Exhibit 4.22
R.V.I. GUARANTY CO., LTD.,
as Insurer
SRI RECEIVABLES PURCHASE CO., INC.,
as Transferor
SPECIALTY RETAILERS, INC.,
as Originator and Servicer
and
BANKERS TRUST (DELAWARE),
as Trustee
INSURANCE AND INDEMNITY AGREEMENT
SRI Receivables Master Trust
$18,375,000
Class D Floating Rate Asset Backed Certificates, Series 1999-1
Dated as of December 9, 1999
INSURANCE AND INDEMNITY AGREEMENT
THIS INSURANCE AND INDEMNITY AGREEMENT (this "Insurance
Agreement"), dated as of December 9, 1999 by and among R.V.I.
GUARANTY CO., LTD. (the "Insurer"), SRI RECEIVABLES PURCHASE CO.,
INC. (together with its permitted successors and assigns, the
"Transferor"), SPECIALTY RETAILERS, INC. as Originator (together
with its permitted successors and assigns, the "Originator") and
as Servicer under the Agreement described below (together with
its permitted successors and assigns, the "Servicer") and BANKERS
TRUST (DELAWARE) not in its individual capacity but solely as
Trustee (together with its permitted successors and assigns, the
"Trustee").
WHEREAS, the Series 1999-1 Supplement dated as of November
9, 1999 by and among the Transferor, the Servicer and the Trustee
(the "Supplement") relating to the SRI Receivables Master Trust,
$18,375,000 Class D Floating Rate Asset Backed Certificates,
Series 1999-1 (the "Securities") provides for, among other
things, the issuance of the Securities, and the Insurer has
issued its certificate guaranty insurance policy (the "Policy")
that guarantees certain payments due on the Securities; and
WHEREAS, the Insurer shall be paid an insurance premium
pursuant to the Supplement, and the details of such premium are
set forth herein; and
WHEREAS, the Transferor, the Trustee, the Originator and the
Servicer have undertaken certain obligations in consideration for
the Insurer's issuance of the Policy.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein contained, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
The terms defined in this Article I shall have the meanings
provided herein for all purposes of this Insurance Agreement,
unless the context clearly requires otherwise, in both singular
and plural form, as appropriate. Unless the context clearly
requires otherwise, all capitalized terms used herein and not
otherwise defined in this Article I shall have the meanings
assigned to them in the Supplement. All words used herein shall
be construed to be of such gender or number as the circumstances
require. This "Insurance Agreement" shall mean this Insurance
Agreement as a whole and as the same may, from time to time
hereafter, be amended, supplemented or modified. The words
"herein," "hereby," "hereof," "hereto," "hereinabove" and
"hereinbelow," and words of similar import, refer to this
Insurance Agreement as a whole and not to any particular
paragraph, clause or other subdivision hereof, unless otherwise
specifically noted.
"Agreement" means the Second Amended and Restated Pooling
and Servicing Agreement among the Transferor, SRI, as servicer,
and Bankers Trust (Delaware), as Trustee, dated as of November 1,
1999.
"Amendment" means the Amendment and Consent among the
Transferor, the Servicer and the Trustee, dated as of December 9,
1999.
"Business Day" means any day other than a Saturday, a Sunday
or a day on which the Insurer is closed or a day on which banking
institutions or trust companies in Bermuda, the States of New
York, Delaware or Texas or in the city in which the corporate
trust office of the Trustee under the Supplement is located are
authorized or obligated by law, regulation or executive order to
remain closed.
"Code" means the Internal Revenue Code of 1986, including,
unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.
"Commission" means the Securities and Exchange Commission.
"Consolidation Facts" means the facts set forth on Schedule
I hereto.
"Credit Agreement" means the Credit Agreement, dated as of
June 16, 1997, among Specialty Retailers, Inc., as borrower,
Stage Stores, Inc., as parent, the banks named therein, and
Credit Suisse First Boston, as administrative agent.
"Date of Issuance" means the date on which the Policy is
issued as specified therein.
"Default" means any event which results, or which with the
giving of notice or the lapse of time or both would result, in an
Event of Default.
"Distribution Date" means December 15, 1999, and the
fifteenth day of each calendar month thereafter, or if such day
is not a Business Day, the next succeeding Business Day.
"Duff & Phelps" means Duff & Phelps Credit Rating Co., and
any successor thereto, and, if such corporation shall for any
reason no longer perform the functions of a securities rating
agency, "Duff & Phelps" shall be deemed to refer to any other
nationally recognized rating agency designated by the Insurer.
"Enhancement Supplement" means the Enhancement Supplement
among the Transferor, the Servicer and the Trustee dated as of
December 9, 1999.
"Event of Default" means any event of default specified in
Section 5.01 hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
Financial Statements" means, with respect to the Transferor
or Stage the balance sheets and the statements of income,
retained earnings and cash flows and the notes thereto.
"Fitch" means Fitch IBCA, Inc., and any successor thereto,
and, if such corporation shall for any reason no longer perform
the functions of a securities rating agency, "Fitch" shall be
deemed to refer to any other nationally recognized rating agency
designated by the Insurer.
"Initial Purchaser" means Credit Suisse First Boston
Corporation.
"Insurer Information" means the information contained in the
Offering Memorandum as of the date thereof under the caption "The
Policy and The Insurer" and the financial statements of the
Insurer contained in Exhibit C to the Offering Memorandum.
"Investment Company Act" means the Investment Company Act of
1940, including, unless the context otherwise requires, the rules
and regulations thereunder, as amended.
"Late Payment Rate" means, for any date of determination,
the higher of (i) the base commercial lending rate per annum
announced from time to time by Credit Suisse First Boston
Corporation in New York in effect on such day, plus two percent
(2.00%) or (ii) the interest rate per annum quoted by Credit
Suisse First Boston Corporation at approximately 11:00 a.m., New
York City time, on such day, to dealers in the New York Federal
funds market for the overnight offering of dollars by Credit
Suisse First Boston Corporation plus two and one-half percent
(2.50%). The Late Payment Rate shall be computed on the basis of
a year of 365 days, calculating the actual number of days
elapsed. In no event shall the Late Payment Rate exceed the
maximum rate permissible under any applicable law limiting
interest rates.
"Liabilities" shall have the meaning ascribed to such term
in Section 3.04(a) hereof.
"Losses" means (a) any actual out-of-pocket loss paid by the
Insurer or its respective parents, subsidiaries and affiliates or
any shareholder, director, officer, employee, agent or any
"controlling person" (as such term is used in the Securities Act)
of any of the foregoing, and (b) any actual out-of-pocket costs
and expenses paid by such party, including reasonable fees and
expenses of its counsel, to the extent not paid, satisfied or
reimbursed from funds provided by any other Person (provided that
the foregoing shall not create or imply any obligation to pursue
recourse against any such other Person).
"Material Adverse Change" means, in respect of any Person, a
material adverse change in (a) the business, financial condition,
results of operations or properties of such Person or (b) the
ability of such Person to perform its obligations under any of
the Transaction Documents.
"Obligor" means the original obligor under each Receivable,
including any guarantor of such obligor and their respective
successors.
"Offering Documents" means the Offering Memorandum of the
Transferor in respect of the Securities (and any amendment or
supplement thereto) and any other offering documents in respect
of the Securities prepared by the Transferor that makes reference
to the Policy.
"Offering Memorandum" means the Offering Memorandum, dated
December 9, 1999, of the Transferor in respect of the Securities
(and any amendment or supplement thereto).
"Opinion Facts and Assumptions" means with respect to the
opinions delivered by Kirkland & Ellis in connection with the
Transaction, the facts and assumptions contained in the
insolvency opinion dated November 9, 1999 by Kirkland & Ellis
insofar as they relate to the Transferor and the Originator.
"Owners" means registered holders of Securities.
"Person" means an individual, joint stock company, trust,
unincorporated association, joint venture, corporation, business
or owner trust, limited liability company, partnership or other
organization or entity (whether governmental or private).
"Premium" means the premium payable in accordance with
Section 3.02 hereof which, with respect to any Payment Date, is
equal to the product of (a) 1/12th the Premium Percentage and (b)
the Class D Investor Principal Amount for such Payment Date
(prior to giving effect to payments of principal on such Payment
Date).
"Premium Percentage" shall mean 3.80% per annum.
"Purchase Agreement" means the Purchase Agreement dated
November 9, 1999 among the Initial Purchaser, Stage and the
Transferor with respect to the offer and sale of the Securities,
as the same may be amended from time to time.
"Receivables" shall have the meaning assigned such term in
the Agreement.
"Receivables Purchase Agreement" means the Receivables
Purchase Agreement dated as of May 30, 1996 between SRI, as
Originator, and the Transferor, as amended by the second
amendment thereto dated as of November 9, 1999.
"Securities Act" means the Securities Act of 1933,
including, unless the context otherwise requires, the rules and
regulations thereunder, as amended from time to time.
"SRI" means Specialty Retailers, Inc., a Texas corporation.
"Stage" means Stage Stores, Inc., a Delaware corporation.
"Term of the Insurance Agreement" shall be determined as
provided in Section 4.01 hereof.
"Transaction" means the transactions contemplated by the
Transaction Documents, including the transactions described in
the Offering Documents.
"Transaction Documents" means this Insurance Agreement, the
Agreement, the Supplement, the Offering Memorandum, the
Securities, the Receivables Purchase Agreement, the Enhancement
Supplement, the Amendment and the Purchase Agreement.
"Trust" has the meaning assigned to such term in the
Agreement.
"Trust Indenture Act" means the Trust Indenture Act of 1939,
including, unless the context otherwise requires, the rules and
regulations thereunder, as amended from time to time.
"Trust Property" shall have the meaning assigned thereto in
the Agreement.
"Trustee" means Bankers Trust (Delaware), not in its
individual capacity but solely as Trustee under the Agreement and
the Supplement, and any successor to the Trustee under the
Agreement and the Supplement.
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 2.01. Representation and Warranties of the Transferor
and the Originator. Each of the Transferor (as to itself) and
the Originator (as to itself and as to the Transferor) represent,
warrant and covenant as of the Date of Issuance, as follows:
(a) Due Organization and Qualification. Each of the Transferor
and the Originator is a corporation duly organized, validly
existing and in good standing under the laws of its respective
jurisdiction of formation. Each of the Transferor and the
Originator is duly qualified to do business, is in good standing
and has obtained all licenses, permits, charters, registrations
and approvals (together, "approvals") necessary for the conduct
of its business as currently conducted and as described in the
Offering Documents and the performance of its obligations under
the Transaction Documents in each jurisdiction in which the
failure to be so qualified or to obtain such approvals would
render any Transaction Document unenforceable in any respect or
would have a material adverse effect upon the Transaction, the
Owners or the Insurer.
(b) Power and Authority. Each of the Transferor and the
Originator has all necessary corporate power and authority to
conduct its business as currently conducted and, as described in
the Transaction Documents, to execute, deliver and perform its
obligations under the Transaction Documents and to consummate the
Transaction.
(c) Due Authorization. The execution, delivery and performance
by the Transferor and the Originator of the Transaction Documents
to which they are parties have been duly authorized by all
necessary corporate action and do not require any additional
approvals or consents of, or other action by or any notice to or
filing with, any Person, including, without limitation, any
governmental entity or the Transferor's or the Originator's
equityholders, which have not been previously obtained or given.
