grounds to believe, and did believe, and as
to the Lenders after reasonable inquiry does
believe, has such knowledge and experience in
financial and business matters that it is
capable of evaluating the merits and risks of
investment in such Notes. Neither the Lessee
nor any Person authorized to act on its
behalf will take any action which would
subject the issuance or sale of any Notes or
any interest in the Lease or any other debt
or other instrument issued or to be issued to
finance the Equipment to the registration
requirements of Section 5 of the Securities
Act.
a) Neither the Lessee nor
Salomon Brothers Inc. (the only Person
authorized or employed by the Lessee as
agent, broker, dealer or otherwise in
connection with the offering or sale of the
beneficial interest in the Trust Estate or
any similar securities) has offered the
beneficial interest in the Trust Estate or
similar securities, or solicited offers to
buy any thereof from, or otherwise approached
or negotiated with respect thereto with, any
prospective purchaser, other than the Owner
Participant and not more than 34 other
institutional investors, each of which was
offered such beneficial interest at private
sale for investment and each of which the
Lessee or such agent had reasonable grounds
to believe, and did believe, and as to the
Owner Participant after reasonable inquiry
does believe, has such knowledge and
experience in financial business matters that
it is capable of evaluating the merits and
risks of investment in such beneficial
interest. Neither the Lessee nor any Person
authorized to act on its behalf will take any
action which would subject the issuance or
sale of any beneficial interest in the Trust
Estate, or any interest in the Lease or any
other debt or other instrument issued or to
be issued to finance the Equipment to the
registration requirements of Section 5 of the
Securities Act.
1. Title. On the Equipment
Closing Date, all UCC financing statements,
Purchase Documents and other documents, if any
necessary or advisable to establish and protect
the Lessor's right, title and interest in and to
the Equipment to be acquired by it and to perfect
for the benefit of the Indenture Trustee and the
Lenders the Lien and security interest in the
Trust Indenture Estate created pursuant to the
Indenture will have been duly executed by all
necessary and appropriate Persons and filed or
recorded and the Indenture, together with such
filings and recordings, will on the Equipment
Closing Date create a valid and perfected first
priority Lien and security interest in the Trust
Indenture Estate effective as against creditors of
and purchasers from the Lessee and, assuming that
the representations and warranties of the Owner
Trustee herein are true and correct, the Owner
Trustee. Upon delivery of the Equipment pursuant
to a Bill of Sale, the Owner Trustee will
thereupon have good, valid and marketable title to
such Equipment free and clear of all Liens other
than Permitted Liens described in clauses (a) -
(c) in the definition of "Permitted Liens". On
the Equipment Closing Date, the Equipment is
located on real property leased by the Lessee from
a directly or indirectly wholly-owned subsidiary
of Zenith and the Equipment is held by such
subsidiary as bailee.
1. No Default, etc. The Lessee
is not in default, and no condition exists that
with notice or lapse of time or both would
constitute a default under any mortgage, deed of
trust, indenture, contract or other instrument or
agreement to which the Lessee is a party or by
which it or any of its properties or assets may be
bound which individually or in the aggregate could
reasonably be expected to have a Material Adverse
Effect with respect to the Lessee, the Indenture
Trustee, the Owner Trustee or any Participant.
1. Taxes. The Lessee has filed
or caused to be filed all tax returns required to
be filed by it and has paid all Taxes shown to be
due and payable on such returns (other than those
that are not yet delinquent, and those Taxes that
the Lessee is contesting in good faith, none of
which contested Taxes are material).
1. Defaults; Events of Loss. No
Default or Event of Default has occurred and is
continuing or will result from the transactions to
take place on the Equipment Closing Date. As of
the Equipment Closing Date, no Event of Loss or
event that with the passage of time or giving of
notice or both would constitute an Event of Loss
has occurred and is continuing with respect to any
Item of Equipment.
1. Sales Tax. All sales, use,
transfer, recording and similar taxes due on the
Equipment Closing Date in connection with the
transactions contemplated by the Operative
Documents have been paid on the Equipment Closing
Date or such transactions are exempt from such
taxes.
1. Financial Statements and
Condition. The audited consolidated balance
sheets and consolidated statements of income and
retained earnings and cash flows of Zenith and its
subsidiaries set forth in Zenith's annual report
on Form 10-K for the fiscal year ended December
31, 1995 (copies of which have been delivered to
the Participants), fairly present, in conformity
with generally accepted accounting principles, the
consolidated financial position of Zenith and its
subsidiaries as of such date and the results of
their operations for the period then ended. The
unaudited consolidated balance sheets and
consolidated statements of income and retained
earnings and cash flows of Zenith and its
subsidiaries set forth in the Lessee's quarterly
report on Form 10-Q for the fiscal quarter ended
September 30, 1996 (copies of which have been
delivered to the Participants), fairly present, in
conformity with generally accepted accounting
principles consistently applied, the consolidated
financial position of Zenith and its subsidiaries
as of such date and the results of their
operations for the period then ended, subject to
the absence of footnotes and normal year-end
adjustments. Since September 30, 1996, no
material adverse change has occurred in the
business or consolidated financial condition of
Zenith and its subsidiaries which has not been
disclosed in Zenith's reports under the Securities
Exchange Act of 1934 or otherwise disclosed in
writing. Zenith's reports under the Securities
Exchange Act of 1934 referred to in this Section
did not contain as of their respective dates any
untrue statement of a material fact or omit to
state a material fact necessary to make the
statements therein in light of the context in
which they were made, not misleading.
1. Chief Executive Office. The
chief executive office (as such term is used in
Article 9 of the UCC) of the Lessee is located at
1000 Milwaukee Avenue, Glenview, Illinois 60025.
2. Environmental Matters. The
Lessee holds and is in compliance with the terms
and conditions of all Governmental Actions
required under applicable Environmental Laws which
Governmental Actions are associated with the
Equipment; the Lessee is in compliance with all
Environmental Laws, except for such non-compliance
as would not involve the risk of any criminal
liability to any Participant or any Agent or would
not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect on
the Lessee, any Participant or any Agent and
Lessee is in compliance with all Environmental
Laws applicable to or otherwise affecting the
Equipment; no Lien has been attached to any of the
Equipment pursuant to any Environmental Law; the
Lessee has not received written notice, and to
Lessee's best knowledge the Lessee is not aware,
of any Environmental Claim or investigation, or
notice of violation, pending or threatened, based
on or related to Environmental Law relating to the
Equipment; to the Lessee's best knowledge, there
are no facts, activities, events, conditions or
circumstances involving Hazardous Substances that
could reasonably be anticipated to form the basis
of an Environmental Claim against or involving the
Lessee, except for Environmental Claims that would
not reasonably be expected to have a Material
Adverse Effect on the Lessee, any Agent or any
Participant; there are no past, pending or, to the
Lessee's best knowledge after due inquiry,
threatened Environmental Claims in any way
involving or relating to (i) the Lessee, except
for Environmental Claims that could not reasonably
be anticipated, individually or in the aggregate,
to have a Material Adverse Effect on the Lessee,
any Participant or any Agent, or (ii) the
Equipment; Hazardous Substances associated in any
way with the Equipment have not at any time been
generated, used, treated, managed, recycled,
stored, disposed of, Released or transported other
than in compliance with all applicable
Environmental Laws; no polychlorinated biphenyls
(PCBs) are used in connection with or contaminate
any part of the Equipment; the Lessee has no
knowledge of any pending or threatened
Environmental Claim at any treatment, storage or
disposal facility that has received Hazardous
Substances associated in any way with the
Equipment.
1. Insurance. On the Equipment
Closing Date, the Equipment will be covered by the
insurance required by Article XX of the Lease.
1. Margin Regulations. None of
the transactions contemplated by the Operative
Documents (including, without limitation, the use
of the proceeds from the sale of the Notes) will
result in a violation of Section 7 of the Exchange
Act or any regulations issued thereunder or
Regulations G, T, U or X of the Board of Governors
of the Federal Reserve System, 12 C.F.R., Chapter
II. None of the proceeds from the sale of the
Notes will be used to purchase or carry (or
refinance any borrowing the proceeds of which were
used to purchase or carry) any "margin stock"
within the meaning of any such Regulations.
1. Broker's Fee. No broker's or
finder's or placement fee or commission will be
payable with respect to the transactions
contemplated by the Operative Documents as a
result of any action by the Lessee, except for the
fees of Salomon Brothers Inc, which shall be
included in Transaction Expenses.
(v) Labor Claims. Neither Lessee nor
any of its Affiliates which hold the Equipment are
subject to any labor or labor-related claim under
any Applicable Law which could reasonably be
expected to have a Material Adverse Effect with
respect to the Lessee or Zenith (and, to the best
of Lessee's knowledge, no such claims are
threatened).
A. Representations and Warranties of
the Owner Participant. The Owner Participant
represents and warrants as follows:
1. Due Incorporation, etc. It is
a corporation duly organized and validly existing
in good standing under the laws of its
jurisdiction of incorporation, and has the
corporate power and authority to enter into and
perform its obligations under the Operative
Documents to which it is a party.
1. Due Authorization, Non-
Contravention, etc. The execution, delivery and
performance of the Operative Documents to which it
is a party have been duly authorized by all
necessary corporate action, do not and will not
conflict with, result in any violation of, or
constitute any default under, any provision of any
of its Organic Documents or Contractual
Obligations or any Applicable Law (but only, in
the case of any Contractual Obligations, as to any
such conflict, violation or default which could
not reasonably be expected to have a Material
Adverse Effect with respect to the Owner
Participant) and will not result in or require the
creation of any Lien (other than Permitted Liens
that are not also Owner Participant Liens) on any
part of the Equipment or on any of its properties
and no Governmental Action by, and no notice to or
filing with, any Governmental Authority or
regulatory body is required for the due execution,
delivery and performance by such Owner Participant
of the Operative Documents to which it is a party,
except for such Governmental Actions, notices or
filings as have been duly obtained or made and are
in full force and effect.
1. Due Execution. The Operative
Documents to which it is a party have been duly
executed and delivered by, and each such Operative
Document constitutes the legal, valid and binding
obligation of, the Owner Participant enforceable
in accordance with its terms.
1. No Public Offering; Brokers.
Neither the Owner Participant nor any Person
acting on its behalf has directly or indirectly
offered or sold, nor will it offer or sell, the
Notes, or any interest in the Equipment or the
Lease, or any similar securities, or has otherwise
approached or negotiated, nor will it approach or
negotiate, with any Person with respect thereto,
so as to bring any of the transactions
contemplated hereby within the purview of
Section 5 of the Securities Act. It is acquiring
its interest in the Trust Estate for its own
account for investment and not with a view to, or
for sale in connection with, any distribution;
provided that the disposition of its property
shall at all times be and remain within its
control. It has not retained or employed, nor
will it retain or employ, any broker or finder to
act on its behalf in connection with the
transactions contemplated by the Operative
Documents on the Equipment Closing Date and has
not authorized, nor will it authorize any broker
or finder retained or employed by any other Person
so to act.
1. Owner Participant Liens. The
Equipment and the Trust Estate are free of Owner
Participant Liens.
1. ERISA. No part of the funds
constituting part of the Equity Amount or
Transaction Expenses, to be used by it to acquire
any interest in the Equipment constitutes an asset
of an "employee benefit plan" (as such term is
defined in Section 3(3) of ERISA) or any "plan"
(as such term is defined in Section 4975(e)(1) of
the Code).
1. Litigation. There is no
pending or, to the best knowledge of such Owner
Participant, threatened litigation, action,
arbitration or proceeding affecting such Owner
Participant or any of its properties, assets or
revenues before any Governmental Authority which
questions the validity or enforceability of any
Operative Document or which, individually or in
the aggregate, if decided adversely to such Owner
Participant, would reasonably be expected to have
a material adverse effect on its ability to
perform its obligations under the Operative
Documents to which it is a party.
A. Representations and Warranties of
the Indenture Trustee. The Indenture Trustee in
its individual capacity represents and warrants as
follows:
1. Due Organization. It is a
national banking association duly organized and
validly existing in good standing under the laws
of the United States and has all requisite
corporate power and authority to execute, deliver
and perform its obligations under this
Participation Agreement and the other Operative
Documents to which it is a party.
1. Due Authorization. This
Participation Agreement and the other Operative
Documents to which it is party have been duly
authorized, executed and delivered by the
Indenture Trustee and constitute the legal, valid
and binding obligations of the Indenture Trustee
enforceable against the Indenture Trustee in
accordance with the terms hereof and thereof.
1. Non-Contravention. Neither
the execution and delivery by the Indenture
Trustee of this Participation Agreement and the
other Operative Documents to which it is party,
nor the authentication by it of the Notes, nor the
consummation by it of the transactions
contemplated hereby or thereby, nor the compliance
by it with any of the terms or provisions thereof
will contravene any Applicable Law, or any
Connecticut or United States judgment or order
applicable to or binding on it, or contravene or
result in any breach of, or constitute any default
under, its Organic Documents or Contractual
Obligations to which it is a party or by which any
of its properties may be bound.
1. Governmental Action. Neither
the execution and delivery by the Indenture
Trustee of this Participation Agreement and the
other Operative Documents to which it is or is to
be party, nor the performance by it of any of the
transactions contemplated hereby or thereby
requires the consent or approval of, the giving of
notice to, the registration with, or the taking of
any other action in respect of, any Governmental
Authority governing the banking or trust powers of
the Indenture Trustee.
1. Litigation. There is no
pending or, to the best knowledge of the Indenture
Trustee, threatened litigation, action,
arbitration or proceeding affecting the Indenture
Trustee or any of its properties, assets or
revenues before any Governmental Authority which
questions the validity or enforceability of any
Operative Document or which, individually or in
the aggregate, if decided adversely to the
Indenture Trustee, would reasonably be expected to
have a material adverse effect on its ability to
perform its obligations under the Operative
Documents to which it is a party.
A. Representations and Warranties of
the Lenders. Each Lender severally represents and
warrants as follows:
(a) Due Organization. It is duly
organized and validly existing in good standing
under the laws of its jurisdiction of organization
and has all requisite corporate power and
authority to execute, deliver and perform its
obligations under this Participation Agreement and
the other Operative Documents to which it is a
party.
(b) Due Authorization. This
Participation Agreement and the other Operative
Documents to which it is party have been duly
authorized, executed and delivered by such Lender
and constitute the legal, valid and binding
obligations of such Lender enforceable against
such Lender in accordance with the terms hereof
and thereof.
(c) Notes for Investment Only. It is
acquiring the Notes for its own account or for one
or more separate accounts maintained by it for
investment and not with a view to, or for sale in
connection with, any distribution, provided that
the disposition of its property shall at all times
be and remain within its control.
