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EXHIBIT 99.2
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RECEIVABLES FINANCING AGREEMENT
Dated as of December 15, 2000
among
KBK ACCEPTANCE COMPANY LP,
as the Borrower
KBK FINANCIAL, INC.,
as the Servicer
AUTOBAHN FUNDING COMPANY L.L.C.,
as the Lender
DG BANK DEUTSCHE GENOSSENSCHAFTSBANK AG,
as the Administrative Agent
and
BANK ONE, N. A.,
as the Collateral Agent
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TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS
Section 1.1 Defined Terms ................................................. 1
Section 1.2 Other Definitional Provisions ................................. 24
Section 1.3 Other Terms ................................................... 24
Section 1.4 Computation of Time Periods ................................... 25
ARTICLE II
THE COMMITMENT, BORROWING PROCEDURES
AND NOTE; HEDGING AGREEMENTS
Section 2.1 The Lender's Commitment ....................................... 25
Section 2.2 Borrowing Procedures .......................................... 25
Section 2.3 Funding ....................................................... 25
Section 2.4 Representation and Warranty ................................... 25
Section 2.5 Note .......................................................... 25
Section 2.6 CP Maturities ................................................. 26
Section 2.7 Borrowing Base Surplus ........................................ 26
ARTICLE III
INTEREST, FEES, ETC.
Section 3.1 Interest Rates ................................................ 26
Section 3.2 Interest Payment Dates ........................................ 27
Section 3.3 Fees .......................................................... 27
Section 3.4 Computation of Interest and Fees .............................. 27
ARTICLE IV
REPAYMENTS AND PREPAYMENTS;
DISTRIBUTION OF COLLECTIONS; ACCOUNTS
Section 4.1 Repayments and Prepayments ................................... 28
Section 4.2 Application of Collections .................................... 28
Section 4.3 Accounts; Permitted Investment ................................ 29
ARTICLE V
PAYMENTS
Section 5.1 Making of Payments .............................................. 31
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Section 5.2 Application of Certain Payments ............................... 31
Section 5.3 Due Date Extension ............................................ 31
ARTICLE VI
INCREASED COSTS, ETC.
Section 6.1 Increased Costs ............................................... 32
Section 6.2 Funding Losses ................................................ 33
ARTICLE VII
CONDITIONS TO BORROWING
Section 7.1 Initial Loan .................................................. 33
Section 7.2 All Loans ..................................................... 34
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
Section 8.1 Organization and Good Standing, etc ........................... 36
Section 8.2 Power and Authority; Due Authorization ........................ 36
Section 8.3 No Violation .................................................. 36
Section 8.4 Validity and Binding Nature ................................... 36
Section 8.5 Government Approvals .......................................... 36
Section 8.6 Financial Condition ........................................... 37
Section 8.7 Margin Regulations ............................................ 37
Section 8.8 Quality of Title .............................................. 37
Section 8.9 Accuracy of Information ....................................... 37
Section 8.10 Offices ...................................................... 37
Section 8.11 Trade Names .................................................. 38
Section 8.12 Taxes ........................................................ 38
Section 8.13 Compliance with Applicable Laws; Licenses, etc ............... 38
Section 8.14 No Proceedings ............................................... 38
Section 8.15 Investment Company Act, Etc .................................. 38
Section 8.16 Eligible Receivables ......................................... 39
ARTICLE IX
COVENANTS OF BORROWER
Section 9.1 Affirmative Covenants ......................................... 39
Section 9.2 Negative Covenants of the Borrower ............................ 44
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ARTICLE X
TERMINATION EVENTS AND THEIR EFFECT
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Section 10.1 Termination Events ........................................... 46
Section 10.2 Effect of Termination Event .................................. 48
ARTICLE XI
THE SERVICER
Section 11.1 KBK as Initial Servicer ...................................... 48
Section 11.2 Certain Agreements of the Servicer ........................... 48
ARTICLE XII
ADMINISTRATIVE AGENT AND COLLATERAL AGENT
Section 12.1 Authorization and Action ..................................... 49
Section 12.2 The Administrative Agent's and the Collateral
Agent's Reliance, Etc ...................................... 49
Section 12.3 The Liquidity Agent, the Collateral Agent,
the Administrative Agent and Affiliates .................... 50
Section 12.4 Appointment and Powers of the Collateral Agent ............... 50
Section 12.5 The Collateral Agent and Employees of
the Collateral Agent ....................................... 51
Section 12.6 Successor Agent .............................................. 51
Section 12.7 Delegation of Duties ......................................... 52
ARTICLE XIII
ASSIGNMENTS
Section 13.1 Restrictions on Assignments .................................. 53
Section 13.2 Documentation ................................................ 53
Section 13.3 Rights of Assignee of the Lender ............................. 54
Section 13.4 Notice of Assignment by the Lender ........................... 54
ARTICLE XIV
INDEMNIFICATION
Section 14.1 General Indemnity of the Borrower ............................ 54
Section 14.2 Indemnity of the Servicer .................................... 55
Section 14.3 Contribution ................................................. 56
ARTICLE XV
MISCELLANEOUS
Section 15.1 No Waiver; Remedies .......................................... 57
Section 15.2 Amendments, Etc .............................................. 57
Section 15.3 Notices, Etc ................................................. 57
Section 15.4 Costs, Expenses and Taxes .................................... 58
Section 15.5 Binding Effect; Survival ..................................... 58
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Section 15.6 Captions and Cross Reference ................................. 59
Section 15.7 Severability ................................................. 59
Section 15.8 GOVERNING LAW ................................................ 59
Section 15.9 Counterparts ................................................. 59
Section 15.10 WAIVER OF JURY TRIAL ........................................ 59
Section 15.11 No Proceedings .............................................. 59
Section 15.12 Entire Agreement ............................................ 60
Section 15.13 Confidentiality ............................................. 60
Section 15.14 Limited Recourse ............................................ 60
Section 15.15 Third Party Beneficiary ..................................... 60
Exhibit A Form of the Borrowing Request (Section 2.2)
Exhibit B Form of Lender Note (Section 2.5)
Exhibit C Form of Monthly Report (Section 9.1(h)(v))
Exhibit D Form of Borrowing Base Certificate (Section 9.1(h)(v))
Exhibit E Forms of Receivables Agreements
Schedule I Lockbox Banks and Lockbox Accounts
Schedule 8.11 Trade Names
Schedule 8.14 Description of Proceedings
Schedule 9.1(f) Description of Credit and Collection Policy
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THIS RECEIVABLES FINANCING AGREEMENT is made and entered into as of
December 15, 2000, among KBK ACCEPTANCE COMPANY LP, a Texas limited partnership
(the "Borrower"), KBK FINANCIAL, INC., a Delaware corporation ("KBK"), as the
initial servicer (in such capacity, the "Servicer"), AUTOBAHN FUNDING COMPANY
L.L.C., a Delaware limited liability company (together with its successors and
permitted assigns, the "Lender"), DG BANK DEUTSCHE GENOSSENSCHAFTSBANK AG ("DG
Bank"), as administrative agent for the Lender (in such capacity, the
"Administrative Agent"), and BANK ONE, N.A. ("Bank One"), as collateral agent
for the Secured Parties (in such capacity, the "Collateral Agent").
BACKGROUND:
1. The Borrower desires that the Lender extend financing to the
Borrower, on the terms and conditions set forth herein.
2. The Lender is willing to provide such financing on the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Defined Terms. As used in this Agreement, the following
terms have the following meanings:
"Account Transfer and Purchase Agreement" means any Account Transfer
and Purchase Agreement, executed between KBK and a Customer pursuant to which
such Customer sells, and KBK buys, certain accounts originated by such Customer
subject to the terms and conditions set forth therein.
"Accrued Liability" means any amount and any other obligations and
liability (other than Premiums) owed by the Borrower to Royal in respect of any
claims paid by Royal to the Borrower pursuant to the Royal Policy, including
interest thereon and all other amounts (other than the Premiums) due and owing
to Royal as specified in the Royal Policy and other Transaction Documents.
"Actual Excess Recoveries" means, for any Collection Period, the dollar
amount, as calculated for each Loan Receivable that became a Defaulted
Receivable during any preceding Collection Period equal to the excess, if any,
of (a) the cash recoveries received during such current Collection Period, over
(b) the excess, if any, of (i) the Estimated Future Recovery for such Loan
Receivable over (ii) the total cash recoveries received during all previous
Collection Periods for such Loan Receivable.
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"Administrative Agent" has the meaning set forth in the Preamble.
"Administrative Agent Fee Letter" means the fee letter, dated as of
December 15, 2000, entered into between the Borrower and the Administrative
Agent in connection with the transaction contemplated herewith.
"Adverse Claim" means, a lien, security interest, pledge, charge or
encumbrance, or similar right or claim of any Person (other than the Collateral
Agent or Custodian, as such).
"Affected Party" means each of the Lender, the Administrative Agent,
the Collateral Agent, the Custodian, each Liquidity Provider, the Liquidity
Agent, the Backup Servicer, each Hedge Counterparty, Royal, and any assignee or
participant thereof.
"Affiliate" of any Person means any other Person that (a) directly or
indirectly controls, is controlled by or is under common control with such
Person (excluding any trustee under, or any committee with responsibility for
administering, any employee benefit plan) or (b) is an officer or director of
such Person. A Person shall be deemed to be "controlled by" any other Person if
such other Person possesses, directly or indirectly, power (i) to vote 5% or
more of the securities (on a fully diluted basis) having ordinary voting power
for the election of directors or managing partners, or (ii) to direct or cause
the direction of the management and policies of such Person whether by contract
or otherwise. The word "Affiliated" has a correlative meaning.
"Agreement" means this Receivables Financing Agreement, as supplemented
by the Administrative Agent Fee Letter and as it may be further amended,
supplemented or otherwise modified from time to time.
"Alternate Reference Rate" means, on any date, a fluctuating rate of
interest per annum equal to the higher of:
(a) the arithmetic average of rates of interest most recently
announced by The Chase Manhattan Bank ("Chase") and Morgan
Guaranty Trust Company of New York ("Morgan"), respectively,
at their respective principal office in New York, New York as
its prime rate (it being understood that at any one time there
shall exist only one such prime rate so announced), which rate
is not necessarily intended to be the lowest rate of interest
determined by Chase or Morgan, as applicable, in connection
with extensions of credit; and
(b) the Federal Funds Rate most recently determined by DG Bank
plus 0.50% per annum.
"Backup Servicer" means Bank One, N.A., and any of its successors and
permitted assigns.
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"Backup Servicer Fee Letter" means the fee letter dated December 15,
2000, entered into between the Borrower and the Backup Servicer in connection
with the transaction contemplated hereby.
"Backup Servicer Fees" means the fees payable to the Backup Servicer
pursuant to the Backup Servicer Fee Letter.
"Backup Servicing Agreement" means the Backup Servicing Agreement,
dated as of December 15, 2000, between the Servicer, the Backup Servicer and the
Borrower, as the same may be amended, supplemented or otherwise modified from
time to time.
"Bank One" has the meaning set forth in the Preamble.
"Bank Rate" means, for any Interest Period, an interest rate per annum
equal to the Eurodollar Rate (Reserve Adjusted) for such Interest Period, plus
1.25%; provided that the "Bank Rate" shall be equal to the Alternate Reference
Rate in effect for any Interest Period if and when it is or becomes unlawful for
the Administrative Agent or any Liquidity Provider to obtain funds in the London
interbank market or the Administrative Agent or the Liquidity Agent is unable to
determine the applicable Eurodollar Rate prior to the commencement of such
Interest Period.
"Bankruptcy Code" means the Bankruptcy Code, 11 U.S.C. Section 101, et
seq., as amended.
"Borrower" has the meaning set forth in the Preamble.
"Borrowing Base" means, at any date of determination, an amount equal
to:
(a) 92% of the difference of (i) the aggregate Outstanding
Balances of all Eligible Commercial Loan Receivables, minus
(ii) the Excess Commercial Loan Concentration Amount; plus
(b) 50% of the difference of (i) the aggregate Outstanding
Balances of all Eligible Leveraged Term Loan Receivables,
minus (ii) the Excess Leveraged Term Loan Receivables
Concentration Amount; plus
(c) the difference of (i) the aggregate Outstanding Balances of
all Eligible Purchased Receivables, minus (ii) Excess
Purchased Receivables Concentration Amount, minus (iii) Total
Purchased Receivables Reserves; plus
(d) the amount on deposit in the Collection Account, minus the
amount of Required Cash Reserves; minus
(e) the Excess Obligor Concentration Amount.
"Borrowing Base Certificate" means the certificate substantially in the
form of Exhibit D.
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"Borrowing Base Deficit" means at any time, an amount equal to the
excess, if any, of (a) the aggregate Outstanding Balances of all Loans, minus
(b) the Borrowing Base.
"Borrowing Base Surplus" means at any time, an amount equal to the
excess, if any, of (a) the Borrowing Base minus (b) the aggregate Outstanding
Balances of all Loans.
"Borrowing Date" has the meaning set forth in Section 2.2.
"Borrowing Request" has the meaning set forth in Section 2.2.
"Business Day" means any day on which (a) commercial banks in New York
and Texas are not authorized or required to be closed, and (b) in the case of a
Business Day which relates to a Eurodollar Loan, dealings are carried on in the
interbank eurodollar market.
