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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 1998
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission File Number 1-10211
ESSEX INTERNATIONAL INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3496934
- - -------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1601 WALL STREET, FORT WAYNE, INDIANA 46802
- - -------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (219) 461-4000
None
-----------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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.
[X ] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
Number of Shares Outstanding
Common Stock As of March 31, 1998
------------ ----------------------------
$.01 Par Value 30,207,275
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<PAGE>
ESSEX INTERNATIONAL INC.
FORM 10-Q INDEX
FOR QUARTERLY PERIOD ENDED MARCH 31, 1998
Page No.
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets........................ 3
Consolidated Statements of Income.................. 4
Consolidated Statements of Cash Flows.............. 5
Notes to Consolidated Financial Statements......... 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations...... 10
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K................... 15
Signature..................................................... 16
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ESSEX INTERNATIONAL INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31,
1998 December 31,
In Thousands, Except Share and Per Share Data (Unaudited) 1997
- - -----------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents .......................................... $ 7,180 $ 2,843
Accounts receivable (net of allowance of $5,362 and $5,583) ........ 195,935 191,737
Inventories ........................................................ 249,656 233,020
Other current assets ............................................... 11,320 15,152
-------- --------
Total current assets .......................................... 464,091 442,752
Property, plant and equipment (net of accumulated depreciation
of $143,216 and $136,365) .......................................... 287,242 287,832
Excess of cost over net assets acquired (net of accumulated
amortization of $22,670 and $21,610) ............................... 122,162 123,222
Other intangible assets and deferred costs (net of accumulated
amortization of $4,417 and $4,103) ................................. 6,626 5,478
Other assets ......................................................... 4,657 4,468
-------- --------
$884,778 $863,752
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to banks ............................................. $ 27,444 $ 34,752
Current portion of long-term debt .................................. 2,500 2,500
Accounts payable ................................................... 70,750 63,845
Accrued liabilities ................................................ 66,359 66,425
Deferred income taxes .............................................. 16,246 15,796
-------- ---------
Total current liabilities ..................................... 183,299 183,318
Long-term debt ....................................................... 305,625 316,250
Deferred income taxes ................................................ 53,130 54,438
Other long-term liabilities .......................................... 17,611 15,650
Stockholders' equity:
Common stock, par value $.01 per share; authorized 150,000,000
shares: 30,207,275 and 29,644,482 shares issued and outstanding
at March 31, 1998 and December 31, 1997, respectively ........... 302 296
Additional paid in capital ......................................... 197,413 188,084
Retained earnings .................................................. 127,398 105,716
-------- --------
Total stockholders' equity .................................... 325,113 294,096
-------- --------
$884,778 $863,752
======== ========
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
ESSEX INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
In Thousands, Except Per Share Data 1998 1997
- - ------------------------------------------------------------------------------------
<S> <C> <C>
Net sales ............................................. $ 385,418 $ 410,778
Cost of goods sold .................................... 303,903 330,907
--------- ---------
Gross profit .......................................... 81,515 79,871
Selling and administrative expenses ................... 37,919 36,961
Other income, net ..................................... (248) (60)
--------- ---------
Income from operations ................................ 43,844 42,970
Interest expense ...................................... 7,362 11,127
--------- ---------
Income before income taxes ............................ 36,482 31,843
Provision for income taxes ............................ 14,800 12,600
--------- ---------
Net income ............................................ $ 21,682 $ 19,243
====== =========
Earnings per common share:
Net income ....................................... $ .73 $ .80
===== ======
Net income - assuming dilution ................... $ .70 $ .71
===== ======
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
ESSEX INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
In Thousands of Dollars 1998 1997
- - -------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income ......................................................... $ 21,682 $ 19,243
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization .................................. 8,662 8,313
Non cash interest expense ...................................... 289 381
Non cash pension expense ....................................... 1,102 902
Provision for losses on accounts receivable .................... (191) 235
Benefit for deferred income taxes .............................. (858) (4,042)
Loss on disposal of property, plant and equipment .............. 368 172
Changes in operating assets and liabilities:
Increase in accounts receivable .............................. (4,007) (28,047)
Increase in inventories ...................................... (16,636) (25,312)
Increase in accounts payable and accrued liabilities ......... 13,805 4,702
Net decrease in other assets and liabilities ................. 4,672 1,862
--------- ---------
NET CASH PROVIDED BY (USED FOR)
OPERATING ACTIVITIES ...................................... 28,888 (21,591)
--------- ---------
INVESTING ACTIVITIES
Additions to property, plant and equipment ......................... (7,362) (5,752)
Proceeds from disposal of property, plant and equipment ............ 6 252
Other investments .................................................. (26) --
--------- ---------
NET CASH USED FOR INVESTING ACTIVITIES ....................... (7,382) (5,500)
--------- ---------
FINANCING ACTIVITIES
Proceeds from long-term debt ....................................... 31,000 237,500
Repayment of long-term debt ........................................ (41,625) (190,294)
Proceeds from notes payable to banks ............................... 190,535 115,158
Repayment of notes payable to banks ................................ (197,843) (138,941)
Common stock repurchase ............................................ -- (500)
Debt issuance costs ................................................ (1,463) --
Stock issuance costs ............................................... -- (60)
Proceeds from exercised stock options .............................. 2,227 57
---------- ----------
NET CASH PROVIDED BY (USED FOR)
FINANCING ACTIVITIES ........................................ (17,169) 22,920
--------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS ................................................... 4,337 (4,171)
Cash and cash equivalents at beginning of period ..................... 2,843 4,429
--------- ---------
Cash and cash equivalents at end of period ........................... $ 7,180 $ 258
========= =========
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
ESSEX INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
In Thousands, Except Share and Per Share Data
NOTE 1 ORGANIZATION
Unless the context otherwise indicates, the term "Company" refers
to Essex International Inc. ("Essex International") and its consolidated
subsidiaries, including its wholly owned subsidiary, Essex Group, Inc.
("Essex"). The principal asset of Essex International is all of the
outstanding common stock of Essex.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The unaudited interim consolidated financial statements contain
all adjustments, consisting of normal recurring adjustments, which are, in
the opinion of the management of the Company, necessary to present fairly
the consolidated financial position of the Company as of March 31, 1998,
and the consolidated results of operations and cash flows of the Company
for the three month periods ended March 31, 1998 and 1997, respectively.
Results of operations for the periods presented are not necessarily
indicative of the results for the full fiscal year. These financial
statements should be read in conjunction with the audited consolidated
financial statements and notes thereto included in the Company's Annual
Report on Form 10-K filed with the Securities and Exchange Commission for
the year ended December 31, 1997.
Recently Issued Accounting Standards
In 1997, the Financial Accounting Standards Board issued
Statement No. 130, "Reporting Comprehensive Income" ("FAS 130"), and
Statement No. 131, "Disclosures about Segments of an Enterprise and
Related Information" ("FAS 131"), which are required to be adopted on
December 31, 1998. It is management's belief that the disclosure
provisions of FAS 130 are not material to its consolidated financial
statements. With respect to FAS 131, the Company will be required to
report certain information about its operating segments in annual and
interim financial statements issued to stockholders. FAS 131 also
requires the reporting of certain information about products and
services, geographic areas in which the Company operates and major
customers. The Company has not yet completed its analysis to determine
the manner in which operating segment disclosures will be made in the
Company's annual and interim financial statements, however, the
disclosure of additional operating information may result upon the
adoption of FAS 131.
NOTE 3 INVENTORIES
Inventories consist of the following:
March 31, December 31,
1998 1997
--------- ------------
Finished goods........................... $178,798 $162,570
Raw materials and work in progress....... 52,527 54,146
-------- --------
231,325 216,716
LIFO reserve............................. 18,331 16,304
-------- --------
$249,656 $233,020
======== ========
<PAGE>
ESSEX INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
In Thousands, Except Share and Per Share Data
The Company values a major portion of its inventories at the
lower of cost or market based on a last-in, first-out ("LIFO") method.
Principal elements of cost included in the Company's inventories are
copper, other purchased materials, direct labor and manufacturing overhead.
Inventories valued using the LIFO method amounted to $240,055 and $222,957
at March 31, 1998 and December 31, 1997, respectively.
An actual valuation of inventory under the LIFO method can be
made only at the end of each year based on the inventory levels and costs
at that time. Accordingly, interim LIFO calculations must necessarily be
based on management's estimates of expected year-end inventory levels and
costs. Because these are subject to many forces beyond management's
control, interim results are subject to the final year-end LIFO inventory
valuation.
NOTE 4 LONG-TERM DEBT
Long-term debt consists of the following:
March 31, December 31,
1998 1997
10% Senior notes....................... $200,000 $200,000
Revolving loan......................... 90,000 100,000
Lease obligation....................... 18,125 18,750
-------- --------
308,125 318,750
Less current portion.............. 2,500 2,500
-------- --------
$305,625 $316,250
======== ========
Through March 31, 1998, the Company fully complied with all of
the financial ratios and covenants under the agreements governing its
outstanding indebtedness.
Also see Note 7 Subsequent Event for additional information
concerning long-term debt.
NOTE 5 CONTINGENT LIABILITIES
There are various claims and pending legal proceedings against
Essex including environmental matters and other matters arising out of the
ordinary course of its business. Pursuant to the 1988 acquisition of Essex
by Essex International from United Technologies Corporation ("UTC"), UTC
agreed to indemnify Essex against all losses (as defined) resulting from or
in connection with damage or pollution to the environment and arising from
events, operations, or activities of Essex prior to February 29, 1988 or
from conditions or circumstances existing at February 29, 1988. Except for
certain matters relating to permit compliance, Essex is fully indemnified
with respect to conditions, events or circumstances known to UTC prior to
February 29, 1988. The sites covered by this indemnity are handled directly
by UTC and all payments required to be made are paid directly by UTC. The
amounts related to this environmental contingency are not material to the
Company's consolidated financial statements. UTC also provided a second
environmental indemnity which deals with losses related to environmental
events, conditions or circumstances existing at or prior to February 29,
1988, which only became known in the five-year period commencing February
29, 1988. As to any such losses, Essex is responsible for the first $4,000
incurred. Management and its legal counsel periodically review the probable
outcome of pending proceedings and the costs reasonably expected to be
incurred. Essex accrues for these costs when it is probable that a
liability
<PAGE>
ESSEX INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
In Thousands, Except Share and Per Share Data
has been incurred and the amount of the loss can be reasonably estimated.
After consultation with counsel, in the opinion of management, the ultimate
cost to Essex, exceeding amounts provided, will not materially affect its
consolidated financial position, cash flows or results of operations. There
can be no assurance, however, that future developments will not alter this
conclusion.
Since approximately 1990, Essex has been named as a defendant in
a number of product liability lawsuits brought by electricians and other
skilled tradesmen claiming injury from exposure to asbestos found in
electrical wire products produced a number of years ago. At March 31, 1998,
the number of cases filed against Essex was 61 involving approximately 229
claims. Essex' strategy is to defend these cases vigorously. Essex believes
that its liability, if any, in these matters and the related defense costs
will not have a material adverse effect either individually or in the
aggregate upon its business or financial condition, cash flows or results
of operations. There can be no assurance, however, that future developments
will not alter this conclusion.
NOTE 6 EARNINGS PER SHARE
The following table sets forth the computation of basic and
diluted earnings per share:
Three Months Ended
March 31,
--------------------------
1998 1997
----- ----
Numerator:
Net income applicable to common stock...... $ 21,682 $ 19,243
=========== ===========
Denominator:
Denominator for basic earnings per
share--weighted-average shares......... 29,921,180 24,076,990
Effect of dilutive securities:
Stock options........................ 998,984 1,243,588
Warrants............................. - 1,880,834
----------- -----------
Dilutive potential common shares... 998,984 3,124,422
----------- -----------
Denominator for diluted earnings
per share--adjusted weighted-average
shares................................. 30,920,164 27,201,412
=========== ===========
Earnings per common share:
Net income.............................. $ .73 $ .80
===== =====
Net income--assuming dilution........... $ .70 $ .71
===== =====
<PAGE>
ESSEX INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
In Thousands, Except Share and Per Share Data
NOTE 7 SUBSEQUENT EVENT
On March 31, 1998, the Company called for redemption (the
"Redemption") its outstanding 10% Senior Notes due 2003 (the "Notes").
The Notes were redeemed at the close of business on May 1, 1998, at 103.75%
of the principal amount then outstanding plus accrued and unpaid interest
to the redemption date. The aggregate principal, premium and accrued
interest paid upon the Redemption totaled $217,500 and was financed by the
Company through a combination of borrowings under the Company's revolving
credit facility, which was amended and restated in connection with the
Redemption, and a new accounts receivable securitization program. During
the second quarter 1998, the Company will record extraordinary charges
totaling $7,500 ($12,500 before applicable tax benefit) or approximately
$.24 per share on a diluted basis, representing the redemption premium and
the write-off of unamortized deferred debt costs associated with the Notes
and the Company's prior revolving credit facility.
The amended and restated revolving credit agreement was entered
into among Essex, Essex International, the Lenders named therein, and The
Chase Manhattan Bank, as administrative agent (the "Revolving Credit
Agreement"). The Revolving Credit Agreement, which terminates October 31,
2001, provides for up to $370,000 in revolving loans reduced by borrowings
under the Company's Canadian credit facility and unsecured lines of credit
in excess of $100,000. The Revolving Credit Agreement also provides a
$25,000 letter of credit subfacility. Outstanding borrowings bear floating
rates of interest, at the Company's option, at bank prime plus 0.50% or a
reserve adjusted Eurodollar rate ("LIBOR") plus 1.50%. The spreads over the
prime and LIBOR rates can be reduced to 0% and .375%, respectively, if a
specified leverage ratio is achieved. The average commitment fees during
the revolving loan period are between 0.125% to 0.375% of the average daily
unused portion of the available credit based upon a specific leverage
ratio. Indebtedness under the Revolving Credit Agreement is guaranteed by
Essex International and all of Essex' subsidiaries, and is secured by a
pledge of the capital stock of Essex and its subsidiaries and by a first
lien on substantially all assets of the Company and its subsidiaries except
for those assets secured under the accounts receivable securitization
program. The Company's ability to borrow under the Revolving Credit
Agreement is restricted by the financial covenants contained therein.
The accounts receivable securitization program was entered into
among Essex and certain of its subsidiaries, Essex Funding Inc. ("Essex
Funding") and Three Rivers Funding Corporation ("TRFCO"), which became
effective April 30, 1998 (the "Receivable Securitization Program"). The
Receivable Securitization Program provides for the sale of certain trade
receivables of Essex and certain of its subsidiaries, up to $150,000, to a
wholly owned, limited purpose subsidiary of Essex, Essex Funding. Essex
Funding finances its purchases of receivables through secured borrowings
from TRFCO. TRFCO generally obtains its financing through proceeds received
upon the issuance of commercial paper.
Under the Receivable Securitization Program, Essex Funding has
granted a security interest in all its trade accounts receivable to TRFCO.
Essex Funding's outstanding borrowings generally bear interest at TRFCO's
commercial paper rate (approximately 6.0% per annum, including certain fees
and expenses, at April 30, 1998). The Receivable Securitization Program
expires April 28, 1999, although it may be extended for successive one-year
periods subject to agreement between Essex Funding and TRFCO. At April 30,
1998, $143,992 was outstanding under this program.
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Introduction
Unless the context otherwise indicates, the term "Company" refers
to Essex International, Inc. ("Essex International") and its consolidated
subsidiaries, including its wholly owned subsidiary, Essex Group, Inc.
("Essex"). The principal asset of Essex International is all of the
outstanding common stock of Essex.
In October 1992, the Company was acquired by Bessemer Holdings,
L.P. ("BHLP") (an affiliate and successor in interest to Bessemer Capital
Partners, L.P.), certain present and former employees of the Company and
other investors. In May 1997, the Company completed its initial public
offering of common stock (the "Offering") and began trading on the New York
Stock Exchange (SXC).
The Company, founded in 1930, is a leading North American
developer, manufacturer and distributor of electrical wire and cable and
insulation products serving over 11,000 customers worldwide in a wide range
of industrial markets from its 28 manufacturing facilities and 37 service
centers located throughout the United States and Canada. Among the
Company's products are building wire for commercial and residential
construction applications; magnet wire and insulation materials for
electromechanical devices such as motors, transformers and electrical
controls; copper communication wire and cable for voice and data
transmissions both inside and outside the home or office; industrial wire
for applications in construction, appliances, recreational vehicles and
industrial facilities; and automotive wire and specialty wiring assemblies
for automobiles and trucks.
Results of Operations
Three Months Ended March 31, 1998
Net sales for the first quarter 1998 were $385.4 million or 6.2%
below the first quarter 1997 net sales of $410.8 million, resulting
primarily from a marked reduction in copper prices, the Company's principal
raw material, partially offset by higher sales volumes. During the first
quarter 1998, the average price per pound of copper on the New York
Commodity Exchange, Inc. (COMEX) was $.77 versus $1.11 for the comparable
period in 1997, a decline of 30.6%. Notwithstanding the magnitude of the
price decline, copper prices are generally passed on to customers through
product pricing. On a copper price adjusted basis, net sales for the first
quarter 1998 increased approximately 7% over the first quarter 1997. Sales
volume improved 3.9% over the first quarter 1997 reflecting continued
long-term growth in the Company's primary served markets. Residential,
non-residential and renovation construction activity is exhibiting
continued improvement reflecting favorable economic conditions within the
domestic economy. The domestic magnet wire market continues to demonstrate
long-term growth trends fueled by increasing demand for electrical
convenience items in homes, offices and vehicles and greater use of energy
efficient electric motors which require significantly more magnet wire.
Outside plant (OSP) copper cable demand, both domestically and
internationally, remains strong while the market for high-bandwidth datacom
wire is experiencing double digit growth rates. The Company believes OSP
copper cable demand continues to strengthen due, in part, to the large
installed base and low cost of copper cable, ease of installation and
recent enhancements in copper electronics which have improved its
transmission capacities. High-bandwidth datacom wire demand is being driven
by the recent proliferation of personal computers, internet usage, and the
development of local and wide area networks. On a copper price adjusted
basis, sales of the Company's building wire, magnet wire and communication
wire products for the first quarter 1998 exceeded the comparable period
last year by 6%, 2% and 29%, respectively. With respect to the Company's
industrial and automotive wire products, sales for the first quarter 1998,
on a copper adjusted basis, exceeded the same period last year by 5% and
12%, respectively.
<PAGE>
Cost of goods sold for the first quarter 1998 was 8.2% below the
comparable period last year due primarily to lower copper prices partially
offset by higher sales volumes. The Company's cost of goods sold, as a
percentage of net sales were 78.9% and 80.6% in the first quarter 1998 and
1997, respectively. On a copper adjusted basis, however, gross profit
margins declined to 21.1% for the first quarter 1998 from 22.2% for the
first quarter 1997. The decline in gross profit margin was due primarily to
copper related purchasing gains, of approximately $3.5 million, recorded in
the first quarter 1997 which were not repeated in 1998 and, to a lesser
extent, reduced spread between selling prices of building wire and the
Company's cost of copper.
Selling and administrative expenses for the first quarter 1998
rose 2.4% above the comparable period last year due primarily to an
increased number of employees and higher general expenses. However, selling
and administrative expenses as a percentage of net sales were 9.8% for the
first quarter 1998 compared with approximately 10.3% for the same period
last year on a copper adjusted basis. This improvement reflects general and
administrative economies of scale associated with the Company's higher
level of sales volume.
Interest expense for the first quarter 1998 was $3.8 million or
nearly 34% below the comparable period last year. The reduction in interest
expense was attributable to a $134.1 million reduction in average debt
outstanding for the first quarter 1998 versus the first quarter of 1997,
partially offset by a slight increase in the Company's average cost of
borrowed funds. The reduction in average debt outstanding was attributable
to particularly strong free cash flows after investing activities and the
proceeds received under the Offering ($46.2 million).
Income tax expense for the first quarter 1998 was 40.6% of pretax
income compared with 39.6% for the first quarter of 1997.
Liquidity, Capital Resources and Financial Condition
General
Essex International is a holding company with no operations and
has virtually no assets other than its ownership of the outstanding common
stock of Essex. All of such stock is pledged, however, to the lenders under
the Revolving Credit Agreement (as defined below). Accordingly, Essex
International's ability to meet its cash obligations is dependent on Essex'
ability to pay dividends, to loan, or otherwise advance or transfer funds
to Essex International in amounts sufficient to service Essex
International's cash obligations.
Essex International expects that it may receive certain cash
payments from Essex from time to time to the extent cash is available and
to the extent it is permitted under the terms of the Revolving Credit
Agreement. Such payments may include: (i) an amount necessary under the tax
sharing agreement between Essex and Essex International to enable Essex
International to pay Essex' taxes as if computed on an unconsolidated
basis; (ii) an annual management fee to an affiliate of BHLP of up to $1.0
million; and (iii) certain other amounts to meet ongoing expenses of Essex
International (such amounts are considered to be immaterial both
individually and in the aggregate, however, because Essex International has
no operations, other than those conducted through Essex, or employees). To
the extent Essex makes any such payments, it will do so out of operating
cash flow, borrowings under the Revolving Credit Agreement or other sources
of funds it may obtain in the future subject to the terms of the Revolving
Credit Agreement.
On March 31, 1998, the Company called for redemption (the
"Redemption") its outstanding 10% Senior Notes due 2003 (the "Notes").
The Notes were redeemed at the close of business on May 1, 1998, at 103.75%
of the principal amount then outstanding plus accrued and unpaid interest
to the redemption date. The aggregate principal, premium and accrued
interest paid upon the Redemption totaled
<PAGE>
$217.5 million and was financed by the Company through a combination of
borrowings under the Revolving Credit Facility, which was amended and
restated in connection with the Redemption, and the Receivable
Securitization Program (as defined below).
The Company's aggregate notes payable to banks and long-term debt
at March 31, 1998, was $335.6 million and its stockholders' equity was
$325.1 million. The resulting ratio of debt to total capitalization
improved to 51% from 55% at December 31, 1997. As of March 31, 1998 the
Company was in compliance with all covenants under the agreements governing
its outstanding indebtedness.
Credit Facilities and Lines of Credit
The Company maintains the following credit facilities: (i) a
$370.0 million revolving credit agreement, amended and restated effective
March 27, 1998, among Essex, Essex International, the Lenders named
therein, and The Chase Manhattan Bank, as administrative agent (the
"Revolving Credit Agreement"); (ii) a $150.0 million accounts receivable
securitization program among Essex and certain of its subsidiaries, Essex
Funding Inc. ("Essex Funding") and Three Rivers Funding Corporation
("TRFCO"), which became effective April 30, 1998 (the "Receivable
Securitization Program"); (iii) a $25.0 million agreement and lease, dated
as of April 12, 1995, between Essex and Mellon Leasing Corporation (the
"Sale and Leaseback Agreement"); (iv) a $15.0 million (U.S. dollar) credit
agreement between a subsidiary of the Company and the Bank of Montreal (the
"Canadian Credit Agreement"); and (v) bank lines of credit with various
lending banks which provide for unsecured borrowings for working capital of
up to $55.0 million.
The Revolving Credit Agreement, which terminates October 31,
2001, provides for up to $370.0 million in revolving loans reduced by
borrowings under the Canadian Credit Agreement and the Company's unsecured
lines of credit in excess of $100.0 million. The Revolving Credit Agreement
also provides a $25.0 million letter of credit subfacility. Outstanding
borrowings bear floating rates of interest, at the Company's option, at
bank prime plus 0.50% or a reserve adjusted Eurodollar rate ("LIBOR") plus
1.50%. The spreads over the prime and LIBOR rates can be reduced to 0% and
.375%, respectively, if a specified leverage ratio is achieved. Based upon
the specified leverage ratio at March 31, 1998, the Company's floating rate
of interest for borrowings under the Revolving Credit Agreement is LIBOR
plus 0.375%. The average commitment fees during the revolving loan period
are between 0.125% to 0.375% of the average daily unused portion of the
available credit based upon a specific leverage ratio. Indebtedness under
the Revolving Credit Agreement is guaranteed by Essex International and all
of Essex' subsidiaries, and is secured by a pledge of the capital stock of
Essex and its subsidiaries and by a first lien on substantially all assets
of the Company and its subsidiaries except for those assets secured under
the Receivable Securitization Program. The Company's ability to borrow
under the Revolving Credit Agreement is restricted by the financial
covenants contained therein. As of March 31, 1998, the Company had $272.8
million of undrawn capacity based upon a $370.0 million borrowing line of
credit, reduced by outstanding borrowings under: (i) the Revolving Credit
Agreement ($90.0 million); and (ii) the Canadian Credit Agreement ($7.2
million). The Revolving Credit Agreement contains various covenants which
include, among other things: (a) the maintenance of certain financial
ratios and compliance with certain financial tests and limitations;
(b) limitations on investments and capital expenditures; (c) limitations on
cash dividends paid; and (d) limitations on leases and the sale of assets.
Through March 31, 1998, the Company fully complied with all of the
financial ratios and covenants contained in the Revolving Credit Agreement.
The Receivable Securitization Program provides for the sale of
certain trade receivables of Essex and certain of its subsidiaries, up to
$150.0 million, to a wholly owned, limited purpose subsidiary of Essex,
Essex Funding. Essex Funding finances its purchases of receivables through
secured borrowings from TRFCO. TRFCO generally obtains its financing
through proceeds received upon the issuance of commercial paper.
<PAGE>
Under the Receivable Securitization Program, Essex Funding has
granted a security interest in all its trade accounts receivable to TRFCO.
Essex Funding's outstanding borrowings generally bear interest at TRFCO's
commercial paper rate (approximately 6.0% per annum, including certain fees
and expenses, at April 30, 1998). The Receivable Securitization Program
expires April 28, 1999, although it may be extended for successive one-year
periods subject to agreement between Essex Funding and TRFCO. At April 30,
1998, $144.0 million was outstanding under this program.
The Sale and Leaseback Agreement provides $25.0 million for the
sale and leaseback of certain of the Company's fixed assets. The lease
obligation has a seven-year term expiring in May 2002. The principal
component of the rental is paid quarterly, with the amount of each of the
first 27 payments equal to 2.5% of lessor's cost of the equipment, and the
balance due at the final payment. The interest component is paid on the
unpaid principal balance and is calculated by the lessor at LIBOR plus
1.875%. The effective interest rate can be reduced by 0.125% to 1.125% if
certain specified financial conditions are achieved.
As of March 31, 1998, $7.2 million was outstanding under the
Canadian Credit Agreement and denoted as notes payable to banks in the
Company's Consolidated Balance Sheets. Borrowings are secured by the
subsidiary's accounts receivable. Interest rates for borrowings under the
Canadian Credit Agreement are based upon Canadian market rates for banker's
acceptances with spreads similar to the Revolving Credit Agreement. The
Canadian Credit Agreement terminates on May 30, 1998, although it may be
extended for successive one-year periods upon the mutual consent of the
subsidiary and the Bank of Montreal.
The Company had $20.2 million of unsecured bank lines of credit
outstanding as of March 31, 1998. Such amount is denoted as notes payable
to banks in the Company's Consolidated Balance Sheets. These lines of
credit bear interest at rates subject to agreement between the Company and
the lending banks.
Cash Flow and Working Capital
In general, the Company requires liquidity for working capital,
capital expenditures, debt repayments, interest and taxes. Of particular
significance to the Company are its working capital requirements which
increase whenever it experiences strong incremental demand in its business
or a significant rise in copper prices. Historically, the Company has
satisfied its liquidity requirements through a combination of funds
generated from operating activities together with funds available under its
credit facilities. Based upon historical experience and the availability of
funds under its credit facilities, the Company expects that its usual
sources of liquidity will be sufficient to enable it to meet its cash
requirements for working capital, capital expenditures, debt repayments,
interest and taxes in 1998.
Operating Activities. Net cash provided by operating activities
in the first quarter of 1998 was $28.9 million, compared to net cash used
of $21.6 million in the same period last year. The increase in cash
provided by operating activities was primarily the result of reduced growth
in accounts receivable attributable to a 31% decline in the average COMEX
cost of copper for the first quarter 1998 compared to the first quarter of
1997, less inventory growth and increased accounts payable and accrued
liabilities during the first quarter 1998 compared to the first quarter of
1997.
Investing Activities. Capital expenditures of $7.4 million for
the first quarter 1998 were $1.6 million more than in the first quarter
1997. Capital expenditures in 1998 are expected to be above 1997 levels and
will be used to improve manufacturing efficiency, expand capacity, and
maintain current facilities and equipment. At March 31, 1998, approximately
$7.4 million was committed to outside vendors for capital expenditures. The
Revolving Credit Agreement imposes limitations on capital expenditures,
business acquisitions and investments.
<PAGE>
Financing Activities. During the first quarter 1998, free cash
flows after investing activities, were applied to reduce debt outstanding
including notes payable to banks, by $17.9 million from December 31, 1997.
Long-Term Liquidity Considerations
The terms of the Sale and Leaseback Agreement include a balloon
payment of $8.1 million in 2002. The Company expects that its traditional
sources of liquidity will enable it to meet its long-term cash requirements
for working capital, capital expenditures, interest and taxes, as well as
its debt repayment obligations under the Sale and Leaseback Agreement.
The Company's operations involve the use, disposal and cleanup of
certain substances regulated under environmental protection laws. The
Company has accrued $0.9 million for environmental remediation and
restoration costs. The accrual is based upon management's estimate of the
Company's exposure in light of relevant available information including the
allocations and remedies set forth in applicable consent decrees,
third-party estimates of remediation costs, the estimated ability of other
potentially responsible parties to pay their proportionate share of
remediation costs, the nature of each site and the number of participating
parties. Subject to the difficulty in estimating future environmental
costs, the Company expects that any sum it may have to pay in connection
with environmental matters in excess of the amounts recorded or disclosed,
if any, will not have a material adverse effect on its financial position,
cash flows or results of operations.
Derivative Financial Instruments
The Company, to a limited extent, uses forward fixed price
contracts and derivative financial instruments to manage foreign currency
exchange and commodity price risks. To protect the Company's anticipated
cash flows from the risk of adverse foreign currency exchange fluctuations
for firm sales and purchase commitments, the Company enters into foreign
currency forward exchange contracts. Copper, the Company's principal raw
material, experiences marked fluctuations in market prices, thereby
subjecting the Company to copper price risk with respect to copper
purchases on fixed customer sales contracts. Forward fixed price contracts
and derivative financial instruments in the form of copper futures
contracts are utilized by the Company to reduce those risks. The Company
does not hold or issue financial instruments for investment or trading
purposes. The Company is exposed to credit risk in the event of
nonperformance by counterparties for foreign exchange forward contracts,
metal forward price contracts and metals futures contracts but the Company
does not anticipate nonperformance by any of these counterparties. The
amount of such exposure is generally the unrealized gains with respect to
the underlying contracts.