(d) Noncontravention. None of the execution and delivery of the
Transaction Documents by the Transferor or the Originator, the
consummation of the transactions contemplated thereby or the
satisfaction of the terms and conditions of the Transaction
Documents:
(i) conflicts with or results in any breach or violation of any
provision of the organizational documents of the Transferor or
the Originator or any law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award currently in
effect having applicability to the Transferor or the Originator
or any of their material properties, including regulations issued
by an administrative agency or other governmental authority
having supervisory powers over the Transferor or the Originator;
(ii) constitutes a default by the Transferor or the Originator
under or a breach of any provision of any loan agreement,
mortgage, indenture or other agreement or instrument to which the
Transferor or the Originator is a party or by which any of its or
their respective properties, which are individually or in the
aggregate material to the Transferor or the Originator, is or may
be bound or affected; or
(iii) results in or requires the creation of any lien upon or
in respect of any assets of the Transferor or the Originator,
except as contemplated by the Transaction Documents.
(e) Legal Proceedings. There is no action, proceeding or
investigation by or before any court, governmental or
administrative agency or arbitrator against or affecting the
Transferor or the Originator or any of its or their subsidiaries,
or any properties or rights of the Transferor or the Originator
or any of its or their subsidiaries, pending or, to the
Transferor's or the Originator's knowledge after reasonable
inquiry, threatened, which in any case could reasonably be
expected to result in a Material Adverse Change with respect to
the Transferor or the Originator, other than those (if any)
disclosed in the Transferor's or Stage's filings with the
Commission pursuant to the Exchange Act.
(f) Valid and Binding Obligations. The Securities, when
executed, authenticated and issued in accordance with the
Supplement, and the Transaction Documents (other than the
Securities), when executed and delivered by the Transferor, the
Originator or the Trustee, as applicable, will constitute the
legal, valid and binding obligations of the Transferor and the
Originator, as applicable, enforceable in accordance with their
respective terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting creditors' rights generally and general
equitable principles. Neither the Transferor nor the Originator
will at any time in the future deny that the Transaction
Documents constitute the legal, valid and binding obligations of
the parties thereto.
(g) Financial Statements. The Financial Statements of the
Transferor and Stage (i) are, as of the dates and for the periods
referred to therein, complete and correct in all material
respects, (ii) present fairly the financial condition and results
of operations of the Transferor and Stage as of the dates and for
the periods indicated and (iii) have been prepared in accordance
with generally accepted accounting principles consistently
applied, except as noted therein (subject as to interim
statements to normal year-end adjustments). Since the date of
the most recent Financial Statements, there has been no Material
Adverse Change in respect of the Transferor or Stage, other than
changes (if any) disclosed in the Transferor's or Stage's filings
with the Commission pursuant to the Exchange Act.
(h) Compliance With Law, Etc. No practice, procedure or policy
employed, or proposed to be employed, by the Transferor or the
Originator in the conduct of its business violates any law,
regulation, judgment, agreement, order or decree applicable to
any of them that, if enforced, could reasonably be expected to
result in a Material Adverse Change with respect to the
Transferor or the Originator. Neither the Transferor nor the
Originator is in breach of or in default under any applicable law
or administrative regulation of its respective jurisdiction of
formation, or any department, division, agency or instrumentality
thereof or of the United States or any applicable judgment or
decree or any loan agreement, note, resolution, certificate,
agreement or other instrument to which the Transferor or the
Originator is a party or is otherwise subject which, if enforced,
would have a material adverse effect on the ability of the
Transferor or the Originator, as the case may be, to perform its
respective obligations under the Transaction Documents.
(i) Taxes. The Transferor and the Originator and the
Transferor's and the Originator's parent company or companies
have filed prior to the date hereof all federal and state tax
returns that are required to be filed and paid all taxes,
including any assessments received by them that are not being
contested in good faith, to the extent that such taxes have
become due, except for any failures to file or pay that,
individually or in the aggregate, would not result in a Material
Adverse Change with respect to the Transferor or the Originator.
(j) Accuracy of Information. None of (i) the Transaction
Documents or (ii) the information furnished by the Transferor and
the Originator to the Insurer regarding the Transferor, SRI,
Stage or the Transaction, contains any statement of a material
fact which was untrue or misleading in any material adverse
respect when made. Except as described in its filings with the
Commission pursuant to the Exchange Act, neither the Transferor
nor the Originator has any knowledge of circumstances that it
reasonably expects to cause a Material Adverse Change with
respect to the Transferor, Stage or SRI. Since the furnishing of
the Transaction Documents, there has been no change or any
development or event involving a prospective change known to the
Transferor and the Originator that would render any of the
Transaction Documents untrue or misleading in any material
respect.
(k) Compliance With Securities Laws. The offer and sale of the
Securities complied in all material respects with all
requirements of law, including all applicable securities laws.
Without limitation of the foregoing, the Offering Memorandum does
not contain any untrue statement of a material fact and does not
omit to state a material fact necessary to make the statements
made therein, in light of the circumstances under which they were
made, not misleading; provided, however, that no representation
is made with respect to the Insurer Information. Assuming the
accuracy of the representations and warranties of the Initial
Purchaser in the Purchase Agreement, neither the offer nor the
sale of the Securities to the Initial Purchaser has been or will
be in violation of the Securities Act or any other federal or
state securities laws. The Agreement and the Supplement are not
required to be qualified under the Trust Indenture Act of 1939.
The Transferor is not required to be registered as an "investment
company" under the Investment Company Act.
(l) Documents. Each of the representations and warranties of
the Transferor and the Originator contained in the Transaction
Documents is true and correct in all material respects when made
and as of the date hereof, and the Transferor and the Originator
hereby makes each such representation and warranty to, and for
the benefit of, the Insurer as if the same were set forth in full
herein.
(m) Solvency; Fraudulent Conveyance. Each of the Transferor
and the Originator is solvent and will not be rendered insolvent
by the Transaction and, after giving effect to the Transaction,
neither the Transferor nor the Originator will be left with an
unreasonably small amount of capital with which to engage in its
business, nor does the Transferor intend to incur, or believe
that it has incurred, debts beyond its ability to pay as they
mature. Neither the Transferor nor the Originator contemplates
the commencement of insolvency, bankruptcy, liquidation or
consolidation proceedings or the appointment of a receiver,
liquidator, conservator, trustee or similar official in respect
of the Transferor, the Originator or any of their respective
assets. The amount of consideration being received by the
Originator upon the transfer of the Receivables to the Transferor
constitutes reasonably equivalent value and fair consideration
for the Receivables. The amount of consideration being received
by the Transferor upon the sale of the Receivables to the Trust
constitutes reasonably equivalent value and fair consideration
for the Receivables. Neither the Originator nor the Transferor
is transferring the Receivables, as provided in the Transaction
Documents, with any intent to hinder, delay or defraud any of
their respective creditors.
(n) Principal Place of Business. The principal place of
business of the Transferor and the Originator is located in
Houston, Texas.
(o) Opinion Facts and Assumptions. The Opinion Facts and
Assumptions insofar as they relate to the Transferor and the
Originator are true and correct in all material respects as of
the Date of Issuance.
Section 2.02. Affirmative Covenants of the Transferor and the
Originator. The Transferor and the Originator hereby agree that
during the Term of the Insurance Agreement, unless the Insurer
shall otherwise expressly consent in writing:
(a) Compliance With Agreements and Applicable Laws. The
Transferor and the Originator shall not be in default in any
material respect under the Transaction Documents and shall comply
with all material requirements of any law, rule or regulation
applicable to them. Neither the Transferor nor the Originator
shall agree to any amendment to or modification of the terms of
any Transaction Documents except in accordance with their terms.
(b) Corporate Existence. Except as otherwise provided in the
Transaction Documents, each of the Transferor, the Originator,
and each successor and assign of the Transferor or the
Originator, shall maintain, except as permitted by the
Transaction Documents, its respective existence and shall at all
times continue to be duly organized under the laws of its
respective jurisdictions of organization and duly qualified and
duly authorized (as described in Section 2.01 (a), (b) and (c)
hereof) and shall conduct its respective business in accordance
with the terms of its respective organizational documents in a
manner that does not materially adversely affect its ability to
perform its respective obligations under the Transaction
Documents or materially adversely affect (i) the Trustee's
security interest in the Trust Property or (ii) the Insurer's
interest under the Transaction Documents.
(c) Financial Statements; Accountants' Reports; Other
Information. The Transferor and the Originator shall keep or
cause to be kept in reasonable detail books and records of
account of their assets and business, including, but not limited
to, books and records relating to the Transaction. The
Transferor and the Originator shall furnish or cause to be
furnished to the Insurer:
(i) Annual Financial Statements. Upon the request of the
Insurer, as soon as available, and in any event within 120 days
after the close of each fiscal year of the Transferor and Stage,
the audited consolidated balance sheets of the Transferor, Stage
and their subsidiaries as of the end of such fiscal year and the
related audited consolidated statements of income, changes in
member's equity and cash flows for such fiscal year, all in
reasonable detail and stating in comparative form the respective
figures for the corresponding date and period in the preceding
fiscal year, prepared in accordance with generally accepted
accounting principles consistently applied and accompanied by the
audit opinion of the Transferor's and Stage's independent
accountants (which shall be nationally recognized independent
public accounting firms) and by the certificates specified in
Section 2.02(d) hereof.
(ii) Certain Information. Upon the reasonable request of the
Insurer, the Transferor and the Originator shall promptly provide
copies of any requested proxy statements, if any, financial
statements, reports and registration statements which the
Transferor or the Originator files with, or delivers to, the
Commission or any national securities exchange relating to the
Securities.
(iii) Other Information. Promptly upon receipt thereof,
copies of all schedules, financial statements or other similar
reports delivered to or by the Transferor or the Originator
pursuant to the terms of the Transaction Documents and, promptly
upon request, such other data relating to the Securities as the
Insurer may reasonably request.
The Insurer agrees that it and its agents, accountants and
attorneys shall keep confidential all financial statements,
reports and other information delivered by the Transferor or the
Originator pursuant to this Section 2.02(c) to the extent
provided in Section 2.02(e) hereof.
(d) Compliance Certificate. The Transferor and the Originator
shall deliver to the Insurer, concurrently with the delivery of
the financial statements required pursuant to Section 2.02(c)(i)
and (ii) hereof, one or more certificates signed by an officer of
the Transferor or the Originator, as applicable, authorized to
execute such certificates on behalf of the Transferor or the
Originator, as applicable, stating that:
(i) to the best of such individual's knowledge following
reasonable inquiry, no Default or Event of Default has occurred
or, if a Default or Event of Default has occurred, specifying the
nature thereof; and
(ii) the attached financial statements submitted in accordance
with Section 2.02(c)(i) or (ii) hereof, as the case may be, are
complete and correct in all material respects and present fairly
the financial condition and results of operations of the
Transferor or Stage, as applicable, as of the dates and for the
periods indicated, in accordance with generally accepted
accounting principles consistently applied.
(e) Access to Records; Discussions With Officers and
Accountants. On a quarterly basis, or upon the occurrence of a
Material Adverse Change, the Transferor and the Originator shall,
upon the reasonable request of the Insurer, permit the Insurer or
its authorized agents:
(i) to inspect the books and records of the Transferor and the
Originator as they may relate to the Securities, or the
obligations of the Transferor and the Originator under the
Transaction Documents, and the Transaction;
(ii) to discuss the affairs, finances and accounts of the
Transferor and the Originator with a senior officer of the
Transferor and the Originator; and
(iii) with the Transferor's or the Originator's consent, as
applicable, which consent shall not be unreasonably withheld, to
discuss the affairs, finances and accounts of the Transferor or
the Originator with the Transferor's or the Originator's
independent accountants, provided that an officer of the
Transferor or the Originator shall have the right to be present
during such discussions.
