<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> DEC-31-1995
<CASH> 51,500
<SECURITIES> 0
<RECEIVABLES> 153,600
<ALLOWANCES> 14,500
<INVENTORY> 199,900
<CURRENT-ASSETS> 441,100
<PP&E> 563,400
<DEPRECIATION> 338,200
<TOTAL-ASSETS> 849,100
<CURRENT-LIABILITIES> 202,400
<BONDS> 177,400
<COMMON> 3,000
0
0
<OTHER-SE> 239,600
<TOTAL-LIABILITY-AND-EQUITY> 849,100
<SALES> 232,100
<TOTAL-REVENUES> 232,100
<CGS> 192,700
<TOTAL-COSTS> 192,700
<OTHER-EXPENSES> 45,400
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,400
<INCOME-PRETAX> (11,400)
<INCOME-TAX> 1,000
<INCOME-CONTINUING> (12,400)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (12,400)
<EPS-PRIMARY> (.62)
<EPS-DILUTED> (.62)
</TABLE>
<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
(X) Quarterly report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended December 31, 1995.
or
( ) Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file number 1-2883
OUTBOARD MARINE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 36-1589715
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
100 Sea Horse Drive
Waukegan, Illinois 60085
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 847-689-6200
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES X NO
------- -------
Number of shares of Common Stock of $0.15 par value outstanding at January 31,
1996 were 20,134,102 shares (not including 129,716 treasury shares).
Exhibit Index Page 13.
-1-
<PAGE> 2
OUTBOARD MARINE CORPORATION
FORM 10-Q
PART I, ITEM 1
FINANCIAL INFORMATION
FINANCIAL STATEMENTS
December 31, 1995
Financial statements required by this form:
Page
----
Statements of Consolidated Earnings 3
Condensed Statements of Consolidated Financial Position 4
Statements of Consolidated Cash Flows 6
Notes to Consolidated Financial Statements 7
-2-
<PAGE> 3
OUTBOARD MARINE CORPORATION
Statements of Consolidated Earnings
(Unaudited)
Three Months Ended
Dec. 31
(In millions except amounts per share) 1995 1994
- -------------------------------------- ---- ----
Net Sales $ 232.1 $ 242.6
Cost of Goods Sold 192.7 191.4
---------------------
Gross Earnings 39.4 51.2
Selling, General & Administrative Expenses 45.7 50.1
---------------------
Earnings (Loss) from Operations (6.3) 1.1
Non-Operating Expense (Income)
Interest 5.4 5.0
Other, Net (.3) (1.6)
---------------------
5.1 3.4
---------------------
Earnings (Loss) Before Provision for Income Taxes (11.4) (2.3)
Provision for Income Taxes 1.0 .8
---------------------
Net Earnings (Loss) $ (12.4) $ (3.1)
=====================
Net Earnings (Loss) Per Share of Common Stock
Primary $ (.62) $ (.16)
=====================
Fully Diluted $ (.62) $ (.16)
=====================
Dividends Paid Per Share $ .10 $ .10
=====================
Average Shares of Common Stock and Common
Stock Equivalents Outstanding (if applicable) 20.1 19.9
The accompanying notes are an integral part of these statements.
-3-
<PAGE> 4
OUTBOARD MARINE CORPORATION
Condensed Statements of Consolidated Financial Position
<TABLE>
<CAPTION> (Unaudited)
Dec. 31 Dec. 31 Sept. 30 Sept. 30
(In Millions) 1995 1994 1995* 1994*
- ------------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Assets
- ------
Current Assets
Cash & Cash Equivalents $ 51.5 $ 43.5 $ 58.3 $ 80.3
Receivables 139.1 140.7 200.9 150.5
Inventories
Finished Products 79.2 75.8 69.9 58.7
Raw Material, Work In
Process & Service Parts 120.7 118.4 124.2 105.0
-----------------------------------------------
Total Inventories 199.9 194.2 194.1 163.7
Other Current Assets 50.6 35.1 48.9 35.3
-----------------------------------------------
Total Current Assets 441.1 413.5 502.2 429.8
Product Tooling, Net 52.9 49.5 52.0 48.3
Intangibles 40.1 31.8 40.6 32.1
Other Assets 89.8 93.2 87.9 89.8
Plant & Equipment 563.4 537.2 558.9 535.6
Accumulated Depreciation (338.2) (320.3) (334.6) (318.5)
-----------------------------------------------
Plant & Equipment, Net 225.2 216.9 224.3 217.1
-----------------------------------------------
Total Assets $ 849.1 $ 804.9 $ 907.0 $ 817.1
===============================================
-4-
<PAGE> 5
Liabilities and Shareholders' Investment
- ----------------------------------------
Current Liabilities
Notes Payable $ - $ 25.0 $ - $ -
Accounts Payable 65.6 79.4 99.6 102.9
Accrued and Other 136.8 125.0 149.2 130.7
-----------------------------------------------
Total Current Liabilities 202.4 229.4 248.8 233.6
Long-Term Debt 177.4 178.2 177.4 178.2
Postretirement Benefits Other
Than Pensions 102.5 102.0 102.6 102.3
Other Non-Current Liabilities 124.2 93.1 122.4 94.0
Shareholders' Investment
Common Stock & Capital Surplus 113.5 110.2 111.6 109.3
Retained Earnings 135.3 101.1 149.7 106.3
Cumulative Translation
Adjustments (6.2) (9.1) (5.5) (6.6)
-----------------------------------------------
Total Shareholders' Investment 242.6 202.2 255.8 209.0
-----------------------------------------------
Total Liabilities and
Shareholders' Investment $ 849.1 $ 804.9 $ 907.0 $ 817.1
===============================================
Shares of Common Stock
Outstanding 20.1 20.0 20.0 20.0
</TABLE>
The accompanying notes are an integral part of these statements.
* Condensed from audited financial statements.
-5-
<PAGE> 6
OUTBOARD MARINE CORPORATION
Statements of Consolidated Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
December 31
(In millions) 1995 1994
- ------------- ---- ----
<S> <C> <C>
Cash Flows from Operating Activities
Net loss $ (12.4) $ (3.1)
Adjustments to reconcile net earnings to net cash
provided by operations:
Depreciation and amortization 11.9 10.8
Changes in current accounts excluding the
effects of noncash transactions:
Decrease in receivables 61.3 10.2
(Increase) in inventories (5.6) (31.2)
(Increase) Decrease in other current assets (1.7) .3
(Decrease) in accounts payable and accrued liabilities (46.3) (31.5)
Other, net .6 (1.3)
--------------------
Net cash provided by (used for) operating activities 7.8 (45.8)
Cash Flows from Investing Activities
Expenditures for plant and equipment, and tooling (14.7) (14.0)
Other, net .1 (1.1)
--------------------
Net cash used for investing activities (14.6) (15.1)
Cash Flows from Financing Activities
Net increase in short-term debt - 25.0
Cash dividends paid (2.0) (2.0)
Other, net 2.3 1.1
--------------------
Net cash provided by (used for) financing activities .3 24.1
Exchange Rate Effect on Cash (.3) -
--------------------
Net Decrease in Cash and Cash Equivalents (6.8) (36.8)
Cash and Cash Equivalents at Beginning of Period 58.3 80.3
--------------------
Cash and Cash Equivalents at End of Period $ 51.5 $ 43.5
====================
Supplemental Cash Flow Disclosures
Interest paid $ 5.7 $ 3.6
Income taxes paid 5.8 1.5
</TABLE>
The accompanying notes are an integral part of these statements.
-6-
<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
- ------------------------
The accompanying unaudited consolidated condensed financial statements present
information in accordance with generally accepted accounting principles for
interim financial information and have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission. Accordingly, they do
not include all information or footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, the information furnished reflects all adjustments necessary for a
fair statement of the results of the interim periods and all such adjustments
are of a normal recurring nature. These financial statements should be read in
conjunction with the financial statements and notes thereto included in the
company's Annual Report on Form 10-K for the year ended September 30, 1995.
The 1996 interim results are not necessarily indicative of the results which
may be expected for the remainder of the year.
2. SHORT-TERM BORROWINGS AND ACCOUNTS RECEIVABLE
- ------------------------------------------------
In December 1995, the company's revolving credit agreement, which provides for
loans of up to $200 million, was extended to expire not later than December 31,
1998.
Also in December 1995, the company entered into a receivables sales agreement
expiring December 20, 1996 whereby the company agreed to sell an ownership
interest in a designated pool of domestic trade accounts receivable. In order
to maintain the balance in the designated pool of accounts receivable sold, the
company is obligated to sell undivided percentage interests in new receivables
as existing receivables are collected.
The company retains a residual interest in the receivables sold, thus
receivables in the accompanying Condensed Statement of Consolidated Financial
Position at December 31, 1995 are only reduced by the net proceeds from the
sale. The company received $20 million from the initial sale and may receive
up to $35 million of additional proceeds on a revolving basis. The company has
retained substantially the same credit risk as if the accounts receivable had
not been sold. The costs associated with the receivables sales agreements are
included in non-operating expense - other, net in the Statement of Consolidated
Earnings for the three months ended December 31, 1995.
Under both the revolving credit agreement and the receivable sales agreement,
the company is required to meet certain financial covenants throughout the
year. At December 31, 1995, the company is in compliance with these financial
covenants.
3. CONTINGENT LIABILITIES
- -------------------------
As a normal business practice, certain subsidiaries have made arrangements by
which qualified retail dealers may obtain inventory financing. Under these
arrangements, the company will repurchase its products in the event of
repossession upon a retail dealer's default. These arrangements contain
provisions which limit the company's annual repurchase obligation. The maximum
potential repurchase commitment cannot exceed $90 million. The company resells
any repurchased products. Losses incurred under this program have not been
material. The company accrues for losses that are anticipated in connection
with expected repurchases.
-7-
<PAGE> 8
The company is engaged in a substantial number of legal proceedings arising in
the ordinary course of business. While the result of these proceedings cannot
be predicted with any certainty, based upon the information presently
available, management is of the opinion that the final outcome of all such
proceedings should not have a material effect upon the company's Consolidated
Financial Position or the Consolidated Earnings of the company.
Under the requirements of Superfund and certain other laws, the company is
potentially liable for the cost of clean-up at various contaminated sites
identified by the United States Environmental Protection Agency and other
agencies. The company has been notified that it is named a potentially
responsible party ("PRP") for study and clean-up costs at various sites which
the company does not believe to be material. In some cases there are several
named PRPs and in others there are hundreds. The company generally
participates in the investigation or clean-up of these sites through cost
sharing agreements with terms that vary from site to site. Costs are typically
allocated based upon the volume and nature of the materials sent to the site or
the amount of time the site was owned or operated. However, under Superfund,
and certain other laws, as a PRP the company can be held jointly and severally
liable for all environmental costs associated with a site.
The company has experience in the remediation of contaminated sites. Once the
company becomes aware of its potential liability at a particular site, it uses
this experience to determine if it is probable that a liability has been
incurred and whether or not the amount of the loss can be reasonably estimated.
Once the company has sufficient information necessary to support a reasonable
estimate or range of loss for a particular site, an amount is added to the
company's aggregate environmental contingent liability accrual. The amount
added to the accrual for the particular site is determined by analyzing the
site as a whole and reviewing the probable outcome for the remediation of the
site. This is not necessarily the minimum or maximum liability at the site
but, based on the company's experience, most accurately reflects the company's
liability based on the information currently available. The company takes into
account the number of other participants involved in the site, their experience
in the remediation of sites, as well as the company's knowledge of their
ability to pay.
As a general rule, the company accrues remediation costs for continuing
operations on an undiscounted basis and does not accrue for normal operating
and maintenance costs for site monitoring and compliance requirements.
However, the company does accrue for environmental close down costs associated
with discontinued operations or facilities, including the environmental costs
of operation and maintenance until disposition. At December 31, 1995, the
company has accrued approximately $11 million for costs related to remediation
at contaminated sites including continuing and closed down operations. The
possible recovery of insurance proceeds has not been considered in estimating
contingent environmental liabilities.
Each site, whether or not remediation studies have commenced, is reviewed on a
quarterly basis and the aggregate environmental contingent liability accrual is
adjusted accordingly. Because the sites are reviewed and the accrual adjusted
quarterly, the company is confident that the accrual accurately reflects the
company's liability based on the information available at the time.
While the results of the proceedings discussed above cannot be predicted with
any certainty, based upon the information presently available, management is of
the opinion that the final outcome of such proceedings, after giving
consideration to the amounts accrued, should not have a material effect on the
company's Consolidated Financial Position or the Consolidated Earnings of the
company.
-8-
<PAGE> 9
OUTBOARD MARINE CORPORATION
FORM 10-Q
PART I, ITEM 2
FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
December 31, 1995
RESULTS OF OPERATIONS
- ---------------------
The first quarter of 1996 was a period of adjustment for the company.
Historically, the company experiences a first quarter loss because of the
seasonality of the business. This year's first quarter incurred a greater loss
than realized in the same quarter last year. However, this year's loss was
essentially in line with expectations. The bulk of the increased loss in this
year's first quarter was due to the decision last summer to reduce production
in the engine plants to keep inventories more in line with sales, although the
company also experienced a four percent sales decline from last year's first
quarter.
The company reported a net loss of $12.4 million, or 62 cents per share, for
the first quarter of 1996, compared with a net loss of $3.1 million, or 16
cents per share, for the first quarter of 1995. This year's first quarter
sales were $232.1 million versus $242.6 million in the first quarter last year.
The company had anticipated flat sales compared with last year's first quarter,
a quarter in which revenues were increased by a greater than usual volume of
back orders carried over from the fourth quarter of 1994. Most of the
shortfall was due to continuing sales softness in the Aluminum Boat Group where
a concerted effort is underway to reduce excess models and brands and re-focus
on our important Lowe, Grumman and Sea Nymph brands. The company also took
excess capacity offline by closing the Elkhart aluminum boat plant. The
Marine Power Products Group and Fishing Boat Group reported smaller sales
declines, while the Recreational Boat Group turned in a modest sales increase.
The decision to reduce production in the MPPG plants, coupled with a three-week
strike at the Waukegan, Illinois, die casting plant, added to the cost of goods
in the quarter and was the major factor in the reduction of the gross earnings
to $39.4 million from $51.2 million in the first quarter last year.
Management discipline reduced the selling, general and administrative expense
nearly 9 percent in this year's first quarter compared to last year's, however
the company still incurred an operating loss of $6.3 million for this year's
first quarter compared to operating earnings of $1.1 million for the same
quarter last year.
As a result of the scheduled reductions in manufacturing, the company made
progress in managing working capital, increasing inventories only $5.8 million
in anticipation of the upcoming boat shows and heavy selling season. This
compares to the $30.5 million inventory increase in last year's first quarter.
And, work in process inventories were reduced by $3.5 million from September
1995 levels.
The provision for income taxes of $1.0 million and $.8 million for the three
months ended December 31, 1995 and 1994, respectively, resulted from expected
taxes payable relating to certain international subsidiaries.
It is not appropriate to compare the results of operations for the current
quarter with those of the preceding quarter because of the seasonal nature of
the company's business.
-9-
<PAGE> 10
FINANCIAL CONDITION
- -------------------
Due to the seasonal nature of the company's business, it is more appropriate to
compare the December 31, 1995 Condensed Statement of Financial Position with
December 31, 1994. The company's ratio of current assets to current
liabilities was 2.2 at December 31, 1995 compared to 1.8 at December 31, 1994.
Current assets of $441.1 million at December 31, 1995 increased $27.6 million
as compared to current assets of $413.5 million at December 31, 1994.
Receivables were $1.6 million lower at December 31, 1995 after deducting $20
million sold in December 1995 through a receivables sales agreement (see Note 2
of Notes to Consolidated Financial Statements). Without this receivables sale,
receivables would have been higher due primarily to extended credit terms
offered as part of specific marketing programs. Inventories increased $5.7
million to $199.9 million at December 31, 1995 as compared to $194.2 million at
December 31, 1994. Inventory levels historically increase in the first quarter
to have product available during the peak spring and summer selling seasons.
Last year, inventories increased $30.5 million from September 30, 1994. In the
first quarter of fiscal 1996, the company reduced production in its engine
plants to bring inventories more in line with sales, and inventories increased
only $5.8 million from September 30, 1995. Other current assets increased
$15.5 million due primarily to deferred income tax benefits.
Other assets decreased $3.4 million due primarily to redemption of the
company's investment in I.J. Holdings, Inc. offset by increases in deferred
income tax benefits and increased pension assets. Product tooling,
intangibles, and plant and equipment increased due primarily to the investment
necessary to introduce new outboard motor models.
Current liabilities decreased by $27.0 million to $202.4 million as of December
31, 1995 compared to $229.4 million at December 31, 1994. Notes payable
decreased $25.0 million at December 31, 1995. The $13.8 million decrease in
accounts payable resulted primarily from decreased manufacturing activity.
Accrued liabilities increased $11.8 million due primarily to increased
participation levels in dealer programs and increased warranty accruals
partially offset by lower restructuring accrual balances. Other non-current
liabilities increased $31.1 million due primarily to an increase in tax
liabilities.
The company's total debt to total capitalization at December 31, 1995 was 42
percent compared to 50 percent at December 31, 1994.
Based on the company's performance since the 1993 restructuring, improved
operating results, an improved balance sheet, a $200 million revolving credit
agreement and other available sources of capital, the company believes it has
available sufficient internal and external financial resources to invest in low
emission engines and to continue making long term investments for future growth
through the next few years.
-10-
<PAGE> 11
TRENDS AND FORWARD-LOOKING DATA
- -------------------------------
Looking forward, the company expects to see modest sales growth in its second
quarter, and will continue to run reduced production levels in the quarter to
adjust the inventories. The reduction the company is planning is about
two-thirds the magnitude of the reduction it implemented in the first quarter,
so the effect on its gross income will not be as significant.
For the full year, the company expects to deliver both sales and earnings
growth, with the bulk of that growth coming in the third and fourth quarters.
In 1995, the company experienced strong sales growth in the first half as a
result of increased market demand and its engine back order situation,
providing it with more difficult earnings comparisons for the first half of
this year. In last year's third quarter, however, U.S. market demand declined
dramatically and the company's sales suffered in what is normally its strongest
selling season. This year, the company believes it will see a more normal
seasonal distribution of sales. That expectation, along with forecasts that
suggest the U.S. marine products market will grow by five to seven percent for
the full year in 1996, gives the company confidence in its expected full-year
performance.
Looking ahead even further, the company's success in technological development
also will shape its performance. Its low-emission FICHT Fuel Injection engine
development effort is running on schedule. The company expects to have a
limited number of these engines available late this spring with full production
and availability early in the 1997 model year. The company's FICHT engine
recently won the 1996 Popular Mechanics Design and Engineering award for its
innovation.
A recently completed leadership conference brought together 70 senior OMC
managers from around the globe to work on its visioning and strategic planning
processes, laying the groundwork for the change it will need to transform the
company into a consistent generator of shareholder value. The company expects
to complete the first strategic planning cycle by late spring.
-11-
<PAGE> 12
OUTBOARD MARINE CORPORATION
FORM 10-Q
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At the Registrant's Annual Meeting of Shareholders held on January 18, 1996,
there were 20,052,213 shares outstanding and entitled to notice of and to vote
at the meeting. The following matters were voted on, with the results
indicated:
William C. France, Ilene S. Gordon and Donald L. Runkle were each
elected a Director for a three year term expiring at the Company's 1999
Annual Meeting of Shareholders with votes of 16,848,935 for and 84,095
withheld, 16,848,751 for and 84,279 withheld and 16,849,737 for and 83,293
withheld, respectively. The term of office as director continued after the
Annual Meeting of Shareholders for Frank Borman, Harry W. Bowman, Richard
T. Lindgren, J. W. Marriott, Jr., Richard J. Stegemeier, and Richard F.
Teerlink.
The appointment of Arthur Andersen LLP as the Registrant's independent
accountants was confirmed with 16,882,024 shares voting "FOR" the
confirmation, 19,984 shares voting "AGAINST" the confirmation and 31,022
shares abstaining from voting.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits reference is made to the Exhibit Index on Page 13.
(b) Reports on Form 8-K. The Registrant did not file any reports on
Form 8-K for the fiscal quarter ended December 31, 1995.
S I G N A T U R E
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OUTBOARD MARINE CORPORATION
Signature Title Date
_________________________ ___________________________ ________________
By: /s/: JAMES R. MAURICE Vice President & Controller February 6, 1996
_________________________ ___________________________ ________________
James R. Maurice
-12-
<PAGE> 13
OUTBOARD MARINE CORPORATION
EXHIBIT INDEX
Exhibit 3: Articles of Incorporation and By-Laws:
(A) With respect to the Registrant's Certificate of Incorporation,
reference is made to Exhibit 4 to the Registrant's Quarterly Report
on Form 10-Q for the quarter ended December 31, 1984; to Exhibit 4
to the Registrant's Quarterly Report on Form 10-Q for the quarter
ended December 31, 1987 and to Exhibit 4 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1988,
all of which are incorporated herein by reference.
(B) With respect to the Registrant's By-Laws as amended September 20,
1995, reference is made to Exhibit 3(B) to the Registrant's Annual
Report on Form 10-K for the fiscal year ended September 30, 1995,
which is incorporated herein by reference.
Exhibit 4: Instruments defining the rights of security holders including
indentures:
(A) With respect to the Agreement of Outboard Marine Corporation,
reference is made to Exhibit 4(A) to the Registrant's Annual Report
on Form 10-K for the fiscal year ended September 30, 1995, which is
incorporated herein by reference.
(B) With respect to rights of Series A Junior Participating Preferred
Stock, reference is made to the Registrant's report on Form 8-K
filed on October 17, 1990, which is incorporated herein by
reference.
(C) With respect to rights of holders of the Registrant's 9-1/8%
Sinking Fund Debentures due 2017, reference is made to Exhibit 4(A)
in the Registrant's Registration Statement Number 33-12759 filed on
March 20, 1987, which is incorporated herein by reference.
(D) With respect to rights of holders of Registrant's 7% Convertible
Subordinated Debentures due 2002, reference is made to Registrant's
Registration Statement Number 33-47354 filed on April 28, 1992,
which is incorporated herein by reference.
Exhibit 10: Material contracts:
(A) With respect to the Registrant's 1987 Stock Option and Performance
Unit Plan, reference is made to Exhibit 10(D) to the Registrant's
Annual Report on Form 10-K for the fiscal year ended September 30,
1987, which is incorporated herein by reference.
(B) With respect to the OMC Executive Bonus Plan, reference is made to
Exhibit 10(C) to the Registrant's Annual Report on Form 10-K for
the fiscal year ended September 30, 1990, which is incorporated
herein by reference.
(C) With respect to the OMC Executive Equity Incentive Plan, reference
is made to Exhibit 10(D) to the Registrant's Annual Report on Form
10-K for the fiscal year ended September 30, 1990, which is
incorporated herein by reference.