Impact of Year 2000
The Company is currently working to determine the impact of the
year 2000 issue on the processing of date-sensitive information by the
Company's computerized information systems, including all date-sensitive
hardware and software used in the manufacture and distribution of its
products, and pursuing due process "discovery" with respect to the
Company's vendors and customers to assure they will be year 2000 compliant
in a timely manner. The year 2000 problem is the result of computer
programs being written using two digits (rather than four) to define the
applicable year. Any of the Company's hardware or software that is
date-sensitive may recognize a date using "00" as the year 1900 rather than
the year 2000, which could result in miscalculations or system and
mechanical failures. Based on information available at this time, costs of
addressing potential problems are not currently expected to have a material
adverse impact on the Company's financial position, results of operations
or cash flows in future periods. The Company is currently engaged in
identifying and resolving all significant year 2000 issues in a timely
manner.
<PAGE>
General Economic Conditions and Inflation
Although net sales are heavily influenced by the price of copper,
the Company's principal raw material, the Company's profitability is
generally not affected by changes in copper prices because the Company
generally has been able to pass on its cost of copper to its customers. The
Company attempts to match its copper purchases with its production
requirements and thereby minimize copper cathode and rod inventories. The
Company cannot predict future copper prices or the effect of fluctuations
in the cost of copper on the Company's future operating results.
The Company believes that it is only affected by inflation to the
extent that the economy in general is thereby affected. Should inflationary
pressures drive costs higher, the Company believes that general industry
competitive price increases would sustain operating results, although there
can be no assurance that this will be the case. In addition, the Company
believes that its sensitivity to downturns in its primary markets is less
significant than it might otherwise be due to its diverse customer base,
broad product line and its strategy of attempting to match its copper
purchases with its needs.
Information Regarding Forward-Looking Statements
This document contains various forward-looking statements and
information that are based on management's belief, as well as assumptions
made by and information currently available to management. Any statements
made that are not historical in nature, including statements preceded by
the words "intend", "expect", "would", and similar expressions are
forward-looking statements are reasonable, it can give no assurance that
such expectations will prove to have been correct. Such statements are
subject to certain risks, uncertainties and assumptions. Should one or more
of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially from those
expected. Among the key factors that may have a direct bearing on the
Company's operating results and forward-looking statements included herein
are fluctuations in the economy, acquisition and consolidation activity in
the Company's businesses, the willingness of customers to accept more
distant distribution channels, demand for the Company's products, the
impact of price competition and fluctuations in the price of copper.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Item Exhibit Index
10.1 Loan and Security Agreement dated April 28, 1998, between
Essex Funding Inc. ("Funding") and Three Rivers Funding
Corporation ("TRFC").
10.2 Sales and Servicing Agreement dated April 28, 1998, among
Essex Group, Inc., Diamond Wire & Cable Co., Interstate
Industries, Inc., as sellers, Funding, as purchaser, and
Essex Group, Inc., as servicer.
27.1 Financial Data Schedule.
(b) Reports on Form 8-K:
No Reports on Form 8-K were filed by Essex International Inc.
during the quarter ended March 31, 1998.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
ESSEX INTERNATIONAL INC.
(Registrant)
May 13, 1998 /s/ David A. Owen
-------------------------------------
David A. Owen
Executive Vice President,
Chief Financial Officer and Treasurer
(Principal Financial Officer)
ESSEX FUNDING INC.
LOAN AND SECURITY AGREEMENT
dated as of April 29, 1998
THREE RIVERS FUNDING CORPORATION
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS......................................
1.1 Defined Terms....................................
1.2 Accounting and Other Terms.......................
SECTION 2. TERMS OF THE LOANS...............................
2.1 The Loans........................................
2.2 The Note.........................................
2.3 Initial Loan Request.............................
2.4 Commitment.......................................
2.5 Mandatory and Optional Prepayments...............
2.6 Settlement Date Statements; Interest;
Fees.............................................
2.7 Proceeds.........................................
2.8 Taxes............................................
2.9 Increased Cost and Reduced Return................
SECTION 3. REPRESENTATIONS AND WARRANTIES...................
3.1 Representations and Warranties of
the Borrower...................................
SECTION 4. CONDITIONS PRECEDENT.............................
4.1 Conditions Precedent to the Initial
Loan...........................................
4.2 Conditions Precedent to Each Loan................
SECTION 5. AFFIRMATIVE COVENANTS............................
5.1 Financial Statements.............................
5.2 Certificates; Other Information..................
5.3 Payment of Obligations...........................
5.4 Conduct of Business and Maintenance
of Existence...................................
5.5 Inspection of Properties, Books and
Records, Discussions ..........................
5.6 Notices..........................................
5.7 Delivery of Other Reports........................
5.8 Servicing Matters................................
5.9 Further Assurances...............................
5.10 Separate Corporate Existence.....................
5.11 Net Worth........................................
5.12 Collections......................................
5.13 Enforcement of Sales and Servicing
Agreement......................................
<PAGE>
SECTION 6. NEGATIVE COVENANTS...............................
6.1 Limitation on Debt...............................
6.2 Limitation on Liens..............................
6.3 Limitation on Fundamental Changes................
6.4 Limitation on Sale of Assets.....................
6.5 Receivables......................................
6.6 Limitation on Dividends..........................
6.7 Limitation on Capital Expenditures...............
6.8 Limitation on Investments, Loans and
Advances.......................................
6.9 Transactions with Affiliates.....................
6.10 Corporate Documents..............................
6.11 Capital Stock....................................
6.12 Fiscal Year......................................
6.13 Limitation on Negative Pledge Clauses............
6.14 Agreements.......................................
6.15 Successor Servicer...............................
6.16 Change in Payment Instructions
to Obligors....................................
6.17 Maintenance of Office or Agency;
Chief Executive Office.........................
SECTION 7. REMEDIES.........................................
SECTION 8. GRANT OF SECURITY INTEREST.......................
8.1 Grant of Security Interest.......................
8.2 Remedies.........................................
8.3 Application of Money Collected...................
8.4 Restoration of Rights and Remedies...............
8.5 Rights and Remedies Cumulative...................
8.6 Delay or Omission Not Waiver.....................
8.7 Waiver of Stay or Extension Laws.................
8.8 Sale of Collateral...............................
8.9 Protection of Collateral; Further
Assurances.....................................
8.10 Opinions as to Collateral........................
SECTION 9. MISCELLANEOUS.....................................
9.1 Amendments and Waivers...........................
9.2 Notices..........................................
9.3 Survival of Representations and
Warranties.....................................
<PAGE>
9.4 Payment of Expenses and Taxes....................
9.5 Successors and Assigns; Participations...........
9.6 Termination......................................
9.7 Counterparts.....................................
9.8 Severability.....................................
9.9 Integration......................................
9.10 GOVERNING LAW....................................
9.11 SUBMISSION TO JURISDICTION; WAIVERS..............
9.12 Acknowledgments..................................
9.13 WAIVER OF JURY TRIAL.............................
9.14 No Bankruptcy Petition Against Lender............
9.15 Non-Recourse.....................................
9.16 No Recourse Against the Borrower's
Stockholders...................................
EXHIBITS
EXHIBIT A FORM OF NOTE
EXHIBIT B FORM OF INITIAL LOAN REQUEST
EXHIBIT C FORM OF BORROWING BASE CERTIFICATE
EXHIBIT D-1 FORM OF ENFORCEABILITY AND PERFECTION
OPINION
EXHIBIT D-2 FORM OF TRUE SALE AND NONCONSOLIDATION
OPINION
EXHIBIT E FORM OF LOCK-BOX AGREEMENT
<PAGE>
LOAN AND SECURITY AGREEMENT
LOAN AND SECURITY AGREEMENT, dated as of April 29, 1998
(the "Loan Agreement"), between ESSEX FUNDING INC., a Delaware
corporation and a wholly-owned subsidiary of Essex Group, Inc.
(the "Borrower"), and THREE RIVERS FUNDING CORPORATION, a
Delaware corporation (the "Lender").
WITNESSETH:
WHEREAS, pursuant to the Sales and Servicing Agreement,
the Borrower has agreed to purchase certain Receivables from
Essex Group, Inc., a Michigan corporation ("Essex"), Diamond Wire
& Cable Co., an Illinois corporation ("Diamond"), and Interstate
Industries, Inc., a Mississippi corporation ("Interstate"; and
together with Essex and Diamond, the "Originators"), and Essex
has agreed to act as Servicer of the Receivables;
WHEREAS, the Borrower has requested that the Lender
make Loans to the Borrower, the proceeds of which shall be used
by the Borrower to make payment to the Originators for the
Receivables transferred under the Sales and Servicing Agreement
and to make payment of fees and expenses hereunder;
WHEREAS, as collateral security for its obligations
under this Loan Agreement, the Borrower shall collaterally assign
all of its right, title and interest in and to the Receivables,
its rights under the Sales and Servicing Agreement, all of its
right, title, interest in and to the Collections and certain
other collateral to the Lender pursuant to this Loan Agreement;
WHEREAS, the Lender intends to fund the Loans by (a)
the issuance of Commercial Paper or (b) if the Lender is unable
for any reason to issue Commercial Paper, by borrowings under the
Liquidity Agreements; and
WHEREAS, subject to the terms and conditions set forth
herein, the Lender is willing to make the Loans to the Borrower.
NOW, THEREFORE, the parties hereto agree as follows:
<PAGE>
SECTION 1. DEFINITIONS
1.1 Defined Terms. The capitalized terms used herein
shall, unless otherwise defined herein, have the following
meanings:
"Account Balance" shall mean, in respect of each
Receivable, all amounts shown as owing by the related Obligor on
the accounting records of the applicable Originator, and all
other amounts which are shown on the most recent Settlement
Statement, in respect of which the related Obligor is obligated.
"Accounting Period" means, with respect to any
Settlement Date (and the Determination Date with respect
thereto), the calendar month prior to the month in which such
Settlement Date occurs.
"Accumulated Funding Deficiency" means a funding
deficiency described in Section 302 of ERISA.
"Actual Dilutions" means, with respect to any
Settlement Date, the aggregate amount of all Dilutions during the
full Accounting Period immediately preceding such Settlement
Date.
"Affected Party" means the Lender and each Person
providing liquidity or credit support to the Lender pursuant to a
Liquidity Agreement or a Program Support Agreement and each of
their respective Affiliates and assigns; provided, however, that,
solely for purposes of this definition of "Affected Party", the
term "Affiliate" shall include only those Persons set forth in
clause (i) of the definition of Affiliate.
"Affiliate" means, with respect to any specified
Person, any other Person (i) which directly or indirectly,
controls, or whose directors or officers directly or indirectly
control, or which is controlled by, or which is under common
control with, such specified Person, (ii) which beneficially owns
or holds, or whose directors or officers own or hold, 10% or more
of any class of the voting stock (or, in the case of an entity
that is not a corporation, 10% of the equity interest) of such
specified Person, or (iii) 10% or more of the voting stock (or,
in the case of an entity that is not a corporation, 10% of the
equity interest) of which is owned or held by such specified
Person. The term "control" means the possession, directly or
<PAGE>
indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the
ownership of voting securities, by contract, or otherwise.
"Authorized Officer" means, with respect to any matter,
any officer of or other Person representing the Borrower, an
Originator or the Servicer, as the case may be, who is authorized
to act for the Borrower, such Originator or the Servicer, as the
case may be.
"Bankruptcy Code" means, the United States Bankruptcy
Code, 11 U.S.C. ss. 101 et seq., as amended.
"Borrower" means Essex Funding Inc., a Delaware
corporation and any successor corporation.
"Borrower Order" or "Borrower Request" means a written
order or request delivered to the Lender and signed in the name
of the Borrower by an Authorized Officer.
"Borrowing Base" means, as of any date, the aggregate
Account Balances of all Eligible Receivables, minus (i) the
Credit Enhancement Reserve, (ii) the aggregate Excess
Concentration, (iii) the Servicer's Compensation Reserve, (iv)
the Cost of Funds Reserve, (v) the Cash Discount Reserve, and
(vi) the Competitive Price Accrual.
"Business Day" means any day that is not a Saturday,
Sunday or other day on which commercial banking institutions in
New York, New York, Fort Wayne, Indiana or Pittsburgh,
Pennsylvania are authorized or obligated by law or executive
order to remain closed.
"Capital Stock" means, with respect to any Person, any
and all shares, interests, participations or other equivalents
(however designated) of capital stock of a corporation, any and
all equivalent ownership interests in a Person (other than a
corporation) and any and all warrants or options to purchase any
of the foregoing.
"Cash Discount Reserve" means, with respect to any
Settlement Date, an amount equal to the sales allowance reserve
as shown on the books and records of the Originators with respect
to the Contracts as of the last day of the Accounting Period
immediately preceding such Settlement Date.
<PAGE>
"Chief Executive Office" shall mean, with respect to
any Person, the place where such Person is located, within the
meaning of Section 9-103(c)(2) of the Uniform Commercial Code as
in effect in the jurisdiction whose laws governs the perfection
of the Borrower's ownership interest in any Receivable or the
Lender's security interest in any Receivable, as the case may be,
or any analogous provision thereof
"Closing Date" means April 30, 1998.
"Code" means the Internal Revenue Code of 1986, as
amended.
"Collateral" has the meaning given such term in the
Section 8.1 of this Loan Agreement.
"Collection Account" means the account or accounts by
that name established and maintained by the Lender pursuant to
Section 7 of this Loan Agreement.
"Collections" means with respect to any Receivable as
of any date, (i) the sum of all amounts, whether in the form of
cash, checks, drafts, or other instruments (excluding promissory
notes), received by the Borrower, an Originator or the Servicer
or in a Lock-Box Account in payment of, or applied to, any amount
owed by an Obligor on account of such Receivable (including but
not limited to all amounts received on account of any Defaulted
Receivable), including, without limitation, all amounts received
on account of such Receivable, and (ii) all amounts deemed to
have been received by the Borrower, an Originator or the Servicer
as a Collection pursuant to the Sales and Servicing Agreement.
"Commercial Paper" means the commercial paper notes of
the Lender issued in the United States commercial paper market.
"Commitment" means the obligation of the Lender to make
Loans to the Borrower under this Loan Agreement in a maximum
principal amount outstanding at any time equal to $150,000,000,
as such amount may be reduced in accordance with the provisions
of Section 2.4.
"Commitment Expiration Date" means the earliest of (i)
April 28, 1999, which may be extended from time to time for an
additional period or periods commencing on the then scheduled
<PAGE>
Commitment Expiration Date, by written notice of request given by
the Borrower to the Lender, specifying the duration of the period
of extension requested, at least 120 days before such scheduled
Commitment Expiration Date, and by written notice of acceptance
(which acceptance may be given or withheld by the Lender in its
sole discretion) by the Lender to the Borrower not later than
ninety (90) days prior to such scheduled Commitment Expiration
Date; provided, that the new scheduled Commitment Expiration Date
shall in no event result in a remaining term of the commitment
that exceeds 360 days, (ii) the date that the Lender shall give
notice of the termination of the Commitment pursuant to Section 7
of this Loan Agreement, and (iii) the first date on which there
shall no longer be any Liquidity Agreement or Program Support
Agreement (to the extent that liquidity support for the
Commercial Paper issued to fund the Loans is being provided by a
Program Support Agreement) in effect (as to which the Lender
shall promptly notify the Borrower after obtaining notice of such
termination); provided, further, that if any Commitment
Expiration Date is not a Business Day it shall occur on the next
preceding Business Day.
"Competitive Price Accrual" means, with respect to any
Settlement Date, an amount equal to the competitive price accrual
as the same is shown in the books and records of the Originators
as of the last day of the Accounting Period immediately preceding
such Settlement Date.
"Concentration Limit" means, with respect to all
Eligible Receivables owing from a single Obligor and its
Affiliates, 2.5% of the aggregate Account Balances of all
Eligible Receivables; provided, however, that with respect to
each of Consolidated Electrical Distributors and Graybar Electric
and its respective Affiliates, the Concentration Limit means 4%
of the aggregate Account Balances of all Eligible Receivables.
"Contract" means a written or oral contract between an
Originator and an Obligor which gives rise to a Receivable
arising from the sale by such Originator of goods or services in
the ordinary course of such Originator's business; provided,
however, that "Contract" shall not include any written or oral
contract between an Originator and (i) an Obligor who is not
located in the United States, (ii) an Obligor who is located in
Puerto Rico, or (iii) an Obligor which is the United States, any
state or municipality or any agency or instrumentality or
political subdivision thereof.
<PAGE>
"Contractual Obligation" means as to any Person, any
provision of any security issued by such Person or of any
agreement, instrument or other undertaking to which such Person
is a party or by which it or any of its property is bound.
"Cost of Funds" means, with respect to any Settlement
Period, an amount, as notified in writing by the Lender to the
Borrower on or prior to the related Determination Date, equal to
the interest, discount or carrying cost for funding the Loans
hereunder during such Settlement Period, either from the issuance
of Commercial Paper, the taking of loans, the sale of interests
in the Loans made hereunder or otherwise, computed by reference
to the weighted average Cost of Funds Rate for such Settlement
Period.
"Cost of Funds Amount" means, with respect to each
Settlement Period, the sum of (a) the Cost of Funds for such
Settlement Period, plus (b) the product of (1) the Program Fee
Rate times the average Outstanding Principal Amount during such
Settlement Period times (2) a fraction, the numerator of which is
the actual number of days in such Settlement Period and the
denominator of which is 360, plus (c) the product of (1) the
Facility Fee Rate times the average Commitment in effect during
such Settlement Period and (2) a fraction, the numerator of which
is the actual number of days in such Settlement Period and the
denominator of which is 360.
"Cost of Funds Rate" means, with respect to the
computation of the Cost of Funds for a Settlement Period, (i) to
the extent the funding for the Loans during such Settlement
Period is obtained through the issuance of Commercial Paper, the
effective yield of such Commercial Paper (including any dealer's
discount or fees) during such Settlement Period, (ii) to the
extent funding for the Loans during such Settlement Period is
obtained through the sale of interests in the Loans pursuant to a
Liquidity Agreement, the sum of the LIBOR Rate for such
Settlement Period plus .625% per annum, and (iii) to the extent
funding for the Loans during such Settlement Period is obtained
through the taking of loans or otherwise or pursuant to any
Program Support Agreement, the rate provided in the operative
documents governing the same during such Settlement Period.
"Cost of Funds Reserve" means, with respect to a
Settlement Date, an amount equal to the product of (i) the
<PAGE>
Outstanding Principal Amount on the Determination Date with
respect to such Settlement Date multiplied by (A) to the extent
that the Loans are funded by Commercial Paper on such
Determination Date, the sum of (1) the average effective yield on
Commercial Paper for the Settlement Period immediately preceding
the Determination Date plus (2) .30% plus (3) the Facility Fee
Rate plus (4) the Program Fee Rate, (B) to the extent that the
Loans are funded by a "funding institution" under any Liquidity
Agreement on such Determination Date, the LIBOR Rate plus .625%
per annum, or (C) to the extent that the Loans are funded by a
"funding institution" under any Program Support Agreement on such
Determination Date, the rate provided therein, in each case
during such Settlement Period, (ii) 1.5, and (iii) the Days Sales
Outstanding divided by 360.
"Credit and Collection Policy" means the Originators'
Credit and Collection Policy as set forth on Exhibit B to the
Sales and Servicing Agreement, as the same may be amended or
modified from time to time.
"Credit Enhancement Floor" shall mean, with respect to
any Settlement Date, the sum of (a) 10.5%, plus (b) the Dilution
Reserve for such Settlement Date.
"Credit Enhancement Reserve" shall mean, with respect
to any Settlement Date the product of (A) the greater of (1) the
sum of (x) the greater of (i) the Dilution Reserve as of such
Settlement Date and (ii) Actual Dilutions as of such Settlement
Date, plus (y) the Credit Loss Reserve as of such Settlement Date
and (2) the Credit Enhancement Floor as of such Settlement Date,
and (B) the positive result, if any, of (1) the aggregate Account
Balances of all Eligible Receivables as of the last day of the
full Accounting Period immediately preceding such Settlement
Date, minus (2) the sum of (v) the Cost of Funds Reserve as of
such Settlement Date, plus (w) the Servicer's Compensation
Reserve as of such Settlement Date, plus (x) the Cash Discount
Reserve as of such Settlement Date, plus (y) the Excess
Concentration as of such Settlement Date, plus (z) the
Competitive Price Accrual as of such Settlement Date.
"Credit Loss Reserve" shall mean, with respect to any
Settlement Date, the product, expressed as a percentage, of (i)
1.5, (ii) the Loss Ratio as of such Settlement Date and (iii) the
Loss Horizon Ratio as of such Settlement Date.
<PAGE>
"Cut-Off Date" means with respect to the Receivables
acquired by the Borrower with the proceeds of the Loan made on
the Closing Date, March 31, 1998.
"Days Sales Outstanding" shall mean, at any time of
determination, the sum of (A) the product of (i) the quotient,
expressed as a percentage, the numerator of which is the
aggregate Account Balances on the last day of the most recent
Accounting Period less the aggregate net sales under the
Contracts in such Accounting Period and the denominator of which
is the net sales under the Contracts in the prior Accounting
Period and (ii) the number of days in the Accounting Period prior
to such Accounting Period plus (B) the number of days in such
Accounting Period.
"Debt" means, with respect to a Person on any day, the
sum on such day of (a) indebtedness for borrowed money or for the
deferred purchase price of property or services, or evidenced by
bonds, notes or other similar instruments, (b) obligations as
lessee under leases which shall have been or should be, in
accordance with GAAP, recorded as capital leases, and (c)
obligations under direct or indirect guaranties in respect of,
and obligations (contingent or otherwise) to purchase or
otherwise acquire, or otherwise to assure a creditor against loss
in respect of, indebtedness or obligations of others of the kinds
referred to in clause (a) or (b) above.
"Default Ratio" shall mean, with respect to any
Settlement Date, a fraction, expressed as a percentage, the
numerator of which is the aggregate Account Balances of all
Eligible Receivables as of the first day of the full Accounting
Period immediately preceding such Settlement Date and which
became Defaulted Receivables during such Accounting Period and
the denominator of which is the aggregate amount of net sales of
the Originators under the Contracts during the fifth full
Accounting Period immediately preceding such Settlement Date.
"Defaulted Receivable" shall mean a Receivable (a) the
Obligor of which is not entitled to purchase additional
merchandise or services from any Originator, by reason of any
default or nonperformance by such Obligor, under the terms of the
Credit and Collection Policy, (b) which has become uncollectible
or has been written off the books of any Originator by reason of
such Obligor's inability to pay, as determined by the Borrower or
the Servicer, in either case in accordance with the Credit and
<PAGE>
Collection Policy, (c) in respect of which an Event of Bankruptcy
has occurred with respect to the related Obligor or (d) which
remains unpaid for more than 90 days past its due date.
"Determination Date" means, with respect to any
Settlement Date, the second Business Day immediately preceding
such Settlement Date.
"Diamond" means Diamond Wire & Cable Co., an Illinois
corporation.
"Dilution" means a reduction of the Account Balance of
an Eligible Receivable given to an Obligor in accordance with the
Credit and Collection Policy as a result of a Dilution Factor.
"Dilution Factor" means, without duplication, credits,
cancellations, cash discounts, volume discounts, allowances,
disputes, rebates, charge backs, and other allowances,
adjustments and deductions (including, without limitation, any
special or other discounts) that are given to an Obligor in
accordance with the Credit and Collection Policy.
"Dilution Horizon Ratio" means, as of any Settlement
Date, the greater of (i) the ratio of (A) the aggregate amount of
net sales of the Originators under the Contracts during the full
Accounting Period immediately preceding such Settlement Date
divided by (B) the aggregate Account Balances of all Eligible
Receivables as of the last day of the full Accounting Period
immediately preceding such Settlement Date, and (ii) 1.
"Dilution Ratio" shall mean, as of any Settlement Date,
the quotient, expressed as a percentage, of the aggregate dollar
amount of Dilutions recognized by the Originators during the full
Accounting Period immediately preceding such Settlement Date
(excluding cash discounts and volume discounts) divided by the
aggregate amount of net sales of the Originators under the
Contracts during the Accounting Period immediately preceding such
Settlement Date.
"Dilution Reserve" shall mean, as of any Settlement
Date, the product of (a) the sum of (i) 1.5 times the Expected
Dilution Ratio as of such Settlement Date, plus (ii) the product
of (x) the positive result, if any, of the Dilution Spike Ratio
minus such Expected Dilution Ratio, and (y) a fraction, the
numerator of which is such Dilution Spike Ratio as of such
<PAGE>
Settlement Date and the denominator of which is such Expected
Dilution Ratio, and (b) the Dilution Horizon Ratio as of such
Settlement Date.
"Dilution Spike Ratio" shall mean, as of any Settlement
Date, the highest average Dilution Ratio for any two (2)
consecutive full Accounting Periods during the period of twelve
(12) full Accounting Periods immediately preceding such
Settlement Date.
"Dispute" shall mean any dispute, deduction, claim,
offset, defense, counterclaim, set-off or obligation of any kind,
contingent or otherwise, relating to a Receivable, including,
without limitation, any dispute relating to goods or services
already paid for.
"Dollar", "Dollars" and the symbol "$" shall mean
lawful money of the United States of America.
"Duff" shall mean Duff & Phelps Credit Rating Co.
"Eligible Receivable" means any Receivable which:
(a) complies with all applicable laws and other legal
requirements, whether Federal, state or local;
(b) constitutes an "account" or a "general intangible"
as defined in the Uniform Commercial Code as in
effect in the jurisdiction whose law governs the
perfection of the Borrower's ownership interest
and the Lender's security interest in such
Receivable;
(c) (i) was originated by an Originator which is
directly or indirectly wholly-owned by Essex
International in the ordinary course of such
Originator's business in a transaction which
complied with the Credit and Collection Policy in
all material respects, or (ii) was originated by a
business subsequently acquired by or merged into
an Originator in a transaction which complied in
all material respects with the policies and
procedures of such business in effect at the time
such Receivable was originated; provided that, in
<PAGE>
the case of clause (ii), the eligibility of the
class of Receivables to which such Receivable
belongs is approved in advance in writing by the
Lender or the Referral Agent;
(d) arises from a Contract (the form of which has been
approved by the Lender or the Referral Agent) and
has been billed, or will be billed to the related
Obligor, or in respect of which the related
Obligor is otherwise liable, in accordance with
the terms of such Contract;
(e) constitutes a legal, valid and binding payment
obligation of the related Obligor, enforceable in
accordance with its terms, except as
enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting the enforcement of
creditors' rights generally and by general
equitable principles (whether enforcement is
sought by proceedings in equity or law);
(f) provides for payment in Dollars by the related
Obligor;
(g) is payable into a Lock-Box Account;
(h) is not a Defaulted Receivable;
(i) has an Obligor who is entitled to purchase
additional merchandise from an Originator under
the terms of the Credit and Collection Policy;
provided, that a Receivable which has an Obligor
who is not entitled to purchase additional
merchandise from an Originator because such
Obligor has reached the credit limit established
by such Originator shall be deemed to satisfy this
paragraph (i);
(j) which was not originated in, or subject to the
laws of, any jurisdiction under which the
transfer, sale, conveyance and assignment thereof
and the Collections therefrom the Originators to
the Borrower and the Grant of a security interest
<PAGE>
and collateral assignment therein by the Borrower
to the Lender would be unlawful, void or voidable;
(k) is owned solely by the Borrower free and clear of
all Liens, except for Permitted Liens;
(l) no rejection or return of the goods or services
which give rise to such Receivable has occurred
and all goods and services in connection therewith
have been performed or delivered to and accepted
by the related Obligor without Dispute;
(m) is not an obligation of the United States, any
state or municipality or any agency or
instrumentality or political subdivision thereof;
(n) is not subject to any contractual right of
set-off;
(o) is an obligation representing part or all of the
sales price of merchandise or services;
(p) has an Obligor who is located in the United
States;
(q) has an Obligor who is not an Affiliate of any
Originator;
(r) was acquired by the Borrower from an Originator
pursuant to and in accordance with the terms of
the Sales and Servicing Agreement;
(s) the Obligor of which has not been deemed to be
ineligible by the Lender, in accordance with the
Lender's customary credit policies;
(t) is payable within 60 days of the billing date if
generated by the Magnet Wire Automotive and
Communications and Distribution business units and
payable within 100 days of the billing date if
generated by the Building Wire/Industrial Products
business unit, unless otherwise individually
approved by the Lender;
<PAGE>
(u) which does not require the consent, authorization
or approval of or notice to, the Obligor thereof
(except for such consents, authorizations,
approvals or notices which have already been
obtained) in connection with the conveyance
thereof (including, without limitation, any rights
to the payments in respect thereof and all
security interests, guaranties and property
securing or supporting payment thereof) from the
Originators to the Borrower and the Grant of a
security interest therein by the Borrower to the
Lender under this Loan Agreement.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
"ERISA Affiliate" means, with respect to any Person (a)
any corporation which is a member of the same controlled group of
corporations (within the meaning of Section 414(b) of the Code)
as such Person, (b) a partnership or other trade or business
(whether or not incorporated) under common control (within the
meaning of Section 414(c) of the Code) with such Person or (c) a
member of the same affiliated service group (within the meaning
of Section 414(m) of the Code) as such Person, any corporation
described in clause (a) above or any partnership or other trade
or business described in clause (b) above.
"Essex" shall mean Essex Group, Inc., a Michigan
corporation.
"Essex International" shall mean Essex International
Inc., a Delaware corporation.
"Event of Bankruptcy" shall mean, for any Person:
(a) if such Person shall fail generally to, or shall
admit in writing its inability to, pay its debts as they become
due;
(b) a proceeding shall have been instituted in a court
having jurisdiction in the premises seeking a decree or order for
relief in respect of such Person in an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or for the appointment of a receiver,
<PAGE>
liquidator, assignee, custodian, trustee, sequestrator,
conservator (under the Bank Conservation Act, as amended, or
otherwise) or other similar official of such Person or for any
substantial part of its property, or for the winding-up or
liquidation of its affairs, and such proceeding shall not be
dismissed within thirty (30) days of the institution thereof;
(c) the commencement by such Person of a voluntary case
under any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect, or such Person's consent to the entry
of an order for relief in an involuntary case under any such law,
or consent to the appointment of or taking possession by a
receiver, liquidator, assignee, trustee, custodian, sequestrator,
conservator (under the Bank Conservation Act, as amended, or
otherwise) or other similar official of such Person or for any
substantial part of its property, or the making of any general
assignment for the benefit of creditors, or, if a corporation or
similar entity, the taking of any corporate action in furtherance
of any of the foregoing; or
(d) a decree or order of a court or agency or
supervisory authority having jurisdiction in the premises for the
appointment of a receiver, liquidator, assignee, trustee,
custodian, sequestrator, or conservator in any insolvency,
readjustment of debt, marshaling of assets and liabilities, or
similar proceedings, shall have been entered against such Person.