Such inspections and discussions shall be conducted during
normal business hours and shall not unreasonably disrupt the
business of the Transferor or the Originator. The books and
records of the Transferor and the Originator shall be maintained
at the address of the Transferor and the Originator designated
herein for receipt of notices, unless the Transferor or the
Originator shall otherwise advise the parties hereto in writing.
Annual discussions with the independent accountants referred to
in clause (iii) above shall be without cost to the Insurer. The
reasonable expenses relating to discussions with the independent
accountants referred to in clause (iii) above made on a quarterly
basis (other than an annual discussion or a discussion upon the
occurrence of a Material Adverse Change) shall be payable by the
Insurer.
The Insurer agrees that it and its shareholders, directors,
agents, accountants and attorneys shall keep confidential any
matter of which it becomes aware through such inspections or
discussions (unless readily available from public sources),
except as may be otherwise required by regulation, law or court
order or requested by appropriate governmental authorities or as
necessary to preserve its rights or security under or to enforce
the Transaction Documents, provided that the foregoing shall not
limit the right of the Insurer to make such information available
to its regulators, securities rating agencies, reinsurers, credit
and liquidity providers, counsel and accountants.
(f) Notice of Material Events. The Transferor and the
Originator shall be obligated promptly to inform the Insurer in
writing of the occurrence of any of the following:
(i) the submission of any claim or the initiation or threat of
any legal process, litigation or administrative or judicial
investigation or rule making or disciplinary proceeding by or
against the Transferor or the Originator that (A) is required to
be disclosed to the Commission or to the Transferor's or the
Originator's shareholders or (B) in the reasonable judgment of
the Transferor or the Originator is reasonably likely to result
in a Material Adverse Change with respect to the Transferor or
the Originator, or the promulgation of any proceeding or any
proposed or final rule which would result in a Material Adverse
Change with respect to the Transferor or the Originator;
(ii) the institution or threat of any legal process, litigation
or administrative or judicial investigation in any federal, state
or local court or before any arbitration board, or any such
proceeding threatened by any government agency, against the
Transferor or the Originator or in which the Transferor or the
Originator becomes a party which, if adversely determined, would
have a material adverse effect on the Transferor, the Owners, the
Originator, or the Insurer; provided, however, that the
Transferor and the Originator are required to give notice to the
Insurer of any threatened legal process, litigation or
administrative or judicial investigation only if, in the
Transferor's or the Originator's reasonable judgment, such
threatened legal process, litigation or administrative or
judicial investigation is reasonably likely to have a material
adverse effect on the Transferor, the Owners, the Originator or
the Insurer;
(iii) any change in the location of the Transferor's or the
Originator's principal office or any change in the location of
the Transferor's or the Originator's books and records;
(iv) the occurrence of any material Default or Event of Default
or of any event which, in the judgment of the Transferor or the
Originator, would reasonably be expected to constitute a Material
Adverse Change;
(v) the commencement of any proceedings by or against the
Transferor or the Originator under any applicable bankruptcy,
reorganization, liquidation, rehabilitation, insolvency or other
similar law now or hereafter in effect or of any proceeding in
which a receiver, liquidator, conservator, trustee or similar
official shall have been, or may be, appointed or requested for
the Transferor or the Originator or any of its assets;
(vi) the receipt of notice that (A) the Transferor or the
Originator is being placed under regulatory supervision, (B) any
license, permit, charter, registration or approval necessary for
the conduct of the Transferor's or the Originator's business is
to be or may be suspended or revoked, or (C) the Transferor or
the Originator is to cease and desist any practice, procedure or
policy employed by the Transferor or the Originator in the
conduct of its business, and such cessation may result in a
Material Adverse Change with respect to the Transferor or the
Originator as it relates to the Transaction and its ability to
perform their obligations under the Transaction Documents; or
(vii) The Originator shall deliver to the Insurer a copy of
each amendment to the Credit Agreement entered into on or after
the date hereof no later than the earlier of (i) two Business
Days after making any filing with the Commission under the
Exchange Act which discloses such amendment and (ii) the 30th day
following the execution thereof.
(g) Financing Statements and Further Assurances. The Transferor
and the Originator shall cause to be filed all necessary
financing statements or other instruments, and any amendments or
continuation statements relating thereto, necessary to be kept
and filed in such manner and in such places as may be required by
law to preserve and protect fully the interest of the Trustee in
the Trust Property. The Transferor and the Originator shall,
upon the request of the Insurer, from time to time, execute,
acknowledge and deliver, or cause to be executed, acknowledged
and delivered, within 10 days of such request, such amendments
hereto and such further instruments and take such further action
as may be reasonably necessary to effectuate such interest of the
Trustee. In addition, the Transferor and the Originator agree to
cooperate with Rating Agencies in connection with any review of
the Transaction that may be undertaken by Rating Agencies after
the date hereof and to provide all information reasonably
requested by Rating Agencies.
(h) Maintenance of Licenses. The Transferor and the Originator
or any successors thereof shall maintain or cause to be
maintained all licenses, permits, charters and registrations
which are material to the conduct of its business which could
affect its obligations under the Transaction Documents.
(i) Redemption of Securities. The Transferor and the Originator
shall instruct the Trustee in writing, upon payment in full of
all of the Securities pursuant to the Supplement or otherwise, to
furnish to the Insurer a notice of such payment in full and, upon
a payment in full of all of the Securities, to surrender the
Policy to the Insurer for cancellation.
(j) Closing Documents. The Transferor and the Originator shall
provide or cause to be provided to the Insurer a velobound volume
or volumes of the Transaction Documents and an executed original
copy, if available, or a copy of each document executed in
connection with the Transaction within 60 days after the date of
closing.
(k) Compliance. Each of the Transferor and the Originator shall
comply with all terms and provisions of its organizational
documents.
(l) Maintenance of Trust. On or before each March 31st
beginning in 2001, so long as any of the Securities are
outstanding, the Transferor and the Originator shall furnish to
the Insurer and the Trustee the opinion of counsel required to be
delivered pursuant to Section 13.2(d)(ii) of the Agreement. The
Transferor will use its best efforts to cause any necessary
recordings or filings to be made with respect to the Trust
Property.
(m) Consolidation Facts. Each of the Transferor and the
Originator shall comply with, or maintain the adequacy of, the
Consolidation Facts during the term of this Insurance Agreement.
Section 2.03. Negative Covenants of the Transferor. The
Transferor and the Originator hereby agree that during the Term
of the Insurance Agreement, unless the Insurer shall otherwise
expressly consent in writing:
(a) Impairment of Rights. Neither the Transferor nor the
Originator shall take any action, or fail to take any action, if
such action or failure to take action would reasonably be
expected to result in a Material Adverse Change as described in
clause (b) of the definition of Material Adverse Change with
respect to the Transferor or the Originator, or would reasonably
be expected to interfere with the enforcement of any rights of
the Insurer under or with respect to the Transaction Documents.
The Transferor and the Originator shall give the Insurer written
notice of any such action or failure to act on the earlier of
(i) the date upon which any publicly available filing or release
is made with respect to such action or failure to act or
(ii) promptly after the date of consummation of such action or
failure to act. The Transferor and the Originator shall furnish
to the Insurer all information requested by it that is reasonably
necessary to determine compliance with this subsection (a).
(b) Waiver, Amendments, Etc. Neither the Transferor nor the
Originator shall waive, modify or amend, or consent to any
waiver, modification or amendment of, any of the terms,
provisions or conditions of any of the Transaction Documents
except in accordance with Section 13.1 of the Agreement. Except
upon the prior written consent of the Insurer, neither the
Transferor nor the Originator shall transfer, modify or amend, or
consent to any transfer, modification or amendment of the
Insurer's interest in the Trust Property.
(c) Restrictions on Liens. Neither the Transferor nor the
Originator shall, except as contemplated by the Transaction
Documents, (i) create, incur or suffer to exist, or agree to
create, incur or suffer to exist, or consent to cause or permit
in the future (upon the happening of a contingency or otherwise)
the creation, incurrence, or existence of any lien or restriction
on the Trust Property or (ii) sign or file under the Uniform
Commercial Code of any jurisdiction any financing statement which
names the Transferor or the Originator as a debtor, or sign any
security agreement authorizing any secured party thereunder to
file such financing statement, with respect to the Trust
Property.
(d) Successors. Neither the Transferor nor the Originator shall
remove or replace, or cause to be removed or replaced the Trustee
without the prior approval of the Insurer.
(e) No Mergers. Neither the Transferor nor the Originator shall
consolidate with or merge into any Person or transfer all or any
material amount of its assets to any Person, liquidate or
dissolve except as permitted by or as contemplated by the
Agreement.
(f) Other Activities. Neither the Transferor nor the Originator
shall (i) sell, pledge, transfer, exchange or otherwise dispose
of any of its assets in violation of the Transaction Documents or
(ii) engage in any business or activity in violation of the
Transaction Documents.
(g) Other Activities. Neither the Transferor nor the Originator
shall engage in any business or activity except as permitted by
its certificate or articles of incorporation.
Section 2.04. Representations, Warranties and Covenants of
Trustee. (A) Representations and Warranties. The Trustee
represents and warrants, as of the Date of Issuance, and covenant
with the other parties hereto as follows:
(a) Due Organization and Qualification. The Trustee is a
Delaware banking corporation, and is duly organized, validly
existing and in good standing under the laws of its jurisdiction
of incorporation.
(b) Due Authorization. The execution, delivery and performance
of the Agreement, the Supplement and the Insurance Agreement by
the Trustee have been duly authorized by all necessary corporate
action and do not require any additional approvals or consents
of, or other action by or any notice to or filing with, any
Person, including, without limitation, any governmental entity or
the Trustee's stockholders, which have not previously been
obtained or given by the Trustee.
(c) Valid and Binding Obligations. The Transaction Documents
(other than the Securities) to which it is a party, when executed
and delivered by the Trustee, will constitute the legal, valid
and binding obligations of the Trustee, enforceable in accordance
with their respective terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting creditors' rights generally and
general equitable principles.
(d) Transaction Documents. Each of the representations and
warranties of the Trustee contained in the Transaction Documents
is true and correct in all material respects, and the Trustee
hereby makes each such representation and warranty to, and for
the benefit of, the Insurer as if the same were set forth in full
herein.
(B). Covenants. The Trustee shall comply in all material
respects with the terms and conditions of the Transaction
Documents to which it is a party.
Section 2.05. Representations and Warranties of the Servicer.
The Servicer represents, warrants and covenants as of the Date of
Issuance, each as to those matters relating to itself and as to
the Transaction Documents only as to the Transaction Documents to
which it is a party and not to the Securities or the Offering
Memorandum, as follows:
(a) Due Organization and Qualification. The Servicer is a
corporation duly organized, validly existing and in good standing
under the laws of its respective jurisdiction of incorporation.
The Servicer is duly qualified to do business, is in good
standing and has obtained all licenses, permits, charters,
registrations and approvals (together, "approvals") necessary for
the conduct of its business as currently conducted and as
described in the Offering Documents and the performance of its
obligations under the Transaction Documents in each jurisdiction
in which the failure to be so qualified or to obtain such
approvals would render any Transaction Document unenforceable in
any respect or would have a material adverse effect upon the
Transaction, the Owners or the Insurer.
(b) Power and Authority. The Servicer has all necessary
corporate power and authority to conduct its business as
currently conducted and, as described in the Transaction
Documents, and to execute, deliver and perform its obligations
under the Transaction Documents and to consummate the
Transaction.