"Change in Control" means (i) with respect to Borrower, that at any
time KBK shall fail to own, directly or indirectly and free and clear of any
Adverse Claim, 100% of the outstanding capital of the Borrower on a fully
diluted basis, (ii) with respect to KBK, that at any time Parent shall fail to
own, directly free and clear of any Adverse Claim, 100% of the share of
outstanding voting stock of KBK on a fully diluted basis, and (iii) with respect
to Parent, the acquisition by any person or group of persons (within the meaning
of Section 13 or 14 of the Securities Exchange Act of 1934, as amended) of 40%
or more of the shares of outstanding voting stock of Parent on a fully diluted
basis; provided, however, that the term "person" as used in the preceding clause
(iii) shall not include Robert G. McGee, Harris A. Kaffie or Daniel R. Feehan,
their respective family members and the Affiliates of any of them.
"Collateral" has the meaning set forth in Section 2.1 of the Security
Agreement.
"Collateral Agent" has the meaning set forth in the Preamble.
"Collateral Agent Fee Letter" means the fee letter, dated as of
December 15, 2000, entered into between the Borrower and the Collateral Agent in
connection with the transaction contemplated herewith.
"Collateral Agent Fees" means the fees payable to the Collateral Agent
pursuant to the Collateral Agent Fee Letter.
"Collection Account" has the meaning set forth in Section 4.3(b).
"Collection Account Bank" means, Bank One, N.A., or such other
financial institution acceptable to the Administrative Agent and Royal.
"Collection Period" means, with respect to a Distribution Date, the
calendar month immediately preceding such Distribution Date.
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"Collections" means all payments made by or on behalf of the Obligors
or any other Person in respect of the Receivables, and all proceeds of any
Obligor Collateral or any other Collateral, whether in the form of cash, checks,
wire transfers, electronic transfers or any other form of cash payment,
including, without limitation, (a) any late charges, scheduled payments,
prepayments or other amounts paid by or on behalf of the Obligor pursuant to any
Underlying Documents, (b) any disposal, liquidation, and insurance proceeds and
recoveries with respect to the Collateral, (c) all investment earnings on the
Collection Account or Lockbox Accounts, (d) any amount paid by KBK or the
Servicer in connection with any repurchase of any such Receivables from the
Borrower pursuant to the Purchase and Sale Agreement or the Servicing Agreement
or (e) any net amount paid by any Hedge Counterparty to the Borrower pursuant to
a Hedging Agreement.
"Commercial Loan Receivables" means, collectively, the Term Loan
Receivables and the Revolving Loan Receivables.
"Commercial Paper Notes" means short-term promissory notes issued or to
be issued by the Lender.
"Commercial Paper Rate" means, with respect to any Interest Period, the
per annum rate equal to the weighted average of the rates payable by the Lender
from time to time as interest on or otherwise (by means of interest rate hedges
or otherwise) in respect of the Commercial Paper Notes (or other borrowings to
fund small or odd amounts) that is allocated, in whole or in part, by the
Administrative Agent to fund or maintain the Loans during such period, as
determined by the Administrative Agent; provided that the "Commercial Paper
Rate" shall be calculated in a manner which includes the costs and expenses of
the Lender of issuing the related Commercial Paper Notes, including all
capitalized interest on discount, dealer commissions thereon and note issuance
costs in connection therewith.
"Commitment Fees" has the meaning set forth in the Administrative Agent
Fee Letter.
"Commitment Termination Date" means the earliest to occur of: (a) the
Scheduled Commitment Termination Date, (b) the effective date on which the
Lender's Commitment is terminated pursuant to Section 10.2, (c) the date on
which the Royal Policy ceases to be in effect and (d) the date on which a claim
is made in accordance with the terms thereof on the Royal Policy.
"Contingent Liability" means any agreement, undertaking or arrangement
by which any Person guarantees, endorses or otherwise becomes or is contingently
liable upon (by direct or indirect agreement, contingent or otherwise, to
provide funds for payment, to supply funds to, or otherwise to invest in, a
debtor, or otherwise to assure a creditor against loss) the indebtedness,
obligation or any other liability of any other Person (other than by
endorsements of instruments in the course of collection), or guarantees the
payment of dividends or other distributions upon the shares of any other Person.
The amount of any Person's obligation under any Contingent Liability shall
(subject to any limitation set forth therein) be deemed to be the outstanding
principal amount (or maximum outstanding principal amount, if larger) of the
debt, obligation or other liability guaranteed thereby.
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"Credit and Collection Policy" means those credit and collection
policies of the Servicer with respect to the Receivables as described in
Schedule 9.1(f), as amended from time to time in accordance with Section
11.2(a).
"Custodian" means Bank One Trust Company, N.A., a national banking
association, together with its successors and permitted assigns.
"Custodian Agreement" means the Custodial Agreement, dated as of
December 15, 2000, among the Custodian, the Borrower, the Servicer and the
Collateral Agent, as the same may be amended, supplemented or otherwise modified
from time to time.
"Custodian Fees" means the fees payable by the Borrower to the
Custodian pursuant to the terms of the Custodian Agreement.
"Customer" means any Person from whom KBK purchases any Purchased
Receivables.
"Default Rate" has the meaning set forth in Section 3.1(c).
"Default Ratio" means the ratio (expressed as a percentage) computed as
of the last day of each Collection Period equal to:
(a) with respect to Purchased Receivables, (i) the aggregate
Outstanding Balances of all Purchased Receivables that became
Defaulted Receivables during such Collection Period, divided
by (ii) the aggregate Outstanding Balances of all Purchased
Receivables generated during the fourth preceding Collection
Period; and
(b) with respect to the Loan Receivables, (i) the aggregate
Outstanding Balances of all Loan Receivables that became
Defaulted Receivables during such Collection Period, divided
by (ii) the aggregate Outstanding Balances of all Loan
Receivables as of the last day of the preceding Collection
Period.
"Defaulted Receivable" means any Receivable:
(a) as to which, if such Receivable is a Purchased Receivable, any
scheduled payment (or part thereof) is past due for more than
90 days from the original due date thereof or more than 120
days from its original invoice date;
(b) as to which, if such Receivable is a Loan Receivable, any
scheduled payment (or part thereof) is past due for more than
120 days from the original due date thereof;
(c) that has been or should be charged-off in accordance with the
Credit and Collection Policy; or
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(d) as to which, the related Obligor or the related Customer, if
any, is subject to an Event of Bankruptcy (without giving
effect to any grace period described in clause (a) of the
definition thereof), unless otherwise approved in writing by
the Administrative Agent.
"Delinquency Ratio" means the ratio (expressed as a percentage)
computed as of the last day of each Collection Period equal to:
(a) with respect to Purchased Receivables, (i) the aggregate
Outstanding Balances of all Purchased Receivables that became
Delinquent Receivables during such Collection Period, divided
by (ii) the aggregate Outstanding Balances of all Purchased
Receivables as of the last day of such Collection Period; and
(b) with respect to the Loan Receivables, (i) the aggregate
Outstanding Balances of all Loan Receivables that became
Delinquent Receivables during such Collection Period, divided
by (ii) the aggregate Outstanding Balances of all Loan
Receivables as of the last day of such Collection Period.
"Delinquent Receivable" means any Receivable (other than a Defaulted
Receivable) as to which: (a) if such Receivable is a Purchased Receivable, any
scheduled payment (or part thereof) is past due for more than 60 days from the
original due date thereof or more than 90 days from the original invoice date;
and (b) if such Receivable is a Loan Receivable, any scheduled payment (or part
thereof) is past due for more than 90 days from the original due date thereof.
"Dilution Ratio" means the ratio (expressed as a percentage) computed
as of the last day of each Collection Period by dividing: (a) the aggregate
amount of payments made by KBK pursuant to Section 3.3 of the Purchase and Sale
Agreement during such Collection Period by (b) the aggregate Outstanding
Balances of all new Purchased Receivables generated during the immediately
preceding Collection Period.
"Dilution Reserve" means, on any day of determination, an amount equal
to: (a) the aggregate Outstanding Balances of all Eligible Purchased Receivables
at the close of business of such date, multiplied by (b) the Dilution Reserve
Percentage.
"Dilution Reserve Percentage" means, on any date, the greater of:
((1.25 x ADR) + ((DS - ADR) x DS / ADR)) x DHR
where:
ADR (Average Dilution Ratio) = the average of the Dilution Ratios
for the most recent 12 consecutive
Collection Periods;
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DS (Dilution Spike) = the highest Dilution Ratio for any
Collection Period during the most
recent 12 consecutive Collection
Periods;
DHR (Dilution Horizon Ratio) = the aggregate new Purchased
Receivables generated during the
most recent Collection Period
divided by the aggregate Outstanding
Balance of all Eligible Purchased
Receivables as of such date.
"Distribution Date" means the 15th day of each month (beginning January
16, 2001) or, if such day is not a Business Day, the Business Day immediately
thereafter or, if the repayment of the Loans has been accelerated pursuant to
Section 10.2 (b), each Business Day.
"Dollar(s)" and the sign "$" means lawful money of the United States of
America.
"Effective Date" means December 15, 2000.
"Eligible Account" means a segregated trust account that is maintained
with the corporate trust department of a depository institution that has a
rating of at least "A2" by Moody's and, if rated by Fitch, at least "A" by Fitch
and is reasonably acceptable to the Administrative Agent, the Lender and Royal.
"Eligible Commercial Loan Receivable" means any Commercial Loan
Receivable that is an Eligible Receivable.
"Eligible Leveraged Term Loan Receivable" means any Leveraged Term Loan
Receivable that is an Eligible Receivable.
"Eligible Loan Receivable" means any Eligible Commercial Loan
Receivable and Eligible Leveraged Term Loan Receivable.
"Eligible Purchased Receivable" means any Purchased Receivable that is
an Eligible Receivable.
"Eligible Receivable" means, at any time of determination, a
Receivable:
(a) that was originated or purchased by KBK in its ordinary course
of business in accordance with the Credit and Collection
Policy;
(b) that constitutes an "account", "chattel paper", a "general
intangible" or an "instrument" as defined in the Uniform
Commercial Code as in effect in all applicable jurisdictions;
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(c) that is payable in Dollars;
(d) that constitutes the legal, valid and binding obligation of
the Obligor of such Receivable enforceable against such
Obligor in accordance with its terms and is not subject to any
dispute, offset, counterclaim, defense or litigation;
(e) that is not a Defaulted Receivable or a Delinquent Receivable;
provided, however, that solely for the purpose of this clause
(e), if any time more than 25% of Receivables relating to any
one Obligor have become Defaulted Receivables, then all
Receivables (whether or not otherwise would be Eligible
Receivables pursuant to other clauses of this definition)
relating to such Obligor would be deemed to be Defaulted
Receivables;
(f) with respect to which only KBK, the Servicer or the Borrower
has the right to amend, modify or waive any payment and other
material terms thereof and there has not been any amendment,
modification or waiver of any payment or other material terms
thereof except by KBK or the Servicer in accordance with the
Credit and Collection Policy;
(g) with respect to which the Borrower is the owner free and clear
of all Adverse Claims (other than the Adverse Claims created
under the Transaction Documents);
(h) with respect to which the related Obligor or the Customer, if
any, is not subject to an Event of Bankruptcy (without giving
effect to any grace period described in clause (a) of the
definition thereof), unless otherwise approved in writing by
the Administrative Agent;
(i) as to which the related Obligor is not an Affiliate of KBK;
(j) which is in substantially one of the forms attached hereto as
Exhibit E, or in such other form as has been approved in
writing by the Administrative Agent and Royal;
(k) is not an executory contract of unexpired lease within the
meaning of Section 365 of the Bankruptcy Code;
(l) if such Receivable is a Purchased Receivable as to which the
related Obligor is (A) not a government or a governmental
subdivision or agency, unless KBK has complied with all the
assignment requirements of the Federal Assignment of Claims
Act with respect thereto; or (B) organized under the laws of
the United States and has its chief executive office and
principal place of business therein, unless: (x) such
Receivable is supported by: (i) a letter of credit issued by a
financial institution rated at least "A2" by Moody's and, if
rated by Fitch, at least "A" by Fitch, or (ii) an insurance
policy issued by an insurance company rated at least "A2" by
Moody's or,
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if rated by Fitch, at least "A" by Fitch or (y) the related
Obligor has leviable assets within the United States; and
(m) if such Receivable is a Loan Receivable:
(i) as to which the related Obligor is (A) not a government
or a governmental subdivision or agency or (B)
organized under the laws of the United States and has
its chief executive office and principal place of
business therein.
(ii) that has a stated maturity of no more than 72
calendar months;
(iii) with respect to which KBK is the only payee under the
promissory note issued evidencing such Receivable; and
(iv) unless such Loan Receivable is a fixed-rate Term Loan
Receivable, bears interest at a floating rate at least
equal to the Alternate Reference Rate plus 1%, provided
that so long as the weighted average rate of interest
of all Term Loan Receivables bearing interest at a
floating rate is at least the Alternate Reference Rate
plus 1%, Term Loan Receivables that bear interest at a
floating rate at least equal to the Alternate Reference
Rate may be included as an Eligible Receivable.
"Eligible Term Loan Receivable" means any Term Loan Receivable that is
an Eligible Receivable.
"ERISA" means the U.S. Employee Retirement Income Security Act of 1974,
as amended from time to time.
"Estimated Future Recovery" means the dollar amount, as calculated for
each Loan Receivable that became a Defaulted Receivable during such Collection
Period, equal to the lesser of (a) KBK's estimated future recovery on such Loan
Receivable or (b) 50% of the Outstanding Balance of such Loan Receivable;
provided, however, if KBK's Estimated Future Recovery is greater than 50% of the
Outstanding Balance of such Loan Receivable, such estimated future recovery
shall be used subject to written request of such by KBK and approval by the
Administrative Agent and Royal. KBK shall, for any Loan Receivable with an
Outstanding Balance greater than $2,000,000 that becomes a Defaulted Receivable,
be required to submit a written explanation of the cause of such default and a
description of the Estimated Future Recovery on such Loan Receivable.