"Event of Termination" means the occurrence of any of
the following events, provided that any condition set forth
therein, if any, has been satisfied:
(a) any Originator or the Borrower fails to pay or
deposit when due any amount payable under any of the Operative
Agreements; provided, however, that in the event that such
failure to pay or deposit shall have resulted from the actions or
inactions of any third party, no Event of Termination shall
result if the Borrower or such Originator, as applicable,
remedies such failure within one (1) Business Day after the due
date thereof;
(b) (i) any Originator or the Borrower shall default in
the performance of, or breach, any covenant set forth in any
Operative Agreement (other than any default or breach referred to
in clause (a) above or in clause (ii) below) and any such default
or breach shall continue for a period of 30 days after the
<PAGE>
earlier of (1) the date that any officer of such Originator or
the Borrower first acquires knowledge thereof and (2) the date
that the Lender or the Referral Agent gives written notice
thereof to such Originator or the Borrower, as the case may be;
(ii) the Borrower shall default in the performance
of, or breach, any covenant set forth in Sections 5.6, 6.1, 6.3,
6.10, 6.11, 6.14, or 6.16;
(c) any representation or warranty of the Borrower or
any Originator made in any Operative Agreement or any other
writing provided to the Referral Agent or the Lender shall be
incorrect in any material respect as of the time when the same
shall have been made or deemed made; provided, however, that, in
the event that such misrepresentation or breach is capable of
being cured within such period, if the Borrower shall cure such
misrepresentation or breach to the reasonable satisfaction of the
Lender within thirty (30) days of the earlier of (1) the date
that any officer of such Originator or the Borrower first
acquires knowledge thereof and (2) the date that the Lender or
the Referral Agent gives written notice thereof to such
Originator or the Borrower, as the case may be, no Event of
Termination shall result therefrom;
(d) an Event of Bankruptcy shall have occurred with
respect to the Borrower or any Originator;
(e) any Originator or the Borrower shall (i) default in
any payment of principal of or interest on any Debt (in excess of
$5,000,000 with respect to such Originator) beyond the period of
grace, if any, provided in the instrument or agreement under
which such Debt was created or (ii) default in the observance or
performance of any other material agreement or condition relating
to any Debt (in excess of $5,000,000 with respect to such
Originator) or contained in any instrument or agreement
evidencing, securing or relating thereto the effect of which is
to cause (or permit the holder of such Debt to cause) such Debt
to be accelerated, unless waived or cured;
(f) for any reason, the Sales and Servicing
Agreement shall not or shall cease to create in the Borrower a
valid and perfected ownership interest in the Receivables,
subject to no Liens other than Permitted Liens, or any other
Operative Agreement shall cease to be in full force and effect
or
<PAGE>
cease to be the legal, valid, binding and enforceable obligation
of any party thereto;
(g) for any reason, this Loan Agreement shall not or
shall cease to create in the Lender a valid and perfected
security interest in the Receivables transferred or purported to
be transferred to the Borrower, subject to no Liens other than
Permitted Liens;
(h) (i) one or more final and non-appealable judgments
or decrees for the payment of money in excess of $5,000,000 in
the aggregate shall have been entered against any Originator or
any of its subsidiaries (other than the Borrower) and is not
paid, bonded or stayed within 30 days after the entry thereof or
covered by insurance in full, or (ii) one or more final and
non-appealable judgments or decrees for the payment of money in
excess of $10,000 in the aggregate shall have been entered
against the Borrower and is not paid, bonded or stayed within 5
days after the entry thereof or covered by insurance in full;
(i) (i) any of the Borrower, any Originator or any
ERISA Affiliate thereof shall engage in any Prohibited
Transaction, (ii) any Accumulated Funding Deficiency, whether or
not waived, shall exist with respect to any Pension Plan which is
a Single Employer Plan, (iii) a Reportable Event shall occur with
respect to, or proceedings shall be commenced by the PBGC to have
a trustee appointed, or a trustee shall be so appointed, to
administer or to terminate, any Single Employer Plan, and which
Reportable Event, commencement of proceedings or appointment of a
trustee is, in the reasonable opinion of the Lender, likely to
result in the termination of such Pension Plan for purposes of
Title IV of ERISA, (iv) the incurrence of any liability by any
Originator, the Borrower or any ERISA Affiliate (other than for
taxes owing on any surplus reversion) in connection with the
termination of any Single Employer Plan under Title IV of ERISA,
(v) any Originator or the Borrower or any ERISA Affiliate shall,
or in the reasonable opinion of the Lender is likely to, incur
any liability in connection with a withdrawal from, or the
insolvency or reorganization of, a Multiemployer Plan within the
meaning of Title IV of ERISA or (vi) any other event or condition
shall occur or exist, with respect to a Pension Plan; and in each
case in clauses (i) through (vi) above, such event or condition,
together with all other such events or conditions, if any, is
likely to subject any Originator or the Borrower or any ERISA
<PAGE>
Affiliate to any tax (other than as provided in clause (iv)
above, penalty or other liabilities in relation to the business,
operations, property or financial or other condition of any
Originator or the Borrower where such event or condition would
have a Material Adverse Effect with respect to the Borrower or
the Originator, as the case may be;
(j) any financial statement delivered pursuant to the
Operative Agreements and reported on by independent certified
public accountants of nationally recognized standing shall
contain a "going concern" or like qualification or exception, or
qualification arising out of the scope of the audit;
(k) the Borrower or any Originator shall become an
"investment company" or a company "controlled" by an "investment
company" within the meaning of the Investment Company Act of
1940, as amended;
(l) the Servicer resigns in violation of the Sales and
Servicing Agreement;
(m) any change in ownership or control of the Borrower,
other than any change that results in the Borrower being
wholly-owned, either directly or indirectly, by Essex
International;
(n) the average Default Ratio for any three consecutive
Accounting Periods is greater than 2.5%;
(o) the occurrence of a Servicer Event of Default;
(p) any Lock-Box Bank shall (i) fail to maintain the
Lock-Box Account as a segregated account, (ii) commingle the
funds deposited in the Lock-Box Account with any other funds of
the Borrower, the Servicer or any of the Originators, or (iii)
fail to deposit any funds from the Lock-Box to the Lock-Box
Account within the time periods set forth in the Lock-Box
Servicing Agreement and such failure shall not have been cured
within fifteen (15) days after the earlier of (1) the date that
any officer of the Borrower or the Servicer first acquires
knowledge thereof and (2) the date that the Lender or the
Referral Agent gives written notice thereof to the Servicer and
the Lock-Box Bank;
<PAGE>
(q) after giving effect to any prepayment under Section
2.5 of this Loan Agreement, the Outstanding Principal Amount (as
determined on the Determination Date with respect to any
Settlement Date) shall exceed the Borrowing Base (as determined
on such Determination Date) on such Settlement Date and the
immediately succeeding two (2) days; or
(r) the average Days Sales Outstanding for any three
consecutive Accounting Periods is greater than 60.
"Excess Concentration" means the sum of the aggregate
amount by which the Account Balances of all of the Eligible
Receivables due from each single Obligor and such Obligor's
Affiliates exceeds the Concentration Limit for such Obligor.
"Excluded Taxes" shall have the meaning set forth in
Section 2.8 of this Loan Agreement.
"Expected Default Ratio" means, with respect to any
Settlement Date, the average of the Default Ratios for the three
(3) consecutive full Accounting Periods immediately preceding
such Settlement Date.
"Expected Dilution Ratio" means, as of any Settlement
Date, a fraction, expressed as a percentage, the numerator of
which is the sum of the Dilution Ratios for each of the twelve
full Accounting Periods immediately preceding such Settlement
Date and the denominator of which is 12.
"Facility Fee" means, with respect to any Settlement
Date, the monthly fee payable by the Borrower to the Lender on
such Settlement Date computed on the basis of the Facility Fee
Rate and the Commitment with respect to the related Settlement
Period.
"Facility Fee Rate" means the rate per annum set forth
in a separate letter agreement between the Borrower and the
Lender.
"Financing Statement" means a document duly signed and
in proper form under applicable law to perfect the interest of
the secured party named therein in the personal property
described therein, which is filed with the appropriate filing
officials in the jurisdiction in which the Chief Executive Office
of an Originator or the Borrower, as applicable, is located.
<PAGE>
"GAAP" means generally accepted accounting principles
in effect from time to time in the United States of America.
"Grant" means bargain, sell, convey, assign, transfer,
mortgage, pledge, create and grant a security interest in and
right of set-off against, deposit, set over and confirm. The
Grant of a security interest in the Collateral effected by this
Loan Agreement shall include a collateral assignment of all
rights, powers, and options (but none of the obligations) of the
Borrower with respect thereto, including, without limitation, the
immediate and continuing right to claim for, collect, receive,
and give receipts for payments in respect of the Receivables and
all other moneys payable thereunder, to give and receive notices
and other communications, to make waivers or other agreements, to
exercise all rights and options, to bring judicial proceedings in
the name of the Borrower or otherwise, and generally to do and
receive anything that the Borrower is or may be entitled to do or
receive thereunder or with respect thereto.
"Independent Director" has the meaning set forth in
Section 5.10 of this Loan Agreement.
"Initial Loan Request" shall have the meaning set forth
in Section 2.3 of this Loan Agreement.
"Interstate" means Interstate Industries, Inc., a
Mississippi corporation.
"Lender" means Three Rivers Funding Corporation, a
Delaware corporation, in its capacity as lender under this Loan
Agreement.
"LIBOR Rate" means, with respect to any date of
determination, the rate at which deposits in dollars for a period
of thirty (30) days are offered to the Referral Agent in the
London Interbank market on such date in an amount approximately
equal to the principal amount of the Loan or Loans being funded
by a "funding institution" under any Liquidity Agreement.
"Lien" shall mean, in respect of the property of any
Person, any ownership interest of any other Person, any mortgage,
deed of trust, hypothecation, pledge, lien, security interest,
grant of a power to confess judgment, preference, right to
<PAGE>
priority of payment, charge or other encumbrance or security
arrangement of any nature whatsoever, including without
limitation, any conditional sale or title retention arrangement,
and any assignment, deposit arrangement, consignment or lease
intended as, or having the effect of, security, and the filing of
any financing statement in connection with any of the foregoing.
"Liquidity Agreements" means, collectively, all
liquidity agreements, funding agreements, credit agreements,
letter of credit agreements, surety agreements, letters of credit
and all other agreements providing liquidity or credit support in
respect of this Loan Agreement which may be in effect from time
to time.
"Loan" means each of the loans made pursuant to, and as
defined in, Section 2.1 of this Loan Agreement.
"Loan Agreement" means this Loan and Security
Agreement, as the same may be amended or modified from time to
time in accordance with the provisions hereof.
"Lock-Box Account" means each account maintained at the
Lock-Box Bank for the purpose of receiving Collections, and with
respect to which a Lock-Box Agreement is in effect.
"Lock-Box Agreement" means each agreement, in
substantially the form of Exhibit E, among the Borrower, the
Servicer, the Lender and the Lock-Box Bank, which agreement sets
forth the rights of the Lender, the Borrower, the Servicer and
the Lock-Box Bank with respect to the disposition and application
of the Collections received into the Lock-Boxes (as such term is
defined in the Sales and Servicing Agreement) and/or the Lock-Box
Accounts, including, without limitation, the right of the Lender
to direct the Lock-Box Bank to remit all Collections of
Receivables directly to the Lender after the occurrence of an
Event of Termination.
"Lock-Box Bank" means Harris Trust and Savings Bank and
its successors or assigns under the Lock-Box Agreement, or any
other financial institution reasonably acceptable to the Lender
acting as a lock-box bank under a Lock-Box Agreement at any time.
"Loss Horizon" means with respect to any Settlement
Date, the most recently ended four (4) full Accounting Periods.
<PAGE>
"Loss Horizon Ratio" means, with respect to any
Settlement Date, a fraction, expressed as a percentage, the
numerator of which is the aggregate amount of net sales of the
Originators under Contracts during the Loss Horizon with respect
to such Settlement Date and the denominator of which is the
aggregate Account Balances of all Eligible Receivables as of the
last day of the full Accounting Period immediately preceding such
Settlement Date.
"Loss Ratio" shall mean, with respect to any Settlement
Date, the highest Expected Default Ratio for any full Accounting
Period during the period of twelve (12) consecutive full
Accounting Periods immediately preceding such Settlement Date.
"Material Adverse Effect" shall mean, with respect to
any Person, any materially adverse effect upon the business,
assets, liabilities, financial condition or results of operation
of such Person or upon the ability of such Person to perform its
obligations under any of the Operative Agreements to which it is
a party.
"Monthly Servicer Report" means the report to be
provided by the Servicer pursuant to Section 4.02 of the Sales
and Servicing Agreement.
"Moody's" means Moody's Investors Service, Inc.
"Multiemployer Plan" means a "Multiemployer plan" as
defined in Section 4001(a)(3) of ERISA to which any Originator or
any of its ERISA Affiliates is making or accruing an obligation
to make contributions, or has within any of the preceding five
plan years made or accrued an obligation to make contributions.
"Note" has the meaning set forth in Section 2.2 of this
Loan Agreement.
"Obligations" has the meaning set forth in Section 8.1
of this Loan Agreement.
"Obligor" means, with respect to any Receivable, the
Person who purchased goods or services under a Contract giving
rise to such Receivable and who is obligated to make payments to
any Originator on such Contract in respect of such Receivable.
<PAGE>
"Officers' Certificate" means a certificate delivered
to the Lender and signed by the President, a Vice President or
the Director, Treasury Services, and by another Vice President,
the Treasurer, an Assistant Treasurer, the Controller, the
Secretary, or an Assistant Secretary of the Borrower, any
Originator or the Servicer, as the case may be, who is not the
same person as the other officer signing such certificate.
"Official Body" shall mean any government or political
subdivision or any agency, authority, bureau, central bank,
commission, department or instrumentality of either, or any
court, tribunal, grand jury or arbitrator, in each case whether
foreign or domestic.
"Operative Agreements" means this Loan Agreement, the
Sales and Servicing Agreement and the Lock-Box Agreement.
"Opinion of Counsel" means a written opinion, which
shall be reasonably satisfactory in form and substance to the
Lender, of counsel who shall be reasonably satisfactory to the
Lender.
"Originators" means Essex, Diamond and Interstate,
collectively, and their respective successors, and "Originator"
means any of such Persons.
"Originator Entity" has the meaning set forth in
Section 5.10 of this Loan Agreement.
"Other Sellers" shall have the meaning set forth in
Section 2.9(a) of this Agreement.
"Outstanding Principal Amount" means, with respect to
any day, the aggregate principal amount of the Loans outstanding
on such day.
"PBGC" means the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA.
"Pension Plan" has the meaning set forth in Section
2.10 of the Sales and Servicing Agreement.
"Permitted Liens" means Liens for (i) taxes,
assessments or other governmental charges or levies which (A) are
not yet due and payable, (B) which are thereafter payable without
<PAGE>
penalty, or (C) which are being diligently contested in good
faith by appropriate proceedings and for which adequate reserves
in accordance with generally accepted accounting principles have
been set aside on such Person's books and records, and (ii) the
Lien in favor of the Lender arising in connection with this
Agreement.
"Person" means any individual, corporation, limited
liability company, partnership, joint venture, association, joint
stock company, trust (including any beneficiary thereof),
unincorporated organization or government or any agency or
political subdivision thereof.
"Program Fee" means, with respect to any Settlement
Date, the monthly fee payable by the Borrower to the Lender on
such Settlement Date computed on the basis of the Program Fee
Rate and the Outstanding Principal Amount with respect to the
related Settlement Period.
"Program Fee Rate" means the rate per annum set forth
in a separate letter agreement between the Borrower and the
Lender.
"Program Support Agreement" means, collectively, all
liquidity agreements, funding agreements, credit agreements,
letter of credit agreements, surety agreements, letter of credit
and all other agreements which may be in effect from time to time
and which provide liquidity or credit support in respect of the
Commercial Paper.
"Prohibited Transaction" means any transaction
described in Section 406 of ERISA which is not exempt by reason
of Section 408 of ERISA or the transitional rules set forth in
Section 414(c) of ERISA and any transaction described in Section
4975(c) of the Code which is not exempt by reason of Section
4975(c)(2) or Section 4975(d) of the Code, or the transitional
rules of Section 2003(c) of ERISA.
"Rating Agency" means each of Moody's, S&P and Duff and
any other nationally recognized statistical rating organization
at any time providing a rating for the Commercial Paper.
"Receivable" means, with respect to any Contract, all
receivables, contract rights, general intangibles, accounts,
chattel paper, instruments (including, without limitation,
<PAGE>
promissory notes), amounts due and to become due to the
Originator arising under such Contract (including but not limited
to finance charges accrued with respect to such amounts and
fees), and all other rights, powers and privileges of the
Originator arising thereunder or related thereto and in the
merchandise (including returned goods) and contracts relating
thereto, assertable against any Person whatsoever, all security
interests, guaranties and property securing or supporting payment
of such Receivable, all Records relating to such Receivable and
all proceeds and products of any of the foregoing.
"Records" means all documents, books, records and other
information (including without limitation, computer programs,
tapes, discs, punch cards, data processing software and related
property and rights) maintained with respect to the Receivables
and the related Obligors.
"Referral Agent" means Mellon Bank, N.A., together with
its successors and assigns.
"Regulatory Change" has the meaning set forth in
Section 2.9 of this Loan Agreement.
"Related Person" means any Person (whether or not
incorporated) which is under common control with any Originator
within the meaning of Section 414(c) of the Internal Revenue Code
of 1986, as amended, or of Section 4001(b) of ERISA.
"Reportable Event" means any of the events set forth in
Section 4043(c) of ERISA or the regulations thereunder, a
withdrawal from a Pension Plan described in Section 4063 of
ERISA, or a cessation of operations described in Section 4062(e)
of ERISA.
"Requirement of Law" means as to any Person, the
Certificate of Incorporation and By-laws or other organizational
or governing documents of such Person and any law, treaty, rule
or regulation or determination of any arbitrator or a court or
other Official Body, in each case applicable to or binding upon
such Person or any of its property or to which such Person or any
of its property is subject.
"S&P" means Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc., its successors and
assigns.
<PAGE>
"Sales and Servicing Agreement" means the Sales and
Servicing Agreement dated as of the Closing Date between the
Borrower and the Originators, as the same may be amended or
modified from time to time in accordance with the provisions
thereof and with the consent of the Lender.
"Servicer" means Essex Group, Inc., a Michigan
corporation, and any successor thereto acting as the servicer in
accordance with the provisions of the Sales and Servicing
Agreement.
"Servicer Event of Default" has the meaning given such
term in the Sales and Servicing Agreement.
"Servicer's Compensation Reserve" means, as of any
Settlement Date, an amount equal to the product of (i) .50%, (ii)
the aggregate Account Balances of all Eligible Receivables as of
the last day of the full Accounting Period immediately preceding
such Settlement Date, and (iii) a fraction, the numerator of
which is the product of (a) the Days Sales Outstanding at the
close of business as of the last day of such Accounting Period
and (b) three, and the denominator of which is 360.
"Servicing Fee" means, with respect to any Settlement
Date, the monthly fee payable to the Servicer on such Settlement
Date pursuant to Section 3.04 of the Sales and Servicing
Agreement, equal to the product of (i) 0.50%, times (ii) the
actual number of days in the full Accounting Period immediately
preceding such Settlement Date divided by 360, times (iii) the
aggregate Account Balances of all Eligible Receivables as of the
last day of the most recently completed Accounting Period.
"Settlement Date" means the 20th day of each calendar
month or, if such day is not a Business Day, the next succeeding
Business Day.
"Settlement Period" means, with respect to a Settlement
Date, the period commencing on the second Determination Date
immediately preceding such Settlement Date (or the Closing Date,
in the case of the first Settlement Date) and ending on the day
preceding the first Determination Date preceding such Settlement
Date.
<PAGE>
"Single Employer Plan" means a single employer plan, as
defined in Section 4001(a)(15) of ERISA, which (a) is maintained
for employees of the Originator or an ERISA Affiliate thereof and
no Person other than the Originator and their ERISA Affiliates or
(b) was so maintained and in respect of which the Originator or
any ERISA Affiliate thereof could have liability under Title IV
of ERISA in the event such plan has been or were to be
terminated.
"Taxes" has the meaning set forth in Section 2.8 of
this Loan Agreement.
"Trade Name" shall have the meaning set forth in
Section 3.1(w) of this Loan Agreement.
"Uniform Commercial Code or UCC" means, with respect to
a particular jurisdiction, the Uniform Commercial Code, as in
effect from time to time in such jurisdiction, or any successor
statute thereto.
"Unmatured Event" means any of the events specified in
the definition of Event of Termination, whether or not any
requirement for the giving of notice, the lapse of time, or both,
has been satisfied.
"Upfront Fee" means the fee set forth in a separate
letter agreement between the Borrower and the Referral Agent.
"Year 2000 Problem" shall have the meaning set forth in
Section 5.8 of this Loan Agreement.
1.2 Accounting and Other Terms. (a) Accounting terms
used but not defined herein shall have the respective meanings
given to them under GAAP.
(b) The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Loan Agreement shall
refer to this Loan Agreement as a whole and not to any particular
provision of this Loan Agreement, and section, subsection,
schedule and exhibit references are to this Loan Agreement unless
otherwise specified.
(c) Capitalized terms used herein, in this Loan
Agreement and the Note shall be equally applicable to both the
singular and plural forms of such terms.
<PAGE>
SECTION 2. TERMS OF THE LOANS
2.1 The Loans. Subject to the terms and conditions
hereof, the Lender hereby agrees that it will, from time to time
prior to the Commitment Expiration Date, make one or more loans
(each a "Loan" and, collectively, the "Loans") to the Borrower
subject to the immediately succeeding sentence. Notwithstanding
anything contained in this Loan Agreement to the contrary, the
Lender shall not be obligated to make any Loan in a principal
amount which exceeds the positive result, if any, of
(a) the lesser of (i) the Borrowing Base and (ii) the Commitment,
less (b) the Outstanding Principal Amount on the proposed date of
the making of such Loan. The Lender shall remit the proceeds of
each Loan to the Borrower in accordance with the disbursement
instructions set forth in the related Loan Request.
2.2 The Note. The Loans shall be evidenced by a
promissory note of the Borrower, substantially in the form of
Exhibit A hereto (the "Note"). The Note shall be payable to the
order of the Lender and shall mature on the Commitment Expiration
Date. The Note shall be dated the Closing Date and provide for
the payment of principal and interest in accordance with Section
2.6. The Borrower hereby authorizes the Lender to make the
appropriate notations on the schedule annexed to the Note for
purposes of recording any Loan made thereon and any payments or
prepayments made with respect thereto (provided that any failure
by the Lender to make any such notation shall not affect the
obligations of the Borrower hereunder or under the Note in
respect of such Loan). The Borrower agrees that each notation
made by the Lender on the schedule annexed to the Note shall be
final and conclusive absent demonstrable error. The Outstanding
Principal Amount at any time shall constitute the principal
amount of the Note at such time.
2.3 Initial Loan Request. (a) The Borrower shall
deliver to the Lender a written request, in substantially the
form of Exhibit B (the "Initial Loan Request"), for the Loan to
be made by the Lender to the Borrower on the Closing Date, no
later than 11:00 A.M., New York City time, at least two Business
Days prior to the Closing Date. The Initial Loan Request shall
specify (i) the principal amount of the Loan to be made on the
Closing Date (which shall be no less than $10,000,000 or such
lesser amount which the Lender shall have approved), and (ii) the
<PAGE>
disbursement instructions for the proceeds of such Loan. The
Initial Loan Request submitted by the Borrower shall be an
affirmation by the Borrower that (x) the representations and
warranties of the Borrower set forth in Section 3 of this Loan
Agreement are on the date of such Initial Loan Request, and will
be on the Closing Date, true and correct in all material respects
as if made on and as of such dates, except to the extent any such
representation or warranty relates specifically to an earlier
date, and (y) no Unmatured Event or Event of Termination shall
have occurred and be continuing on either of such dates. The
Initial Loan Request given pursuant hereto shall be irrevocable.
(b) The Initial Loan Request delivered to the Lender
hereunder shall be accompanied by a Borrowing Base Certificate
and a Monthly Servicer Report dated of even date therewith,
demonstrating compliance with the provisions of Section 2.1 of
this Loan Agreement, together with such other information
reasonably requested by the Lender.
(c) Requests for Loans to be made on any Settlement
Date subsequent to the Closing Date, if any, shall be made by the
Borrower by indicating the amount of such desired Loan and the
disbursement instructions for such Loan on the Borrowing Base
Certificate delivered on the related Determination Date.
2.4 Commitment. (a) The Borrower may, upon at least
thirty (30) days' prior written notice to the Lender, terminate
in whole or permanently reduce in part the unused portion of the
Commitment; provided, that (i) such termination shall not be
effective unless and until the Outstanding Principal Amount has
been reduced to zero and all Cost of Funds Amount and all other
fees or amounts due to the Lender hereunder or under any other
Operative Agreement have been paid in full, (ii) each partial
reduction shall be in the amount of at least $10,000,000 or an
integral multiple thereof, and (iii) any partial reduction of the
Commitment which would result in the remaining Commitment being
less than $25,000,000 shall be deemed to be a termination in
whole of the Commitment.
(b) If any bank or financial institution which is a
party to any Liquidity Agreement does not consent to the
extension of the expiration date of its commitment under such
Liquidity Agreement or its commitment thereunder expires or is
terminated for any reason, to the extent such bank or financial
institution is not replaced on or prior to such expiration date,
<PAGE>
then the Commitment shall be reduced by such amount as shall be
necessary to cause the Commitment to be equal to the aggregate of
all commitments of banks and/or financial institutions under the
Liquidity Agreement(s) after giving effect to such termination or
expiration. If any Program Support Agreement providing liquidity
support for the Commercial Paper being issued to fund the Loans
is terminated for any reason, to the extent such Program Support
Agreement is not replaced on or prior to such termination, then
the Commitment shall be reduced by an amount equal to the share
of liquidity support provided thereunder which is allocable to
the Loans hereunder.
2.5 Mandatory and Optional Prepayments. (a) The
Borrower may at any time and from time to time prepay the Loans,
in whole or in part, on any Settlement Date, without premium or
penalty, upon at least 30 days' irrevocable prior written notice
to the Lender in the case of a prepayment in whole or at least
three (3) Business Days' irrevocable prior written notice to the
Lender in the case of a partial prepayment; provided, that each
partial prepayment shall be in the amount of at least $10,000,000
or an integral multiple thereof; provided, further, that the
Borrower shall (i) simultaneously pay to the Lender, and
indemnify the Lender and hold the Lender harmless from, all costs
and expenses incurred by the Lender in connection with such
prepayment, and (ii) indemnify the Lender and hold the Lender
harmless from any funding loss (in an amount equal to the amount
of interest the Lender would have received but for such
prepayment less the interest earned on investing such funds) and
expense which the Lender may sustain or incur as a consequence of
such prepayment. Any such prepayment of the Loans shall be
accompanied by, without duplication of the preceding sentence, a
payment of all accrued but unpaid interest on the Loans through
the date of prepayment, plus all accrued but unpaid fees,
expenses and other amounts due to the Lender arising under or in
connection with this Loan Agreement and the Note through the date
of prepayment.
(b) If, on the Determination Date relating to any
Settlement Date, after giving effect to transfers of Receivables
made during the Settlement Period immediately preceding such
Settlement Date by the Originator to the Borrower under the Sales
and Servicing Agreement, the Outstanding Principal Amount shall
exceed the Borrowing Base, the Borrower shall on such Settlement
Date make a prepayment in respect of the principal of the Loans
in an amount at least equal to such excess, accompanied by a
<PAGE>
payment of all accrued but unpaid interest on such amount through
the date of prepayment.
(c) If, after giving effect to any reduction of the
Commitment pursuant to Section 2.4(b) above, the Outstanding
Principal Amount shall exceed the Commitment, the Borrower shall,
within three (3) Business Days of its receipt of written notice
of the reduction of the Commitment, make a prepayment in respect
of the principal of the Loans in an amount equal to the excess of
the Outstanding Principal Amount over the Commitment as so
reduced, accompanied by a payment of all accrued but unpaid
interest on such amount through the date of such prepayment.
2.6 Settlement Date Statements; Interest; Fees.
(a) No later than the Determination Date with respect
to each Settlement Date, the Borrower shall deliver to the Lender
(i) a Monthly Servicer Report and (ii) a Borrowing Base
Certificate in the form of Exhibit C hereto, in each case as of
the last day of the immediately preceding Accounting Period.
(b) On each Settlement Date, the Borrower shall make,
or cause the Servicer to make the following cash payments:
(i) to the Lender as interest on the Loans, all
accrued and unpaid Cost of Funds Amount;
(ii) to the Lender, all accrued and unpaid amounts
due and payable to the Lender under this Loan Agreement not
described in clause (i) above or clause (iii) below, including
without limitation, the Program Fee and the Facility Fee;
(iii) to the Lender, the amounts, if any, required
to be paid pursuant to Section 2.5 above; and
(iv) to the Servicer, the accrued and unpaid
amount of the Servicing Fee.
2.7 Proceeds. The proceeds of each Loan shall be used
by the Borrower solely to purchase Receivables from the
Originators pursuant to the Sales and Servicing Agreement.
2.8 Taxes. All payments made by the Borrower under this
Loan Agreement and the Note shall be made free and clear of, and
without deduction or withholding for or on account of, any
<PAGE>
present or future income, stamp or other taxes, levies, imposts,
duties, charges, fees, deductions or withholdings, hereafter
imposed, levied, collected, withheld or assessed by the
Government of the United States or any political subdivision
thereof having taxing authority, excluding (i) income and
withholding taxes (including, without limitation, branch profits
taxes, minimum taxes and taxes computed under alternative
methods, at least one of which is based on net income) and
franchise taxes (imposed in lieu of income taxes) imposed on the
net income of the Lender as a result of any present or former
connection between the jurisdiction imposing such tax or any
political subdivision or taxing authority thereof or therein and
the Lender; and (ii) any Taxes that would not have been imposed
but for the failure of the Lender to provide and keep current any
certification or other documentation required to qualify for an
exemption from or reduction in the rate of any Tax (all such
excluded taxes described in clause (i) or (ii) above being
hereinafter called "Excluded Taxes" and all such non-Excluded
Taxes, levies, imposts, duties, charges, fees, deductions and
withholdings being hereinafter called "Taxes"). If any Taxes are
required to be deducted or withheld from any amounts payable to
or under the Note, the amounts so payable to the Lender shall be
increased to the extent necessary to yield to the Lender (after
payment of all Taxes on such increased amounts) the amount that
would have otherwise been received by the Lender had not such
deduction or withholdings been imposed. Whenever any Taxes are
payable by the Borrower, as promptly as possible thereafter the
Borrower shall send to the Lender a certified copy of an original
official receipt received by the Borrower showing payment
thereof. If the Borrower fails to pay any Taxes when due to the
appropriate taxing authority or fails to remit to the Lender the
required receipts or other required documentary evidence, the
Borrower shall indemnify the Lender for any incremental Taxes,
interest or penalties that the Lender is legally required to pay
as a result of any such failure. If the Lender receives any
refund or credit in respect of any Taxes with respect to which
the Borrower has made full payment to the Lender pursuant to this
Section 2.8, it shall pay over such refund and remit such credit
to the Borrower, net of all out-of-pocket expenses incurred by
the Lender in obtaining such refund or credit. The agreements in
this subsection shall survive the termination of this Loan
Agreement and the payment of the Note.