(c) Due Authorization. The execution, delivery and performance
of the Transaction Documents by the Servicer have been duly
authorized by all necessary corporate action and do not require
any additional approvals or consents of, or other action by or
any notice to or filing with, any Person, including, without
limitation, any governmental entity or the Servicer's
stockholders, which have not previously been obtained or given by
the Servicer.
(d) Noncontravention. None of the execution and delivery of the
Transaction Documents by the Servicer, the consummation of the
transactions contemplated thereby or the satisfaction of the
terms and conditions of the Transaction Documents:
(i) conflicts with or results in any breach or violation of any
provision of the certificate of incorporation or bylaws of the
Servicer or any law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award currently in effect
having applicability to the Servicer or any of their material
properties, including regulations issued by an administrative
agency or other governmental authority having supervisory powers
over the Servicer;
(ii) constitutes a default by the Servicer under or a breach of
any provision of any receivables agreement, indenture or other
agreement or instrument to which the Servicer is a party or by
which any of its or their respective properties, which are
individually or in the aggregate material to the Servicer, is or
may be bound or affected; or
(iii) results in or requires the creation of any lien upon or
in respect of any assets of the Servicer, except as contemplated
by the Transaction Documents.
(e) Legal Proceedings. There is no action, proceeding or
investigation by or before any court, governmental or
administrative agency or arbitrator against or affecting, the
Servicer or any of its subsidiaries, or any properties or rights
of the Servicer or any of its subsidiaries, pending or, to the
Servicer's knowledge after reasonable inquiry, threatened, which
in any case could reasonably be expected to result in a Material
Adverse Change with respect to the Servicer other than those (if
any) disclosed in Stage's filings with the Commission pursuant to
the Exchange Act.
(f) Valid and Binding Obligations. This Insurance Agreement and
the Transaction Documents, when executed and delivered by the
Servicer will constitute the legal, valid and binding obligations
of the Servicer, enforceable in accordance with their respective
terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting creditors' rights generally and general
equitable principles. The Servicer will not at any time in the
future deny that the Transaction Documents constitute the legal,
valid and binding obligations of the Servicer.
(g) Financial Statements. The Financial Statements of Stage
(i) are, as of the dates and for the periods referred to therein,
complete and correct in all material respects, (ii) present
fairly the financial condition and results of operations of Stage
as of the dates and for the periods indicated and (iii) have been
prepared in accordance with generally accepted accounting
principles consistently applied, except as noted therein (subject
as to interim statements to normal year-end adjustments). Since
the date of the most recent Financial Statements of Stage, there
has not been any Material Adverse Change in the condition of
Stage, other than changes (if any) disclosed in Stage's filings
with the Commission pursuant to the Exchange Act.
(h) Compliance With Law, Etc. No practice, procedure or policy
employed, or proposed to be employed, by the Servicer in the
conduct of its business violates any law, regulation, judgment,
agreement, order or decree applicable to any of them that, if
enforced, could reasonably be expected to result in a Material
Adverse Change with respect to the Servicer. The Servicer is not
in breach of or in default under any applicable law or
administrative regulation of its respective jurisdiction of
incorporation, or any department, division, agency or
instrumentality thereof or of the United States or any applicable
judgment or decree or any receivables agreement, note,
resolution, certificate, agreement or other instrument to which
the Servicer is a party or is otherwise subject which, if
enforced, would have a material adverse effect on the ability of
the Servicer, as the case may be, to perform its respective
obligations under the Transaction Documents.
(i) Taxes. The Servicer and its parent company or companies
have filed prior to the date hereof all federal and state tax
returns that are required to be filed and paid all taxes,
including any assessments received by them that are not being
contested in good faith, to the extent that such taxes have
become due, except for any failures to file or pay that,
individually or in the aggregate, would not result in a Material
Adverse Change with respect to the Servicer.
(j) Accuracy of Information. None of (i) the Transaction
Documents or (ii) the information relating to the Receivables,
contains any statement of a material fact by the Servicer which
was untrue or misleading in any material adverse respect when
made. Except as described in its filings with the Commission
under the Exchange Act, the Servicer has no knowledge of
circumstances that it reasonably be expects to cause a Material
Adverse Change with respect to the Servicer. Since the
furnishing of the information in clauses (i) and (ii) of the
preceding sentence, there has been no change or any development
or event involving a prospective change known to the Servicer
that would render any of the such documents untrue or misleading
in any material respect.
(k) Compliance With Securities Laws. The Offering Memorandum
(excluding any Insurer Information contained therein) does not
contain any untrue statement of a material fact and does not omit
to state a material fact necessary to make the statements made
therein, in light of the circumstances under which they were
made, not misleading.
(l) Documents. Each of the representations and warranties of
the Servicer contained in the Transaction Documents is true and
correct in all material respects, and the Servicer hereby makes
each such representation and warranty to, and for the benefit of,
the Insurer as if the same were set forth in full herein.
(m) Solvency; Fraudulent Conveyance. The Servicer is solvent
and will not be rendered insolvent by the Transaction and, after
giving effect to the Transaction, the Servicer will not be left
with an unreasonably small amount of capital with which to engage
in its business, nor does the Servicer intend to incur, or
believe that it has incurred, debts beyond its ability to pay as
they mature. The Servicer does not contemplate the commencement
of insolvency, bankruptcy, liquidation or consolidation
proceedings or the appointment of a receiver, liquidator,
conservator, trustee or similar official in respect of the
Servicer or any of its assets.
(n) Principal Place of Business. The principal place of
business of the Servicer is located in Houston, Texas.
Section 2.06. Affirmative Covenants of the Servicer. The
Servicer hereby agrees that during the Term of the Insurance
Agreement, unless the Insurer shall otherwise expressly consent
in writing:
(a) Compliance With Agreements and Applicable Laws. The
Servicer shall not be in default under the Transaction Documents
and shall comply with all material requirements of any law, rule
or regulation applicable to it. The Servicer shall not agree to
any amendment to or modification of the terms of any Transaction
Documents except in accordance with the terms thereof.
(b) Corporate Existence. The Servicer or its successors and
assigns shall maintain its respective existence and shall at all
times continue to be duly organized under the laws of its
respective jurisdictions of incorporation and duly qualified and
duly authorized (as described in Section 2.05 (a), (b) and (c)
hereof) and shall conduct its respective business in accordance
with the terms of its respective certificate or articles of
incorporation and bylaws.
(c) Financial Statements; Accountants' Reports; Other
Information. The Servicer shall keep or cause to be kept in
reasonable detail books and records of account of their assets
and business, including, but not limited to, books and records
relating to the Transaction. The Servicer shall furnish or cause
to be furnished to the Insurer:
(i) Annual Financial Statements. As soon as available, and in
any event within 120 days after the close of each fiscal year of
Stage, the audited consolidated balance sheets of Stage and its
subsidiaries as of the end of such fiscal year and the related
audited consolidated statements of income, changes in
shareholders' equity and cash flows for such fiscal year, all in
reasonable detail and stating in comparative form the respective
figures for the corresponding date and period in the preceding
fiscal year, prepared in accordance with generally accepted
accounting principles consistently applied and accompanied by the
audit opinion of Stage's independent accountants (which shall be
nationally recognized independent public accounting firms) and by
the certificates specified in Section 2.06(d) hereof.
(ii) Quarterly Financial Statements. As soon as available, and
in any event within 120 days after each of the first three fiscal
quarters of each fiscal year of Stage, the unaudited consolidated
balance sheets of Stage, and its subsidiaries as of the end of
such fiscal quarter and the related unaudited consolidated
statements of income, changes in shareholders' equity and cash
flows for such fiscal quarter, all in reasonable detail and
stating in comparative form the respective figures for the
corresponding date and period in the preceding fiscal year,
prepared in a manner consistent with generally accepted
accounting principles, excluding notes to the consolidated
financial statements, consistently applied and accompanied by the
certificates specified in Section 2.06(d) hereof.
(iii) Certain Information. Upon the reasonable request of
the Insurer, Stage shall promptly provide copies of any requested
proxy statements, financial statements, reports and registration
statements which Stage files with, or delivers to, the Commission
or any national securities exchange.
(iv) Other Information. Promptly upon receipt thereof, copies of
all schedules, financial statements or other similar reports
delivered to or by the Servicer pursuant to the terms of the
Transaction Documents and, promptly upon request, such other data
as the Insurer may reasonably request.
The Insurer agrees that it and its agents, accountants and
attorneys shall keep confidential all financial statements,
reports and other information delivered by the Transferor
pursuant to this Section 2.06(c) to the extent provided in
Section 2.06(f) hereof.
(d) Compliance Certificate. The Servicer shall deliver to the
Insurer, concurrently with the delivery of the financial
statements required pursuant to Section 2.06(c)(i) and (ii)
hereof, one or more certificates signed by an officer of the
Servicer authorized to execute such certificates on behalf of the
Servicer stating that:
(i) to the best of such individual's knowledge following
reasonable inquiry, no Default or Event of Default has occurred
or, if a Default or Event of Default has occurred, specifying the
nature thereof; and
(ii) the attached financial statements submitted in accordance
with Section 2.06(c)(i) or (ii) hereof, as the case may be, are
complete and correct in all material respects and present fairly
the financial condition and results of operations of the Servicer
as of the dates and for the periods indicated, in accordance with
generally accepted accounting principles consistently applied.
(e) Access to Records; Discussions With Officers and
Accountants. On a quarterly basis, or upon the occurrence of a
Material Adverse Change, the Servicer shall, upon the reasonable
request of the Insurer and upon receiving reasonable
notification, permit the Insurer or its authorized agents:
(i) to inspect the books and records of the Servicer as they may
relate to the Receivables or the obligations of the Servicer
under the Transaction Documents, and the Transaction;
(ii) to discuss the affairs, finances and accounts of the
Servicer with the chief executive officer and the chief financial
officer of the Servicer; and
(iii) with the Servicer's consent, which consent shall not be
unreasonably withheld, to discuss the affairs, finances and
accounts of the Servicer with the Servicer's independent
accountants, provided that the chief financial officer of the
Servicer shall have the right to be present during such
discussions.
Such inspections and discussions shall be conducted during
normal business hours and shall not unreasonably disrupt the
business of the Servicer. The books and records of the Servicer
shall be maintained at the address of the Servicer designated
herein for receipt of notices, unless the Servicer shall
otherwise advise the parties hereto in writing. Annual
discussions with the independent accountants referred to in
clause (iii) above shall be without cost to the Insurer. The
reasonable expenses relating to discussions with the independent
accountants referred to in clause (iii) above made on a quarterly
basis (other than an annual discussion or a discussion upon the
occurrence of a Material Adverse Change) shall be payable by the
Insurer.
The Insurer agrees that it and its shareholders, directors,
agents, accountants and attorneys shall keep confidential any
matter of which it becomes aware through such inspections or
discussions (unless readily available from public sources),
except as may be otherwise required by regulation, law or court
order or requested by appropriate governmental authorities or as
necessary to preserve its rights or security under or to enforce
the Transaction Documents, provided that the foregoing shall not
limit the right of the Insurer to make such information available
to its regulators, securities rating agencies, reinsurers, credit
and liquidity providers, counsel and accountants.