"Eurodollar Loan" means any Loan (or portion thereof) that bears
interest at the Eurodollar Rate (Reserve Adjusted).
"Eurodollar Rate (Reserve Adjusted)" means, for any Interest Period for
the related Loan, the rate of interest per annum (rounded upward to the next
1/16th of 1%) determined by the Administrative Agent as follows:
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Receivables Financing Agreement
<PAGE> 16
Eurodollar Rate = LIBO
------------------------------------
(Reserve Adjusted) 1.00 - Eurodollar Reserve Percentage
Where,
"Eurodollar Reserve Percentage" means, for any day for any
Interest Period, the maximum reserve percentage (expressed as a
decimal, rounded upward to the next 1/100th of 1%) in effect on such
day (whether or not applicable to any the Lender) under regulations
issued from time to time by the Board of Governors of the Federal
Reserve System (or any successor thereto) for determining the maximum
reserve requirement (including any emergency, supplemental or other
marginal reserve requirement) with respect to Eurocurrency funding
(currently referred to as "Eurocurrency liabilities"); and
"LIBO" means the rate of interest per annum determined by the
Administrative Agent in accordance with its usual procedures (which
determination shall be conclusive absent manifest error) to be the
London interbank ask rate set forth on the "LIBO" page at the Reuters
Monitor Money Rate Service (or appropriate successor or, if Reuters or
its successor ceases to provide such quotes, a comparable replacement
determined by the Administrative Agent) at approximately 11:00 a.m.
(London time) two Business Days prior to the commencement of such
Interest Period for an amount comparable to such Loan and having a
borrowing date and a maturity comparable to such Interest Period.
The Eurodollar Rate (Reserve Adjusted) shall be adjusted automatically
as of the effective date of any change in the Eurodollar Reserve Percentage.
"Event of Bankruptcy" shall be deemed to have occurred with respect to
a Person if either:
(a) a case or other proceeding shall be commenced, without the
application or consent of such Person, in any court, seeking
the liquidation, reorganization, debt arrangement,
dissolution, winding up, or composition or readjustment of
debts of such Person, the appointment of a trustee, receiver,
custodian, liquidator, assignee, sequestrator or the like for
such Person or all or substantially all of its assets, or any
similar action with respect to such Person under any law
relating to bankruptcy, insolvency, reorganization, winding up
or composition or adjustment of debts, and such case or
proceeding shall continue undismissed, or unstayed and in
effect, for a period of 30 consecutive days; or an order for
relief in respect of such Person shall be entered in an
involuntary case under the federal bankruptcy laws or other
similar laws now or hereafter in effect; or
(b) such Person shall commence a voluntary case or other
proceeding under any applicable bankruptcy, insolvency,
reorganization, debt arrangement, dissolution or other similar
law now or hereafter in effect, or shall consent to the
appointment of or taking possession by a receiver, liquidator,
assignee, trustee, custodian, sequestrator (or other similar
official) for such Person or for any substantial part of its
property,
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Receivables Financing Agreement
<PAGE> 17
or shall make any general assignment for the benefit of
creditors, or shall fail to, or admit in writing its inability
to, pay its debts generally as they become due, or, if a
corporation or similar entity, its board of directors shall
vote to implement any of the foregoing.
"Excess Commercial Loan Receivables Concentration Amount" means, at any
time of determination, the sum (without duplication) of:
(a) the aggregate amount for each Obligor by which the aggregate
Outstanding Balances of Eligible Commercial Loan Receivables
relating to such Obligor exceeds the lesser of (i) $5,000,000,
or (ii) 5% of the aggregate Outstanding Balances of all
Eligible Receivables;
(b) the amount by which the aggregate Outstanding Balances of
Eligible Commercial Loan Receivables secured by owner-occupied
real property exceeds 10% of the aggregate Outstanding
Balances of all Eligible Commercial Loan Receivables; and
(c) the amount by which the aggregate Outstanding Balances of all
Eligible Term Loan Receivables exceeds 50% of the aggregate
Outstanding Balances of all Eligible Receivables; and
(d) the amount by which the aggregate Outstanding Balances of all
Eligible Term Loan Receivables exceeds $70,500,000.
"Excess Leveraged Term Loan Receivables Concentration Amount" means, at
any time of determination, the sum (without duplication) of:
(a) the aggregate amount for each Obligor by which the Outstanding
Balances of Eligible Leveraged Term Loan Receivables relating
to such Obligor exceeds the lesser of (i) $5,000,000 or (ii)
5% of the aggregate Outstanding Balance of all Eligible
Receivables; and
(b) the amount by which the aggregate Outstanding Balances of all
Eligible Leveraged Term Loan Receivables exceeds $10,000,000.
"Excess Obligor Concentration Amount" mean, at any time of
determination, the aggregate amount for each Obligor by which the Outstanding
Balances of Eligible Receivables relating to such Obligor minus the amounts
described in clause (a) of the definitions of Excess Commercial Loan Receivables
Concentration Amount, Excess Leveraged Term Loan Receivables Concentration
Amount and Excess Purchased Receivables Concentration Amount for such Obligor
exceeds $5,000,000 (or, with respect to Southwest Jet, Spray Booth Systems and
Bender Shipbuilding, the Outstanding Balance of such Obligor's Receivables as of
the date hereof).
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Receivables Financing Agreement
<PAGE> 18
"Excess Purchased Receivables Concentration Amount" means, at any time
of determination, the sum (without duplication) of:
(a) the aggregate amount for each Obligor by which the aggregate
Outstanding Balances of Eligible Purchased Receivables
relating to such Obligor exceeds the lesser of (i) $5,000,000,
or (ii) 5% of the aggregate Outstanding Balance of all
Eligible Receivables;
(b) the amount by which the aggregate Outstanding Balances of
Eligible Purchased Receivables relating to governmental
Obligors exceeds 10% of the aggregate Outstanding Balance of
all Eligible Purchased Receivables;
(c) the amount by which the aggregate Outstanding Balances of
Eligible Purchased Receivables relating to foreign Obligors
exceeds 20% of the aggregate Outstanding Balances of all
Eligible Purchased Receivables; and
(d) the aggregate amount for each Customer by which the aggregate
Outstanding Balances of Eligible Purchased Receivables
purchased from such Customer exceeds the lesser of (i)
$5,000,000 or (ii) 5% of the aggregate Outstanding Balance of
all Eligible Receivables.
"Facility Limit" has the meaning set forth in Section 2.1.
"Facility Fees" means, collectively, the Program Fees and the
Commitment Fees.
"Federal Funds Rate" means, for any period, a fluctuating interest rate
per annum equal (for each day during such period) to:
(a) the weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System
arranged by federal funds brokers, as published for such day
(or, if such day is not a Business Day, for the next preceding
Business Day) by the Federal Reserve Bank of New York; or
(b) if such rate is not so published for any day that is a
Business Day, the average of the quotations for such day on
such transactions received by DG Bank from three federal funds
brokers of recognized standing selected by it.
"Fee Letter" means, collectively, the Administrative Agent Fee Letter,
the Backup Servicer Fee Letter and the Collateral Agent Fee Letter.
"Fees" means, collectively, the Facility Fees, the Collateral Agent
Fees, the Backup Servicer Fees and the Custodian Fees, which fees may not be
increased without the prior written consent of Royal.
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Receivables Financing Agreement
<PAGE> 19
"Financial Officer" has the meaning set forth in Section 9 (h)(i).
"Fiscal Quarter" means any quarter in a Fiscal Year.
"Fiscal Year" means any period of twelve consecutive calendar months
ending on December 31.
"Fitch" means Fitch, Inc.
"GAAP" means generally accepted United States accounting principles.
"Hedge Counterparty" means a Person acceptable to the Liquidity Agent
and the Administrative Agent and having long-term unsecured debt obligations
rated at least "A2" by Moody's and, if rated by Fitch, at least "A" by Fitch and
short-term unsecured debt obligations rated at least"P-1" by Moody's and, if
rated by Fitch, at least "F-1" by Fitch.
"Hedging Agreement" means any agreement between the Borrower and a
Hedge Counterparty entered into pursuant to Section 9.1(j), which agreement
shall consist of a "Master Agreement" in a form published by the International
Swaps and Derivatives Association, Inc., together with a "Schedule" thereto
substantially in a form as the Liquidity Agent, the Administrative Agent and
Royal shall reasonably approve in writing, and each "Confirmation" thereunder
confirming the specific terms of each related hedge transaction.
"Indebtedness" of any Person means, without duplication: (a) all
obligations of such Person for borrowed money and all obligations of such Person
evidenced by bonds, debentures, notes or other similar instruments; (b) all
obligations, contingent or otherwise, relative to the face amount of all letters
of credit, whether or not drawn, and banker's acceptances issued for the account
of such Person; (c) all obligations of such Person as lessee under leases that
have been or should be, in accordance with GAAP, recorded as capitalized lease
liabilities; (d) all other items that, in accordance with GAAP, would be
included as liabilities on the liability side of the balance sheet of such
Person as of the date at which Indebtedness is to be determined; (e) whether or
not so included as liabilities in accordance with GAAP, all obligations of such
Person to pay the deferred purchase price of property or services, and
indebtedness (excluding prepaid interest thereon) secured by a lien on property
owned or being purchased by such Person (including indebtedness arising under
conditional sales or other title retention agreements), whether or not such
indebtedness shall have been assumed by such Person or is limited in recourse;
(f) all net obligations of such Person in respect of interest rate swap, cap,
collar, swaption, option or similar agreements; and (g) all Contingent
Liabilities of such Person in respect of any of the foregoing.
"Indemnified Amounts" has the meaning set forth in Section 14.1.
"Indemnified Party" has the meaning set forth in Section 14.1.
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Receivables Financing Agreement
<PAGE> 20
"Insurance Agreement" means the Insurance Agreement, dated as of
December 15, 2000, among the Borrower, KBK and Royal.
"Interest Period" means, with respect to any Loan:
(a) a period commencing on the date of the initial funding of such
Loan and ending on the first Distribution Date thereafter; and
(b) thereafter, each period commencing on the day after the last
day of the immediately preceding Interest Period for such Loan
and ending on the next subsequent Distribution Date.
"KBK" has the meaning set forth in the Preamble.
"Lender" has the meaning set forth in the Preamble.
"Lender Note" is defined in Section 2.5.
"Lender's Commitment" is defined in Section 2.1.
"Leveraged Term Loan Agreement" means any Leveraged Term Loan
Agreement, entered into between KBK and an Obligor pursuant to which KBK extends
certain leveraged term loan facilities to such Obligor pursuant to the terms set
forth therein.
"Leveraged Term Loan Receivable" means any indebtedness owned by or on
behalf of any Obligor and any right of KBK to receive payments underwritten as a
"Leveraged Term Loan" in accordance with the Credit and Collection Policy,
whether constituting an account, chattel paper, instrument or general
intangible, arising in connection with the sale or lease of goods or the
rendering of services by KBK and includes the obligation to pay any finance
charges, fees and other charges with respect thereto.
"Liquidity Agent" has the meaning set forth in the Liquidity Agreement.
"Liquidity Agreement" means the Liquidity Purchase Agreement, dated as
of December 15, 2000, among the Lender, the Liquidity Providers and the
Liquidity Agent, as amended, supplemented or otherwise modified from time to
time.
"Liquidity Provider" means and includes the financial institutions as
are, or may become, parties to the Liquidity Agreement, as lenders thereunder.
"List of Receivables" means the list of Receivables attached as an
Exhibit to each Borrowing Request delivered pursuant to Section 2.2, as the same
may be amended, supplemented or replaced from time to time.
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Receivables Financing Agreement
<PAGE> 21
"Loan" is defined in Section 2.1.
"Loan Receivable Net Default" means the dollar amount computed as of
the last day of each Collection Period equal to: (a) the aggregate Outstanding
Balances of all Loan Receivables that became Defaulted Receivables during such
Collection Period, minus (b) the Estimated Future Recovery for each Loan
Receivable that became a Defaulted Receivable during such Collection Period
minus (c) the Actual Excess Recoveries, plus (d) the excess, if any, of (i) the
Estimated Future Recovery on each Loan Receivable that became a Defaulted
Receivable during the sixth previous Collection Period over (ii) the total cash
recoveries received during any Collection Period on such Loan Receivable.
"Loan Receivable Net Default Ratio" means the ratio (expressed as a
percentage) computed as of the last day of each Collection Period equal to: (a)
the sum of the Loan Receivable Net Defaults during the previous 12 Collection
Periods, divided by (b) the average of the aggregate Outstanding Balances of all
Loan Receivables as of the last day of the preceding 12 Collection Periods.
"Loan Receivables" means, collectively, the Revolving Loan Receivables,
Term Loan Receivables and Leveraged Term Loan Receivables.
"Lockbox Account" means any of the bank accounts maintained with a
Lockbox Account Bank listed on Schedule I.
"Lockbox Account Agreement" means any of the agreements among the
Borrower, the Servicer, the Collateral Agent and a Lockbox Account Bank, as
applicable (as amended, supplemented or otherwise modified from time to time),
in connection with the transaction contemplated hereby.
"Lockbox Account Bank" means any of the banks listed on Schedule I, or
such other financial institution acceptable to the Administrative Agent and
Royal.
"Loss Reserve" means at any date of determination, an amount equal to:
(a) the aggregate Outstanding Balances of all Eligible Purchased Receivables,
multiplied by (b) the Loss Reserve Percentage.