-13-
<PAGE> 14
(D) With respect to the OMC 1994 Long-Term Incentive Plan, reference is
made to Exhibit C, to Outboard Marine Corporation's Notice of
Annual Meeting and Proxy Statement prepared in connection with the
January 20, 1994 Annual Meeting of Shareholders, which is
incorporated herein by reference.
(E) With respect to Severance Agreements for all elected officers of
the Registrant (except Mr. Bowman), reference is made to Exhibit
10(E) of the Registrant's Annual Report on Form 10-K for the fiscal
year ended September 30, 1988, which is incorporated herein by
reference.
(F) With respect to the Employment Agreement for Mr. Bowman, reference
is made to Exhibit 10(F) of the Registrant's Annual Report on Form
10-K for the fiscal year ended September 30, 1995, which is
incorporated herein by reference.
(G) With respect to the Severance Agreement for Mr. Bowman, reference
is made to Exhibit 10(G) of the Registrant's Annual Report on Form
10-K for the fiscal year ended September 30, 1995, which is
incorporated herein by reference.
(H) With respect to the Registrant's Revolving Credit Agreement dated
as of December 30, 1994, reference is made to Exhibit 10(G) to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1994, which is incorporated herein by reference. With
respect to Amendment No. 1 to such Credit Agreement, reference is
made to Exhibit 10(H) to the Registrant's Annual Report on Form
10-K for the fiscal year ended September 30, 1995, which is
incorporated herein by reference. With respect to Amendment No. 2
to such Credit Agreement, a copy is attached hereto as Exhibit
10(H).
(I) With respect to the Registrant's Receivables Purchase Agreement
dated as of December 22, 1995, a copy is attached hereto as Exhibit
10(I).
Exhibit 11: Statements regarding computation of per share earnings:
A statement regarding the computation of per share earnings is
attached hereto as Exhibit 11.
Exhibit 19: Report furnished to security holders:
A copy of the Registrant's Shareholders Report for the fiscal
quarter ended December 31, 1995, is attached hereto as Exhibit 19.
Exhibit 27: Financial data schedules:
This information is filed only in the electronic filing.
-14-
<PAGE> 15
EXHIBIT 10(H)
(CONFORMED COPY)
AMENDMENT NO. 2 TO
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
AMENDMENT NO. 2, DATED AS OF DECEMBER 22, 1995 (this "Amendment"), TO
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT, dated as of December 30,
1994, as amended by that certain Amendment No. 1., dated as of September 15,
1995 (as so amended, the "Credit Agreement"), among OUTBOARD MARINE
CORPORATION (the "Company"), certain financial institutions parties hereto
(each a "Bank" and collectively, the "Banks"), THE FIRST NATIONAL BANK OF
CHICAGO, as agent for the Banks (in such capacity, the "Agent"), and BANK OF
AMERICA ILLINOIS, as co-agent for the Banks (in such capacity, the
"Co-Agent").
WHEREAS, the Company, the Banks, the Agent and the Co-Agent have entered
into the Credit Agreement;
WHEREAS, the Company, the Banks, the Agent and the Co-Agent desire to
amend the Credit Agreement as set forth herein;
NOW, THEREFORE, in consideration of the premises made hereunder, and for
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto, intending to be legally bound, hereby
agree as follows:
l. Definitions. Unless otherwise expressly defined herein, all
capitalized terms used herein and defined in the Credit Agreement shall be
used herein as so defined. Unless otherwise expressly stated herein, all
Section and Article references herein shall refer to Sections and Articles of
the Credit Agreement.
2. Section 1.01. The following definitions in Section 1.01 of the
Credit Agreement are amended in the following manner:
(a) The definition of "Indebtedness for Borrowed Money" is hereby
amended to insert the phrase "other than the Performance Guaranty,"
immediately following the heading "(iv)" where it appears in the first
sentence therein.
(b) The following definition is hereby inserted immediately following
the definition of "Percentage Share" contained in Section 1.01:
`"Performance Guaranty" means that certain Performance Guaranty,
dated as of December 22, 1995, executed and delivered by the Company in
favor of its wholly-owned Subsidiary, Outboard Marine Receivables Corp.,
a Delaware corporation ("OMRC"), pursuant to which the Company
guarantees certain performance obligations in connection with the sale
of accounts receivable permitted under Section 6.04(h) by certain of
its Subsidiaries to OMRC including, without limitation, customary
indemnities, representations and warranties but excluding, as a general
matter, collectibility of such accounts, as such Performance Guaranty
may be amended, restated, supplemented or otherwise modified from time
to time.'
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<PAGE> 16
(c) The definition of "Standard & Poor's" shall be deleted in its
entirety and restated as follows:
`"Standard & Poor's" means Standard & Poor's Ratings Services, a
division of The McGraw Hill Companies, Inc.'
(d) The definition of "Termination Date" shall be deleted in its
entirety and restated as follows:
`"Termination Date" means the earliest to occur of
(a) December 31, 1998, or such later date to which the
Termination Date is extended pursuant to Section 2.21 hereof,
(b) the date on which, prior to the date set forth in (a) above,
the Credit terminates in accordance with a notice to that effect given
to the Agent by the Company pursuant to Section 2.13, and
(c) the date on which the Credit is terminated or accelerated
pursuant to Article VII.'
3. Section 2.04. Clause (a) of Section 2.04 of the Credit Agreement
is hereby deleted in its entirety and replaced with the following:
"(a) The outstanding principal balance of each Advance shall bear
interest to but excluding the last day of the Interest Period therefor at a
rate per annum equal to the Base Rate selected by the Company plus the
Applicable Margin set forth below for each Base Rate, which corresponds to
the lower of the most recently published final Standard & Poor's or Moody's
rating for the Company's senior long-term unsecured public debt (without
credit enhancement) in effect four (4) Banking Days before the applicable
date of Borrowing:
Reference Rate LIBOR Rate CD Rate
-------------- ---------- -------
Equal to or Better
than BBB and Baa2 0% .25% .375%
Equal to or Better
than BBB- and Baa3 0% .35% .475%
Equal to or Better
than BB+ and Ba1 0% .50% .625%
Equal to or Better
than BB
and Ba2 0% .625% .750%
Lower than BB
or Ba2 .0% 1.00% 1.125%"
4. Section 2.07. Clause (a) of Section 2.07 of the Credit Agreement
is hereby deleted in its entirety and replaced with the following:
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<PAGE> 17
"(a) For the period from December 22, 1995 to but excluding the
Termination Date, the Company shall pay to the Agent for the account of the
Banks a facility fee at a rate per annum equal to the percentage set forth
below of the Aggregate Commitment for the lower of the most recently
published final Standard & Poor's or Moody's rating of the Company's senior
long-term unsecured public debt (without credit enhancement) in effect on
the last day of the then ending fiscal quarter of the Company. The facility
fee shall be due quarterly in arrears, and each payment shall be made within
five (5) days following the end of each calendar quarter, and the last
payment shall be due and paid on the Termination Date. The applicable rate
shall be the rate set forth below:
Equal to or Equal to or Equal to or Equal to or
Better than Better than Better than Better than Lower than
BBB and Baa2 BBB- and Baa3 BB+ and Ba1 BB and Ba2 BB or Ba2
.15% .20% .25% .25% .375%"
5. Section 2.20. Clause (g) of Section 2.20 of the Credit
Agreement is hereby deleted in its entirety and replaced with the following:
"(g) Compensation for Facility Letters of Credit. The Company shall
pay to the Agent, for the ratable account of each Bank, a Letter of
Credit Fee in respect of the Facility Letter of Credit then being issued in
accordance with the following schedule, based on the lower of the most
recently published final Standard & Poor's or Moody's rating of the
Company's senior long-term unsecured public debt (without credit
enhancement) in effect on the day such Facility Letter of Credit is issued.
For Existing Letters of Credit, the Letter of Credit Fee will commence on
the Closing Date and be payable in accordance with the following schedule.
Promptly upon its receipt of such Letter of Credit Fee, the Agent shall
promptly pay to each Bank, in immediately available funds, an amount equal
to such Bank's Percentage Share thereof.
Letter of Credit Fee
For the period from and For the period from and
including the Closing Date including 12/22/95 and
to but excluding 12/22/95 thereafter
-------------------------- -----------------------
Equal to or Better
than BBB and Baa2 .30% .25%
Equal to or Better
than BBB- and Baa3 .40% .35%
Equal to or Better
than BB+ and Ba1 .70% .50%
Equal to or Better
than BB and Ba2 .90% .625%
Lower than BB or Ba2 1.00% 1.00%
Any Issuer shall have the right to receive, for its own account, (i) in
respect of each Facility Letter of Credit issued by it, a fee in the amount
of 1/4 of 1% per annum of the maximum face amount of such Facility Letter of
Credit ("Issuer's Fee"), and (ii) all of its reasonable and customary costs
of issuing and servicing the Facility Letters of Credit. The Letter of
Credit Fee and the Issuer's Fee shall begin to accrue on the Issuance Date
or, for Existing Letters of Credit, commencing on the Closing Date and shall
be payable quarterly in arrears."
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<PAGE> 18
6. Section 2.21. Section 2.21 of the Credit Agreement is hereby
deleted in its entirety and replaced with the following:
"2.21. Extension of Termination Date. The Company may, by notice to
the Agent (each such notice being an "Extension Notice") given no later than
October 31, 1996 but not sooner than October 1, 1996, extend the Termination
Date to a date one year after the then applicable Termination Date;
provided, however, that such extension shall not be effective unless all
of the Banks consent to such extension by written notice to the Agent within
30 days of the Agent's receipt of the Extension Notice. Failure to respond
shall be deemed a rejection of the extension request. The Agent shall notify
each Bank of its receipt of an Extension Notice within two (2) Business Days
after the Agent's receipt thereof. The Company may deliver only one (1)
Extension Notice during the term of this Agreement. In no event may the
Termination Date be extended beyond December 31, 1999. If less than 100% of
the Banks consent to the proposed extension, the Commitments of the Banks
shall terminate on the then effective Termination Date without giving effect
to such proposed extension."
7. Section 6.04. Clause (h) of Section 6.04 of the Credit Agreement
is hereby deleted in its entirety and replaced with the following:
"(h) (1) sales of receivables by the Company or any Consolidated
Subsidiary to any Consolidated Subsidiary; and (2) sales of receivables by
the Company or any Consolidated Subsidiary to any Person other than a
Consolidated Subsidiary (i) in such amounts that at any one time the
aggregate unpaid amount of accounts receivable so sold shall not exceed One
Hundred Twenty-five Million Dollars ($125,000,000); (ii) the consideration
received by the applicable transferor for such sales of accounts receivable
includes cash, cash equivalents and marketable securities in an amount not
less than fifty percent (50%) of the outstanding principal amount (excluding
rebates) of such accounts; (iii) not more than twenty percent (20%) of the
consideration received by the applicable transferor for such sales of
accounts receivable consists of promissory notes (whether subordinated or
otherwise restricted in payment) against which the purchaser of such
accounts receivable may offset the principal amount of uncollected accounts
receivable; and (iv) the amount of any recourse (other than customary
representations and warranties made by the applicable transferor with
respect to such receivables) to the applicable transferor established in
connection with such sale of receivables does not exceed 10% of the face
amount of the receivables sold."
8. Effective Date. This Amendment shall become effective as of the
date first above written (the "Effective Date") upon receipt by the Agent of
counterparts of this Amendment duly executed by the Company, the Banks, the
Co-Agent and the Agent.
9. Company Representations. The Company hereby represents and warrants
that, as of the Effective Date, (i) the execution, delivery and performance of
this Amendment are within the Company's corporate powers and have been duly
authorized by all requisite corporate action, (ii) the Credit Agreement (both
prior to and after the effectiveness of this Amendment), each Note and any and
all other agreements, documents, certificates and other instruments executed in
connection therewith are in full force and effect and constitute the valid and
binding obligations of the Company, (iii) the representations of the Company
set forth in Article IV (other than Sections 4.09 and 4.13(a)) are true and
correct in all material respects on and as of the Effective Date, and (iv) the
Company is in compliance with all of the terms and conditions in the Credit
Agreement to be performed or observed on its part and no Default or Event of
Default has occurred and is continuing under the Credit Agreement.
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<PAGE> 19
10. Effect of Amendment. The parties agree that, except as amended
hereby, the Credit Agreement shall remain in full force and effect in
accordance with its terms. From and after the Effective Date, any reference
to the Credit Agreement shall be deemed to be a reference to the Credit
Agreement as amended by this Amendment.
11. Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall constitute an original, but all of which
when taken together shall constitute but one instrument.
12. Governing Law. This Amendment shall be governed by and construed
in accordance with the laws of the State of Illinois.
13. Fees and Expenses. The Company agrees to pay all out-of-pocket
fees and expenses of the Agent (including the fees and expenses of counsel)
incurred in the negotiation, drafting and execution of this Amendment.
IN WITNESS WHEREOF, the Company, the Agent, the Co-Agent and the Banks
have caused this Amendment to be duly executed by their respective authorized
officers as of the day and year first above written.
OUTBOARD MARINE CORPORATION
By: /s/: JAMES R. MAURICE
----------------------
Name: James R. Maurice
Title: Vice President and Controller
THE FIRST NATIONAL BANK OF CHICAGO,
individually and as Agent
By: /s/: DEBORAH E. STEVENS
------------------------
Name: Deborah E. Stevens
Title: Authorized Agent
BANK OF AMERICA ILLINOIS,
individually and as Co-Agent
By: /s/: MICHAEL G. HEALY
---------------------
Name: Michael G. Healy
Title: Vice President
ROYAL BANK OF CANADA
By: /s/: MOLLY DRENNAN
------------------
Name: Molly Drennan
Title: Vice President
THE BANK OF NEW YORK
By: /s/: SARAH POWELL-GOLDMAN
-------------------------
Name: Sarah Powell-Goldman
Title: Assistant Vice President
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<PAGE> 20
NBD BANK, N.A.
By: /s/: JENNY GILPIN
-----------------
Name: Jenny Gilpin
Title: Second Vice President
ABN AMRO BANK N.V.
By: /s/: JOHN WM. STRANGER
----------------------
Name: John Wm. Stranger
Title: Group Vice President
By: /s/: R. MICHIEL SCHWARTZ
-----------------------
Name: R. Michiel Schwartz
Title: Vice President
THE BANK OF NOVA SCOTIA
By: /s/: F. C. H. ASHBY
-------------------
Name: F. C. H. Ashby
Title: Senior Manager Loan Operations
FIRSTAR BANK MILWAUKEE, N.A.
By: /s/: F. R. DENGEL
-----------------
Name: F. R. Dengel
Title: Vice President
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<PAGE> 21
EXHIBIT 10(I)
RECEIVABLES PURCHASE AGREEMENT
Dated as of December 22, 1995
Among
OUTBOARD MARINE RECEIVABLES CORP.,
as Seller
and
PREFERRED RECEIVABLES FUNDING CORPORATION
and
THE FINANCIAL INSTITUTIONS PARTY HERETO,
as Investors
and
THE FIRST NATIONAL BANK OF CHICAGO,
as Agent
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<PAGE> 22
TABLE OF CONTENTS
ARTICLE I
AMOUNTS AND TERMS OF THE PURCHASES
Section 1.1. Purchase Facility...........................................
Section 1.2. Making Incremental Purchases................................
Section 1.3. Selection of Tranche Periods and Discount Rates.............
Section 1.5. Dividing or Combining Receivable Interests..................
Section 1.6. Reinvestment Purchases......................................
Section 1.7. Liquidation Settlement Procedures...........................
Section 1.8. Deemed Collections..........................................
Section 1.9. Discount; Payments and Computations, Etc....................
Section 1.10. Maximum Aggregate Receivables Interest.....................
Section 1.11. Seller's Extinguishment....................................
Section 1.12. Servicer Fee...............................................
ARTICLE II
LIQUIDITY FACILITY
Section 2.1. Transfer to Investors........................................
Section 2.2. Transfer Price Reduction Discount............................
Section 2.3. Payments to PREFCO...........................................
Section 2.4. Limitation on Commitment to Purchase from PREFCO.............
Section 2.5. Defaulting Investors.........................................
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1. Seller Representations and Warranties.......................
(a) Corporate Existence and Power..................................
(b) No Conflict....................................................
(c) Governmental Authorization.....................................
(d) Binding Effect.................................................
(e) Accuracy of Information........................................
(f) Use of Proceeds................................................
(h) Good Title; Perfection.........................................
(i) Places of Business.............................................
(j) Collection Banks; Etc..........................................
(k) Material Adverse Effect........................................
(l) Names..........................................................
(m) Actions, Suits.................................................
(n) Credit and Collection Policies.................................
(o) Payments to Originators........................................
(p) Ownership of the Seller........................................
(q) Not an Investment Company......................................
Section 3.2. Investor Representations and Warranties.....................
(a) Existence and Power............................................
(b) No Conflict....................................................
(c) Governmental Authorization.....................................
(d) Binding Effect.................................................
ARTICLE IV
CONDITIONS OF PURCHASES
Section 4.1. Conditions Precedent to Initial Purchase....................
Section 4.2. Conditions Precedent to All Purchases and Reinvestments.....
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<PAGE> 23
ARTICLE V
COVENANTS
Section 5.1. Affirmative Covenants of Seller.............................
(a) Financial Reporting............................................
(b) Notices........................................................
(c) Compliance with Laws...........................................
(d) Audits.........................................................
(e) Keeping and Marking of Records and Books.......................
(f) Compliance with Contracts and Credit and Collection Policy.....
(g) Purchase of Receivables from the Originators...................
(h) Ownership Interest.............................................
(i) Payment to the Originators.....................................
(j) Performance and Enforcement of Transfer Agreement..............
(k) Purchasers' Reliance...........................................
(l) Collections....................................................
(m) Minimum Net Worth..............................................
Section 5.2. Negative Covenants of Seller................................
(a) Name Change, Offices, Records and Books of Accounts............
(b) Change in Payment Instructions to Obligors.....................
(c) Modifications to Contracts and Credit and Collection Policy....
(d) Sales, Liens, Etc..............................................
(e) Nature of Business; Other Agreements; Other Indebtedness.......
(f) Amendments to Transfer Agreement...............................
(g) Amendments to Corporate Documents..............................
(h) Merger.........................................................
ARTICLE VI
ADMINISTRATION AND COLLECTION
Section 6.1. Designation of Servicer.....................................
Section 6.2. Duties of Servicer..........................................
Section 6.3. Collection Notices..........................................
Section 6.4. Responsibilities of the Seller..............................
Section 6.5. Reports.....................................................
ARTICLE VII
SERVICER DEFAULTS
Section 7.1. Servicer Default............................................
ARTICLE VIII
INDEMNIFICATION
Section 8.1. Indemnities by the Seller...................................
Section 8.2. Increased Cost and Reduced Return...........................
Section 8.3. Other Costs and Expenses Relating to this Agreement.........
Section 8.4. Other Costs and Expenses Relating to PREFCO; Allocations....
ARTICLE IX
THE AGENT
Section 9.1. Authorization and Action....................................
Section 9.2. Delegation of Duties........................................
Section 9.3. Exculpatory Provisions......................................
Section 9.4. Reliance by Agent...........................................
Section 9.5. Non-Reliance on Agent and Other Purchasers..................
Section 9.6. Reimbursement and Indemnification...........................
Section 9.7. Agent in its Individual Capacity............................
Section 9.8. Successor Agent.............................................
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<PAGE> 24
ARTICLE X
ASSIGNMENTS; PARTICIPATIONS
Section 10.1. Assignments................................................
Section 10.2. Participations.............................................
ARTICLE XI
MISCELLANEOUS
Section 11.1. Waivers and Amendments.....................................
Section 11.2 Notices....................................................
Section 11.3. Ratable Payments...........................................
Section 11.4. Protection of Ownership Interests of the Purchasers........
Section 11.5. Confidentiality............................................
Section 11.6. Bankruptcy Petition........................................
Section 11.7. Limitation of Liability....................................
SECTION 11.8. CHOICE OF LAW..............................................
SECTION 11.9. CONSENT TO JURISDICTION....................................
SECTION 11.10. WAIVER OF JURY TRIAL......................................
Section 11.11. Integration; Survival of Terms............................
Section 11.12. Counterparts; Severability................................
Section 11.13. First Chicago Roles.......................................
Section 11.14. Characterization..........................................
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<PAGE> 25
OUTBOARD MARINE RECEIVABLES CORP.
RECEIVABLES PURCHASE AGREEMENT
This Receivables Purchase Agreement dated as of December 22, 1995 is
among OUTBOARD MARINE RECEIVABLES CORP., a Delaware corporation (the "Seller"),
the Investors, Preferred Receivables Funding Corporation ("PREFCO") and The
First National Bank of Chicago, as Agent. Unless defined elsewhere herein,
capitalized terms used in this Agreement shall have the meanings assigned to
such terms in Exhibit I hereto.
PRELIMINARY STATEMENTS
The Seller desires to transfer and assign Receivable Interests to the
Purchasers from time to time.
PREFCO may, in its absolute and sole discretion, purchase Receivable
Interests from the Seller from time to time.
Investors shall, at the request of the Seller, purchase Receivable
Interests from time to time. In addition, the Investors have agreed to provide
a liquidity facility to PREFCO.
The First National Bank of Chicago has been requested and is willing to
act as Agent on behalf of PREFCO and the Investors in accordance with the terms
hereof.
ARTICLE I
AMOUNTS AND TERMS OF THE PURCHASES
Section 1.1. Purchase Facility. (a) Upon the terms and subject to
the conditions hereof, the Seller may, at its option, sell and assign
Receivable Interests to the Agent for the benefit of the Purchasers. PREFCO
may, at its option, instruct the Agent to purchase on behalf of PREFCO, or if
PREFCO shall decline to purchase, the Agent shall purchase on behalf of the
Investors, Receivable Interests from time to time during the period from the
date hereof to but not including the Facility Termination Date. The Seller
hereby assigns, transfers and conveys to the Agent for the benefit of the
relevant Purchaser or Purchasers, and the Agent hereby acquires all of the
Seller's right, title and interest in and to the Receivable Interests.
(b) The Seller may, upon at least five days' notice to the Agent,
terminate in whole or reduce in part ratably among the Investors the unused
portion of the Purchase Limit; provided that each partial reduction of the
Purchase Limit shall be in an amount equal to $5,000,000 or an integral
multiple thereof.
Section 1.2. Making Incremental Purchases. The Seller shall provide
the Agent with a purchase notice, in substantially the form of Exhibit IX
hereto (each a "Purchase Notice"), at least three Business Days prior to each
Incremental Purchase. Each Purchase Notice shall, except as set forth below,
be irrevocable and shall specify the requested Purchase Price (which shall not
be less than $5,000,000) and date of such Incremental Purchase, together with
the duration of the initial Tranche Period and the initial Discount Rate
related thereto. Following receipt of a Purchase Notice, the Agent will
determine whether PREFCO agrees to make the purchase. If PREFCO declines to
make a proposed purchase, the Agent shall promptly advise the Seller and the
Servicer, and the Seller may thereupon cancel the Purchase Notice or the
Incremental Purchase of the Receivable Interests will be made by the Investors.