2.9 Increased Cost and Reduced Return. (a) If any
Affected Party shall be charged any fee, expense or increased
<PAGE>
cost other than relating to Taxes or Excluded Taxes on account of
the adoption after the date hereof of any applicable law, rule,
regulation or guideline (including any applicable law, rule,
regulation or guideline regarding capital adequacy) or any change
therein after the date hereof, or any change after the date
hereof in the interpretation or administration thereof by any
Official Body, central bank or comparable agency (a "Regulatory
Change"): (i) which subjects such Affected Party to any charge or
withholding on or with respect to a Liquidity Agreement or a
Program Support Agreement, as the case may be, or such Affected
Party's obligations under a Liquidity Agreement or Program
Support Agreement, as the case may be, or on or with respect to
this Loan Agreement or the Loans, or changes the basis of
taxation to any Affected Party of any amounts payable under a
Liquidity Agreement, a Program Support Agreement or this Loan
Agreement (except for changes in the rate of tax on the overall
net income of such Affected Party), 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, or credit extended by, an
Affected Party under a Liquidity Agreement or a Program Support
Agreement, as the case may be, or (iii) which imposes any other
condition the result of which is (x) to increase the cost to such
Affected Party of performing its obligations, or (y) to reduce
the rate of return on such Affected Party's capital as a
consequence of its obligations, in each case under a Liquidity
Agreement or Program Support Agreement, as the case may be, or to
reduce the amount of any sum received or receivable by such
Affected Party, or to require any payment calculated by reference
to the amount of interests or loans held or interest received by
it, in each case under a Liquidity Agreement or Program Support
Agreement, as the case may be, then, upon demand by the Lender,
the Borrower shall be obligated to immediately pay to the Lender,
for the benefit of such Affected Party, such amounts charged to
such Affected Party or to compensate such Affected Party for such
increase, reduction or imposition; provided, that the Borrower
and any other Persons who from time to time sell receivables or
interests therein to the Lender or grant security interests
therein to the Lender to secure indebtedness of such Person to
the Lender (the "Other Sellers") each shall be liable for such
amount ratably in accordance with the usage under their
respective facilities; provided, further, that (i) any portion of
such amount is attributable to the Borrower and not attributable
to any Other Seller, the Borrower shall be solely liable for such
portion, and (ii) if any portion of such amount is attributable
<PAGE>
to any Other Seller and not attributable to the Borrower in any
way, the Borrower shall not be liable for any such portion. The
Lender's determination with respect to the allocation of such
amounts among the Borrower and Other Sellers shall be binding on
the Borrower, absent manifest error.
(b) The Lender agrees that it shall use reasonable
efforts to take any action that will avoid the need to pay, or
reduce the amount of, any increased amounts referred to in this
Section 2.9; provided that the Lender shall not be obligated to
take any actions that would, in the Lender's sole discretion, be
materially disadvantageous to the Lender. In the event that any
Affected Party claims any increased costs referred to in this
Section 2.9, the Lender will furnish to the Borrower a
certificate setting forth the basis and amount of each request by
such Affected Party for any such increased amounts referred to in
paragraph (a) of this Section 2.9. Determinations by the Lender
of any increased amounts referred to in paragraph (a) of this
Section 2.9 shall be conclusive, absent manifest error.
SECTION 3. REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Borrower. To
induce the Lender to enter into this Loan Agreement and to make
the Loans, the Borrower hereby represents and warrants to Lender
as of the date hereof, as of each Settlement Date and as of the
date of delivery of each Monthly Servicer Report hereunder that:
(a) Financial Condition. The Borrower does not have any
Debt, contingent liability or liability for taxes, except for
taxes which (i) are not yet due and payable, (ii) which are
thereafter payable without penalty, or (iii) which are being
diligently contested in good faith by appropriate proceedings and
for which adequate reserves in accordance with generally accepted
accounting principles have been set aside on such Person's books
and records, or any long-term lease or unusual forward or
long-term commitment, including, without limitation, any interest
rate or foreign currency swap or exchange transaction, other than
as contemplated or permitted by the Operative Agreements.
(b) Corporate Existence; Compliance with Law. The
Borrower (i) is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization,
<PAGE>
(ii) has the corporate power and authority, and the legal right,
to own and operate its property, and to conduct the business in
which it is currently engaged, (iii) is duly qualified as a
foreign corporation and in good standing under the laws of each
jurisdiction where its ownership, lease or operation of property
or the conduct of its business requires such qualification and
(iv) is in compliance with all Requirements of Law, except, in
the case of clauses (iii) and (iv) where the failure to be so
qualified and in good standing or to be in such compliance would
not have a Material Adverse Effect with respect to the Borrower.
(c) Corporate Power; Authorization; Enforceable
Obligations. The Borrower has the corporate power and authority,
and the legal right, to make, deliver and perform each Operative
Agreement to which it is a party and to borrow hereunder, and has
taken all necessary corporate action to authorize the execution,
delivery and performance of each Operative Agreement to which it
is a party; and all consents or authorizations of, filings with
or other acts by or in respect of, any Official Body or any other
Person required to be obtained, made or given by it in connection
with the borrowings hereunder or with the execution, delivery,
performance, validity or enforceability of this Loan Agreement or
the other Operative Agreements to which the Borrower is a party
have been so obtained, made or received, except where the failure
to have such power, to take such action or to obtain, make or
take such consent, authorization, filing or other action would
not have a Material Adverse Effect with respect to the Borrower.
This Loan Agreement and each other Operative Agreement to which
the Borrower is a party has been duly executed and delivered on
behalf of the Borrower. Each Operative Agreement to which the
Borrower is a party constitutes a legal, valid and binding
obligation of the Borrower, enforceable against the Borrower, in
accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles
(whether enforcement is sought by proceedings in equity or at
law).
(d) No Legal Bar. The execution, delivery and
performance of this Loan Agreement and the other Operative
Agreements, the borrowings hereunder and the use of the proceeds
thereof will not violate any Requirement of Law applicable to, or
Contractual Obligation of, the Borrower and will not result in,
or require, the creation or imposition of any Lien (except for
<PAGE>
Permitted Liens) on any of its properties or revenues pursuant to
any such Requirement of Law or Contractual Obligation, except
where such violation would not have a Material Adverse Effect
with respect to the Borrower.
(e) No Material Litigation. No litigation,
investigation or proceeding of or before any arbitrator or
Official Body is pending or threatened by or against the Borrower
or any of its properties or revenues (i) asserting the invalidity
of this Loan Agreement or the other Operative Agreements or any
of the transactions contemplated hereby or thereby, or (ii) which
could reasonably be expected to have a Material Adverse Effect on
the Borrower.
(f) No Default. The Borrower is not in default under or
with respect to any of its Contractual Obligations in any respect
except for any default which would not have a Material Adverse
Effect with respect to the Borrower. No Event of Termination or
Unmatured Event has occurred and is continuing.
(g) No Burdensome Restrictions. The Borrower is not a
party to or subject to any Contractual Obligation (other than the
Operative Agreements) except for any Contractual Obligation which
would not have a Material Adverse Effect with respect to the
Borrower.
(h) Taxes. The Borrower has (i) filed or caused to be
filed all Federal, state and other tax returns which are
required to be filed by it, (ii) paid all taxes shown to be due
and payable on said returns, and (iii) paid any Federal, state
and other taxes, fees or other charges imposed on it or any of
its property by any Official Body having taxing power. No tax
Lien has been filed against the Borrower or with respect to any
of its property (except for tax Liens described in subsection
6.2(a) hereof), and no claim is being asserted by any Official
Body with respect to any Federal, state or other tax, fee or
other charge relating to the Borrower or any of its property.
(i) ERISA. Neither the Borrower nor any ERISA
Affiliate of the Borrower has participated in any Multiemployer
Plan in the past five years other than the Central States
Southeast and Southwest Areas Pension Fund. Except for the
Originators, neither the Borrower nor any ERISA Affiliate of
the Borrower has maintained any Single Employer Plan. No
Reportable Event has occurred during the five-year period prior
to the date
<PAGE>
on which this representation is made or deemed made with respect
to any Pension Plan of any Originator, and each
such Pension Plan has complied with the applicable provisions
of ERISA and the Code other than ministerial errors or
omissions with resulted or may have resulted in an immaterial
liability with respect to any Pension Plan. The present value
of all accrued benefits under each such Pension Plan (based on
those assumptions used to fund the Pension Plans) did not, as
of the last annual valuation date prior to the date on which
this representation is made or deemed made, exceed the value of
the assets of such Pension Plan allocable to such accrued
benefits. With respect to each Multiemployer Plan, (i) there
are no contributions due thereto which either the Originators
or the Borrower or any ERISA Affiliate have failed to make,
(ii) neither the Borrower nor any Originator or ERISA Affiliate
has received notice from such plan that it is in reorganization
or insolvent (within the respective meanings of Section 4241
and 4245 of ERISA) or that such plan is not qualified under
Section 401(a) of the Code and (iii) based upon the best
information available and due inquiry by the Originators and
the Borrower, it is the best estimate of the Borrower and the
Originators, that the aggregate potential withdrawal liability
of the Borrower, the Originators or any ERISA Affiliate with
respect to such Multiemployer Plans would not exceed
$1,000,000.
(j) Investment Company Act; Other Regulations. The
Borrower is not an "investment company", or a company
"controlled" by an "investment company", within the meaning of
the Investment Company Act of 1940, as amended. The Borrower is
not subject to regulation under any Federal or State statute or
regulation which limits its ability to incur Debt.
(k) Subsidiaries. The Borrower has no subsidiaries.
(m) No Deduction. The Borrower is not required to
make any deduction or withholding from payments to be made by
it to the Lender under this Loan Agreement or the other
Operative Agreements, and the execution and performance of this
Loan Agreement and any of the other Operative Agreements does
not make the Borrower liable for any registration tax, stamp
duty or similar tax or duty imposed by any Official Body of or
within its jurisdiction of incorporation, which tax or duty has
not been, or will not be, paid when due.
<PAGE>
(n) No Priority Claims. Except for the obligations
and transactions contemplated by the Operative Agreements, the
Borrower has no liability in respect of any unsecured Debt
under which the lender, creditor or lessor or the Person in
whose favor such Debt is issued has any right, by operation of
law or otherwise, to have any claim in respect of such
obligation or guarantee first satisfied out of the general
assets of the Borrower in priority to the claims of its general
creditors.
(o) Title; Liens. Except for Permitted Liens, the
Borrower owns each item of the Collateral free and clear of any
and all Liens or claims of others. No security agreement,
financing statement or other public notice with respect to all
or any part of the Collateral is on file or of record in any
public office, except such as may have been filed in favor of
the Lender pursuant to this Loan Agreement or in respect of
Permitted Liens. Pursuant to this Loan Agreement, the Lender
holds a valid security interest in and to the Collateral, which
is perfected with respect to the Collateral, subject to no
other Liens other than Permitted Liens. Fully executed Uniform
Commercial Code Financing Statements or other appropriate
filings containing a description of the Collateral have been
filed of record in every governmental, municipal or other
office in every jurisdiction in which filings are necessary to
publish notice of and protect the validity of and to establish
a valid and perfected security interest in favor of the Lender
in respect of the Collateral, and no further or subsequent
filing, refiling, recording, rerecording, registration or
reregistration is necessary in any such jurisdiction, except as
provided under applicable law with respect to the filing of
continuation statements or amendments necessary to reflect any
changes to the name, identity or corporate structure of the
Borrower which, absent such amendments, would make the
Financing Statements filed hereunder seriously misleading, or
which are necessary to reflect any change in the Chief
Executive Office of the Borrower. No financing statement
listing the Borrower or any Trade Name of the Borrower as
debtor (other than any which may have been filed for the
benefit of the Lender) covering any of the Collateral is on
file in any public office. The Borrower has not previously
created any security interest in the Collateral or any part
thereof.
(p) Ownership of Receivables. The purchase by the
Borrower of the Receivables from the Originators constitutes a
true sale of such Receivables to the Borrower and creates in
<PAGE>
favor of the Borrower a perfected ownership interest in such
Receivables, which ownership interest is not subject to any
Lien other than Permitted Liens.
(q) No Petition. The Borrower has no intent to file a
voluntary petition under the federal bankruptcy laws with
respect to the Borrower.
(r) Separate Corporate Existence. The Borrower is a
special purpose corporation whose primary activities are
restricted in its certificate of incorporation to purchasing
Receivables from the Originators, entering into agreements for
the servicing thereof, borrowing funds secured thereby and
conducting such other activities as necessary or appropriate to
carry out its primary activities. The Borrower's certificate of
incorporation provides for at least one Independent Director as
set forth at Section 5.10 hereof, and requires, inter alia, the
unanimous vote of its Board of Directors to take corporate
action to institute, file or consent to insolvency or
bankruptcy proceedings with respect to the Borrower.
(s) Places of Business. The Chief Executive Office of
the Borrower and the office where the Borrower keeps its
records concerning the Receivables are located at 1601 Wall
Street, Fort Wayne, Indiana; the Chief Executive Office of
Essex is located at 1601 Wall Street, Fort Wayne, Indiana, and
the office where Essex keeps its records concerning the
Receivables is located at 1601 Wall Street, Fort Wayne,
Indiana; the Chief Executive Office of Diamond is located at
1601 Wall Street, Fort Wayne, Indiana, and the office where
Diamond keeps its records concerning the Receivables is located
at 1601 Wall Street, Fort Wayne, Indiana; and the Chief
Executive Office of Interstate is located at 1601 Wall Street,
Fort Wayne, Indiana, and the office where Interstate keeps its
records concerning the Receivables is located at Attala
Industrial Park, Kosciusko, Mississippi.
(t) Lock-Box Bank; Lock-Box Account. The name and
address of the Lock-Box Bank, together with the account numbers
of the Lock-Box Accounts, are specified in Schedule 1.
(u) Franchises, Licenses, Trademarks and other
Rights. The Borrower has all franchises, permits, licenses and
other authority as are necessary to enable it to conduct its
businesses as currently being conducted and as proposed to be
conducted, and it is not in default under any of such
franchises, permits,
<PAGE>
licenses or other authority, except where such failure to
possess such franchise, permit, license or other authority or
such default under any such franchise, permit, license or
authority would not have a Material Adverse Effect with respect
to the Borrower. To the best of the Borrower's knowledge, the
Borrower possesses all patents, patent rights, trademarks,
trademark rights, Trade Names, trade name rights, copyrights
and other intellectual property rights necessary to conduct its
businesses as currently being conducted and as proposed to be
conducted, without, to the best of the Borrower's knowledge,
conflict with any valid rights of others, except where such
failure to possess such patent, patent right, trademark,
trademark right, Trade Name, trade name right, copyright or
other intellectual property or such conflict would not have a
Material Adverse Effect with respect to the Borrower.
(v) Capital Stock. Essex owns, beneficially and of
record, 100% of the issued and outstanding capital stock of the
Borrower. No Person has the right to require the Borrower
(other than its parent) to issue to such Person or any other
Person any capital stock, other equity securities or any other
ownership interest in (including, without limitation, stock or
securities exchangeable for or convertible into Capital Stock,
other equity securities or ownership interests) the Borrower.
(w) Trade Names, etc. The Borrower (a) does not
conduct or transact, nor has it ever conducted or transacted,
business in any jurisdiction under any assumed name, fictitious
name, trade name or alternate corporate name (each a "Trade
Name"), and (b) has not made any filing or application with or
otherwise sought the approval of any Official Body with respect
to the use by the Borrower of a Trade Name in any jurisdiction.
The Borrower has not at any time (i) incurred any Indebtedness
under any Trade Name, (ii) granted any security interest or
permitted or suffered any Lien to exist against the Borrower or
any portion of its assets or property, whether real or personal
(including, without limitation, any of the Collateral) under
any Trade Name, (iii) executed or filed any financing statement
as a debtor under the Uniform Commercial Code as in effect in
any jurisdiction under any Trade Name, except pursuant to this
Loan Agreement, or (iv) had any judgment entered or rendered
against it under any Trade Name.
(x) Receivables. Each Receivable identified on a
Borrowing Base Certificate as an Eligible Receivable shall be
an
<PAGE>
Eligible Receivable at the time of acquisition thereof by the
Borrower.
SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions Precedent to the Initial Loan. The
agreement of the Lender to make the initial Loan hereunder is
subject to the satisfaction, immediately prior to or
concurrently with the making of such Loan on the Closing Date,
of the following conditions precedent:
(a) Operative Agreements. The Lender shall have
received (i) this Loan Agreement executed and delivered by a
duly authorized officer of the Borrower, (ii) the Note executed
and delivered by a duly authorized officer of the Borrower,
(iii) copies of all the other Operative Agreements, executed by
all parties thereto and in form and substance satisfactory to
the Lender, and (iv) such other documents or instruments as may
be reasonably requested by the Lender.
(b) Corporate Proceedings. The Lender shall have
received a copy of the resolutions, in form and substance
satisfactory to the Lender, of the Board of Directors of each
of the Originators and the Borrower authorizing the execution,
delivery and performance of the Operative Agreements to which
each is a party certified by the Secretary or an Assistant
Secretary of each such corporation, as of the Closing Date,
which certificate shall state that the resolutions thereby
certified have not been amended, modified, revoked or rescinded
and shall be in form and substance satisfactory to the Lender.
(c) Corporate Documents; Incumbency. The Lender shall
have received (i) copies of the certificate of incorporation
and by-laws of each of the Originators and the Borrower
certified as of the Closing Date as complete and correct copies
thereof by its Secretary or Assistant Secretary, and (ii) an
Officer's Certificate of each of the Originators and the
Borrower, certifying the names and true signatures of the
officers of each Originator and the Borrower authorized to sign
the Operative Agreements to which it is a party.
(d) Fees. The Lender shall have received in
immediately available funds any fees due and payable to it which
have been invoiced, all as set forth herein, and the Referral
<PAGE>
Agent shall have received in immediately available funds the
Upfront Fee.
(e) Legal Opinions. The Lender shall have received
the executed legal opinions of counsel to the Originators and
the Borrower, substantially in the form of Exhibit D-1, Exhibit
D-2, and Exhibit D-3 hereto, to the effect that, among other
things, (A) the Borrower would not be substantively
consolidated with any Originator for purposes of the Bankruptcy
Code in the case of a bankruptcy of such Originator, (B) that
each purchase by the Borrower of Receivables constitutes a true
sale of the Receivables to the Borrower, (C) the Sales and
Servicing Agreement creates a valid, perfected security
interest, within the meaning of the UCC, granted by the
Originators in the Receivables, (D) this Loan Agreement creates
a valid, perfected security interest, within the meaning of the
UCC, granted by the Borrower in the Receivables and (E) such
other matters incident to the transactions contemplated by this
Loan Agreement and the other Operative Agreements as the Lender
may require.
(f) Lien Certificate. The Lender shall have received
a certificate of an Authorized Officer of each of the
Originators and the Borrower to the effect that the Receivables
are not subject to any Lien, except for Permitted Liens.
(g) UCC Searches. The Lender shall have received (i)
lien searches and other evidence as to the absence, except for
Permitted Liens, of any Lien on or security interest in the
Receivables in form and substance satisfactory to the Lender,
and (ii) Certified copies of Requests for Information or Copies
(Form UCC-11) (or a similar search report certified by a party
acceptable to the Lender), dated a date reasonably near to the
date of the initial Loan, listing all effective financing
statements which name the Borrower or any Originator (under
their respective present names and any previous names) as
debtor and which are filed with any jurisdiction in which a
filing would be necessary in order to perfect an ownership or
security interest in the Collateral, together with copies of
such financing statements. Any termination statements or
releases reasonably requested by the Lender to be filed with
respect to the Receivables shall have been filed.
(h) UCC Financing Statements. The Lender shall have
received signed copies of proper Financing Statements
satisfactory to the Lender for all jurisdictions that the
Lender
<PAGE>
may deem necessary or desirable in order to perfect the ownership
interest of the Borrower created by the Sales and Servicing
Agreement and the security interests created by this Loan
Agreement, all other filings, notifications, consents and
recordings necessary to consummate the transactions contemplated
hereunder and under the other Operative Agreements shall be
accomplished and the Lender shall have received evidence of such
filings, notifications, consents and recordings satisfactory in
form and substance to the Lender.
(i) Diligence. The operation of the Originators'
billing, collection and information systems with respect to the
Receivables shall be reasonably satisfactory to the Lender.
(j) Credit and Collection Policy. The Credit and
Collection Policy shall be reasonably satisfactory to the Lender
in all material respects.
(k) Internal Controls. The Lender shall be reasonably
satisfied that the Servicer has implemented all necessary
internal and other systems and procedures to monitor collections
on account of the Receivables in order to gather all information
and furnish all reports required under the Operative Agreements
and to monitor compliance with the Operative Agreements.
(l) Consents. The Lender shall have received copies of
all consents, licenses and approvals, if any, reasonably required
in connection with the execution, delivery and performance by the
Borrower and the validity and enforceability against the Borrower
of the Operative Agreements to which it is a party and such
consents, licenses and approvals shall be in full force and
effect.
4.2 Conditions Precedent to Each Loan. The
agreement of the Lender to make the any Loan hereunder is
subject to the satisfaction, immediately prior to or
concurrently with the making of such Loan on its closing
date, of the following conditions precedent: (i) each of the
representations and warranties made by the Borrower and each
Originator in or pursuant to any of the Operative Agreements
shall be true and correct in all material respects on and as
of such date as if made on and as of such date, unless such
representation or warranty specifically relates to an earlier
date, (ii) no Event of Termination or Unmatured Event shall
have occurred and be
<PAGE>
continuing, and (iii) the Lender shall have received a
certification from an Authorized Officer of the Borrower as
to the matters in clauses (i) and (ii).
SECTION 5. AFFIRMATIVE COVENANTS
The Borrower hereby agrees that, so long as this Loan
Agreement remains in effect, the Borrower shall:
5.1 Financial Statements. Furnish to the Lender:
(a) as soon as available, but in any event within 90
days after the end of each fiscal year of the Borrower and
Essex International, a copy of the balance sheet of Essex
International as at the end of such year and the related
statements of income and of cash flows for such year, setting
forth in each case in comparative form the figures for the
previous year , reported on by independent certified public
accountants of nationally recognized standing, and, a copy of
the unaudited balance sheet of the Borrower as at the end of
such year and the related statements of income and of cash
flows for such year, setting forth in each case in comparative
form the figures for the previous year (except for the
Borrower's first fiscal year for which there are no comparative
figures for the previous fiscal year); and
(b) as soon as available, but in any event not later
than 45 days after the end of each fiscal quarter of the
Borrower and Essex International, the unaudited balance sheet
of such Person as at the end of such quarterly period and the
related unaudited statements of income and of cash flows of
such Person for such period and the portion of the fiscal year
through the end of such period, setting forth in each case in
comparative form the figures for the previous year (except for
the Borrower's first fiscal year for which there are no
comparative figures for the previous fiscal year), certified by
an Authorized Officer as being fairly stated in all respects
(subject to normal year-end audit adjustments).
All such financial statements referred to above must
be complete and correct in all material respects and are to be
prepared in accordance with GAAP applied consistently
throughout the periods reflected therein and with prior periods
(except as approved by such accountants or officer, as the case
may be, and
<PAGE>
disclosed therein and subject to normal year-end audit
adjustments).
5.2 Certificates; Other Information. Furnish to the
Lender:
(a) concurrently with the delivery of the financial
statements of Essex International referred to in subsection
5.1(a), a certificate of the independent certified public
accountants reporting on such financial statements stating that
in making its normal examination for purposes of its annual
audit, no knowledge was obtained of any Event of Termination or
Unmatured Event, except as specified in such certificate;
(b) concurrently with the delivery of the financial
statements referred to in subsections 5.1(a) and 5.1(b), a
certificate of an Authorized Officer of each of the Borrower
and Essex International stating that, to such Authorized
Officer's knowledge, the Borrower and the Originators have
each, during such period, observed or performed in all material
respects all of its respective covenants and other agreements,
and satisfied in all material respects every condition,
contained in each Operative Agreement to be observed, performed
or satisfied by it, and that such Authorized Officer has
obtained no knowledge of any Unmatured Event or Event of
Termination, in each case, except as disclosed in such
certificate;
(c) within five Business Days after the same are
sent, copies of all financial statements, reports and other
communications that the Borrower, Essex International or any
Originator may make to, or file or have with, the Securities
and Exchange Commission or any state securities commission; and
(d) promptly, such additional financial and other
information with respect to the Borrower or any Originator as
the Lender may from time to time reasonably request.
5.3 Payment of Obligations. Pay, discharge or
otherwise satisfy at or before maturity or before they become
delinquent, as the case may be, all its payment obligations.
5.4 Conduct of Business and Maintenance of Existence.
Continue to engage in business of the same type as permitted
hereunder as of the date hereof and preserve, renew and keep in
full force and effect its corporate existence and take
<PAGE>
all action to maintain all rights, privileges and franchises
necessary or desirable in the normal conduct of its business;
and comply with all Contractual Obligations and Requirements of
Law applicable to it, except where such failure to so engage,
preserve, renew, keep and take would not have a Material
Adverse Effect with respect to the Borrower.
5.5 Inspection of Properties, Books and Records,
Discussions. Keep proper books of records and account in which
full, true and correct entries in conformity with GAAP and all
Requirements of Law applicable to the Borrower shall be made of
all material dealings and transactions in relation to its
business and activities; and permit representatives of the
Lender to visit and inspect any of its properties and examine
and make abstracts from any of its books and records at any
time and as often as may be desired on three (3) Business Days'
prior notice during normal business hours and to discuss the
business, operations, properties and financial and other
condition of the Borrower with officers and employees of the
Borrower and with its independent certified public accountants.
Any expense incident to the exercise by the Lender during the
continuance of any Event of Termination or Unmatured Event
under this subsection 5.6 shall be borne by the Borrower.
5.6 Notices. Promptly after obtaining knowledge
thereof give notice to the Lender of:
(a) the occurrence of any Unmatured Event or Event of
Termination;
(b) any (i) default or event of default by the
Borrower under any Contractual Obligation of the Borrower or
(ii) litigation which may exist at any time affecting the
Borrower or any investigation or proceeding pending before any
Official Body affecting the Borrower;
(c) a material adverse change in the business,
properties, assets, operations or condition (financial or
otherwise) of the Borrower which could adversely affect the
servicing or collection of the Receivables; and
(d) any change (i) in the Borrower's corporate name
or in any Trade Name used to identify it in the conduct of its
business or the ownership of its properties or (ii) in the
location of its Chief Executive Office, its principal place of
<PAGE>
business, any office in which it maintains records relating to
the Collateral or the offices or facilities at which Collateral
is located (including the establishment of any such new office
or facility).
Each notice pursuant to this subsection shall be accompanied by
a statement of an Authorized Officer setting forth details of
the occurrence referred to therein and stating what action the
Borrower proposes to take with respect thereto.
5.7 Delivery of Other Reports. Furnish, or instruct
the Servicer to deliver any reports required to be delivered by
the Borrower, an Originator or the Servicer pursuant to any
Operative Agreement to which the Borrower, such Originator or
the Servicer is a party or which the Borrower, each Originator
or the Servicer has signed.
5.8 Servicing Matters. The Borrower shall instruct
and require the Servicer (i) to maintain and implement
administrative and operating procedures necessary to permit the
identification and segregation of the Receivables and all
collections and adjustments to such Receivable from all other
assets that are owned, controlled, or otherwise in the custody
of the Servicer in accordance with the Sales and Servicing
Agreement, including, without limitation, implementing such
procedures as shall be necessary for the proper deemed
allocation of Collections to the Lender on each day during each
Settlement Period in accordance with the allocation provisions
set forth herein and in the Sales and Servicing Agreement, (ii)
take all action necessary to mitigate by December 30, 1999 the
risk that computer applications used by the Servicer may be
unable to recognize and properly perform date-sensitive
functions involving certain dates prior to, during and after
the year 2000 (the "Year 2000 Problem"), and (iii) except as
otherwise may be expressly permitted in this Loan Agreement, to
forbear from (A) altering the Credit and Collection Policy in a
manner that could have a material adverse effect on the
collectibility of the Receivables and (B) rescinding or
modifying the terms of any Receivable except in accordance with
the Sales and Servicing Agreement and the Credit and Collection
Policy, in each case without the prior written consent of the
Lender. The Borrower shall cause a firm of nationally
recognized independent certified public accountants (who may
render other services to the Borrower, the Servicer or the
Originators) to furnish a report, at least annually, to the
Lender to the effect that they have applied certain procedures
<PAGE>
agreed upon with the Servicer and Lender and examined certain
documents and records relating to the servicing of the
Receivables under the Sales and Servicing Agreement and that,
based upon such agreed-upon procedures, nothing has come to the
attention of such accountants that caused them to believe that
the servicing (including, without limitation, the allocation of
the Collections) has not been conducted in compliance with the
terms and conditions of this Loan Agreement and the Sales and
Servicing Agreement, except for such exceptions as they believe
to be immaterial and such other exceptions as shall be set
forth in such statement; and in addition, each report shall set
forth the agreed-upon procedures performed.
5.9 Further Assurances. Do such further acts and
things and execute and deliver to the Lender such assignments,
agreements, powers and instruments as are reasonably required
by the Lender to carry into effect the purposes of this Loan
Agreement and the other Operative Agreements or to better
assure and confirm unto the Lender its rights, powers and
remedies hereunder and under the other Operative Agreements,
including, without limitation, to obtain such consents and give
such notices, and to file and record all such documents and
instruments, and renew each such consent, notice, filing and
recordation, at such time or times, in such manner and at such
places, as may be necessary or desirable to preserve and
protect the position of the Lender hereunder and under the
other Operative Agreements.
5.10 Separate Corporate Existence. The Borrower
hereby acknowledges that the Lender is entering into the
transactions contemplated by this Loan Agreement in reliance
upon the Borrower's identity as a separate legal entity from
the Originators or any Originator Entity (as defined below).
Therefore, from and after the date of execution and delivery of
this Loan Agreement, the Borrower shall take all reasonable
steps including, without limitation, all steps that the Lender
may from time to time reasonably request, to maintain the
Borrower's identity as a separate legal entity and to make it
manifest to third parties that the Borrower is an entity with
assets and liabilities distinct from those of the Originators
and any Affiliates (other than the Borrower) thereof (each of
the Originators and its respective Affiliates (other than the
Borrower) shall be referred to herein as an "Originator
Entity"), and not just a division of any Originator Entity.
Without limiting the generality of the foregoing, the Borrower
shall:
<PAGE>
(i)require that all full-time employees of the
Borrower, if any, identify themselves as such and not
as employees of any Originator Entity (including,
without limitation, by means of providing appropriate
employees with business or identification cards
identifying such employees as the Borrower's
employees);
(ii)allocate all overhead expenses (other than
expenses allocable to the Borrower's use of office
space made available by an Originator Entity),
including, without limitation, telephone and other
utility charges, for items shared between the
Borrower and any Originator Entity 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;
(iii)at all times have at least one member of
its Board of Directors (an "Independent Director")
who is not at such time, and shall not have been at
any time during the preceding three years (A) a
director, officer, employee or Affiliate of any
Originator Entity or any major creditor thereof, (B)
a person related to any officer or director of any
Originator Entity, (C) a holder (directly or
indirectly) of more than 10% of any class of Capital
Stock of any Originator Entity, or (D) a person
related to a holder (directly or indirectly) of more
than 10% of any class of Capital Stock of any
Originator Entity (The term "major creditor" shall
mean a financial institution to which the Originator
has outstanding indebtedness for borrowed money in a
sum sufficiently large as would reasonably be
expected to influence the judgment of the proposed
Independent Director adversely to the interests of
the Borrower when its interests are adverse to those
of the Originator);
(iv)ensure that all corporate actions are duly
authorized by its Board of Directors;
<PAGE>
(v)maintain the Borrower's books and records
separate from those of any Originator Entity;
(vi)prepare its financial statements separately
from those of other Originator Entities;
(vii)except as specifically permitted by the
Operative Agreements, not commingle funds or other
assets of Borrower with those of any other Originator
Entity and not maintain bank accounts or other
depository accounts to which any Originator Entity is
an account party, into which any Originator Entity
makes deposits or from which any Originator Entity
has the power to make withdrawals;
(viii)except as specifically permitted by the
Operative Agreements, not permit any Originator
Entity to pay any of the Borrower's operating
expenses;
(ix)at all times act solely in its corporate
name and through its duly authorized officers or
agents to maintain an arm's-length relationship with
the Originator and each other Originator Entity; and
(x)conduct its business solely in its own name
so as to not mislead others as to the identity of the
corporation with which those others are concerned,
and particularly use all reasonable efforts to avoid
the appearance of conducting business on behalf of
any Originator or any other Originator Entity or that
the assets of the Borrower are available to pay the
creditors of the Originator or any other Originator
Entity.