"Loss Reserve Percentage" means, on any date, the greater of:
(a) 8.0%; and
(b) 1.25 x LR x LHR x PTM
where:
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Receivables Financing Agreement
<PAGE> 22
LR (Loss Ratio) = the highest average of the Default
Ratios for any three consecutive
calendar months during the twelve most
recent calendar months;
LHR (Loss Horizon) = the aggregate Outstanding Balances of
all new Purchased Receivables
generated during the three most recent
Collection Periods divided by the
aggregate Outstanding Balances of all
Eligible Purchased Receivables as of
such date;
PTM (Payment
Term Multiplier) = the Payment Term Multiplier as of the
most recently ended Collection Period.
"Material Adverse Effect" means any event or circumstance that will
have a material adverse effect on any of the following:
(a) the business, assets, financial condition or operations of the
Borrower or KBK;
(b) the ability of the Servicer to perform its obligations under
this Agreement or any other Transaction Document;
(c) the validity, enforceability or collectibility of this
Agreement or the other Transaction Documents;
(d) the status, existence, perfection or priority of the
Collateral Agent's security interest in the Collateral; or
(e) the validity, enforceability or collectibility of a material
amount of the Receivables.
"Month End Date" means the last day of each calendar month.
"Monthly Report" has the meaning set forth in Section 9(i)(h)(iv).
"Moody's" means Moody's Investors Service, Inc.
"Obligations" means all obligations (monetary or otherwise) of the
Borrower to the Lender, the Administrative Agent, the Collateral Agent, the
Servicer, the Custodian, Royal or any other Affected Party under or in
connection with this Agreement, the Lender Note and each other Transaction
Document.
"Obligor" means, with respect to any Receivable, any Person obligated
to make payments under or in respect of such Receivable.
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Receivables Financing Agreement
<PAGE> 23
"Obligor Collateral" means any goods, equipment, inventory, accounts,
general intangibles, any other personal or real property, and any guaranties,
letters of credit, surety bonds, as applicable, in each case, that secure the
payment obligation of any Obligor in respect of any Receivable.
"Outstanding Balance" means, with respect to any Receivable and on any
date of determination, the outstanding principal balance of such Receivable;
provided, however, that the Outstanding Balance of any Receivable purchased or
repurchased by the Servicer or KBK, as applicable, pursuant to the Servicing
Agreement shall be deemed to be zero as of the last day of the Collection Period
during which such purchase occurs.
"Payment Term" means with respect to any Purchased Receivable, the
number of days between its invoice date and its due date.
"Payment Term Multiplier" means, as of any date, (a) 1.0, if the
Payment Term Variable is not more than 36, (b) 1.1, if the Payment Term Variable
is 37 to 39, (c) 1.17, if the Payment Term Variable if 40 to 45, (d) 1.22, if
the Payment Term Variable is 46 to 50, (d) 1.28, if the Payment Term Variable is
51 to 55, (f) 1.33, if the Payment Term Variable if 56 to 60 and (g) 1.38, if
the Payment Term Variable is 61 to 65; provided, however, that, if the Payment
Term Variable exceeds 65, the Payment Term Multiplier for such date shall be
determined by calculating the sum of (x) 1.38 and (y) 0.05, for each 5-day
increment by which the Payment Term Variable exceeds 65, it being understood
that the same number shall apply for all Payment Term Variables that fall within
a five- day range.
"Payment Term Variable" means as of the most recently ended Collection
Period, the weighted average of the Payment Terms of all Purchased Receivables
as the last day of such Collection Period (rounded upwards to the nearest whole
number).
"Parent" means KBK Capital Corporation.
"Parent Undertaking" means the Parent Undertaking, dated as of December
15, 2000, executed by the Parent in favor of the Collateral Agent for the
benefit of the Secured Parities..
"Permitted Investment" means, at any time:
(a) any evidence of Indebtedness, maturing not more than one year
after such time, issued or guaranteed by the United States
Government or any agency thereof;
(b) commercial paper, maturing not more than nine months from the
date of issue, issued by (i) a corporation (other than
Borrower or any Affiliate of Borrower) organized under the
laws of any state of the United States or of the District of
Columbia and rated at least "P-1" by Moody's, and if rated by
Fitch, at least "F-1" by Fitch; or (ii)
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Receivables Financing Agreement
<PAGE> 24
Administrative Agent so long as it is rated at least "P-1" by
Moody's and if rated by Fitch, at least "F-1" by Fitch.
(c) any certificate of deposit (or time deposits represented by
such certificates of deposit) or bankers' acceptance, maturing
not more than one year after such time, or overnight federal
funds transactions that are issued or sold by either (i) a
commercial banking institution that is a member of the Federal
Reserve System and has a combined capital and surplus and
undivided profits of not less than $500,000,000 and is rated
at least "P-1" by Moody's and if rated by Fitch, at least
"F-1" by Fitch; or (ii) Administrative Agent so long as it is
rated at least "P-1" by Moody's and if rated by Fitch, at
least "F-1" by Fitch.
(d) any repurchase agreement entered into with a commercial
banking institution of the stature referred to in clause
(c)(i) or (c)(ii)) that (i) is secured by a fully perfected
(by control, if the revised UCC is applicable) security
interest in any obligation of the type described in any of
clauses (a) through (c), and (ii) has a market value at the
time such repurchase agreement is entered into of not less
than 100% of the repurchase obligation of such Lender (or
other commercial banking institution) thereunder; or
(e) money market funds (including money market funds of the
Collateral Agent or any of its Affiliates for which the
Collateral Agent or such Affiliate, as applicable, may act as
investment advisor, distributor, manager or co-manager or may
derive a fee for services in connection therewith) that are
(i) rated not lower than the highest rating category from
Moody's and if, rated by Fitch, Fitch or (ii) otherwise
acceptable to the Rating Agencies.
Each Permitted Investment shall be a "security" (as defined in Section 8-102 of
the UCC) or an "instrument" (as defined in Section 9-105 of the UCC) and shall
be: (i) evidenced by certificates or instruments issued in the name of the
Collateral Agent (for the benefit of the Secured Parties) which (together with
any appropriate instruments of transfer) are delivered to, and held by, the
Collateral Agent (for the benefit of the Secured Parties) or an agent thereof
(which shall not be the Borrower or any of its Affiliates); (ii) certificated
securities that otherwise are "transferred" to the Collateral Agent in
accordance with the terms of one or more of the relevant subparagraphs of
Section 8-313(1) of the UCC (or "delivered" under one or more of the relevant
subparagraphs of Section 8-301(a) of the Revised UCC); (iii) maintained in
book-entry form on the records of one or more Federal Reserve Banks (but
"certificated" for purposes of federal law) pursuant to applicable Federal
regulations, in which case such investment shall be "transferred" to the
Collateral Agent through the Federal Reserve System in accordance with one or
more of the relevant subparagraphs of Section 8-313(1) of the UCC (or
"delivered" under one or more of the relevant subparagraphs of Section 8-301(a)
of the Revised UCC) and pertinent Federal regulations; or (iv) in book-entry
form in which the
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Receivables Financing Agreement
<PAGE> 25
Collateral Agent shall have a perfected (by control, if the Revised UCC is
applicable) security interest.
"Person" means an individual, partnership, corporation (including a
business trust), limited liability company, joint stock company, trust,
unincorporated association, joint venture, government or any agency or political
subdivision thereof or any other entity.
"Premium" means the premium payable by the Borrower to Royal under the
Royal Policy.
"Program Document" means any management agreement, administration
agreement, referral agreement, depository agreement, security agreement, program
liquidity or credit enhancement agreement and any other similar document,
agreement or instrument with respect to the Lender's Commercial Paper Note
program, as such documents, agreements and instruments may be from time to time
amended, supplemented, replaced or otherwise modified.
"Program Fees" has the meaning set forth in the Administrative Agent
Fee Letter.
"Purchase and Sale Agreement" means the Purchase and Sale Agreement,
dated as of December 15, 2000, between KBK and the Borrower, as amended,
supplemental or otherwise modified from time to time.
"Purchased Receivable" means any indebtedness owned by or on behalf of
any Obligor and any right of KBK to receive payments under: (a) any Account
Transfer and Purchase Agreement, and (b) any Revolving Account Transfer and
Purchase Agreement; in each case, whether constituting an account, chattel
paper, instrument or general intangible, arising in connection with the sale or
lease of goods or the rendering of services by the Customer and includes the
obligation to pay any finance charges, fees and other charges with respect
thereto.
"Qualified Institution" means Bank One, N.A. or a depositary
institution or trust company organized under the laws of the United States of
America or any one of the states thereof or the District of Columbia; provided,
however, that at all times such depositary institution or trust company is a
member of the FDIC and (i) has a long-term indebtedness rating from Moody's of
not lower than "A2" and, if rated by Fitch, from Fitch of not lower than "A" and
a short-term indebtedness rating from Moody's not lower than "P-1" and, if rated
by Fitch, from Fitch not lower than "F1" or (ii) has such other rating which has
been approved by the Rating Agencies.
"Rating Agencies" means Fitch and Moody's.
"Receivable" means any Loan Receivable and any Purchased Receivable.
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Receivables Financing Agreement
<PAGE> 26
"Receivable Files" means, (a) with respect to any Purchased Receivable,
the copy of the purchase agreement and copies of related UCC filings in respect
of such Purchased Receivables; and (b) with respect to each Loan Receivable, the
copy of the loan agreement (including the original of the promissory note issued
thereunder), the related UCC filings, any guaranties, surety bond, letter of
credit and any other instrument, and any amendment, supplement and modification
thereof, in each case, in relation with such Loan Receivable.
"Regulatory Change" means, relative to any Affected Party:
(a) any change in or the adoption of any: (i) United States
Federal or state law or foreign law applicable to such
Affected Party, (ii) regulation, interpretation, directive,
requirement or request (whether or not having the force of
law) applicable to such Affected Party of (A) any court or
government authority charged with the interpretation or
administration of any law referred to in clause (a)(i), or of
(B) any Rating Agency, fiscal, monetary or other authority
having jurisdiction over such Affected Party, or (iii) GAAP or
regulatory accounting principles applicable to such Affected
Party and affecting the application to such Affected Party of
any law, regulation, interpretation, directive, requirement or
request referred to in clause (a)(i) or (a)(ii) above;
(b) any change in the application to such Affected Party of any
existing law, regulation, interpretation, directive,
requirement, request or accounting principles referred to in
clause (a)(i), (a)(ii) or (a)(iii) above; or
(c) the issuance, publication or release of any regulation,
interpretation, directive, requirement or request of a type
described in clause (a)(ii) above to the effect that the
obligations of any Liquidity Bank under the Liquidity
Agreement are not entitled to be included in the zero percent
category of off-balance sheet assets for purposes of any
risk-weighted capital guidelines applicable to such Liquidity
Provider or any related Affected Party.
"Required Cash Reserves" means, at any date of determination, an amount
equal to the sum of: (a) the accrued and unpaid Collateral Agent Fees, Custodian
Fees, Servicing Fees, Backup Servicer Fees, Facility Fees and Premiums, (b) the
aggregate of the accrued and unpaid net amount payable to the Hedging
Counterparties (other than the breakage costs), and (c) the accrued and unpaid
interest amount payable on the Loans.
"Revolving Account Transfer and Purchase Agreement" means any Revolving
Account Transfer and Purchase Agreements, entered into between KBK and a
Customer pursuant to which such Customer will sell, and KBK will buy, all
accounts generated by such Customer pursuant to the terms set forth therein.
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Receivables Financing Agreement
<PAGE> 27
"Revolving Loan Receivable" means any indebtedness owned by or on
behalf of any Obligor and any right of KBK to receive payments under any
Revolving Loan Agreement and underwritten as a "Revolving Loan" in accordance
with the Credit and Collection Policy, whether constituting an account, chattel
paper, instrument or general intangible, arising in connection with the sale or
lease of goods or the rendering of services by KBK and includes the obligation
to pay any finance charges, fees and other charges with respect thereto.
"Revolving Loan Agreement" means any Revolving Loan Agreement, entered
into between KBK and an Obligor pursuant to which KBK extends certain revolving
loan facilities to such Obligor pursuant to the terms set forth therein.
"Royal" means Royal Indemnity Company, a Delaware capital stock
insurance company.
"Royal Policy" means the insurance policy issued by Royal under the
Insurance Agreement.
"Scheduled Commitment Termination Date" means December 15, 2005.
"Secured Parties" has the meaning set forth in the Security Agreement.
"Security Agreement" means the Security Agreement, dated as of December
15, 2000, between the Borrower and the Collateral Agent, as amended,
supplemented or otherwise modified from time to time.
"Servicer" has the meaning set forth in the Preamble.
"Servicing Agreement" means the Servicing Agreement, dated as of
December 15, 2000, among the Servicer, the Collateral Agent and the Borrower, as
the same may be amended, supplemented or otherwise modified from time to time.
"Servicing Fee" has the meaning set forth in the Servicing Agreement.
"Servicing Fee Rate" means 0.5% per annum.
"Stated Maturity Date" means December 15, 2005.
"Subsidiary" means, with respect to any Person, a corporation of which
such Person and/or its other Subsidiaries own, directly or indirectly, such
number of outstanding shares as have more than 50% of the ordinary voting power
for the election of directors.
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"Term Loan Agreement" means any Term Loan Agreement, entered into
between KBK and an Obligor pursuant to which KBK extends certain term loan
facilities to such Obligor pursuant to the terms set forth therein.