On the date of each Incremental Purchase, upon satisfaction of the applicable
conditions precedent set forth in Article IV, PREFCO or each Investor, as
applicable, shall deposit to the Facility Account, in immediately available
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<PAGE> 26
funds, no later than 12:00 noon (Chicago time), an amount equal to (i) in the
case of PREFCO, the aggregate Purchase Price of each Receivable Interests
PREFCO is then purchasing or (ii) in the case of an Investor, such Investor's
Pro Rata Share of the aggregate Purchase Price of each of the Receivable
Interests the Investors are purchasing.
Section 1.3. Selection of Tranche Periods and Discount Rates. (a) Each
Receivable Interest shall at all times have an associated amount of Capital, a
Discount Rate and Tranche Period applicable to it. Not less than $5,000,000 of
Capital may be allocated to any single Receivable Interest. The Seller shall
request Discount Rates and Tranche Periods for the Receivable Interests of the
Purchasers. The Seller may select the CP Rate, with the concurrence of the
Agent, or the Base Rate for the Receivable Interests of PREFCO and the LIBO
Rate or the Base Rate for the Receivable Interests of the Investors. The Seller
shall by 9:00 a.m. (Chicago time), (i) at least three Business Days prior to
the expiration of any then existing Tranche Period with respect to which the
LIBO Rate is being requested as a new Discount Rate, (ii) at least one Business
Day prior to the expiration of any then existing Tranche Period with respect to
which the CP Rate is being requested as a new Discount Rate and (iii) at least
one Business Day prior to the expiration of any Tranche Period with respect to
which the Base Rate is being requested as a new Discount Rate, give the Agent
irrevocable notice of the new Tranche Period and Discount Rate for the
Receivable Interest associated with such expiring Tranche Period. The Agent
shall, promptly following its knowledge thereof, advise the Seller in any
instance if the Tranche Period selected by the Seller at any time is not
acceptable to PREFCO or the Investors, as applicable. If the Seller fails to
request timely a Discount Rate and/or a Tranche Period for any Receivable
Interest pursuant to the terms of this Section 1.3, or the Seller and the Agent
fail to agree on an acceptable duration for any Tranche Period, the Discount
Rate shall be the CP Rate (if PREFCO is the applicable Purchaser) or the Base
Rate, in the Agent's sole discretion, and the applicable Tranche Period shall
be a period of one day commencing on the day requested in the Purchase Notice
or the last day of the then expiring Tranche Period for such Receivable
Interest, as applicable. Until the Seller gives notice to the Agent of
another Discount Rate, the initial Discount Rate for any Receivable Interest
transferred to the Investors pursuant to Section 2.1 shall be the Base Rate.
(b) If any Investor notifies the Agent that it has determined that
funding its Pro Rata Share of the Receivable Interests of the Investors at a
LIBO Rate would violate any applicable law, rule, regulation, or directive of
any governmental or regulatory authority, whether or not having the force of
law, or that (i) deposits of a type and maturity appropriate to match fund its
Receivable Interests at such LIBO Rate are not available or (ii) such LIBO Rate
does not accurately reflect the cost of acquiring or maintaining a Receivable
Interest at such LIBO Rate, then the Agent shall suspend the availability of
such LIBO Rate and require the Seller to select a new Discount Rate for any
Receivable Interest accruing Discount at such LIBO Rate.
Section 1.4. Percentage Evidenced by Receivable Interests. (a) Each
Receivable Interest shall be initially computed on its date of purchase.
Thereafter, until its Liquidation Day, each Receivable Interest shall be
automatically recomputed (or deemed to be recomputed) on each day prior to its
Liquidation Day. The variable percentage represented by any Receivable
Interest as computed (or deemed recomputed) as of the close of business on the
day immediately preceding its Liquidation Day shall remain constant at all
times after such Liquidation Day.
(b) If any Receivable Interest would otherwise be reduced or increased
on any day on account of newly arising Collections or Receivables, the Agent
may prevent that reduction by notifying the Servicer on such day that the Net
Receivables Balance for such Receivable Interest will include only the number
or portion of Receivables or Collections arising on such day as shall cause the
percentage evidenced by such Receivable Interest to remain constant. The
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<PAGE> 27
remainder of the Receivables, Collections or portion thereof arising on such
day shall be treated as arising on the next succeeding Business Day.
Section 1.5. Dividing or Combining Receivable Interests. The Seller or
the Agent may, upon notice to and consent by the other received not later than
the applicable time required under Section 1.3(a) prior to the end of a Tranche
Period for any Receivable Interest, take any of the following actions with
respect to such Receivable Interest: (i) divide the Receivable Interest into
two or more Receivable Interests having aggregate Capital equal to the Capital
of such divided Receivable Interest, (ii) combine the Receivable Interest with
another Receivable Interest with a Tranche Period ending on the same day,
creating a new Receivable Interest having Capital equal to the Capital of the
two Receivable Interests combined or (iii) combine the Receivable Interest
with a Receivable Interest to be purchased on such day by such Purchaser,
creating a new Receivable Interest having Capital equal to the Capital of the
two Receivable Interests combined, provided that, a Receivable Interest of
PREFCO may not be combined with a Receivable Interest of the Investors.
Section 1.6. Reinvestment Purchases. At any time that any Collection
or Collections are received by the Servicer after the initial purchase, or any
other Incremental Purchase, of a Receivable Interest hereunder and on or prior
to the Liquidation Day of such Receivable Interest, the Seller hereby requests
and the Purchasers hereby agree to make, simultaneously with such receipt, a
reinvestment (each a "Reinvestment") with that portion of each and every
Collection received by the Servicer that is part of such Receivable Interest,
such that after giving effect to such Reinvestment, the amount of the Capital
of such Receivable Interest immediately after any such receipt and
corresponding Reinvestment shall be equal to the amount of the Capital
immediately prior to such receipt.
Section 1.7. Liquidation Settlement Procedures. On the Liquidation Day
of a Receivable Interest and on each day thereafter, the Servicer shall set
aside and hold in trust for the holder of such Receivable Interest, the
percentage evidenced by such Receivable Interest of Collections received on
such day. On the last day of each Tranche Period of a Receivable Interest
after the occurrence of its Liquidation Day, the Servicer shall remit to the
Agent's account the amounts set aside pursuant to the preceding sentence,
together with any remaining amounts set aside pursuant to Section 1.8 prior to
such day, but not to exceed the sum of (i) the accrued Discount for such
Receivable Interest, (ii) the Capital of such Receivable Interest, (iii) the
aggregate of all other amounts then owed hereunder by Seller to the
Purchasers, and (iv) the accrued Servicer Fee for such Receivable Interest. If
there shall be insufficient funds on deposit for the Servicer to distribute
funds in payment in full of the aforementioned amounts, the Servicer shall
distribute funds first, to reimbursement of the Agent's costs of collection and
enforcement of this Agreement, second, in reduction of the Capital of the
Receivable Interests, third, in payment of all accrued Discount for the
Receivable Interests, fourth, in payment of all other amounts payable to the
Purchasers, and fifth, to the Servicer in payment of all accrued Servicer Fee
in respect of such Receivable Interest. Collections allocated to the
Receivable Interests of the Investors shall be shared ratably by the Investors
in accordance with their Pro Rata Shares. Collections applied to the payment
of fees, expenses, Discount and all other amounts payable by the Seller to the
Agent and the Purchasers hereunder shall be allocated ratably among the Agent
and the Purchasers in accordance with such amounts owing to each of them. To
the extent Collections are available for such purpose in accordance with the
foregoing, the accrued Servicer Fee in respect of each Receivable Interest
shall be remitted to the Servicer. Following the date on which the Aggregate
Unpaids are reduced to zero, the Servicer shall pay to Seller any remaining
Collections set aside and held by the Servicer pursuant to this Section 1.7.
Section 1.8. Deemed Collections. If on any day the Outstanding Balance
of, or Finance Charges in respect of, a Receivable is either (x) reduced as a
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result of any defective or rejected goods or services, any cash discount or any
adjustment by the Seller, any Designated Servicer or any Originator or (y)
reduced or canceled as a result of a setoff in respect of any claim by any
Person (whether such claim arises out of the same or a related transaction or
an unrelated transaction), the Seller shall be deemed to have received on such
day a Collection of such Receivable in the amount of such reduction or
cancellation. If on any day any of the representations or warranties in
Article III are no longer true with respect to a Receivable, the Seller shall
be deemed to have received on such day a Collection of such Receivable in full.
If the Seller receives any Collections or is deemed to receive Collections
pursuant to this Section 1.8 or otherwise, the Seller shall immediately pay
such Collections or deemed Collections to the Servicer and, at all times prior
to such payment, such Collections shall be held in trust by the Seller for the
exclusive benefit of the Purchasers and the Agent.
Section 1.9. Discount; Payments and Computations, Etc. (a) Discount
shall accrue for each Receivable Interest for each day occurring during the
Tranche Period for such Receivable Interest. On the last day of each Tranche
Period the Seller shall pay to the Agent an amount equal to the accrued and
unpaid Discount for such Tranche Period.
(b) Notwithstanding any limitation on recourse contained in this
Agreement, the Seller shall pay to the Agent, for the account of the relevant
Purchaser, such fees as set forth in the Fee Letter (which fees shall be
sufficient to pay the Investor Fees), all amounts payable as Discount, all
amounts payable pursuant to Article VIII, if any, all Servicer costs, if any,
payable pursuant to Section 6.2 and on demand therefor, any Early Collection
Fee. If any Person fails to pay any amount when due hereunder, such Person
agrees to pay, on demand, the Default Fee.
(c) All amounts to be paid or deposited by any Person hereunder shall be
paid or deposited in accordance with the terms hereof no later than 12:00 noon
(Chicago time) on the day when due in immediately available funds; if such
amounts are payable to a Purchaser they shall be paid to the Agent, for the
account of such Purchaser, at One First National Plaza, Chicago, Illinois 60670
until otherwise notified by the Agent. The Agent shall, in accordance with its
customary practice, provide invoices from time to time to the Seller in
respect of Discount and other fees and expenses payable by the Seller
hereunder. In the event the Seller shall at any time fail to pay any amount
when due hereunder, the Agent may, on notice to the Seller, debit the Facility
Account for such amount. All computations of Discount and per annum fees
hereunder and under the Fee Letter shall be made on the basis of a year of 360
days for the actual number of days elapsed (including the first but excluding
the last day). All per annum fees shall be payable monthly in arrears. If
any amount hereunder shall be payable on a day which is not a Business Day,
such amount shall be payable on the next succeeding Business Day.
Section 1.10. Maximum Aggregate Receivables Interest. (a) The Seller
shall ensure that the aggregate Receivable Interests of the Purchasers shall at
no time exceed 100%. If, on any day, the aggregate Receivable Interests of the
Purchasers exceeds 100%, the Seller shall immediately pay to the Agent an
amount to be applied to reduce the Capital of the Receivable Interests, such
that after giving effect to such payment the aggregate of the Receivable
Interest equals or is less than 100%; provided that in the event the aggregate
Receivable Interests shall exceed 100% by reason of the circumstances described
in Section 1.10(b) below, the procedures set forth therein shall apply. Such
amount shall be applied to the reduction of the Capital of the Receivable
Interests ratably in accordance with the percentages of the Receivable
Interests. Any amounts received by the Investors pursuant to the preceding
sentence shall be applied ratably in accordance with their Pro Rata Shares.
The Seller hereby grants to the Agent for the ratable benefit of the
Purchasers a security interest in all of its interest in the Receivables,
Related Security, Collections and proceeds thereof to secure payment of the
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Aggregate Unpaids, including its indemnity obligations under Article VIII and
all other obligations owed hereunder to the Purchasers.
(b) If at any time either
(i) the aggregate payment obligations of the Originators arising
during the period of 12 consecutive months then most recently ended for
the repurchase of inventory sold to any Person under or in connection
with any Floor Plan Program shall exceed an amount equal to 10% of the
Outstanding Balance of all Receivables as of the last day of such period
that are financed under any Floor Plan Program; or
(ii) OMC shall at any time fail to maintain a ratio of (a) EBIT
net of cash interest income (excluding interest income earned on dealer
financing) to (b) Interest Expense, net of cash interest income
(excluding interest income earned on dealer financing), of not less 2.50
to 1.00 as of the last day of each calendar quarter, as measured in each
case on a consolidated basis for the twelve-month period ending on the
last day of such calendar quarter, all Floor Plan Receivables shall
thereupon cease to be Eligible Receivables for purposes of this
Agreement and the Receivables Interests shall be recomputed. If the
aggregate Receivable Interests of the Purchasers, after giving effect to
such recomputation, shall exceed 100%, all Purchases and Reinvestments
shall cease and a Liquidation Day shall be deemed to have occurred.
Thereafter, until such time as the aggregate Receivable Interests of the
Purchasers shall be less than or equal to 100%, the settlement
procedures set forth in Section 1.7 shall apply.
For purposes of this Section 1.10(b), "EBIT" means for any period of
determination the sum of (a) the amount shown on the consolidated income
statement of OMC and its consolidated subsidiaries as its "net earnings (loss)"
before deduction of taxes, (b) all accrued interest paid or payable by OMC and
its consolidated subsidiaries, (c) any extraordinary losses, and (d)
amortization of goodwill and intangibles associated with any acquisition minus
any extraordinary gains, all calculated on a consolidated basis.
Section 1.11. Seller's Extinguishment. The Seller shall have the
right, on five (5) Business Days' written notice to the Agent, at any time
following the reduction of the Capital to a level that is less than five
percent (5%) of the original Purchase Limit, to repurchase from the Purchasers
all, and not part, of the then outstanding Receivable Interests. The purchase
price in respect thereof shall be an amount equal to the Aggregate Unpaids
through the date of such repurchase, payable in immediately available funds.
Such repurchase shall be without representation, warranty or recourse of any
kind by, on the part of or against any Purchaser or Agent.
Section 1.12. Servicer Fee. Each Purchaser shall pay to the Servicer a
collection fee (the "Servicer Fee") of two percent (2%) per annum on the
average daily amount of Capital of each Receivable Interest, from the date such
Receivable Interest arises until the date on which such Receivable Interest
shall be reduced to zero, payable on the last day of each Tranche Period for
such Receivable Interest; provided, however, that upon three Business Days'
notice to the Agent, the Servicer may (if not a Designated Servicer) elect to
be paid as such fee another percentage per annum on the average daily amount of
Capital of each such Receivable Interest but in no event in excess of 110% of
the actual and reasonable costs and expenses related to servicing , collecting
and administering the Receivables; and provided, further, that such fee in any
event shall be payable only from Collections pursuant to, and subject to the
priority of payment set forth in, Section 1.7.
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ARTICLE II
LIQUIDITY FACILITY
Section 2.1. Transfer to Investors. Each Investor hereby agrees,
subject to Section 2.4, that immediately upon written notice from PREFCO
delivered on or prior to the Liquidity Termination Date, it shall acquire by
assignment from PREFCO, without recourse or warranty, its Pro Rata Share of
one or more of the Receivable Interests of PREFCO as specified by PREFCO. Each
Investor shall promptly pay to the Agent at an account designated by the Agent,
for the benefit of PREFCO, its Acquisition Amount. Unless an Investor has
notified the Agent that it does not intend to pay its Acquisition Amount, the
Agent may assume that such payment has been made and may, but shall not be
obligated to, make the amount of such payment available to PREFCO in reliance
upon such assumption. PREFCO hereby sells and assigns to the Agent for the
ratable benefit of the Investors, and the Agent hereby purchases and assumes
from PREFCO, effective upon the receipt by PREFCO of the PREFCO Transfer Price,
the Receivable Interests of PREFCO which are the subject of any transfer
pursuant to this Article II.
Section 2.2. Transfer Price Reduction Discount. If the Adjusted
Liquidity Price is included in the calculation of the PREFCO Transfer Price for
any Receivable Interest, each Investor agrees that the Agent shall pay to
PREFCO the Reduction Percentage of any Discount received by the Agent with
respect to such Receivable Interest.
Section 2.3. Payments to PREFCO. In consideration for the reduction of
the PREFCO Transfer Prices by the PREFCO Transfer Price Reductions, effective
only at such time as the aggregate amount of the Capital of the Receivable
Interests of the Investors equals the PREFCO Residual, each Investor hereby
agrees that the Agent shall not distribute to the Investors and shall
immediately remit to PREFCO any Discount, Collections or other payments
received by it to be applied pursuant to the terms hereof or otherwise to
reduce the Capital of the Receivable Interests of the Investors.
Section 2.4. Limitation on Commitment to Purchase from PREFCO.
Notwithstanding anything to the contrary in this Agreement, no Investor shall
have any obligation to purchase any Receivable Interest from PREFCO, pursuant
to Section 2.1 or otherwise, if: (i) PREFCO shall have voluntarily commenced
any proceeding or filed any petition under any bankruptcy, insolvency or
similar law seeking the dissolution, liquidation or reorganization of PREFCO or
taken any corporate action for the purpose of effectuating any of the
foregoing; or (ii) involuntary proceedings or an involuntary petition shall
have been commenced or filed against PREFCO by any Person under any bankruptcy,
insolvency or similar law seeking the dissolution, liquidation or reorganiza-
tion of PREFCO and such proceeding or petition shall have not been dismissed.
Section 2.5. Defaulting Investors. If one or more Investors defaults
in its obligation to pay its Acquisition Amount pursuant to Section 2.1 (each
such Investor shall be called a "Defaulting Investor" and the aggregate amount
of such defaulted obligations being herein called the "PREFCO Transfer Price
Deficit"), then upon notice from the Agent, each Investor other than the
Defaulting Investors (a "Non-Defaulting Investor") shall promptly pay to the
Agent, in immediately available funds, an amount equal to the lesser of (x)
such Non-Defaulting Investor's proportionate share (based upon the relative
Commitments of the Non-Defaulting Investors) of the PREFCO Transfer Price
Deficit and (y) the unused portion of such Non-Defaulting Investor's Commit-
ment. A Defaulting Investor shall forthwith upon demand pay to the Agent for
the account of the Non-Defaulting Investors all amounts paid by each
Non-Defaulting Investor on behalf of such Defaulting Investor, together with
interest thereon, for each day from the date a payment was made by a
Non-Defaulting Investor until the date such Non-Defaulting Investor has been
paid such amounts in full, at a rate per annum equal to the Federal Funds
Effective Rate plus 2%. In addition, without prejudice to any other rights
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that PREFCO may have under applicable law, each Defaulting Investor shall pay
to PREFCO forthwith upon demand, the difference between such Defaulting
Investor's unpaid Acquisition Amount and the amount paid with respect thereto
by the non-Defaulting Investors, together with interest thereon, for each day
from the date of the Agent's request for such Defaulting Investor's Acquisition
Amount pursuant to Section 2.1 until the date the requisite amount is paid to
PREFCO in full, at a rate per annum equal to the Federal Funds Effective Rate
plus 2%.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section. 3.1. Seller Representations and Warranties. The Seller
hereby represents and warrants to the Purchasers that:
(a) Corporate Existence and Power. The Seller is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation, and has all corporate power and all governmental licenses,
authorizations, consents and approvals required to carry on its business in
each jurisdiction in which its business is conducted.
(b) No Conflict. The execution, delivery and performance by the Seller
of this Agreement and each other Transaction Document, and the Seller's use of
the proceeds of purchases made hereunder, are within its corporate powers, have
been duly authorized by all necessary corporate action, do not contravene or
violate (i) its certificate or articles of incorporation or by-laws, (ii) any
law, rule or regulation applicable to it, (iii) any restrictions under any
agreement, contract or instrument to which it is a party or by which it or any
of its property is bound, or (iv) any order, writ, judgment, award, injunction
or decree binding on or affecting it or its property, and do not result in the
creation or imposition of any Adverse Claim on assets of the Seller or its
Subsidiaries (except created hereunder); and no transaction contemplated hereby
requires compliance with any bulk sales act or similar law. This Agreement and
each other Transaction Document has been duly authorized, executed and
delivered by the Seller.
(c) Governmental Authorization. Other than the filing of the financing
statements required hereunder, no authorization or approval or other action by,
and no notice to or filing with, any governmental authority or regulatory body
is required for the due execution, delivery and performance by the Seller of
the Transaction Documents.
(d) Binding Effect. The Transaction Documents constitute the legal,
valid and binding obligations of the Seller enforceable against the Seller in
accordance with their respective terms, except as such enforcement may be
limited by applicable bankruptcy, insolvency, reorganization or other similar
laws relating to or limiting creditors' rights generally.
(e) Accuracy of Information. All information heretofore furnished by
the Seller or any of its Affiliates to the Agent or the Purchasers for purposes
of or in connection with this Agreement, any of the other Transaction Documents
or any transaction contemplated hereby or thereby is, and all such information
hereafter furnished by the Seller or any of its Affiliates to the Purchasers
will be, true and accurate in every material respect, on the date such
information is stated or certified and does not and will not contain any
material misstatement of fact or omit to state a material fact or any fact
necessary to make the statements contained therein not misleading.
(f) Use of Proceeds. No proceeds of any purchase hereunder will be used
(i) for a purpose which violates, or would be inconsistent with, Regulation G,
T, U or X promulgated by the Board of Governors of the Federal Reserve System
from time to time or (ii) to acquire any security in any transaction which is
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subject to Section 13 or 14 of the Securities Exchange Act of 1934, as amended.
(g) Title to Receivables Purchased from Originators. Each Receivable
transferred to the Seller has been purchased by the Seller from an Originator
in accordance with the terms of the applicable Transfer Agreement, and the
Seller has thereby irrevocably obtained all legal and equitable title to, and
has the legal right to sell and encumber, such Receivable and the Related
Security. Each such Receivable has been transferred to the Seller free and
clear of any Adverse Claim. Without limiting the foregoing, there has been
duly filed all financing statements or other similar instruments or documents
necessary under the UCC of all appropriate jurisdictions (or any comparable
law) to perfect the Seller's ownership interest in such Receivable.
(h) Good Title; Perfection. Immediately prior to each purchase
hereunder, the Seller shall be the legal and beneficial owner of the
Receivables and Related Security with respect thereto, free and clear of any
Adverse Claim, except as created by the Transaction Documents. This Agreement
is effective to, and shall, upon each purchase hereunder, transfer to the
relevant Purchaser or Purchasers (and such Purchaser or Purchasers shall
acquire from the Seller) a valid and perfected first priority undivided
percentage ownership interest in each Receivable existing or hereafter arising
and in the Related Security and Collections with respect thereto, free and
clear of any Adverse Claim, except as created by the Transactions Documents.
(i) Places of Business. The principal places of business and chief
executive office of the Seller and the offices where the Seller keeps all its
Records are located at the address(es) listed on Exhibit II or such other
locations notified to the Agent in accordance with Section 5.2(a) in
jurisdictions where all action required by Section 5.2(a) has been taken and
completed. The Seller's Federal Employer Identification Number is correctly
set forth on Exhibit II.