5.11 Net Worth. The Borrower shall, at all times,
have a positive net worth as determined in accordance with
generally accepted accounting principles.
5.12 Collections. Instruct all Obligors to cause all
Collections to be deposited directly to the Lock-Box Account
and if the Borrower shall receive any Collections, the Borrower
shall remit such Collections to the Servicer within two
Business Days following the Borrower's receipt thereof.
5.13 Enforcement of Sales and Servicing Agreement.
The Borrower shall enforce its rights under the Sales and
Servicing Agreement against the Servicer and the Originators in
accordance with the terms thereof, except where the failure to
enforce such rights would not have a Material Adverse Effect on
the Lender or the Receivables.
SECTION 6. NEGATIVE COVENANTS
The Borrower hereby agrees that, so long as this Loan
Agreement remains in effect, the Borrower shall not, without
the consent of the Lender:
6.1 Limitation on Debt. Create, incur, assume or
suffer to exist any Debt, except indebtedness in respect of the
Loans and the Note and any other obligations of the Borrower
under the Operative Agreements and additional Debt of the
Borrower not to exceed $10,000 at any time outstanding.
6.2 Limitation on Liens. Create, incur, assume or
suffer to exist any Lien upon any of its property, assets or
revenues, whether now owned or hereafter acquired, except
Permitted Liens.
6.3 Limitation on Fundamental Changes. Enter into any
merger, consolidation or amalgamation, or liquidate, wind up or
dissolve itself (or suffer any liquidation or dissolution), or
convey, sell, lease, assign, transfer or otherwise dispose of
all or substantially all of its property, business or assets.
6.4 Limitation on Sale of Assets. Convey, sell,
lease, assign, transfer or otherwise dispose of any of its
property, business or assets (including, without limitation,
Receivables and interests therein) which is valued in excess of
$10,000, whether now owned or hereafter acquired, except as
expressly permitted by the Operative Agreements.
<PAGE>
6.5 Receivables.
(a) sell, assign or otherwise encumber any Receivable
owned by it, except as expressly permitted by the Operative
Agreements; or
(b) cancel, terminate, amend, modify or waive any
term or condition of any Receivable (including the granting of
rebates or adjustments with respect thereto), except in
accordance with the Sales and Servicing Agreement and the
Credit and Collection Policy.
6.6 Limitation on Dividends. Declare or pay any
dividend on, or make any payment on account of, or set apart
assets for a sinking or other analogous fund for, the purchase,
redemption, defeasance, retirement or other acquisition of, any
shares of any class of Capital Stock of the Borrower or any
warrants or options to purchase any such Capital Stock, whether
now or hereafter outstanding, or make any other distribution in
respect thereof, either directly or indirectly, whether in cash
or property or in obligations of the Borrower except (i)
dividends payable solely in common stock of the Borrower, and
(ii) payments pursuant to any agreement or other arrangement
approved in writing by the Lender, such approval not to be
unreasonably withheld, with respect to the payment by the
Borrower of its allocable share of the taxes of any affiliated,
consolidated, unitary, combined or similar group including the
Borrower and (iii) cash dividends to the extent permitted by
applicable law; provided that, in the case of clause (i) or
(iii), after giving effect thereto, no Event of Termination or
Unmatured Event shall have occurred and be continuing.
6.7 Limitation on Capital Expenditures. Make or
commit to make (by way of the acquisition of securities of a
Person or otherwise) any expenditure in respect of the purchase
or other acquisition of fixed or capital assets in excess of
$10,000.
6.8 Limitation on Investments, Loans and Advances.
Make any advance, loan, extension of credit or capital
contribution to, or purchase any stock, bonds, notes,
debentures or other securities of or any assets constituting a
business unit of, or make any other investment in, any Person,
except:
<PAGE>
(a) the purchase of the Receivables pursuant to the
Sales and Servicing Agreement; and
(b) as otherwise contemplated by the Operative
Agreements.
6.9 Transactions with Affiliates. Enter into any
transaction, including, without limitation, any purchase, sale,
lease or exchange of property or the rendering of any service,
with any Affiliate, except for (i) purchases of Receivables
pursuant to the Sales and Servicing Agreement, (ii)
transactions which do not violate any provision of the
Operative Agreements and which are necessary to carry out the
business of the Borrower and the purposes of this Loan
Agreement, and (iii) an agreement or other arrangement
reasonably satisfactory to the Lender to share taxes of any
affiliated, consolidated, unitary, combined or similar group
including any of the Originators and the Borrower.
6.10 Corporate Documents. Amend its Certificate of
Incorporation or By-laws.
6.11 Capital Stock. Issue any shares of Capital Stock
in addition to the shares issued and paid for as of the Closing
Date or permit during the term of this Loan Agreement any
transfers of any shares of its Capital Stock to any Person
other than Essex; provided that the Borrower may issue shares
of its capital stock to another direct or indirect wholly-owned
subsidiary of Essex International as long as the Lender shall
have received an opinion of counsel reasonably satisfactory to
the Lender that the Borrower would not be substantively
consolidated with such subsidiary.
6.12 Fiscal Year. Permit the fiscal year of the
Borrower to end on a day other than December 31.
6.13 Limitation on Negative Pledge Clauses. Enter
into any agreement with any Person other than the Lender
pursuant to the Operative Agreements which prohibits or limits
the ability of the Borrower to create, incur, assume or suffer
to exist any Lien upon any of its property, assets or revenues,
whether now owned or hereafter acquired except with the prior
written consent of the Lender.
<PAGE>
6.14 Agreements.
(a) Cancel, terminate, amend, supplement, modify or
waive any of the provisions of any Operative Agreement.
(b) Cancel, terminate, amend, supplement, modify or
waive any of the provisions of the Credit and Collection Policy
in any material respect.
(c) Permit any Originator or the Servicer to assign
any of their respective rights or obligations under the Sales
and Servicing Agreement, except as expressly permitted by the
Sales and Servicing Agreement.
6.15 Successor Servicer. Permit any change of
Servicer, except in accordance with the Sales and Servicing
Agreement.
6.16 Change in Payment Instructions to Obligors.
Terminate any bank as a Lock-Box Bank from those listed in
Schedule 1 or make any material change in its instructions to
Obligors regarding payments to be made to the Borrower or
payments to be made to any Lock-Box Bank, unless the Lender
shall have received thirty (30) days' prior written notice of
such termination or change, or add any bank as a Lock-Box Bank
unless the Lender shall have received (i) thirty (30) days'
prior written notice of such addition and (ii) prior to the
effective date of such addition, (x) executed copies of
Lock-Box Agreements executed by each new Lock-Box Bank, the
Servicer and the Borrower and (y) copies of all agreements and
documents signed by either the Servicer, the Borrower or the
respective Lock-Box Bank with respect to any new Lock-Box
Account.
6.17 Maintenance of Office or Agency; Chief Executive
Office. The Borrower will not change the location of its Chief
Executive Office as set forth in Section 3.1(s) without giving
the Lender at least 60 days' prior written notice thereof.
SECTION 7. REMEDIES
At any time after the occurrence of an Event of
Termination and so long as such Event of Termination is
continuing, the Lender may, in accordance with the Uniform
Commercial Code or other applicable law, take one or more of
the
<PAGE>
following actions: (i) give notice (which may be telephone
notice confirmed in writing) to the Borrower of the occurrence
of such Event of Termination, and the Lender's election to
terminate the Commitment under this Loan Agreement, whereupon
the Lender's obligation to make Loans shall be terminated
(except that in the case of the occurrence of any Event of
Termination described in clause (d) of the definition of such
term, no such notice shall be required and such termination
shall be automatic), (ii) by notice to the Borrower declare the
unpaid principal amount and interest under the Note, the Loans
and all other amounts payable to the Lender by the Borrower
hereunder to be forthwith due and payable, whereupon such
amounts shall become forthwith due and payable, both as to
principal and interest, without presentment, demand, protest or
any other notice of any kind, all of which are hereby expressly
waived, anything contained herein or in the Note to the
contrary notwithstanding (except that in the case of the
occurrence of any Event of Termination described in clause (d)
of the definition of such term, no such notice shall be
required and such termination and acceleration shall be
automatic), (iii) to demand, collect, receive payment of, give
receipt for and give discharges and releases of all or any of
the Collateral, (iv) to notify, or to require the Borrower or
the Servicer to notify, each Obligor to make payment in respect
of the Receivables directly to the Lender, and (v) to use,
sell, assign, transfer, pledge, make any agreement with respect
to or otherwise deal with all or any of the Collateral, and to
do any and all other and further acts and actions which the
Lender may take pursuant to this Loan Agreement or under the
Uniform Commercial Code or other applicable law, including,
without limitation (A) establishing an account or accounts (the
"Collection Account") with the Referral Agent or such other
financial institution as the Lender may designate into which
the Collections or any amounts realized on the Collateral shall
be paid, and (B) taking control of the Lock-Box Accounts (by
delivery to the Lock-Box Bank of notices in substantially the
forms attached to the Lock-Box Agreement).
In case of the pendency of any receivership,
insolvency, liquidation, bankruptcy, reorganization,
arrangement, adjustment, composition, or other judicial
proceeding relative to the Borrower, any Originator or the
Servicer, the other obligations secured hereby or relating to
the property of the Borrower, any Originator, the Servicer or
of such other obligor or their creditors, the Lender
(irrespective of whether the Obligations shall then be due and
payable as therein expressed or by declaration or otherwise and
irrespective of whether the
<PAGE>
Lender shall have made any demand on the Borrower, any
Originator or the Servicer for the payment of overdue principal
or interest or any such other obligation) shall be entitled and
empowered, by intervention in such proceeding or otherwise,
(i) to file and prove a claim for the whole
amount of principal, interest, if any, owing and
unpaid in respect of the Obligations and any other
obligation secured hereby and to file such other
papers or documents as may be necessary or advisable
in order to have the claims of the Lender (including
any claim for the reasonable compensation, expenses,
disbursements and advances of the Lender, its agents
and counsel) and of the Lender allowed in such
judicial proceeding, and
(ii) to collect and receive any moneys or other
property payable or deliverable on any such claims
and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator,
sequestrator, or other similar official in any such judicial
proceeding is hereby authorized by the Lender to make such
payments to the Lender and, in the event that the Lender shall
consent to the making of such payments directly to the Lender,
to pay to the Lender any amount due it for the reasonable
compensation, expenses, disbursements and advances of the
Lender, its agents and counsel.
SECTION 8. GRANT OF SECURITY INTEREST
8.1 Grant of Security Interest. The Borrower hereby
Grants to the Lender a security interest in all of the
Borrower's right, title and interest in and to (a) each
Receivable, whether now owned or hereafter acquired, and all
Collections and other amounts now due or hereafter becoming due
with respect thereto, (b) all rights of the Borrower to or
under any guarantees of or collateral for the Obligor's
obligations under any Contract, (c) all of the Borrower's
right, title and interest in and to the goods subject to each
Receivable, (d) all moneys held by a Lock-Box Bank in a
Lock-Box Account in respect of the Receivables, (e) all rights
of the Borrower under the Sales and Servicing Agreement, and
(f) all proceeds of the conversion, whether voluntary or
involuntary, of any of the foregoing into cash or other
property (collectively, the "Collateral"). Such Grant is
<PAGE>
made in trust to secure (1) the payment of all amounts due to
the Lender from the Borrower in accordance with the terms of
the Operative Agreements, and (2) the performance of each and
all of the Borrower's other obligations under this Loan
Agreement and the other Operative Agreements (collectively, the
"Obligations").
8.2 Remedies. Following any acceleration of the
Obligations, the Lender shall have all of the rights, powers
and remedies with respect to the Collateral set forth in
Section 7 hereof or as are otherwise available to secured
parties under the Uniform Commercial Code or other applicable
law.
8.3 Application of Money Collected. Any money
realized from a sale by the Lender of any Collateral subject to
the Lien of this Loan Agreement pursuant to this Section 8
shall be applied in the following order, at the date or dates
fixed by the Lender:
first, to the payment of all costs and expenses
of collection incurred by the Lender (including the
fees and expenses of any counsel to the Lender) in
connection with any Operative Agreement and all other
amounts due the Lender under Section 9.4 and, after
such costs and expenses incurred by the Lender have
been paid, then to the payment of any other such
costs and expenses incurred by the Lender in
connection with any Operative Agreement;
second, if the Servicer is not an Originator,
the Borrower or an Affiliate of either thereof, to
the payment of all Servicing Fees then due;
third, to the payment to the Lender of all
accrued and unpaid Cost of Funds Amount (including
interest on overdue payments of interest or principal
as set forth in this Loan Agreement), Program Fees
and Facility Fees;
fourth, to the payment to the Lender of the
Outstanding Principal Amount;
fifth, to the Lender, all other amounts owed to
it pursuant to the Operative Agreements;
<PAGE>
sixth, if the Servicer is an Originator, the
Borrower or an Affiliate of either thereof, to the
payment of all Servicing Fees then due;
seventh, the balance, if any, to the Borrower.
8.4 Restoration of Rights and Remedies. If the Lender
has instituted any proceeding to enforce any right or remedy
under this Loan Agreement and such proceeding has been
discontinued or abandoned for any reason, or has been
determined adversely to the Lender, then and in every such
case, subject to any determination in such proceeding, the
Borrower and the Lender shall be restored severally and
respectively to their former positions hereunder and thereafter
all rights and remedies of the Lender shall continue as though
no such proceeding had been instituted.
8.5 Rights and Remedies Cumulative. No right or
remedy herein conferred upon or reserved to the Lender is
intended to be exclusive of any other right or remedy, and
every right and remedy shall, to the extent permitted by law,
be cumulative and in addition to every other right and remedy
given hereunder or now or hereafter existing at law or in
equity or otherwise. The assertion or employment of any right
or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate
right or remedy.
8.6 Delay or Omission Not Waiver. No delay or
omission of the Lender to exercise any right or remedy accruing
upon any Event of Termination shall impair any such right or
remedy or constitute a waiver of any such Event of Termination
or an acquiescence therein. Every right and remedy given by
this Section or by law to the Lender may be exercised from time
to time, and as often as may be deemed expedient, by the
Lender.
8.7 Waiver of Stay or Extension Laws. The Borrower
covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay
or extension law wherever enacted, now or at any time hereafter
in force, which may affect the covenants or the performance of
this Loan Agreement; and the Borrower (to the extent that it
may lawfully do so) hereby expressly waives all benefit or
advantage of any such law and covenants that it will not
hinder, delay or impede the execution of any power herein
granted to the Lender,
<PAGE>
but will suffer and permit the execution of every such power as
though no such law had been enacted.
8.8 Sale of Collateral.
(a) The power to effect any sale of any portion of
the Collateral pursuant to Section 7 shall not be exhausted by
any one or more sales as to any portion of the Collateral
remaining unsold, but shall continue unimpaired until the
entire Collateral shall have been sold or all Obligations shall
have been paid. The Lender may from time to time postpone any
public sale by public announcement made at the time and place
of such sale.
(b) In connection with a sale of all or any portion
of the Collateral:
(i) the Lender may bid for and purchase the
property offered for sale, and upon compliance with
the terms of sale may hold, retain, and possess and
dispose of such property, without further
accountability, and the Lender may, in paying the
purchase money therefor, deliver in lieu of cash the
Note or claims for interest thereon for credit in the
amount that shall, upon distribution of the net
proceeds of such sale, be payable thereon, and the
Note, in case the amounts so payable thereon shall be
less than the amount due thereon, shall be returned
to the Lender after being appropriately stamped to
show such partial payment;
(ii) the Lender may bid for and acquire the
property offered for sale in connection with any
public sale thereof;
(iii) the Lender shall execute and deliver an
appropriate instrument of conveyance transferring its
interest in any portion of the Collateral in
connection with a sale thereof;
(iv) the Lender is hereby irrevocably appointed
the agent and attorney-in-fact of the Borrower to
transfer and convey its interest in any portion of
the Collateral in connection with a sale thereof, and
to take all action necessary to effect such sale; and
(v) no purchaser or transferor at such a sale
shall be bound to ascertain the Lender's authority,
inquire into the satisfaction of any conditions
precedent or see to the application of any moneys.
(c) The method, manner, time, place and terms of any
sale of all or any portion of the Collateral shall be
commercially reasonable.
(d) The provisions of this Section 8.8 shall not be
construed to restrict the ability of the Lender to exercise any
rights and powers against the Borrower or the Collateral that
are vested in the Lender by this Loan Agreement, including,
without limitation, the power of the Lender to proceed against
the Collateral subject to the lien of this Loan Agreement and
to institute judicial proceedings for the collection of any
deficiency remaining thereafter.
8.9 Protection of Collateral; Further Assurances.
The Borrower will from time to time execute and
deliver all such supplements and amendments hereto and all such
Financing Statements, continuation statements, instruments of
further assurance, and other instruments, and will take such
other action as may be reasonably necessary or advisable to
(i) grant more effectively a security interest
in all or any portion of the Collateral;
(ii) maintain or preserve the Lien of this Loan
Agreement or carry out more effectively the purposes
hereof;
(iii) publish notice of, or protect the validity
of, any Grant made or to be made by this Loan
Agreement and perfect the security interest
contemplated hereby in favor of the Lender in each of
the Receivables and the other property constituting
part of the Collateral;
(iv) enforce or cause the Servicer to enforce
any of the Receivables; or
(v) preserve and defend title to any Receivable
(including the right to receive all payments due or
to become due thereunder) or other Collateral as
required
<PAGE>
by the Sales and Servicing Agreement and preserve and
defend the rights of the Lender in such Receivable
(including the right to receive all payments due or
to become due thereunder) and other property against
the claims of all persons and parties.
The Borrower hereby designates the Lender its agent and
attorney-in-fact to execute, upon the Borrower's failure to do
so, any Financing Statement or continuation statement required
pursuant to this Section 8.9. In furtherance of the assignment
of all of the Borrower's rights under the Sales and Servicing
Agreement, the Borrower hereby irrevocably authorizes and
empowers the Lender in its own name, or in the name of its
nominee, or in the name of the Borrower, from and after the
date on which any Unmatured Event or Event of Termination shall
occur and be continuing, to ask, demand, sue for, collect and
receive any and all payments to which the Borrower is or may
become entitled under the Sales and Servicing Agreement, and to
enforce compliance by each and every party, or any one or more
of them, with all or any of the terms and provisions of the
Sales and Servicing Agreement.
8.10 Opinions as to Collateral. On or before March 15
in each calendar year, beginning March 15, 1999, the Borrower
shall furnish to the Lender an Opinion of Counsel either
stating that, in the opinion of such counsel, such action has
been taken with respect to the execution and filing of any
Financing Statements and continuation statements as is required
pursuant to the Sales and Servicing Agreement and Section 8.9
hereof to maintain the ownership interest of the Borrower in
each Receivable (including the right to receive all payments
due or to become due thereunder) and the valid and perfected
Lien created by this Loan Agreement in each Receivable and
reciting the details of such action or stating that in the
opinion of such counsel no such action is necessary to maintain
such Lien and security interest. Such Opinion of Counsel shall
also describe the execution and filing of any Financing
Statements and continuation statements that will, in the
opinion of such counsel, be required to maintain the valid and
perfected Lien of this Loan Agreement with respect to the
Receivables until March 15 in the following calendar year.
<PAGE>
SECTION 9. MISCELLANEOUS
9.1 Amendments and Waivers. None of this Loan
Agreement, the Note or any other Operative Agreement to which
the Lender or the Borrower is a party, nor any terms hereof or
thereof, may be amended, supplemented or modified except in
accordance with the provisions of this subsection. Subject to
obtaining the consent of any other party required hereunder or
thereunder, the Lender and the Borrower may, from time to time,
enter into written amendments, supplements or modifications
hereto and to the Note and the other Operative Agreements to
which they are parties for the purpose of adding any provisions
to this Loan Agreement or the Note or such other Operative
Agreements or changing in any manner the rights of Lender or
the Borrower hereunder or thereunder and, in addition, waiving,
on such terms and conditions as Lender may specify in such
instrument, any of the requirements of this Loan Agreement or
the Note or such other Operative Agreements or any Unmatured
Event or Event of Termination and its consequences. Any such
waiver and any such amendment, supplement or modification shall
be binding upon the Lender and all future holders of the Note.
In the case of any waiver, the Lender and the Borrower shall be
restored to their former position and rights hereunder and
under the Note and any other Operative Agreements to which they
are parties, and any Unmatured Event or Event of Termination
waived shall be deemed to be cured and not continuing; but no
such waiver shall extend to any subsequent or other Unmatured
Event or Event of Termination, or impair any right consequent
thereon.
9.2 Notices. Except where telephonic instructions or
notices are authorized herein to be given, all notices,
demands, instructions and other communications required or
permitted to be given to or made upon any party hereto shall be
in writing and shall be personally delivered or sent by
overnight courier service, or by registered, certified or
express mail, postage prepaid, return receipt requested, or by
facsimile copy, or telegram (with messenger delivery specified
in the case of a telegram) and shall be deemed to be delivered
for purposes of this Loan Agreement on: (a) the third Business
Day following the day on which such notice was placed in the
custody of the U.S. Postal Service, (b) the next Business Day
following the day on which such notice was placed in the
custody of any overnight courier service, including express
mail service or (c) the same Business Day on which such notice
is sent by telegram, messenger or facsimile. Unless otherwise
specified in a notice sent or
<PAGE>
delivered in accordance with the foregoing provisions of this
subsection, notices, demands, instructions and other
communications in writing shall be given to or made upon the
respective parties hereto at their respective addresses (or to
their respective facsimile numbers) indicated below, and, in
the case of telephonic instructions or notices, by calling the
telephone number or numbers indicated for such party below:
If to the Borrower: Essex Funding Inc.
1601 Wall Street
Fort Wayne, Indiana 46801-1601
Attention: Mr. Dale D. Dean
Telephone: (219) 461-4626
Facsimile: (219) 461-4762
If to Essex: Essex Group, Inc.
1601 Wall Street
Fort Wayne, Indiana 46801-1601
Attention: Mr. Dale D. Dean
Telephone: (219) 461-4626
Facsimile: (219) 461-4762
If to Diamond: Diamond Wire & Cable Co.
1601 Wall Street
Fort Wayne, Indiana 46801-1601
Attention: Mr. Dale D. Dean
Telephone: (219) 461-4626
Facsimile: (219) 461-4762
If to Interstate: Interstate Industries, Inc.
1601 Wall Street
Fort Wayne, Indiana 46801-1601
Attention: Mr. Dale D. Dean
Telephone: (219) 461-4626
Facsimile: (219) 461-4762
<PAGE>
If to the Lender: Three Rivers Funding Corporation
c/o Merrill Lynch Money Markets Inc.
World Financial Center - North Tower
250 Vesey Street
New York, New York 10281
Attention:Mr. Stewart L. Cutler
Telephone:(212) 449-7468
Facsimile:(212) 449-8939
With a copy to:
Mellon Bank, N.A.
One Mellon Bank Center - Room 0410
Pittsburgh, Pennsylvania 15258-0001
Attention: Ms. Virginia H. Borkovic
Telephone: (412) 234-8261
Facsimile: (412) 234-5434
9.3 Survival of Representations and Warranties. All
representations and warranties made hereunder and in any
document, certificate or statement delivered pursuant hereto or
in connection herewith shall survive the execution and delivery
of this Loan Agreement and the Note.
9.4 Payment of Expenses and Taxes. The Borrower
agrees, on demand, to (a) pay or reimburse the Lender for all
its reasonable out-of-pocket costs and expenses incurred in
connection with the preparation and execution of any amendment,
supplement or modification to, this Loan Agreement, the Note
and the other Operative Agreements and any other agreements
prepared in connection herewith or therewith, and the
consummation of the transactions contemplated hereby and
thereby, including, without limitation, any and all reasonable
collateral audit fees, and the fees and disbursements of
counsel to the Lender, (b) pay or reimburse the Lender for all
its costs and expenses incurred in connection with the
enforcement or preservation of any rights under this Loan
Agreement, the Note and the other Operative Agreements,
including, without limitation, fees and disbursements of
counsel to the Lender and (c) pay, indemnify, and hold the
Lender harmless from, any and all recording and filing fees and
any and all liabilities with respect to, or resulting from any
delay in paying, any registration tax, stamp, duty and other
similar taxes or duties, if any, which may be payable or
<PAGE>
determined to be payable in connection with the execution and
delivery of, or consummation of any of the transactions
contemplated by, or any amendment, supplement or modification
of, or any waiver or consent under or in respect of, this Loan
Agreement, the Note and the other Operative Agreements, and (d)
pay, indemnify, and hold the Lender harmless from and against
any and all other liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or
disbursements to the extent arising from the execution,
delivery and administration of, and the enforcement against the
Borrower of, this Loan Agreement, the Note and the other
Operative Agreements (all the foregoing, collectively, the
"indemnified liabilities"); provided that the Borrower shall
not have any obligation hereunder to the Lender with respect to
indemnified liabilities arising from the gross negligence or
willful misconduct of the Lender. Without limitation of the
generality of this Section 9.4(d), the Borrower shall pay on
demand to the Lender any and all amounts necessary to indemnify
the Lender from and against any and all indemnified liabilities
relating to or resulting from any of the following:
(i) reliance on any representation or warranty
made or deemed made by the Borrower (or any of its
officers) under or in connection with this Loan
Agreement, any Operative Document, any Loan Request
or any other information or report delivered by the
Borrower pursuant hereto, which, in any such case,
shall have been false or incorrect in any material
respect when made or deemed made or delivered, except
to the extent it specifically relates to an earlier
date:
(ii) the failure by the Borrower to comply with
any term, provision or covenant contained in this
Loan Agreement or any Operative Document or with any
applicable law, rule or regulation with respect to
any Receivable, or the nonconformity of any
Receivable with any such applicable law, rule or
regulation;
(iii) the failure as a result of any action by
the Borrower to vest and maintain vested in the
Lender, a perfected security interest in the
Receivables transferred or purported to be
transferred to the Borrower, together with all
Collections and related security agreements,
instruments and documents, and all
<PAGE>
other Collateral, free and clear of any Lien (other
than Permitted Liens);
(iv) the failure by the Borrower to file, or any
delay in filing (other than solely as a result of the
action or inaction of the Lender), Financing
Statements or other similar instruments or documents
under the UCC of any applicable jurisdiction or other
applicable laws against the Borrower with respect to
any Receivables;
(v) any dispute, claim, offset or defense (other
than discharge in bankruptcy of the Obligor or other
financial inability of the Obligor to pay such
Receivable) of the Obligor to the payment of any
Receivable which is, or is purported to be, a
Receivable, including, without limitation, a defense
based on such Receivable 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 or lease of the
goods or services related to such Receivable or the
furnishing or failure to furnish goods or services;
(vi) any products liability claim or personal
injury or property damage suit or other similar or
related claim or action of whatever sort arising out
of or in connection with the goods or services
subject to any Receivable;
(vii) the failure to pay when due any taxes,
including, without limitation, sales, excise or
personal property taxes payable by the Borrower in
connection with the Receivables;
(viii) the commingling of any Collections of
Receivables with any other funds; and
(ix) the failure of the computer applications of
the Servicer to resolve the Year 2000 Problem on or
prior to December 30, 1999.
The agreements in this subsection shall survive repayment of
the Loans, the Note and all other amounts payable hereunder.
Notwithstanding anything in this Section 9.4 to the contrary,
the Borrower shall not have any obligation hereunder to the
Lender
<PAGE>
with respect to indemnified liabilities arising from the gross
negligence or willful misconduct of the Lender.
9.5 Successors and Assigns; Participations.
(a) This Loan Agreement shall be binding upon and
inure to the benefit of the Borrower, the Lender and all future
holders of the Note and their respective successors and
assigns, except that the Borrower may not assign or transfer
any of its rights or obligations under this Loan Agreement
without the prior consent of the Lender, and the Lender may not
assign or transfer any of its rights or obligations under this
Loan Agreement without the prior consent of the Borrower (which
consent shall not be unreasonably withheld). The parties to
this Agreement acknowledge that the Lender has assigned and
shall be permitted to continue to assign (without consent) to
Bankers Trust Company, as collateral agent for the benefit of
the holders of any debt instruments issued by the Lender, its
security interest in all of the Collateral.
(b) The Borrower and the Lender agree that the Lender
may, from time to time, with the prior consent of the Borrower
(which consent shall not be unreasonably withheld), sell a
portion of the Lender's obligation to make Loans hereunder and
of the Lender's rights hereunder and under the Loans and the
Note, or grant participations herein and in the Loans and the
Note. Any such assignee or participant may have the same rights
as the Lender in respect of the rights granted to the Lender
hereunder. In such connection, it is agreed that the Lender
shall not be responsible for a failure by any such assignee or
participant, and that each such assignee or participant shall
not be responsible for a failure by the Lender (or another such
assignee or participant), to make or fund, as the case may be,
its pro rata portion of any Loan.
(c) Every participant or assignee of the Lender shall
provide the Borrower (A) prior to becoming a participant or
assignee (i) if the participant or assignee is incorporated or
established under the laws of a jurisdiction outside of the
United States, two duly completed copies of the United States
Internal Revenue Form 4224 or 1001 (or, if the assignee or
participant is not a bank, Form W-8) or successor applicable or
required forms, in each case entitling the participant or
assignee to receive payments under this Agreement without
deduction or withholding of any United States Federal income
<PAGE>
taxes and demonstrating the participant's or assignee's
exemption from backup withholding tax, (ii) a duly completed
copy of the Internal Revenue Service Form W-8 or W-9 or
successor applicable or required forms, and (iii) such other
forms and information as may be reasonably required to confirm
the availability of any applicable exemption from United States
Federal, state or local withholding taxes, and (B) to the
extent possible, each potential participant or assignee must
also agree to provide the Borrower on or before the date that
any such form expires or becomes obsolete, or upon the
occurrence of any event requiring an amendment, resubmission or
change in the most recent form previously delivered by it, and
such extensions or renewals as may be reasonably requested by
the Borrower. Notwithstanding any provision of this Agreement
to the contrary, the Borrower shall be entitled to withhold or
cause withholding, and no amount shall be payable under Section
2.8, to the extent such amount would otherwise be payable as
the result of such participant's or assignee's failure to
deliver the forms required by this paragraph (c) on a timely
basis.