(f) Notice of Material Events. The Servicer shall be obligated
promptly to inform the Insurer in writing of the occurrence of
any of the following:
(i) the submission of any claim or the initiation or threat of
any legal process, litigation or administrative or judicial
investigation or rule making or disciplinary proceeding by or
against the Servicer that (A) is required to be disclosed to the
Commission or to the Servicer's shareholders or (B) in the
reasonable judgment of the Servicer is reasonably likely to
result in a Material Adverse Change with respect to the Servicer,
or the promulgation of any proceeding or any proposed or final
rule which would result in a Material Adverse Change with respect
to the Servicer;
(ii) the institution or threat of any legal process, litigation
or administrative or judicial investigation in any federal, state
or local court or before any arbitration board, or any such
proceeding threatened by any government agency, against the
Servicer or in which the Servicer becomes a party which, if
adversely determined, would have a material adverse effect on the
Servicer, the Owners or the Insurer; provided, however, that the
Servicer is required to give notice to the Insurer of any
threatened legal process, litigation or administrative or
judicial investigation only if, in the Servicer's reasonable
judgment, such threatened legal process, litigation or
administrative or judicial investigation is reasonably likely to
have a material adverse effect on the Servicer, the Owners or the
Insurer;
(iii) any change in the location of the Servicer's principal
office or any change in the location of the Servicer's books and
records;
(iv) the occurrence of any material Default or Event of Default
or of any event which in the judgment of the Servicer, would be
expected to constitute a Material Adverse Change;
(v) the commencement of any proceedings by or against the
Servicer under any applicable bankruptcy, reorganization,
liquidation, rehabilitation, insolvency or other similar law now
or hereafter in effect or of any proceeding in which a receiver,
liquidator, conservator, trustee or similar official shall have
been, or may be, appointed or requested for the Servicer or any
of its assets;
(vi) the receipt of notice that (A) the Servicer is being placed
under regulatory supervision, (B) any license, permit, charter,
registration or approval necessary for the conduct of the
Servicer's business is to be or may be suspended or revoked, or
(C) the Servicer is to cease and desist any practice, procedure
or policy employed by the Servicer in the conduct of its
business, and such cessation is reasonably likely to result in a
Material Adverse Change with respect to the Servicer as it
relates to the Transaction and their ability to perform their
obligations under the Transaction Documents; or
(vii) The Servicer shall deliver to the Insurer a copy of
each amendment to the Credit Agreement entered into on or after
the date hereof no later than the earlier of (i) two Business
Days after making any filing with the Commission under the
Exchange Act which discloses such amendment and (ii) the 30th day
following the execution thereof..
(g) Financing Statements and Further Assurances. The Servicer
shall cause to be filed all necessary financing statements or
other instruments, and any amendments or continuation statements
relating thereto, necessary to be kept and filed in such manner
and in such places as may be required by law to preserve and
protect fully the interest of the Trustee in the Trust Property.
The Servicer shall, upon the request of the Insurer, from time to
time, execute, acknowledge and deliver, or cause to be executed,
acknowledged and delivered, within 10 days of such request, such
amendments thereto and such further instruments and take such
further action as may be reasonably necessary to effectuate the
intention, performance and provisions of the Transaction
Documents. In addition, the Servicer agrees to cooperate with
Rating Agencies in connection with any review of the Transaction
that may be undertaken by Rating Agencies after the date hereof
and to provide all information reasonably requested by Rating
Agencies.
(h) Maintenance of Licenses. The Servicer or any successors
thereof shall maintain or cause to be maintained all licenses,
permits, charters and registrations which are material to the
conduct of its business which could reasonably be expected to
affect its obligations under the Transaction Documents.
(i) Servicing of the Receivables. The Servicer shall perform
such actions with respect to the Receivables as are required by
the Agreement.
(j) Year 2000 Program. The description of the Servicer's
current status with respect to Year 2000 compliance in the
Offering Memorandum and the filings of Stage with the Commission
pursuant to the Exchange Act is true and correct in all material
respects and does not omit a statement necessary in order to make
the statements therein, in the light of the circumstances under
which they were made, not misleading.
(k) Consolidation Facts. The Servicer shall comply with, or
maintain the adequacy of, the Consolidation Facts during the term
of this Insurance Agreement.
Section 2.07. Negative Covenants of the Servicer. The Servicer
hereby agrees that during the Term of this Insurance Agreement,
unless the Insurer shall otherwise expressly consent in writing
and as to the Transaction Documents only with respect to the
Transaction Documents to which it is a party and not the
Securities:
(a) Impairment of Rights. The Servicer shall not take any
action, or fail to take any action, if such action or failure to
take action would reasonably be expected to result in a Material
Adverse Change as described in clause (b) of the definition of
Material Adverse Change with respect to the Servicer, or would
reasonably be expected to interfere with the enforcement of any
rights of the Insurer under or with respect to the Transaction
Documents. The Servicer shall give the Insurer written notice of
any such action or failure to act on the earlier of (i) the date
upon which any publicly available filing or release is made with
respect to such action or failure to act or (ii) promptly after
the date of consummation of such action or failure to act. The
Servicer shall furnish to the Insurer all information requested
by it that is reasonably necessary to determine compliance with
this subsection (a).
(b) Waiver, Amendments, Etc. The Servicer shall not waive,
modify or amend, or consent to any waiver, modification or
amendment of, any of the terms, provisions or conditions of any
of the Transaction Documents without the prior written consent of
the Insurer.
(c) Credit Card Receivable Agreements; Charge-off Policy. The
Servicer will comply with all covenants in the Agreement with
respect to its collection policies and its charge-off policies.
ARTICLE III
THE POLICY; REIMBURSEMENT
Section 3.01. Issuance of the Policy. The Insurer agrees to
issue the Policy on the Closing Date subject to satisfaction of
the conditions precedent set forth below:
(a) Payment of Expenses. The Transferor and the Originator shall
agree to reimburse or pay directly other fees and expenses
identified in Section 3.02 hereof as payable.
(b) Documents. The Insurer shall have received a copy of each
of the Transaction Documents, duly authorized, executed and
delivered by each of the parties thereto.
(c) Certified Documents and Resolutions. The Insurer shall have
received a copy of (i) the certificate or articles of
incorporation and bylaws of the Transferor, (ii) the resolutions
of the Transferor's Board of Directors authorizing the sale of
the Securities and the execution, delivery and performance by the
Transferor of the Transaction Documents and the transactions
contemplated thereby, certified by the Secretary or an Assistant
Secretary of the Transferor (which certificate shall state that
such certificate of incorporation, bylaws and resolutions are in
full force and effect without modification on the Date of
Issuance), (iii) the certificate or articles of incorporation and
bylaws of the Originator and Servicer and (iv) the resolutions of
the Servicer's and Originator's Board of Directors authorizing
the sale of the Receivables and the execution, delivery and
performance by the Servicer and Originator of the Transaction
Documents and the transactions contemplated thereby, certified by
the Secretary or an Assistant Secretary of the Servicer and the
Originator (which certificate shall state that such certificate
or articles of incorporation, bylaws and resolutions are in full
force and effect without modification on the Date of Issuance).
(d) Incumbency Certificate. The Insurer shall have received a
certificate of the Secretary or an Assistant Secretary of the
Transferor certifying the names and signatures of the officers of
the Transferor authorized to execute and deliver the Transaction
Documents. The Insurer shall have received a certificate of the
Secretary or an Assistant Secretary of the Originator and
Servicer certifying the names and signatures of the officers of
the Servicer authorized to execute and deliver the Transaction
Documents.
(e) Representations and Warranties; Certificate. The
representations and warranties of the Transferor, the Originator
and the Servicer set forth or incorporated by reference in this
Insurance Agreement shall be true and correct as of the Date of
Issuance as if made on the Date of Issuance, and the Insurer
shall have received a certificate of appropriate officers of the
Transferor, the Originator and the Servicer to that effect.
(f) Representations and Warranties of the Originator,
Certificate. The Originator shall have agreed in the Receivables
Purchase Agreement that the Insurer shall be a third party
beneficiary in respect of the Receivables Purchase Agreement.
(g) Opinions of Counsel.
(i) The law firm of Kirkland & Ellis or internal counsel shall
have issued its favorable opinion, in form and substance
acceptable to the Insurer and its counsel, regarding the
corporate existence and authority of the Transferor, the
Originator and the Servicer and the validity and enforceability
of the Transaction Documents against such parties.
(ii) The law firm of Kirkland & Ellis shall have furnished its
opinions, in form and substance acceptable to the Insurer and its
counsel, regarding the tax treatment of payments on the
Securities under federal tax laws.
(iii) The law firm of Kirkland & Ellis shall have furnished
its opinions, in form and substance acceptable to the Insurer and
its counsel, regarding the transfer of the Receivables.
(iv) The Insurer shall have been furnished with all of the
opinions of counsel delivered in connection with the Transaction
and such opinions shall either be addressed to the Insurer or
state therein that the Insurer may rely thereon.
(v) The Insurer shall have received such other opinions of
counsel, in form and substance acceptable to the Insurer and its
counsel, addressing such other matters as the Insurer may
reasonably request. Each opinion of counsel delivered in
connection with the Transaction shall be addressed to and
delivered to the Insurer.
(h) Approvals, Etc. The Insurer shall have received true and
correct copies of all approvals, licenses and consents, if any,
including, without limitation, any required approval of the
shareholders of the Transferor, the Originator and the Servicer,
required in connection with the Transaction.
(i) No Litigation, Etc. No suit, action or other proceeding,
investigation or injunction, or final judgment relating thereto,
shall be pending or threatened before any court or governmental
agency in which it is sought to restrain or prohibit or to obtain
damages or other relief in connection with the Transaction
Documents or the consummation of the Transaction.
(j) Legality. No statute, rule, regulation or order shall have
been enacted, entered or deemed applicable by any government or
governmental or administrative agency or court that would make
the transactions contemplated by any of the Transaction Documents
illegal or otherwise prevent the consummation thereof.
(k) Issuance of Ratings. The Insurer shall have received
confirmation that the Securities are currently rated at least
"BBB-" by each of Fitch and Duff & Phelps.
(l) No Default. No Default or Event of Default shall have
occurred.
(m) Additional Items. The Insurer shall have received such other
documents, instruments, approvals or opinions requested by the
Insurer or its counsel as may be reasonably necessary to effect
the Transaction, including, but not limited to, evidence
satisfactory to the Insurer and its counsel that the conditions
precedent, if any, in the Transaction Documents have been
satisfied.
(n) Conform to Documents. The Insurer and its counsel shall
have determined that all documents, certificates and opinions to
be delivered in connection with the Securities conform to the
terms of the Transaction Documents.
(o) Satisfaction of Conditions of the Purchase Agreement. All
conditions in the Purchase Agreement relating to the Initial
Purchaser's obligation to purchase the Securities shall have been
satisfied.
(p) Purchase Agreement. The Insurer shall have received copies
of each of the documents, and shall be entitled to rely on each
of the documents, required to be delivered to the Initial
Purchaser pursuant to the Purchase Agreement.
Section 3.02. Payment of Fees and Premium.
(a) Legal and Accounting Fees. The Transferor shall pay or
cause to be paid, on the Date of Issuance, legal fees and
disbursements incurred by the Insurer in connection with the
issuance of the Policy for which invoices have been provided at
least one Business Day prior thereto.
(b) Premium. In consideration of the issuance by the Insurer of
the Policy, the Insurer shall be entitled to receive the Premium
as and when due in accordance with the terms of this Insurance
Agreement and the Agreement monthly pursuant to the Agreement;
provided, however, that the Premium payable on the Policy from
the Date of Issuance shall be offset against the payment of
$100,000 paid to the Insurer prior to the Date of Issuance until
such offset has reduced such amount to zero. The Premium paid
hereunder or under the Agreement shall be nonrefundable without
regard to whether the Insurer makes any payment under the Policy
or any other circumstances relating to the Securities or
provision being made for payment of the Securities prior to
maturity. The Trustee shall make all payments of Premium to be
made by it by wire transfer to an account designated from time to
time by the Insurer by written notice to the Trustee.