(j) Collection Banks; Etc. Except as otherwise notified to the Agent in
accordance with Section 5.2(b), (i) the Seller has instructed, or has caused
the Originators to instruct, all Obligors to pay all Collections directly to a
lock-box listed on Exhibit III or to wire-transfer or otherwise remit payments
directly to a concentration account listed on Exhibit III, (ii) in the case of
all proceeds remitted to any such lock-box, such proceeds are deposited
directly by a Collection Bank into a concentration account or a depository
account listed on Exhibit III, (iii) the names and addresses of all Collection
Banks, together with the account numbers of the Collection Accounts of the
Seller at each Collection Bank, are listed on Exhibit III, and (iv) from and
after January 15, 1996, each lock-box and Collection Account to which
Collections are remitted shall be subject to a Collection Account Agreement
that is then in full force and effect. In the case of lock-boxes and
Collection Accounts identified on Exhibit III which were established by any
Originator or by any Person other than the Seller, exclusive dominion and
control thereof has been transferred to the Seller. The Seller has not granted
any Person, other than the Agent as contemplated by this Agreement, dominion
and control of any lock-box or Collection Account, or the right to take
dominion and control of any lock-box or Collection Account at a future time or
upon the occurrence of a future event.
(k) Material Adverse Effect. Since September 30, 1995, no event has
occurred which would have a Material Adverse Effect.
(l) Names. In the past five years, the Seller has not used any
corporate names, trade names or assumed names other than those listed on
Exhibit II.
(m) Actions, Suits. There are no actions, suits or proceedings pending,
or to the best of the Seller's knowledge, threatened, against or affecting the
Seller or any Originator, or any of the respective properties of the Seller or
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any Originator, in or before any court, arbitrator or other body, which are
reasonably likely to (i) adversely affect the collectibility of a material
portion of the Receivables, (ii) materially adversely affect the financial
condition of the Seller or such Originator or (iii) materially adversely
affect the ability of the Seller or such Originator to perform its obligations
under the Transaction Documents. Neither the Seller nor any Originator is in
default with respect to any order of any court, arbitrator or governmental
body.
(n) Credit and Collection Policies. With respect to each Receivable,
each of the applicable Originator, the Seller and the Designated Servicer has
complied in all material respects with the Credit and Collection Policy.
(o) Payments to Originators. With respect to each Receivable
transferred to the Seller, the Seller has given reasonably equivalent value to
the applicable Originator in consideration for such transfer of such Receivable
and the Related Security with respect thereto under the applicable Transfer
Agreement and such transfer was not made for or on account of an antecedent
debt. No transfer by any Originator of any Receivable is or may be voidable
under any Section of the Bankruptcy Reform Act of 1978 (11 U.S.C. Section 101
et seq.), as amended.
(p) Ownership of the Seller. OMC owns, directly or indirectly, one
hundred percent (100%) of the issued and outstanding capital stock of the
Seller. Such capital stock is validly issued, fully paid and nonassessable and
there are no options, warrants or other rights to acquire securities of the
Seller.
(q) Not an Investment Company. The Seller is not an "investment
company" within the meaning of the Investment Company Act of 1940, as amended
from time to time, or any successor statute.
(r) Purpose. The Seller has determined that, from a business viewpoint,
the purchase of Receivables and related interests from the Originators under
the Transfer Agreements, and the sale of Receivable Interests to the Purchasers
and the other transactions contemplated herein, are in the best interest of the
Seller.
Section 3.2. Investor Representations and Warranties. Each Investor
hereby represents and warrants to the Agent and PREFCO that:
(a) Existence and Power. Such Investor is a corporation or a banking
association duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation or organization, and has all
corporate power to perform its obligations hereunder.
(b) No Conflict. The execution, delivery and performance by such
Investor of this Agreement are within its corporate powers, have been duly
authorized by all necessary corporate action, do not contravene or violate (i)
its certificate or articles of incorporation or association or by-laws, (ii)
any law, rule or regulation applicable to it, (iii) any restrictions under any
agreement, contract or instrument to which it is a party or any of its property
is bound, or (iv) any order, writ, judgment, award, injunction or decree
binding on or affecting it or its property, and do not result in the creation
or imposition of any Adverse Claim on its assets. This Agreement has been duly
authorized, executed and delivered by such Investor.
(c) Governmental Authorization. No authorization or approval or other
action by, and no notice to or filing with, any governmental authority or
regulatory body is required for the due execution, delivery and performance by
such Investor of this Agreement.
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(d) Binding Effect. This Agreement constitutes the legal, valid and
binding obligation of such Investor enforceable against such Investor in
accordance with its terms, except as such enforcement may be limited by
applicable bankruptcy, insolvency, reorganization or other similar laws
relating to or limiting creditors' rights generally.
ARTICLE IV
CONDITIONS OF PURCHASES
Section 4.1. Conditions Precedent to Initial Purchase. The initial
purchase of a Receivable Interest under this Agreement is subject to the
conditions precedent that the Agent shall have received on or before the date
of such purchase those documents listed on Schedule A hereto, including,
without limitation, the consent of each Floor Plan Lender as of the date hereof
to the assignment of all claims under the applicable Floor Plan Program of each
Originator to the Seller, and by the Seller to the Agent for the benefit of the
Purchasers hereunder.
Section 4.2. Conditions Precedent to All Purchases and Reinvestments.
Each purchase of a Receivable Interest (other than pursuant to Section 2.1) and
each Reinvestment shall be subject to the further conditions precedent that (a)
in the case of each such purchase, the Servicer shall have delivered to the
Agent on or prior to the date of such purchase, in form and substance
satisfactory to the Agent, all Monthly Reports as and when due under Section
6.5; (b) on the date of each such purchase or Reinvestment, the following
statements shall be true both before and after giving effect to such purchase
or Reinvestment (and acceptance of the proceeds of such purchase or
Reinvestment shall be deemed a representation and warranty by the Seller that
such statements are then true):
(i) the representations and warranties set forth in Article III
are correct on and as of the date of such purchase or Reinvestment as
though made on and as of such date;
(ii) no event has occurred, or would result from such purchase or
Reinvestment, that will constitute a Servicer Default, and no event has
occurred and is continuing, or would result from such purchase or
Reinvestment, that would constitute a Potential Servicer Default; and
(iii) the Liquidity Termination Date shall not have occurred, the
aggregate Capital of all Receivable Interests shall not exceed the
Purchase Limit and the aggregate Receivable Interests shall not exceed
100%;
and (c) the Agent shall have received such other approvals, opinions or
documents as it may reasonably request.
ARTICLE V
COVENANTS
Section 5.1. Affirmative Covenants of Seller. Until the date on which
the Aggregate Unpaids have been indefeasibly paid in full, the Seller hereby
covenants, individually and in its capacity as Servicer, that:
(a) Financial Reporting. The Seller will maintain a system of
accounting established and administered in accordance with generally accepted
accounting principles, and furnish to the Agent:
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(i) Annual Reporting. Within 100 days after the close of each of
its fiscal years, financial statements for such fiscal year certified in
a manner acceptable to the Agent by the controller of the Seller.
(ii) Quarterly Reporting. Within 60 days after the close of the
first three quarterly periods of each of its fiscal years, balance
sheets as at the close of each such period and statements of income and
retained earnings and a statement of cash flows for the period from the
beginning of such fiscal year to the end of such quarter, all certified
by its controller.
(iii) Compliance Certificate. Together with the financial
statements required hereunder, a compliance certificate in substantially
the form of Exhibit IV signed by the Seller's controller and dated the
date of such annual financial statement or such quarterly financial
statement, as the case may be.
(iv) Notices under Transaction Documents. Forthwith upon its
receipt of any notice, request for consent, financial statements,
certification, report or other communication under or in connection with
any Transaction Document from any Person other than the Agent or any
Purchaser, copies of the same.
(v) Change in Credit and Collection Policy. At least 30 days
prior to the effectiveness of any material change in or amendment to the
Credit and Collection Policy, a copy of the Credit and Collection Policy
then in effect and a notice indicating such change or amendment.
(vi) Other Information. Such other information (including
non-financial information) as the Agent or any Purchaser may from time
to time reasonably request.
(b) Notices. The Seller will notify the Agent in writing of any of the
following immediately upon learning of the occurrence thereof, describing the
same and, if applicable, the steps being taken with respect thereto:
(i) Servicer Defaults or Potential Servicer Defaults. The
occurrence of each Servicer Default or each Potential Servicer Default,
by a statement of the corporate controller or senior financial officer
of the Seller.
(ii) Judgment. The entry of any judgment or decree against the
Seller.
(iii) Litigation. The institution of any litigation, arbitration
proceeding or governmental proceeding against the Seller or to which the
Seller becomes party.
(iv) Indebtedness under Transfer Agreements. Any of the
following: (A) the execution and delivery by the Seller of any
"Revolving Note", or the initial incurrence of any indebtedness by the
Seller to any Originator in connection with a "Revolving Loan" made by
such Originator, under any Transfer Agreement (such notice to be
accompanied by a certified copy of such Revolving Note) or (B) the
declaration by any Originator of the "Termination Date" under any
Transfer Agreement.
(c) Compliance with Laws. The Seller will comply in all material
respects with all applicable laws, rules, regulations, orders writs, judgments,
injunctions, decrees or awards to which it may be subject.
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(d) Audits. The Seller will furnish to the Agent from time to time such
information with respect to it and the Receivables as the Agent may reasonably
request. The Seller shall, from time to time during regular business hours as
requested by the Agent upon reasonable notice, permit the Agent, or its agents
or representatives (and shall cause each Originator to permit the Agent or its
agents or representatives) (i) to examine and make copies of and abstracts from
all Records in the possession or under the control of the Seller or such
Originator relating to Receivables and the Related Security, including, without
limitation, the related Contracts, and (ii) to visit the offices and properties
of the Seller or such Originator for the purpose of examining such materials
described in clause (i) above, and to discuss matters relating to the Seller's
or such Originator's financial condition or the Receivables and the Related
Security or the Seller's performance hereunder, or such Originator's
performance under any of the other Transaction Documents, or the Seller's or
such Originator's performance under the Contracts with any of the officers or
employees of the Seller or such Originator having knowledge of such matters.
(e) Keeping and Marking of Records and Books.
(i) The Seller will, and will cause each Originator to, maintain
and implement administrative and operating procedures (including,
without limitation, an ability to recreate records evidencing
Receivables in the event of the destruction of the originals thereof),
and keep and maintain all documents, books, records and other
information reasonably necessary or advisable for the collection of all
Receivables (including, without limitation, records adequate to permit
the immediate identification of each new Receivable and all Collections
of and adjustments to each existing Receivable). The Seller will, and
will cause each Originator to, give the Agent notice of any material
change in the administrative and operating procedures referred to in the
previous sentence.
(ii) The Seller will, and will cause each Originator to, (a) on
or prior to the date hereof, mark its master data processing records and
other books and records relating to the Receivable Interests with a
legend, acceptable to the Agent, describing the Receivable Interests and
(b) upon the request of the Agent (x) mark each Contract with a legend
describing the Receivable Interests and (y) deliver to the Agent all
Contracts (including, without limitation, all multiple originals of any
such Contract) relating to the Receivables.
(f) Compliance with Contracts and Credit and Collection Policy. The
Seller will, and will cause each Originator to, timely and fully (i) perform
and comply with all provisions, covenants and other promises required to be
observed by it under the Contracts related to the Receivables, and (ii) comply
in all material respects with the Credit and Collection Policy in regard to
each Receivable and the related Contract. The Seller will, and will cause each
Originator to, pay when due any taxes payable in connection with the
Receivables.
(g) Purchase of Receivables from the Originators. With respect to each
Receivable purchased under any Transfer Agreement, the Seller shall (or shall
cause the applicable Originator to) take all actions necessary to vest legal
and equitable title to such Receivable and the Related Security irrevocably in
the Seller, including, without limitation, the filing of all financing
statements or other similar instruments or documents necessary under the UCC of
all appropriate jurisdictions (or any comparable law) to perfect the Seller's
interest in such Receivable and such other action to perfect, protect or more
fully evidence the interest of the Seller as the Agent may reasonably request.
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(h) Ownership Interest. The Seller shall take all necessary action to
establish and maintain a valid and perfected first priority undivided
percentage ownership interest in the Receivables and the Related Security and
Collections with respect thereto, to the full extent contemplated herein, in
favor of the Agent and the Purchasers, including, without limitation, taking
such action to perfect, protect or more fully evidence the interest of the
Agent and the Purchasers hereunder as the Agent may reasonably request.
(i) Payment to the Originators. With respect to any Receivable
purchased by the Seller from an Originator, such sale shall be effected under,
and in strict compliance with the terms of, the applicable Transfer Agreement,
including, without limitation, the terms relating to the amount and timing of
payments to be made to such Originator in respect of the purchase price for
such Receivable.
(j) Performance and Enforcement of Transfer Agreement. The Seller shall
timely perform the obligations required to be performed by the Seller, and
shall vigorously enforce the rights and remedies accorded to the Seller, under
each Transfer Agreement. The Seller shall take all actions to perfect and
enforce its rights and interests (and the rights and interests of the
Purchasers and the Agents, as assignees of the Seller) under each Transfer
Agreement as the Agent may from time to time reasonably request, including,
without limitation, making claims to which it may be entitled under any
indemnity, reimbursement or similar provision contained in any Transfer
Agreement.
(k) Purchasers' Reliance. The Seller acknowledges that the Purchasers
are entering into the transactions contemplated by this Agreement in reliance
upon the Seller's identity as a legal entity that is separate from OMC and from
each other Originator. Therefore, from and after the date of execution and
delivery of this Agreement, the Seller shall take all reasonable steps
including, without limitation, all steps that the Agent or any Purchaser may
from time to time reasonably request to maintain the Seller's identity as a
separate legal entity and to make it manifest to third parties that the Seller
is an entity with assets and liabilities distinct from those of each Originator
and any Affiliates thereof and not just a division of any Originator. Without
limiting the generality of the foregoing and in addition to the other covenants
set forth herein, the Seller shall:
(i) conduct its own business in its own name and require that all
full-time employees of the Seller identify themselves as such and not as
employees of any Originator (including, without limitation, by means of
providing appropriate employees with business or identification cards
identifying such employees as the Seller's employees);
(ii) compensate all employees, consultants and agents directly,
from the Seller's bank accounts, for services provided to the Seller by
such employees, consultants and agents and, to the extent any employee,
consultant or agent of the Seller is also an employee, consultant or
agent of any Originator, allocate the compensation of such employee,
consultant or agent between the Seller and such Originator on a basis
which reflects the services rendered to the Seller and such Originator;
and such Originator;
(iii) clearly identify its offices (by signage or otherwise) as
its offices and, if such office is located in the offices of OMC or any
other Originator, the Seller shall lease such office at a fair market
rent;
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(iv) have a separate telephone number, which will be answered
only in its name and separate stationery, invoices and checks in its own
name;
(v) conduct all transactions with each Originator (including,
without limitation, any delegation of its obligations hereunder as
Servicer) strictly on an arm's-length basis, allocate all overhead
expenses (including, without limitation, telephone and other utility
charges) for items shared between the Seller and such Originator on the
basis of actual use to the extent practicable and, to the extent such
allocation is not practicable, on a basis reasonably related to actual
use;
(vi) at all times have at least one member of its Board of
Directors (an "Independent Director") who is not (A) a director,
officer or employee of any Originator or any affiliate thereof, (B) a
Person related to any officer or director of any Originator, (C) a
holder (directly or indirectly) of any securities of any Originator, or
(D) a Person related to a holder (directly or indirectly) of any voting
securities of any Originator; and promptly reimburse OMC or any other
Originator in respect of any losses or expenses which are claimed by
such Independent Director in his or her capacity as Independent
Director and which are paid by OMC or such Originator;
(vii) observe all corporate formalities as a distinct entity, and
ensure that all corporate actions relating to (A) the selection,
maintenance or replacement of the Independent Director, (B) the
dissolution or liquidation of the Seller or (C) the initiation of
participation in, acquiescence in or consent to any bankruptcy,
insolvency, reorganization or similar proceeding involving the Seller,
are duly authorized by unanimous vote of its Board of Directors
(including the Independent Director);
(viii) maintain the Seller's books and records separate from
those of each Originator and otherwise readily identifiable as its own
assets rather than assets of any Originator;
(ix) prepare its financial statements separately from those of
each Originator and insure that any consolidated financial statements
of any Originator or any Affiliate thereof that include the Seller have
detailed notes clearly stating that the Seller is a separate corporate
entity and that its assets will be available first and foremost to
satisfy the claims of the creditors of the Seller;
(x) except as herein specifically otherwise provided, not
commingle funds or other assets of the Seller with those of any
Originator and not maintain bank accounts or other depository accounts
to which any Originator is an account party, into which any Originator
makes deposits or from which any Originator has the power to make
withdrawals;
(xi) not permit any Originator to pay any of the Seller's
operating expenses (except pursuant to allocation arrangements that
comply with the requirements of this Section 5.1(k));
(xii) not permit the Seller to be named as an insured on the
insurance policy covering the property of any Originator or enter into
an agreement with the holder of such policy whereby in the event of a
loss in connection with such property, proceeds are paid to the
Seller; and
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(xiii) take such other actions as are necessary on its part to
ensure that the facts and assumptions set forth in the opinion issued
by Skadden, Arps, Slate, Meagher & Flom, as counsel for the Seller, in
connection with the closing or initial purchase under this Agreement
and relating to substantive consolidation issues, and in the
certificates accompanying such opinion, remain true and correct in all
material respects at all times.
(l) Collections. The Seller shall instruct all Obligors, or cause the
applicable Originators to instruct, all Obligors to pay all Collections
directly to a lock-box listed on Exhibit III or to wire-transfer or otherwise
remit payments directly to a concentration account listed on Exhibit III. In
the case of payments remitted to any such lock-box, the Seller shall cause all
proceeds from such lock-box to be deposited directly by a Collection Bank into
a concentration account or a depositary account listed on Exhibit III. The
Seller shall maintain exclusive dominion and control (subject to the terms of
this Agreement) to each such lock-box, concentration account and depositary
account. In the case of any Collections received by the Seller or an
Originator, the Seller shall remit (or shall cause such Originator to remit)
such Collections to a Collection Account not later than the Business Day
immediately following the date of receipt of such Collections, and, at all
times prior to such remittance, the Seller shall itself hold (or, if
applicable, shall cause such Originator to hold) such Collections in trust, for
the exclusive benefit of the Purchasers and the Agent. In the case of any
remittances received by the Seller in any such lock-box, concentration account
or depositary account that shall have been identified, to the satisfaction of
the Servicer, to not constitute Collections or other proceeds of the
Receivables or the Related Security, the Seller shall promptly remit such items
to the Person identified to it as being the owner of such remittances. From
and after the date the Agent delivers to any of the Collection Banks a
Collection Notice pursuant to Section 6.3, the Agent may request that the
Seller, and the Seller thereupon promptly shall, direct all Obligors on
Receivables to remit all payments thereon to a new depositary account (the "New
Concentration Account") specified by the Agent and, at all times thereafter the
Seller shall not deposit or otherwise credit, and shall not permit any
Originator or any other Person to deposit or otherwise credit to the New
Concentration Account any cash or payment item other than Collections.
Alternatively, the Agent may request that the Seller, and the Seller thereupon
promptly shall, direct all Persons then making remittances to any account
listed on Exhibit III which remittances are not payments on Receivables to
deliver such remittances to a location other than an account listed on Exhibit
III.
(m) Minimum Net Worth. The Seller shall at all times maintain a net
worth of not less than three percent (3%) of the Outstanding Balance of the
Receivables at such time.
Section 5.2. Negative Covenants of Seller. Until the date on which the
Aggregate Unpaids have been indefeasibly paid in full, the Seller hereby
covenants, individually and in its capacity as Servicer, that:
(a) Name Change, Offices, Records and Books of Accounts. The Seller
will not change its name, identity or corporate structure (within the meaning
of Section 9-402(7) of any applicable enactment of the UCC) or relocate its
chief executive office or any office where Records are kept unless it shall
have: (i) given the Agent at least 45 days prior notice thereof and (ii)
delivered to the Agent all financing statements, instruments and other
documents requested by the Agent in connection with such change or relocation.
(b) Change in Payment Instructions to Obligors. The Seller will not add
or terminate any bank as a Collection Bank from those listed in Exhibit III, or
make any change in its instructions to Obligors regarding payments to be made
to the Seller or payments to be made to any lock-box, Collection Account or
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Collection Bank, unless the Agent shall have received, at least 10 days before
the proposed effective date therefor, (i) written notice of such addition,
termination or change and (ii) with respect to the addition of a lock-box,
Collection Account or Collection Bank, an executed account agreement and an
executed Collection Account Agreement from such Collection Bank relating
thereto; provided, however, that the Seller may make changes in instructions
to Obligors regarding payments if such new instructions require such Obligor to
make payments to another existing lock-box or Collection Account that is
subject to a Collection Account Agreement then in effect.
(c) Modifications to Contracts and Credit and Collection Policy. The
Seller will not make any change to the Credit and Collection Policy which would
be reasonably likely to adversely affect the collectibility of any material
portion of the Receivables or decrease the credit quality of any newly created
Receivables. Except as provided in Section 6.2(c), the Seller, acting as
Servicer or otherwise, will not extend, amend or otherwise modify the terms of
any Receivable or any Contract related thereto other than in accordance with
the Credit and Collection Policy.
(d) Sales, Liens, Etc. The Seller shall not sell, assign (by operation
of law or otherwise) or otherwise dispose of, or grant any option with respect
to, or create or suffer to exist any Adverse Claim upon (including, without
limitation, the filing of any financing statement) or with respect to, any
Receivable or Related Security or Collections in respect thereof, or upon or
with respect to any Contract under which any Receivable arises, or any lock-box
or Collection Account or assign any right to receive income in respect thereof
(other than, in each case, the creation of the interests therein in favor of
the Agent and the Purchasers provided for herein), and the Seller shall defend
the right, title and interest of the Agent and the Purchasers in, to and under
any of the foregoing property, against all claims of third parties claiming
through or under the Seller or any Originator.
(e) Nature of Business; Other Agreements; Other Indebtedness. The
Seller shall not engage in any business or activity of any kind or enter into
any transaction or indenture, mortgage, instrument, agreement, contract, lease
or other undertaking other than the transactions contemplated and authorized
by this Agreement and the Transfer Agreements. Without limiting the generality
of the foregoing, the Seller shall not create, incur, guarantee, assume or
suffer to exist any indebtedness or other liabilities, whether direct or
contingent, other than (i) as a result of the endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of business, (ii) the incurrence of obligations under this Agreement,
(iii) the incurrence of obligations, as expressly contemplated in any Transfer
Agreement, to make payment to the Originator thereunder for the purchase of
Receivables from such Originator under such Transfer Agreement, and (iv) the
incurrence of operating expenses in the ordinary course of business of the type
otherwise contemplated in Section 5.1(k) of this Agreement. In the event the
Seller shall at any time borrow a "Revolving Loan" under any Transfer
Agreement, the obligations of the Seller in connection therewith shall be
subordinated to the obligations of the Seller to the Purchasers and the Agent
under this Agreement, on such terms as shall be satisfactory to the Agent.