(d) Notwithstanding anything contained herein to the
contrary, the Lender hereby agrees (i) to maintain the
confidentiality of the information relating to the business and
operations of the Originators and the Borrower as the Borrower,
the Originators or the Servicer may from time to time disclose
to the Lender and (ii) not to duplicate, disclose or distribute
such information to any Person other than its directors,
officers, representatives (including its accountants, attorneys
and agents) and employees who are directly participating in the
administration of the transactions contemplated by the
Operative Agreements; provided, however, that the Lender may
disclose any such information (i) if in the reasonable judgment
of the Lender, such disclosure is required under any
requirement of applicable law, rule or regulation or compliance
by the Lender with any binding requirements of any regulatory
body having jurisdiction over the Lender, (ii) if such
information has become available to the public other than as a
result of a disclosure by or through the Lender, (iii) if such
information was available to the Lender on a non-confidential
basis prior to its disclosure to the Lender hereunder, (iv) if
the Lender should be required in connection with any legal or
regulatory proceeding to disclose such information (including
pursuant to court order or subpoena) or (v) to its liquidity or
credit providers under any Liquidity Agreement, which agrees in
writing to maintain the confidentiality of such information in
accordance with this
<PAGE>
paragraph (d), or a rating agency rating the securities of the
Lender; provided, however, that in the case of any instance set
forth in clause (i) or (iv) above, the Lender will, to the
extent practicable, inform the Borrower of its intention to
make any such disclosure prior to (and, to the extent
reasonably practicable, three (3) days prior to) making any
such disclosure. The Borrower authorizes the Lender to
disclose, to any assignee or participant or proposed assignee
or participant referred to in Section 9.5(b) any and all
financial information in its possession concerning the
Originator, the Borrower and their affiliates which has been
delivered to it by or on behalf of such Person pursuant to this
Loan Agreement or any Operative Agreement or which has been
delivered to it by or on behalf of such Person in connection
with its credit evaluation of the Originators, the Borrower and
their Affiliates prior to becoming a party to this Loan
Agreement, provided, that such assignee or participant shall
first have agreed in writing to be bound by the provisions of
this Section 9.5(d).
(e) Notwithstanding anything contained herein to the
contrary, without the prior written consent of the Lender, the
Borrower hereby agrees (i) to maintain the confidentiality of
this Loan Agreement and the other Operative Agreements and the
information relating to the business and operations of the
Lender as the Lender may from time to time disclose to the
Borrower and (ii) not to duplicate, disclose or distribute this
Loan Agreement or any other Operative Agreement or any such
information to any Person other than its directors, officers,
representatives (including its accountants, attorneys and
agents), employees, and Affiliates who are directly
participating in the administration of the transactions
contemplated by the Operative Agreements; provided, however,
that the Borrower may disclose any such information (i) if in
the reasonable judgment of the Borrower such disclosure is
required under any requirement of applicable law, rule or
regulation or compliance by the Borrower with any binding
requirements of any regulatory body, including any securities
exchange, having jurisdiction over the Borrower, (ii) if such
information has become available to the public other than as a
result of a disclosure by or through the Borrower, (iii) if
such information was available to the Borrower on a
non-confidential basis prior to its disclosure to the Borrower
hereunder, (iv) if the Borrower should be required in
connection with any legal or regulatory proceeding to disclose
such information (including pursuant to court order or
subpoena), or (v) if upon advice of counsel, the disclosure of
such information
<PAGE>
shall be reasonably necessary or desirable in connection with
any litigation; provided, however, that in the case of any
instance set forth in clause (i) or (iv) above, the Borrower
will, to the extent practicable, inform the Lender of its
intention to make any such disclosure prior to (and, to the
extent reasonably practicable, three (3) days prior to) making
any such disclosure.
(f) The Lender shall not grant to any assignee or
participant the right to consent to any amendment or waiver
entered into in accordance with subsection 9.1 except for any
such amendment or waiver which would reduce the amount or
extend the due date of any principal of or interest on the
Note.
9.6 Termination. This Loan Agreement shall terminate
upon payment in full of all outstanding principal, interest and
other amounts due hereunder; provided, however, that to the
extent that the Borrower or any Obligor makes a payment to the
Lender or the Lender exercises its rights of set-off and such
payment or set-off or any part thereof is subsequently
invalidated, declared to be fraudulent or preferential, set
aside, recovered from, disgorged by, or is required to be
refunded, rescinded, returned, repaid or otherwise restored to
the Borrower, such Obligor, a trustee, a receiver or any other
Person under any law, including, without limitation, any
bankruptcy law, any state or federal law, common law or
equitable cause, the obligation or part thereof originally
intended to be satisfied shall, to the extent of any such
restoration, be reinstated, revived and continued in full force
and effect as if such payment had not been made or such set-off
had not occurred. The provisions of the proviso to this Section
9.6 shall survive the termination of this Loan Agreement.
Notwithstanding anything herein to the contrary, in the event
that any Originator shall cease to be directly or indirectly
wholly-owned by Essex International, such Originator shall,
from and after the date on which it so ceases to be directly or
indirectly wholly-owned by Essex International, cease to be an
"Originator" for purposes of this Loan Agreement and the Sales
and Servicing Agreement; provided, however, that such
Originator's liability for any obligations under any Operative
Agreement which are accrued through such date on which it
ceases to be directly or indirectly wholly-owned by Essex
International shall continue.
9.7 Counterparts. This Loan Agreement may be executed
by one or more of the parties to this Loan Agreement on any
number of separate counterparts, and all of said counterparts
<PAGE>
taken together shall be deemed to constitute one and the same
instrument.
9.8 Severability. Any provision of this Loan
Agreement which is 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.
9.9 Integration. This Loan Agreement represents the
agreement of the Borrower and the Lender with respect to the
subject matter hereof, and there are no promises, undertakings,
representations or warranties by Lender relative to the subject
matter hereof not expressly set forth or referred to herein or
in the other Operative Agreements.
9.10 GOVERNING LAW. THIS LOAN AGREEMENT AND THE NOTE
AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS LOAN
AGREEMENT AND THE NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW
YORK.
9.11 SUBMISSION TO JURISDICTION WAIVERS. EACH OF THE
PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY:
(a) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL
ACTION OR PROCEEDING RELATING TO THIS LOAN AGREEMENT AND THE
OTHER OPERATIVE AGREEMENTS TO WHICH IT IS A PARTY, OR FOR
RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF,
TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE
STATE OF NEW YORK, THE COURTS OF THE UNITED STATES OF AMERICA
FOR THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS
FROM ANY THEREOF;
(b) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY
BE BROUGHT IN SUCH COURTS AND WAIVES ANY OBJECTION THAT IT MAY
NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR
PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING
WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR
CLAIM THE SAME;
(c) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION
OR PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY
<PAGE>
REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM
OF MAIL), POSTAGE PREPAID, TO ITS ADDRESS SET FORTH IN
SUBSECTION 9.2 OR AT SUCH OTHER ADDRESS OF WHICH ALL OF THE
OTHER PARTIES HERETO SHALL HAVE BEEN NOTIFIED PURSUANT THERETO;
AND
(d) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT
TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY
LAW OR SHALL LIMIT THE RIGHT TO SUE IN ANY OTHER JURISDICTION.
9.12 Acknowledgments. The Borrower hereby
acknowledges that:
(a) it has been advised by counsel in the
negotiation, execution and delivery of this Loan Agreement, the
Note and the other Operative Agreements;
(b) the Lender has no fiduciary relationship to the
Borrower, and the relationship between the Lender and the
Borrower is solely that of debtor and creditor; and
(c) no joint venture exists between the Borrower and
the Lender.
9.13 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN
ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS LOAN AGREEMENT
OR THE NOTE OR ANY OTHER OPERATIVE AGREEMENT AND FOR ANY
COUNTERCLAIM THEREIN.
9.14 No Bankruptcy Petition Against Lender. The
Borrower covenants and agrees that it will not institute
against, or join any other Person in instituting against, the
Lender any bankruptcy, reorganization, arrangement, insolvency
or liquidation proceedings, or other proceedings under any
federal or state bankruptcy or similar law.
9.15 No Recourse. The obligations of the Lender under
this Loan Agreement are solely the corporate obligations of the
Lender. No recourse shall be had for the payment of any amount
owing in respect to this Loan Agreement or for the payment of
any fee hereunder or for any other obligation or claim arising
out of or based upon this Loan Agreement against any
stockholder, employee, officer, director or incorporator of the
Lender or against Mellon Bank, N.A. or any stockholder,
employee, officer, director, incorporator or affiliate thereof.
<PAGE>
9.16 No Recourse Against the Borrower's Stockholders.
The obligations of the Borrower under this Loan Agreement are
solely the corporate obligations of the Borrower. No recourse
shall be had for the payment of any amount owing in respect to
this Loan Agreement or for the payment of any fee hereunder or
for any other obligation or claim arising out of or based upon
this Loan Agreement against any stockholder, employee, officer,
director or incorporator of the Borrower or an Affiliate
thereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused
this Loan Agreement to be duly executed and delivered in New
York, New York by their proper and duly authorized officers as
of the day and year first above written.
ESSEX FUNDING INC.
By: /S/ David A. Owen
--------------------------------
Name: David A. Owen
Title: Vice President, Treasurer
THREE RIVERS FUNDING CORPORATION
By: /s/ Stewart L. Cutler
--------------------------------
Authorized Signatory
<PAGE>
SCHEDULE 1
to the Loan Agreement
LOCK-BOXES/LOCK BOX-BANKS
1. Harris Trust and Savings Bank
Attention: Remittance Processing Division, 311/7
P.O. Box 755
Chicago, Illinois 60690
Account No. _________________
ABA No. ________________
Lock-Box No. Business Unit
71010 Magnet Wire
71144 Wire and Cable
71248 Automotive
71264 Essex Brownell
71306 US Samica
71785 Cable Communications
71934 Triangle
95356 Appliance Wire
95481 Diamond
95876 HandiWire
95691 Interstate Industries Inc.
<PAGE>
EXHIBIT A
to the Loan Agreement
[Form of Note]
$150,000,000 April , 1998
FOR VALUE RECEIVED, the undersigned, upon the terms
and the conditions set forth in the Loan Agreement (as such
term is hereinafter defined), hereby promises to pay to the
order of THREE RIVERS FUNDING CORPORATION (the "Lender"), the
principal sum which is the lesser of One Hundred Fifty Million
Dollars ($150,000,000) and the aggregate unpaid principal
amount from time to time outstanding of all Loans made by the
Lender to the undersigned pursuant to Section 2.1 of the Loan
Agreement, in immediately available funds and in lawful money
of the United States of America on the Commitment Expiration
Date, and to pay interest on the unpaid balance of said
principal sum from time to time outstanding, from the date
hereof until the principal sum shall be paid in full, in like
funds and money, at the office of the Lender as shall be
designated by the Lender, at the rates of interest and at such
times as provided in said Loan Agreement.
This promissory note is the Note referred to in the
Loan Agreement dated as of April 29, 1998 (as the same may from
time to time be amended, the "Loan Agreement"), between the
undersigned and the Lender, to which Loan Agreement reference
is made for a description of the rights of prepayment, the
Events of Termination and the rights of acceleration of
maturity upon the occurrence of an Event of Termination. All
advances made by the Lender to the undersigned pursuant to the
Loan Agreement and all payments made on account of principal
hereof shall be recorded by the Lender and, prior to any
transfer hereof, endorsed on the grid attached hereto which is
part of this promissory note (provided that any failure by the
Lender to make any such endorsement shall not affect the
obligations of the undersigned under this Note in respect of
any such advance).
<PAGE>
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
ESSEX FUNDING INC.
By:
--------------------------
Name:
Title:
<PAGE>
[REVERSE OF NOTE OR SCHEDULE THERETO]
This Note evidences Loans made by the Lender under
Section 2.1 of the Loan Agreement dated as of April 29, 1998,
as from time to time amended, between ESSEX FUNDING INC. and
the Lender, in the principal amounts and on the dates set forth
below, subject to the payments and prepayments of principal set
forth below:
PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT AMOUNT PAID BALANCE
DATE LOANED OR PREPAID OUTSTANDING
<PAGE>
EXHIBIT B
to the Loan Agreement
[Form of Initial Loan Request]
Three Rivers Funding Corporation
c/o Merrill Lynch Money Markets Inc.
World Financial Center - North Tower
250 Vesey Street
New York, New York 10281
Attention: Mr. Stewart L. Cutler
Ladies and Gentlemen:
This Initial Loan Request is delivered to you pursuant
to Section 2.3 of the Loan Agreement dated as of April 29, 1998
(as such Loan Agreement may be amended, supplemented, restated or
otherwise modified from time to time, the "Agreement") between
Essex Funding Inc. (the "Borrower") and Three Rivers Funding
Corporation (the "Lender"). Unless otherwise defined herein or
the context otherwise requires, all capitalized terms used herein
will have the respective meanings assigned to them in the
Agreement.
The Borrower hereby requests that a Loan be made on
________________, 199_, in the principal amount of $___________.
The Borrower hereby certifies and affirms that (i) the
representations and warranties of the Borrower set forth in each
Operative Document are on the date hereof true and correct in all
material respects as if made on and as of each such date, except
to the extent such representation or warranty specifically
relates to an earlier date, (ii) no Unmatured Event, Event of
Termination or, to the knowledge of the Borrower, Servicer Event
of Default has occurred and is continuing on the date hereof or
shall have occurred and be continuing on the date of the proposed
Loan, and (iii) after giving effect to the making of the Loan
requested hereby, the aggregate principal amount of all Loans
outstanding will not exceed the lesser of (A) the Borrowing Base
and (B) the Commitment.
<PAGE>
The Borrower agrees that if, prior to the time that the
Loan requested hereby is made, any matter affirmed herein shall
no longer be true and correct, it will promptly so notify the
Lender. Except to the extent, if any, that prior to the time that
the Loan requested hereby is made the Lender shall receive
written notice to the contrary from the Borrower, each matter
affirmed herein shall be deemed once again to be affirmed as true
and correct in all material respects as of the date of such Loan
as if then made, except to the extent such representation or
warranty specifically relates to an earlier date.
Please wire transfer the proceeds of the requested Loan
to the account(s) of the following Persons at the financial
institution(s) indicated below:
Amount to be Person to be Paid Name, Address, etc.
Transferred Name Account No. of Payee Bank
$----------- ---------- ----------- ------------------
------------------
ABA #_____________
Attention: _______
$---------- ---------- ----------- ------------------
------------------
ABA #_____________
Attention: _______
The Borrower has caused this Initial Loan Request to be
executed and delivered, and the affirmations and warranties
contained herein to be made, by its duly authorized officer this
____ day of __________, 199_.
ESSEX FUNDING INC.
By:
-------------------------
Name:
Title:
cc: Mellon Financial Markets, Inc.
One Mellon Bank Center - Room 0400
Pittsburgh, Pennsylvania 15258-0001
Attention: Mr. Jonathan F. Widich
<PAGE>
EXHIBIT C
to the Loan Agreement
[Form of Borrowing Base Certificate]
[GRAPHIC OMITTED]
<PAGE>
H. All of the Eligible Receivables included above are subject
to security interest granted pursuant to the Loan and
Security Agreement.
I. The undersigned has examined the amounts and calculations
set forth herein and such amounts are true, complete and
correct in all respects as of the date hereof.
IN WITNESS WHEREOF, the undersigned has executed this
Borrowing Base Certificate on this ____ day of ____________,
199_.
----------------------------
Title:____________________
<PAGE>
EXHIBIT D-1
to the Loan Agreement
[Form of Enforceability and Perfection Opinion]
<PAGE>
EXHIBIT D-2
to the Loan Agreement
[Form of True Sale and Nonconsolidation Opinion]
<PAGE>
EXHIBIT E
to the Loan Agreement
[Form of Lock-Box Agreement]
ESSEX GROUP, INC.,
DIAMOND WIRE & CABLE CO., and
INTERSTATE INDUSTRIES, INC., as Sellers,
AND
ESSEX GROUP, INC., as Servicer
AND
ESSEX FUNDING INC., Purchaser
SALES AND SERVICING AGREEMENT
Dated as of April 29, 1998
ALL RIGHT, TITLE AND INTEREST IN AND TO THIS AGREEMENT ON THE
PART OF ESSEX FUNDING INC. HAVE BEEN ASSIGNED TO AND ARE SUBJECT
TO A SECURITY INTEREST IN FAVOR OF THREE RIVERS FUNDING
CORPORATION, AS LENDER, UNDER A LOAN AND SECURITY AGREEMENT DATED
AS OF APRIL 29, 1998.
<PAGE>
TABLE OF CONTENTS
Page
EXHIBIT A Form of Purchaser Note
EXHIBIT B Form of Credit and Collection Policy
EXHIBIT C Form of Monthly Servicer's Report
SCHEDULE 1 Location of Chief Executive Office
of the Servicer and each Seller
<PAGE>
SALES AND SERVICING AGREEMENT
SALES AND SERVICING AGREEMENT dated as of April 29,
1998 among ESSEX GROUP, INC., a Michigan corporation ("Essex"),
DIAMOND WIRE & CABLE CO., an Illinois corporation ("Diamond"),
INTERSTATE INDUSTRIES, INC., a Mississippi corporation
("Interstate"; and, together with Essex and Diamond, the
"Sellers"); ESSEX FUNDING INC., a Delaware corporation (the
"Purchaser"); and ESSEX GROUP, INC., in its capacity as servicer
(the "Servicer").
RECITALS
WHEREAS, the Sellers wish to sell and assign to the
Purchaser and the Purchaser wishes to purchase from the Sellers,
all right, title and interest of each Seller in, to and under its
respective Receivables (such term and all other capitalized terms
used herein and not defined herein having the meanings assigned
thereto in the Loan and Security Agreement dated as of April __,
1998 (as the same may be amended from time to time, the "Loan
Agreement") between Three Rivers Funding Corporation, as lender
(the "Lender"), and the Purchaser, as borrower (the "Purchaser");
WHEREAS, pursuant to the Loan Agreement, the Lender
will make Loans to the Purchaser from time to time the proceeds
of which will be used by the Purchaser to make payment to the
Sellers for the Receivables;
NOW, THEREFORE, for good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound, agree as follows:
SECTION 1. PURCHASE AND SALE OF RECEIVABLES
1.01 Purchases. (a) Initial Purchase. As of the Closing
Date, each Seller hereby sells and assigns to the Purchaser, and
the Purchaser hereby purchases from each Seller, without
recourse, all of each such Seller's right, title and interest in
and to all of its respective Receivables in existence on the
Cut-Off Date.
(b) Subsequent Purchases. Subject to the terms and
conditions hereof, each Seller hereby sells, transfers, assigns,
sets over and conveys to the Purchaser, and the Purchaser hereby
<PAGE>
agrees to purchase from each Seller, at the times set forth in
Section 1.02, all of such Seller's right, title and interest in,
to and under (i) all Receivables created by such Seller that
arise during the period from and including the closing of such
Seller's business on the Cut-Off Date to but excluding the
Commitment Expiration Date, and (ii) all proceeds of such
Receivables (including all Collections with respect thereto).
1.02 Timing of Purchases. After the closing of the
Sellers' businesses on the Cut-Off Date until the closing of the
Sellers' businesses on the Business Day immediately preceding the
Commitment Expiration Date, all Receivables of each Seller shall
be sold automatically to the Purchaser pursuant hereto
immediately (and without further action by any Person) upon the
creation of such Receivables.
1.03 Calculation of Purchase Price.
(a) On each Settlement Date, the Servicer shall (i)
deliver to the Purchaser and each Seller a Monthly Servicer
Report with respect to the Purchaser's purchases of Receivables
from each Seller that were made during the immediately preceding
Settlement Period and (ii) record the net increase or decrease in
each Purchaser Note and compute the amount of interest thereon
which is then accrued and unpaid.
(b) On each day when Receivables are purchased by the
Purchaser from the Sellers pursuant to Section 1.01 (including,
without limitation, the Closing Date), the "Purchase Price" to be
paid to each Seller on such day for the Receivables that are to
be sold by such Seller on such day shall be an amount equal to
the product of (i) the aggregate outstanding balance of the
Receivables of such Seller that are to be purchased from such
Seller on such day times (ii) the Purchase Price Percentage.
"Purchase Price Percentage" shall mean the percentage determined
in accordance with the following formula:
PPP = 100% - CLR
where:
PPP = the Purchase Price Percentage in effect
during such Settlement Period, and
<PAGE>
CLR = the Credit Loss Reserve (expressed as a
percentage) determined on the Settlement Date
with respect to the immediately preceding
Accounting Period.
The Purchase Price Percentage shall be recomputed by the
Servicer on each Settlement Date, in each case as of the
then most recent Determination Date.
1.04 Purchase Price Payments. On the Business Day
following each day on which any Receivables are purchased by the
Purchaser pursuant to Section 1.01, on the terms and subject to
the conditions of this Agreement, the Purchaser shall pay to each
Seller the Purchase Price for the Receivables purchased on such
day by the Purchaser from such Seller (i) by making a cash
payment pro rata to each such Seller to the extent that the
Purchaser has cash available to make the payment pursuant to
Section 1.06 and (ii) if the Purchase Price to be paid for the
Receivables of such Seller exceeds the amount of any cash
actually paid for the account of such Seller on such day pursuant
to clause (i), by automatically increasing the principal amount
outstanding under the Purchaser Note payable to such Seller by
the amount of the excess.
Each Seller agrees that, prior to the Maturity Date,
the Purchaser shall be required to make payments in respect of
the payment obligations evidenced by the Purchaser Notes only to
the extent that it has cash available under Section 1.06.
1.05 The Purchaser Notes.
(a) On the Closing Date, the Purchaser will deliver to
each Seller a promissory note, substantially in the form of
Exhibit A, payable to the order of such Seller (such promissory
note, as the same may be amended, supplemented, endorsed or
otherwise modified from time to time, together with any
promissory note issued from time to time in substitution therefor
or renewal thereof in accordance with the Sale Documents, being
herein called a "Purchaser Note"). Each Purchaser Note is payable
in full on the date (the "Maturity Date") that is one year and
one day after the date on which all the obligations owed by the
the Purchaser to the Lender under the Loan Agreement have been
repaid in full. Each Purchaser Note shall bear interest at a rate
per annum equal to the rate publicly announced by the Referral
Agent from time to time as its reference rate,
<PAGE>
determined as of each Determination Date. The Purchaser may repay
all or part of the outstanding balance of the Purchaser Notes
from time to time without any premium or penalty in accordance
with Section 1.06.
(b) The Servicer (or its designee) shall hold all the
Purchaser Notes for the benefit of the Sellers and shall make all
appropriate recordkeeping entries with respect to the Purchaser
Notes or otherwise to reflect the payments on and adjustment of
the Purchaser Notes. The Servicer's Records shall constitute
rebuttable presumptive evidence of the principal amount of any
accrued interest on each Purchaser Note at any time. Each Seller
hereby irrevocably authorizes the Servicer to mark its Purchaser
Note "CANCELED" and return it to the Purchaser upon the final
payment thereof.
1.06 Application of Collections and other Funds. The
Purchaser shall have the right to receive all proceeds with
respect to Collections; provided, however, that the Purchaser
shall have no right to any amounts held in trust by the Servicer
in accordance with Section 4.01 hereof and Section 2.6 of the
Loan Agreement. If, on any day, the Purchaser receives any
amounts as set forth in the preceding sentence, the Purchaser
shall apply the funds as follows:
(a) first, to pay the Purchaser's existing expenses and
to set aside funds for the payment of expenses that are then
accrued (in each case to the extent such expenses are permitted
to exist under Section 6 of the Loan Agreement),
(b) second, to pay the Purchase Price for Receivables
purchased by the Purchaser from each Seller on the next preceding
Business Day,
(c) third, to repay amounts owed by the Purchaser to
each Seller under the Purchaser Notes,
(d) fourth, to loan amounts to the Sellers, and
(e) fifth, to declare and pay dividends to Essex to the
extent permitted by applicable law and the Operative Agreements.
1.07 Monthly Calculations. For ease of computation, the
Purchaser and each Seller agree that the daily payments and
<PAGE>
adjustments to the balance of the Purchaser Notes shall occur
automatically and without a requirement for immediate
computation, and Servicer shall only be required to reconcile the
amounts of the foregoing payments on a monthly basis on each
Determination Date.
1.08 Deemed Collections. (a) If on any day the Account
Balance of a Receivable is reduced as a result of a Dilution with
respect to such Receivable, the Seller from whom the Purchaser
purchased such Receivable shall be deemed to have received on
such day a Collection with respect to such Receivable in the
amount of such reduction. If on any day any of the
representations and warranties of any Seller set forth in Section
2.03(a) of this Sales and Servicing Agreement is no longer true
or was not true when made with respect to such Receivable, of any
of the representations and warranties of the Seller set forth in
Section 2.03(b) of this Sales and Servicing Agreement was not
true when made, the Seller from whom the Purchaser purchased such
Receivable shall be deemed to have received on such day a
Collection of such Receivable in full.
(b) In order to effect any deemed Collection required
by paragraph (a) above, the Purchaser and each Seller agree that
either (i) the Purchase Price for any Receivable with respect to
which a deemed Collection shall have occurred shall be reduced by
the amount of such payment or (ii) the principal amount
outstanding under such Seller's Purchaser Note on such date shall
be increased by such amount.
1.09 Payments and Computations, Etc.
(a) All amounts to be paid by any Seller to the
Purchaser hereunder shall be received in accordance with the
terms hereof no later than 1:00 p.m., New York City time, on the
day when due in Dollars in immediately available funds in an
account that the Purchaser shall from time to time specify in
writing. Payments received by the Purchaser after such time shall
be deemed to have been received on the next Business Day. In the
event that any payment otherwise is scheduled to become due on a
day that is not a Business Day, then payment shall become due on
the next Business Day. Each Seller shall, to the extent permitted
by applicable law, pay to the Purchaser, on demand, interest on
all amounts not paid when due hereunder at 2% per annum above the
interest rate on the Purchaser Note in effect on the date the
payment was due; provided, however, that the
<PAGE>
interest rate shall not at any time exceed the maximum rate
permitted by applicable law. All computations of interest payable
hereunder shall be made on the basis of a year of 360 days for
the actual number of days (including the first but excluding the
last day) elapsed.
(b) All amounts to be paid by the Purchaser to any
Seller hereunder shall be paid to such Seller no later than 2:00
p.m., New York City time, on the day when due in Dollars in
immediately available funds to an account that each Seller shall
from time to time specify in writing. Payments received by a
Seller after such time shall be deemed to have been received on
the next Business Day. In the event that any payment otherwise is
scheduled to become due on a day that is not a Business Day, then
such payment shall become due on the next Business Day.
1.10 No Recourse. Except as specifically provided in
this Sales and Servicing Agreement, the sale and purchase of
Receivables under this Agreement shall be without recourse to any
Seller; it being understood that each Seller shall be liable to
the Purchaser for all of its respective representations,
warranties, covenants and indemnities made by such Seller
pursuant to the terms of this Sales and Servicing Agreement, all
of which obligations have been designed so as not to constitute
recourse to any such Seller for the credit risk of the Obligors.
1.11 No Assumption of Obligations. Neither the
Purchaser nor the Lender shall have any obligation or liability
to any Obligor or other customer or client of any Seller
(including any obligation to perform any of the obligations of
any such the Seller under any Receivable, related Contracts or
any other related purchase orders or other agreements). No such
obligation or liability is intended to be assumed by the Purchase
or the Lender hereunder, and any assumption thereof is
expressly disclaimed.
1.12 True Sales. (a) Each Seller and the Purchaser
intend the transfers of such Seller's respective Receivables
hereunder to be true sales by such Seller to the Purchaser that
are absolute and irrevocable and that provide the Purchaser with
the full benefits of ownership of the Receivables, and neither
any Seller nor the Purchaser intends the transactions
contemplated hereunder to be, or for any purpose to be
characterized as, loans from the Purchaser to such Seller.
<PAGE>
(b) It is, further, not the intention of the Purchaser
or any Seller that the conveyance of its respective Receivables
be deemed a grant of a security interest in such Receivables by
such Seller to the Purchaser to secure a debt or other obligation
of such Seller. However, in the event that, notwithstanding the
intent of the parties, any Receivables are property of any
Seller's estate, (i) this Sales and Servicing Agreement also
shall be deemed to be and hereby is a security agreement within
the meaning of the Uniform Commercial Code of any applicable
jurisdiction, and (ii) the conveyance by each Seller provided for
in this Sales and Servicing Agreement shall be deemed to be a
grant by such Seller to the Purchaser of, and such Seller hereby
grants to the Purchaser, a security interest in and to all of
such Seller's right, title and interest in, to and under the
Receivables to secure the rights of the Purchaser hereunder. Each
Seller and the Purchaser shall, to the extent consistent with
this Sales and Servicing Agreement, take such actions as may be
necessary to ensure that, if this Sales and Servicing Agreement
were deemed to create a security interest in the Receivables,
such security interest would be deemed to be a perfected security
interest of first priority (subject to Liens created or permitted
under the Loan Agreement) in favor of the Purchaser under
applicable law and will be maintained as such throughout the term
of this Sales and Servicing Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES
Each Seller hereby represents and warrants as of the
date of this Sales and Servicing Agreement and as of each
transfer of its Receivables hereunder as follows:
2.01 Corporate Organization and Authority.
Such Seller:
(a) is a corporation duly organized, validly
existing and in good standing under the laws
of its jurisdiction of incorporation,
(b) has all requisite power and authority and all
necessary licenses and permits to own and
operate its properties and to carry on its
business as now conducted (except where the
failure to have such licenses and permits
would not have a material adverse effect on
<PAGE>
the Collateral or the business or condition
(financial or otherwise) of such Seller or
impair the enforceability of any of its
Receivables or the ability of such Seller to
perform any of its obligations under any of
the Operative Agreements) and to enter into
and perform its obligations under this Sales
and Servicing Agreement and the transactions
contemplated hereby and thereby, including
(with respect to Essex only) performance of
the duties of the Servicer hereunder,
(c) has duly qualified and is authorized to do
business and is in good standing as a foreign
corporation in each jurisdiction where the
character of its properties or the nature of
its activities makes such qualification
necessary (except where the failure to be so
qualified or in good standing would not have
a material adverse effect on the Collateral
or the business or condition (financial or
otherwise) of such Seller or impair the
enforceability of any of its Receivables or
the ability of such Seller to perform any of
its obligations under any of the Operative
Agreements),
(d) has no place of business other than as set
forth for such Seller on Schedule 1 attached
hereto, and
(e) for the past six years, has not had any legal
name or operated under any name other than
the name set forth for such Seller on page
one of this Sales and Servicing Agreement.
2.02 Financial Statements. (a) The consolidated balance
sheets of Essex and its subsidiaries (including, without
limitation, the other Seller which are parties hereto) for the
years ended December 31, 1997, December 31, 1996 and December 31,
1995 and the related consolidated statements of income, retained
earnings and cash flow for the respective periods and fiscal
years ended on such dates, all accompanied by reports thereon
containing opinions without qualification, except as therein
noted, by [Insert name of accountants], independent certified
<PAGE>
public accountants (with respect to the financial statements for
the years ended December 31, 1997, December 31, 1996 and December
31, 1995, the unaudited consolidated balance sheet of Essex as of
______ __, 1998 and the related statements of income for three
months ended on such date have been prepared in accordance with
generally accepted accounting principles consistently applied,
and present fairly the financial position of Essex and its
subsidiaries as of such dates and the results of their operations
for such periods.