Section 3.03. Reimbursement and Additional Payment Obligation.
(a) In accordance with the priorities and at the times
established in the Supplement and payable only as provided
therein the Insurer shall be entitled to reimbursement for any
payment made by the Insurer under the Policy with respect to
Insured Payments, which reimbursement shall be due and payable on
the date that any amount is to be paid pursuant to a Notice (as
defined in the Policy), in an amount equal to the amount to be so
paid and all amounts previously paid that remain unreimbursed,
together with interest on any and all amounts remaining
unreimbursed (to the extent permitted by law, if in respect of
any unreimbursed amounts representing interest) from the date
such amounts became due until paid in full (after as well as
before judgment), at a rate of interest equal to the Late Payment
Rate.
(b) The Insurer shall be entitled to reimbursement for any and
all charges and expenses which the Insurer may pay or incur in
connection with the enforcement of this Insurance Agreement, the
Transaction Documents or any other agreement between the
Transferor and the Insurer or upon foreclosure upon, sale or
other disposition of the Trust Property, including but not
limited to the fees and expenses of counsel, plus interest on any
such amounts at the Late Payment Rate from the date of payment by
the Insurer until the payment thereof in full; and
(c) The Insurer shall be entitled to reimbursement for all other
payments made by the Insurer on behalf of the Transferor, plus
interest on any such amounts at the Late Payment Rate from the
date of payment by the Insurer until the payment thereof in full.
All amounts payable pursuant to clause (a) above are to be
immediately due and payable without demand and in accordance with
the Transaction Documents and all amounts payable pursuant to
clauses (b) and (c) above are payable on demand.
Section 3.04. Indemnification; Limitation of Liability.
(a) In addition to any and all rights of indemnification or any
other rights of the Insurer pursuant hereto or under law or
equity, the Transferor (as to itself) and the Servicer and the
Originator, jointly and severally, and any successors thereto
agree to pay, and to protect, indemnify and save harmless, the
Insurer and its officers, directors, shareholders, employees,
agents and each person, if any, who controls the Insurer within
the meaning of either Section 15 of the Securities Act or Section
20 of the Exchange Act from and against any and all claims,
Losses, liabilities (including penalties), actions, suits,
judgments, demands, damages, costs or reasonable expenses
(including penalties), actions, suits, judgments, demands,
damages, costs or reasonable expenses (including, without
limitation, reasonable fees and expenses of attorneys,
consultants and auditors and reasonable costs of investigations)
or obligations whatsoever paid by the Insurer (herein
collectively referred to as "Liabilities") of any nature arising
out of or relating to the Transaction by reason of:
(i) any untrue statement or alleged untrue statement of a
material fact contained in the Offering Memorandum (other than
the Insurer Information) or in any amendment or supplement
thereto or arising out of or based upon any omission or alleged
omission to state therein a material fact necessary to make the
statements therein not misleading;
(ii) to the extent not covered by clause (i) above any act or
omission of the Transferor, the Originator or the Servicer, or
the allegation thereof, in connection with the offering, issuance
or sale or delivery of the Securities other than by reason of
false or misleading information in the Insurer Information;
(iii) the misfeasance or malfeasance of, or negligence or
theft committed by, any director, officer, employee or agent of
the Transferor, the Originator or the Servicer;
(iv) the violation by the Transferor, the Originator or the
Servicer of any federal or state laws, rules or regulations
relating to the Transaction, including without limitation, the
maximum amount of interest permitted to be received on account of
any loan of money;
(v) the breach by the Transferor, the Originator or the Servicer
of any of its respective obligations under this Insurance
Agreement or any of the other Transaction Documents; and
(vi) the breach by the Transferor, the Originator or the Servicer
of any representation or warranty on its part contained in the
Transaction Documents or in any certificate or report furnished
or delivered to the Insurer thereunder.
This indemnity provision shall not be affected by any
limitations with respect to remedies of any party in any other
Transaction Document. This indemnity provision shall survive the
termination of this Insurance Agreement and shall survive until
the statute of limitations has run on any causes of action which
arise from one of these reasons and until all suits filed as a
result thereof have been finally concluded.
(b) Any party which proposes to assert the right to be
indemnified under this Section 3.04 will, promptly after receipt
of notice of commencement of any action, suit or proceeding
against such party in respect of which a claim is to be made
against the Transferor, the Originator or the Servicer under this
Section 3.04, notify the Transferor, the Originator or the
Servicer of the commencement of such action, suit or proceeding,
enclosing a copy of all papers served. In case any action, suit
or proceeding shall be brought against any indemnified party and
it shall notify the Transferor, the Originator or the Servicer of
the commencement thereof, the Transferor, the Originator or the
Servicer shall be entitled to participate in, and, to the extent
that it shall wish, to assume the defense thereof, with counsel
satisfactory to such indemnified party, and after notice from the
Transferor, the Originator or the Servicer to such indemnified
party of its election so to assume the defense thereof, the
Transferor, the Originator or the Servicer shall not be liable to
such indemnified party for any legal or other expenses other than
reasonable costs of investigation subsequently incurred by such
indemnified party in connection with the defense thereof. The
indemnified party shall have the right to employ its counsel in
any such action the defense of which is assumed by the
Transferor, the Originator or the Servicer in accordance with the
terms of this subsection (b), but the fees and expenses of such
counsel shall be at the expense of such indemnified party unless
(i) such party has agreed to pay such fees and expenses or (ii)
the named parties to such action or proceeding include both the
indemnified party and the Transferor, the Originator or the
Servicer, and the indemnified party has been advised by counsel
that there may be one or more defenses available to it that are
different from or additional to those available to the
Transferor, the Originator or the Servicer. All Indemnified
Parties are limited to one counsel in each applicable
jurisdiction. The Transferor, the Originator or the Servicer
shall not be liable for any settlement of any action or claim
effected without its consent but if settled with their written
consent, or if there be a final judgment for the plaintiff in any
such action or proceeding, the Transferor, the Originator or the
Servicer agrees to indemnify and hold harmless the indemnified
party harmless from and against any loss or liability by reasons
of such judgment or settlement.
This indemnity in this section shall survive the termination
of this Insurance Agreement and shall survive until the statute
of limitations has run on any causes of action which arise from
one of these reasons and until all suits filed as a result
thereof have been finally concluded.
Section 3.05. Payment Procedure. In the event of any payment by
the Insurer, the Trustee, the Transferor, the Originator and the
Servicer agree to accept the voucher or other evidence of payment
as prima facie evidence of the propriety thereof and the
liability therefor to the Insurer, subject to the terms of the
Transaction Documents. All payments to be made to the Insurer
under this Insurance Agreement shall be made to the Insurer in
lawful currency of the United States of America in immediately
available funds at the notice address for the Insurer as
specified in Section 6.02 hereof on the date when due or as the
Insurer shall otherwise direct by written notice to the other
parties hereto. In the event that the date of any payment to the
Insurer or the expiration of any time period hereunder occurs on
a day which is not a Business Day, then such payment or
expiration of time period shall be made or occur on the next
succeeding Business Day with the same force and effect as if such
payment was made or time period expired on the scheduled date of
payment or expiration date. Payments to be made to the Insurer
under this Insurance Agreement shall bear interest at the Late
Payment Rate from the date when due to the date paid.
ARTICLE IV
FURTHER AGREEMENTS
Section 4.01. Effective Date; Term of the Insurance Agreement.
This Insurance Agreement shall take effect on the Date of
Issuance and shall remain in effect until the later of (a) such
time as the Insurer is no longer subject to a claim under the
Policy and the Policy shall have been surrendered to the Insurer
for cancellation and (b) all amounts payable to the Insurer by
the Trustee, the Transferor, the Originator and the Servicer and
from any other source under the Transaction Documents and all
amounts payable under the Securities have been paid in full;
provided, however, that the provisions of Sections 3.02, 3.03,
3.04 and 4.06 hereof shall survive any termination of this
Insurance Agreement.
Section 4.02. Further Assurances and Corrective Instruments.
(a) Except during the time when an Insurer Default shall exist,
none of the Transferor, the Trustee, the Originator or the
Servicer shall grant any waiver of rights under any of the
Transaction Documents except in accordance with the terms of such
documents, and any such waiver not in accordance with such terms
shall be null and void and of no force or effect.
(b) To the extent permitted by law and the Transaction
Documents, the Transferor, the Trustee, the Originator and the
Servicer agree that they will, from time to time, execute,
acknowledge and deliver, or cause to be executed, acknowledged
and delivered, such supplements hereto and such further
instruments as the Insurer may request and as may be required in
the Insurer's reasonable judgment to effectuate the intention of
or facilitate the performance of this Insurance Agreement.
Section 4.03. Obligations Absolute.
(a) The obligations of the Transferor, the Trustee, the
Originator and the Servicer hereunder shall be absolute and
unconditional and shall be paid or performed strictly in
accordance with this Insurance Agreement under all circumstances
irrespective of:
(i) any lack of validity or enforceability of, or any amendment
or other modifications of, or waiver with respect to any of the
Transaction Documents, the Securities or the Policy;
(ii) any exchange or release of any other obligations hereunder;
(iii) the existence of any claim, setoff, defense, reduction,
abatement or other right that the Transferor, the Trustee, the
Originator or the Servicer may have at any time against the
Insurer or any other Person;
(iv) any document presented in connection with the Policy proving
to be forged, fraudulent, invalid or insufficient in any respect
or any statement therein being untrue or inaccurate in any
respect;
(v) any payment by the Insurer under the Policy against
presentation of a certificate or other document that does not
strictly comply with terms of the Policy;
(vi) any failure of the Transferor, the Trustee, the Originator
or the Servicer to receive the proceeds from the sale of the
Securities; or
(vii) any breach by the Transferor, the Trustee, the
Originator or the Servicer of any representation, warranty or
covenant contained in any of the Transaction Documents.
(b) the Transferor, the Trustee, the Servicer, the Originator
and any and all others who are now or may become liable for all
or part of the obligations of the Transferor, the Trustee, the
Originator or the Servicer under this Insurance Agreement agree
to be bound by this Insurance Agreement and waive all rights of
abatement, diminution, postponement or deduction, or any defense
other than payment, or any right of setoff or recoupment arising
out of any breach under any of the Transaction Documents by any
party thereto or any beneficiary thereof, or out of any
obligation at any time owing to the Transferor, the Trustee, the
Originator or the Servicer.
(c) Nothing herein shall be construed as prohibiting the
Transferor, the Trustee, the Originator or the Servicer from
pursuing any rights or remedies it may have against any other
Person in a separate legal proceeding.
Section 4.04. Assignments; Reinsurance; Third Party Rights.
(a) This Insurance Agreement shall be a continuing obligation of
the parties hereto and shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and
permitted assigns. None of the Transferor, the Trustee, the
Originator or the Servicer may assign its rights under this
Insurance Agreement, or delegate any of its duties hereunder,
without the prior written consent of the Insurer. Any assignment
made in violation of this Insurance Agreement shall be null and
void.
(b) The Insurer shall have the right to give participations in
its rights under this Insurance Agreement and to enter into
contracts of reinsurance with respect to the Policy upon such
terms and conditions as the Insurer may in its discretion
determine; provided, however, that no such participation or
reinsurance agreement or arrangement shall relieve the Insurer of
any of its obligations hereunder or under the Policy.