(f) Amendments to Transfer Agreement. The Seller shall not, without the
prior written consent of the Agent, (i) cancel or terminate any Transfer
Agreement, (ii) give any consent, waiver, directive or approval under any
Transfer Agreement, (iii) waive any default, action, omission or breach under
any Transfer Agreement, or otherwise grant any indulgence thereunder, or (iv)
amend, supplement or otherwise modify any of the terms of any Transfer
Agreement.
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(g) Amendments to Corporate Documents. The Seller shall not amend its
Certificate of Incorporation or By-Laws in any respect that would impair its
ability to comply with the terms or provisions of any of the Transaction
Documents, including, without limitation, Section 5.1(k) of this Agreement.
(h) Merger. The Seller shall not merge or consolidate with or into, or
convey, transfer, lease or otherwise dispose of (whether in one transaction or
in a series of transactions, and except as otherwise contemplated herein) all
or substantially all of its assets (whether now owned or hereafter acquired)
to, or acquire all or substantially all of the assets of, any Person.
ARTICLE VI
ADMINISTRATION AND COLLECTION
Section 6.1. Designation of Servicer. (a) The servicing,
administration and collection of the Receivables shall be conducted by such
Person (the "Servicer") so designated from time to time in accordance with this
Section 6.1. The Seller is hereby designated as, and hereby agrees to perform
the duties and obligations of, the Servicer pursuant to the terms of this
Agreement. The Agent may at any time designate as Servicer any Person to
succeed the Seller or any successor Servicer.
(b) The Seller is permitted to delegate, and the Seller hereby advises
the Purchasers and the Agent that it has delegated, to each Originator, as a
subservicer of the Servicer, certain of its duties and responsibilities as
Servicer hereunder in respect of the Receivables transferred by such
Originator to the Seller. Notwithstanding the foregoing, (i) the Seller shall
be and remain primarily liable to the Agent and the Purchasers for the full and
prompt performance of all duties and responsibilities of the Servicer
hereunder and (ii) the Agent and the Purchasers shall be entitled to deal
exclusively with the Seller in matters relating to the discharge by the
Servicer of its duties and responsibilities hereunder, and the Agent and the
Purchasers shall not be required to give notice, demand or other communication
to any Person other than the Seller in order for communication to the Servicer
and its respective delegates and subservicers in respect thereof to be
accomplished. The Seller, at all times that it is the Servicer, shall be
responsible for providing its delegates and subservicers with any notice given
under this Agreement.
(c) Without the prior written consent of the Required Investors, (i) the
Seller shall not be permitted to delegate any of its duties or responsibilities
as Servicer to any Person other than an Originator, and then such delegation
shall be limited to the activities of Servicer hereunder as the same may relate
to the Receivables originated by such Originator, and (ii) no Originator shall
be permitted to further delegate to any other Person any of the duties or
responsibilities of the Servicer delegated to it by the Seller. If at any
time the Agent shall designate as Servicer any Person other than the Seller,
all duties and responsibilities theretofore delegated by the Seller to any
Originator may, at the discretion of the Agent, be terminated forthwith on
notice given by the Agent to the Seller.
Section 6.2. Duties of Servicer. (a) The Servicer shall take or cause
to be taken all such actions as may be necessary or advisable to collect each
Receivable from time to time, all in accordance with applicable laws, rules and
regulations, with reasonable care and diligence, and in accordance with the
Credit and Collection Policy.
(b) The Servicer shall administer the Collections in accordance with the
procedures described herein and in Article I. The Servicer shall set aside and
hold in trust for the account of the Seller and the Purchasers their respective
shares of the Collections of Receivables in accordance with Sections 1.6 and
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1.7. The Servicer shall upon the request of the Agent after the occurrence of
a Liquidation Day, segregate, in a manner acceptable to the Agent, all cash,
checks and other instruments received by it from time to time constituting
Collections from the general funds of the Servicer or the Seller prior to the
remittance thereof in accordance with Section 1.7. If the Servicer shall be
required to segregate Collections pursuant to the preceding sentence, the
Servicer shall segregate and deposit with a bank designated by the Agent such
allocable share of Collections of Receivables set aside for the Purchasers on
the first Business Day following receipt by the Servicer of such Collections,
duly endorsed or with duly executed instruments of transfer.
(c) The Servicer, may, in accordance with the Credit and Collection
Policy, extend the maturity of any Receivable or adjust the Outstanding Balance
of any Receivable as the Servicer may determine to be appropriate to maximize
Collections thereof; provided, however, that such extension or adjustment
shall not alter the status of such Receivable as a Delinquent Receivable or
Defaulted Receivable or limit the rights of the Agent or the Purchasers under
this Agreement. Notwithstanding anything to the contrary contained herein,
from and after the occurrence of a Servicer Default, the Agent shall have the
absolute and unlimited right to direct the Servicer to commence or settle any
legal action with respect to any Receivable or to foreclose upon or repossess
any Related Security.
(d) The Servicer shall hold in trust for the Seller and the Purchasers,
in accordance with their respective Receivable Interests, all Records that
evidence or relate to the Receivables, the related Contracts and Related
Security or that are otherwise necessary or desirable to collect the
Receivables and shall, as soon as practicable upon demand of the Agent, deliver
or make available to the Agent all such Records, (x) if such demand is made at
any time prior to the replacement of the Seller as Servicer hereunder, at the
chief executive office of each applicable Originator and (y) if such demand is
made at any time after the replacement of the Seller as Servicer hereunder, at
100 Sea Horse Drive, Waukegan, Illinois. The Servicer shall, as soon as
practicable following receipt thereof, turn over to the Seller (i) that portion
of Collections of Receivables representing the Seller's undivided fractional
ownership interest therein, less, in the event the Seller is not the Servicer,
all reasonable out-of-pocket costs and expenses of the Servicer of servicing,
administering and collecting the Receivables, and (ii) any cash collections or
other cash proceeds received with respect to indebtedness not constituting
Receivables. The Servicer shall, from time to time at the request of any
Purchaser, furnish to the Purchasers (promptly after any such request) a
calculation of the amounts set aside for the Purchasers pursuant to Section
1.7.
(e) Any payment by an Obligor in respect of any indebtedness owed by it
to the Seller shall, except as otherwise specified by such Obligor or otherwise
required by contract or law and unless otherwise instructed by the Agent, be
applied as a Collection of any Receivable of such Obligor (starting with the
oldest such Receivable) to the extent of any amounts then due and payable
thereunder before being applied to any other receivable or other obligation of
such Obligor.
Section 6.3. Collection Notices. The Agent is authorized at any time
to date and to deliver to the Collection Banks a Collection Notice under any
Collection Account Agreement. The Seller hereby transfers to the Agent for the
benefit of the Purchasers, effective when the Agent delivers such notice, the
exclusive ownership and control of the Collection Accounts. In case any
authorized signatory of the Seller whose signature appears on a Collection
Account Agreement shall cease to have such authority before the delivery of
such notice, such Collection Notice shall nevertheless be valid as if such
authority had remained in force. The Seller hereby authorizes the Agent, and
agrees that the Agent shall be entitled to (i) endorse the Seller's name on
checks and other instruments representing Collections, (ii) enforce the
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Receivables, the related Contracts and the Related Security and (iii) take such
action as shall be necessary or desirable to cause all cash, checks and other
instruments constituting Collections of Receivables to come into the
possession of the Agent rather than the Seller.
Section 6.4. Responsibilities of the Seller. Anything herein to the
contrary notwithstanding, the exercise by the Agent and the Purchasers of their
rights hereunder shall not release the Servicer or the Seller from any of their
duties or obligations with respect to any Receivables or under the related
Contracts. The Purchasers shall have no obligation or liability with respect
to any Receivables or related Contracts, nor shall any of them be obligated to
perform the obligations of the Seller.
Section 6.5. Reports. On the 23rd day of each month (or, if such date
is not a Business Day, the next following Business Day), and at such other
times as the Agent shall request, the Servicer shall prepare and forward to the
Agent a Monthly Report. Each Monthly Report shall contain, among other
things, information relating to the Receivables on a consolidated basis and on
an Originator-by-Originator basis. Promptly following any request therefor by
the Agent, the Seller shall prepare and provide to the Agent a listing by
Obligor of all Receivables together with an aging of such Receivables.
ARTICLE VII
SERVICER DEFAULTS
Section 7.1. Servicer Default. The occurrence of any one or more of
the following events shall constitute a Servicer Default:
(a) Any Designated Servicer or the Seller shall fail (i) to make any
payment or deposit required hereunder, (ii) to perform or observe any term,
covenant or agreement hereunder relating to the Receivables, the Related
Security or the Collections or (iii) to perform or observe any term, covenant
or agreement hereunder (other than as referred to in clause (i) or (ii) of this
paragraph (a)) and such failure shall remain unremedied for three Business Days
following occurrence thereof (in the case of any such failure on the part of
any Designated Servicer) or following written notice thereof given to such
Designated Servicer or the Seller (in the case of any such failure on the part
of the Seller).
(b) Any representation, warranty, certification or statement made by the
Seller, any Designated Servicer or any Originator in this Agreement, any other
Transaction Document or in any other document delivered pursuant hereto shall
prove to have been incorrect in any material respect when made or deemed made.
(c)(i) The Seller or any Designated Servicer shall generally not pay its
debts as such debts become due or shall admit in writing its inability to pay
its debts generally or shall make a general assignment for the benefit of
creditors; or any proceeding shall be instituted by or against the Seller or
any Designated Servicer seeking to adjudicate it bankrupt or insolvent, or
seeking liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or seeking the
entry of an order for relief or the appointment of a receiver, trustee or other
similar official for it or any substantial part of its property or (ii) the
Seller or any Designated Servicer shall take any corporate action to authorize
any of the actions set forth in clause (i) above in this subsection (c).
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(d) As at the end of any calendar month,
(i) the Delinquency Ratio shall exceed 13% in respect of any
month;
(ii) the Default Ratio shall exceed 9% in respect of any month;
(iii) the average Dilution Ratio shall exceed 10% in respect of
any period of three consecutive months; or
(iv) the average Loss-to-Liquidation Ratio shall exceed 2% in
respect of any period of three consecutive months.
(e) Any Originator (i) shall fail to perform or observe any term,
covenant or agreement contained in any other Transaction Document, or (ii)
shall for any reason cease to transfer, or cease to have the legal capacity or
otherwise be incapable of transferring, Receivables to the applicable
transferee under any Transfer Agreement to which it is party, or any "Event of
Default" or "Potential Event of Default" shall occur under any Transfer
Agreement.
(f) The aggregate Receivable Interests hereunder shall at any time
exceed 100%.
(g) A Change of Control shall occur.
(h) A default shall occur under the Performance Guaranty, or OMC or any
other Person shall attempt to terminate or assert the invalidity or
unenforcebility of the Performance Guaranty or any provision thereof.
ARTICLE VIII
INDEMNIFICATION
Section 8.1. Indemnities by the Seller. Without limiting any other
rights which the Agent or any Purchaser may have hereunder or under applicable
law, the Seller hereby agrees to indemnify the Agent and each Purchaser and
their respective officers, directors, agents and employees (each an
"Indemnified Party") from and against any and all damages, losses, claims,
taxes, liabilities, costs, expenses and for all other amounts payable,
including reasonable attorneys' fees (which attorneys may be employees of the
Agent or such Purchaser) and disbursements (all of the foregoing being
collectively referred to as "Indemnified Amounts") awarded against or incurred
by any of them arising out of or as a result of this Agreement or the
acquisition, either directly or indirectly, by a Purchaser of an interest in
the Receivables, excluding, however:
(i) Indemnified Amounts to the extent final judgment of a court
of competent jurisdiction holds such Indemnified Amounts resulted from
gross negligence or willful misconduct on the part of the Indemnified
Party seeking indemnification;
(ii) Indemnified Amounts to the extent the same includes losses
in respect of Receivables which are uncollectible on account of the
insolvency, bankruptcy or lack of creditworthiness of the related
Obligor; or
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(iii) taxes imposed by the jurisdiction in which such
Indemnified Party's principal executive office is located, on or
measured by the overall net income of such Indemnified Party to the
extent that the computation of such taxes is consistent with the
Intended Characterization;
provided, however, that nothing contained in this sentence shall limit
the liability of the Seller or the Servicer or limit the recourse of the
Purchasers to the Seller or Servicer for amounts otherwise specifically
provided to be paid by the Seller or the Servicer under the terms of this
Agreement. Without limiting the generality of the foregoing indemnification,
the Seller shall indemnify the Agent and the Purchasers for Indemnified Amounts
(including, without limitation, losses in respect of uncollectible
receivables, regardless of whether reimbursement therefor would constitute
recourse to the Seller or the Servicer) relating to or resulting from:
(i) any representation or warranty made by the Seller, any Originator or
the Servicer (or any officers of the Seller, any Originator or the Servicer)
under or in connection with this Agreement, any other Transaction Document, any
Monthly Report or any other information or report delivered by the Seller, any
Originator or the Servicer pursuant hereto or thereto, which shall have been
false or incorrect when made or deemed made;
(ii) the failure by the Seller, any Originator or the Servicer to comply
with any applicable law, rule or regulation with respect to any Receivable or
Contract related thereto, or the nonconformity of any Receivable or Contract
included therein with any such applicable law, rule or regulation;
(iii) any failure of the Seller, any Originator or the Servicer to
perform its duties or obligations in accordance with the provisions of this
Agreement or any other Transaction Document;
(iv) any products liability or similar claim arising out of or in
connection with merchandise, insurance or services which are the subject of any
Contract;
(v) any dispute, claim, offset or defense (other than discharge in
bankruptcy of the Obligor) of any Obligor to the payment of any Receivable
(including, without limitation, a defense based on such Receivable or the
related Contract not being a legal, valid and binding obligation of such
Obligor enforceable against it in accordance with its terms), or any other
claim resulting from the sale of the merchandise or service related to such
Receivable or the furnishing or failure to furnish such merchandise or
services;
(vi) the commingling of Collections of Receivables at any time with
other funds;
(vii) any investigation, litigation or proceeding related to or arising
from this Agreement or any other Transaction Document, the transactions
contemplated hereby or thereby, the use of the proceeds of a purchase, the
ownership of the Receivable Interests or any other investigation, litigation
or proceeding relating to the Seller or any Originator in which any Indemnified
Party becomes involved as a result of any of the transactions contemplated
hereby or thereby;
(viii) any inability to litigate any claim against any Obligor in
respect of any Receivable as a result of such Obligor being immune from civil
and commercial law and suit on the grounds of sovereignty or otherwise from any
legal action, suit or proceeding;
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(ix) any Servicer Default described in Section 7.1(c);
(x) the failure to vest and maintain vested in the Agent and the
Purchasers, or to transfer to the Agent and the Purchasers, legal and equitable
title to, and ownership of, a first priority perfected undivided percentage
ownership (to the extent of the Receivable Interests contemplated hereunder) in
the Receivables, the Related Security and the Collections, free and clear of
any Adverse Claim; or
(xi) any failure of the Seller to give reasonably equivalent value to
any Originator under any Transfer Agreement in consideration of the transfer by
such Originator of any Receivable, or any attempt by any Person to void any
such transfer under statutory provisions or common law or equitable action,
including, without limitation, any provision of the Bankruptcy Code.
Section 8.2. Increased Cost and Reduced Return. (a) If after the date
hereof, any Funding Source shall be charged any fee, expense or increased cost
on account of the adoption of any applicable law, rule or regulation (including
any applicable law, rule or regulation regarding capital adequacy) or any
change therein, or any change in the interpretation or administration thereof
by any governmental authority, central bank or comparable agency charged with
the interpretation or administration thereof, or compliance with any request
or directive (whether or not having the force of law) of any such authority,
central bank or comparable agency (a "Regulatory Change"): (i) which subjects
any Funding Source to any charge or withholding on or with respect to any
Funding Agreement or a Funding Source's obligations under a Funding Agreement,
or on or with respect to the Receivables, or changes the basis of taxation of
payments to any Funding Source of any amounts payable under any Funding
Agreement (except for changes in the rate of tax on the overall net income of
a Funding Source) or (ii) which imposes, modifies or deems applicable any
reserve, assessment, insurance charge, special deposit or similar requirement
against assets of, deposits with or for the account of a Funding Source, or
credit extended by a Funding Source pursuant to a Funding Agreement or (iii)
which imposes any other condition the result of which is to increase the cost
to a Funding Source of performing its obligations under a Funding Agreement,
or to reduce the rate of return on a Funding Source's capital as a consequence
of its obligations under a Funding Agreement, or to reduce the amount of any
sum received or receivable by a Funding Source under a Funding Agreement or to
require any payment calculated by reference to the amount of interests or
loans held or interest received by it, then, upon demand by the Agent, the
Seller shall pay to the Agent, for the benefit of the relevant Funding Source,
such amounts charged to such Funding Source or compensate such Funding Source
for such reduction.
(b) Payment of any sum pursuant to Section 8.2(a) shall be made by the
Seller to the Agent, for the benefit of the relevant Funding Source, not later
than ten (10) days after any such demand is made. A certificate of any Funding
Source, signed by an authorized officer claiming compensation under this
Section 8.2 and setting forth the additional amount to be paid for its benefit
and explaining the manner in which such amount was determined shall be
conclusive evidence of the amount to be paid, absent manifest error. Demand
for payment of any amount pursuant to this Section 8.2 shall be made within
thirty (30) days after the end of the applicable Tranche Period during which
the same shall have been incurred by (or, in the case of any Funding Agreement
other than this Agreement, thirty (30) days after demand shall have been made
under such Funding Agreement against) the affected Purchaser; provided that, in
the case of any claim arising by reason of a requirement that a Funding
Source's capital be increased, demand by such Funding Source under this
Section 8.2 therefor shall not be made for any portion of any period prior to
forty-five (45) days before the date of such demand.
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Section 8.3. Other Costs and Expenses Relating to this Agreement. The
Seller shall pay to the Agent and PREFCO on demand all costs and out-of-pocket
expenses in connection with the preparation, execution, delivery and
administration of this Agreement, the transactions contemplated hereby and the
other documents to be delivered hereunder, including without limitation, the
cost of PREFCO's auditors auditing the books, records and procedures of the
Seller, reasonable fees and out-of-pocket expenses of legal counsel for PREFCO
and the Agent (which such counsel may be employees of PREFCO or the Agent) with
respect thereto and with respect to advising PREFCO and the Agent as to their
respective rights and remedies under this Agreement. The Seller shall pay to
the Agent on demand any and all costs and expenses of the Agent and the
Purchasers, if any, including reasonable counsel fees and expenses in
connection with the enforcement of this Agreement and the other documents
delivered hereunder and in connection with any restructuring or workout of
this Agreement or such documents, or the administration of this Agreement
following a Servicer Default.
Section 8.4. Other Costs and Expenses Relating to PREFCO; Allocations.
The Seller shall reimburse PREFCO on demand for all other costs and expenses
incurred by PREFCO or any shareholder of PREFCO ("Other Costs"), including,
without limitation, the cost of auditing PREFCO's books by certified public
accountants, the cost of rating the Commercial Paper by independent financial
rating agencies, and the reasonable fees and out-of-pocket expenses of counsel
for PREFCO or any counsel for any shareholder of PREFCO with respect to
advising PREFCO or such shareholder as to matters relating to PREFCO's
operations. PREFCO shall allocate the liability for Other Costs among the
Seller and other Persons with whom PREFCO has entered into agreements to
purchase interests in receivables ("Other Sellers"). If any Other Costs are
attributable to the Seller and not attributable to any Other Seller, the Seller
shall be solely liable for such Other Costs. However, if Other Costs are
attributable to Other Sellers and not attributable to the Seller, such Other
Sellers shall be solely liable for such Other Costs. All allocations to be
made pursuant to the foregoing provisions of this Article VIII shall be made by
PREFCO in its sole discretion and shall be binding on the Seller and the
Servicer. In any allocation made by PREFCO between the Seller and the Other
Sellers, PREFCO shall advise the Seller of the Seller's percentage of all such
Other Costs.
ARTICLE IX
THE AGENT
Section 9.1. Authorization and Action. Each Purchaser hereby
designates and appoints First Chicago to act as its agent hereunder and under
each other Transaction Document, and authorizes the Agent to take such actions
as agent on its behalf and to exercise such powers as are delegated to the
Agent by the terms of this Agreement and the other Transaction Documents
together with such powers as are reasonably incidental thereto. The Agent
shall not have any duties or responsibilities, except those expressly set
forth herein or in any other Transaction Document, or any fiduciary
relationship with any Purchaser, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities on the part of the Agent
shall be read into this Agreement or any other Transaction Document or
otherwise exist for the Agent. In performing its functions and duties
hereunder and under the other Transaction Documents, the Agent shall act solely
as agent for the Purchasers and does not assume nor shall be deemed to have
assumed any obligation or relationship of trust or agency with or for the
Seller or any of its successors or assigns. The Agent shall not be required to
take any action which exposes the Agent to personal liability or which is
contrary to this Agreement, any other Transaction Document or applicable law.
The appointment and authority of the Agent hereunder shall terminate upon the
indefeasible payment in full of all Aggregate Unpaids. Each Purchaser hereby
authorizes the Agent to execute on behalf of such Purchaser (the terms of
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which shall be binding on such Purchaser) each of the Uniform Commercial Code
financing statements, together with such other instruments or documents
determined by the Agent to be necessary or desirable in order to perfect,
evidence or more fully protect the interest of the Purchasers contemplated
hereunder.
Section 9.2. Delegation of Duties. The Agent may execute any of its
duties under this Agreement and each other Transaction Document by or through
agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Agent shall not be
responsible for the negligence or misconduct of any agents or attorneys-in-fact
selected by it with reasonable care.
Section 9.3. Exculpatory Provisions. Neither the Agent nor any of its
directors, officers, agents or employees shall be (i) liable for any action
lawfully taken or omitted to be taken by it or them under or in connection with
this Agreement or any other Transaction Document (except for its, their or such
Person's own gross negligence or willful misconduct), or (ii) responsible in
any manner to any of the Purchasers for any recitals, statements,
representations or warranties made by the Seller contained in this Agreement,
any other Transaction Document or any certificate, report, statement or other
document referred to or provided for in, or received under or in connection
with, this Agreement, or any other Transaction Document or for the value,
validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement, or any other Transaction Document or any other document furnished in
connection herewith or therewith, or for any failure of the Seller to perform
its obligations here under or thereunder, or for the satisfaction of any
condition specified in Article IV, or for the perfection, priority, condition,
value or sufficiency or any collateral pledged in connection herewith. The
Agent shall not be under any obligation to any Purchaser to ascertain or to
inquire as to the observance or performance of any of the agreements or
covenants contained in, or conditions of, this Agreement or any other
Transaction Document, or to inspect the properties, books or records of the
Seller. The Agent shall not be deemed to have knowledge of any Servicer
Default or Potential Servicer Default unless the Agent has received notice from
the Seller or a Purchaser.