(d) ERISA. At least one of the
following statements is an accurate representation
as to each source of funds (a "Source") to be used
by such Lender to pay the purchase price of the
Notes to be purchased by it hereunder:
(i) the Source is an insurance
company general account as such term is used
in U.S. Department of Labor Prohibited
Transaction Class Exemption ("PTCE") 95-60,
and the amount of reserves and liabilities
(as defined in the annual statement for life
insurance companies approved by the National
Association of Insurance Commissioners (the
"NAIC Annual Statement") and before reduction
for credits on account of any reinsurance
ceded on the coinsurance basis) (the
"Reserves and Liabilities"), for the general
account contract(s) held by or on behalf of
any Plan, together with the amount of the
Reserves and Liabilities for the general
account contracts(s) held by or on behalf of
any other Plans maintained by the same
employer (or any "affiliate" thereof within
the meaning of Section V(a)(1) of PTCE 95-
60), does not exceed 10% of the total
Reserves and Liabilities of such general
account plus surplus, as set forth in the
NAIC Annual Statement filed with the state of
domicile of the insurance company maintaining
such general account; or
(ii) the Source is a separate
account that is maintained solely in
connection with such Lender's fixed
contractual obligations under which the
amounts payable, or credited, to any employee
benefit plan (or its related trust) that has
any interest in such separate account (or to
any participant or beneficiary of such plan
(including any annuitant)) are not affected
in any manner by the investment performance
of the separate account; or
(iii) the Source is either (A) an
insurance company pooled separate account,
within the meaning of PTCE 90-1 (issued
January 29, 1990), or (B) a bank collective
investment fund, within the meaning of PTCE
91-38 (issued July 12, 1991) and, except as
disclosed by such Purchaser to the Lessee and
the Owner Participant in writing pursuant to
this paragraph (iii), no employee benefit
plan or group of plans maintained by the same
employer or employee organization
beneficially owns more than 10% of all assets
allocated to such pooled separate account or
collective investment fund; or
(iv) the Source constitutes assets
of an "investment fund" (within the meaning
of Part V of PTCE 84-14) managed by a
"qualified professional asset manager" or
"QPAM" (within the meaning of Part V of PTCE
84-14), no employee benefit plan's assets
that are included in such investment fund,
when combined with the assets of all other
employee benefit plans established or
maintained by the same employer or by an
affiliate (within the meaning of Section
V(c)(1) of PTCE 84-14) of such employer or by
the same employee organization and managed by
such QPAM, exceed 20% of the total client
assets managed by such QPAM, the conditions
of Part I (c) and (g) of PTCE 84-14 are
satisfied, and neither the QPAM nor a person
controlling or controlled by the QPAM
(applying the definition of "control" in
Section V(e) of PTCE 84-14) owns a 5% or more
interest in the Lessee or the Owner
Participant; or
(v) the Source constitutes assets
managed by an "in-house asset manager" or
"INHAM" (within the meaning of Part IV of
PTCE 96-23), the conditions of Part I(a) of
PTCE 96-23 are satisfied, and neither the
INHAM nor a person controlling or controlled
by the INHAM (applying the definition of
"control" in Section IV(d) of PTCE 96-23)
owns a 5% or more interest in the Lessee or
the Owner Participant; or
(vi) the Source is a governmental
plan; or
(vii) the Source is one or more
employee benefit plans, or a separate account
or trust fund comprised of one or more
employee benefit plans, each of which has
been identified to the Lessee and the Owner
Participant in writing pursuant to this
paragraph (vii); or
(viii) the Source does not include
assets of any employee benefit plan, other
than a plan exempt from the coverage of
ERISA. As used in this Section 4.4(d), the
terms "employee benefit plan", "governmental
plan" and "separate account" shall have the
respective meanings assigned to such terms in
Section 3 of ERISA.
(e) U.S. Person. It is a "United
States Person" as defined in Section 7701(a)(30)
of the Code.
A. Representations and Warranties of
Fleet and the Owner Trustee. Fleet and the Owner
Trustee (where noted) represent and warrant to
each of the other parties hereto that:
1. Due Organization. Fleet is a
national banking association duly organized and
validly existing in good standing under the laws
of the United States and has all requisite
corporate power and authority to execute, deliver
and perform its obligations under this Agreement
and the Trust Agreement and (assuming due
authorization, execution and delivery of the Trust
Agreement by the Owner Participant) has all
requisite corporate power and authority as Owner
Trustee to execute and deliver the other Operative
Documents to which it is or is to be a party.
1. Due Authorization. This
Agreement and the Trust Agreement have been duly
authorized, executed and delivered by Fleet and
the Owner Trustee, as the case may be, and
constitute the legal, valid and binding
obligations of Fleet and the Owner Trustee, as the
case may be, enforceable against Fleet and the
Owner Trustee, as the case may be, in accordance
with the terms hereof and thereof. Assuming the
due authorization, execution and delivery of the
Trust Agreement by the Owner Participant, the
Operative Documents to which the Owner Trustee is
a party have been duly authorized, executed and
delivered by it and constitute the legal, valid
and binding obligations of the Owner Trustee
enforceable against it in accordance with the
terms thereof.
1. Non-Contravention. Neither
the execution and delivery by Fleet or the Owner
Trustee, as the case may be, of any of the
Operative Documents to which it is or is to be a
party, nor the consummation by it of the
transactions contemplated thereby nor compliance
by it with any of the terms or provisions thereof
will contravene any Applicable Law of Connecticut,
any Applicable Law of the United States governing
banking and trust powers or any judgment or order
applicable to or binding on it, or contravene or
result in any breach of, or constitute any default
under, its Organic Documents or Contractual
Obligations to which it is a party or by which any
of its properties may be bound.
1. Governmental Action. Neither
the execution and delivery by Fleet or the Owner
Trustee, as the case may be, of each of the
Operative Documents to which it is or is to be a
party, nor the performance of its obligations
thereunder requires the consent or approval of or
the giving of notice to, the registration with, or
the taking of any other action in respect of, any
Connecticut Governmental Authority or any United
States Governmental Authority governing its
banking and trust powers.
1. Location. The chief executive
office (as such term is used in Article 9 of the
UCC) of the Owner Trustee is located at Boston,
Massachusetts, and its principal corporate trust
office is located at Hartford, Connecticut.
1. Title. On the Equipment
Closing Date, the Owner Trustee will have whatever
title to the Items of Equipment delivered on such
Equipment Closing Date as was conveyed to it by
the Lessee.
1. Litigation. There is no
pending or, to the best knowledge of Fleet or the
Owner Trustee, as the case may be, threatened
litigation, action, arbitration or proceeding
affecting the Owner Trustee or any of its
properties, assets or revenues before any
Governmental Authority which questions the
validity or enforceability of any Operative
Document or which, individually or in the
aggregate, if decided adversely to Fleet or the
Owner Trustee, as the case may be, would
reasonably be expected to have a material adverse
effect on its ability to perform its obligations
under the Operative Documents to which it is a
party.
1. Liens; Conveyances. The Trust
Estate is free and clear of any Lessor Liens
attributable to Fleet or the Owner Trustee, as the
case may be. Except as contemplated by the
Operative Documents, the Owner Trustee has not
conveyed any interest in the Trust Estate to any
Person.
I. ARTICLE
Covenants
A. Covenants of the Owner Participant,
Fleet and the Owner Trustee.
1. Liens. Each of the Owner
Participant, Fleet and the Owner Trustee severally
agrees that at all times the Trust Estate shall be
free of any Owner Participant Liens or Lessor
Liens, respectively, attributable to it. The
Owner Participant, Fleet and the Owner Trustee
each severally agrees that it will, at its own
cost and expense, promptly take such action as may
be necessary duly to discharge any Owner
Participant Lien or Lessor Lien, respectively,
attributable to it and will make restitution and
hold harmless each other Indemnified Person on an
After Tax Basis, from and against any costs or
expenses (including Fees and Expenses) and, any
reduction in the amount payable out of the Trust
Indenture Estate to each present or future holder
of a Note in respect of the Notes, incurred, in
each case, by such party as a result of the
imposition or enforcement of any such Owner
Participant Lien or Lessor Lien attributable to
it; provided, that the Owner Participant and Fleet
may in good faith by appropriate proceedings
contest claims or charges resulting in any such
Owner Participant Lien or Lessor Lien as long as
such proceeding does not involve any material
danger of the sale, forfeiture or loss (or loss of
use) of any Item of Equipment or any other part of
the Trust Estate or the Trust Indenture Estate, or
any interest therein.
1. No Amendments. Each of Fleet
and the Owner Participant agrees that until
expiration or earlier termination of the Lease it
will not terminate the Trust Agreement or amend
the Trust Agreement in any manner which would be
materially adverse to the Lessee, the Lenders or
the Indenture Trustee without the prior written
consent of the Indenture Trustee and the Lessee.
1. Change to Principal Place of
Business or Chief Executive Office, etc. Fleet
shall use its best efforts to notify the Owner
Participant, the Indenture Trustee and the Lessee
in writing at least 30 days prior to any change to
its principal place of business, chief executive
office, name or organizational structure or to the
place where the Owner Trustee maintains records
concerning the transactions contemplated hereby
and, in any event, shall notify such parties
within 30 days after such change.
A. Covenants of the Indenture Trustee.
The Indenture Trustee agrees, in its individual
capacity, that:
1. Discharge of Liens. The
Indenture Trustee shall not create or permit to
exist, and shall, at its own cost and expense,
promptly take such action as may be necessary duly
to discharge all liens and encumbrances on any
part of the Trust Indenture Estate which result
from claims against it in its individual capacity
not related to its Lien and security interest in
the Trust Indenture Estate or the administration
of the Trust Indenture Estate.
1. Discharge of Indenture. The
Indenture Trustee shall release the Lien of the
Indenture when directed to do so pursuant to
Section 10.01 thereof.
A. Covenants of the Lessee.
1. Further Assurances. The
Lessee, at its own cost and expense, shall cause
to be promptly and duly taken, executed,
acknowledged and delivered all such further acts,
documents (including Bills of Sale) and assurances
as any Participant, the Owner Trustee, the Owner
Participant or the Indenture Trustee may from time
to time reasonably request in order to carry out
more effectively the intent and purposes of this
Participation Agreement and the other Operative
Documents, and the transactions contemplated
hereby and thereby (including ensuring that the
agreements between Lessee and its Affiliates that
possess the Equipment establish that the Equipment
is leased by Lessee under the Lease Agreement).
The Lessee, at its own cost and expense, shall
cause the financing statements (and continuation
statements with respect thereto) and documents
enumerated and described in Schedule IV to be
recorded or filed at such places and times in such
manner, and shall take all such other actions or
cause such actions to be taken, as may be
necessary or requested by the Owner Trustee, the
Owner Participant or the Indenture Trustee, in
order to establish, preserve, protect and perfect
the good and marketable title of the Owner Trustee
to the Equipment, and the Owner Trustee's and the
Owner Participant's rights under this
Participation Agreement and the other Operative
Documents and, so long as any Notes are
outstanding under the Indenture, the first
priority Lien and security interest of the
Indenture Trustee in the Trust Indenture Estate
and the Indenture Trustee's rights under this
Participation Agreement and the other Operative
Documents referred to and included under the
Granting Clauses of the Indenture (including,
without limitation, the filing of financing
statements in appropriate jurisdictions and filing
offices relating to any site to which any portion
of the Equipment may be relocated and the filing
of continuation statements in appropriate
jurisdictions and filing offices). The Lessee
shall promptly from time to time furnish to the
Owner Participant or the Owner Trustee such
information as may be required to enable the Owner
Participant or the Owner Trustee, as the case may
be, to timely file any reports and obtain any
licenses or permits required to be filed or
obtained by the Owner Trustee as the lessor under
the Lease or as the owner of the Equipment or the
Owner Participant as the beneficiary of the Trust
Estate with any Governmental Authority (including
environmental and tax authorities). The Lessee
will at the Lessee's expense furnish to Owner
Trustee and the Indenture Trustee, annually and at
the time continuation statements are required to
be filed, an opinion of counsel satisfactory to
Owner Trustee and the Indenture Trustee stating
that (1) all financing statements or other notices
have been filed for record in all public offices
wherein such filing is necessary to protect the
right, title and interest of the Owner Trustee in
and to the Equipment and to perfect the Lien and
security interest in the Trust Indenture Estate
created pursuant to the Indenture under the
provisions of the UCC and (2) all continuation
statements and amendments to such financing
statements required to maintain the priority and
perfection of such Liens and security interests
have been recorded, registered and filed as
necessary in order to maintain such priority and
perfection.
1. Maintenance of Corporate
Existence, etc. The Lessee shall at all times
maintain its existence as a corporation in good
standing under the laws of the State of Delaware.
The Lessee shall do or shall cause to be done all
things necessary to preserve and keep in full
force and effect its rights (charter and
statutory) and franchises.
1. Change to Principal Place of
Business or Chief Executive Office, Etc. The
Lessee shall provide the Owner Trustee, the Owner
Participant and the Indenture Trustee with ten
(10) Business Days' prior written notice of any
change to its chief executive office, principal
place of business, name or corporate structure or
to the place where it maintains its business
records.
1. Lessee to Defend Title. The
Lessee covenants that it shall, at all times, at
its own cost and expense, warrant and defend the
title of the Owner Trustee to the Trust Estate and
the Lien and security interest of the Indenture
Trustee in and to the Trust Indenture Estate
against any Lien (other than Permitted Liens),
claims and demands of or against the Lessee and
all other Persons claiming through the Lessee.
The Lessee covenants that with respect to any Item
of Equipment that has not had a Final Acceptance
Date as of the Equipment Closing Date, the Lessee
shall on or prior to September 30, 1997, either
have (a) caused a Final Acceptance Date to occur,
or (b) rejected such Item of Equipment (based upon
such Item's failure to comply with the operating
specifications therefor) after an Equipment
Closing Date has occurred with respect to such
Item of Equipment and prior to the Final
Acceptance Date for such Item.
1. Furnishing of Information. The
Lessee agrees to furnish to each Participant and
each Agent:
a) within 120 days after the
close of each fiscal year of the Lessee
occurring after the Initial Closing Date, an
unaudited, unconsolidated balance sheet and
statement of income of Lessee as of the end
of and for such year;
a) within sixty (60) days after
the end of each of the first three (3)
quarters of each of Zenith's fiscal years, an
unaudited, unconsolidated balance sheet and
statement of income of Lessee as of the end
of and for such period;
a) simultaneously with the
delivery of the year-end financial statements
referred to in (i) above, a certificate of
the Chief Financial Officer, the Comptroller,
Treasurer or an Assistant Treasurer of the
Lessee stating that such officer has reviewed
the activities of the Lessee during the
immediately preceding fiscal year and
whether, to the knowledge of such officer,
there exists on the date of such certificate
any Default, Event of Default, Indenture
Event of Default, or Event of Loss, and, if
any Default, Event of Default, Indenture
Event of Default or Event of Loss exists,
specifying the nature and period of existence
thereof and the action the Lessee is taking
and proposes to take with respect thereto;
a) immediately upon the Lessee
becoming aware of the existence of a Default
or Event of Default, a written notice
specifying the nature of such Default or
Event of Default and what action the Lessee
is taking or proposes to take with respect
thereto;
b) all reports and permits
required under Applicable Law to be filed or
delivered by any Lessor Party with respect to
the Equipment;
a) promptly, all reports or
statements which the Lessee may make to, or
file with, the Securities Exchange Commission
or any successor agency thereto; and
a) promptly, such additional
information with respect to the financial
condition or business of the Lessee as any
Participant or the Indenture Trustee or the
Owner Trustee may reasonably request.
1. Inspection. The Lessee will
permit each Participant, the Owner Trustee and the
Indenture Trustee, upon reasonable notice and at a
mutually convenient time and at their expense so
long as no Default or Event of Default has
occurred and is continuing (and thereafter at the
expense of the Lessee), (i) to visit the sites
where the Items of Equipment are located and
inspect such Equipment and related records and the
corporate headquarters of the Lessee and (ii) to
discuss with the relevant officers of the Lessee
the Items of Equipment and the financial affairs
and condition of the Lessee or any Subsidiary
thereof insofar as these are relevant to their
interests hereunder and subject to any legal
restrictions on disclosure.
1. Merger, Consolidation, etc.,
of Lessee. The Lessee covenants that it shall not
consolidate or merge with or into any Person, nor
sell, transfer, convey or lease all or
substantially all its properties or assets as an
entirety to any Person, unless:
a) the successor entity
formed by such consolidation or with or into
which it is merged, or the successor entity
that acquires by conveyance, transfer or
lease all or substantially all its assets as
an entirety, shall be organized under the
laws of the U.S., a state thereof or the
District of Columbia, shall be authorized
under all Applicable Laws to operate the
Equipment and perform the obligations of the
Lessee under the Operative Documents to which
it is a party to the same extent as the
Lessee, shall have a tangible net worth (as
determined in accordance with GAAP) not less
than the tangible net worth of the Lessee
immediately prior to giving effect to such
transaction, shall execute and deliver to the
Owner Trustee, the Indenture Trustee and each
Participant an agreement in form and
substance satisfactory to the Owner Trustee,
the Indenture Trustee and each Participant,
containing an assumption by such successor
entity of the due and punctual performance of
each covenant and condition of the Operative
Documents to be performed or observed by the
Lessee;
a) immediately after giving
affect to such transaction, no Default or
Event of Default shall have occurred and be
continuing;
a) the Lessee or such successor
entity, as the case may be, shall have
delivered to the Owner Trustee, the Indenture
Trustee and each Participant an Officer's
Certificate and an opinion of counsel
satisfactory to the Owner Trustee, the
Indenture Trustee and each Participant,
stating that such consolidation, merger,
sale, conveyance, transfer or lease, and the
assumption agreement required by clause (i)
above, comply with this Section 5.3, that all
conditions precedent relating to such action
have been satisfied, that such assumption
agreement has been duly authorized, executed
and delivered by such successor entity and
constitutes the legal, valid and binding
obligation of such successor entity,
enforceable against such successor entity in
accordance with its terms and that the rights
of the Participants under the Operative
Documents will not be adversely affected
thereby, and that such transaction will not
result in adverse tax consequences for the
Owner Trustee, the Indenture Trustee or any
Participant with respect to the transactions
contemplated by the Operative Documents; and
a) the Guarantor and Zenith
shall have delivered to the Owner Trustee,
the Indenture Trustee and each Participant a
confirmation in form and substance
satisfactory to each such Person confirming
its obligations under the Guaranty or the
Parent Guaranty, as the case may be, with
respect to such successor entity.