"Term Loan Receivable" means any indebtedness owned by or on behalf of
any Obligor and any right of KBK to receive payments under any Term Loan
Agreement and underwritten as a "Term Loan" in accordance with the Credit and
Collection Policy, whether constituting an account, chattel paper, instrument or
general intangible, arising in connection with the sale or lease of goods or the
rendering of services by KBK and includes the obligation to pay any finance
charges, fees and other charges with respect thereto.
"Termination Event" means any of the events described in Section 10.1.
"Total Purchased Receivables Reserve" means the sum of: (a) the Loss
Reserve; (b) the Dilution Reserve; and (c) the Yield Reserve.
"Transaction Documents" means this Agreement, the Purchase and Sale
Agreement, the Lender Note, the Fee Letter, the Security Agreement, the
Servicing Agreement, the Backup Servicing Agreement, each Hedging Agreement, the
Insurance Agreement, the Royal Policy, the Liquidity Agreement, the Collection
Account Agreement, each Lockbox Account Agreement, the Custodian Agreement, the
Parent Undertaking and the other instruments, certificates, agreements, reports
and documents to be executed and delivered under or in connection with this
Agreement, as any of the foregoing may be amended, supplemented, amended and
restated, or otherwise modified from time to time.
"UCC" means the Uniform Commercial Code as from time to time in effect
in the applicable jurisdiction or jurisdictions.
"Underlying Documents" means collectively, any (i) Account Transfer and
Purchase Agreement, (ii) Revolving Account Transfer and Purchase Agreement,
(iii) Leveraged Term Loan Agreement, (iv) Revolving Loan Agreement, (v) Term
Loan Agreement and (vi) any other documents, agreement or instruments entered
into in connection with any of the foregoing.
"Unmatured Termination Event" means any event that, if it continues
uncured, will, with lapse of time or notice or lapse of time and notice,
constitute a Termination Event.
"Yield Reserve" means, at any date of determination, an amount equal
to: (a) the aggregate Outstanding Balances of all Eligible Purchased Receivables
at the close of business of such date multiplied by (b) the Yield Reserve
Percentage on such date.
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"Yield Reserve Percentage" means, at any time:
(BR + SFR+0.25%) x 1.5 x TR
---------------
12
where:
BR = the Alternate Reference Rate in effect at such time,
SFR = the Servicing Fee Rate; and
TR = the aggregate Outstanding Balance of Eligible
Purchased Receivables as of such time, divided by the
aggregate new Eligible Purchased Receivables generated
during the most recently ended Collection Period.
Section 1.2 Other Definitional Provisions.
(a) Unless otherwise specified therein, all terms defined in this
Agreement have the meanings as so defined herein when used in the
Lender Note or any other Transaction Document, certificate, report or
other document made or delivered pursuant hereto.
(b) Each term defined in the singular form in Section 1.1 or
elsewhere in this Agreement means the plural thereof when the plural
form of such term is used in this Agreement, the Lender Note or any
other Transaction Document, certificate, report or other document made
or delivered pursuant hereto, and each term defined in the plural form
in Section 1.1 means the singular thereof when the singular form of
such term is used herein or therein.
(c) The words "hereof," "herein," "hereunder" and similar terms
when used in this Agreement shall refer to this agreement as a whole
and not to any particular provision of this Agreement, and article,
section, subsection, schedule and exhibit references herein are
references to articles, sections, subsections, schedules and exhibits
to this Agreement unless otherwise specified.
Section 1.3 Other Terms. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP. All terms used in Article 9
of the UCC and not specifically defined herein, are used herein as defined in
such Article 9.
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Section 1.4 Computation of Time Periods. Unless otherwise stated in
this Agreement, in the computation of a period of time from a specified date to
a later specified date, the word "from" means "from and including" and the words
"to" and "until" each means "to but excluding."
ARTICLE II
THE COMMITMENT, BORROWING PROCEDURES
AND NOTE; HEDGING AGREEMENTS
Section 2.1 The Lender's Commitment. On the terms and subject to the
conditions set forth in this Agreement, the Lender agrees to make loans (each, a
"Loan") to the Borrower on a revolving basis from time to time (the "Lender's
Commitment") on and after the Effective Date and before the Commitment
Termination Date in such amounts as may be from time to time requested by the
Borrower pursuant to Section 2.2; provided, however, that the aggregate
principal amount of all Loans from time to time outstanding hereunder shall not
exceed the least of: (a) $200,000,000 (the "Facility Limit"), subject to
increase as provided in the Administrative Agent Fee Letter; (b) the Borrowing
Base; and (c) $350,000,000. Under no circumstances shall the Lender make any
Loan if, after giving effect to such Loan, the aggregate face amount of all
Commercial Paper Notes issued by the Lender to fund Loans hereunder exceeds the
Facility Limit. Within the limits of the Lender's Commitment, the Borrower may
borrow, prepay and reborrow under this Section 2.1.
Section 2.2 Borrowing Procedures. The Borrower may request a Loan
hereunder by giving a written request (each, a "Borrowing Request") to the
Administrative Agent not later than 1:00 p.m. (Eastern time) on the day that is
one Business Day prior to the proposed date of borrowing date (such date, a
"Borrowing Date"). Each Borrowing Request shall be in the form of Exhibit A and
shall specify the Borrowing Date (which shall be a Business Day) and amount of
the proposed borrowing. Any Borrowing Request, once given, shall be irrevocable
and binding on the Borrower.
Section 2.3 Funding. Subject to the satisfaction of the conditions
precedent set forth in Article VII, on each Borrowing Date the Lender shall make
the proceeds of the requested Loan available to the Borrower, as directed
thereby, in same day funds to the account listed on Schedule 2.3. Each borrowing
shall be in an amount of at least $500,000 and in integral multiples of $100,000
in excess thereof.
Section 2.4 Representation and Warranty. Each request for a borrowing
pursuant to Section 2.2 shall automatically constitute a representation and
warranty by the Borrower and the Servicer to the Administrative Agent, the
Collateral Agent, the Lender and Royal that on the applicable Borrowing Date all
of the conditions precedent set forth in Article VII have been satisfied.
Section 2.5 Note. The Loans shall be evidenced by a single promissory
grid note (herein, as amended, modified, extended or replaced from time to time,
called the "Lender Note")
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substantially in the form set forth in Exhibit B, with appropriate insertions,
payable to the order of the Lender. The Borrower hereby irrevocably authorizes
the Administrative Agent in connection with the Lender Note to make (or cause to
be made) appropriate notations on the grid attached to the Lender Note (or on
any continuation of such grid, or at the Administrative Agent's option, in its
records), which notations, if made, shall evidence, inter alia, the date of, the
outstanding principal of, and the interest rate and Interest Period applicable
to the Loans evidenced thereby. Such notations shall be rebuttably presumptive
evidence of the subject matter thereof absent manifest error; provided, however,
that the failure to make any such notations shall not limit or otherwise affect
any Obligations of the Borrower.
Section 2.6 CP Maturities. The Administrative Agent shall select the
maturity dates for Commercial Paper Notes issued from time to time by the Lender
in connection herewith in its discretion; provided, however, that so long as no
Termination Event has occurred, the Administrative Agent shall use reasonable
efforts, taking into account market conditions, to accommodate the Borrower's
preferences.
Section 2.7 Borrowing Base Surplus. On any day if there exists a
Borrowing Base Surplus, the Borrower may notify the Administrative Agent in
writing that it requests that the amount on deposit in the Collection Account in
excess of the Required Cash Reserves (to the extent of such Borrowing Base
Surplus) be applied towards purchase of additional Receivables, provided,
however, that the Borrower may not make any such purchase unless all conditions
precedent set forth in Section 7.2 shall have been satisfied as if the Borrower
was to borrow additional Loans hereunder. Upon receipt of such written notice
and satisfaction of such conditions, the Administrative Agent shall direct the
Collateral Agent to apply such excess amount as so requested by the Borrower.
ARTICLE III
INTEREST, FEES, ETC.
Section 3.1 Interest Rates. The Borrower hereby promises to pay
interest on the unpaid principal amount of each Loan (or any portion thereof)
for the period commencing on the date of such Loan until such Loan is paid in
full, as follows:
(a) at all times while the making or maintenance of such Loan (or
the applicable portion thereof) by the Lender is funded by the issuance
of Commercial Paper Notes of the Lender at a rate per annum equal to
the Commercial Paper Rate applicable to such Interest Period;
(b) at all times while the making or maintenance of such Loan (or
the applicable portion thereof) by the Lender is funded pursuant to the
Liquidity Agreement at a rate per annum equal to the Bank Rate
applicable to such Interest Period;
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(c) if a Termination Event or an Unmatured Termination Event, at a
rate per annum (the "Default Rate") equal to the Alternate Reference
Rate applicable to such Interest Period, plus 2%, provided that with
respect to a Termination Event described in Section 10.1(g) or (l), the
Default Rate shall equal the Alternate Reference Rate.
After the date any principal amount of any Loan is due and payable
(whether on the Stated Maturity Date, upon acceleration or otherwise) or after
any other monetary Obligation of Borrower arising under this Agreement shall
become due and payable, Borrower shall pay (to the extent permitted by law, if
in respect of any unpaid amounts representing interest), except to the extent
the preceding clause (c) is applicable, interest (after as well as before
judgment) on such amounts at a rate per annum equal to the Alternate Reference
Rate plus a margin of 2%. No provision of this Agreement or the Lender Note
shall require the payment or permit the collection of interest in excess of the
maximum permitted by applicable law.
Section 3.2 Interest Payment Dates. Subject to Section 4.2, interest
accrued on each Loan shall be payable, without duplication:
(a) on the Stated Maturity Date;
(b) on the date of any payment or prepayment, in whole or
in part, of such Loan;
(c) on each Distribution Date prior to the Stated
Maturity Date; and
(d) on the day any Loan (a portion thereof) is
accelerated pursuant to Section 10.2.
Section 3.3 Fees. The Borrower agrees to pay certain Fees to such
Persons, in the amounts, and on the dates, set forth in the Fee Letter.
Section 3.4 Computation of Interest and Fees. All interest and fees
shall be computed on the basis of the actual number of days (including the first
day but excluding the last day) occurring during the period for which such
interest or fee is payable over a year comprised of 360 days (or, in the case of
interest on a Loan bearing interest at, or based upon, the Alternate Reference
Rate, 365 days or, if appropriate, 366 days).
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ARTICLE IV
REPAYMENTS AND PREPAYMENTS;
DISTRIBUTION OF COLLECTIONS; ACCOUNTS
Section 4.1 Repayments and Prepayments. The Borrower shall repay in
full the unpaid principal amount of each Loan on the Stated Maturity Date. Prior
thereto, the Borrower, subject to Section 4.2 :
(a) may, from time to time on any Business Day, prepay, in whole
or in part, the outstanding principal amount of any Loans; provided
that all such voluntary prepayments shall require at least two but no
more than five Business Days' prior written notice to Administrative
Agent; and each such voluntary partial prepayments shall be in a
minimum amount of $500,000 and an integral multiple of $100,000;
(b) shall, immediately upon any acceleration of the Stated
Maturity Date of any Loans pursuant to Section 10.2 repay such Loan;
provided that if only a portion of such Loan is accelerated pursuant to
Section 10.2, the Borrower shall repay such accelerated portion of the
Loan; and
(c) shall, if at any time a Borrowing Base Deficit shall exist,
make a prepayment of the Loans in an amount equal to such Borrowing
Base Deficit within two Business Days.
Each such prepayment shall be subject to the payment of any amounts
required by Section 6.2.
Section 4.2 Application of Collections
(a) All Collections deposited in the Collection Account shall be
distributed by the Collateral Agent in accordance with Section 2.7 and
this Section 4.2. In making the determinations and allocations required
under this Section 4.2, the Collateral Agent may rely absolutely upon
the information in the Monthly Report, unless the Servicer provides
alternate information prior to the distribution of funds pursuant to
Section 4.2(b) and in sufficient time to permit the Collateral Agent to
process and act upon such alternate information on the relevant
Distribution Date (and then the Collateral Agent may rely absolutely on
such alternate information).
(b) On each Distribution Date, the Collateral Agent shall
distribute from the Collection Account in the following amounts and
order of priority:
First, to the Collateral Agent, Royal and the Custodian, as
applicable, on a pro rata basis, the accrued Collateral
Agent Fees, Premiums and Custodian Fees then due and
payable:
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Second, to the Servicer, the accrued Servicing Fee then due and
payable;
Third, to the Backup Servicer, the accrued Backup Servicer
Fees (and, if the Backup Servicer becomes successor
Servicer hereunder, a one-time transition fee of
$25,000) then due and payable;
Fourth, to each Hedge Counterparty, on a pro rata basis, the
aggregate net amount then due and payable to such Hedge
Counterparty under each applicable Hedge Agreement
(excluding breakage costs);
Fifth, to the Administrative Agent, for the account of the
Lender, accrued interest on the Loans (including
overdue interest) then due and payable on such date;
Sixth, to the Administrative Agent, the accrued Facility Fees
due and payable;
Seventh, to the Administrative Agent, for the account of the
Lender, any principal amount of the Loans then payable
pursuant to Section 4.1;
Eighth, to the Person entitled thereto, all other Obligations
then due and payable by the Borrower under this
Agreement (including any amount payable under Articles
VI and XII);
Ninth, to Royal, an amount equal to the Accrued Liability on
the Loans then due and payable;
Tenth, to each Hedge Counterparty, on a pro rata basis, any
other amount (including any breakage costs) incurred by
such Person under the applicable Hedging Agreement then
due and payable; and
Eleventh, the balance, if any, shall be paid to the Borrower,
provided that if a Termination Event or an Unmatured
Termination Event exists, such amount shall be retained
in the Collection Account and applied as set forth
above on the next Distribution Date.