Section 9.4. Reliance by Agent. The Agent shall in all cases be
entitled to rely, and shall be fully protected in relying, upon any document or
conversation believed by it to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons and upon advice and statements of
legal counsel (including, without limitation, counsel to the Seller),
independent accountants and other experts selected by the Agent. The Agent
shall in all cases be fully justified in failing or refusing to take any action
under this Agreement or any other Transaction Document unless it shall first
receive such advice or concurrence of PREFCO or the Required Investors or all
of the Purchasers, as applicable, as it deems appropriate and it shall first be
indemnified to its satisfaction by the Purchasers, provided that unless and
until the Agent shall have received such advice, the Agent may take or refrain
from taking any action, as the Agent shall deem advisable and in the best
interests of the Purchasers. The Agent shall in all cases be fully protected
in acting, or in refraining from acting, in accordance with a request of PREFCO
or the Required Investors or all of the Purchasers, as applicable, and such
request and any action taken or failure to act pursuant thereto shall be
binding upon all the Purchasers.
Section 9.5. Non-Reliance on Agent and Other Purchasers. Each
Purchaser expressly acknowledges that neither the Agent, nor any of its
officers, directors, employees, agents, attorneys-in-fact or affiliates has
made any representations or warranties to it and that no act by the Agent
hereafter taken, including, without limitation, any review of the affairs of
the Seller, shall be deemed to constitute any representation or warranty by the
Agent. Each Purchaser represents and warrants to the Agent that it has and
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will, independently and without reliance upon the Agent or any other Purchaser
and based on such documents and information as it has deemed appropriate, made
its own appraisal of and investigation into the business, operations, property,
prospects, financial and other conditions and creditworthiness of the Seller
and made its own decision to enter into this Agreement, the other Transaction
Documents and all other documents related hereto or thereto.
Section 9.6. Reimbursement and Indemnification. The Investors agree to
reimburse and indemnify the Agent and its officers, directors, employees,
representatives and agents ratably according to their Pro Rata Shares, to the
extent not paid or reimbursed by the Seller (i) for any amounts for which the
Agent, acting in its capacity as Agent, is entitled to reimbursement by the
Seller hereunder and (ii) for any other expenses incurred by the Agent, in its
capacity as Agent and acting on behalf of the Purchasers, in connection with
the administration and enforcement of this Agreement and the other Transaction
Documents.
Section 9.7. Agent in its Individual Capacity. The Agent and its
Affiliates may make loans to, accept deposits from and generally engage in any
kind of business with the Seller or any Affiliate of the Seller as though the
Agent were not the Agent hereunder. With respect to the acquisition of
Receivable Interests pursuant to this Agreement, the Agent shall have the same
rights and powers under this Agreement as any Purchaser and may exercise the
same as though it were not the Agent, and the terms "Investor," "Purchaser,"
"Investors" and "Purchasers" shall include the Agent in its individual
capacity.
Section 9.8. Successor Agent. The Agent may, upon five days' notice to
the Seller and the Purchasers, and the Agent will, upon the direction of all of
the Purchasers (other than the Agent, in its individual capacity) resign as
Agent. If the Agent shall resign, then the Required Investors during such
five-day period shall appoint from among the Purchasers a successor agent. If
for any reason no successor Agent is appointed by the Required Investors during
such five-day period, then effective upon the termination of such five day
period, the Purchasers shall perform all of the duties of the Agent hereunder
and under the other Transaction Documents and the Seller shall make all
payments in respect of the Aggregate Unpaids directly to the applicable
Purchasers and for all purposes shall deal directly with the Purchasers. After
the effectiveness of any retiring Agent's resignation hereunder as Agent, the
retiring Agent shall be discharged from its duties and obligations hereunder
and under the other Transaction Documents and the provisions of this Article
IX and Article VIII shall continue in effect for its benefit with respect to
any actions taken or omitted to be taken by it while it was Agent under this
Agreement and under the other Transaction Documents.
ARTICLE X
ASSIGNMENTS; PARTICIPATIONS
Section 10.1. Assignments. (a) The Seller and each Investor hereby
agree and consent to the complete or partial assignment by PREFCO of all of its
rights under, interest in, title to and obligations under this Agreement to the
Investors pursuant to Section 2.1 or to any other Person, and upon such
assignment, PREFCO shall be released from its obligations so assigned.
Further, the Seller and each Investor hereby agree that any assignee of PREFCO
of this Agreement or all or any of the Receivable Interests of PREFCO shall
have all of the rights and benefits under this Agreement as if the term
"PREFCO" explicitly referred to such party, and no such assignment shall in any
way impair the rights and benefits of PREFCO hereunder. The Seller shall not
have the right to assign its rights or obligations under this Agreement.
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(b) Any Investor may at any time and from time to time assign to one or
more Persons ("Purchasing Investors") all or any part of its rights and
obligations under this Agreement pursuant to an assignment agreement, in a form
and substance satisfactory to the Agent (the "Assignment Agreement"), executed
by such Purchasing Investor and such selling Investor. The consent of PREFCO
shall be required prior to the effectiveness of any such assignment. Each
assignee of an Investor must have a short-term debt rating of A-1 or better by
Standard & Poor's Ratings Group and P-1 by Moody's Investors Service, Inc. and
must agree to deliver to the Agent, promptly following any request therefor by
the Agent or PREFCO, an enforceability opinion in form and substance
satisfactory to the Agent and PREFCO. Upon delivery of the executed Assignment
Agreement to the Agent, such selling Investor shall be released from its
obligations hereunder to the extent of such assignment. Thereafter the
Purchasing Invest or shall for all purposes be an Investor party to this
Agreement and shall have all the rights and obligations of an Investor under
this Agreement to the same extent as if it were an original party hereto and no
further consent or action by the Seller, the Purchasers or the Agent shall be
required.
(c) Each of the Investors agrees that in the event that it shall cease
to have a short-term debt rating of A-1 or better by Standard & Poor's
Corporation and P-1 by Moody's Investors Service, Inc. (an "Affected
Investor"), such Affected Investor shall be obliged, at the request of PREFCO
or the Agent, to assign all of its rights and obligations hereunder to (x)
another Investor or (y) another financial institution nominated by the Agent
and acceptable to PREFCO, and willing to participate in this Agreement through
the Liquidity Termination Date in the place of such Affected Investor; provided
that the Affected Investor receives payment in full, pursuant to an Assignment
Agreement, of an amount equal to such Investor's Pro Rata Share of the Capital
and Discount owing to the Investors and all accruing but unpaid fees and other
costs and expenses payable in respect of its Pro Rata Share of the Receivable
Interests.
Section 10.2. Participations. Any Investor may, in the ordinary course
of its business at any time sell to one or more Persons (each a "Participant")
participating interests in its Pro Rata Share of the Receivable Interests of
the Investors, its obligation to pay PREFCO its Acquisition Amounts or any
other interest of such Investor hereunder. Notwithstanding any such sale by an
Investor of a participating interest to a Participant, such Investor's rights
and obligations under this Agreement shall remain unchanged, such Investor
shall remain solely responsible for the performance of its obligations
hereunder, and the Seller, PREFCO and the Agent shall continue to deal solely
and directly with such Investor in connection with such Investor's rights and
obligations under this Agreement. Each Investor agrees that any agreement
between such Investor and any such Participant in respect of such participating
interest shall not restrict such Investor's right to agree to any amendment,
supplement, waiver or modification to this Agreement, except for any
amendment, supplement, waiver or modification described in clause (i) of
Section 11.1(b).
ARTICLE XI
MISCELLANEOUS
Section 11.1. Waivers and Amendments. (a) No failure or delay on the
part of any party hereto in exercising any power, right or remedy under this
Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power, right or remedy preclude any other further
exercise thereof or the exercise of any other power, right or remedy. The
rights and remedies herein provided shall be cumulative and nonexclusive of any
rights or remedies provided by law. Any waiver of this Agreement shall be
effective only in the specific instance and for the specific purpose for which
given.
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(b) No provision of this Agreement may be amended, supplemented,
modified or waived except in writing in accordance with the provisions of this
Section 11.1(b). PREFCO, the Seller and the Agent, at the direction of the
Required Investors, may enter into written modifications or waivers of any
provisions of this Agreement, provided, however, that no such modification or
waiver shall:
(i) without the consent of each affected Purchaser, (A) extend
the Liquidity Termination Date or the date of any payment or deposit of
Collections by the Seller or the Servicer, (B) reduce the rate or extend
the time of payment of Discount (or any component thereof), (C) reduce
any fee payable to the Agent for the benefit of the Purchasers, (D)
except pursuant to Article X hereof, change the amount of the Capital of
any Purchaser, an Investor's Pro Rata Share or an Investor's Commitment,
(E) amend, modify or waive any provision of the definition of Required
Investors or this Section 11.1(b), (F) consent to or permit the
assignment or transfer by the Seller of any of its rights and
obligations under this Agreement, (G) change the definition of
"Eligible Receivable," "Loss Reserve," or "Loss Percentage," or (H)
amend or modify any defined term (or any defined term used directly or
indirectly in such defined term) used in clauses (A) through (G) above
in a manner which would circumvent the intention of the restrictions set
forth in such clauses; or
(ii) without the written consent of the then Agent, amend, modify
or waive any provision of this Agreement if the effect thereof is to
affect the rights or duties of such Agent.
Notwithstanding the foregoing, (i) without the consent of the Investors,
the Agent may, with the consent of the Seller, amend this Agreement solely to
add additional Persons as Investors hereunder and (ii) without the consent of
the Seller, the Agent, the Required Investors and PREFCO may enter into
amendments to modify any of the terms or provisions of Article II, Article IX,
Article X or Section 11.13 provided that such amendment has no negative impact
upon the Seller. Any modification or waiver made in accordance with this
Section 11.1 shall apply to each of the Purchasers equally and shall be binding
upon the Seller, the Purchasers and the Agent.
Section 11.2 Notices. (a) Except as provided in subsection (b) below,
all communications and notices provided for hereunder shall be in writing
(including bank wire, telecopy or electronic facsimile transmission or similar
writing) and shall be given to the other parties hereto at their respective
addresses or telecopy numbers set forth on the signature pages hereof. All
such communications and notices shall, when mailed, telecopied, telegraphed,
telexed or cabled, be effective when received through the mails, transmitted by
telecopy, delivered to the telegraph company, confirmed by telex answerback or
delivered to the cable company, respectively, except that communications and
notices to the Agent or any Purchaser pursuant to Article I or II shall not be
effective until received by the intended recipient.
(b) The Seller hereby authorizes the Agent to effect purchases and
Tranche Period and Discount Rate selections based on telephonic notices made by
any Person whom the Agent in good faith believes to be acting on behalf of the
Seller. The Seller agrees to deliver promptly to the Agent a written
confirmation of each telephonic notice signed by an authorized officer of the
Seller. However, the absence of such confirmation shall not affect the
validity of such notice. If the written confirmation differs from the action
taken by the Agent, the records of the Agent shall govern absent manifest
error.
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Section 11.3. Ratable Payments. If any Purchaser, whether by setoff or
otherwise, has payment made to it with respect to any portion of the Aggregate
Unpaids owing to such Purchaser (other than payments received pursuant to
Section 8.2 or 8.3) in a greater proportion than that received by any other
Purchaser entitled to receive a ratable share of such Aggregate Unpaids, such
Purchaser agrees, promptly upon demand, to purchase for cash without recourse
or warranty a portion of the Aggregate Unpaids held by the other Purchasers so
that after such purchase each Purchaser will hold its ratable proportion of the
Aggregate Unpaids; provided that if all or any portion of such excess amount is
thereafter recovered from such Purchaser, such purchase shall be rescinded and
the purchase price restored to the extent of such recovery, but without
interest.
Section 11.4. Protection of Ownership Interests of the Purchasers. (a)
The Seller agrees that from time to time, at its expense, it will promptly
execute and deliver all instruments and documents, and take all actions, that
may be necessary or desirable, or that the Agent may request, to perfect,
protect or more fully evidence the Receivable Interests, or to enable the Agent
or the Purchasers to exercise and enforce their rights and remedies hereunder.
The Agent may, or the Agent may direct the Seller to, notify the Obligors of
Receivables, at any time following the replacement of the Seller as Servicer
and at the Seller's expense, of the ownership interests of the Purchasers under
this Agreement and may also direct that payments of all amounts due or that
become due under any or all Receivables be made directly to the Agent or its
designee. The Seller shall, at any Purchaser's written request, withhold the
identity of such Purchaser in any such notification.
(b) If the Seller or the Servicer fails to perform any of its
obligations hereunder, the Agent or any Purchaser may (but shall not be
required to) perform, or cause performance of, such obligation; and the Agent's
or such Purchaser's costs and expenses incurred in connection therewith shall
be payable by the Seller (if the Servicer that fails to so perform is the
Seller or an Affiliate thereof) as provided in Section 8.3, as applicable. The
Seller and the Servicer each irrevocably authorizes the Agent at any time and
from time to time in the sole discretion of the Agent, and appoints the Agent
as its attorney-in-fact, to act on behalf of the Seller and the Servicer (i) to
execute on behalf of the Seller as debtor and to file financing statements
necessary or desirable in the Agent's sole discretion to perfect and to
maintain the perfection and priority of the interest of the Purchasers in the
Receivables and (ii) to file a carbon, photographic or other reproduction of
this Agreement or any financing statement with respect to the Receivables as a
financing statement in such offices as the Agent in its sole discretion deems
necessary or desirable to perfect and to maintain the perfection and priority
of the interests of the Purchasers in the Receivables. This appointment is
coupled with an interest and is irrevocable.
Section 11.5. Confidentiality. (a) The Seller shall maintain and shall
cause each of its employees and officers to maintain the confidentiality of
this Agreement and the other confidential proprietary information with respect
to the Agent and PREFCO and their respective businesses obtained by it or them
in connection with the structuring, negotiating and execution of the
transactions contemplated herein, except that the Seller and its officers and
employees may disclose such information to the Seller's external accountants
and attorneys and as required by any applicable law or order of any judicial or
administrative proceeding. In addition, the Seller may disclose any such
nonpublic information pursuant to any law, rule, regulation, direction ,
request or order of any judicial, administrative or regulatory authority or
proceedings (whether or not having the force or effect of law).
(b) Anything herein to the contrary notwithstanding, the Seller hereby
consents to the disclosure of any nonpublic information with respect to it (i)
to the Agent, the Investors or PREFCO by each other, (ii) by the Agent or the
Purchasers to any prospective or actual assignee or participant of any of them
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or (iii) by the Agent to any rating agency, Commercial Paper dealer or provider
of a surety, guaranty or credit or liquidity enhancement to PREFCO or any
entity organized for the purpose of purchasing, or making loans secured by,
financial assets for which First Chicago acts as the administrative agent and
to any officers, directors, employees, outside accountants and attorneys of any
of the foregoing, provided each such Person is informed of the confidential
nature of such information in a manner consistent with the practice of the
Agent for the making of such disclosures generally to Persons of such type. In
addition, the Purchasers and the Agent may disclose any such nonpublic inform-
ation pursuant to any law, rule, regulation, direction, request or order of any
judicial, administrative or regulatory authority or proceedings (whether or not
having the force or effect of law).
Section 11.6. Bankruptcy Petition. The Seller, the Agent and each
Investor hereby covenants and agrees that, prior to the date which is one year
and one day after the payment in full of all outstanding senior indebtedness of
PREFCO, it will not institute against, or join any other Person in instituting
against, PREFCO any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings or other similar proceeding under the laws of the
United States or any state of the United States.
Section 11.7. Limitation of Liability. Except with respect to any
claim arising out of the willful misconduct or gross negligence of PREFCO, the
Agent or any Investor, no claim may be made by the Seller, the Servicer or any
other Person against PREFCO, the Agent or any Investor or their respective
Affiliates, directors, officers, employees, attorneys or agents for any
special, indirect, consequential or punitive damages in respect of any claim
for breach of contract or any other theory of liability arising out of or
related to the transactions contemplated by this Agreement, or any act,
omission or event occurring in connection therewith; and the Seller hereby
waives, releases, and agrees not to sue upon any claim for any such damages,
whether or not accrued and whether or not known or suspected to exist in its
favor.
SECTION 11.8. CHOICE OF LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE
OF ILLINOIS.
SECTION 11.9. CONSENT TO JURISDICTION. THE SELLER HEREBY IRREVOCABLY
SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR
ILLINOIS STATE COURT SITTING IN CHICAGO IN ANY ACTION OR PROCEEDING ARISING OUT
OF OR RELATING TO THIS AGREEMENT OR ANY DOCUMENT EXECUTED BY THE SELLER
PURSUANT TO THIS AGREEMENT AND THE SELLER HEREBY IRREVOCABLY AGREES THAT ALL
CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN
ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER
HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A
COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT
THE RIGHT OF THE AGENT OR ANY PURCHASER TO BRING PROCEEDINGS AGAINST THE
SELLER IN THE COURTS OF ANY OTHER JURISDICTION WHEREIN ANY ASSETS OF THE SELLER
OR ANY ORIGINATOR MAY BE LOCATED. ANY JUDICIAL PROCEEDING BY THE SELLER
AGAINST THE AGENT OR ANY PURCHASER OR ANY AFFILIATE OF THE AGENT OR A PURCHASER
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF,
RELATED TO, OR CONNECTED WITH THIS AGREEMENT OR ANY DOCUMENT EXECUTED BY THE
SELLER PURSUANT TO THIS AGREEMENT SHALL BE BROUGHT ONLY IN A COURT IN CHICAGO,
ILLINOIS.
SECTION 11.10. WAIVER OF JURY TRIAL. THE AGENT, THE SELLER AND EACH
PURCHASER HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING,
DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR
OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS
AGREEMENT, ANY DOCUMENT EXECUTED BY THE SELLER PURSUANT TO THIS AGREEMENT OR
THE RELATIONSHIP ESTABLISHED HEREUNDER OR THEREUNDER.
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Section 11.11. Integration; Survival of Terms. This Agreement, the
Collection Account Agreements, and the Fee Letter contain the final and
complete integration of all prior expressions by the parties hereto with
respect to the subject matter hereof and shall constitute the entire agreement
among the parties hereto with respect to the subject matter hereof superseding
all prior oral or written understandings. The provisions of Article VIII and
Section 11.6 shall survive any termination of this Agreement.
Section 11.12. Counterparts; Severability. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which when taken together shall constitute one and the same
Agreement. Any provisions of this Agreement which are prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
Section 11.13. First Chicago Roles. Each of the Investors acknowledges
that First Chicago acts, or may in the future act, (i) as administrative agent
for PREFCO, (ii) as issuing and paying agent for the Commercial Paper, (iii) to
provide credit or liquidity enhancement for the timely payment for the
Commercial Paper and (iv) to provide other services from time to time for
PREFCO (collectively, the "First Chicago Roles"). Without limiting the
generality of this Section 11.13, each Investor hereby acknowledges and
consents to any and all First Chicago Roles and agrees that in connection with
any First Chicago Role, First Chicago may take, or refrain from taking, any
action which it, in its discretion, deems appropriate, including, without
limitation, in its role as administrative agent for PREFCO, the giving of
notice to the Agent of a mandatory purchase pursuant to Section 2.1.
Section 11.14. Characterization. (a) It is the intention of the
parties hereto that each purchase hereunder shall constitute an absolute and
irrevocable sale, which purchase shall provide the applicable Purchaser with
the full benefits of ownership of the applicable Receivable Interest. Except
as specifically provided in this Agreement, each sale of a Receivable Interest
hereunder is made without recourse to the Seller; provided, however, that (i)
the Seller shall be liable to each Purchaser and the Agent for all
representations, warranties and covenants made by the Seller pursuant to the
terms of this Agreement, and (ii) such sale does not constitute and is not
intended to result in an assumption by any Purchaser or the Agent or any
assignee thereof of any obligation of the Seller or any Originator or any other
person arising in connection with the Receivables, the Related Security, or the
related Contracts, or any other obligations of the Seller or any Originator.
(b) If the conveyance by the Seller to the Purchasers of interests in
Receivables hereunder shall be characterized as a secured loan and not a sale,
it is the intention of the parties hereto that this Agreement shall constitute
a security agreement under applicable law, and that the Seller shall be deemed
to have granted to the Agent for the ratable benefit of the Purchasers a duly
perfected security interest in all of the Seller's right, title and interest
in, to and under the Receivables, the Collections, each Collection Account,
all Related Security, all payments on or with respect to such Receivables, all
other rights relating to and payments made in respect of the Receivables, and
all proceeds of any thereof prior to all other liens on and security interests
therein. After a Servicer Default, the Agent and the Purchasers shall have, in
addition to the rights and remedies which they may have under this Agreement,
all other rights and remedies provided to a secured creditor after default
under the UCC and other applicable law, which rights and remedies shall be
cumulative. In that regard, the Agent is hereby granted a license or other
right to use, without charge, the Seller's copyrights, rights of use of any
name, trade names, trademarks, service marks and advertising matter, or any
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property of a similar nature, as it may pertain to Related Security comprising
repossessed or returned inventory the sale or lease of which shall have given
rise to a Receivable and in order to facilitate the disposition by the
Purchaser of such inventory.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date hereof.
OUTBOARD MARINE RECEIVABLES CORP.
GORDON G. REPP
By: ______________
Vice President
100 Sea-Horse Drive
Waukegan, Illinois 60085
Attention: Treasurer
Fax: (847) 689-7806
PREFERRED RECEIVABLES FUNDING CORPORATION
WANDA M. HARRISON
By: _________________
Authorized Signatory
c/o The First National Bank
of Chicago, as Agent
Suite 0596, 1-21
One First National Plaza
Chicago, Illinois 60670
Fax: (312) 732-4487
INVESTORS:
Commitment
-----------
$55,000,000 THE FIRST NATIONAL BANK OF CHICAGO, as
an Investor and as Agent
WANDA M. HARRISON
By: _________________
Vice President
The First National Bank of Chicago
Suite 0596, 1-21
One First National Plaza
Chicago, Illinois 60670
Fax: (312) 732-4487
-----------
$55,000,000 PURCHASE LIMIT
-----------
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<PAGE> 56
EXHIBITS AND SCHEDULES
EXHIBIT I DEFINITIONS
EXHIBIT II PRINCIPAL PLACE OF BUSINESS OF THE SELLER;
LOCATION(S) OF RECORDS; FEDERAL EMPLOYER
IDENTIFICATION NUMBERS
EXHIBIT III LOCK-BOXES; CONCENTRATION ACCOUNTS; DEPOSITARY ACCOUNTS
EXHIBIT IV FORM OF COMPLIANCE CERTIFICATE
EXHIBIT V FORM OF COLLECTION ACCOUNT AGREEMENT
EXHIBIT VI CREDIT AND COLLECTION POLICY
EXHIBIT VII FORM OF CONTRACT(S)
EXHIBIT VIII FORM OF MONTHLY REPORT
EXHIBIT IX FORM OF PURCHASE NOTICE
SCHEDULE A LIST OF DOCUMENTS TO BE DELIVERED TO THE AGENT PRIOR
TO THE INITIAL PURCHASE
NOTE: Exhibits II - IX and Schedule A are not material to the Agreement and
are therefore not attached.