Upon any such consolidation or merger,
or any sale, conveyance, transfer or lease of
substantially all the assets of the Lessee in
accordance with this Section 5.3(g), the successor
entity formed by such consolidation or with or
into which the Lessee shall be merged, or to which
such sale, conveyance, transfer or lease shall be
made, shall succeed to, and be substituted for,
and may exercise every right and power and shall
be subject to each and every obligation of, the
Lessee under the Operative Documents to which it
is a party with the same effect as if such
successor corporation had been named as the Lessee
therein. No such sale, conveyance, transfer or
lease of all or substantially all the assets of
the Lessee shall have the effect of releasing the
Lessee or any successor entity that shall
theretofore have become such in the manner
prescribed in this Section 5.3(g) from its
liability under the Operative Documents to which
it is a party.
1. Purchase of Notes. Other than
in connection with the exercise of the EBO Option
under the Lease, neither the Lessee nor any of its
Affiliates will purchase or otherwise acquire any
of the Notes.
(i) Environmental Matters. The Lessee
shall
a) comply in all respects, and
cause all other Persons to comply in all
respects, with all Environmental Laws
applicable in any way to, or otherwise
affecting, the Equipment, and the Lessee
shall have sole responsibility for the
expenses (including legal, consultant and
other professional fees and expenses and
costs of investigation) associated with such
compliance;
a) obtain, at or prior to the
time required by applicable Environmental
Laws, all Governmental Actions necessary in
connection with the Equipment, and maintain
such Governmental Actions in full force and
effect;
a) not treat, recycle, manage,
generate, transport, store or Release, or
permit the treatment, recycling, management,
generation, transportation, storage or
Release of, Hazardous Substances used in
connection with the Equipment, other than in
compliance with all applicable Environmental
Laws;
a) conduct and complete, at its sole
and expense, any investigation, study,
sampling, monitoring and testing and
undertake any cleanup, removal, remedial,
corrective, mitigation, response or other
action necessary or advisable to abate,
correct, remove and clean up or remediate any
Release or threatened Release of any
Hazardous Substance associated in any way
with the Equipment, in accordance with
applicable Environmental Laws;
a) provide reasonably detailed
written notice, within 10 days of Lessee's
discovery thereof, of any fact, circumstance,
condition, occurrence or Release relating in
any way to the Equipment that has resulted or
is reasonably likely to result in (i)
noncompliance with any applicable
Environmental Law or (ii) an Environmental
Claim; and
a) provide to each Participant and
each Agent copies of all written
communications relating to any alleged
violation of or noncompliance with any
Environmental Law or any Environmental Claim
relating to the Equipment simultaneously with
the giving or receiving of such written
communications.
(j) Purchase Agreement; Invoices. The
Lessee shall deliver or otherwise make available
to each of the Indenture Trustee and the Owner
Participant copies of such Purchase Documents
relating to the Items of Equipment delivered on
the Equipment Closing Date and Invoices from the
respective Sellers thereof specifying the amounts
comprising the respective purchase prices of such
Items, in each case as such Person may reasonably
request.
(k) Performance Under Lease. The
Lessee agrees that it will fully perform its
obligations under the Lease.
A. Transfers of Notes. Each Lender
agrees that it will not transfer any Note unless
such Note is registered under the Securities Act
or an exemption from such registration is avail-
able. Furthermore, each Lender, solely with
respect to itself, severally covenants that,
except pursuant to Section 2.13 or 2.17 of the
Trust Indenture, it will not transfer any Note to
any Person unless such Person (the "Proposed
Lender") (a) shall have agreed in writing to be
bound by this Participation Agreement, and the
other Operative Documents to which the Lenders are
a party, as though named as a Lender herein and
therein and (b) the representations set forth in
Section 4.4 hereof (other than Section 4.4(e)) are
true with respect to such Proposed Lender as of
the date of the transfer of such Notes (provided
that if the representation in Section 4.4(d) is
correct with respect to such Proposed Lender only
because clause (vii) applies, no such transfer of
the Notes to such Proposed Lender shall be made
without the prior consent of the Lessee and the
Owner Participant).
A. Advertising; Trademarks. Each
Participant and Agent agrees that it will not
advertise, or otherwise publish for advertising
purposes in any news medium, the fact that it has
furnished financing or lease accommodations to any
party hereto without first obtaining the written
consent of such party; provided, that such consent
shall not be required in connection with the
transfer by the Owner Participant of its right,
title and interest in the Trust Estate in
accordance with the terms of the Operative
Documents. Notwithstanding any other provision of
any Operative Document, no Participant or Agent
will have any right to use any trademark, trade
name or trade dress of, or otherwise refer to, any
party hereto in any promotion or publication in a
news medium without first obtaining the written
consent of such party, except for identifying the
Equipment as having been owned by, leased to or
used by Zenith, in connection with (a) the
repossession of or foreclosure on the Equipment,
or (b) any transfer by the Owner Participant of
its right, title and interest in the Trust Estate
in accordance with the terms of the Operative
Documents.
I. ARTICLE
Indemnities
All payments to be made by the Lessee to
any Indemnified Person under this Article VI will
be free of expense to such Indemnified Person for
collection or other charges. The Lessee's
obligations to any Indemnified Person under the
indemnities provided in this Participation
Agreement shall be those of a primary obligor
whether or not such Indemnified Person shall also
be indemnified with respect to the same matter
under the terms of any other agreement
contemplated hereby or thereby, or any other
document or instrument whether or not related to
the transactions contemplated hereby or thereby,
and the Persons seeking indemnification from the
Lessee pursuant to any provisions of this
Participation Agreement may proceed directly
against the Lessee without first seeking to
enforce any other right of indemnification.
A. General Indemnity. The Lessee
hereby assumes liability for, and (whether or not
any of the transactions contemplated hereby shall
be consummated and whether or not the Lease, any
Lease Supplement or other Operative Document has
expired or been terminated) agrees to defend,
indemnify, protect, release, save and hold
harmless and keep whole each Indemnified Person,
on an After-Tax Basis, from and against any and
all liabilities (including but not limited to
liabilities arising out of the doctrine of strict
liability or arising out of violation of
regulatory requirements of any kind), obligations,
losses, damages, penalties, claims (including
Environmental Claims), actions, suits, judgments,
costs, expenses, charges, fees and disbursements
(including out of pocket fees and expenses, Fees
and Expenses and costs of investigation), whether
any of the foregoing be founded or unfounded, of
whatsoever kind and nature (collectively, the
"Claims") that may be imposed on, incurred by or
asserted against any Indemnified Person or any
Equipment, in any way relating to or arising out
of (a) the Equipment or the Operative Documents
(including, without limitation, the performance or
enforcement of all obligations of the Lessee or
the Guarantor under the Operative Documents and
payments made pursuant thereto or any other
transactions contemplated thereby or the breach of
any covenant or agreement contained therein by the
Lessee or the Guarantor, or the falsity of any
representation or warranty made therein by the
Lessee or the Guarantor), or the design, manufac-
ture, construction, reassembly, purchase,
acceptance, possession, rejection, control,
financing, refinancing, modification, alteration,
testing, non-use, ownership, delivery,
nondelivery, use, operation, leasing, subleasing,
condition, maintenance, repair, sale, abandonment,
storage, substitution, insurance, redelivery or
de-installation, return or other disposition of
the Equipment or any Item thereof (whether or not
such Equipment or Item is in compliance with the
Operative Documents), (b) any other disposition
of, or the imposition of any Lien (or incurrence
of any liability to refund or pay over any amount
as a result of any Lien) on, the Equipment or any
interest therein, including, without limitation,
any claim or penalty arising out of violations of
Applicable Law, or in tort (whether creating a
strict liability or otherwise) or arising from the
active or passive negligence of an Indemnified
Person, latent or other defects, whether or not
discoverable by any Indemnified Person, or any
other Person, loss of or damage to any property or
the environment, death of or injury to any Person
and any claim for patent, trademark or copyright
infringement, (c) the offer, issuance, sale,
resale or delivery of any Note or any direct or
beneficial interest under any Operative Document,
(d) any Event of Default, any Event of Loss, any
redemption, refunding, prepayment or transfer of
the Notes made in accordance with the Operative
Documents, any amendment, modification or
supplement to any Operative Document, or any
transfer of all or any part of the right, title
and interest of the Owner Trustee or any Owner
Participant in the Trust Estate or in, to and
under any of the Operative Documents, (e) the
presence, Release or threatened Release of any
Hazardous Substance in, on, at or from any Item of
Equipment or any facility or site in or on which
any Item of Equipment is or was present, stored,
used, recycled, managed, treated, disposed of, or
located at any time, (f) any transport, treatment,
recycling, storage, Release, disposal or
arrangement therefor, of any Hazardous Substance
generated by, used in connection with or otherwise
present in or on any Item of Equipment or any
facility or site in or on which any Item of
Equipment is or was present, stored, used,
recycled, managed, treated, disposed of, or
located at any time, (g) any Environmental Law or
any published policy or guidance document issued
in connection therewith or demand of a
Governmental Authority applicable in any way
whatsoever related to any Item of Equipment or any
facility or site in or on which any Item of
Equipment is or was present, stored, used,
recycled, managed, treated, disposed of, or
located at any time, (h) any loss of or damage to
any property, natural resources or the
environment, or death of or injury to any Person,
resulting from or relating to any Hazardous
Substance that is or was present, used, generated,
treated, stored, recycled, managed, transported or
Released in connection with any Item of Equipment
or any facility or site in or on which any Item of
Equipment is or was present, stored, used,
recycled, managed, treated, disposed of or
otherwise located at any time or (i) any non-
exempt prohibited transaction under Section 406 of
ERISA or Section 4975 of the Code; provided, that
the Lessee shall not be required pursuant to this
Section 6.1 to indemnify:
a) any Indemnified Person
for any Claim to the extent resulting or
arising from acts or events occurring after
redelivery of all of the Items of Equipment
in accordance with the Lease and payment of
all Rent due and payable but only to the
extent not resulting or arising from acts or
events occurring prior to such redelivery;
a) any Indemnified Person
for loss or liability to the extent resulting
from the gross negligence or wilful
misconduct of such Indemnified Person or a
Related Indemnified Person of such Person
(for purposes of this Section, the Indenture
Trustee shall not be deemed a Related
Indemnified Person of any Lender and the
Owner Trustee shall not be deemed to be a
Related Indemnified Person of the Owner
Participant), or from such Indemnified
Person's or a Related Indemnified Person's
breach of any of its representations or
warranties or covenants contained in any
Operative Document;
a) any Indemnified Person for
any Taxes, and any cost or expense of
contesting any such Taxes, other than any
Item referred to in clause (i) above which
constitutes a Tax; provided, however, that
this clause (iii) does not affect any
payments otherwise payable hereunder on an
After-Tax Basis;
a) Fleet, the Owner Trustee
or the Owner Participant, as the case may be,
in connection with any claim resulting from
any Lessor Lien or any Owner Participant Lien
attributable to it;
(v) the Lenders, Fleet, the Owner
Trustee or the Owner Participant, as the case
may be, in connection with any claim
resulting from the sale, lease or other
disposition by the Lenders, Owner Trustee or
Owner Participant, as the case may be, of
their respective rights in the Notes, the
Equipment or any part thereof or any right to
or interest in the Operative Documents except
for any transfer or disposition by reason of
or pursuant to (A) any sublease, substitution
or maintenance of, or modification to, any
Item of Equipment, (B) the Lessee's exercise
of the Purchase Option or the EBO Option, or
the option to terminate the Lease with
respect to certain Items for obsolescence
pursuant to Article VII of the Lease, (C) an
Event of Loss, or a condemnation or taking
not constituting an Event of Loss, (D) after
or during the continuance of an Event of
Default, or (E) Lessee's exercise of its
rights under Article XI or XVI hereof or,
with respect to the Lenders, any transfer of
the Notes pursuant to Section 2.13 or 2.17 of
the Indenture, all as specifically
contemplated by the Operative Documents
(items described in (A)-(E) above being
defined as "Excepted Transfers");
(vi) any Indemnified Party in
connection with any claim resulting from
either Agent's failure to distribute funds
held by it in accordance with the terms of
the Operative Documents; or
(vii) the Owner Participant or any
Related Indemnified Person of such Person in
connection with any claim arising from or
related to any prohibited transaction or
other violation of Section 406 of ERISA or
Section 4975 of the Code resulting from or
attributable to an alleged breach of
fiduciary duty or any prohibited transaction
by the Owner Participant or such Related
Indemnified Party within the meaning of
Section 406 of ERISA or Section 4975 of the
Code.
The indemnities set forth in this
Section 6.1 shall not constitute a guarantee,
representation or warranty to any Indemnified
Person of, or as to the value or useful life of,
any Item of Equipment or a guarantee,
representation or warranty that any debt incurred
by the Owner Participant to finance its Equity
Amount will be paid. Upon payment in full of any
indemnity pursuant to this Section 6.1, the Lessee
shall, to the extent of such payment and so long
as no Event of Default shall have occurred and be
continuing, be subrogated to any rights of the
Indemnified Person in respect of the matter
against which such indemnity was given (other than
with respect to any insurance policies carried by
such Indemnified Person).
Subject to the provisions of the
following paragraph, the Lessee shall at its sole
cost and expense be entitled to control, and shall
assume full responsibility for, the defense of any
Claim; provided, that the Lessee shall keep the
Indemnified Person which is the subject of such
proceeding fully apprised of the status of such
proceeding and shall provide such Indemnified
Person with all information with respect to such
proceeding as such Indemnified Person shall
reasonably request.
Notwithstanding any of the foregoing to
the contrary, the Lessee shall not be entitled to
control and assume responsibility for the defense
of such Claim unless it shall have confirmed in
writing to the relevant Indemnified Person that
such Claim is covered by the terms of the
indemnity set forth herein and that it
acknowledges its liability to fully indemnify such
Indemnified Person in respect thereof or if (i) an
Event of Default shall have occurred and be
continuing, (ii) such proceeding will involve any
material danger of the sale, forfeiture or loss
of, or the creation of any Lien (other than any
Permitted Lien or a Lien which is adequately
bonded to the satisfaction of such Indemnified
Person) on any Item of Equipment, (iii) the
amounts involved, in the good faith opinion of
such Indemnified Person, are likely to have an
adverse effect on the business of such Indemnified
Person other than the ownership, leasing and
financing of the Equipment, (iv) in the good faith
opinion of such Indemnified Person, there exists
an actual or potential conflict of interest such
that it is advisable for such Indemnified Person
to retain control of such proceeding or (v) such
claim or liability involves the possibility of
criminal sanctions or liability to such
Indemnified Person. In any of the circumstances
described above, the Indemnified Person shall be
entitled to control and assume responsibility for
the defense of such claim or liability at the
expense of the Lessee. In addition, any
Indemnified Person may participate in any
proceeding controlled by the Lessee pursuant to
this Section 6.1, at its own expense in respect of
any such proceeding as to which the Lessee shall
have acknowledged in writing its obligation to
indemnify the Indemnified Person pursuant to this
Section 6.1, and at the expense of Lessee in
respect of any such proceeding as to which the
Lessee shall not have so acknowledged its
obligation to the Indemnified Person pursuant to
this Section 6.1. The Lessee may in any event
participate in all such proceedings at its own
cost. Nothing contained in this Section 6.1 shall
be deemed to require an Indemnified Person to
contest any Claim or to assume responsibility for
or control of any judicial proceeding with respect
thereto.