(b) Since December 31, 1997, there has been no change
in the business or condition (financial or otherwise) of such
Seller in the financial statements referred to in Section
2.02(a), except changes in the ordinary course of business, none
of which individually or in the aggregate has been materially
adverse. Neither such Seller nor any of its subsidiaries has any
material liabilities or obligations not incurred in the ordinary
course of business in the financial statements referred to in
Section 2.02(a) or for which adequate reserves are reflected in
such financial statements.
2.03 Receivables. With respect to the Receivables of
such Seller:
(a) Upon payment by the Purchaser of the Purchase Price
to such Seller to be paid for the purchase of each Receivable
from such Seller as provided in Section 1.03 hereof, the
Purchaser will be the legal owner of such Receivable (including
the Collections and the right to receive all other payments due
or to become due thereunder) and such ownership interest will be
duly perfected. At such time, such Receivables (including the
Collections and the right to receive all other payments due or to
become due thereunder) will be free and clear of all Liens other
than the Lien created by the Loan Agreement.
(b) At the time of each acquisition of a Receivable by
the Purchaser hereunder, each such Receivable will be a legal,
valid and binding full recourse obligation of the Obligor
thereunder, enforceable by the Purchaser (and by the Lender as
assignee of the Purchaser) against such Obligor in accordance
with the terms thereof, except as such enforcement may be limited
by bankruptcy, insolvency, reorganization or similar laws
relating to or affecting the enforcement of creditors' rights,
and will be in full force and effect, and any and all
requirements of any federal, state or local law including,
<PAGE>
without limitation, usury, truth-in-lending and equal credit
opportunity laws applicable to such Receivable will have been
complied with, and such Seller will have no knowledge (after due
inquiry) of any challenge or dispute by the Obligor under such
Receivable or of the bankruptcy or insolvency of any such
Obligor.
(c) Each Receivable will have been entered into or
acquired in accordance with the Credit and Collection Policy, a
copy of which is attached hereto as Exhibit B.
(d) All amounts to be paid under each Receivable are
stated in United States Dollars and are to be paid in legal
tender in the United States of America.
(e) There will be no facts or circumstances existing as
of the time of each transfer of Receivables hereunder which give
rise, or would give rise at any time in the future, to any right
of rescission, offset, counterclaim or defense, including the
defense of usury, to the obligations of any Obligor, including
the obligation of such Obligor to pay all amounts due with
respect to any Receivable to which such Obligor is a party, and
neither the operation of any of the terms of any Receivable nor
the exercise of any right thereunder will render such Receivable
unenforceable in whole or in part or subject to any right of
rescission, offset, counterclaim or defense, including the
defense of usury, and no such right of rescission, offset,
counterclaim or defense will have been asserted with respect
thereto.
(f) No Receivable will have been originated in or be
subject to the laws of any jurisdiction whose laws would make the
transfer and sale thereof under this Sales and Servicing
Agreement unlawful.
(g) The sale of the Receivables will at all times be
reflected on such Seller's consolidating balance sheet and other
financial statements as a sale and contribution of assets by such
Seller under GAAP.
(h) No Obligor is the United States of America or any
agency, department or instrumentality of the United States of
America. Each Obligor is a United States resident.
<PAGE>
(i) Each Receivable is an "eligible asset" as defined
in Rule 3a-7 under the Investment Company Act of 1940, as
amended.
2.04 Full Disclosure. As of the Closing Date and each
date upon which the Purchaser acquires Receivables from such
Seller hereunder, there will be no fact peculiar to such Seller
or any Affiliate of such Seller or, to the knowledge of such
Seller, any Receivable or Obligor which such Seller will not have
disclosed in writing to the Purchaser and the Lender that
materially affects adversely nor, so far as such Seller then can
reasonably foresee, will materially affect adversely the ability
of such Seller to perform the transactions contemplated by this
Sales and Servicing Agreement.
2.05 Pending Litigation. There are no proceedings or
investigations pending, or to the knowledge (after due inquiry)
of such Seller threatened, against or affecting such Seller or
any subsidiary in or before any court, governmental authority or
agency or arbitration board or tribunal which, individually or in
the aggregate, involve the possibility of materially and
adversely affecting the properties, business, prospects, profits
or condition (financial or otherwise) of such Seller and its
subsidiaries, or the ability of such Seller to perform its
obligations under this Sales and Servicing Agreement or any other
Operative Agreement. Such Seller is not in default with respect
to any order of any court, governmental authority or agency or
arbitration board or tribunal.
2.06 Transactions Legal and Authorized. This Sales and
Servicing Agreement and the transfer by such Seller to the
Purchaser of all of such Seller's right, title and interest in
and to each Receivable of such Seller (including the Collections
and the right to receive all other payments due or to become due
thereunder) at any time transferred hereunder and compliance by
such Seller with all of the provisions of this Sales and
Servicing Agreement:
(a) have been duly authorized by all necessary
corporate action on the part of such Seller, and do not and will
not require any stockholder approval, or approval or consent of
any trustee or holders of any indebtedness or obligations of such
Seller except such as have been duly obtained;
(b) are within the corporate powers of such Seller; and
<PAGE>
(c) are legal, valid and binding obligations of such
Seller enforceable in accordance with their terms and will not
conflict with, result in any breach in any of the provisions of,
constitute a default under, or result in the creation of any Lien
upon any property of such Seller under the provisions of, any
agreement, charter instrument, by-law or other instrument to
which such Seller is or will be a party or by which it or its
property may be bound or result in the violation of any law,
regulation, rule, order or judgment applicable to such Seller or
its properties of or by any government or governmental agency or
authority.
2.07 Governmental Consent. No consent, approval or
authorization of, or filing, registration or qualification with,
any governmental authority is or will be necessary or required on
the part of such Seller in connection with the execution,
delivery and performance of this Sales and Servicing Agreement or
the transfer of the Receivables of such Seller hereunder.
2.08 Taxes. (a) All tax returns required to be filed by
such Seller or any subsidiary in any jurisdiction have in fact
been filed, and all taxes, assessments, fees and other
governmental charges upon such Seller or any subsidiary thereof,
or upon any of their respective properties, income or franchises,
shown to be due and payable on such returns have been paid. All
such tax returns were true and correct, and neither such Seller
nor any subsidiary thereof knows of any proposed additional tax
assessment against it in any material amount nor of any basis
therefor.
(b) The provisions for taxes on the books of such
Seller and each subsidiary thereof are in accordance with
generally accepted accounting principles.
(c) Such Seller is not consolidated with any entity
other than Essex International, Inc. and other direct or indirect
subsidiaries of Essex International, Inc. for federal income tax
purposes.
2.09 Compliance with Law. Such Seller:
(a) is not in violation of any laws, ordinances,
governmental rules or regulations to which it is
subject,
<PAGE>
(b) has not failed to obtain any licenses, permits,
franchises or other governmental authorizations
necessary to the ownership of its property or to
the conduct of its business, and
(c) is not in violation of any term of any agreement,
charter instrument, by-law or other instrument to
which it is a party or by which it may be bound,
which violation or failure to obtain might materially adversely
affect the business or condition (financial or otherwise) of such
Seller and its subsidiaries or such Seller's ability to perform
its obligations under the Operative Agreements.
2.10 ERISA. (a) The present value of all benefits
vested under all "employee pension benefit plans," as such term
is defined in Section 3 of ERISA, maintained by the such Seller
and its Related Persons, or in which employees of such Seller or
any Related Person are entitled to participate, as from time to
time in effect (herein called the "Pension Plans"), does not
exceed the value of the assets of the Pension Plans allocable to
such vested benefits (based on the value of such assets as of the
last annual valuation date for the Pension Plans);
(b) No Prohibited Transactions, Accumulated Funding
Deficiencies, withdrawals or Reportable Events have occurred with
respect to any Pension Plans that, in the aggregate, could
subject such Seller to any material tax, penalty or other
liability; and
(c) No notice of intent to terminate a Pension Plan has
been filed, nor has any Pension Plan been terminated under
Section 4041(f) of ERISA, nor has the PBGC instituted proceedings
to terminate, or appoint a trustee to administer, a Pension Plan
and no event has occurred or condition exists which might
constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer,
any Pension Plan.
2.11 Ordinary Course; No Insolvency. The transactions
contemplated by this Sales and Servicing Agreement are being
consummated by such Seller in furtherance of such Seller's
ordinary business purposes and constitute a practical and
reasonable course of action by such Seller designed to improve
<PAGE>
the financial position of such Seller, with no contemplation of
insolvency and with no intent to hinder, delay or defraud any of
its present or future creditors. Neither as a result of the
transactions contemplated by this Sales and Servicing Agreement,
nor immediately before or after any such transactions, will such
Seller be insolvent or have an unreasonably small capital for the
conduct of its business and the payment of its anticipated
obligations. No Event of Bankruptcy has occurred with respect to
such Seller.
2.12 Assets and Liabilities. (a) Both immediately
before and after the sale of its Receivables (including the right
to receive all Collections due or to become due thereunder)
contemplated by this Sales and Servicing Agreement, the present
fair salable value of such Seller's assets will be in excess of
the amount that will be required to pay such Seller's probable
liabilities as they then exist and as they become absolute and
matured; and
(b) Both immediately before and after the sale of its
Receivables (including the right to receive all Collections due
or to become due thereunder) contemplated by this Sales and
Servicing Agreement, the sum of such Seller's assets will be
greater than the sum of such Seller's debts, valuing such
Seller's assets at a fair salable value.
2.13 Fair Consideration. The consideration received by
such Seller in exchange for the transfer of its Receivables
(including the right to receive all Collections due or to become
due thereunder) is fair consideration having value equivalent to
or in excess of the value of the assets being transferred by such
Seller.
2.14 Ability to Pay Debts. Neither as a result of the
transactions contemplated by this Sales and Servicing Agreement
nor otherwise does such Seller believe that it will incur debts
beyond its ability to pay or which would be prohibited by its
charter documents or bylaws. Such Seller's assets and cash flow
enable it to meet its present obligations in the ordinary course
of business as they become due.
2.15 Bulk Transfer Provisions. The sale, transfer,
assignment and conveyance of its Receivables by such Seller to
the Purchaser contemplated by this Sales and Servicing Agreement
<PAGE>
will not be subject to the bulk transfer or any similar statutory
provisions in effect in any applicable jurisdiction.
2.16 Transfer Taxes. No sale, transfer, assignment or
conveyance of its Receivables contemplated by this Sales and
Servicing Agreement is subject to or will result in any tax, fee
or governmental charge payable by such Seller or the Purchaser to
any federal, state or local government ("Transfer Taxes"). In the
event that such Seller or the Purchaser receives actual notice of
any Transfer Taxes arising out of the transfer, assignment and
conveyance of any of such Seller's Receivables, on written demand
by the Purchaser, or upon such Seller otherwise being given
notice thereof, such Seller shall pay, and otherwise indemnify
and hold the Purchaser and the Lender harmless, on an after-tax
basis, from and against any and all such Transfer Taxes (it being
understood that the Lender shall not have any obligation to pay
such Transfer Taxes).
2.17 Chief Executive Office. The chief executive office
of such Seller is as set forth on Schedule 1 attached hereto, and
such Seller has not had any other location as its chief executive
office for the four months immediately preceding the Closing
Date.
SECTION 3 REPRESENTATIONS AND WARRANTIES
OF THE SERVICER
The Servicer represents and warrants (in the case of
the initial Servicer, as of the date hereof, and in the case of
any Servicer appointed thereafter pursuant to Section 8, as of
the date of its acceptance of its appointment, and in each case
as of the date of each Monthly Servicer Report) as follows:
3.01 Organization and Qualification. The Servicer is a
corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation. The Servicer
is duly qualified to do business as a foreign corporation in good
standing in each jurisdiction in which the ownership of its
properties or the nature of its activities or both, requires it
to be so qualified or, if not so qualified, the failure to so
qualify would not have a material adverse effect on its business,
operations, properties or financial condition.
<PAGE>
3.02 Authorization. The Servicer has the corporate
power and authority to execute and deliver this Sales and
Servicing Agreement and to perform its obligations hereunder.
3.03 Execution and Binding Effect. This Sales and
Servicing Agreement has been duly and validly executed and
delivered by the Servicer and constitutes a legal, valid and
binding obligation of the Servicer enforceable in accordance with
its terms.
3.04 Authorizations and Filings. No authorization,
consent, approval, license, exemption or other action by, and no
registration, qualification, designation, declaration or filing
with, any Official Body is or will be necessary or, in the
opinion of the Servicer, advisable in connection with the
execution and delivery of this Sales and Servicing Agreement, the
consummation of the transactions herein contemplated or the
performance of or the compliance with the terms and conditions
hereof by the Servicer, to ensure the legality, validity or
enforceability hereof.
3.05 Absence of Conflicts. Neither the execution and
delivery of this Sales and Servicing Agreement, nor the
consummation of the transactions herein contemplated, nor the
performance of or the compliance with the terms and conditions
hereof by the Servicer, will (i) violate any Law or (ii) conflict
with or result in a breach of or a default under (A) the articles
or certificate of incorporation or by-laws of the Servicer or (B)
any agreement or instrument, including, without limitation, any
and all indentures, debentures, loans or other agreements to
which the Servicer is a party or by which it or any of its
properties (now owned or hereafter acquired) may be subject or
bound.
3.06 No Termination Event. No event has occurred and is
continuing and no condition exists which constitutes a
Termination Event or an Unmatured Event.
3.07 Accurate and Complete Disclosure. No information,
whether written or oral, furnished by the Servicer to the
Purchaser pursuant to or in connection with this Sales and
Servicing Agreement or any transaction contemplated hereby,
including without limitation information regarding the Lock-Box
Accounts and Lock-Box Banks, is false or misleading in any
material respect (and with respect to any Monthly Servicer
<PAGE>
Report, when furnished, in any respect, whether or not material)
as of the date as of which such information was furnished
(including by omission of material information necessary to make
such information not misleading).
3.08 No Proceedings. There are no proceedings or
investigations pending or threatened before any court, official
body, regulatory body, administrative agency, or other tribunal
or governmental instrumentality (A) asserting the invalidity of
any of this Sales and Servicing Agreement, (B) seeking to prevent
the consummation of any of the transactions contemplated by any
of this Sales and Servicing Agreement, or (C) seeking any
determination or ruling that could materially and adversely
affect (i) the performance by the Servicer of its obligations
under this Sales and Servicing Agreement or (ii) the validity or
enforceability of the Contracts or any material amount of the
Receivables.
SECTION 4. SERVICING OF RECEIVABLES
4.01 Servicer to Act. (a) Following the transfer and
assignment by each Seller of its respective Receivables
(including the right to receive all Collections due or to become
due thereunder) and until such time as a Complete Servicing
Transfer shall have occurred, Essex, as the Servicer, for the
benefit of the Purchaser, will service, administer and collect
each Receivable in accordance with the terms thereof and of this
Sales and Servicing Agreement; provided, however, that upon
written approval by the Lender such duties may be delegated by
Essex to any of its Affiliates or a third party (without
impairment of Essex's Obligations as Servicer). The Servicer
shall receive all Collections on or in respect of each Receivable
and shall keep accurate records thereof and of the Receivables to
which each such payment relates. Any amount received by the
Servicer from time to time from any Seller, the Purchaser or any
Obligor which is or is intended to be subject to the Lien of the
Loan Agreement shall be held in trust by the Servicer for
application in accordance with the provisions of the Loan
Agreement.
(b) The Servicer shall do, and shall have full power
and authority to do, subject only to the specific requirements
and prohibitions of this Sales and Servicing Agreement, any and
all things in connection with the servicing and administration of
the Receivables which are consistent with the manner in which it
<PAGE>
services receivables constituting part of its own portfolio and
consistent with customary practices of prudent servicers, but in
performing its duties hereunder, the Servicer will act on behalf
and for the benefit of the Purchaser and the Lender, subject at
all times to the provisions of the Loan Agreement, without regard
to any relationship which the Servicer or any Affiliate of the
Servicer may otherwise have with an Obligor. The Servicer shall
at all times act in accordance with the provisions of each
Receivable, and shall observe and comply with all requirements of
law applicable to it. The Servicer shall, to the maximum extent
permitted by law, have the power and authority, on behalf of the
Purchaser as part of the Servicer's administrative and servicing
obligations hereunder, to take such action in respect of any
Receivable as the Servicer may deem advisable, including the
resale of any repossessed, returned or rejected goods; provided,
however, that the Servicer may not under any circumstances
compromise, rescind, cancel, adjust or modify (including by
extension of time for payment or granting any discounts,
allowances or credits) the Account Balance of the related
Contract for any Receivable, except in accordance with the Credit
and Collection Policy. The Servicer undertakes to comply with
each of the covenants of the Seller included herein in respect of
which each Seller undertakes to cause the Servicer to take or
avoid taking actions specified therein.
(c) Without limiting the generality of the foregoing,
the Servicer agrees to (i) invoice each Obligor for all payments
required to be paid by such Obligor in such manner and to the
same extent as the Servicer does with respect to similar
receivables held for its own account, (ii) maintain with respect
to each Receivable, and with respect to each payment by each
Obligor and compliance by each Obligor with the provisions of
each Receivable, complete and accurate records in the same form
and to the same extent as the Servicer does with respect to
receivables held for its own account (which records shall be at
least as complete and accurate as those maintained by the
Servicer as of the date of this Sales and Servicing Agreement),
and (iii) execute, deliver and file (or cause the same to be
done), and the Servicer is hereby authorized and empowered to
execute, deliver, and file on behalf of the Purchaser and the
Lender, any and all tax returns with respect to sales, use,
personal property and other taxes (other than corporate income
tax returns) and any and all reports or licensing applications
required to be filed in any jurisdiction with respect to any
<PAGE>
Receivable and any and all filings required by Section 4.01(d)
below.
(d) On or prior to the Closing Date, the Servicer will
file the Financing Statements and assignments of Financing
Statements required by the Operative Agreements, and the Servicer
thereafter will file such additional Financing Statements and
continuation statements and assignments with respect thereto as
may be necessary so that the ownership interest contemplated by
this Sales and Servicing Agreement in favor of the Purchaser and
the Lien contemplated by the Loan Agreement in favor of the
Lender in each of the Receivables will be perfected by such
filings with the appropriate Uniform Commercial Code Filing
offices. The Purchaser agrees to execute such Financing
Statements and continuation statements as shall be necessary and
shall furnish the Servicer with any powers of attorney or other
documents necessary and appropriate to enable the Servicer to
carry out its servicing and administration duties hereunder.
(e) In the event of a default under any Receivable
before a Servicer Event of Default, the Servicer shall, at the
expense of the Seller from whom such Receivable was purchased
hereunder, to the maximum extent permitted by law, have the power
and authority, on behalf of the Purchaser as part of the
Servicer's administrative and servicing obligations hereunder, to
take any action in respect of any such Receivable as the Servicer
may deem advisable; provided, however, that the Servicer or such
Seller, as the case may be, shall take no enforcement action
(judicial or otherwise) with respect to such Receivable, except
in accordance with the Credit and Collection Policy. The Servicer
or such Seller, as the case may be, will apply or will cause to
be applied at all times before a Servicer Event of Default the
same standards and follow the same procedures with respect to
deciding to commence, and in prosecuting, litigation on such
Receivables as is applied and followed with respect to like
accounts not owned by the Purchaser. In no event shall the
Servicer or such Seller, as the case may be, be entitled to make
or authorize any Person to make the Purchaser a party to any
litigation without the Purchaser's express prior written consent.
(f) The Purchaser may, but shall have no obligation to,
take any action or commence any proceeding to realize upon any
Receivable. At such time as the Servicer or a Seller, as the case
may be, has any obligation to pursue the collection of
Receivables and the Purchaser possesses any documents necessary
<PAGE>
therefor, the Purchaser agrees to furnish such documents to the
Servicer or such Seller, as the case may be, to the extent and
for the period necessary for the Servicer or such Seller, as the
case may be, to comply with its obligations hereunder.
(e) The Servicing Fee shall constitute the Servicer's
compensation for performing its responsibilities as the servicer
hereunder. If Essex is the Servicer, the Servicing Fee shall not
be paid on or after any day on which a Termination Event shall
have occurred and be continuing.
4.02 Monthly Servicer Reports. The Servicer shall
submit to the Purchaser and the Lender on each Determination
Date, a Monthly Servicer Report in the form of Exhibit C attached
hereto, signed by an Authorized Officer of the Servicer and
including information in respect of the Receivables as of the
last day of the Accounting Period most recently completed. The
execution and delivery of any Monthly Servicer Report shall
constitute a representation and warranty by each Seller and the
Servicer that the information contained therein is true and
correct as of the date thereof. Such Monthly Servicer Report
shall be accompanied by such other information as the Purchaser
and the Lender may reasonably request.
4.03 Receivables Status. Upon ten (10) Business Days'
notice from the Purchaser or the Lender, the Servicer will
furnish or cause to be furnished to the Purchaser and the Lender
a written report, signed by an Authorized Officer of the
Servicer, containing such information as the Purchaser or the
Lender may reasonably request (in such form as the Purchaser or
Lender may reasonably request), which shall include, without
limitation, with respect to the Receivables (a) the Account
Balances of the Contracts for all Receivables, together with all
Collections, Dilutions, and other adjustments to such Receivables
since the date of the last written report furnished to the
Purchaser and the Lender, and an aging of all Contracts as of a
date no later than the date of such notice; and (b) an analysis
and explanation of significant variances, if any, between actual
Collections of Receivables during such Accounting Period and
historical collections experience.
4.04 Daily Settlements. (a) On each day with regard to
each Settlement Period, the Collections shall be allocated first,
in accordance with the provisions of Section 2.6 of the Loan
Agreement, and then in accordance with the provisions of
<PAGE>
Section 1.06 of this Sales and Servicing Agreement. The Servicer
shall hold the Collections in trust for the benefit of the
Persons to whom such Collections are allocated in accordance with
the foregoing sentence. Notwithstanding the foregoing, in the
event that at the end of any Settlement Period the amounts held
in trust for the benefit of the Lender pursuant to Section 2.6 of
the Loan Agreement and not previously paid to the Lender are less
than the accrued and unpaid amounts so allocated to the Lender
for such Settlement Period, then any amount which had been deemed
to be a remainder during such Settlement Period (up to the amount
of such deficit in the amount available to pay the Lender) shall
be deemed to have been held in trust for the benefit of the
Lender.
(b) On each Settlement Date, the Servicer shall pay to
the Lender and the Servicer the amounts held in trust for the
benefit of the Lender and the Servicer, respectively, pursuant to
subsection (a) above and not previously paid to the Lender and
the Servicer, respectively.
4.05 Allocation of Collections. Except as required by
applicable law or the underlying Contract, if any Obligor is
obligated under one or more Receivables and also under one or
more Contracts not constituting Receivables, then any payment
received from or on behalf of such Obligor shall be applied (i)
to a specific Contract if the Obligor designates such payment to
be so applied, or (ii) to the Receivables in the order in which
payments are due thereunder if the application of such payment is
not so designated.
4.06 Maintenance of Information and Computer Records.
Each Seller will, or will cause the Servicer to, hold in trust
and keep safely for the Purchaser all evidence of the Purchaser's
right, title and interest in the Receivables. Each Seller will,
or will cause the Servicer to, on or prior to the Closing Date,
and with respect to all Receivables that are purchased after the
Closing Date, on each respective date such Receivables are added,
place an appropriate code or notation in its Records to indicate
those Receivables which are or which will be sold hereunder.
4.07 Maintenance of the Location of Writings and
Records. Each Seller will at all times until completion of a
Complete Servicing Transfer keep or cause to be kept at its chief
executive office or at an office of the Servicer designated in
advance to the Purchaser, separate and apart from all other
<PAGE>
Records, each writing or Record which evidences, and which is
necessary or desirable to establish or protect, including such
books of account and other Records as will enable the Purchaser
or its designee to determine at any time the status of each
Receivable.
4.08 Indemnification. The Servicer shall indemnify the
Purchaser in respect of any losses, claims, damages, liabilities,
costs or expenses incurred or arising out of any action taken or
caused to be taken by the Servicer under this Section 4.
4.09 Complete Servicing Transfer. (a) If at any time a
Servicer Event of Default shall have occurred and be continuing,
the Lender may, by notice in writing to each Seller and Essex,
terminate Essex's capacity as Servicer in respect of the
Receivables (such termination referred to herein as a "Complete
Servicing Transfer"), notify Obligors of its interest in the
Receivables, take control of the Lock-Box Accounts and exercise
all other incidences of ownership in the Receivables. After a
Complete Servicing Transfer, the Lender may administer, service
and collect the Receivables itself, and in such event may retain
the Servicing Fee for its own account, in any manner it sees fit,
including, without limitation, by compromise, extension or
settlement of such Receivables. Alternatively, the Lender may
engage Mellon Bank to perform all or any part of the
administration, servicing and collection of the Receivables and
pay to Mellon Bank all or a portion of the Servicing Fee in
consideration thereof.
(b) Essex, within ten (10) Business Days after
receiving a notice pursuant to Section 4.09(a) hereof, shall, at
its own cost and expense, deliver or cause to be delivered to the
Lender or its designated agent (i) a schedule of the Receivables
indicating as to each such Receivable information as to the
related Obligor, the Account Balance as of such date of the
related Contract and the location of the evidences of such
Receivable and related Contract, together with such other
information as the Purchaser may reasonably request and (ii) all
evidence of such Receivables and related Contracts and such other
Records related thereto (including, without limitation, true
copies of any computer tapes and data in computer memories) as
the Lender may reasonably deem necessary to enable it to protect
and enforce its rights to, or its position as owner of such
Receivables. After any such delivery, neither any Seller nor
Essex will hold or retain any executed counterpart or any
<PAGE>
document evidencing such Receivables or related Contracts without
clearly marking the same to indicate conspicuously that the same
is not the original and that transfer thereof does not transfer
any rights against the related Obligor or any other Person.
(c) From and after the occurrence of a Complete
Servicing Transfer, each Seller and the Servicer will cause to be
transmitted and delivered directly to the Lender or its
designated agent, for the Lender's own account, forthwith upon
receipt and in the exact form received, all Collections (properly
endorsed, where required, so that such items may be collected by
the Purchaser) on account of its interest in the Receivables. All
such Collections consisting of cash shall not be commingled with
other items or monies of any Seller or Essex for a period longer
than the lesser of (i) two (2) Business Days or (ii) the number
of days specified in Section 9-306(4)(d) of the Uniform
Commercial Code as in effect in the jurisdiction whose laws
govern the rights of the Lender in and to any such Collections.
If the Lender or its designated agent receives items or monies
that are not payments on account of the Receivables, such items
or monies shall be delivered promptly to the related Seller after
being so identified by the Lender or its designated agent. Each
Seller hereby irrevocably grants the Lender or its designated
agent, if any, an irrevocable power of attorney, with full power
of substitution, coupled with an interest, to take in the name of
such Seller all steps with respect to such Receivable which the
Lender, in its sole discretion, may deem necessary or advisable
to negotiate or otherwise realize on any right of any kind held
or owned by such Seller or transmitted to or received by the
Lender or its designated agent (whether or not from such Seller
or any Obligor) in connection with such Receivable; provided,
however, that the Lender hereby agrees not to exercise, and not
to permit its designated agents to exercise, such power of
attorney unless a Servicer Event of Default shall have occurred
and be continuing. The Lender will provide such periodic
accountings and other information related to disposition of funds
so collected as any Seller may reasonably request.
(d) Essex agrees that, in the event of a Complete
Servicing Transfer, it will reimburse the Lender for all
out-of-pocket expenses (including, without limitation, attorneys'
and accountants' and other third parties' fees and expenses,
expenses incurred by the Referral Agent's credit recovery group
(or any successor), expenses of litigation or preparation
therefor, and expenses of audits and visits to the offices of
<PAGE>
Essex) incurred by the Lender or the Referral Agent in connection
with and following the transfer of functions following a Complete
Servicing Transfer (excluding, however, the fees of any successor
Servicer).
(e) At any time, and from time to time following a
Complete Servicing Transfer, or if a Servicer Event of Default or
potential Servicer Event of Default shall have occurred and be
continuing, each Seller, Essex and the Servicer shall permit such
Persons as the Lender may designate to open and inspect all mail
received by any Seller or the Servicer at any of its offices, and
to remove therefrom any and all Collections or other
correspondence from Obligors or Essex in respect of Receivables.
All Collections received by the Purchaser shall be applied in
accordance with Section 4.04 hereof. The Lender shall be entitled
to notify the Obligors of Receivables to make payments directly
to the Lender of amounts due thereunder at any time and from time
to time following the occurrence of (i) a Servicer Event of
Default, (ii) a Complete Servicing Transfer, or (iii) a violation
by the Seller of the provisions of Section 4.10 hereof.
4.10 Lockboxes. Each Seller and Essex hereby agree (i)
to cause all Collections which may be sent by mail as payment on
account of Receivables to be mailed by Obligors to the Lock-Box
Accounts; (ii) to make or cause the Servicer to make the
necessary bookkeeping entries to reflect such Collections on the
Records pertaining to such Receivables; (iii) to apply or cause
the Servicer to apply all such Collections as provided in this
Sales and Servicing Agreement; and (iv) not to amend or modify
any term, with respect to the disposition of such Collections or
any other amounts received by the Seller, Essex or the Servicer
or any Lock-Box Bank, of this Sales and Servicing Agreement or
any other agreement (including instructions with respect thereto)
without the prior written consent of the Purchaser to such
amendment or modification.
4.11 Receivable Amendments and Modifications. In
performing its obligations hereunder, the Servicer may, acting in
the name of the Purchaser and without the necessity of obtaining
the prior consent of the Purchaser or the Lender, enter into and
grant modifications, waivers and amendments to the terms of any
Receivable so long as such modifications, waivers or amendments
(i) are consistent with the servicing standards set forth in
Section 4.01 above and the Credit and Collection Policy, (ii) do
not reduce the amount or extend the time for payment of any
<PAGE>
Receivable or the Obligor's absolute and unconditional obligation
to make payment of the same, and (iii) otherwise could not
adversely affect the interests of the Purchaser or the Lender.
4.12 Servicing Provisions Customary. The servicing
arrangements hereunder, including without limitation the terms
and conditions pursuant to which Essex will act as Servicer and
the Servicing Fee to be paid to Essex, are consistent with the
arrangements and customary practices of Essex when providing
comparable services to entities which are not Affiliates and of
other servicers in the trade receivables servicing industry.
SECTION 5. SELLER'S SUPPORT
5.01 Indemnification. Each Seller agrees to indemnify
and hold harmless the Purchaser, the Servicer and the Lender
(each an "Indemnified Party") against any and all liabilities,
losses, damages, penalties, costs and expenses (including costs
of defense and legal fees and expenses) which may be incurred or
suffered by such Indemnified Party (except to the extent caused
by gross negligence or willful misconduct on the part of the
Indemnified Party) as a result of claims, actions, suits or
judgments asserted or imposed against it and arising out of the
transactions contemplated hereby or by the other Operative
Agreements, and any tort claims and any fines or penalties
arising from any violation of the laws or regulations of the
United States or any state or local government or governmental
authority, provided that the foregoing indemnity shall in no way
be deemed to impose on such Seller any obligation, other than to
the extent specifically set forth in this Section 5, to make any
payment with respect to principal or interest on a Loan or to
reimburse the Purchaser for any payments on account of the Note.