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<PAGE> 57
EXHIBIT I
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings (such meanings to be equally applicable to both the singular and
plural forms of the terms defined):
"Acquisition Amount" means, on the date of any purchase from PREFCO of
Receivable Interests pursuant to Section 2.1, (i) with respect to each Investor
other than First Chicago, the lesser of (a) such Investor's Pro Rata Share of
the PREFCO Transfer Price and (b) such Investor's unused Commitment and (ii)
with respect to First Chicago, the difference between (a) the PREFCO Transfer
Price and (b) the aggregate amount payable by all other Investors on such date
pursuant to clause (i) above.
"Adjusted Liquidity Price" means, in determining the PREFCO Transfer
Price for any Receivable Interest, an amount equal to
(i) DC + (ii) RI x [ NDR ]
-------------------
1 + (.50 x LP)
where:
RI = the undivided percentage interest evidenced by such
Receivable Interest.
DC = the Deemed Collections.
NDR = the Outstanding Balance of all non-Defaulted Receivables.
LP = the Loss Percentage.
Each of the foregoing shall be determined from the most recent Monthly
Report received from the Servicer.
"Adjusted Outstanding Balance" means, on any date, an amount equal to
(i) the aggregate Outstanding Balance of all Eligible Receivables as of the
opening of business of the Servicer on such date, minus (ii) an amount equal to
10% of the aggregate Outstanding Balance of all Receivables on such date that
are Floor Plan Financed Receivables.
"Adverse Claim" means a lien, security interest, charge or encumbrance,
or other right or claim in, of or on any Person's assets or properties in favor
of any other Person.
"Affiliate" means, with respect to any Person, any other Person directly
or indirectly controlling (including but not limited to all directors and
officers of such Person), controlled by, or under direct or indirect common
control with such Person. A Person shall be deemed to control another Person
if such Person possesses, directly or indirectly, the power to direct or cause
the direction of the management or policies of the other Person, whether
through ownership of voting securities, by contract or otherwise. In
addition, for purposes of the definitions of "Concentration Limit," "Eligible
Receivable" and "Net Receivables Balance," a Person shall be deemed to control
another Person if such Person owns 10% or more of any class of voting
securities (or corresponding interest in the case of non-corporate entities) of
the other Person.
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"Agent" means First Chicago in its capacity as agent for the Purchasers
pursuant to Article IX, and not in its individual capacity as an Investor, and
any successor Agent appointed pursuant to Article IX.
"Aggregate Unpaids" means, at any time, an amount equal to the sum of
all accrued and unpaid Discount, Capital and all other amounts owed (whether
due or accrued) hereunder or under the Fee Letter to the Agent and the
Purchasers at such time, plus all accrued and unpaid Servicer Fees owed
hereunder to the Servicer.
"Agreement" means this Receivables Purchase Agreement, as it may be
amended or modified and in effect from time to time.
"Average Collection Period" means at any time that period of days equal
to the average maturity of the Receivables (whether Undated Receivables or
Dated Receivables) calculated by the Servicer in the then most recent Monthly
Report; provided that if the Agent shall disagree with any such calculation,
the Agent may recalculate the Average Collection Period for either category of
Receivables.
"Base Rate" means, (i) prior to the occurrence of a Servicer Default, a
rate per annum equal to the corporate base rate, prime rate or base rate of
interest, as applicable, announced by the Reference Bank from time to time,
changing when and as such rate changes, and (ii) at all times after the
occurrence of a Servicer Default, such rate plus 1% per annum.
"Business Day" means any day on which banks are not authorized or
required to close in New York, New York or Chicago, Illinois and The Depository
Trust Company of New York is open for business, and, if the applicable Business
Day relates to any computation or payment to be made with respect to the LIBO
Rate, any day on which dealings in dollar deposits are carried on in the London
interbank market.
"Capital" of any Receivable Interest means, at any time, the Purchase
Price of such Receivable Interest (and after giving effect to any adjustments
contemplated in Section 1.5), minus the sum of the aggregate amount of
Collections and other payments received by the Agent which in each case are
applied to reduce such Capital; provided that such Capital shall be restored in
the amount of any Collections or payments so received and applied if at any
time the distribution of such Collections or payments are rescinded or must
otherwise be returned for any reason.
"Change of Control" means (i) any Person or Persons acting in concert
shall acquire beneficial ownership (within the meaning of Rule 13d-3 of the
Securities and Exchange Commission under the Securities Exchange Act of 1934)
of 15% or more of the outstanding shares of voting stock of OMC and the board
of directors of OMC shall fail to redeem, within the time period prescribed
therein, the rights issued under OMC's Amended and Restated Rights Plan dated
as of June 12, 1986, as amended and restated as of September 6, 1990; or (ii)
during any period of twelve (12) consecutive months, commencing before or after
the date hereof, individuals who at the beginning of such twelve-month period
were directors of OMC shall cease for any reason to constitute a majority of
the board of directors of OMC; or (iii) any change of control shall occur as
defined under the provisions of OMC's certificate of incorporation or by-laws,
as at any time amended; or (iv) OMC shall cease to own, free and clear of all
Adverse Claims, all of the outstanding shares of voting stock of the Seller
and each other Originator on a fully diluted basis.
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<PAGE> 59
"Charged-Off Receivable" means a Receivable: (i) as to which the
Obligor thereof has taken any action, or suffered any event to occur, of the
type described in Section 7.1(c) (as if references to the Seller therein refer
to such Obligor); (ii) a s to which the Obligor thereof, if a natural person,
is deceased, (iii) which, consistent with the Credit and Collection Policy,
would be written off the Seller's books as uncollectible, or (iv) which has
been identified by the Seller as uncollectible.
"Collection Account" means each concentration account, depositary
account, lock-box account or similar account in which any Collections are
collected or deposited.
"Collection Account Agreement" means, in the case of any actual or
proposed Collection Account, an agreement in substantially the form of Exhibit
V hereto.
"Collection Bank" means, at any time, any of the banks or other
financial institutions holding one or more Collection Accounts.
"Collection Notice" means a notice, in substantially the form of the
Collection Notice contained in Exhibit V hereto, from the Agent to a Collection
Bank.
"Collections" means, with respect to any Receivable, all cash
collections and other cash proceeds in respect of such Receivable, including,
without limitation, all cash proceeds of Related Security with respect to such
Receivable and all amounts payable to the Purchasers by the Seller pursuant to
Section 1.8.
"Commercial Paper" means promissory notes of PREFCO issued by PREFCO in
the commercial paper market.
"Commitment" means, for each Investor, the commitment of such Investor
to purchase its Pro Rata Share of Receivable Interests from (i) the Seller and
(ii) PREFCO, such Pro Rata Share not to exceed, in the aggregate, the amount
set forth opposite such Investor's name on the signature pages of this
Agreement, as such amount may be modified in accordance with the terms hereof.
"Concentration Limit" means, at any time for any Obligor (other than a
Floor Plan Lender), an amount equal to (i) 3.33%, multiplied by (ii) the
Adjusted Outstanding Balance at such time, or such other amount (a "Special
Concentration Limit") for such Obligor as may be designated by the Agent;
provided, that in the case of an Obligor and any Affiliate of such Obligor, the
Concentration Limit shall be calculated as if such Obligor and such Affiliate
are one Obligor; and provided, further, that PREFCO or the Required Investors
may, upon not less than three Business Days' notice to the Seller, cancel any
Special Concentration Limit.
"Contract" means, with respect to any Receivable, any and all
instruments, agreements, leases, invoices or other writings pursuant to which
such Receivable arises or which evidences such Receivable.
"CP Rate" means, the rate, requested by the Seller and agreed to by
PREFCO, equivalent to the rate (or if more than one rate, the weighted average
of the rates) at which Commercial Paper having a term equal to the relevant
Tranche Period may be sold by any placement agent or commercial paper dealer
reasonably selected by PREFCO, as agreed between each such dealer or agent and
PREFCO plus any and all applicable issuing and paying agent fees and
commissions of placement agents and commercial paper dealers in respect of such
Commercial Paper; provided, however, that if the rate (or rates) as agreed
between any such agent or dealer and PREFCO is a discount rate (or rates), the
"CP Rate" for such Tranche Period shall be the rate (or if more than one rate,
the weighted average of the rates) resulting from PREFCO's converting such
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discount rate (or rates) to an interest-bearing equivalent rate per annum.
"Credit and Collection Policy" means the Seller's credit and collection
policies and practices relating to Contracts and Receivables existing on the
date hereof and summarized in Exhibit VI hereto, as modified from time to time
in accordance with this Agreement. It is understood that the Credit and
Collection Policy of the Seller in respect of any Receivable shall be the
credit and collection policies of the applicable Originator thereof. To the
extent any Originator shall not have comprehensively reduced to writing its
credit and collection policies, the Credit and Collection Policy in respect of
Receivables originated by such Originator shall be those credit and collection
policies of such Originator in effect on the date hereof and disclosed to the
Agent on or prior to the date hereof.
"Dated Receivable" means a Receivable which by its terms is due and
payable not fewer than 31 days, and not more than 365 days, after the original
billing date therefor.
"Deemed Collections" means the aggregate of all amounts owing to PREFCO
pursuant to Sections 1.8 and 8.1.
"Default Fee" means with respect to any amount due and payable by the
Seller hereunder or under the Fee Letter, an amount equal to interest on any
such amount at a rate per annum equal to 1% above the Base Rate, provided,
however, that such interest rate will not at any time exceed the maximum rate
permitted by applicable law.
"Default Ratio" means, as of the last day of any calendar month, a
percentage equal to (i) the aggregate Outstanding Balance of all Receivables
that are then Defaulted Receivables, divided by (ii) the aggregate Outstanding
Balance of all Receivables as of such date.
"Defaulted Receivable" means a Receivable as to which any payment, or
part thereof, remains unpaid for 91 days or more from the original due date for
such payment.
"Delinquency Ratio" means, as of the last day of any calendar month, a
percentage equal to (i) the aggregate Outstanding Balance of all Receivables
that are then Delinquent Receivables, divided by (ii) the aggregate Outstanding
Balance of all Receivables as of such date.
"Delinquent Receivable" means a Receivable as to which any payment, or
part thereof, remains unpaid for 61 days or more from the original due date for
such payment.
"Designated Obligor" means an Obligor indicated by the Agent to the
Seller in writing.
"Designated Servicer" means, at any time, each of the following (i) the
Servicer, if other than the Agent or a Purchaser at such time, and (ii) each
Originator, if any responsibility of the Servicer hereunder shall have been
delegated to such Originator.
"Dilution Ratio" means, as of the last day of any calendar month, a
percentage equal to (i) the aggregate amount of Dilutions (other than Rebates)
which shall have occurred during such month, divided by (ii) the aggregate
amount of sales made by the Originators during the immediately preceding month.
"Dilution Reserve" means, on any date, an amount equal to (i) the
greater of (a) 15% or (b) two times the Dilution Ratio in respect of the month
then most recently ended, multiplied by (ii) the Adjusted Outstanding Balance
as of the opening of business of the Servicer on such date.
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"Dilutions" means, at any time, the aggregate amount of reductions in
the Outstanding Balances of the Receivables as a result of any setoff,
discount, adjustment or otherwise, other than cash Collections on account of
the Receivables.
"Discount" means, for each Receivable Interest for any Tranche Period:
AD
DR x C x -----------
360
where:
DR = the Discount Rate for such Receivable Interest for such Tranche
Period;
C = the Capital of such Receivable Interest during such Tranche Period;
and
AD = the actual number of days elapsed during such Tranche Period;
provided, that no provision of this Agreement shall require the payment or
permit the collection of Discount in excess of the maximum permitted by
applicable law; and provided, further, that Discount for any Tranche Period
shall not be considered paid by any distribution to the extent that at any time
all or a portion of such distribution is rescinded or must otherwise be
returned for any reason.
"Discount Rate" means the LIBO Rate, the CP Rate or the Base Rate, as
applicable; provided that from and after the occurrence of a Servicer Default,
the Discount Rate in respect of each Receivable Interest and Tranche Period
shall be the Base Rate.
"Discount Reserve" means, on any date, an amount equal to 3% multiplied
by the Adjusted Outstanding Balance as of the opening of business of the
Servicer on such date; provided that if at any time the CP Rate (determined in
reference to a Tranche Period of 30-days) shall exceed 7.50% per annum, the
Discount Reserve shall thereafter, on any date, be an amount equal to the
percentage determined in accordance with the formula set forth below,
multiplied by the Adjusted Outstanding Balance as of the opening of business of
the Servicer on such date:
[ CPR x ACP (U) x URP ] + [ (CPR + 2%) x ACP (D) x DRP ]
------- -------
360 360
where:
CPR = the sum of (i) the CP Rate, assuming a 30-day Tranche Period
commencing on such date, and (ii) 0.40%;
ACP(U) = the greater of 30 days and the Average Collection Period in
respect of Undated Receivables at such time
DRP = a fraction, the numerator of which shall be the aggregate
Outstanding Balance of all Dated Receivables that are
Eligible Receivables at such time and the denominator of
which shall be the aggregate Outstanding Balance of all
Eligible Receivables at such time; and
ACP(D) = the greater of 270 days and the Average Collection Period in
respect of Dated Receivables at such time.
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URP = a fraction equal to one minus DRP at such time.
"Early Collection Fee" means, for any Receivable Interest which has its
Capital reduced, or its Tranche Period terminated prior to the date on which it
was originally scheduled to end, the excess, if any, of (i) the Discount that
would have accrued during the remainder of the Tranche Period subsequent to
the date of such reduction or termination on the Capital of such Receivable
Interest if such reduction or termination had not occurred, over (ii) the sum
of (a) to the extent all or a portion of such Capital is allocated to another
Receivable Interest, the Discount actually accrued during such period on such
Capital for the new Receivable Interest, and (b) to the extent such Capital is
not allocated to another Receivable Interest, the income, if any, actually
received during such period by the holder of such Receivable Interest from
investing the portion of such Capital not so allocated. In the event that the
amount referred to in clause (ii) exceeds the amount referred to in clause (i),
the relevant Purchaser or Purchasers agree to pay to the Seller the amount of
such excess.
"Eligible Receivable" means, at any time, a Receivable:
(i) the Obligor of which (a) if a natural person, is a resident
of the United States or, if a corporation or other business
organization, is organized under the laws of the United States or any
political subdivision thereof and has its chief executive office in the
United States; (b) is not an Affiliate of any of the parties hereto; (c)
is not a Designated Obligor; and (d) is not a government or a
governmental subdivision or agency,
(ii) the Obligor of which is not the Obligor of any Charged-Off
Receivable,
(iii) as to which any no payment, or part thereof, remains unpaid
for 61 days or more from the original due date for such payment, and
such Receivable is not a Defaulted Receivable or a Charged-Off
Receivable,
(iv) which has not had its payment terms extended and is either
(i) an Undated Receivable or (ii) a Dated Receivable; provided that the
aggregate Outstanding Balance of Eligible Receivables that are Dated
Receivables shall not at any time exceed an amount equal to 50% of the
aggregate Outstanding Balance of all Receivables at such time,
(v) which is an account receivable representing all or part of
the sales price of merchandise, insurance and services within the
meaning of Section 3(c)(5) of the Investment Company Act of 1940, as
amended,
(vi) a purchase of which with the proceeds of notes would
constitute a "current transaction" within the meaning of Section 3(a)(3)
of the Securities Act of 1933, as amended,
(vii) which is an "account" within the meaning of Section 9-106
of the UCC of all applicable jurisdictions,
(viii) which is denominated and payable only in United States
dollars in the United States,
(ix) which arises under a Contract in substantially the form of
one of the form contracts set forth on Exhibit VII hereto or otherwise
approved by the Agent in writing, which, together with such Receivable,
is in full force and effect and constitutes the legal, valid and binding
obligation of the related Obligor enforceable by the Seller and its
assignees against such Obligor in accordance with its terms,
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(x) which arises under a Contract which (a) does not require the
Obligor under such Contract to consent to the transfer, sale or
assignment of the rights and duties of the applicable Originator or any
of its assignees under such Contract and (b) does not contain a
confidentiality provision that would have the effect of restricting the
ability of the Agent or any Purchaser to exercise its rights under this
Agreement, including, without limitation, its right to review the
Contract,
(xi) which arises under a Contract that contains an obligation to
pay a specified sum of money, contingent only upon the sale of goods or
the provision of services by an Originator,
(xii) which is not subject to any right of rescission, set-off
(in respect of all or any portion of the Outstanding Balance thereof
then being proposed for inclusion in Net Receivables Balance as of any
date), counterclaim, any other defense (including defenses arising out
of violations of usury laws) of the applicable Obligor or the applicable
Originator or any other Adverse Claim, and the Obligor thereon holds no
right as against any Originator to cause such Originator to repurchase
the goods or merchandise the sale of which shall have given rise to such
Receivable,
(xiii) as to which the applicable Originator of such Receivable
has satisfied and fully performed all obligations on its part with
respect to such Receivable required to be fulfilled by it, and no
further action is required to be performed by any Person with respect
thereto other than payment thereon by the applicable Obligor,
(xiv) all right, title and interest to and in which has been
validly transferred by the applicable Originator directly to the Seller
under and in accordance with the applicable Transfer Agreement, and the
Seller has good and marketable title thereto free and clear of any
Adverse Claim,
(xv) which, together with the Contract related thereto, was
created in compliance with each, and does not contravene any, law, rule
or regulation applicable thereto (including, without limitation, any
law, rule and regulation relating to truth in lending, fair credit
billing, fair credit reporting, equal credit opportunity, fair debt
collection practices and privacy) and with respect to which no part of
the Contract related thereto is in violation of any such law, rule or
regulation,
(xvi) which satisfies all applicable requirements of the Credit
and Collection Policy,
(xvii) which was generated in the ordinary course of the
applicable Originator's business in connection with the purchase of
goods or services by the applicable Obligor from such Originator,
(xviii) which arises solely from the sale or the provision of
services to the related Obligor by the Originator that shall have
transferred such Receivable to the Seller, and not by any other Person
(in whole or in part),
(xix) as to which the Agent has not notified the Seller that the
Agent has determined that such Receivable or class of Receivables is
not acceptable as an Eligible Receivable, including, without
limitation, because such Receivable arises under a Contract that is
not acceptable to the Agent, and
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(xx) if such Receivable is a Floor Plan Financed Receivable, as
to which each of the following additional conditions shall be
satisfied: (a) the applicable Originator shall have issued an invoice
in respect of such inventory and the applicable Floor Plan Lender shall
have accepted such invoice, or shall have otherwise unconditionally
agreed to make a payment directly to such Originator in the amount of
the Outstanding Balance of such Receivable, (b) such Receivable is, in
accordance with a written agreement between such Originator and such
Floor Plan Lender, assignable to the Seller by such Originator, and by
the Seller to the Agent on behalf of the Purchasers hereunder, (c) such
Floor Plan Lender has consented to each such assignment (in a written
agreement that is in form and substance satisfactory to the Agent), and
no further notice to, or consent or approval of, such Floor Plan Lender
is required for any such assignment, (d) no default has occurred and is
then continuing under the applicable Floor Plan Program, and (e) the
Outstanding Balance of such Receivable, together with the aggregate
Outstanding Balance of all other Floor Plan Receivables that are then
Eligible Receivables, shall not exceed an amount equal to 50% of the
aggregate Outstanding Balance of all Receivables at such time.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Facility Account" means the Seller's Account No. 55-51102 at First
Chicago.
"Facility Termination Date" means the earliest of (i) December 20, 1996,
(ii) the date the Seller shall exercise its right to repurchase the outstanding
Receivable Interests pursuant to Section 1.11, (iii) any date selected by the
Seller on not less than 30 days' prior written notice to the Agent; provided
that if any Person then acting as Agent hereunder shall have elected or been
required to resign as Agent pursuant to Section 9.8, the Seller may elect, by
written notice to the Agent given promptly following notice to the Seller of
such resignation, to have the Facility Termination Date occur on the effective
date of such resignation; (iv) the date of the occurrence of any Servicer
Default involving the Seller and of the type described in Section 7.1(c), and
(v) any date following the occurrence, and during the continuance, of any
Servicer Default which the Required Investors declare to be the Facility
Termination Date.
"Federal Funds Effective Rate" means, for any period, a fluctuating
interest rate per annum equal for each day during such period equal to (a) the
weighted average of the rates on overnight federal funds transactions with
members of the Federal Reserve System arranged by federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the
preceding Business Day) by the Federal Reserve Bank of New York in the
Composite Closing Quotations for U.S. Governments Securities; or (b) if such
rate is not so published for any day which is a Business Day, the average of
the quotations at approximately 10:30 a.m. (Chicago time) for such day on such
transactions received by the Reference Bank from three federal funds brokers of
recognized standing selected by it.
"Fee Letter" means that certain letter agreement dated as of the date
hereof between the Seller and the Agent, as it may be amended or modified and
in effect from time to time.
"Finance Charges" means, with respect to a Contract, any finance,
interest, late payment charges or similar charges owing by an Obligor pursuant
to such Contract.
"First Chicago" means The First National Bank of Chicago in its
individual capacity and its successors.
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"Floor Plan Financed Receivable" means any Receivable the payment and
performance of which is guaranteed by, or otherwise supported by an obligation
of, a Floor Plan Lender under a Floor Plan Program.
"Floor Plan Lender" means Bombardier Capital Inc., Deutsche Financial
Services, Transamerica Commercial Finance Corporation and Textron Financial
Corporation, and any other financial institution that shall then be providing a
Floor Plan Program and that shall, for purposes of determining eligibility of
any Receivables hereunder, have been approved by the Agent.
"Floor Plan Program" means a wholesale financing facility then being
made available to a retail dealer of goods of the type sold by an Originator,
the proceeds of which facility are used by such dealer to acquire inventory
from such Originator.
"Funding Agreement" means this Agreement and any agreement or instrument
executed by any Funding Source with or for the benefit of PREFCO.
"Funding Source" means (i) any Investor or (ii) any insurance company,
bank or other financial institution providing liquidity, credit enhancement or
back-up purchase support or facilities to PREFCO.
"Incremental Purchase" means a purchase of one or more Receivable
Interests which increases the total outstanding Capital hereunder.