6.2 Payment of Taxes; General Tax
Indemnity.
(a) General Taxes. Subject to the
provisions of Section 6.2(b), the Lessee agrees to
pay and assume liability for, and does hereby
agree to indemnify, protect, defend and hold
harmless, on an After-Tax Basis, each Indemnified
Person from and against any and all Taxes imposed
upon or payable by such Indemnified Person
(including amounts payable by such Indemnified
Person solely as withholding agent) or the Lessee
or withheld from any payment pursuant to the
Operative Documents, whether imposed against the
Equipment or any Item of Equipment, any
Modification, or any part or portion thereof or
interest therein, or the Notes, or any Affiliate
of the Lessee that possesses the Equipment,
otherwise in connection with or relating to or on
or with respect to (i) this Agreement or any of
the other Operative Documents or any amendment,
supplement, waiver or consent thereto or the
execution, delivery or performance of any thereof;
(ii) the Equipment, any Item of Equipment, any
Modification, or any interest therein; (iii) the
acquisition, construction, purchase, acceptance,
possession, rejection, ownership, delivery,
nondelivery, return, financing, refinancing,
mortgaging, repossession, transfer, control, use,
non-use, operation, leasing, subleasing,
gratuitous bailment, registration, re-
registration, hire, condition, maintenance,
storage, modification, importation, exportation,
repair, substitution, replacement, insuring,
improvement, sale, abandonment, redelivery,
location, transfer of title or other application
or disposition of or with respect to the
Equipment, any Item of Equipment, any part of the
Equipment, any Modification, or any interest
therein; (iv) the payment of Rent or other
amounts, receipts, income or earnings arising from
or received with respect to the Equipment or any
part thereof or interest therein or any
application, acquisition or disposition thereof;
(v) any other amount paid or payable pursuant to
the Operative Documents or any document related
thereto or the property, income or other proceeds
with respect to the property held in the Trust
Estate or the Indenture Estate; (vi) the payment
of principal of, or interest or premium on, or
other amounts payable with respect to, or the
issuance, acquisition, modification, refinancing,
reoptimization, holding, sale, assignment,
transfer or other disposition of, any Note; or
(vi) otherwise with respect to or in connection
with the transactions contemplated by the
Operative Documents.
(b) The Lessee will have no obligation
under Section 6.2(a) with respect to any one or
more of the following:
(i) Taxes imposed on an Indemnified
Person by the United States or, in the case
of the Owner Participant, any foreign taxing
authority or the State of Texas (or any local
government authority therein) and, in each
case, that are measured by, based on or with
respect to the net or gross income or
receipts, items of tax preference, excess
profits, conduct of business, capital or net
worth of such Indemnified Person provided,
however, that the exclusion in this
subparagraph (i) (A) shall apply to Taxes
imposed by any foreign taxing jurisdiction or
the State of Texas (or any local government
authority therein) on the Owner Participant
only to the extent that such Taxes would have
been imposed in the absence of (v) the use,
location, registration, subleasing, leasing
or operation of the Equipment or any part
thereof in such foreign taxing jurisdiction
or the State of Texas (or any local
government authority therein), (w) the
execution or delivery of any Operative
Document in such foreign taxing jurisdiction
or the State of Texas (or any local
government authority therein), (x) the making
or receipt of any payment pursuant to the
Operative Documents in such foreign taxing
jurisdiction or the State of Texas (or any
local government authority therein), (y) the
identity or activities or presence of the
Lessee, the Guarantor or any Lessee Person in
such foreign taxing jurisdiction or the State
of Texas (or any local government authority
therein) or (z) the performance of or
exercise of rights, powers or remedies under
the Operative Documents; and (B) shall not
apply to any Taxes that are, or are in the
nature of, sales, use, transfer, value-added,
ad valorem, property, license, stamp or
rental Taxes or similar Taxes; provided, that
this Section 6.2(b)(i) (and each other
exclusion contained in Section 6.2(b)) shall
not be interpreted to exclude any amounts
necessary to make any payment on an After-Tax
basis;
(ii) Taxes that are imposed by any state
of the United States or any local government
authority therein (other than the State of
Texas or any local government authority
therein) and based on or measured by or with
respect to the net or gross income or
receipts, items of tax preference, excess
profits, conduct of business, capital or net
worth; provided, that the exclusion in this
subparagraph (ii) shall apply to Taxes
imposed by any state or local government
political subdivision or taxing authority
therein only to the extent that such Taxes
would have been imposed in the absence of the
use, location, registration, subleasing,
leasing or operation of the Equipment or any
part thereof in such state or locality and,
provided, further, that there shall not be
excluded under this subparagraph (ii) any
Taxes that are, or are in the nature of,
sales, use, transfer, value-added, ad valorem
property, license, stamp or rental Taxes or
similar Taxes;
(iii) Taxes imposed against or payable
by an Indemnified Person attributable to (A)
any voluntary sale, assignment, transfer or
other disposition (a "Transfer") by such
Indemnified Person of any interest in the
Owner Trust, the Equipment or any interest
therein, the Notes, or any interests or
obligations arising under the Operative
Documents other than (1) any Transfer
contemplated by the Operative Documents to
occur on the Equipment Closing Date, (2) any
Refunding pursuant to Article XI of the
Participation Agreement, (3) any Transfer
while a Material Default or an Event of
Default has occurred and is continuing or (4)
any Transfer in connection with the exercise
of any of the Lessee's rights or performance
of the Lessee's obligations under the
Operative Documents (including without
limitation, any sale, assignment, transfer or
disposition under Articles VI, VII, VIII, IX,
X and XI of the Lease) or (B) any involuntary
transfer by such Indemnified Person of any
interest in the Owner Trustee, the Trust
Estate, the Equipment or any part thereof or
interest therein, the Notes or any interests
or obligations arising under the Operative
Documents resulting from any bankruptcy or
other proceeding for relief of debtors in
which such Indemnified Person is the debtor
or any foreclosure by a creditor of the
Indemnified Person other than any such
transfer following a Default or an Event of
Default;
(iv) with respect to the Equipment,
Taxes attributable to any period after the
expiration or earlier termination of the
Lease with respect to the Equipment and, if
the Lessee is required to return such
Equipment to the Owner Trustee, the return of
the Equipment to the Owner Trustee in
accordance with the terms of the Lease and
payment in full of all amounts then due under
the Operative Documents, unless and to the
extent such Taxes are attributable to
actions, omissions or events occurring in
connection with the exercise of remedies
following the occurrence and continuance of a
Material Default or an Event of Default;
provided, that with respect to the Equipment,
there shall not be excluded under this
subparagraph (iv) any Taxes to the extent
such Taxes relate to events, acts or
omissions or circumstances occurring or
matters arising prior to or simultaneously
with such expiration or termination or, if
applicable, such return or to payments made
pursuant to the Operative Documents;
(v) any Taxes imposed against or payable
by an Indemnified Person resulting from the
gross negligence or willful misconduct of
such Indemnified Person;
(vi) Taxes imposed on or with respect to
or payable by the Owner Trustee or the
Indenture Trustee based on, measured by or
imposed with respect to any fees paid to or
accruable by the Owner Trustee or the
Indenture Trustee, as the case may be, in its
capacity as Owner Trustee or the Indenture
Trustee, as the case may be;
(vii) with respect to the Noteholders
only, Taxes imposed against or payable by any
Noteholder by or to any jurisdiction to the
extent such Taxes would not have been imposed
but for such Noteholder being organized under
the laws of such jurisdiction or engaging in
such jurisdiction in activities unrelated to
the transactions contemplated by the
Operative Documents;
(viii) with respect to the Noteholders
only, United States federal, state and local
income Taxes which are required to be
withheld from payments hereunder (or under
the Lease) to or for the benefit of any
Noteholder;
(ix) in the case of payments to or for
the benefit of the Owner Participant, Taxes
imposed, or which are required to be withheld
from payments hereunder (or under the Lease),
solely as a result of the Owner Participant
being a Non-U.S. Person;
(x) Taxes which have been included in
Lessor's Cost to the extent actually paid on
or before the Equipment Closing Date;
(xi) Taxes imposed upon the Owner
Participant for which the Lessee is obligated
to indemnify the Owner Participant pursuant
to the Tax Indemnity Agreement; and
(xii) Taxes imposed against a transferee
(or subsequent transferee) of an original
Indemnified Person to the extent of the
excess of such Taxes over the amount of such
Taxes which would have been imposed against
the original Indemnified Person had there not
been a transfer by such Original Indemnified
Person of its interest in the Owner Trustee,
the Trust Estate, the Equipment or any part
thereof or interest therein, or the Notes;
provided, however, that this
subparagraph (xii) shall not apply to any
transfer following the occurrence and
continuance of a Material Default or an Event
of Default or to any amounts necessary to
make any payments hereunder on an After-Tax
Basis.
(c) Calculation of General Tax
Indemnity Payments; Tax Savings. Any payment or
indemnity to or for the benefit of any Indemnified
Person with respect to any Tax which is subject to
indemnification under Section 6.2(a) hereof shall
be made on an After-Tax Basis. If, by reason of
any payment made on an "After-Tax Basis" to or for
the account of an Indemnified Person by or on
behalf of the Lessee pursuant to Section 6.1, this
Section 6.2, Article VII, or any other Operative
Document other than the Tax Indemnity Agreement
(or the circumstances or event giving rise
thereto) such Indemnified Person or any of its
Affiliates realizes a net Tax benefit, refund,
saving, deduction or credit that results in a
reduction in Taxes for which the Lessee is not
required to indemnify such Indemnified Person
under this Agreement or the other Operative
Documents and such reduction in Taxes was not
previously taken into account in computing the
amount of the payment to such Indemnified Person,
such Indemnified Person shall pay to the Lessee on
an After-Tax Basis an amount equal to the net
reduction in Taxes, if any, as determined in good
faith by the Indemnified Person, realized by such
Indemnified Person or any of its Affiliates which
is attributable to such net Tax benefit, refund,
saving, deduction or credit. The Indemnified
Person shall make such payment within 30 days
after it or any of its Affiliates actually
realizes such reduction in Taxes. Each of the
Owner Participant, the Owner Trustee and the Trust
Estate agrees to use its reasonable efforts and to
cause its Affiliates (in a manner consistent with
its overall financial and public relations
interests) to seek and claim, and further agrees
to take such actions as the Lessee may reasonably
request, as long as such efforts or actions do not
expose such Persons to a risk of material adverse
consequences (determined in good faith judgment of
the Indemnified Person), and such Indemnified
Person is indemnified in a manner satisfactory to
such Indemnified Party, determined in its sole
discretion for any adverse consequences, to
realize any refunds, deductions or other tax
benefits that would reduce the Lessee's indemnity
obligations hereunder. Any costs incurred by an
Indemnified Person in pursuing the actions
contemplated by the preceding sentence shall be
for the account of the Lessee. Notwithstanding
the foregoing provisions of this Section 6.2(c),
(A) an Indemnified Person shall not be obligated
to make any payment pursuant to this
Section 6.2(c) if, and for so long as, a Material
Default or an Event of Default shall have occurred
and
be continuing (but shall hold such amount for the
benefit of the Lessee and pay such withheld amount
to the Lessee promptly following the date on which
the Material Default or Event of Default is no
longer continuing) and (B) to the extent the
amount of such payment by the Indemnified Person
to the Lessee made pursuant to Section 6.2(c) (all
determined without regard to any amount necessary
to make such payments on an After-Tax Basis) would
exceed the excess of all payments made on an
After-Tax Basis by the Lessee to such Indemnified
Person pursuant to Section 6.1, Section 6.2(a),
Article VII or the other Operative Documents other
than the Tax Indemnity Agreement (all determined
without regard to any amount necessary to make
such payments on an After-Tax Basis) over the
amount of all prior payments by such Indemnified
Person to the Lessee of tax benefits pursuant to
this paragraph (c) (determined without regard to
any amounts necessary to make such payments on an
After-Tax Basis), such excess shall not be paid
but shall be carried forward and shall reduce the
Lessee's obligation to make subsequent payments on
an After-Tax Basis to such Indemnified Person
under Section 6.1, Section 6.2(a), Article VII or
the other Operative Documents other than the Tax
Indemnity Agreement. Any Taxes that are imposed
on any Indemnified Person (or any of its
Affiliates)as a result of the disallowance,
unavailability, recapture or reduction of any tax
benefit, savings, deduction or credit referred to
in this Section 6.2(c) as to which an Indemnified
Person has made a payment to the Lessee or which
was otherwise taken into account under
Section 6.1, Section 6.2, Article VII or the other
Operative Documents other than the Tax Indemnity
Agreement shall be treated as a Tax for which the
Lessee must indemnify such Indemnified Person
hereunder without regard to Section 6.2(b) or (d)
hereof.
Notwithstanding the preceding, the
Lessee and the Owner Participant agree that the
obligation of the Owner Participant to reimburse
the Lessee in the case of payments made by the
Lessee pursuant to Article VII which are made as a
result of the Owner Participant being a Non-U.S.
Person shall be governed by the provisions of
Article VII.
(d) Contests.
(i) Initiation. If any written claim
shall be made against any Indemnified Person
or if any proceeding shall be commenced
against any Indemnified Person for any Taxes
as to which the Lessee may have an indemnity
obligation pursuant to this Section 6.2, such
Indemnified Person shall promptly notify the
Lessee provided, however, that the failure to
notify the Lessee shall not relieve the
Lessee of any obligation to indemnify the
Indemnified Person hereunder unless such
failure precludes the Lessee from initiating
or continuing the contest of such claim. The
Indemnified Person shall not take any action
with respect to such claim, proceeding or Tax
without the consent of the Lessee (such
consent not to be unreasonably withheld or
unreasonably delayed) for 30 days after the
receipt of such notice by the Lessee, unless
the Indemnified Person shall be required by
law or regulation to take action prior to the
end of such 30-day period.
(ii) Control and Conditions. If a
contest is requested in writing by the Lessee
within 30 days after receipt by the Lessee of
the notice required by subparagraph (i) with
respect to the claim or proceeding that is
the subject of such notice (provided,
however, that if a shorter period is required
for taking actions with respect to such Tax
claim, the Lessee shall use its best efforts
to request such contest within the shorter
period of time), or, in the case of any claim
or proceeding with respect to which the
Lessee (as opposed to the Indemnified Person)
receives notice, upon the written request of
the Lessee, the Lessee may, in the case of a
Tax which may be contested (1) in the name of
the Lessee, (2) independently from any Tax
that is not subject to indemnification by the
Lessee and (3) in the Indemnified Person's
good faith determination without any adverse
effect on such Indemnified Person, contest
the validity, applicability or amount of such
Tax. If the Lessee has made the written
request described in the first sentence of
the subparagraph (ii) and the contest would
meet the requirements of clauses (1) and (2)
of such first sentence, the Lessee shall, if
requested by the Indemnified Person, in good
faith, contest the validity, applicability or
amount of such Tax. A contest described in
either of the first two sentences of this
subparagraph (ii) shall be hereinafter
referred to as a "Lessee-Controlled Contest.
If the contest requested by the Lessee
pursuant to the first sentence of this
subparagraph (ii) is not a Lessee-Controlled
Contest, the Indemnified Person shall itself,
contest in good faith the validity,
applicability or amount of such Tax. Any
contest conducted pursuant to this
subparagraph (ii) shall be conducted by (1)
resisting payment thereof, (2) not paying the
same except under protest (which protest must
be pursued using reasonable efforts in
appropriate administrative and/or judicial
proceedings) if protest shall be necessary
and proper or (3) if payment shall be made,
using reasonable efforts to obtain a refund
thereof in appropriate administrative and/or
judicial proceedings (it being understood
that no appeal to the United States Supreme
Court shall be required hereunder).