(c) In addition, the Insurer shall be entitled to assign or
pledge to any bank or other lender providing liquidity or credit
with respect to the Transaction or the obligations of the Insurer
in connection therewith any rights of the Insurer under the
Transaction Documents or with respect to any real or personal
property or other interests pledged to the Insurer, or in which
the Insurer has a security interest, in connection with the
Transaction.
(d) Except as provided herein with respect to participants and
reinsurers, nothing in this Insurance Agreement shall confer any
right, remedy or claim, express or implied, upon any Person,
including, particularly, any Owner, other than the Insurer
against the Transferor, or the Servicer, pursuant to
Section 3.02, 3.03 or 3.04 hereof, the Trustee, and all the
terms, covenants, conditions, promises and agreements contained
herein shall be for the sole and exclusive benefit of the parties
hereto and their successors and permitted assigns. Neither the
Trustee nor any Owner shall have any right to payment from any
Premiums paid or payable hereunder or under the Agreement or from
any amounts paid by the Transferor, the Trustee, the Originator
or the Servicer pursuant to Section 3.02, 3.03 or 3.04 hereof.
(e) The Transferor, the Trustee, the Originator and the Servicer
agree that the Insurer shall have all rights of a third-party
beneficiary in respect of the Agreement and each other
Transaction Document to which the Insurer is not a signing party
and hereby incorporate and restate their representations,
warranties and covenants as set forth therein for the benefit of
the Insurer.
Section 4.05. Liability of the Insurer. Neither the Insurer nor
any of its officers, directors or employees shall be liable or
responsible for (a) the use that may be made of the Policy by the
Trustee or for any acts or omissions of the Trustee in connection
therewith or (b) the validity, sufficiency, accuracy or
genuineness of documents delivered to the Insurer in connection
with any claim under the Policy, or of any signatures thereon,
even if such documents or signatures should in fact prove to be
in any or all respects invalid, insufficient, fraudulent or
forged (unless the Insurer shall have actual knowledge thereof).
In furtherance and not in limitation of the foregoing, the
Insurer may accept documents that appear on their face to be in
order, without responsibility for further investigation.
Section 4.06. Parties Will Not Institute Insolvency Proceedings.
So long as this Insurance Agreement is in effect, and for one
year and one day following the last day on which any rated
security of the Transferor or the Trust is outstanding, none of
the parties hereto will file any involuntary petition or
otherwise institute any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceeding or other proceedings under
any federal or state bankruptcy or similar law against the
Transferor.
Section 4.07. Trustee, Transferor, Originator and Servicer to
Join in Enforcement Action. To the extent necessary to enforce
any right of the Insurer in or remedy of the Insurer under any
Document, the Trustee on behalf of the Trust, the Transferor, the
Originator and the Servicer agree to join in any action initiated
by the Trust or the Insurer for the protection of such right or
exercise of such remedy. The foregoing sentence shall apply with
respect to the Servicer only to the extent that the Servicer is a
party to the applicable Transaction Document.
Section 4.08. Subrogation. To the extent of any payments under
the Policy, the Insurer shall be fully subrogated to any remedies
available to the Trustee under the Agreement or other Transaction
Documents against the Transferor and the Originator or in respect
of the Transaction Documents. The Trustee acknowledges such
subrogation and, further, agrees to execute such instruments
prepared by the Insurer and to take such reasonable actions as,
in the sole judgment of the Insurer, are necessary to evidence
such subrogation and to perfect the rights of the Insurer to
receive any moneys paid or payable under the Supplement in
respect of such subrogated amounts.
ARTICLE V
DEFAULTS; REMEDIES
Section 5.01. Defaults. The occurrence of any of the following
events shall constitute an Event of Default hereunder (with
respect to the defaulting party or parties only):
(a) any representation or warranty made by the Transferor, the
Originator, or the Servicer hereunder or under the Transaction
Documents, or in any certificate furnished hereunder or under the
Transaction Documents, shall prove to be incorrect in any
material respect as of the time when the same shall have been
made and the incorrectness of such representation, warranty or
statement could reasonably be expected to result in a Material
Adverse Change in any such Person or the Trust or the interest of
the Insurer and such representation, warranty or statement shall
not have been eliminated or otherwise cured within 60 days of the
date on which any such Person shall have been given notice of
such failure by the Insurer;
(b) (i) The Transferor, the Originator, or the Servicer shall
fail to pay when due any amount payable by the Transferor, the
Originator, or the Servicer hereunder or under any Transaction
Document on or before the date occurring five (5) Business Days
after the date such amount is required to be paid hereunder or
(ii) a legislative body has enacted any law that declares or a
court of competent jurisdiction shall find or rule that any
Transaction Document is not valid and binding on the Transferor,
the Originator, or the Servicer;
(c) the occurrence and continuance of an "Event of Default"
under the Agreement (as defined therein);
(d) any failure on the part of the Transferor, the Originator,
or the Servicer duly to observe or perform in any material
respect any other of the covenants or agreements on the part of
the Transferor, the Originator, or the Servicer contained in this
Insurance Agreement or in any other Transaction Document which
continues unremedied for a period of 60 days with respect to this
Insurance Agreement, or, with respect to any other Transaction
Document, beyond any cure period provided for therein, after the
date on which written notice of such failure, requiring the same
to be remedied, shall have been given to the Transferor, the
Originator or the Servicer, as applicable, by the Insurer (with a
copy to the Trustee) or by the Trustee (with a copy to the
Insurer);
(e) a decree or order of a court or agency or supervisory
authority having jurisdiction in the premises in an involuntary
case under any present or future federal or state bankruptcy,
insolvency or similar law or the appointment of a conservator or
receiver or liquidator or other similar official in any
insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings, or for the winding-up or
liquidation of its affairs, shall have been entered against the
Transferor, the Originator or the Servicer and such decree or
order shall have remained in force undischarged or unstayed for a
period of 90 consecutive days;
(f) the Transferor, the Originator or the Servicer shall consent
to the appointment of a conservator or receiver or liquidator or
other similar official in any insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings of
or relating to the Transferor, the Originator or the Servicer or
of or relating to all or substantially all of the property of
either;
(g) the Transferor, the Originator or the Servicer shall admit
in writing its inability to pay its debts generally as they
become due, file a petition to take advantage of or otherwise
voluntarily commence a case or proceeding under any applicable
bankruptcy, insolvency, reorganization or other similar statute,
make an assignment for the benefit of its creditors or
voluntarily suspend payment of its obligations; or
(h) the failure of the Transferor, the Originator or the
Servicer to comply with, or maintain the adequacy of, the
Consolidation Facts, which failure continues for a period of 15
days after the date on which notice of such failure, requiring
the same to be remedied, shall have been given to the Transferor,
the Originator or the Servicer, as applicable, by the Insurer
(with a copy to the Trustee) or by the Trustee (with a copy to
the Insurer) and which failure is reasonably likely, in the
judgment of the Insurer, to have a material adverse effect on the
conclusions contained in the opinion of Kirkland & Ellis referred
to in Section 3.01(g)(iii) hereof.
Notwithstanding the foregoing, a failure under clause
(h) above shall not be an Event of Default if the
Transferor, the Originator or the Servicer shall provide to
the Insurer an opinion of counsel of Kirkland & Ellis
affirming its conclusions in the creditors' rights opinion
referred to in Section 3.01(g)(iii) hereof, notwithstanding
such failure.
Section 5.02. Remedies; No Remedy Exclusive.
(a) Upon the occurrence of an Event of Default, the Insurer may
exercise any one or more of the rights and remedies set forth
below:
(i) exercise any rights and remedies accorded to the Insurer
under the related Transaction Documents in accordance with the
terms of the related Transaction Documents or direct the Trustee
to exercise such remedies in accordance with the terms of the
related Transaction Documents; or
(ii) take whatever action at law or in equity as may appear
necessary or desirable in its judgment to collect the amounts
then due to it under the related Transaction Documents or to
enforce performance and observance of any obligation, agreement
or covenant of the Transferor, the Trustee, or the Servicer under
the related Transaction Documents.
(b) Unless otherwise expressly provided, no remedy herein
conferred upon or reserved is intended to be exclusive of any
other available remedy, but each remedy shall be cumulative and
shall be in addition to other remedies given under the
Transaction Documents or existing at law or in equity. No delay
or omission to exercise any right or power accruing under the
Transaction Documents upon the happening of any event set forth
in Section 5.01 hereof shall impair any such right or power or
shall be construed to be a waiver thereof, but any such right and
power may be exercised from time to time and as often as may be
deemed expedient. In order to entitle the Insurer to exercise
any remedy reserved to the Insurer in this Article, it shall not
be necessary to give any notice other than such notice as may be
required in this Article V.
Section 5.03. Waivers.
(a) No failure by the Insurer to exercise, and no delay by the
Insurer in exercising, any right hereunder shall operate as a
waiver thereof. The exercise by the Insurer of any right
hereunder shall not preclude the exercise of any other right, and
the remedies provided herein to the Insurer are declared in every
case to be cumulative and not exclusive of any remedies provided
by law or equity.
(b) The Insurer shall have the right, to be exercised in its
complete discretion, to waive any Event of Default hereunder, by
a writing setting forth the terms, conditions and extent of such
waiver signed by the Insurer and delivered to the Transferor, the
Trustee, the Originator or the Servicer. Unless such writing
expressly provides to the contrary, any waiver so granted shall
extend only to the specific event or occurrence which gave rise
to the Event of Default so waived and not to any other similar
event or occurrence which occurs subsequent to the date of such
waiver.
ARTICLE VI
MISCELLANEOUS
Section 6.01. Amendments, Etc. This Insurance Agreement may be
amended, modified or terminated only by written instrument or
written instruments signed by the parties hereto. The Transferor
agrees to promptly provide a copy of any amendment to this
Insurance Agreement to the Trustee and the Rating Agencies. No
act or course of dealing shall be deemed to constitute an
amendment, modification or termination hereof.
Section 6.02. Notices. All demands, notices and other
communications to be given hereunder shall be in writing (except
as otherwise specifically provided herein) and shall be mailed by
registered mail or personally delivered or telecopied to the
recipient as follows:
(a) To the Insurer:
R.V.I. Guaranty Co., Ltd.
20 Reid Street, 3rd Floor
Williams House
Hamilton HM HX, Bermuda
Attention: Adrienne Hintz
Telecopy No.: (441) 292-8062
Confirmation: (441) 295-1646
with a copy to in all situations other than a
Notice of Claim under the Policy to:
CNA Guaranty & Credit
40 Wall Street, 8th Floor
New York, New York 10005
Attention: John P. Verel
Telecopy No.: (212) 440-3880
Confirmation: (212) 440-7669
(b) To the Transferor:
SRI Receivables Purchase Co., Inc.
10201 Main Street
Houston, Texas 77025
Attention: President
Telecopy No.: (713) 669-2709
Confirmation: (713) 669-2832
(c) To the Trustee:
Bankers Trust (Delaware)
1011 Centre Road, Suite 200
Wilmington, Delaware 19805
Attention: []
Telecopy No.: []
Confirmation: []
With a copy to:
Bankers Trust Company
4 Albany Street, 10th Floor
New York, New York 10006
Attention: Patricia Russo
(d) To the Servicer or the Originator:
Specialty Retailers, Inc.
10201 Main Street
Houston, Texas 77025
Attention: Chief Financial Officer
Telecopy No.: (713) 669-2709
Confirmation: (713) 669-2832
A party may specify an additional or different address or
addresses by writing mailed or delivered to the other parties as
aforesaid. All such notices and other communications shall be
effective upon receipt.