"Intended Characterization" means, for income tax purposes, the
characterization of the acquisition by the Purchasers of Receivable Interests
as a loan or loans by the Purchasers to the Seller secured by the Receivables,
the Related Security and the Collections.
"Investor Fee" means, for each Investor, a fee agreed to in writing by
the Agent or PREFCO and such Investor.
"Investors" means the financial institutions listed on the signature
pages of this Agreement under the heading "Investors" and their respective
successors and assigns.
"LIBO Rate" means the rate per annum equal to the sum of (i) (a) the
rate at which deposits in U.S. Dollars are offered by the Reference Bank to
first-class banks in the London interbank market at approximately 11:00 a.m.
(London time) two Business Days prior to the first day of the relevant Tranche
Period, such deposits being in the approximate amount of the Capital of the
Receivable Interest to be funded or maintained, divided by (b) one minus the
Reserve Requirement (expressed as a decimal) applicable to such Tranche Period
plus (ii) the Applicable Margin. The "Applicable Margin" shall, at any time,
be equal to the "Applicable Margin" then in effect with respect to "Eurodollar
Advances" under, and as each such term is defined in, that certain Amended and
Restated Revolving Credit Agreement (the "Credit Agreement") dated as of
December 30, 1994 among OMC, certain banks parties thereto, The First National
Bank of Chicago, as "Agent" and Bank of America Illinois, as "Co-Agent", as the
same has been or may hereafter be amended, restated, supplemented or otherwise
modified from time to time; provided that if for any reason the Credit
Agreement shall be terminated or shall otherwise cease to be in effect, the
Applicable Margin for purposes of this Agreement shall be the Applicable Margin
in respect of Eurodollar Advances in effect under the Credit Agreement
immediately prior to the time the Credit Agreement ceased to be in effect. The
LIBO Rate shall be rounded, if necessary, to the next higher 1/16 of 1%.
"Liquidation Day" means, for any Receivable Interest, the earliest to
occur of (i) any Business Day so designated by the Agent on or at any time
following any day on which the conditions precedent set forth in Section 4.2
are not satisfied, (ii) any Business Day so designated by the Seller or PREFCO
after the occurrence of the Termination Date and (iii) the Business Day
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immediately prior to the occurrence of a Servicer Default set forth in Section
7.1(c).
"Liquidity Termination Date" means December 20, 1996.
"Loss Percentage" means, at any time, the greater of (i) 1.5 times the
Default Ratio in respect of the month then most recently ended, and (ii) 10%.
"Loss Reserve" means, on any date, an amount equal to (i) the Loss
Percentage multiplied by (ii) the Adjusted Outstanding Balance as of the
opening of business of the Servicer on such date.
"Loss-to-Liquidation Ratio" means, as at the last day of any calendar
month, a percentage equal to (i) the amount of Charged-Off Receivables which
became Charged-Off Receivables at any time during such month, divided by (ii)
the aggregate amount of Collections during such month.
"Material Adverse Effect" means a material adverse effect on (i) the
financial condition, business or operations of the Seller or any Originator,
(ii) the ability of the Seller or any Originator to perform its obligations
under any Transaction Document, (iii) the legality, validity or enforceability
of this Agreement, any Transaction Document or any Collection Account Agreement
or Collection Notice relating to a Collection Account into which a material
portion of Collections are deposited, (iv) the Seller's or any Purchaser's
interest in the Receivables generally or in any significant portion of the
Receivables, the Related Security or the Collections with respect thereto, or
(v) the collectibility of the Receivables generally or of any material portion
of the Receivables.
"Monthly Report" means a report, in substantially the form of Exhibit
VIII hereto (appropriately completed), furnished by the Servicer to the Agent
pursuant to Section 6.5.
"Net Receivables Balance" means, at any time, the Adjusted Outstanding
Balance at such time, reduced by the aggregate amount by which the Outstanding
Balance of all Eligible Receivables of each Obligor and its Affiliates exceeds
the Concentration Limit for such Obligor.
"New Concentration Account" has the meaning set forth in Section 5.1(l).
"Obligor" means a Person (including any Floor Plan Lender) obligated to
make payments pursuant to a Contract.
"OMC" means Outboard Marine Corporation, a Delaware corporation.
"Originator" means any of the following: (i) OMC, (ii) OMC Aluminum
Boat Group, Inc., a Delaware corporation, (iii) OMC Fishing Boat Group, Inc., a
Delaware corporation and (iv) Recreational Boat Group Limited Partnership, a
Delaware limited partnership.
"Other Costs" has the meaning set forth in Section 8.4.
"Outstanding Balance" of any Receivable at any time means the then
outstanding principal balance thereof, and shall exclude (i) any interest or
finance charges thereon, without regard to whether any of the same shall have
been capitalized, and (ii) any Rebates in respect thereof.
"Performance Guaranty" means that certain Performance Guaranty of even
date herewith made by OMC in favor of the Seller, as the same may be amended,
restated, supplemented or otherwise modified from time to time.
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"Person" means an individual, partnership, corporation, association,
trust, or any other entity, or organization, including a government or
political subdivision or agent or instrumentality thereof.
"Potential Servicer Default" means an event which, with the passage of
time or the giving of notice, or both, would constitute a Servicer Default.
"PREFCO Residual" means the sum of the PREFCO Transfer Price Reductions.
"PREFCO Transfer Price" means, with respect to the assignment by PREFCO
of one or more Receivable Interests to the Agent for the benefit of the
Investors pursuant to Section 2.1, the sum of (i) the lesser of (a) the Capital
of each Receivable Interest and (b) the Adjusted Liquidity Price of each
Receivable Interest and (ii) all accrued and unpaid Discount for such
Receivable Interests.
"PREFCO Transfer Price Reduction" means in connection with the
assignment of a Receivable Interest by PREFCO to the Agent for the benefit of
the Investors, the positive difference between (i) the Capital of such
Receivable Interest and (ii) the Adjusted Liquidity Price for such Receivable
Interest.
"Pro Rata Share" means, for each Investor, the Commitment of such
Investor divided by the Purchase Limit, adjusted as necessary to give affect to
the application of the terms of Section 2.5.
"Purchase Limit" means the aggregate of the Commitments of the Investors
hereunder.
"Purchase Price" means, with respect to any Incremental Purchase of a
Receivable Interest, the amount paid to the Seller for such Receivable
Interest.
"Purchaser" means PREFCO or an Investor, as applicable.
"Rebate" means, with respect to any Receivable, any reduction in the
Outstanding Balance thereof arising or existing as a result of any sales
incentive program and calculated in reference to purchase volumes.
"Receivable" means the indebtedness and other obligations owed (at the
time it arises, and before giving effect to any transfer or conveyance
contemplated under any Transfer Agreement or hereunder) to an Originator,
whether constituting an account, chattel paper, instrument or general
intangible, arising in connection with the sale of goods or the rendering of
services by such Originator, and includes, without limitation, the obligation
to pay any Finance Charges with respect thereto. Indebtedness and other
rights and obligations arising from any one transaction, including, without
limitation, indebtedness and other rights and obligations represented by an
individual invoice, shall constitute a Receivable separate from a Receivable
consisting of the indebtedness and other rights and obligations arising from
any other transaction.
"Receivable Interest" means, at any time, an undivided percentage
ownership interest associated with a designated amount of Capital, Discount
Rate and Tranche Period selected pursuant to Section 1.3 in (i) all Receivables
transferred to or other wise acquired or held by the Seller and arising prior
to the time of the most recent computation or recomputation of such undivided
interest pursuant to Section 1.4, (ii) all Related Security with respect to
such Receivables, and (iii) all Collections with respect to, and other
proceeds of, such Receivables. Such undivided percentage interest shall equal:
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C
---------------------------
NRB - (LR + DR + DLR + SFR)
where:
C = the Capital of such Receivable Interest.
LR = the Loss Reserve.
DR = the Discount Reserve.
DLR = the Dilution Reserve.
SFR = the Servicer Fee Reserve.
NRB = the Net Receivables Balance.
"Records" means, with respect to any Receivable, all Contracts and other
documents, books, records and other information (including, without limitation,
computer programs, tapes, disks, punch cards, data processing software and
related property and rights) relating to such Receivable, any Related Security
therefor and the related Obligor.
"Reduction Percentage" means, for any Receivable Interest acquired by
the Investors from PREFCO for less than the Capital of such Receivable
Interest, a percentage equal to a fraction the numerator of which is the PREFCO
Transfer Price Reduction for such Receivable Interest and the denominator of
which is the Capital of such Receivable Interest.
"Reference Bank" means First Chicago or such other bank as the Agent
shall designate with the consent of the Seller.
"Required Investors" means, at any time, Investors with Commitments in
excess of 66-2/3% of the Purchase Limit.
"Related Security" means, with respect to any Receivable:
(i) all of the Seller's interest in the inventory and goods
(including returned or repossessed inventory or goods), if any, the
financing or lease of which gave rise to such Receivable, and all
insurance contracts with respect thereto,
(ii) all other security interests or liens and property subject
thereto from time to time, if any, purporting to secure payment of such
Receivable, whether pursuant to the Contract related to such Receivable
or otherwise, together with all financing statements and security
agreements describing any collateral securing such Receivable,
(iii) all guaranties, insurance and other agreements or
arrangements of whatever character from time to time supporting or
securing payment of such Receivable whether pursuant to the Contract
related to such Receivable or otherwise,
(iv) all service contracts and other contracts and agreements
associated with such Receivables,
(v) all Records related to such Receivables,
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(vi) all of the Seller's right, title and interest in, to and
under each Transfer Agreement, the Performance Guaranty and each
instrument, document or agreement executed in connection therewith in
favor of or otherwise for the benefit of the Seller (or, if different,
the applicable transferee thereunder); and
(vii) all proceeds of any of the foregoing.
"Related Security" shall not include copyrights, trade names, trademarks,
servicemarks or property of similar nature except to the extent that the Seller
shall have granted a license therein to the Agent under Section 11.14(b).
"Reserve Requirement" means the maximum aggregate reserve requirement
(including all basic, supplemental, marginal and other reserves) which is
imposed against the Reference Bank in respect of Eurocurrency liabilities, as
defined in Regulation D of the Board of Governors of the Federal Reserve
System as in effect from time to time.
"Section" means a numbered section of this Agreement, unless another
document is specifically referenced.
"Seller Interest" means, at any time, an undivided percentage ownership
interest of the Seller in the Receivables, Related Security and all Collections
with respect thereto equal to (i) one, minus (ii) the aggregate of the
Receivable Interests.
"Servicer" means at any time the Person (which may be the Agent) then
authorized pursuant to Article VI to service, administer and collect
Receivables.
"Servicer Fee" has the meaning specified in Section 1.12.
"Servicer Fee Reserve" means, on any date, an amount equal to (i) 2%
multiplied by (ii) the Adjusted Outstanding Balance as of the opening of
business of the Servicer on such date.
"Servicer Default" has the meaning specified in Article VII.
"Subsidiary" of a Person means (i) any corporation more than 50% of the
outstanding securities having ordinary voting power of which shall at the time
be owned or controlled, directly or indirectly, by such Person or by one or
more of its Subsidiaries or by such Person and one or more of its
Subsidiaries, or (ii) any partnership, association, joint venture or similar
business organization more than 50% of the ownership interests having ordinary
voting power of which shall at the time be so owned or controlled. Unless
otherwise expressly provided, all references herein to a "Subsidiary" shall
mean a Subsidiary of the Seller.
"Termination Date" means, for any Receivable Interest, the Facility
Termination Date, and, solely with respect to a Receivable Interest of PREFCO,
that Business Day so designated by the Seller or PREFCO by notice to the other.
"Tranche Period" means, with respect to any Receivable Interest:
(a) if Discount for such Receivable Interest is calculated with
respect to the CP Rate, a period of days not to exceed 270 days
commencing on a Business Day requested by the Seller and agreed to by
PREFCO;
(b) if Discount for such Receivable Interest is calculated on the
basis of the LIBO Rate, a period of one, two or three months, or such
other period as may be mutually agreeable to the Agent and the Seller,
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commencing on a Business Day selected by the Seller or the Agent
pursuant to this Agreement. Such Tranche Period shall end on the day in
the applicable succeeding calendar month which corresponds numerically
to the beginning day of such Tranche Period, provided, however, that if
there is no such numerically corresponding day in such succeeding month,
such Tranche Period shall end on the last Business Day of such
succeeding month; and
(c) if Discount for such Receivable Interest is calculated on the
basis of the Base Rate, a period of 30 days commencing on a Business Day
selected by the Seller.
If any Tranche Period would end on a day which is not a Business Day,
such Tranche Period shall end on the next succeeding Business Day, provided,
however, that in the case of Tranche Periods corresponding to the LIBO Rate, if
such next succeeding Business Day falls in a new month, such Tranche Period
shall end on the immediately preceding Business Day. In the case of any
Tranche Period for any Receivable Interest of which commences before the
Termination Date and would otherwise end on a date occurring after the
Termination Date, such Tranche Period shall end on the Termination Date. The
duration of each Tranche Period which commences after the Termination Date
shall be of such duration as selected by the Agent.
"Transaction Documents" means, collectively, this Agreement, the
Transfer Agreements, the Performance Guaranty, the Fee Letter, each Collections
Notice and all other instruments, documents and agreements executed and
delivered by the Seller or any Originator in connection herewith.
"Transfer Agreement" means, with respect to any Originator, that certain
Receivable Purchase Agreement of even date herewith between the Seller, as
purchaser, and such Originator, as seller, in each case as the same may be
amended, restated, supplemented or otherwise modified from time to time.
"UCC" means the Uniform Commercial Code as from time to time in effect
in the specified jurisdiction.
"Undated Receivable" means a Receivable which by its terms is due and
payable not more than 30 days after the original billing date therefor.
All accounting terms not specifically defined herein shall be construed
in accordance with generally accepted accounting principles. All terms used in
Article 9 of the UCC in the State of Illinois, and not specifically defined
herein, are used herein as defined in such Article 9.
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EXHIBIT 11
OUTBOARD MARINE CORPORATION AND SUBSIDIARIES
Computation of Per Share Earnings
Three Months Ended
Dec. 31
(In millions except amounts per share) 1995 1994
- -------------------------------------- ---- ----
Primary Earnings Per Share
Net Earnings (Loss) $ (12.4) $ (3.1)
======================
Weighted Average Number of Shares 20.1 19.9
Common Stock Equivalents (Stock options) * *
----------------------
Average Shares Outstanding 20.1 19.9
======================
Primary Earnings (Loss) Per Share $ (.62) $ (.16)
======================
Fully Diluted Earnings Per Share
Net Earnings (Loss) $ (12.4) $ (3.1)
Add: After-Tax Interest and Related
Expense Amortization on 7%
Convertible Subordinated Debentures .9 .8
----------------------
Net Earnings (Loss) Adjusted $ (11.5) $ (2.3)
======================
Weighted Average Number of Shares 20.1 19.9
Common Stock Equivalents (Stock options) .1 .1
Weighted Average Common Shares Assuming
Conversion of 7% Convertible
Subordinated Debentures 3.4 3.4
----------------------
Average Shares Outstanding 23.6 23.4
======================
Fully Diluted Earnings (Loss) Per Share $ ** $ **
======================
* The computation of primary earnings per share of common stock is computed
without common stock equivalents because inclusion of common stock
equivalents is antidilutive.
** The computation of fully diluted earnings per share of common stock is
antidilutive; therefore, the amount reported for primary and fully diluted
earnings per share is the same.
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EXHIBIT 19
To Our Shareholders:
The first quarter of 1996 was a period of adjustment for our company.
Historically, we experience a first quarter loss because of the seasonality of
our business. This year's first quarter incurred a greater loss than we
realized in the same quarter last year. However, that loss was essentially in
line with our expectations. The bulk of our increased loss in this year's first
quarter was due to our decision last summer to reduce production in our engine
plants to keep our inventories more in line with sales, although we also
experienced a four percent sales decline from last year's first quarter.
We reported a net loss of $12.4 million, or 62 cents per share, for the first
quarter of 1996, compared with a net loss of $3.1 million, or 16 cents per
share, for the first quarter of 1995. This year's first quarter sales were
$232.1 million versus $242.6 million in the first quarter last year. We had
anticipated flat sales compared with last year's first quarter, a quarter in
which revenues were increased by a greater than usual volume of back orders
carried over from the fourth quarter of 1994. Most of our shortfall was due to
continuing sales softness in our Aluminum Boat Group where a concerted effort
is underway to reduce excess models and brands and re-focus on our important
Lowe, Grumman and Sea Nymph brands. We also took excess capacity offline by
closing our Elkhart aluminum boat plant this month. The Marine Power Products
Group and Fishing Boat Group reported smaller sales declines, while our
Recreational Boat Group turned in a modest sales increase.
Our decision to reduce production in our MPPG plants, coupled with a three-week
strike at our Waukegan, Illinois, die casting plant, added to our cost of goods
in the quarter and was the major factor in the reduction of our gross earnings
to $39.4 million from $51.2 million in the first quarter last year.
Management discipline reduced our selling, general and administrative expense
nearly 9 percent in this year's first quarter compared to last year's, however
we still incurred an operating loss of $6.3 million for this year's first
quarter compared to operating earnings of $1.1 million for the same quarter
last year.
As a result of our scheduled reductions in manufacturing, we made progress in
managing our working capital, increasing inventories only $5.8 million in
anticipation of the upcoming boat shows and heavy selling season. This compares
to the $31 million inventory increase in last year's first quarter. And, work
in process inventories were reduced by $3.5 million from September 1995
levels.
Looking forward, we expect to see modest sales growth in our second quarter,
and will continue to run reduced production levels in the quarter to adjust our
inventories. The reduction we are planning is about two-thirds the magnitude of
the reduction we implemented in the first quarter, so the effect on our gross
income will not be as significant.
For the full year, we expect to deliver both sales and earnings growth, with
the bulk of that growth coming in the third and fourth quarters. In 1995, as
you know, we experienced strong sales growth in the first half as a result of
increased market demand and our engine back order situation, providing us with
more difficult earnings comparisons for the first half of this year. In last
year's third quarter, however, U.S. market demand declined dramatically and our
sales suffered in what is normally our strongest selling season. This year, we
believe we will see a more normal seasonal distribution of sales. That
expectation, along with forecasts that suggest the U.S. marine products market
will grow by five to seven percent for the full year in 1996, gives us
confidence in our expected full-year performance.
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<PAGE> 73
Looking ahead even further, our success in technological development also will
shape our performance. Our low-emission FICHT Fuel Injection engine development
effort is running on schedule. We expect to have a limited number of these
engines available late this spring with full production and availability early
in the 1997 model year. Our FICHT engines recently won the 1996 Popular
Mechanics Design and Engineering award for their innovation.
We have also recently completed a leadership conference which brought together
70 senior OMC managers from around the globe to work on our visioning and
strategic planning processes, laying the groundwork for the change we'll need
to transform our company into a consistent generator of shareholder value. We
expect to complete our first strategic planning cycle by late spring.
We are making progress, and I am encouraged by the commitment and actions of
OMC's people in beginning to build a stronger company.
On January 18, our board of directors declared a cash dividend of 10 cents per
share for the first quarter, payable March 29 to shareholders of record March
15.
HARRY W. BOWMAN
---------------
Harry W. Bowman
Chairman, President and
Chief Executive Officer
January 24, 1996
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OUTBOARD MARINE CORPORATION
Statements of Consolidated Earnings
(Unaudited)
Three Months Ended
Dec. 31
(In millions except amounts per share) 1995 1994
- -------------------------------------- ---- ----
Net Sales $ 232.1 $ 242.6
Cost of Goods Sold 192.7 191.4
---------------------
Gross Earnings 39.4 51.2
Selling, General & Administrative Expenses 45.7 50.1
---------------------
Earnings (Loss) from Operations (6.3) 1.1
Non-Operating Expense (Income)
Interest 5.4 5.0
Other, Net (.3) (1.6)
---------------------
5.1 3.4
---------------------
Earnings (Loss) Before Provision for Income Taxes (11.4) (2.3)
Provision for Income Taxes 1.0 .8
---------------------
Net Earnings (Loss) $ (12.4) $ (3.1)
=====================
Net Earnings (Loss) Per Share of Common Stock
Primary $ (.62) $ (.16)
=====================
Fully Diluted $ (.62) $ (.16)
=====================
Dividends Paid Per Share $ .10 $ .10
=====================
Average Shares of Common Stock and Common
Stock Equivalents Outstanding (if applicable) 20.1 19.9
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OUTBOARD MARINE CORPORATION
Condensed Statements of Consolidated Financial Position
(Unaudited)
<TABLE>
<CAPTION>
Dec. 31 Dec. 31 Sept. 30 Sept. 30
(In Millions) 1995 1994 1995 1994
- ------------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Assets
- ------
Current Assets
Cash & Cash Equivalents $ 51.5 $ 43.5 $ 58.3 $ 80.3
Receivables 139.1 140.7 200.9 150.5
Inventories
Finished Products 79.2 75.8 69.9 58.7
Raw Material, Work In
Process & Service Parts 120.7 118.4 124.2 105.0
-----------------------------------------------
Total Inventories 199.9 194.2 194.1 163.7
Other Current Assets 50.6 35.1 48.9 35.3
-----------------------------------------------
Total Current Assets 441.1 413.5 502.2 429.8
Product Tooling, Net 52.9 49.5 52.0 48.3
Intangibles 40.1 31.8 40.6 32.1
Other Assets 89.8 93.2 87.9 89.8
Plant & Equipment 563.4 537.2 558.9 535.6
Accumulated Depreciation (338.2) (320.3) (334.6) (318.5)
-----------------------------------------------
Plant & Equipment, Net 225.2 216.9 224.3 217.1
-----------------------------------------------
Total Assets $ 849.1 $ 804.9 $ 907.0 $ 817.1
===============================================
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Liabilities and Shareholders' Investment
- ----------------------------------------
Current Liabilities
Notes Payable $ - $ 25.0 $ - $ -
Accounts Payable 65.6 79.4 99.6 102.9
Accrued and Other 136.8 125.0 149.2 130.7
-----------------------------------------------
Total Current Liabilities 202.4 229.4 248.8 233.6
Long-Term Debt 177.4 178.2 177.4 178.2
Postretirement Benefits Other
Than Pensions 102.5 102.0 102.6 102.3
Other Non-Current Liabilities 124.2 93.1 122.4 94.0
Shareholders' Investment
Common Stock & Capital Surplus 113.5 110.2 111.6 109.3
Retained Earnings 135.3 101.1 149.7 106.3
Cumulative Translation
Adjustments (6.2) (9.1) (5.5) (6.6)
-----------------------------------------------
Total Shareholders' Investment 242.6 202.2 255.8 209.0
-----------------------------------------------
Total Liabilities and
Shareholders' Investment $ 849.1 $ 804.9 $ 907.0 $ 817.1
===============================================
Shares of Common Stock
Outstanding 20.1 20.0 20.0 20.0
</TABLE>
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