Notwithstanding the foregoing, in no
event shall an Indemnified Person be required to
commence or continue any contest unless: (1) the
amount at issue (taking into account all similar
and logically related claims) exceeds $75,000; (2)
the Lessee shall have agreed in writing to pay the
Indemnified Person and shall pay on demand on an
After-Tax Basis as incurred all reasonable out-of-
pocket costs (including computer time) and
expenses that such Indemnified Person shall incur
in connection with contesting such claim
(including, without limitation, all reasonable
costs, expenses, legal, accounting and
investigatory fees and disbursements); (3) such
Indemnified Person shall have in good faith
reasonably determined that the action to be taken
will not result in any material danger of sale,
forfeiture or loss of the Equipment or the
creation of any Lien on the Equipment, the Trust
Estate or the Indenture Estate or the security
interests of the Lenders and the Indenture Trustee
therein and that there is no risk of criminal
liability that may be imposed with respect to such
Indemnified Person or any Affiliate; (4) if such
contest shall involve payment of the claim, the
Lessee shall advance the amount thereof plus
interest, penalties and additions to tax with
respect thereto to such Indemnified Person on an
interest-free basis (with no additional net after-
tax cost to such Indemnified Person); (5) no
Material Default or Event of Default shall have
occurred and be continuing; (6) prior to
initiating the contest, if requested, the Lessee
shall have furnished the Indemnified Person with
an opinion of tax counsel selected by the Lessee
and reasonably satisfactory to the Indemnified
Person to the effect that a reasonable basis
within the meaning of ABA Formal Opinion No. 85-
352 exists for such contest and in the case of an
appeal from an adverse lower court decision, that
it is more likely than not that the lower court's
opinion would be reversed or substantially
modified; and (7) the Lessee shall have
acknowledged in writing its obligation to
indemnify the Indemnified Person in the event the
contest is unsuccessful in whole or in part unless
the contest is ultimately resolved by a court of
competent jurisdiction on a clearly articulated
basis that establishes no basis for
indemnification hereunder.
(iii) Conduct. The Lessee shall
conduct any Lessee-Controlled Contest and the
relevant Indemnified Person shall control any
contest other than a Lessee-Controlled
Contest. The party conducting the contest
("Controlling Party") shall consult in good
faith with the other party ("Noncontrolling
Party") and its counsel with respect to the
contest of such claim for Taxes (or claim for
refund) but the decisions regarding what
actions to be taken shall be made by the
Controlling Party in its sole judgment
provided, however, that the Indemnified
Person shall be entitled to reassert control
of any contest if it determines in good faith
that the Lessee's continued control of the
contest will adversely affect the Indemnified
Person. In addition, the Controlling Party
shall keep the Noncontrolling Party
reasonably informed as to the progress of the
contest, and upon request shall provide the
Noncontrolling Party with a copy of (or
appropriate excerpts from) any reports or
claims issued by the relevant auditing agents
or taxing authority to the Controlling Party
or any Affiliate thereof, in connection with,
but solely to the extent relating to, such
claim or the contest thereof. The
Controlling Party shall be responsible for
the selection of counsel, which counsel, in
the case of a Lessee-Controlled Contest, must
be reasonably satisfactory to the
Noncontrolling Party.
Notwithstanding anything contained in
this paragraph (d) to the contrary, no
Indemnified Person shall be required to
contest any Tax claim if the subject matter
thereof shall be of a continuing nature and
there shall have been a Final Determination
with respect thereto, unless there shall have
been a change in facts or the law (including,
without limitation, amendments to statues or
Regulations, administrative rulings and court
decisions), and such Indemnified Person shall
have received an opinion of counsel, selected
by the Lessee and reasonably acceptable to
the Indemnified Person, which opinion shall
be furnished at the Lessee's sole expense,
setting forth the facts and legal analysis on
which it is based, to the effect that as a
result of such change in facts or the law it
is more likely than not that the Indemnified
Person shall prevail in the contest of such
claim.
(iv) Waiver of Indemnity.
Notwithstanding anything contained in this
Section 6.2, an Indemnified Person shall not
be required to contest any claim or permit
the Lessee to contest any claim and may
settle any contest without the consent of the
Lessee if such Indemnified Person (A) shall
waive its right to indemnity under this
Section 6.2 with respect to such claim for
such Tax, and (B) shall pay to the Lessee any
amount previously paid or advanced by the
Lessee pursuant to clause (4) of the second
paragraph of Section 6.2(d)(ii) with respect
to such claim.
(e) Payments. Any Taxes payable
hereunder by the Lessee shall be payable by the
Lessee, to the extent allowed, directly to the
appropriate taxing authority on or before the time
due, and in the manner, prescribed by Applicable
Law, without the necessity of any prior demand by
an Indemnified Person. If direct payment is not
permitted or otherwise is not made, any amount
payable by the Lessee to an Indemnified Person
pursuant to this Section 6.2 shall be paid within
10 days after receipt by the Lessee of a written
demand therefor from such Indemnified Person
accompanied by a written statement describing in
reasonable detail the amount so payable, but shall
in no event be payable before the date such Tax is
due. Any payments to be made pursuant to this
Section 6.2 by Lessee to an Indemnified Person or
by an Indemnified Person to the Lessee shall be
made directly to the Indemnified Person entitled
thereto or the Lessee, as the case may be, in
immediately payable funds at such bank or to such
account as specified by the payee in written
directions to the payor or, if no such direction
shall have been given, by check of the payor
payable to the order of the payee and mailed to
the payee by certified mail, postage prepaid at
its address. Any amount payable under this
Section 6.2 that is not paid when due shall bear
interest at the Overdue Rate. Upon a Final
Determination of any contest pursuant to
Section 6.2(d) in respect of any Taxes for which
the Lessee has made an advance payment, the amount
of the Lessee's obligation under Section 6.2 shall
be determined as if such advance payment had not
been made. If in connection with a refund or
credit of all or part of any Taxes paid,
reimbursed or advanced by the Lessee pursuant to
this Section 6.2, an Indemnified Person receives
an amount representing interest on such refund or
credit, the Indemnified Person shall pay to the
Lessee the amount of such interest that shall be
fairly attributable to such Taxes paid, reimbursed
or advanced by the Lessee prior to the receipt of
such refund or credit. Any obligation of the
Lessee under this Section 6.2 and the Indemnified
Person's obligation to repay the advance and
interest, if any, will be satisfied first by set
off against each other, and any difference owing
by either party will be paid within 10 days of
such Final Determination.
(f) Reports. If any report, return or
statement (a "Filing") is required to be filed
with respect to any Tax that is subject to
indemnification under this Section 6.2, the Lessee
shall promptly notify the appropriate Indemnified
Person of such requirement in writing and, if
permitted by Applicable Law to do so, the Lessee
shall timely file or cause to be filed such Filing
with respect to such Tax (except for any such
Filing that an Indemnified Person has notified
Lessee in writing that such Indemnified Person
intends to file) and will (if ownership of the
Equipment or any part thereof or interest therein
is required to be shown on such Filing) show the
ownership of the Equipment in the name of the
Owner Trustee, and send a copy of such Filing to
the appropriate Indemnified Person; provided, that
such Indemnified Person shall have furnished the
Lessee, at the Lessee's request and expense, with
such information, not within the control of the
Lessee, as is in such Indemnified Person's control
or is reasonably available to such Indemnified
Person and necessary to file such Filing. If the
Lessee is not permitted by Applicable Law to file
any such Filing, the Lessee will promptly notify
the appropriate Indemnified Person of such
requirement in writing and prepare and deliver to
the appropriate Indemnified Person a proposed form
of such Filing within a reasonable time, and in
all events at least 10 days prior to the time such
Filing is required to be filed. If the Owner
Participant, the Owner Trustee, or the Trust
Estate becomes aware of any Tax due, or report,
return or filing required with respect to any Tax
indemnified hereunder, it will promptly notify the
Lessee of such requirement, it being understood
that any failure to so notify the Lessee shall not
affect any Indemnified Person's rights hereunder.
(g) Verification. At the Lessee's
request, such request to be made in writing within
15 days after the Lessee receives any computation
from the Indemnified Person, the amount of any
indemnity payment by the Lessee pursuant to this
Section 6.2 or any payment by an Indemnified
Person to the Lessee pursuant to this Section 6.2
shall be verified by a nationally recognized
independent accounting firm mutually acceptable to
the Indemnified Person and the Lessee who shall be
asked to verify, after consulting with the
Indemnified Person, whether the Indemnified
Person's computations are correct and to report
its conclusions to both the Lessee and the
Indemnified Person. Subject to acceptable
confidentiality agreements as described below,
each Indemnified Person and the Lessee hereby
agree to provide such firm with all information
and materials as shall be reasonably necessary or
desirable in connection therewith provided,
however, that in no case shall the Indemnified
Person be required to provide its books or tax
returns to such accounting firm or anybody else.
The fee of such firm shall be paid by the Lessee
unless such verification discloses an error
adverse to the Lessee equal to 5% or more of the
amount determined to be due by such firm, in which
case such fees shall be paid by such Indemnified
Person. Any information provided to such firm by
any Person shall be and remain the exclusive
property of such Person and shall be deemed by the
parties to be (and such firm will confirm in
writing in a manner satisfactory to the
Indemnified Person that they will treat such
information as) the private, proprietary and
confidential property of such Person, and no
Person other than such Person and such firm shall
be entitled thereto, and all such materials shall
be returned to such Person. Such firm shall be
requested to make its determination within 30
days. If such firm shall determine that such
computations are incorrect, then such firm shall
determine what it believes to be the correct
computations. The computations of the accounting
firm shall be final, binding and conclusive upon
the Lessee and such Indemnified Person with
respect to matters other than the interpretation
of this Agreement and the Lessee shall have no
right to inspect the books, records, tax returns
or other documents (including working papers) of
or relating to such Indemnified Person or
Affiliate to verify such computations or for any
other purpose; provided, that the Lessee and each
Indemnified Person agree that the sole
responsibility of the accounting firm shall be to
verify the amount of an indemnity payable
hereunder and that matters of interpretation of
this Agreement are not within the scope of the
accounting firm's responsibilities.
I. ARTICLE
Tax Withholding
The Lessee agrees that in the event the
Lessee, the Lessor, the Indenture Trustee or the
Owner Participant is required by law to withhold
Taxes from any payment of Rent, the Lessee shall
make such withholding and shall pay the full
amount withheld to the applicable taxing authority
or other authority in accordance with Applicable
Law, and the Lessee shall pay an additional amount
on an After-Tax Basis such that, after deduction
of all amounts required to be withheld, the net
amount actually received by the Lessor and the
Indenture Trustee on an After-Tax Basis will equal
the amount that would have been received absent
such withholding, provided that in no event shall
the net amount paid after deduction for such
withholding tax be less than the amount payable
prior to the calculation of such withholding tax
and the amount payable under this Article VII.
Upon presentment of evidence of payment of
withheld Taxes, and provided that no Material
Default or Event of Default has occurred and is
continuing, the Lessee shall be entitled to
reimbursement from the Owner Participant on an
After-Tax Basis (such reimbursement being
sufficient to place the Lessee in the same
position it would have been in if no such
withholding had been imposed) for any such
additional amount with respect to any withholding
for United States federal income Taxes required to
be withheld solely by reason of the status of the
Owner Participant as a Non-U.S. Person.
Notwithstanding any other provision of
this Article VII to the contrary, the Lessee will
indemnify the Owner Trustee, the Trust Estate and
the Owner Participant (and any Affiliate of any of
the foregoing) on an After-Tax Basis for any
obligation with respect to United States federal
withholding Taxes imposed on the Owner Trustee,
the Trust Estate or the Owner Participant (or any
Affiliate of any of the foregoing) with respect to
the Notes (or any debt issued to refinance or
refund the Notes) or as a result of a claim by the
Internal Revenue Service (the "Service") asserted
against the Trust Estate, the Owner Trustee or the
Owner Participant (or any Affiliate of any of the
foregoing) with respect to such withholding Tax;
provided, however, that (A) the Lessee shall be
subrogated to the rights and defenses of the Owner
Trustee, the Trust Estate and the Owner
Participant (and any Affiliate of any of the
foregoing) in respect of such withholding Taxes,
including the rights and defenses set forth under
the Operative Documents, and (B) the Lessee shall
have no indemnification obligation under this
sentence if such obligation of the Owner Trust,
the Owner Trustee or the Owner Participant (or any
Affiliate of any of the foregoing) results solely
from the status of the Owner Participant as a Non-
U.S. Person.
The Indenture Trustee shall comply with
Section 2.04 of the Indenture with respect to
withholding taxes on payments due on the Notes.
I. ARTICLE
Expenses
A. Transaction Expenses Payable by the
Owner Participant. The Lessee shall have the
right to review all invoices for Transaction
Expenses. Subject to the Lessee's prior review,
Transaction Expenses for which invoices have been
received by the Owner Participant (with a copy to
the Lessee) shall be paid by the Owner Participant
promptly after receipt thereof. Subject to the
Lessee's prior review, Transaction Expenses for
which invoices are submitted after the Equipment
Closing Date shall be paid promptly after receipt
thereof by the Owner Participant (with a copy to
the Lessee); provided, that all invoices in
respect of Transaction Expenses incurred on or
prior to the Equipment Closing Date shall be
submitted within sixty (60) days after the
Equipment Closing Date.
A. Transaction Expenses Payable by the
Lessee. If the transactions contemplated hereby
are not consummated for any reason, the Lessee
will pay all Transaction Expenses promptly after
receipt of an invoice therefor; provided, that all
invoices in respect of Transaction Expenses shall
be submitted within sixty (60) days after the
scheduled Equipment Closing Date or, if no such
date has been scheduled, within sixty (60) days
after the last date of incurrence of Transaction
Expenses. If the transactions contemplated hereby
are consummated, the Owner Participant shall be
responsible for all Transaction Expenses up to the
percentages indicated in the Pricing Assumptions;
provided, however, if the Transaction Expenses
shall exceed the percentages indicated in the
Pricing Assumptions, the Lessee, at the request of
the Owner Participant, will pay the amount of
Transaction Expenses which exceeds the percentages
indicated in the Pricing Assumptions promptly
after receipt of an invoice therefor; provided,
that Lessee shall pay any Transaction Expenses not
promptly paid by, and which are required hereby to
be paid by, the Owner Participant and the Owner
Participant shall reimburse the Lessee for any
such Transaction Expenses paid by the Lessee on
behalf of the Owner Participant; provided further
that all invoices in respect of such Transaction
Expenses which are incurred on or prior to the
Equipment Closing Date shall be submitted within
sixty (60) days after the Equipment Closing Date.
A. Amendments, Waivers, etc. The
Lessee will pay all costs and expenses for which
appropriate bills and invoices are submitted
within nine months after the incurrence thereof
which have been incurred in connection with the
entering into or the giving or withholding of any
future amendments, supplements, waivers, consents
with respect to the Operative Documents, any
action requested by the Lessee or any action
required by the Operative Documents (other than
those required as a result of an action taken by a
Person other than Lessee or the Guarantor),
including, without limitation, any amendments,
waivers, or consents resulting from any Event of
Default, work-out, renegotiation or restructuring
relating to the non-performance by the Lessee or
the Guarantor of its respective obligations under
the Operative Documents, whether or not the same
shall become effective.
A. Fees of Agents. The Lessee will
pay all continuing fees and expenses of the Agents
in connection with the transactions contemplated
by the Operative Documents, other than the initial
fees of such Agents due and payable on the Initial
Closing Date and included in Transaction Expenses.
If the Owner Participant fails to pay such initial
fees when due, the Lessee shall be obligated to
pay such fees and shall be entitled to recover any
such payment from the Owner Participant.