Section 4.3 Accounts; Permitted Investment.
(a) Lock-Box Account. Each of the Lock-Box Accounts shall at all
times be maintained with a Lock-Box Bank in the name of the Borrower.
The Collateral Agent may, at any time following the occurrence and
during the continuance of a Termination Event, give notice to the
Lock-Box Bank that the Collateral Agent is exercising its rights in
accordance
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with the Lockbox Account Agreement and will do any or all of the
following: (i) to have the exclusive ownership and control of the
Lockbox Account and to exercise exclusive dominion and control over the
funds deposited therein, (ii) to have the Collections that are sent to
any other account (other than to the Collection Account) be redirected
pursuant to its instructions, and (iii) to take any or all other
actions the Collateral Agent is permitted to take under Lockbox Account
Agreement.
(b) Collection Account. (i) On or prior to the date of the initial
Loan, the Servicer shall establish and maintain, in the name of the
Collateral Agent, for the benefit of the Secured Parties, an Eligible
Account with the Collection Account Bank bearing a designation clearly
indicating that the funds deposited therein are held for the benefit of
the Secured Parties (the "Collection Account"). The Collateral Agent
shall possess all right, title and interests in or to all moneys,
instruments, securities and other property on deposit from time to time
in the Collection Account and in all proceeds thereof for the benefit
of the Secured Parties. If at any time the Collection Account shall
cease to be an Eligible Account, the Collateral Agent shall within 10
Business Days establish a new Collection Account meeting the conditions
specified herein.
(ii) Without limiting anything provided in clause (i), if at any
time the Borrower or KBK, or any Affiliate thereof, receives any
Collections other than in accordance with the Collection Procedures,
the Borrower or KBK, as applicable, shall promptly (but in any event
within two (2) Business Days of receipt thereof) remit or cause to be
remitted all such Collections to the Collections Account. Prior to such
remittance, the Borrower and KBK, as applicable, shall hold or cause to
be held all such Collections in trust for the exclusive benefit of the
Secured Parties.
(c) Permitted Investments. (i) Funds at any time held in the Collection
Account shall, to the extent practicable, be invested and reinvested by the
Collateral Agent, at the written direction of the Servicer (unless a Termination
Event shall have occurred and be continuing, in which case at the written
direction of the Secured Parties) received by the Collateral Agent by 12:00
noon, Eastern time, on the Business Day prior to the date on which such
investment shall be made, in one or more Permitted Investments in a manner
provided in clause (iii). If no such written direction is received by the
Collateral Agent by such time, the Collateral Agent shall invest such funds in
Permitted Investments specified in clause (e) of the definition thereof.
(ii) Each investment made pursuant to this Section 4.3 on any date
shall mature or be available not later than the Business Day preceding
the Distribution Date after the day on which such investment is made,
except that any investment made on the day preceding a Distribution
Date shall mature on such Distribution Date.
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(iii) Any investment of funds in the Collection Account shall be
made in Permitted Investments held by a financial institution with
respect to which such institution has noted the Collateral Agent's
interest therein by book entry or otherwise, and a confirmation of the
Collateral Agent's interest has been sent to the Collateral Agent.
Subject to the other provisions hereof, the Collateral Agent shall have
sole control over each such investment and the income thereon, and any
certificate or other instrument evidencing any such investment, if any,
shall be delivered directly to the Collateral Agent or its agent,
together with each document of transfer, if any, necessary to transfer
title to such investment to the Collateral Agent.
(iv) The Collateral Agent shall not be liable in any manner by
reason of any insufficiency in the Collection Account resulting from
any loss on any Permitted Investment included therein.
ARTICLE V
PAYMENTS
Section 5.1 Making of Payments. All payments of principal of or
interest on the Loans, all Fees and all other amounts to be deposited by the
Borrower or the Servicer hereunder shall be made by the Borrower or the
Servicer, as applicable, no later than 1:00 p.m. (Eastern time), on the day when
due in lawful money of the United States of America in same day funds to the
account at a location in New York from time to time specified by the
Administrative Agent in writing. Funds received by the Administrative Agent
after 1:00 p.m. Eastern time, on the date when due, will be deemed to have been
received by the Administrative Agent on its next following Business Day.
Section 5.2 Application of Certain Payments. Each payment of principal
of the Loans shall be applied to such Loans as the Borrower shall direct or, in
the absence of such notice or during the existence of a Termination Event or
after the Commitment Termination Date, as the Administrative Agent shall
determine in its discretion.
Section 5.3 Due Date Extension. If any payment of principal or interest
with respect to any Loan falls due on a day which is not a Business Day, then
such due date shall be extended to the next following Business Day, and
additional interest shall accrue and be payable for the period of such
extension.
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ARTICLE VI
INCREASED COSTS, ETC.
Section 6.1 Increased Costs. If any change in Regulation D of the Board
of Governors of the Federal Reserve System, or any Regulatory Change, in each
case occurring after the date hereof:
(a) shall subject any Affected Party to any tax, duty or other
charge with respect to any Loan made or funded by it, or shall change
the basis of taxation of payments to such Affected Party of the
principal of or interest on any Loan owed to or funded by it or any
other amounts due under this Agreement in respect of any Loan made or
funded by it (except for changes in the rate of tax on the overall net
income of such Affected Party imposed by the jurisdiction in which such
Affected Party's principal executive office (or, in the case of a
Eurodollar office of such Affected Party, in which such Eurodollar
office) is located); or
(b) shall impose, modify or deem applicable any reserve
(including, without limitation, any reserve imposed by the Board of
Governors of the Federal Reserve System, but excluding any reserve
included in the determination of interest rates pursuant to Section
3.1), special deposit or similar requirement against assets of,
deposits with or for the account of, or credit extended by, any
Affected Party;
(c) shall change the amount of capital maintained or required or
requested or directed to be maintained by any Affected Party; or
(d) shall impose on any Affected Party any other condition
affecting any Loan made or funded by any Affected Party;
and the result of any of the foregoing is or would be to increase the cost to
(or in the case of Regulation D referred to above, to impose a cost on) (i) an
Affected Party funding or making or maintaining any Loan (including extensions
of credit under the Liquidity Agreement, or any commitment of such Affected
Party with respect to any of the foregoing), or (ii) the Administrative Agent
for continuing its or the Borrower's relationship with the Lender, to reduce the
amount of any sum received or receivable by an Affected Party under this
Agreement, the Lender Note, the Liquidity Agreement with respect thereto, or in
the sole good faith determination of such Affected Party, to reduce the rate of
return on the capital of an Affected Party as a consequence of its obligations
hereunder or arising in connection herewith to a level below that which such
Affected Party could otherwise have achieved, then within five Business Days
after demand by such Affected Party to the Borrower (which demand shall be
accompanied by a written statement setting forth the basis of such demand), the
Borrower shall pay to the Administrative Agent for the account of such Affected
Party, such additional amount or amounts as will (in the reasonable
determination of such Affected Party) compensate such Affected Party for such
increased cost or such reduction. Such written statement
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(which shall include calculations in reasonable detail) shall, in the absence of
manifest error, be rebuttably presumptive evidence of the subject matter
thereof.
Section 6.2 Funding Losses. The Borrower hereby agrees that upon demand
by any Affected Party (which demand shall be accompanied by a statement setting
forth the basis for the calculations of the amount being claimed) the Borrower
will indemnify such Affected Party against any net loss or expense which such
Affected Party may sustain or incur (including, without limitation, any net loss
or expense incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by such Affected Party to fund or maintain any Loan made by
the Lender to the Borrower), as reasonably determined by such Affected Party, as
a result of (a) any payment or prepayment (including any mandatory prepayment)
of any Loan on a date other than the Distribution Date for such Loan, or (b) any
failure of the Borrower to borrow any Loan on a date specified therefor in a
related Borrowing Request. Such written statement shall, in the absence of
manifest error, be rebuttably presumptive evidence of the subject matter
thereof.
ARTICLE VII
CONDITIONS TO BORROWING
The making of any Loan hereunder is subject to the following conditions
precedent:
Section 7.1 Initial Loan. The obligation of the Lender to make the
initial Loan hereunder is subject to the condition precedent that the
Administrative Agent shall have received all of the following, each duly
executed and dated the date of such Loan (or such earlier date as shall be
satisfactory to the Administrative Agent), in form and substance satisfactory to
the Liquidity Agent:
(a) Authority; Transaction Documents. Evidence of the due
authorization, execution and delivery by each of the parties to this
Agreement and the other Transaction Documents.
(b) Consents, etc. Certified copies of all documents evidencing
any necessary action, consents and governmental approvals (if any) with
respect to this Agreement and the other Transaction Documents.
(c) Incumbency and Signatures. A certificate of the Borrower,
certifying the names of its officer or officers authorized to sign this
Agreement and the other Transaction Documents on behalf thereof.
(d) Good Standing Certificates. A certificate of existence for the
Borrower issued as of a recent date acceptable to the Administrative
Agent by the Secretary of State of the jurisdiction of the Borrower's
organization.
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(e) Financing Statements. (i) Acknowledgment copies of proper
financing statements (Form UCC-1), filed on or prior to the date of the
initial Loan, naming the Borrower as debtor and the Collateral Agent as
the secured party as may be reasonably necessary or, in the opinion of
the Administrative Agent, desirable under the UCC to perfect the
Collateral Agent's security interest in the Collateral and (ii)
executed copies of proper Uniform Commercial Code Form UCC-3 financing
statements necessary to release or terminate all or part of liens and
other Adverse Claims of any Person in the Collateral granted by any
Person.
(f) Search Reports. A written search report dated no more than two
weeks prior to the date of the initial Loan by a search service
acceptable to the Administrative Agent, listing all effective financing
statements that name the Borrower as debtor or assignor and that are
filed in the jurisdictions in which filings were made pursuant to
Section 7.1(f) above and in such other jurisdictions that the
Administrative Agent shall reasonably request, together with copies of
such financing statements (none of which shall cover any Collateral or
interests therein or proceeds of any thereof, other than those liens
that have been previously released or terminated), and tax and judgment
lien search reports from a Person satisfactory to the Administrative
Agent showing no evidence of such lien filed against the Borrower.
(g) Fee Letter; Payment of Fees. Each of the Fee Letters, together
with all fees due and payable thereunder and all costs and expenses due
and payable pursuant to Section 15.4.
(h) Closing Certificate. A certificate from an authorized officer
of the Borrower and the Servicer as to the satisfaction of the
conditions set forth in Section 7.2.
(i) Opinions of Counsel. Favorable opinions of counsels to the
Borrower, the Servicer and KBK in form and substance satisfactory to
the Administrative Agent.
(j) Accounts. Establishment of (a) the Lockbox Accounts, and (b)
the Collection Account in accordance with Section 4.3 hereof.
(k) Royal Policy. The Royal Policy shall become effective.
(l) Other. Such agreements, opinions, rating letters, certificates
and other documents as the Administrative Agent may reasonably request.
Section 7.2 All Loans. The making of the initial Loan and each
subsequent Loan are subject to the following further conditions precedent:
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(a) No Default, etc. (i) No Termination Event or Unmatured
Termination Event has occurred and is continuing or will result from
the making of such Loan, (ii) the representations and warranties of the
Borrower contained in Article VIII are true and correct as of the date
of such requested Loan, with the same effect as though made on the date
of such representations and warranties were made, and (iii) after
giving effect to such Loan, the aggregate Outstanding Balances of the
Loans will not exceed the Borrowing Base.
(b) Borrowing Request, etc. The Administrative Agent shall have
received the following: (i) a Borrowing Request for such Loan in
accordance with Section 2.2 (which may be a facsimile transmission of a
properly completed and executed Borrowing Request), together with all
items required to be delivered in connection therewith; (ii) a List of
Receivables, identifying the Eligible Receivables to be funded with the
proceeds of such Loan; (iii) confirmation from the Custodian (or its
designee) of its receipt of the items required pursuant to Section
7.2(c); and (iv) a Borrowing Base Certificate duly executed by a
Financial Officer of the Servicer showing a calculation of the
Borrowing Base as of the date of such Loan.
(c) Delivery of Receivables Files. The Borrower shall have
delivered (a) to the Collateral Agent and the Custodian, a true and
correct copy of the List of Receivables for such Borrowing Request, and
(b) to the Custodian, the Receivable Files for each Receivable
identified in such List of Receivables.
(d) Commitment Termination Date. The Commitment Termination Date
shall not have occurred.
(e) Representations and Warranties of KBK. All representations
and warranties made by KBK, individually and in its capacity as the
Servicer, under the Purchase and Sale Agreement are true and correct in
all material respects.
(f) Other. The Administrative Agent shall have delivered such
agreements, opinions, ratings, letters, certificates and other
documents as reasonably requested thereby.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
In order to induce the Lender, the Administrative Agent, the Collateral
Agent and the Liquidity Agent to enter into this Agreement and, in the case of
the Lender, to make Loans hereunder, the Borrower hereby represents and warrants
to the Administrative Agent, the Collateral Agent, the Liquidity Agent and the
Lender as follows:
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Section 8.1 Organization and Good Standing, etc. The Borrower has been
duly organized and is existing as a limited partnership in good standing under
the laws of the State of Texas, with power and authority to own its properties
and to conduct its business as such properties are presently owned and such
business is presently conducted. The Borrower is duly licensed or qualified to
do business as a foreign entity and is in good standing in the jurisdiction
where its principal place of business and chief executive office are located and
in each other jurisdiction in which the failure to be so licensed or qualified
would be reasonably likely to have a Material Adverse Effect.