5.02 Payments Held in Trust. Any amount received by any
Seller from time to time from the Servicer, the Purchaser or any
Obligor which is or is intended to be subject to the Lien of the
Loan Agreement shall be held in trust by such Seller, as agent
for the Lender, and turned over within two Business Days of
receipt thereof to the Lender for application in accordance with
the provisions of the Loan Agreement.
5.03 Payment Advices. Each payment by any Seller or the
Servicer to the Lender pursuant to any of the provisions of this
Sales and Servicing Agreement shall be accompanied by written
advice containing sufficient information to identify the
<PAGE>
Receivable to which such payment relates, the Section of this
Sales and Servicing Agreement pursuant to which such payment is
made, and the proper application pursuant to the provisions of
the Loan Agreement of the amounts being paid.
SECTION 6. COVENANTS OF THE SERVICER
6.01 Merger or Consolidation of the Servicer. The
Servicer will keep in full force and effect its existence, rights
and franchise as a corporation under the laws of its jurisdiction
of incorporation and will preserve its qualification to do
business as a foreign corporation in each jurisdiction in which
such qualification is necessary to protect the validity and
enforceability of any of the Receivables or to permit performance
of the Servicer's duties under this Sales and Servicing
Agreement.
The Servicer shall not merge or consolidate with any
other Person unless (i) the entity surviving such merger or
consolidation is a corporation organized under the laws of the
United States or any jurisdiction thereof, (ii) the surviving
entity, if not the Servicer, shall execute and deliver to the
Purchaser, each Seller and the Lender, in form and substance
satisfactory to each of them, (x) an instrument expressly
assuming all of the obligations of the Servicer hereunder and (y)
an opinion of counsel to the effect that such Person is a
corporation of the type described in the preceding clause (i) and
has effectively assumed the obligations of the Servicer
hereunder, and (iii) the Lender has notified the Servicer in
writing of its approval thereof.
6.02 Limitation on Liability of the Servicer and
Others. Neither the Servicer nor any of the directors, officers,
employees or agents of the Servicer shall incur any liability to
the Purchaser or the Lender for any action taken or not taken in
good faith pursuant to the terms of this Sales and Servicing
Agreement with respect to any Receivable (including any Defaulted
Receivable), provided, that this provision shall not protect the
Servicer or any such Person against any breach of warranties or
representations made by it herein or in any certificate delivered
in conjunction with the Operative Agreements or for any liability
which would otherwise be imposed for any action or inaction
resulting from willful misconduct or bad faith or for negligence
in the performance of its duties hereunder.
<PAGE>
6.03 Removal/Resignation of Servicer. The Servicer
shall not resign from the servicing obligations and duties hereby
imposed on it except in connection with an assignment permitted
by Section 9.02 hereof or upon determination that such duties
hereunder are no longer permissible under applicable law. Any
such determination permitting the resignation of the Servicer
shall be evidenced by an opinion of independent counsel,
addressed to, and in form and substance satisfactory to, the
Lender.
No resignation or removal of the Servicer shall in any
event become effective until the Lender or a successor servicer
shall have assumed the Servicer's servicing responsibilities and
obligations in accordance with Section 8.02 hereof.
6.04 Financial and Business Information. The Servicer
will deliver to the Purchaser and the Lender:
(a) Quarterly Statements -- within 45 days after
the end of each of the first three quarterly fiscal
periods in each fiscal year of the Servicer, a copy of:
(i) a consolidated balance sheet of the Servicer
and its consolidated subsidiaries as at the end of such
quarter, and (ii) consolidated statements of income,
retained earnings and cash flow of the Servicer and its
consolidated subsidiaries for that quarter and for the
portion of the fiscal year ending with such quarter,
accompanied by a certificate signed by an Authorized
Officer of the Servicer stating that such financial
statements present fairly the financial condition of
the Servicer and its consolidated subsidiaries and have
been prepared in accordance with generally accepted
accounting principles consistently applied;
(b) Annual Statements -- within 135 days after the
end of each fiscal year of the Servicer, a copy of:
(i) a consolidated balance sheet of the Servicer
and its consolidated subsidiaries, at the end of that
year, and
(ii) consolidated statements of income, retained
earnings and cash flow of the Servicer and its
<PAGE>
consolidated subsidiaries for that year, setting forth
in each case in comparative form the figures for the
previous fiscal year, all in reasonable detail and
accompanied by an opinion of a firm of independent
certified public accountants of recognized national
standing stating that such financial statements present
fairly the financial condition of the Servicer and its
consolidated subsidiaries and have been prepared in
accordance with generally accepted accounting
principles consistently applied (except for changes in
application in which such accountants concur and
footnote), and that the examination of such accountants
in connection with such financial statements has been
made in accordance with generally accepted auditing
standards, and accordingly included such tests of the
accounting records and such other auditing procedures
as were considered necessary in the circumstances;
(c) Notice of Servicer Event of Default of Default;
Event of Termination -- immediately upon becoming aware of the
existence of any condition or event which constitutes a Servicer
Event of Default of Default (as defined in Section 8.01), Event
of Termination or Unmatured Event, a written notice describing
its nature and period of existence and what action the Servicer
is taking or proposes to take with respect thereto.
(d) SEC and Other Reports -- promptly upon their
becoming available, one copy of each report (including the
Servicer's annual report to shareholders and reports on Form 8-K,
10-K, and 10-Q), proxy statement, registration statement,
prospectus and notice filed with or delivered to any securities
exchange, the Securities and Exchange Commission or any successor
agencies;
(e) Report on Proceedings -- promptly upon the Servicer
becoming aware of
(i) any proposed or pending investigation of it by
any governmental authority or agency, or
(ii) any court or administrative proceeding which
involves or may involve the possibility of materially
and adversely affecting the properties, business,
prospects, profits or conditions (financial or
otherwise) of the Servicer, a written notice specifying
<PAGE>
the nature of such investigation or proceeding and what
action the Servicer is taking or proposes to take with
respect thereto and evaluating its merits; and
(f) Requested Information -- with reasonable
promptness, any other data and information which may be
reasonably requested from time to time.
6.05 Officers' Certificates. With each set of financial
statements delivered pursuant to Section 6.04, the Servicer will
deliver an Officers' Certificate stating (i) that the officers
signing such Certificate have reviewed the relevant terms of this
Sales and Servicing Agreement and have made, or caused to be made
under such officers' supervision, a review of the activities of
the Servicer during the period covered by the statements then
being furnished, (ii) that the review has not disclosed the
existence of any Servicer Event of Default of Default or, if a
Servicer Event of Default of Default exists, describing its
nature and what action the Servicer has taken and is taking with
respect thereto, and (iii) that on the basis of such review the
officers signing such certificate are of the opinion that during
such period the Servicer has serviced the Receivables in
compliance with the procedures hereof except as described in such
certificate.
6.06 Inspection. The Servicer will permit, on
reasonable prior notice, the representatives of the Purchaser or
the Lender to examine all of the books of account, records,
reports and other papers of the Servicer, to make copies and
extracts therefrom, and to discuss its affairs, finances and
accounts with its officers, employees and independent public
accountants (and by this provision the Servicer authorizes said
accountants to discuss the finances and affairs of the Servicer)
all at such reasonable times and as often as may be reasonably
requested for the purpose of reviewing or evaluating the
financial condition or affairs of the Servicer or the Servicer's
performance of its duties and obligations hereunder. Any expense
incident to the exercise by the Purchaser or the Lender during
the continuance of any Servicer Event of Default of Default or
Event of Termination, or any event or condition which with the
giving of notice or the lapse of time or both would become a
Servicer Event of Default of Default or Event of Termination, of
any right under this Section 6.06 shall be borne by the Servicer.
6.07 Servicer Records. The Servicer will indicate in
its records that it is servicing and administering each
Receivable in its
<PAGE>
capacity as Servicer hereunder, at the request and for the
benefit of the Purchaser (and subject to the provisions of the
Loan Agreement).
6.08 Credit and Collection Policy. The Servicer will at
all times service the Receivables in accordance with the Credit
and Collection Policy attached hereto as Exhibit B, as the same
may be amended from time to time in the ordinary course of
business of each Seller and, with respect to material changes
thereto, with the prior written consent of the Lender.
SECTION 7. COVENANTS OF EACH SELLER
7.01 Merger or Consolidation. Each Seller will keep in
full force and effect its existence, rights and franchise as a
corporation under the laws of its jurisdiction of incorporation
and will preserve its qualification to do business as a foreign
corporation in each jurisdiction in which such qualification is
necessary to protect the validity and enforceability of any of
its Receivables or to permit performance of such Seller's duties
under this Sales and Servicing Agreement.
No Seller shall merge or consolidate with any other
Person unless (i) the entity surviving such merger or
consolidation is a corporation organized under the laws of the
United States or any jurisdiction thereof, (ii) the surviving
entity, if not such Seller, shall execute and deliver to the
Purchaser, the Servicer and the Lender, in form and substance
satisfactory to each of them, (x) an instrument expressly
assuming all of the obligations of such Seller hereunder and (y)
an opinion of counsel to the effect that such Person is a
corporation of the type described in the preceding clause (i) and
has effectively assumed the obligations of such Seller hereunder,
and (iii) the Lender has notified such Seller in writing of its
approval thereof.
7.02 Limitation of Fundamental Changes; Control of
Purchaser. So long as any of the Obligations remain outstanding,
no Seller will, without the prior written consent of the Lender,
(a) enter into any merger, consolidation or amalgamation, or
liquidate, wind up or dissolve itself (or suffer any liquidation
or dissolution), or convey, sell, lease, assign, transfer or
otherwise dispose of all or substantially all of its property,
business or assets, or make any material change in its present
method of conducting business, (b) sell, pledge or otherwise
transfer any of the Capital Stock in the Purchaser held by such
Seller, if any, or (c)
<PAGE>
vote such Capital Stock in favor of any amendment to or
alteration of the Certificate of Incorporation of the Purchaser.
7.03 Financial and Business Information. Each Seller
will deliver to the Purchaser and the Lender:
(a) Notice of Certain Events -- immediately upon
becoming aware of the existence of any condition or
event which constitutes a Servicer Event of Default of
Default, Event of Termination or Unmatured Event, a
written notice describing its nature and period of
existence and what action such Seller is taking or
proposes to take with respect thereto;
(b) SEC and Other Reports -- promptly upon their
becoming available, one copy of each report (including
such Seller's annual report to shareholders and reports
on Form 8-K, 10-K, and 10-Q), proxy statement,
registration statement, prospectus and notice filed
with or delivered to any securities exchange, the
Securities and Exchange Commission or any successor
agencies by such Seller;
(c) Report on Proceedings -- promptly upon such
Seller's becoming aware of
(i) any proposed or pending investigation of it by
any governmental authority or agency, or
(ii) any court or administrative proceeding which
involves or may involve the possibility of materially
and adversely affecting the properties, business,
prospects, profits or conditions (financial or
otherwise) of such Seller, a written notice specifying
the nature of such investigation or proceeding and what
action such Seller is taking or proposes to take with
respect thereto and evaluating its merits;
(d) ERISA -- (i) promptly and in any event within
10 days after such Seller knows or has reason to know
of the occurrence of a Reportable Event with respect to
a Pension Plan with regard to which notice must be
provided to the PBGC, a copy of such materials required
to be filed with the PBGC with respect to such
Reportable Event and in each such case a statement of
the chief financial officer of such Seller setting
forth details as to such Reportable Event and the
<PAGE>
action which such Seller proposes to take with respect thereto;
(ii) at least 10 days prior to the filing by any plan
administrator of a Pension Plan of a notice of intent to
terminate such Pension Plan, a copy of such notice; (iii)
promptly and in no event more than 10 days after the filing
thereof with the Internal Revenue Service, copies of each annual
report which is filed on Form 5500, together with certified
financial statements for the Pension Plan (if any) as of the end
of such year and actuarial statements on Schedule B to such Form
5500; (iv) promptly and in any event within 10 days after it
knows or has reason to know of any event or condition which might
constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer,
any Pension Plan, a statement of the chief financial officer of
such Seller describing such event or condition; (v) promptly and
in no event more than 10 days after receipt thereof by such
Seller or any Related Person, each notice received by such Seller
or any Related Person concerning the imposition of any withdrawal
liability under Section 4202 of ERISA; and (vi) promptly after
receipt thereof a copy of any notice such Seller or any Related
Person may receive from the PBGC or the Internal Revenue Service
with respect to any Pension Plan; provided, however, that this
clause (vi) shall not apply to notices of general application
promulgated by the PBGC or the Internal Revenue Service; and
(e) Requested Information -- with reasonable
promptness, any other data and information which may be
reasonably requested from time to time.
7.04 Inspection. Each Seller will permit, on reasonable
prior notice, the representatives of the Purchaser or the Lender
to examine all of the books of account, records, reports and
other papers of such Seller, to make copies and extracts
therefrom, and to discuss its affairs, finances and accounts with
its officers, employees and independent public accountants (and
by this provision such Seller authorizes said accountants to
discuss the finances and affairs of such Seller) all at such
reasonable times and as often as may be reasonably requested for
the purpose of reviewing or evaluating the financial condition or
affairs of such Seller or such Seller's performance of its duties
and obligations hereunder. Any expense incident to the exercise
by the Purchaser or the Lender during the continuance of any
Event of Termination or default by such Seller in any of its
obligations hereunder of any right under this Section 7.04 shall
be borne by such Seller.
<PAGE>
7.05 No Bankruptcy Petition Against the Purchaser. No
Seller will, prior to the date that is one year and one day after
the payment in full of all amounts owing pursuant to the
Operative Agreements, institute against the Purchaser, or join
any other Person in instituting against the Purchaser, any
bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings or other similar proceedings under the
laws of the United States or any state of the United States. This
Section 7.05 shall survive the termination of this Sales and
Servicing Agreement.
7.06 Books and Records. Each Seller will clearly mark
its books and records to reflect each sale of a Receivable by
such Seller to the Purchaser.
7.07 Communications. Each Seller will reply to all
inquiries by third parties with respect to the transactions
contemplated by this Sales and Servicing Agreement by indicating
that it has sold to the Purchaser its Receivables.
7.08 Credit and Collection Policy. No Seller will
modify or alter the Credit and Collection Policy in any manner
without the consent of the Lender.
7.09 Notice of Termination Event. Promptly upon
becoming aware of any Termination Event or Unmatured Event, each
Seller will give the Purchaser and the Lender notice thereof,
together with a written statement of an Authorized Officer
setting forth the details thereof and any action with respect
thereto taken or contemplated to be taken by such Seller.
7.10 Notice of Material Adverse Change. Promptly upon
becoming aware thereof, each Seller shall give the Purchaser and
the Lender notice of any material adverse change in the business,
operations or financial condition of such Seller which affect
adversely the collectibility of the Receivables of such Seller
purchased by the Purchaser hereunder or the ability to service
such Receivables.
7.11 Compliance with Laws. Each Seller shall comply in
all material respects with all laws applicable to such Seller,
its business and properties and its Receivables.
7.12 Enforceability of Contracts. Each Seller shall
ensure that, with respect to each Receivable purchased by
Purchaser hereunder from such Seller, the obligation of any
related Obligor to pay the
<PAGE>
unpaid balance of such Receivable in accordance with the terms of
the related Contract remains legal, valid, binding and
enforceable against such Obligor, except as such enforceability
may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws which may be
applied in the event of the bankruptcy or insolvency of such
Obligor and as such enforceability may be limited by general
principles of equity (whether considered in a suit at law or in
equity).
7.13 Fulfillment of Obligations. Each Seller will duly
observe and perform, or cause to be observed or performed, all
obligations and undertakings on its part to be observed and
performed under or in connection with its Receivables, and will
do nothing to impair the rights, title and interest of the
Purchaser in and to such Receivables.
7.14 Customer List. Each Seller shall at all times
maintain (or cause the Servicer to maintain) a current list
(which may be stored on magnetic tapes or disks) of all Obligors
under Contracts related to its Receivables, including the name,
address, telephone number and account number of each such
Obligor. Each Seller shall deliver or cause to be delivered a
copy of such list to the Purchaser and the Lender as soon as
practicable following either such Person's request therefore.
7.15 Total Systems Failure. Each Seller shall cause the
Servicer to promptly notify the Purchaser and the Lender of any
total systems failure and to advise such Persons Purchaser of the
estimated time required to remedy such total systems failure and
of the estimated date on which a Monthly Servicer Report can be
delivered. Until a total systems failure is remedied, each Seller
shall cause the Servicer (i) to furnish to the Purchaser and the
Lender such periodic status reports and other information
relating to such total systems failure as such Persons may
reasonably request and (ii) to promptly notify the Purchaser and
the Lender if the Servicer believes that such total systems
failure cannot be remedied by the estimated date, which notice
shall include a description of the circumstances which gave rise
to such delay, the action proposed to be taken in response
thereto, and a revised estimate of the date on which a Monthly
Servicer Report can be delivered. Each Seller shall cause the
Servicer to promptly notify the Purchaser and the Lender when a
total systems failure has been remedied.
7.16 Notice of Relocation. Each Seller shall give the
Purchaser and the Lender sixty (60) days' prior written notice of
any
<PAGE>
relocation of its chief executive office if, as a result of such
relocation, the applicable provisions of the Uniform Commercial
Code of any applicable jurisdiction or other applicable laws
would require the filing of any amendment of any previously filed
financing statement or continuation statement or of any new
financing statement. Each Seller will at all times maintain its
chief executive office within a jurisdiction in the United States
in which Article Nine of the Uniform Commercial Code (1972 or
later revision) is in effect.
7.17 Statementing for and Treatment of the Sales. No
Seller shall prepare any financial statements for financial
accounting or reporting purposes which shall account for the
transactions contemplated hereby in any manner other than as a
sale of its Receivables to the Purchaser.
7.18 No Rescissions or Modifications. No Seller shall
rescind or cancel any Receivable or related Contract or modify
any terms or provisions thereof, except in accordance with the
Credit and Collection Policy.
7.19 No Liens. No Seller shall cause any of its
Receivables to be sold, pledged, assigned or transferred or to be
subject to a Lien, other than the sale and assignment herein to
the Purchaser.
7.20 No Changes. No Seller shall change its name,
identity or corporate structure in any manner which would, could
or might make any financing statement or continuation statement
filed in connection with this Sales and Servicing Agreement or
the transactions contemplated hereby seriously misleading within
the meaning of Section 9-402(7) of the Uniform Commercial Code of
any applicable jurisdiction or other applicable laws unless it
shall have given the Purchaser and the Lender at least sixty (60)
days' prior written notice thereof.
SECTION 8. DEFAULT
8.01 Servicer Event of Defaults of Default. The
following events and conditions shall constitute Servicer Event
of Defaults of Default hereunder:
(i) failure on the part of the Servicer to remit
any payment to the Lender within the time period
required by Section 4.01(a) hereof;
(ii) failure on the part of the Servicer to
observe or perform in any material respect any other of
<PAGE>
its covenants or agreements in this Sales and Servicing
Agreement which failure continues unremedied for a
period of 30 days after the earlier of (A) the date it
first becomes known to any officer of the Servicer, and
(B) the date on which written notice thereof requiring
the same to be remedied shall have been given to the
Servicer, as the case may be, by the Lender;
(iii) if any representation or warranty of the
Servicer made in this Sales and Servicing Agreement or
in any certificate or other writing delivered pursuant
hereto or made by any successor Servicer in connection
with such successor Servicer's assumption of the duties
of the Servicer shall prove to be incorrect in any
material respect as of the time when the same shall
have been made;
(iv) the occurrence of an Event of Bankruptcy with
respect to the Servicer;
(v) the failure of the Servicer to make one or
more payments due with respect to recourse debt or
other recourse obligations, which debt or obligations
in the aggregate exceed $1,000,000 or the occurrence of
any event or the existence of any condition, the effect
of which event or condition is to cause (or permit one
or more Persons to cause) more than $1,000,000 of
aggregate recourse debt or other recourse obligations
of the Servicer to become due before its (or their)
stated maturity or before its (or their) regularly
scheduled dates of payment so long as such failure,
event or condition shall be continuing and shall not
have been waived by the Person or Persons entitled to
performance; or
(vi) the rendering against the Servicer of a
judgment, decree or order for the payment of money in
excess of $1,000,000 and the continuance of such
judgment, decree or order unsatisfied and in effect for
any period of 30 consecutive days without a stay of
execution.
8.02 Termination. If a Servicer Event of Default of
Default shall have occurred and be continuing, (i) the Lender
shall take all action with respect to the Collateral as it may
elect, and (ii) if the
<PAGE>
Lender so elects, the Lender may give written notice to the
Servicer of the termination of all of the rights and obligations
of the Servicer (but none of Essex's obligations as a Seller
hereunder, which shall survive any such termination) under this
Sales and Servicing Agreement. Upon the receipt by the Servicer
of such written notice, all rights and obligations of the
Servicer under this Sales and Servicing Agreement, including
without limitation the Servicer's right to receive the Servicing
Fee, but none of Essex's obligations as a Seller hereunder, shall
cease and the same shall pass to and be vested in, and assumed
by, any successor appointed pursuant to Section 8.03.
8.03 Appointment of Successor. Following the occurrence
of a Servicer Event of Default of Default and the removal of the
Servicer pursuant to Section 8.02 above, the Lender shall (i)
appoint a successor to the Servicer hereunder to assume all of
the rights and obligations of the Servicer hereunder, including,
without limitation, the Servicer's right hereunder to receive the
Servicing Fee or, (ii) if no such institution is so appointed,
petition a court of competent jurisdiction to appoint an
institution meeting such criteria as the Servicer hereunder. In
connection with such appointment and assumption, the Lender shall
cause such successor to the Servicer to enter into a servicing
agreement substantially in the form of this Sales and Servicing
Agreement except that such agreement shall not include any of the
Sellers' representations, warranties or obligations and the
Lender may make arrangements for the compensation of such
successor out of payments on Receivables as it and such successor
shall agree.
8.04 Servicer to Cooperate. The Servicer hereby agrees
to cooperate with any successor to the Servicer appointed in
accordance with Section 8.03 hereof, in effecting the termination
and transfer of the responsibilities and rights of the Servicer
hereunder to any successor to the Servicer, including, without
limitation, the execution and delivery of assignments of
Financing Statements, and the transfer to such successor to the
Servicer for administration by it of all cash amounts which shall
at the time be held by the Servicer or thereafter received with
respect to the Receivables. The Servicer hereby agrees to
transfer to any successor to the Servicer its electronic records
and all other records, correspondence and documents relating to
the Receivables in the manner and at such times as the successor
to the Servicer shall reasonably request. The Servicer hereby
designates any successor to the Servicer its agent and attorney-
in-fact to execute transfers of Financing Statements (including
any and all Financing Statements naming an individual Obligor as
debtor and the Seller as secured party) and any other
<PAGE>
filings or instruments which may be necessary or advisable to
effect such transfer of the Servicer's responsibilities and
rights hereunder.
8.05 Remedies Not Exclusive. Nothing in the preceding
provisions of this Section 8 shall be interpreted as limiting or
restricting any rights or remedies which the Purchaser, the
Lender or any other Person would otherwise have at law or in
equity on account of the breach or violation of any provision of
this Sales and Servicing Agreement by the Servicer, including
without limitation the right to recover full and complete damages
on account thereof to the extent not inconsistent with Section
6.02 hereof.
SECTION 9. ASSIGNMENT
9.01 Assignment to Lender. It is understood that this
Sales and Servicing Agreement and all rights of the Purchaser
hereunder will be assigned by the Purchaser to the Lender
pursuant to the Loan Agreement, and may be subsequently assigned
by the Lender to any successor Lender or as otherwise provided in
the Loan Agreement. The Servicer and each Seller hereby expressly
agrees to each such assignment and agrees that all of its duties,
obligations, representations and warranties hereunder shall be
for the benefit of, and may be enforced by, the Lender from time
to time and any successor to or assignee thereof.
9.02 Assignment by any Seller or Servicer. None of the
respective rights or obligations of any Seller or the Servicer
hereunder may be assigned without the prior written consent of
the Purchaser and the Lender; provided that nothing herein shall
preclude the Servicer from performing its duties hereunder
through the use of agents to the extent that such use is
consistent with the Servicer's business practices; provided,
further, that such use of agents shall not relieve the Servicer
from any of its obligations or liabilities hereunder.
SECTION 10. NATURE OF EACH SELLER'S OBLIGATIONS
AND SECURITY THEREFOR
10.01 Each Seller's Obligations Absolute. The
obligations of each Seller hereunder, and the rights of the
Lender, as assignee of the Purchaser, in and to all amounts
payable by such Seller hereunder, shall be absolute and
unconditional and shall not be subject to any abatement,
reduction, setoff, defense, counterclaim or recoupment whatsoever
including, without limitation, abatements, reductions, setoffs,
defenses, counterclaims or recoupments due or alleged to be
<PAGE>
due to, or by reason of, any past, present or future claims which
such Seller may have against the Servicer, the Purchaser, the
Lender or any other Person for any reason whatsoever; nor, except
as otherwise expressly provided herein, shall this Sales and
Servicing Agreement terminate, or the respective obligations of
the Purchaser, such Seller or the Servicer be otherwise affected,
by reason of any defect in any Receivable or in the respective
rights and interests of the Purchaser, the such Seller and the
Lender in any thereof, or by reason of any Liens with respect to
any Receivable, or any failure by the Purchaser or the Servicer
to perform any of its obligations herein contained, or by reason
of any other indebtedness or liability, howsoever and whenever
arising, of the Purchaser, the Servicer or the Lender to such
Seller or any other Person or by reason of any insolvency,
bankruptcy, or similar proceedings by or against such Seller, the
Servicer, the Purchaser, the Lender or any other Person or for
any other cause whether similar or dissimilar to the foregoing,
any present or future law to the contrary notwithstanding, it
being the intention of the parties hereto that all obligations of
such Seller hereunder and all amounts payable by such Seller
hereunder shall continue to be due and payable in all events and
in the manner and at the times herein provided unless and until
the obligation to perform or pay the same shall be terminated or
limited pursuant to the express provisions of this Sales and
Servicing Agreement.
10.02 Security for Obligations. As security for the
full and timely performance by each Seller and the Servicer of
each of their respective obligations hereunder, and by the
Purchaser of each of its obligations hereunder and under the Loan
Agreement, each Seller hereby pledges and Grants to the Lender
(as a precaution in the event that, contrary to the intent of the
parties to the transactions contemplated hereby, it is contended
that such Seller has any continuing interest in any Receivable or
any other of the property, rights and interests subject or
intended to be subject to the Loan Agreement) a first priority
Lien on and security interest in all right, title and interest of
such Seller now or hereafter acquired in and to each Receivable
(including the right to receive all payments due or to become due
thereunder) and all other property, rights and interests at any
time subject or intended to be subject to the Loan Agreement and
all proceeds of any of the foregoing. The foregoing security
interest is granted upon and is subject to the same terms and
provisions as are set forth in the Loan Agreement and shall
continue in full force and effect until the same is discharged in
accordance with the terms therein, notwithstanding any waiver or
modification of any of the terms hereof or thereof or of any of
the Operative Agreements, whether with or without the consent of
such Seller.
<PAGE>
SECTION 11. MISCELLANEOUS
11.01 Continuing Obligations. This Sales and Servicing
Agreement shall continue in full force and effect until all
amounts due to the Lender have been paid in full and all other
Obligations, if any, secured by the Lien of the Loan Agreement
have been fully satisfied.
11.02 Governing Law. This Sales and Servicing Agreement
shall be construed and enforced in accordance with, and the
rights of the parties shall be governed by, the laws of the State
of New York. If any provision of this Sales and Servicing
Agreement is deemed invalid, it shall not affect the balance of
this Sales and Servicing Agreement.
11.03 Successors and Assigns. This Sales and Servicing
Agreement shall be binding upon and inure to the benefit of the
successors and assigns of the Purchaser, each Seller, the
Servicer and shall inure to the benefit of the successors and
assigns of the Lender which is expressly a third party
beneficiary hereunder.
11.04 Modification. The terms of this Sales and
Servicing Agreement shall not be waived, modified or amended
without the written consent of the Lender.
11.05 Notices. All notices and other communications
given in connection with this Sales and Servicing Agreement shall
be sufficient for every person hereunder if in writing and sent
by telex, facsimile, or certified, registered or express mail, or
hand delivered to, in case of the parties hereto, their
respective addresses set forth below or to such other address as
either party may specify to the other from time to time in
accordance with this Section 11.05 or, in the case of the Lender,
to such addresses as are provided pursuant to Section 9.2 of the
Loan Agreement.
11.06 Counterparts. This Sales and Servicing Agreement
may be executed in any number of counterparts, each counterpart
constituting an original, but all together constituting only one
Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Sales and Servicing Agreement to be duly executed as of the day
and year first above written.
ESSEX GROUP, INC., as Servicer and
a Seller
By: /s/ David A. Owen
---------------------------
Name: David A. Owen
Title: Executive Vice President,
Chief Financial Officer
DIAMOND WIRE & CABLE CO., as a Seller
By: /s/ David A. Owen
----------------------------
Name: David A. Owen
Title: Vice President, Treasurer
INTERSTATE INDUSTRIES, INC., as a Seller
By: /s/ David A. Owen
----------------------------
Name: David A. Owen
Title: Vice President, Treasurer
ESSEX FUNDING INC., as Purchaser
By: /s/ David A. Owen
----------------------------
Name: David A. Owen
Title: Vice President, Treasurer
<PAGE>
Exhibit A
to the Sales and
Servicing Agreement
Form of Purchaser Note
<PAGE>
Exhibit B
to the Sales and
Servicing Agreement
[Form of Seller's Credit and Collection Policy]
<PAGE>
Exhibit C
to the Sales and
Servicing Agreement
[Form of Monthy Servicer Report]
<PAGE>
Schedule 1
to the Sales and
Servicing Agreement
Location of the Chief Executive Office of
the Servicer and Each Seller
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Form 10-Q as of March 31, 1998 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0000846919
<NAME> ESSEX INTERNATIONAL INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 7,180
<SECURITIES> 0
<RECEIVABLES> 201,297
<ALLOWANCES> 5,362
<INVENTORY> 249,656
<CURRENT-ASSETS> 464,091
<PP&E> 430,458
<DEPRECIATION> 143,216
<TOTAL-ASSETS> 884,778
<CURRENT-LIABILITIES> 183,299
<BONDS> 305,625
0
0
<COMMON> 302
<OTHER-SE> 324,811
<TOTAL-LIABILITY-AND-EQUITY> 884,778
<SALES> 385,418
<TOTAL-REVENUES> 385,418
<CGS> 303,903
<TOTAL-COSTS> 303,903
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,362
<INCOME-PRETAX> 36,482
<INCOME-TAX> 14,800
<INCOME-CONTINUING> 21,682
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,682
<EPS-PRIMARY> .73
<EPS-DILUTED> .70
</TABLE>