I. ARTICLE
Recomputation of Basic Rent, EBO Prices,
Fixed Purchase Option Prices,
Casualty Values and Termination Values
A. Making of Adjustments.
(a) In the event that on or prior to the
Equipment Closing Date, it is determined that any
of the factors constituting Pricing Assumptions
(including but not limited to, the actual Lessor's
Cost of the Equipment to be settled for on such
Equipment Closing Date or the date of such
Equipment Closing Date) shall be different from
those reflected in the Pricing Assumptions and,
the Owner Participant shall elect to effect an
adjustment pursuant hereto; then, (x) the Pro
Forma Schedules of Basic Rent, the EBO Price,
Casualty Values and Termination Values for such
Items of Equipment to be purchased on such
Equipment Closing Date shall be adjusted by such
amounts as shall be appropriate to preserve for
the benefit of the Owner Participant its Net
Economic Return and (y) the amortization schedules
set forth in the Pro Forma Schedules for each
Series of Notes to be issued on or after such
Equipment Closing Date shall be adjusted in
compliance with Section 9.5 hereof.
(b) In the event that:
(i) a Refunding pursuant to
Article XI hereof and Section 2.12 of the
Indenture shall occur; or
(ii) Transaction Expenses paid by
the Owner Participant are different from 2% of
Lessor's Cost; or
(iii) a Modification is financed
by the Lessor pursuant to Section 6.4 of the
Lease;
and, in any such case, the Owner Participant shall
elect to effect an adjustment pursuant hereto;
then, Basic Rent, the EBO Price, Casualty Values
and Termination Values for all affected Items of
Equipment shall be adjusted from time to time by
such amounts as shall be appropriate to preserve
for the benefit of the Owner Participant its Net
Economic Return effective as of the next
succeeding Rent Payment Date for such Items of
Equipment.
A. Limitations. Any provision herein
or in any other Operative Document to the contrary
notwithstanding, no adjustment pursuant to Section
9.1 shall result in (a) Basic Rent payable on any
Rent Payment Date being less than the principal
amount of, and interest on, the Notes payable on
such Rent Payment Date under the Indenture, (b)
the Casualty Value and Termination Value for each
Item of Equipment payable on any date being less
than the principal amount of the Notes equal to
the Loan Value of such Item (other than, in the
case of any such date which is also a Rent Payment
Date, interest due on such Rent Payment Date) and
(c) the EBO Price payable on each EBO Date for the
Items of Equipment described in any Lease
Supplement and related Schedule of Equipment being
less than the principal amount of the Notes plus
any accrued and unpaid interest. Further, no
adjustment to the amortization schedules of the
Notes set forth in the Pro Forma Schedules shall
violate Section 9.5.
A. Computation of Adjustments. Upon
the occurrence of an event requiring an adjustment
to the Basic Rent, the EBO Price, Casualty Values
or Termination Values pursuant to this Article IX,
the Owner Participant shall make the necessary
computations and, within ninety (90) days after
the Owner Participant's knowledge of such event,
furnish to the Lessee a certificate complying with
the requirements of Section 9.4 hereof. In making
any such computations, the Owner Participant
(a) shall utilize the same methods and assumptions
(including tax constraints) originally used to
calculate the payments of Basic Rent, the EBO
Price, Casualty Values and Termination Values
(other than those assumptions changed as a result
of the event described in Section 9.1
necessitating such computations; it being agreed
that such computation shall reflect solely any
changes of assumptions or facts resulting directly
from any such event necessitating such recalcu-
lation); and (b) shall minimize to the maximum
extent possible, but subject at all times to the
preservation of Net Economic Return, the present
value (discounted semi-annually at an interest
rate per annum equal to the Debt Rate) of the
payments of Basic Rent. All Basic Rent
adjustments shall be consistent with Rev. Procs.
75-21 and 75-28 and Section 467 of the Code as in
effect at the time of the adjustment, including
any final, proposed or temporary regulation or
other administrative announcement issued
thereunder. In no event shall any such
adjustment, in the judgment of the Owner
Participant, result in the Lease being treated as
a "disqualified leaseback" or "long term
agreement" within the meaning of Section 467 of
the Code and any regulation (including any
proposed regulation) or other interpretation
regarding Section 467 of the Code, or otherwise
cause any adverse tax consequences to the Owner
Participant. If the Lessee shall disagree with
any such determinations, such determinations and
the supporting data described below shall be
reviewed and determined by an independent
accounting firm jointly chosen by the Lessee and
the Owner Participant, or, in the absence of
agreement as to such firm, by a third independent
accounting firm jointly chosen by two independent
accounting firms, one chosen by the Owner
Participant and one chosen by the Lessee. In
connection with any such review, the Owner
Participant shall make available to such
accounting firm or firms on a confidential basis
its pricing runs and its related assumptions, but
under no circumstances shall such pricing runs or
assumptions be made available to the Lessee;
provided, however, that in connection with any
such review the Owner Participant shall not be
required to disclose its tax returns or other
proprietary information. The adjustments as
determined by such accounting firm will replace
the adjustments provided by Owner Participant
unless the Lessee and the Owner Participant
otherwise agree. The costs of such verification
shall be borne by the Lessee, except that such
costs shall be borne by the Owner Participant if
such verification results in a reduction of the
amount of the present value (discounted semi-
annually at an interest rate per annum equal to
the Debt Rate) of the Basic Rent payments during
the Base Term of the affected Items of Equipment
from the amounts proposed by the Owner Participant
of more than the lesser of (a) 10 basis points or
(b) 5% of the Owner Participant's proposed
adjustments, in which case such costs shall be
borne by the Owner Participant. Notwithstanding
any provision herein to the contrary, the sole
responsibility of the accounting firm shall be to
verify the calculations hereunder, and matters of
interpretation of this Agreement or any other
Operative Document shall not be within the scope
of its duties.
A. Adjustments Certificate; Lease
Supplement. In connection with any adjustments
pursuant to this Article IX, the Owner Participant
shall provide to the Lessee a certificate of a
Responsible Officer of such Owner Participant
stating that all such computations were made in
good faith and were made so that any increase in
Net Economic Return was minimized consistent with
the adjustments required, and (b) stating that all
the requirements of Article IX were complied with.
In connection with any adjustment pursuant to this
Article IX, the Owner Trustee and the Lessee shall
enter into a Lease Supplement setting forth the
revised schedules of Basic Rent, Casualty Value,
Termination Value and EBO Prices, and the Lessee
shall deliver a copy of each such Lease Supplement
to the Indenture Trustee and each Participant, and
shall deliver the chattel paper original of each
such Lease Supplement to the Indenture Trustee.
A. Average Life of Notes.
Notwithstanding anything to the contrary contained
herein or in any other Operative Document, on the
Equipment Closing Date, the Average Life of Notes
shall not deviate from the Average Life of the
Notes as determined in the Pro-Forma Schedules by
more than three months.
A. Rent Adjustment Indemnity. The
Lessee shall indemnify and hold harmless (in the
manner provided in Sections 6.1 and 6.2 hereof and
subject to the exclusions contained therein) the
Owner Trustee, the Owner Participant, the
Indenture Trustee and the Lenders on an After-Tax
Basis for all fees, costs and expenses, including,
without limitation, the reasonable and actual fees
and expenses of their respective counsel, in
connection with the transactions contemplated by
this Article IX.
I. ARTICLE
Transfer of Owner Participant's Interests
A. Transfers.
1. Without the prior written
consent of the Lessee or the Guarantor (in each
case so long as no Event of Default has occurred
and is continuing), and the Indenture Trustee, no
Owner Participant shall assign, convey or
otherwise transfer all or any part of its right,
title and interest in and to the Trust Estate
except as provided in this Section 10.1.
1. An Owner Participant may
assign, convey or otherwise transfer all or any
part of its right, title and interest in the Trust
Estate to an Eligible Owner Participant pursuant
to an Owner Participant Transfer Agreement in
substantially the form of Appendix F to this
Agreement, subject to such assignment satisfying
the conditions set forth in this Section 10.1.
1. After giving effect to any
such assignment, conveyance or transfer, the
aggregate number of Owner Participants shall not
exceed four (4).
1. The assignment, conveyance or
transfer shall not result in a violation of the
Securities Act, and the Lessee, the Guarantor and
the Indenture Trustee shall each have received, at
the expense of the parties to such assignment,
conveyance or transfer, an opinion of counsel
(which may be the General Counsel of the Owner
Participant or the transferee) to that effect, in
form and substance satisfactory to each such
Person and to Lessee's Counsel.
1. The transferee or assignee
shall not be a Competitor of the Lessee or the
Guarantor or an Affiliate of such a Competitor
(excluding any Person which is a passive Investor
holding a minority interest in such Competitor).
1. The Lessee, the Guarantor and
the Indenture Trustee shall each have received, at
the expense of the parties to such assignment, (i)
an Owner Participant Transfer Agreement in
substantially the form of Appendix F, executed by
the transferor and the transferee, by which such
transferee agrees to be bound by and to undertake
on its own behalf all of the terms,
representations and warranties (to the extent
applicable) and covenants of the transferring
Owner Participant under the Operative Documents on
and after the effective date of transfer, (ii) if
applicable (pursuant to the definition of Eligible
Owner Participant), a guaranty with respect to the
obligations of such transferee in substantially
the form of Appendix F-1 and (iii) an opinion of
counsel (which may be the General Counsel of the
Owner Participant or the transferee, as the case
may be) reasonably acceptable to the Lessee, the
Lessee's Counsel and the Indenture Trustee as to
the due authorization and enforceability of such
agreements.
1. The transferring Owner
Participant shall have given written notice to the
Lessee, and the Indenture Trustee of any such
transfer or assignment at least fifteen (15)
Business Days prior to the effective date of such
transfer or assignment, together with drafts of
the certificates, opinions and agreements to be
delivered in accordance with the foregoing
conditions and such other evidence as is necessary
to establish compliance with the foregoing
conditions.
1. Upon any such assignment,
conveyance or transfer (including any subsequent
assignment, conveyance or transfer), (i) the
transferee shall be deemed an "Owner Participant"
for all purposes hereof, and shall be deemed to
have made all payments in respect of the right,
title and interest so transferred, and shall have
a ratable interest therein, and each reference in
any Operative Document to or encompassing such
Owner Participant shall thereafter be deemed to
include a reference to such transferee and
(ii) the transferor shall have no further rights
or interest hereunder or under any other Operative
Document, to the extent of the interest so
transferred.
(i) Notwithstanding any of the
foregoing, (i) the Owner Participant shall be
permitted and required to transfer its interest in
the Trust Estate to the Lessee in accordance with
the terms of Article X of the Lease if the Lessee
so elects in connection with its exercise of the
EBO Option and (ii) the limitations set forth in
Sections 10.1 (e) shall not apply if a Material
Default or an Event of Default has occurred and is
continuing.
I. ARTICLE
Refunding
A. Refunding. So long as no Material
Default or Event of Default shall be in existence
and Zenith simultaneously requests a refunding or
refinancing under the U.S. Participation
Agreement, and subject to satisfaction of the
terms and conditions set forth in this Article XI
and in Section 2.12 of the Indenture, the Lessee
shall have the right to request the Owner
Participant to effect, and the Owner Participant,
the Owner Trustee and the Indenture Trustee agree,
at the sole cost and expense of the Lessee whether
or not such refunding is consummated, to cooperate
to effect, an optional prepayment of all, but not
less than all, of the Notes pursuant to
Section 2.12 of the Indenture as part of a
refunding or refinancing, on the terms set forth
in this Article XI and such Section 2.12 (such
refunding or refinancing, a "Refunding");
provided, that the Lessee shall have the right to
so request a Refunding and a "Refunding" under and
as defined in the U.S. Participation Agreement
only twice in the aggregate; provided further,
that a substantially simultaneous Refunding
hereunder with a "Refunding" under the U.S.
Participation Agreement shall be deemed as one
refunding request for purposes of such limit and;
provided further, that the Owner Participant shall
in any event have the right to consent to any such
Refunding, which consent the Owner Participant may
withhold in the Owner Participant's sole good
faith discretion; except that the Owner
Participant shall not have such consent right if
and to the extent Hunton & Williams, or such other
counsel selected by the Owner Participant and
reasonably acceptable to the Lessee, delivers an
opinion to the Owner Participant (which opinion
the Owner Participant agrees to timely request at
the time of such Refunding) that, as a result of a
change in or clarification of Regulations under
Section 467 of the Code (which change or
clarification occurs after the Equipment Closing
Date and before such Refunding), the absence of
such consent right shall not adversely affect the
eligibility of the Lease for initial and continued
compliance with Section 1.467-3(c)(2)(i) of the
Regulations. In connection with a Refunding:
1. there shall be no
material change in the Operative Documents
(except to the extent provided in clause (c)
and for the inclusion, if any, of additional
covenants upon the Lessee which are
acceptable to, or required by, the Lessee and
the Owner Participant), and specifically,
there shall be no change in the Operative
Documents adverse to the Owner Participant or
the Owner Trustee, in either of such Person's
reasonable judgment, including the provisions
of the Indenture providing the Owner Trustee
with rights in the event of an Indenture
Default or an Indenture Event of Default;
1. the Lessee, the Owner
Participant, the Owner Trustee, the Indenture
Trustee, and any other appropriate parties
will enter into an agreement, in form and
substance satisfactory to such Persons,
providing for (i) the issuance and sale by
the Owner Trustee on the date specified in
such agreement (for the purposes of this
Article XI, the "Refunding Date") of debt
securities in an aggregate principal amount
(in the lawful currency of the U.S.) equal to
the aggregate outstanding principal amount of
all of the Notes on the Refunding Date, after
taking into account any scheduled
amortization of principal, if any, occurring
on such Refunding Date (the "Replacement
Notes"), (ii) payments by the Lessee as
Supplemental Rent to the Person or Persons
entitled thereto of all other amounts, in
respect of accrued interest, and Make Whole
Premium Amount, if any, payable on such
Refunding Date and all other amounts due and
owing to the Lenders under the Operative
Documents, and (iii) such other provisions as
are reasonably acceptable to or required by
the Owner Participant, the Owner Trustee, the
Indenture Trustee, the Lessee and the
Guarantor;
1. the Lessee and the Owner
Trustee will amend the Lease to provide that
Rent payable in respect of the period from
and after the Refunding Date shall be
recalculated to preserve the Net Economic
Return which the Owner Participant would have
realized had such refunding or refinancing
not occurred; provided, that the net present
value of Rent shall be minimized to the
extent consistent therewith, and amounts
payable in respect of Casualty Value,
Termination Value, and the EBO Price from and
after the Refunding Date shall be
appropriately recalculated to preserve the
Net Economic Return which the Owner
Participant would have realized had such
refunding or refinancing not occurred (it
being agreed that any recalculations pursuant
to this clause (c) shall be performed in
accordance with the requirements of
Article IX);
1. subject to subparagraph
(a) above, the Owner Trustee will enter into
an agreement not materially different from
the Indenture to provide for the securing
thereunder of the Replacement Notes issued by
the Owner Trustee pursuant to this Article XI
in like manner as the Notes refunded;
2. on the Refunding Date and
as a condition precedent to such Refunding,
the entire principal amount of Notes,
together with accrued interest thereon, the
Make Whole Premium Amount, if any, and all
other sums due to the Lenders under the
Operative Documents shall be prepaid or paid
in accordance with Section 2.12 of the
Indenture;
1. the Lessee shall pay to
the Owner Participant a Refunding fee in an
amount equal to $150,000 (it being understood
that one payment of $150,000 will discharge
the Lessee's obligation under this Section
11.1(f) and Zenith's obligation under Section
11.1(f) of the U.S. Participation Agreement);
1. such refinancing shall
not result in a violation of Applicable Law
and the Lessee, the Guarantor, the Owner
Participant, the Owner Trustee and the
Indenture Trustee shall have received
(i) such opinions of counsel as they may
reasonably request concerning compliance with
Applicable Law relating to the sale of
securities and (ii) such other opinions of
counsel and such certificates and other
documents, each in form and substance
satisfactory to them, as they may reasonably
request in connection with the terms and
conditions of this Article XI;
1. all necessary
authorizations, Governmental Actions,
approvals and consents in connection with
such Refunding shall have been obtained;
1. as a result of such
Refunding, the Equity Amount shall not
increase or decrease; and
1. the Replacement Notes
shall be in the form of non-recourse loans
denominated in dollars and the final stated
maturity of the Replacement Notes for each
Series shall not extend beyond the final
stated maturity of the Notes being refunded,
and the Weighted Average Life to Maturity of
the Replacement Notes shall not exceed the
Weighted Average Life to Maturity of the
Notes being refunded;
1. the refunding shall not
result in the Lease being treated as other
than an operating lease under Statement of
Financial Accounting Standards No. 13.
provided, that (x) no Refunding of the Notes will
be permitted unless, within thirty (30) days after
receipt of a request pursuant to the first
sentence of Section 11.2 from the Lessee to effect
a refinancing pursuant to this Section 11.1 and of
all relevant information regarding the terms and
conditions of such Refunding necessary to render
the determinations referred to below, the Owner
Participant, at the expense of the Lessee, shall
have received an opinion of independent tax
counsel (selected by the Owner Participant and
reasonably acceptable to the Lessee) reasonably
satisfactory to the Owner Participant to the
effect that there shall be no adverse tax
consequences resulting from such Refunding or the
Lessee shall have agreed to indemnify the Owner
Participant in a manner in form and substance
(including with respect to any collateral
arrangement) satisfactory to the Owner Participant
in its sole discretion (exercised in good faith);
and (y) the Lessee shall (i) compensate, on a
reasonable basis, the Owner Participant for its
time and (ii) pay to or reimburse the
Participants, the Owner Trustee and the Indenture
Trustee, on an After-Tax Basis, for all reasonable
costs and expenses (including Fees and Expenses)
paid or incurred by them, in either case, in
connection with such Refunding or such proposed
Refunding.