Section 8.2 Power and Authority; Due Authorization. The Borrower has
(a) all necessary power, authority and legal right to (i) execute, deliver and
perform its obligations under this Agreement and each of the other Transaction
Documents to which it is a party, and (ii) to borrow on the terms and subject to
the conditions herein provided, and (b) duly authorized, by all necessary action
(as applicable), the execution, delivery and performance of this Agreement and
the other Transaction Documents to which it is a party and the borrowing, and
the granting of security therefor, on the terms and conditions provided herein
and in the Security Agreement.
Section 8.3 No Violation. The consummation of the transactions
contemplated by this Agreement and the other Transaction Documents and the
fulfillment of the terms hereof will not (a) conflict with, result in any breach
of any of the terms and provisions of, or constitute (with or without notice or
lapse of time or both) a default under, (i) the certificate or articles of
incorporation or by-laws of the Borrower, or (ii) any indenture, loan
agreement, pooling and servicing agreement, receivables purchase agreement,
mortgage, deed of trust, or other agreement or instrument to which the Borrower
is a party or by which it or any of its properties is bound, (b) result in or
require the creation or imposition of any Adverse Claim upon any of its
properties pursuant to the terms of any such indenture, loan agreement, pooling
and servicing agreement, receivables purchase agreement, mortgage, deed of
trust, or other agreement or instrument, other than the Transaction Documents,
or (c) violate any law or any order, rule, or regulation applicable to the
Borrower or of any court or of any federal, state or foreign regulatory body,
administrative agency, or other governmental instrumentality having jurisdiction
over the Borrower or any of its properties.
Section 8.4 Validity and Binding Nature. This Agreement is, and the
other Transaction Documents to which it is a party when duly executed and
delivered by the Borrower will be, the legal, valid and binding obligation of
the Borrower enforceable against the Borrower in accordance with their
respective terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar law affecting
creditors' rights generally and by general principles of equity.
Section 8.5 Government Approvals. No authorization or approval or other
action by, and no notice to or filing with, any governmental authority or
regulatory body required for the due execution, delivery or performance by the
Borrower of any Transaction Document to which it is a party remains
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unobtained or unfiled, except for the filing of the UCC financing statements
referred to in Section 7.1(c).
Section 8.6 Financial Condition. Since December 31, 1999, no event has
occurred that has had, or is reasonably likely to have, a Material Adverse
Effect.
Section 8.7 Margin Regulations. The Borrower is not engaged in the
business of extending credit for the purpose of purchasing or carrying margin
stock, and no proceeds of any Loans, directly or indirectly, will be used for a
purpose that violates, or would be inconsistent with, Regulations T, U and X
promulgated by the Federal Reserve Board from time to time.
Section 8.8 Quality of Title. The Borrower is the legal and beneficial
owner of all the Collateral, free and clear of any Adverse Claim (other than the
Adverse Claims under the Transaction Documents). The Security Agreement creates
a valid security interest in favor of the Collateral Agent (for the benefit of
the Secured Parties) in the Collateral, which security interest has been
perfected, or upon filing of UCC Financing Statements pursuant to Section
7.1(e), will be perfected and constitutes and will constitute (upon such filing)
perfected first priority security of the Collateral Agent. No other effective
financing statement or similar instrument in effect covering any of the
Collateral or any interest therein is on file in any recording office except for
financing statements that may be filed (i) in favor of the Collateral Agent for
the benefit of the Secured Parties in accordance with the Security Agreement,
(ii) in favor of the Borrower in accordance with the Purchase and Sale Agreement
(as assigned to the Collateral Agent) or (iii) with respect to which a release
or related UCC termination statement has been obtained in connection with a
Loan.
Section 8.9 Accuracy of Information. All factual written information
heretofore or contemporaneously furnished by the Borrower to the Lender, the
Administrative Agent, the Collateral Agent or the Liquidity Agent for purposes
of or in connection with any Transaction Document or any transaction
contemplated hereby or thereby is, and all other such factual, written
information hereafter furnished by the Borrower to the Lender, the
Administrative Agent, the Collateral Agent or the Liquidity Agent pursuant to or
in connection with any Transaction Document will be, true and accurate in every
material respect on the date as of which such information is dated or certified.
No information contained in any report or certificate delivered pursuant to this
Agreement or any other Transaction Document shall be incomplete by omitting to
state a material fact or any fact necessary to make the statements contained
therein not misleading on the date as of which such information is dated or
certified.
Section 8.10 Offices. The principal place of business and chief
executive office of the Borrower is located at the address referred to in
Section 15.3 (or at such other locations, notified to the Administrative Agent
in accordance with Section 9.1(e), in jurisdictions where all action required
thereby has been taken and completed).
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Section 8.11 Trade Names. The Borrower does not use any trade name
other than its actual corporate name.
Section 8.12 Taxes. The Borrower has filed all tax returns and reports
required by law to have been filed by it and has paid all taxes and governmental
charges thereby shown to be owing, except any such taxes or charges that are
being diligently contested in good faith by appropriate proceedings and for
which adequate reserves in accordance with GAAP shall have been set aside on its
respective books.
Section 8.13 Compliance with Applicable Laws; Licenses, etc.
(a) The Borrower is in compliance with the requirements of all
applicable laws, rules, regulations, and orders of all governmental
authorities (including, without limitation, the Federal Consumer Credit
Protection Act, as amended, Regulation Z of the Board of Governors of
the Federal Reserve System, as amended, laws, rules and regulations
relating to usury, truth in lending, fair credit billing, fair credit
reporting, equal credit opportunity, fair debt collection practices and
privacy and all other consumer laws, rules and regulations applicable
to the Receivables), except to the extent failure to so comply could
not have a Material Adverse Effect.
(b) The Borrower has not failed to obtain any licenses, permits,
franchises or other governmental authorizations necessary to the
ownership of its properties or to the conduct of its business, except
to the extent such failure could not have a Material Adverse Effect.
Section 8.14 No Proceedings. (a) There is no order, judgment, decree,
injunction, stipulation or consent order of or with any court or other
government authority to which the Borrower is subject, and there is no action,
suit, arbitration, regulatory proceeding or investigation pending, or, to the
knowledge of the Borrower, threatened, before or by any court, regulatory body,
administrative agency or other tribunal or governmental instrumentality, against
the Borrower; and
(b) There is no action, suit, proceeding, arbitration, regulatory
or governmental investigation, pending or, to the knowledge of the
Borrower threatened, before or by any court, regulatory body,
administrative agency, or other tribunal or governmental
instrumentality (i) asserting the invalidity of this Agreement, the
Lender Note or any other Transaction Document, (ii) seeking to prevent
the issuance of the Lender Note or the consummation of any of the other
transactions contemplated by this Agreement or any other Transaction
Document or (iii) seeking to adversely affect the federal income tax
attributes of the Borrower.
Section 8.15 Investment Company Act, Etc. The Borrower is not an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended, or a "holding company", or a "subsidiary company", of a "holding
company", or an "affiliate" of a "holding company", or of
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a "subsidiary company" of a "holding company", within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
Section 8.16 Eligible Receivables. Each Receivable included in the
calculation of the Borrowing Base as an Eligible Receivable on the date of any
Borrowing Base Certificate or the date of funding of any Loan shall, in fact, be
an Eligible Receivable on such date.
ARTICLE IX
COVENANTS OF BORROWER
Section 9.1 Affirmative Covenants. From the date hereof until the first
day, following the Commitment Termination Date, on which all Obligations shall
have been finally and fully paid and performed, the Borrower hereby covenants
and agrees with the Lender, the Administrative Agent, the Collateral Agent, the
Liquidity Agent and Royal Allowance that it will:
(a) Compliance with Laws, Etc. Comply in all material respects
with all applicable laws, rules, regulations and orders of all
governmental authorities (including those which relate to the
Receivables).
(b) Preservation of Existence. Preserve and maintain its corporate
existence, rights, franchises and privileges in the jurisdiction of its
organization, and qualify and remain qualified in good standing as a
foreign corporation in the jurisdiction where its principal place of
business and its chief executive office are located and in each other
jurisdiction where the failure to preserve and maintain such existence,
rights, franchises, privileges and qualifications would have a Material
Adverse Effect.
(c) Audits. (i) At any time and from time to time (but not more
frequently than once per calendar quarter, unless a Termination Event
or Unmatured Termination Event shall have occurred and be continuing)
during regular business hours (upon at least five Business Days' prior
notice (so long as no Termination Event or Unmatured Termination Event
shall have occurred and be continuing)), permit the Royal and the
Administrative Agent, or their agents or representatives (A) to examine
and make copies of and abstracts from all books, records and documents
(including, without limitation, computer tapes and disks) in possession
or under the control of the Borrower or the Servicer relating to the
Receivables and the other Collateral, and (B) to visit the offices and
properties of the Borrower or the Servicer for the purpose of examining
such materials described in clause (i)(A) next above, and to discuss
matters relating to the Receivables or the performance hereunder with
any of the officers or employees of the Borrower or the Servicer having
knowledge of such matters, and (ii) without limiting the foregoing
clause (i) above, from time to time on request of the Administrative
Agent (but not more frequently than once per calendar quarter, unless a
Termination Event or
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Unmatured Termination Event has occurred), permit certified public
accountants or other auditors selected by the Administrative Agent to
conduct a review of the Borrower's and the Servicer's books and records
with respect to the Receivables and all other documents related
thereto. Any costs and expenses incurred in connection with the
foregoing shall: (i) with respect to the Administrative Agent, be paid
by itself, and (ii) with respect to Royal, be paid by the Borrower for
the first $2,500 per calendar quarter and by Royal for any additional
amounts; provided, however, that following the occurrence of a
Termination Event or an Unmatured Termination Event, all such costs and
expenses incurred by the Administrative Agent and Royal shall be paid
by the Borrower.
(d) Keeping of Records and Books of Account. Keep (or cause the
Servicer on its behalf to keep) books and records that accurately
reflect all of the Borrower's business affairs and transactions, and
cause the Servicer to maintain and implement administrative and
operating procedures (including, without limitation, an ability to
re-create records evidencing the Receivables in the event of the
destruction of the originals thereof) and keep and maintain all
documents, books, records and other information reasonably necessary or
advisable for the collection of all Receivables.
(e) Location of Records. Keep its principal place of business and
chief executive office at the address referred to in Section 8.10 or,
upon 30 days' prior written notice to the Collateral Agent, at such
other locations in jurisdictions in the continental United States where
all action required to maintain the Collateral Agent's perfected
security interest pursuant to Section 3.1(b) of the Security Agreement
shall have been taken and completed or shall be so taken and completed
prior to the loss of any perfection thereof arising from such
relocation.
(f) Credit and Collection Policy. Comply (and cause the Servicer
to comply) in all material respects with the Credit and Collection
Policy in regard to each Receivable.
(g) Separate Corporate Existence. The Borrower hereby acknowledges
that the Lender, the Administrative Agent, the Collateral Agent, the
Liquidity Agent and Royal are entering into the transactions
contemplated by this Agreement and the other Transaction Documents in
reliance upon the Borrower's identity as a legal entity separate from
KBK. Therefore, from and after the date hereof, the Borrower shall take
all reasonable steps specifically required by this Agreement to
continue the Borrower's identity as a separate legal entity and to make
it apparent to third Persons that the Borrower is an entity with assets
and liabilities distinct from those of KBK and any other Person, and is
not a division of KBK or any other Person. Without limiting the
generality of the foregoing and in addition to and consistent with the
covenant set forth in Section 9.1(b), the Borrower shall take such
actions as shall be required in order that:
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(i) The Borrower will be a special purpose, bankruptcy-remote
corporation whose primary activities are restricted to the purposes
described in its certificate of incorporation, including entering into
the Transaction Documents to which it is a party and conducting such
other activities as it deems necessary or appropriate to carry out its
primary activities;
(ii) The Borrower has at least two independent directors as
required under its certificate of incorporation;
(iii) The Borrower will not incur any indirect or overhead
expenses for items shared among the Borrower and KBK (or any other
Affiliate thereof);
(iv) The Borrower's operating expenses will not be paid by KBK or
any other Affiliate thereof;
(v) The Borrower will have its own phone number and stationery;
(vi) The Borrower's books and records will be maintained
separately from those of KBK and any other Affiliate thereof;
(vii) The Borrower's assets will be maintained in a manner that
facilitates their identification and segregation from those of KBK or
any Affiliate thereof;
(viii) The Borrower will strictly observe corporate formalities in
its dealings with KBK or any Affiliate thereof, and funds or other
assets of the Borrower will not be commingled with those of KBK. The
Borrower shall not maintain joint bank accounts or other depository
accounts to which KBK or any Affiliate thereof (other than KBK in its
capacity as the Servicer) has independent access; and
(ix) The Borrower will maintain arm's-length relationships with
KBK and any Affiliate thereof. Any Person that renders or otherwise
furnishes services to the Borrower will be compensated thereby at
market rates for such services it renders or otherwise furnishes
thereto. None of the Borrower, KBK or any Affiliate thereof will be or
will hold itself out to be responsible for the debts of the other or
the decisions or actions respecting the daily business and affairs of
the other.