Section 6.03. [Reserved.]
Section 6.04. Agreement with respect to Section 1213(c)(1) of
the New York Insurance Law. Each of the parties hereto agrees
that it will not seek to require the Insurer to have to post a
bond, securities or cash in order to enforce its rights or to
respond to an action in the New York courts as described in
Section 1213(c)(1) of the New York Insurance Law and similar
laws.
Section 6.05. Severability. In the event that any provision of
this Insurance Agreement shall be held invalid or unenforceable
by any court of competent jurisdiction, the parties hereto agree
that such holding shall not invalidate or render unenforceable
any other provision hereof. The parties hereto further agree
that the holding by any court of competent jurisdiction that any
remedy pursued by any party hereto is unavailable or
unenforceable shall not affect in any way the ability of such
party to pursue any other remedy available to it.
Section 6.06. Governing Law. THIS INSURANCE AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK WITHOUT REGARD TO CHOICE OF LAW PROVISIONS.
Section 6.07. Consent to Jurisdiction.
(a) The parties hereto hereby irrevocably submit to the
jurisdiction of the United States District Court for the Southern
District of New York and any court in the State of New York
located in the City and County of New York, and any appellate
court from any thereof, in any action, suit or proceeding brought
against it and to or in connection with any of the Transaction
Documents or the transactions contemplated thereunder or for
recognition or enforcement of any judgment, and the parties
hereto hereby irrevocably and unconditionally agree that all
claims in respect of any such action or proceeding may be heard
or determined in such New York state court or, to the extent
permitted by law, in such federal court. The parties hereto
agree that a final judgment in any such action, suit 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. To the extent permitted by applicable law, the
parties hereto hereby waive and agree not to assert by way of
motion, as a defense or otherwise in any such suit, action or
proceeding, any claim that it is not personally subject to the
jurisdiction of such courts, that the suit, action or proceeding
is brought in an inconvenient forum, that the venue of the suit,
action or proceeding is improper or that the related documents or
the subject matter thereof may not be litigated in or by such
courts.
(b) To the extent permitted by applicable law, the parties
hereto shall not seek and hereby waive the right to any review of
the judgment of any such court by any court of any other nation
or jurisdiction which may be called upon to grant an enforcement
of such judgment.
(c) Except as provided in Section 4.06 herein, nothing contained
in this Insurance Agreement shall limit or affect the Insurer's
right to serve process in any other manner permitted by law or to
start legal proceedings relating to any of the Transaction
Documents against any party hereto or its or their property in
the courts of any jurisdiction.
Section 6.08. Consent of the Insurer. In the event that the
consent of the Insurer is required under any of the Transaction
Documents, the determination whether to grant or withhold such
consent shall be made by the Insurer in its sole discretion
without any implied duty towards any other Person.
Section 6.09. Counterparts. This Insurance Agreement may be
executed in counterparts by the parties hereto, and all such
counterparts shall constitute one and the same instrument.
Section 6.10. Headings. The headings of Articles and Sections
and the Table of Contents contained in this Insurance Agreement
are provided for convenience only. They form no part of this
Insurance Agreement and shall not affect its construction or
interpretation. Unless otherwise indicated, all references to
Articles and Sections in this Insurance Agreement refer to the
corresponding Articles and Sections of this Insurance Agreement.
Section 6.11. Trial by Jury Waived. Each party hereto hereby
waives, to the fullest extent permitted by law, any right to a
trial by jury in respect of any litigation arising directly or
indirectly out of, under or in connection with any of the
Transaction Documents or any of the transactions contemplated
thereunder. Each party hereto (a) certifies that no
representative, agent or attorney of any party hereto has
represented, expressly or otherwise, that it would not, in the
event of litigation, seek to enforce the foregoing waiver and
(b) acknowledges that it has been induced to enter into the
Transaction Documents to which it is a party by, among other
things, this waiver.
Section 6.12. Limited Liability. No recourse under any
Transaction Document shall be had against, and no personal
liability shall attach to, any officer, employee, director,
affiliate or shareholder of any party hereto, as such, by the
enforcement of any assessment or by any legal or equitable
proceeding, by virtue of any statute or otherwise in respect of
any of the Transaction Documents, the Securities or the Policy,
it being expressly agreed and understood that each Transaction
Document is solely a corporate obligation of each party hereto,
and that any and all personal liability, either at common law or
in equity, or by statute or constitution, of every such officer,
employee, director, affiliate or shareholder for breaches by any
party hereto of any obligations under any Transaction Document is
hereby expressly waived as a condition of and in consideration
for the execution and delivery of this Insurance Agreement.
With respect to the Trustee, it is expressly understood and
agreed by the parties hereto that this Insurance Agreement is
executed and delivered by Bankers Trust (Delaware), not
individually or personally but solely as Trustee under this
Insurance Agreement, in the exercise of the powers and authority
conferred and vested in it under the Agreement, (b) each of the
representations, undertakings and agreements herein made on the
part of the Trustee is made and intended not as personal
representations, undertakings and agreements by Bankers Trust
(Delaware) but is made and intended for the purpose for binding
only the Trustee and (c) under no circumstances shall Bankers
Trust (Delaware) be personally liable for the payment of any
indebtedness or expenses of the Trustee or be liable for the
breach or failure of any obligation, representation, warranty or
covenant made or undertaken by the Trustee under this Insurance
Agreement or the other related documents.
Section 6.13. Entire Agreement. The Transaction Documents and
the Policy set forth the entire agreement between the parties
with respect to the subject matter thereof, and this Insurance
Agreement supersedes and replaces any agreement or understanding
that may have existed between the parties prior to the date
hereof in respect of such subject matter.
[Remainder of page intentionally blank.]
IN WITNESS WHEREOF, the parties hereto have executed this
Insurance Agreement, all as of the day and year first above
mentioned.
R.V.I. GUARANTY CO., LTD., as
Insurer
By: /s/ Peter Strong
Title: Authorized Representative
SRI RECEIVABLES PURCHASE CO.,
INC., as Transferor
By: /s/ Charles M. Sledge
Title: SVP Finance and Treasurer
SPECIALTY RETAILERS, INC.,
as Servicer and Originator
By: /s/ Charles M. Sledge
Title: SVP Finance and Treasurer
BANKERS TRUST (DELAWARE), not
in its individual capacity but
solely as Trustee
By: /s/ Francisco B. Talavera
Title: AVP
Facts Relating to Consolidation
1. The Transferor will not amend its Certificate of
Incorporation in any manner which would affect its restricted
activities.
2. The Transferor's Certificate of Incorporate provides that
its Board of Directors shall at all times include at least one
"Independent Director." The Independent Director must be an
individual who, except in his or her capacity as an Independent
Director, (a) is not at such time, and shall not have been at any
time during the preceding five years a director, officer or
employee of the Originator or any of its subsidiaries or
affiliates (other than the Transferor); (b) is not (and is not
affiliated with a company or a firm that is) a significant
advisor or consultant to the Originator or any of its
subsidiaries and affiliates; (c) is not a affiliated with a
significant customer or supplier of the Originator or any of its
subsidiaries or affiliates; (d) is not affiliated with a company
of which the Originator or any of its subsidiaries is a
significant customer or supplier; (e) does not have any
significant personal services contract(s) with the Originator or
any of its subsidiaries and affiliates; (f) is not affiliated
with a tax-exempt entity that receives significant contributions
from the Originator or any of its subsidiaries or affiliates; (g)
is not at such time (or at any time thereafter while serving as
an Independent Director) the beneficial owner of shares of common
stock of the Originator or any affiliate of the Originator; and
(h) is not a spouse, parent, sibling or child of any person
described by (a) through (g) above. Each Independent Director
has been and shall be paid director's fees by the Transferor in
amounts mutually acceptable to such Independent Director and to
the Transferor. Whenever necessary, the Transferor will observe
all requirements of the Delaware General Corporation Law, its
Certificate of Incorporation and its by-laws.
3. The Transferor's books and records have been and will be
maintained separately from those of the Originator. Any
consolidated financial statements of the Originator which include
the Transferor have contained and will contain detailed notes
clearly stating that the Receivables have been sold to a third
party and that collections under the Receivables are available
only to the holders of the Certificates. Each of the Transferor
and the Originator will conduct its business solely in its
respective corporate name and in such a separate manner so as not
to mislead others with whom it is dealing.
4. Neither the Originator nor the Transferor has concealed or
will conceal from any interested party any transfers contemplated
by the Transaction Documents. Neither the Transferor nor the
Originator has itself removed or concealed, and will not itself
remove or conceal, from creditors any of its assets and has not
participated and will not participate in removing or concealing
the assets of any other entity. The Obligors on the Receivables
will not be notified of the transfer of the Receivables to the
Transferor, in part, because such notification could cause
confusion that could disrupt collections on the Receivables to
the detriment of the holders of the investor certificates. The
Originator will indicated in its computer files that the
Receivables have been sold to the Transferor. The Transferor's
books and records shall indicate that such Receivables have
further been sold by the Transferor to the Trust. In addition,
the Originator will provide to the Transferor a true and complete
list of all the accounts relating to such Receivables, identified
by number.
5. The Transferor does and will maintain its own books of
account and corporate records separate from those of the
Originator or any of their subsidiaries or affiliates, including
separate audited financial statements.
6. The Transferor does and will at all times cause the
Independent Director(s) to be elected and compensated as
described above.
7. Any allocations of direct, indirect or overhead expenses for
items shared between the Transferor and the Originator have been
and will be made to the extent practical on the basis of actual
use or value of services rendered and otherwise on a basis
reasonably related to actual use or the value of services
rendered.
8. The Transferor has paid and will pay (or the Originator will
pay and the Transferor will reimburse the Originator for) its own
operating expenses and liabilities from its own funds, except the
Originator paid the organizational expenses of the Transferor and
will pay a portion of the expenses incurred in connection with
the Transactions. The Transferor also has paid and will pay a
portion of the expense related to the Transactions.
9. The Transferor prepares and has made available to holders of
the investor certificates its separate audited financial
statements, and the Transferor's separate financial statements
have and will disclose that the Receivables have been sold.
10. The Transferor does and will maintain its assets in such a
manner that it is not costly or difficult to segregate, ascertain
or otherwise identify its individual assets from or as against
those of the Originator or any of their subsidiaries or
affiliates.
11. The Transferor does not and will not commingle or pool its
funds or other assets with those of the Originator or any other
subsidiaries or affiliates of the Originator, except as
specifically provided in the Agreement. The Transferor does not
and will not maintain any joint bank account or other depository
account to which the Originator or any of their other
subsidiaries or affiliates, other than the Originator in its
capacity as Servicer, has independent access.
12. The Transferor does and will maintain arm's length
relationships with the Originator and all their other affiliates.
Neither the Transferor, on the one hand, nor the Originator or
any of their other affiliates, on the other hand, is or will be,
or holds or will hold itself out to be, responsible for the debts
of the other or the decisions or actions respecting the daily
business and affairs of the other.
13. The Transferor is not named, and has not entered into any
agreement to be named, directly or indirectly, as a direct or
contingent beneficiary or loss payee on any insurance policy
covering the property of the Originator.
14. Each officer and director of the Transferor shall discharge
his or her respective fiduciary duties and obligations to the
Transferor in accordance with all applicable laws.
15. All of the Transferor's transactions with the Originator and
any of their subsidiaries and affiliates will be fully documented
and will reflect arm's-length transactions undertaken in good
faith for bona fide business purposes.