A. Notice. The Lessee shall give the
other parties hereto written notice at least
thirty (30) days prior to the deposit of cash with
the Indenture Trustee in connection with any
desired refinancing or refunding pursuant to this
Article XI, which notice shall set forth to the
extent practicable the proposed terms and
conditions of such refunding or refinancing,
including the desired date therefor. The Lessee
will promptly provide to the Participants, the
Owner Trustee and the Indenture Trustee final
terms and conditions of any such refunding or
refinancing not less than three Business Days
prior to the execution and delivery of the
documents contemplated hereunder in connection
therewith.
I. ARTICLE
Miscellaneous
This Participation Agreement shall be
governed by, and construed in accordance with, all
of the Documentary Conventions; provided, however,
that no amendment, supplement or modification of
this Participation Agreement which would have the
effect of (a) increasing the amount of, or
bringing forward in time the due date for payment
of, any obligation of the Lessee or (b) amending
this Article XII shall be effective as against the
Guarantor unless made by an instrument in writing
signed by the Guarantor.
I. ARTICLE
No Recourse to Owner Participant; No Implied
Obligations
1. No Recourse. It is expressly
agreed and understood that no recourse may be had
to any Owner Participant, and no Owner Participant
shall have any obligation or liability, with
respect to the obligations and liabilities of the
Owner Trustee or the Trust Estate (including,
without limitation, the obligations and
liabilities of the Owner Trustee under the
Indenture with respect to the Notes); provided,
however, that the Owner Participant shall be
personally liable for amounts due under Section
2.13 of the Indenture upon an election by the
Owner Trustee to purchase the Notes as provided in
such Section.
1. No Implied Obligations. No
Participant shall have any obligations to any
other party hereto except for the express
obligations of such Participant set forth in the
Operative Documents.
I. ARTICLE
Tax Treatment
It is hereby agreed among the parties
hereto that for federal and state income tax
purposes the Owner Participant will treat itself
as the owner of each Item of Equipment as of the
Equipment Closing Date and the Lessee will treat
itself as the lessee of each Item of Equipment as
of such date, and that neither the Owner
Participant nor the Lessee will take a position
that is inconsistent with the foregoing.
ARTICLE XV
Quiet Enjoyment
So long as no Event of Default shall
have occurred and be continuing, as among the
Lessee and the Lessor Parties, the Lessee shall
have the exclusive rights to possession and
control of all Items of Equipment and none of the
Lessor Parties nor any Person acting or claiming
through any of them will take any action that
shall interfere with the peaceful and quiet
enjoyment or the possession and use or non-use of
any Item of Equipment by the Lessee, and the
Lessee shall have the right to possess and use or
not use such Item of Equipment in its sole
discretion, subject always to the terms and
conditions of the Lease. The foregoing is not
intended to limit the inspection rights of the
Items of Equipment granted by the Lessee pursuant
to Sections 8.3 and 12.1 of the Lease.
ARTICLE XVI
Lessee's Right to Assume Liability under Notes
Each of the Lenders acknowledges and
agrees that pursuant to Article X of the Lease,
the Lessee will have the right to assume liability
under the Notes as provided in such Article X.
Each Lender and the Lessee agree to cooperate in
amending, modifying, restating or substituting for
the Notes in the event of such an assumption, if
required or deemed advisable by the Lessee or the
Lenders, to reflect the Lessee as the obligor
under such Notes.
ARTICLE XVII
Confidentiality
The Lessor Parties agree to take normal
and reasonable precautions in accordance with
their normal procedures and exercise due care to
maintain the confidentiality of all information
relating to the Lessee, the Guarantor and their
respective Affiliates, which has been identified
as confidential by the Lessee or the Guarantor,
and neither the Lessor Parties nor any of their
Affiliates shall use any such information for any
purpose or in any manner other than pursuant to
the terms contemplated by the Operative Documents;
except to the extent such information (a) was or
becomes generally available to the public other
than as a result of a disclosure by the Lessor
Parties, or (b) was or becomes available on a non-
confidential basis from a source other than the
Lessee or the Guarantor; provided, that such
source is not bound by a confidentiality agreement
with either the Lessee or the Guarantor known to
the Lessor Parties; and provided, further, that
any Lessor Party may disclose such information (i)
at the request or pursuant to any requirement of
any Governmental Authority to which such Lessor
Party is subject or in connection with an
examination of such Lessor Party by any such
Governmental Authority including, without
limitation, the National Association of Insurance
Commissioners and any other industry regulators or
rating agencies, (ii) pursuant to subpoena or
other court process, (iii) when required to do so
in accordance with the provisions of any
Applicable Law, (iv) to each Lessor Party's
independent auditors and other professional
advisors and (v) to any Person and in any
proceeding necessary in any Lessor Party's
judgment to protect such Lessor Party's interests
in connection with any claim or dispute involving
the Lessor Party. Notwithstanding the foregoing,
the Lessee authorizes the Lessor Parties to
disclose to any Participant or assignee or
purchaser of Equipment (each, a "Transferee"), to
any prospective Transferee and to any Affiliate,
such financial and other information in the Lessor
Parties' possession concerning the Lessee, the
Guarantor or their respective Affiliates which has
been delivered to the Lessor Parties pursuant to
this Lease or the Participation Agreement;
provided, that unless otherwise agreed by the
Lessee or the Guarantor, as applicable, the
Transferee agrees in writing to such Lessor
Parties to keep such information confidential to
the same extent required of the Lessor Parties
hereunder. The Lessee agrees to keep the
Appraisal confidential on the terms set forth in,
and subject to the exceptions set forth in, the
first sentence of this Section, in each case
mutatis mutandis.
ARTICLE XVIII
Liability of Owner Trustee
The parties hereto each acknowledge that
the Owner Trustee (except as otherwise expressly
provided herein or therein) is entering into this
Agreement and the other Operative Documents to
which it is a party (other than the Trust
Agreement), solely in its capacity as trustee, as
the case may be, under the Trust Agreement and not
in its individual capacity and that Fleet shall
not be liable or accountable under any
circumstances whatsoever in its individual
capacity for or on account of any statements,
representations, warranties, covenants or
obligations stated to be those of the Owner
Trustee except for its own gross negligence or
willful misconduct and as otherwise expressly
provided herein or in the other Operative
Documents.
[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY]
IN WITNESS WHEREOF, intending to be legally
bound, the parties hereto have each caused this
Participation Agreement to be duly executed as of
the date first above written.
ZENITH ELECTRONICS
CORPORATION OF TEXAS
By:
_____________________________
Name:
Title:
GENERAL FOODS CREDIT
CORPORATION
By:
_____________________________
Name:
Title:
FLEET NATIONAL BANK,
not in its
individual capacity
(except as expressly
set forth herein)
but solely as Owner
Trustee
By:
_____________________________
Name:
Title:
FIRST SECURITY BANK,
NATIONAL
ASSOCIATION, not in
its individual
capacity (except as
expressly set forth
herein) but solely
as Indenture Trustee
By:
_____________________________
Name:
Title:
FINANCIAL SUPPORT AGREEMENT
THIS FINANCIAL SUPPORT AGREEMENT (this "Agreement")
is entered into as of March 31, 1997 between LG ELECTRONICS INC.,
a Korean corporation ("LGE"), and ZENITH ELECTRONICS
CORPORATION, a Delaware corporation ("Zenith").
W I T N E S S E T H:
WHEREAS, LGE, with its associated company, LG Semicon Co.,
Ltd., currently owns a majority of the issued and outstanding capital stock
of Zenith; and
WHEREAS, Zenith has requested certain financial support from
LGE and LGE has agreed to provide such support in consideration of the
issuance of the stock options to LGE as herein provided;
NOW, THEREFORE, in consideration of the foregoing premises
and the representations, warranties and covenants set forth in this
Agreement, LGE and Zenith hereby agree as follows:
1. Parent Undertaking - Securitization Transactions. LGE
shall, at the request of Zenith, provide a performance undertaking (the
"Performance Undertaking") to the trustee (the "Trustee") of a trust to be
formed for the purpose of establishing securitization program of trade
receivables (the "Receivables") of Zenith and certain of its subsidiaries
(collectively, the "Originators") in an aggregate principal amount not to
exceed U.S. $200 million at any one time outstanding, pursuant to which
LGE shall unconditionally and irrevocably undertake for the benefit of the
Trustee to perform when due all of the respective covenants, agreements
and other obligations (other than any payment obligations) of each of the
Originators, Zenith, as servicer, Zenith Finance Corporation, a wholly-
owned subsidiary of Zenith, as purchaser of Receivables from the
Originators, under each agreement relating to such securitization program
to which each such entity is a party; provided that the obligation of LGE to
provide the Performance Undertaking shall not extend beyond March 31,
2,000; provided further that the terms of the Performance Undertaking
shall not differ materially from the form of the Parent Undertaking
Agreement (the "Parent Undertaking Agreement") attached hereto as
Exhibit 1 without LGE's prior written approval, which approval may be
given or withheld by LGE, in its sole and absolute discretion.
2. LGE Guaranties - Lease Transactions. LGE shall, at the
request of Zenith, execute and deliver guaranties (collectively, the
"Guaranties") for the benefit of Zenith and Zenith Electronics Corporation
of Texas, a wholly-owned subsidiary of Zenith (collectively, the "Lessees")
in connection with (i) a lease (the "U.S. Lease") by Zenith for the term of
twelve and half years relating to certain U.S.-sited equipment having an
aggregate fair market value of U.S. $66,025,216, and (ii) a lease (the
"Mexican Lease"; together with the U.S. Lease, collectively, the "Leases")
for the term of twelve and half years relating to certain Mexico-sited
equipment having an aggregate fair market value of U.S. $20,567,000,
pursuant to which LGE shall irrevocably and unconditionally guarantee the
payment obligations of the Lessees under the Leases and any other related
agreements to which each Lessee is a party; provided that the terms of the
Guaranties shall not differ materially from the form of the Guaranties
attached hereto as Exhibit 2 without LGE's prior approval, which approval
may be given or withheld by LGE, in its sole and absolute discretion.
3. Vendor Credit Line. LGE shall provide, or cause to
provide, Zenith with a vendor credit line (the "Vendor Credit Line") in an
aggregate amount not substantially in excess of US $100,000,000
outstanding at any time for an initial period of 3 years in connection with
the sales of products by LGE or its subsidiaries or associated companies to
Zenith; provided, however, that LGE, in its sole and absolute discretion,
may (i) increase the amount of the Vendor Credit Line, (ii) terminate the
term of the Vendor Credit Line at any time or (iii) extend the term of the
Vendor Credit Line.
4. Stock Options.
4.1 Issuance of Stock Options. In consideration of LGE's
agreement to provide the Performance Undertaking Agreement, the
Guaranties and the Vendor Credit Line, Zenith hereby agrees to grant to
LGE irrevocable stock options (the "Stock Options") to purchase shares
(the "Shares") of the common stock of Zenith at a purchase price of one
cent ($.01) per Share (the "Purchase Price") up to 3,965,000 Shares, being
the number obtained by dividing (X) the sum of (i) $6,000,000 (the
Securitization Transactions undertaking fees, as computed below), plus (ii)
$30,650,000 (the Lease Transactions guarantee fees as computed below),
plus (iii) $3,000,000 (the Vendor Credit Line fees, as computed below) by
(Y) $10, being an amount rounded, if necessary, to the nearest dollar of the
average closing price per Share on the New York Stock Exchange for the
month of March, 1997.
For purposes of this Agreement, (i) the Securitization Transactions
undertaking fees shall be the product of (a) 1% of $200,000,000 times (b)
3 (years); (ii) the Lease Transactions guarantee fees shall be the product of
(a) approximately 2.83% of $86,600,000 times (b) 12.5 (years); and (iii)
the Vendor Credit Line fees shall be the product of (a) 1% of
$100,000,000 times (b) 3 (years). LGE acknowledges that the aggregate
amount of the fees to be paid by Zenith to LGE shall be subject to a
fairness opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated.
Zenith agrees to renegotiate the amount of fees with respect to the Vendor
Credit Line in the event that LGE substantially increases the amount of the
Vendor Credit Line, in its sole and absolute discretion.
4.2 Shares to be Issued under the Stock Options. Zenith
warrants and covenants that the Shares to be issued upon the exercise of
the Stock Options shall be duly authorized, fully paid, non-assessable and
validly issued when issued and shall have all of the same rights and
entitlement as the shares of the common stock as described in Section 4.3
of the Stock Purchase Agreement dated as of July 17, 1995 between LGE
and Zenith.
4.3 Exercise and Transfer of Stock Options.
(a) The Stock Options granted in this
Agreement shall vest and may be exercised in whole
or in part, as set forth in Schedule A attached to this
Agreement. The Stock Options shall terminate on
March 31, 2012.
(b) In the event LGE or any permitted
assignee wishes to exercise the Stock Options in
whole or in part, LGE or such assignee shall send a
written notice (an "Exercise Notice") to Zenith
specifying the total number of Shares LGE or such
assignee wishes to purchase, the denominations of
the certificate or certificates evidencing such Shares
which LGE or such assignee wishes to receive, a
date which shall be a business day which is at least
five business days after delivery of such notice, and
the place for the closing of such purchase (a
"Closing"), which place will be in Chicago, Illinois.
LGE may, in its discretion upon its exercise of the
Stock Options, have any Shares issued in the name
of any of subsidiaries or associated companies.
(c) Upon receipt of an Exercise Notice,
Zenith shall be obligated to deliver to LGE or LGE's
permitted assignee a certificate or certificates
evidencing the number of Shares specified therein, in
accordance with the terms of this Agreement, on the
date specified in such Exercise Notice.
(d) LGE may assign the Stock Options in
whole or in part to any of LGE's subsidiaries or
associated companies.
(e) In the event Zenith shall be
prohibited from delivering any of the Shares to LGE
upon any exercise of the Stock Option, as a result of
any law, rule, regulation, judgment, order or decree
of any government, governmental body or court
having jurisdiction over Zenith, Zenith and LGE
shall negotiate in good faith and agree on an
alternative consideration to be provided to LGE in
an amount and on the terms at least as favorable to
LGE as the Stock Options granted or to be granted
hereunder.
4.4 Closing. At each Closing, Zenith will deliver to LGE a
certificate or certificates evidencing the number of Shares specified in the
applicable Exercise Notice (in the denominations specified therein) against
payment of the Purchase Price therefor by LGE to Zenith. All payments
made by LGE to Zenith pursuant to this Section 4.4 shall be made, at the
option of LGE, either (a) by wire transfer of immediately available United
States funds in amount of the aggregate Purchase Price for the Shares
being purchased, or (b) by delivery to Zenith of a certified or bank check or
checks payable in the United States to or on the order of Zenith in an
amount equal to the aggregate Purchase Price.
4.5 Adjustments of Shares.
(a) In the event of any change in the
capitalization of Zenith or in the number of
outstanding shares of Zenith by reason of a stock
dividend, split-up, recapitalization, reclassification,
combination, exchange of shares or similar
transaction, or any other change in the corporate or
capital structure of Zenith (including, without
limitation, the declaration or payment of an
extraordinary dividend in cash, securities or other
property), the type and number of shares or
securities to be issued by Zenith upon exercise of the
Stock Option shall be adjusted appropriately, and
proper provision shall be made in the agreements
governing such transaction, so that LGE shall
receive upon exercise of the Stock Option the
number and class of shares or other securities or
property that LGE would have received if the Stock
Option had been exercised immediately prior to such
event, or the record date therefor, as applicable, and
elected to the fullest extend it would have been
permitted to elect, to receive such securities, cash or
other property.
(b) In the event that Zenith shall enter
into an agreement (i) to consolidate with or merge
into any person, and Zenith shall not be the
continuing or surviving corporation of such
consolidation or merger, (ii) to permit any person to
merge into Zenith and Zenith shall be the continuing
or surviving corporation but, in connection with
such merger, the then outstanding shares of Zenith
shall be changed into or exchanged for stock or
other securities of Zenith or any other person or into
cash or any other property, or the outstanding shares
of Zenith shall after such merger represent less than
50% of the outstanding shares and share equivalents
of the surviving corporation or (iii) to sell or
otherwise transfer all or substantially all of its assets
to any person in a single transaction or series of
related transactions and, in connection with such
sale or transfer the outstanding shares of Zenith shall
be changed into or exchanged for stock or other
securities of Zenith or any other person or into cash
or any other property, then in any such case, proper
provision shall be made in the agreements governing
such transaction so that LGE shall receive upon
exercise of the Stock Option the number and class of
shares or other securities or property that LGE
would have received if the Stock Option had been
exercised immediately prior to such transaction, or
the record date therefor, as applicable, and elected
to the fullest extent it would have been permitted to
elect, to receive such securities, cash or other
property.
4.6 Registration Rights.
(a) Demand Registration. Commencing
on May 1, 1997, LGE shall have the right to require
Zenith to register all or any portion of the Shares
received by LGE as a result of exercises by then of
the Stock Options pursuant to Section 4.3 above for
disposition on a delayed or continuous basis
pursuant to Rule 415 of the U.S. Securities Act of
1933, as amended (the "Securities Act"). Upon
receipt of such request, Zenith shall effect the
registration under the Securities Act of all such
Shares within 120 days of receipt of such request for
disposition in accordance with the intended method
of disposition stated in such request. Zenith shall
take such actions as are reasonably required in order
to expedite or facilitate the registration of the
Shares, including, without limitation, (i) preparing
and filing with the U.S. Securities and Exchange
Commission (the "Commission") a registration
statement, or any amendments and supplements
thereto, with respect to such Shares and causing
such registration statement to become and remain
effective for the period of the distribution
contemplated thereby, (ii) qualifying the Shares
covered by such registration statement under such
other securities or blue sky laws of such jurisdiction
within the United States as shall be reasonably
appropriate for the distribution of such Shares, (iii)
entering into customary agreements (including if the
method of distribution is by means of an
underwriting, an underwriting agreement in
customary form), (iv) providing to LGE so many
copies of the final prospectus with respect to the
registration statement as LGE may reasonably
request, and (v) otherwise complying with all
applicable rules and regulations of the Commission.
(b) Incidental Registration. If at any
time Zenith determines that it shall file a registration
statement under the Securities Act on any form that
would also permit the registration of the Shares and
such filing is to be on its behalf and/or on behalf of
selling holders, Zenith shall each such time promptly
give LGE written notice of such determination
setting forth the date on which Zenith proposes to
file such registration statement, which date shall be
no earlier than sixty (60) days from the date of such
notice, and advising Zenith of its right to have the
Shares received by LGE as a result of exercises by
then of the Stock Option pursuant to Section 5.1
above included in such registration. Upon the
written request of LGE received by Zenith no later
than thirty (30) days after the date of Zenith's
notice, Zenith shall effect the registration under the
Securities Act of all such Shares within 120 days of
receipt of such request except, however, to the
extent that the managing underwriter, if any, of the
offering with respect to which such registration
statement shall have been filed shall determine in
good faith that the inclusion of such Shares would
interfere with the successful marketing of such
offering, in which case such Shares, or a portion
thereof determined by such managing underwriter,
shall be excluded from such registration.
(c) Expenses of Registration. All
expenses incurred in connection with each
registration pursuant to Paragraph (a) or (b) of this
Section 4.6, including without limitation all
registration, filing and qualification fees, word
processing, duplicating, printers' and accounting
fees, fees of the National Association of Securities
Dealers, Inc. or listing fees, messenger and delivery
expenses, all fees and expenses of complying with
state securities or blue sky law, fees and
disbursements of counsel for Zenith, and the fees
and expenses of counsel for LGE, shall be paid by
Zenith.
(d) Indemnification. In the event any
Share is included in a registration statement
pursuant to this Section 4.6, Zenith shall indemnify
LGE, its directors and officers, each person who
participates in the offering and each person who
controls LGE within the meaning of Section 15 of
the Securities Act against losses, claims, damages,
expenses, or liabilities to which they may become
subject under the Securities Act or otherwise, arising
out of or based on any untrue or alleged untrue
statement of any material fact contained in such
registration statement on the effective date thereof
or in the final prospectus with respect thereto filed
with the Commission pursuant to Rule 424(b) or
arising out of or based on the omission or alleged
omission to state in the registration statement, the
final prospectus, or any preliminary prospectus, a
material fact required to be stated therein or
necessary to make the statements therein, in light of
the circumstances under which they were made, not
misleading except insofar as such losses, claims,
damages, expenses or liabilities are caused by
information provided in writing by LGE to Zenith
expressly for inclusion in such registration
statement, final prospectus, or preliminary
prospectus.
(e) Transfer of Registration Rights. The
registration rights of LGE under this Section 4.6
with respect to any Share may be transferred to (i)
any transferee of such Share who acquires at least
twenty percent (20%) of LGE's Shares received by
LGE as a result of exercises by them of the Stock
Option pursuant to Section 4.3 or (ii) any of its
subsidiaries or associated companies.
5. Representations. Each of the parties represents on its own
behalf to the other party that:
(a) Such party has obtained all
authorization, consents, approvals, orders or licenses
required of it under applicable laws, rules or
regulations (including, in the case of LGE, those of
the Republic of Korea) for the execution, delivery
and performance of its obligations under this
Agreement (including, in the case of Zenith, the
approval of the Audit Committee has been obtained
and notice to shareholders will be given promptly);
(b) The execution, delivery and
performance of this Agreement by such party does
not (a) violate or conflict with (i) its articles of
incorporation or by-laws or any comparable
organizational documents, (ii) any applicable laws,
rules or regulations or (iii) any order, writ,
judgment, award, injunction or decree binding on or
affecting it or its properties and (B) conflict with,
result in any breach of any of the terms and
provisions of, or constitute (with or without notice
or lapse of time or both) a default under, any
indenture, contract, agreement, mortgage, deed of
trust or other instrument to which it is a party or by
which it or its properties are bound;
(c) This Agreement has been duly
authorized by all necessary corporate action on the
part of such party and is a legal, valid and binding
obligation of such party, enforceable against such
party in accordance with its terms.
6. Reimbursement and Interest. Zenith shall reimburse the
payments made by LGE to the relevant beneficiaries pursuant hereto. In
addition, Zenith shall pay to LGE monthly or semi-annually in arrears,
interest on the payments made by LGE to the relevant beneficiaries
pursuant hereto, accrued on the date of payment until payment of such
interest in full, at a rate equal to the call-loan rate charged to LGE on the
date of payment by a Korean bank selected by LGE and with which LGE
transacts banking business.
7. Subrogation. Zenith agrees that subject to the terms of the
Parent Undertaking Agreement and the Guaranties, LGE, by virtue of any
payment or performance to the relevant beneficiaries pursuant hereto, shall
be subrogated to such beneficiaries' claim against Zenith or any person
relating thereto.
8. Indemnity. Zenith hereby undertakes to indemnify and hold
harmless LGE from and against all liabilities, costs, losses, damages and
expenses which LGE may incur or sustain by reason of or arising in any
way in connection with the performance or payment by LGE to the
relevant beneficiaries pursuant hereto.
9. Covenants of Zenith
9.1 Reporting Requirements and Other Documents. Zenith
shall furnish to LGE a copy of each document or instrument to be delivered
to each of the parties to, and in connection with, the transactions described
in Section 1 above (herein called, the "Securitization Transactions") and
the transactions described in Section 2 above (herein called, the "Lease
Transactions") by Zenith and its subsidiaries. Zenith shall furnish or cause
to be furnished to LGE such financial and operating data and other
information with respect to the business and properties of Zenith and any
of its subsidiaries as LGE may reasonably request from time to time.
9.2 Notice of Material Adverse Effect. Zenith shall give prompt
notice to LGE of (i) any material breach of, or the occurrence or
nonoccurrence of any event which with notice or lapse of time or both
would be a material breach of, any representation or warranty or covenant
or agreement contained in this Agreement, (ii) the occurrence or
nonoccurrence of any event which with notice or lapse of time or both
would be an event of default under, or otherwise a material breach of any
representation or warranty or covenant or agreement contained in, any of
the agreements into which Zenith shall have entered in connection with the
Securitization Transactions or the Lease Transactions or (iii) the
occurrence of any event which could have a material adverse effect on the
condition (financial or otherwise), earnings, business affairs or business
prospects of Zenith and its subsidiaries taken as a whole, whether or not
arising in the ordinary course of business.
9.3 Consents of LGE. Zenith acknowledges that LGE shall
have no obligation to consent to any amendment, modification, supplement
or change of any term or condition of any of the agreements into which
Zenith shall have entered in connection with the Securitization Transactions
or the Lease Transactions. LGE may consent to such amendment,
modification, supplement or change, in its sole and absolute discretion.
Zenith agrees to consult with LGE prior to its dealings with any of the
parties to the Securitization Transactions and the Lease Transactions.
Unless LGE shall otherwise consent in writing, Zenith shall not amend,
modify, supplement or change in any manner, any term or condition of any
of the agreements into which Zenith shall have entered in connection with
the Securitization Transactions and the Lease Transactions.
9.4 Taxes.
(a) Zenith shall make its best efforts to
(i) minimize its tax liabilities that may accrue under
the United States tax laws and regulations, including
the interest stripping provision thereunder, in
connection with the Performance Undertaking
Agreement, the Guaranties or the Vendor Credit
Line and (ii) minimize tax liabilities to which LGE
may be subject with respect to the Shares received
upon exercise by it of the Stock Option.
(b) Upon the reasonable request of LGE,
Zenith shall cause each beneficiary under the
Performance Undertaking Agreement or the
Guaranties which shall have been organized under
the laws of a jurisdiction outside the United States
to provide LGE with Internal Revenue Service form
1001 or 4224, as appropriate, or any successor or
other form prescribed by the Internal Revenue
Service, certifying that such beneficiary is exempt
from or is entitled to a reduced rate of United States
withholding tax on payments under the relevant
agreements or documents.
9.5 Default. In the event that Zenith shall fail to perform or
observe any agreement set forth in this Agreement, LGE shall terminate the
Vendor Credit Line, and LGE may take any other actions, as it deems
necessary.
10. Miscellaneous
10.1 Governing Law. This Agreement shall he governed by,
construed under and enforced in accordance with, the laws of the State of
Illinois.
10.2 Consent to Jurisdiction. LGE and Zenith hereby irrevocably
and unconditionally submit to the nonexclusive jurisdiction of any court of
the State of Illinois or the Federal courts of the United States of America
sitting in Illinois, and any appellate court from any thereof, in any legal
action or proceeding arising out of or in connection with this Agreement or
the transactions contemplated hereby and LGE and Zenith hereby agree
that any summons, pleading, judgment, memorandum of law, or other
paper relevant to any action or proceeding shall be sufficiently served if
delivered to the recipient thereof by certified or registered mail (with return
receipt) at its address set forth in Section 10.4. Nothing in the proceeding
sentence shall affect the right of any party to proceed in any jurisdiction for
the enforcement or execution of any judgment, decree or order made by a
court specified in said sentence.
10.3 Expenses. Except as provided in Article 4, each of the
parties shall pay its own expenses incurred in connection with the
negotiation and preparation of this Agreement and the effectuation of the
transactions contemplated hereby including, without limitation, all fees and
disbursements of its respective legal counsel, advisors, and accountants.
10.4 Notices. In case of any event or circumstance giving rise to
an obligation of LGE or Zenith to provide notice hereunder, such notice
shall be delivered within the time specifically set forth herein or, if no such
time is specified, then as promptly as practicable after becoming aware of
such event or circumstance. Any notice required or permitted to be given
under this Agreement shall be written, and may be given by personal
delivery, by cable, telecopy or telegram (with a confirmation copy mailed
as follows), by Federal Express, United Parcel Service, or other reputable
commercial delivery service, or by registered or certified mail, first-class
postage prepaid, return receipt requested. Notice shall be deemed given
upon actual receipt. Mailed notices shall be addressed as follows, but each
party may change address by written notice in accordance with this
paragraph.
To Zenith: Zenith Electronics Corporation
1000 Milwaukee Avenue
Glenview, Illinois 60025
Attention: Chief Financial Officer
To LGE: LG Electronics Inc.
20 Yoido-dong
Youngdungpo-gu
Seoul, Korea 150-721
Attention: Director of Finance
10.5 Severability. The exercise of the rights and the performance
of the obligations of the parties hereunder are subject to applicable laws,
regulations, rules and decisions of the courts and other government,
governmental agencies and authorities having jurisdiction over such rights
and obligations. The unenforceability or invalidity of any provision of the
Agreement shall not affect any other provision hereof and in the event of a
judicial, administrative or arbitral finding of such unenforceability or
invalidity, the Agreement shall remain in force in all other respects.
10.6 Waiver. No term or provision hereof shall be deemed
waived and no breach hereof excused unless such waiver or consent shall
be in writing and signed by the party claimed to have waived or consented.
No waiver hereunder shall apply or be construed to apply beyond its
expressly stated terms. No failure is exercise and no delay in exercising any
right, remedy, power or privilege hereunder shall operate as a waiver
thereof. No failure to insist upon strict performance of any term or
provision of this Agreement or to exercise any right hereunder, shall be
construed as a waiver or as a relinquishment of such term, provision or
right.
10.7 Assignment and Parties in Interest. This Agreement and the
rights hereunder may not be assigned by LGE or Zenith without the prior
written consent of the other party, which may be given or withheld in the
other party's discretion, except that LGE may (i) exercise any or all rights
and/of fulfill any or all obligations under this Agreement in conjunction
with or through one or more associated companies of LGE; and/or (ii)
assign this Agreement to an associated company of LGE. This Agreement
shall be binding upon and inure solely to the benefit of LGE and Zenith and
their respective successors and permitted assigns and nothing in this
Agreement, express or implied, is intended to or shall confer upon any
other person any rights, benefits or remedies of any nature whatsoever
under or by reason of this Agreement.
10.8 Amendment. This Agreement may be amended only by a
written instrument executed and delivered by a duly authorized officer of
LGE and a duly authorized officer of Zenith.
10.9 Cumulation of Remedies. All remedies available to any
party for breach or non-performance of this Agreement are cumulative and
not exclusive of any rights, remedies, powers or privileges provided by law,
and may be exercised concurrently or separately, and the exercise of and
any remedy shall not be deemed an election of such remedy to the
exclusion of other remedies.
10.10 Headings; References. Headings used in this Agreement are
inserted as a matter of convenience and for reference, do not constitute a
part of this Agreement for any other purpose, and shall not affect the
interpretation or enforcement hereof or thereof.
10.11 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereby have executed and
delivered this Agreement as of the date first above written.
LG ELECTRONICS INC.
By:
_________________________ Name:
Title:
ZENITH ELECTRONICS
CORPORATION
By:
_________________________
Name:
Title:
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