(h) Reporting Requirements of the Borrower. The Borrower will
furnish to the Administrative Agent and Royal:
(i) Monthly Financial Statements. As soon as available and in any
event within 30 days after the end of each of the first two calendar
months of each Fiscal Quarter of Parent, (i) copies of the unaudited
balance sheet of the Parent as at the end of such calendar month,
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together with unaudited statements of earnings and cash flows for such
calendar month and for the period commencing at the end of the previous
Fiscal Year and ending with the end of such calendar month, prepared in
accordance with generally accepted accounting principles and certified
by the chief financial officer, treasurer, assistant treasurer or chief
accounting officer (a "Financial Officer") of the Parent, and (ii) a
letter from a Financial Officer of KBK certifying that neither a
Termination Event nor an Unmatured Termination Event has occurred and
is continuing;
(ii) Quarterly Financial Statements. As soon as available and in
any event within 45 days after the end of each of the first three
Fiscal Quarters of each Fiscal Year of the Borrower and Parent, (i)
copies of the unaudited balance sheet of the Borrower and the Parent as
at the end of such Fiscal Quarter, together with unaudited statements
of earnings and cash flows for such Fiscal Quarter and for the period
commencing at the end of the previous Fiscal Year and ending with the
end of such Fiscal Quarter, prepared in accordance with generally
accepted accounting principles and certified by Financial Officer, of
the Borrower and the Parent, respectively, and (ii) a letter from a
Financial Officer of the Borrower or the Parent, respectively,
certifying that neither a Termination Event nor an Unmatured
Termination Event has occurred and is continuing;
(iii) Annual Financial Statements. As soon as available and in any
event within 90 days after the end of each Fiscal Year of the Borrower
and the Parent, a copy of the unaudited annual report for such Fiscal
Year of the Borrower and audited annual report for such Fiscal Year of
the Parent including a copy of the balance sheet of the Borrower and
the Parent as at the end of such Fiscal Year, together with the related
statements of earnings and cash flows for such Fiscal Year, in each
case prepared in accordance with generally accepted accounting
principles and certified by KPMG Peat Marwick LLP or other independent
public accountants reasonably acceptable to the Administrative Agent,
together with a letter from a Financial Officer of the Borrower and the
Parent, respectively, certifying that neither a Termination Event nor
an Unmatured Termination Event has occurred and is continuing;
(iv) Monthly Reports. On or before the third Business Day
preceding each Distribution Date, the Borrower shall prepare (or cause
the Servicer to prepare) and deliver to the Administrative Agent, Royal
and the Collateral Agent a report, substantially in the form of Exhibit
C or in such other form reasonably acceptable to the Administrative
Agent and the Collateral Agent (a "Monthly Report"), as of the
preceding Month End Date signed by a Financial Officer of the Servicer,
setting forth among other things the amounts payable to each Person
pursuant to Section 4.1, and a Borrowing Base Certificate, setting
forth a calculation of the Borrowing Base (together with such other
information set forth therein) as of the preceding Month End Date
signed by a Financial Officer of the Servicer;
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(v) Proceedings. As soon as possible and in any event within two
Business Days after, the Borrower receives notice thereof, any
settlement of, judgment (including a judgment with respect to the
liability phase of a bifurcated trial) in or commencement of any labor
controversy, litigation, action or proceeding of the type described in
Section 8.14, notice thereof and, upon the Collateral Agent's, Royal's
or the Administrative Agent's request, copies of all non-confidential
or non-privileged documentation relating thereto that are in the
possession of the Borrower, KBK or the Servicer.
(vi) Litigation. As soon as possible and in any event within two
Business Days of the Borrower's knowledge thereof, notice of (A) any
litigation, investigation or proceeding of the type described in
Schedule 8.14 not previously disclosed to the Collateral Agent or the
Administrative Agent, and (B) any material adverse development in
previously disclosed litigation, investigation or proceeding;
(vii) Notice of Material Events. Promptly upon becoming aware
thereof, notice of any other event or circumstance that, in the
reasonable judgment of the Borrower, is likely to have a Material
Adverse Effect;
(viii) Termination Events. As soon as possible and in any event
within two Business Days after the occurrence of each Termination Event
or Unmatured Termination Event, a written statement of a Financial
Officer of the Borrower setting forth details of such event and the
action that the Borrower proposes to take with respect thereto; and
(ix) Other. Promptly, from time to time, such other information,
documents, records or reports respecting the Collateral, the
Receivables, or the condition or operations, financial or otherwise, of
the Borrower as the Collateral Agent, the Administrative Agent, the
Liquidity Agent or Royal may from time to time reasonably request.
(i) Use of Proceeds. The Borrower shall use the proceeds of the
Loans made hereunder solely to purchase Receivables from KBK pursuant
to the Purchase and Sale Agreement.
(j) Interest Rate Hedge. If at any time (i) the excess of (A) the
weighted average of the stated interest rates applicable to the
fixed-rate Eligible Term Loan Receivables over (B) the Alternate
Reference Rate plus 1.4% shall at any time be less than 0.25%, or (ii)
the aggregate Outstanding Balances of fixed-rate Eligible Term Loan
Receivables exceeds $20,000,000 the Borrower shall, at its own expense
and within five Business Days after the occurrence of such condition,
enter into, and thereafter maintain in full force and effect, one or
more Hedge Agreements, each of which shall contain a payment schedule,
providing for payment of interest on a monthly basis equal to the
Alternate Reference Rate plus 1%, relating to such fixed-rate Eligible
Term Loan Receivables and once so hedged, shall no longer
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constitute fixed rate Eligible Term Loan Receivables for purposes of
this Section 9.1(j). The Borrower agrees to execute such documents and
instruments as may be necessary or, in the reasonable opinion of the
Collateral Agent, Administrative Agent or Royal, desirable, to effect
the assignment of its rights under the Hedge Agreements to the
Collateral Agent for the benefit of the Secured Parties.
(k) UCC Filings. The Borrower shall file or cause to be filed and
maintain in effect all UCC financing statements, and take all such
other actions, as may be necessary to protect the validity, perfection
and priority of the Collateral Agent's security interest in the
Collateral.
Section 9.2 Negative Covenants of the Borrower. From the date hereof
until all Obligations shall have been finally and fully paid and performed, the
Borrower shall perform its Obligations under this Section 9.2.
(a) Sales, Liens, Etc. Except pursuant to, or as contemplated by,
the Transaction Documents, the Borrower shall not sell, assign (by
operation of law or otherwise) or otherwise dispose of, or create or
suffer to exist voluntarily or involuntarily any Adverse Claims upon or
with respect to any of the Collateral, any interest therein or any
right to receive any amount from or in respect thereof.
(b) Mergers, Acquisitions, Sales, Subsidiaries, etc. The Borrower
shall not:
(i) be a party to any merger or consolidation, or directly or
indirectly purchase or otherwise acquire all or substantially all of
the assets or any stock of any class of, or any partnership or joint
venture interest in, any other Person, except for Permitted Investments
and securities received in settlement of Receivables, or sell,
transfer, assign, convey or lease any of its property and assets (or
any interest therein) other than pursuant to, or as contemplated by,
this Agreement or the other Transaction Documents;
(ii) make, incur or suffer to exist an investment in, equity
contribution to, loan or advance to, or payment obligation in respect
of the deferred purchase price of property from, any other Person,
except pursuant to the Transaction Documents; or
(iii) create any direct or indirect Subsidiary or otherwise
acquire direct or indirect ownership of any equity interests in any
other Person other than pursuant to the Transaction Documents.
(c) Amendments to Certain Documents. The Borrower shall not amend,
supplement, amend and restate, or otherwise modify or agree to any
waiver of any provision contained in its certificate of incorporation
or by-laws or any Transaction Document unless it is made (a) in
accordance with the terms of such document, instrument or agreement or
(b)
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with the prior written consent of the Administrative Agent, the
Liquidity Agent, Lender, the Collateral Agent and Royal.
(d) Incurrence of Indebtedness; Distributions. The Borrower shall
not create, incur or permit to exist, any Indebtedness except for (a)
Indebtedness and liabilities incurred pursuant to the Transaction
Documents and normal trade payables incurred in the ordinary course of
its business and (b) Indebtedness arising under Hedging Agreements; and
the Borrower shall not pay or make any distributions if, after giving
effect thereto, any Termination Event or Unmatured Termination Event
would exist.
(e) Deposits. The Borrower shall not deposit or otherwise credit,
or cause or permit to be so deposited or credited by any Person, to the
Collection Account or the Lockbox Account cash or cash proceeds other
than the Collections. The Borrower shall deposit any Collections
received directly thereby into the Collection Account within one
Business Day.
(f) Change in Business Policy. The Borrower shall not make any
material change in the character of its business.
(g) Change in Payment Instructions or Accounts. The Borrower shall
not make any change in its instructions to Obligors regarding
Collections or payments to be made to the Collection Account, the
Lockbox Account or any post-office box, unless (i) the Administrative
Agent shall have received notice of such change and (ii) the
Administrative Agent previously shall have consented in writing to such
change, such consent not to be unreasonably delayed or withheld. The
Borrower shall not add or terminate any bank as the Collection Account
Bank, the Lockbox Account Bank, or any post-office box or make any
change in its instructions regarding payments to be made by the
Collection Account Bank, Lockbox Account Bank or any post-office box,
unless (A) the Collateral Agent shall have received duly executed
counterparts of the Lockbox Account Agreement (in form and substance
reasonably satisfactory to the Collateral Agent) with such Lockbox
Account Bank, or information satisfactory to the Collateral Agent with
respect to the Collection Account Bank, in each case, such account
shall be an Eligible Account, and (B) the Collateral Agent previously
shall have consented in writing to such termination or change (such
consent not to be unreasonably withheld).
(h) Forms of Receivables. The Borrower shall not fund or acquire
any Receivable that is (i) not substantially in a form previously
approved by the Collateral Agent or (ii) if not specifically approved,
in a form which does not materially deviate in any substantive way from
the provisions of any form that has been approved by the Collateral
Agent.
(i) Hedging. The Borrower shall not at any time permit the
notional amount of any Hedge Agreement to vary from the amount required
under Section 2.6(iii) by more than 2.0%.
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ARTICLE X
TERMINATION EVENTS AND THEIR EFFECT
Section 10.1 Termination Events. Each of the following shall constitute
a Termination Event under this Agreement:
(a) Non-Payment of Loans, Etc. The Borrower shall fail to make any
payment when due of any principal of or interest on any Loan, the Fees
and other amount payable by the Borrower hereunder or under any other
Transaction Documents, which failure shall have continued for two
Business Days.
(b) Non-Compliance with Other Provisions. The Borrower shall fail
to perform or observe any other term, covenant or agreement contained
in this Agreement, the Security Agreement or any other Transaction
Document on its part to be performed or observed and any such failure
shall remain unremedied for 30 days after the occurrence thereof.
(c) Breach of Representations and Warranties. Any representation
or warranty of the Borrower made or deemed to have been made hereunder
or in any other Transaction Document or any other writing or
certificate furnished by or on behalf of the Borrower to the
Administrative Agent, the Collateral Agent, Royal or the Lender for
purposes of or in connection with this Agreement or any other
Transaction Document (including, without limitation, any certificates
delivered pursuant to Section 9.1(h)(i) or (ii) and any Monthly Report
or Borrowing Base Certificate delivered pursuant to Section 9.1(h)(iii)
shall prove to have been false or incorrect in any material respect
when made or deemed to have been made.
(d) Bankruptcy. An Event of Bankruptcy shall have occurred and
remained continuing with respect to the Borrower or KBK.
(e) Borrowing Base Deficit. At any time the aggregate principal
amount of all Loans outstanding hereunder shall exceed the Borrowing
Base and such condition shall continue unremedied for two consecutive
Business Days.
(f) Hedging Agreement. The Borrower shall fail to comply with
Section 9.1(j).
(g) Ratios. (i) The three-month rolling average Default Ratio of
Purchased Receivables shall equal or exceed 5% or (ii) the six-month
rolling average Default Ratio for Loan Receivables shall equal or
exceed 3.5%.
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(h) Tax Liens; ERISA Liens. The Internal Revenue Service shall
file notice of a lien pursuant to Section 6323 of the Internal Revenue
Code with regard to any of the assets of the Borrower or the Pension
Benefit Guaranty Corporation shall file notice of a lien pursuant to
Section 4068 of ERISA with regard to any of the assets of the Borrower.
(i) Validity of Transaction Documents. (a) Any Transaction
Document, or any lien or security interest granted thereunder, shall
(except in accordance with its terms), in whole or in part, terminate,
cease to be effective or cease to be the legally valid, binding and
enforceable obligation of the Borrower, (b) the Borrower, KBK or any
other party shall, directly or indirectly, contest in any manner such
effectiveness, validity, binding nature or enforceability or (c) the
security interest of the Collateral Agent (for the benefit of the
Secured Parties) in the Collateral shall, in whole or in part, cease to
be a perfected first priority security interest.
(j) Change in Control. A Change in Control shall have occurred
with respect to the Borrower or KBK.
(k) Defaults Under Other Agreements. (a) A "Servicer Termination
Event" (as defined therein) shall have occurred under the Servicing
Agreement, and (b) a "Purchase and Sale Termination Event" (as defined
therein) shall have occurred under the Purchase and Sale Agreement, (c)
an "Insurance Agreement Event of Default" (as defined therein) shall
have occurred under the Insurance Agreement or (d) any party to any
Hedging Agreement shall fail to make any payment when due and such
failure shall remain unremedied for two Business Days.
(l) Net Worth. The Borrower shall cease to have a tangible net
worth of at least $10,000,000, as determined in accordance with GAAP.
(m) Investment Company. The Borrower becomes an "investment
company" with the meaning of the Investment Company Act of 1940, as
amended.
(n) Merger. The Borrower or KBK shall enter into any transaction
or merger in which it is not the surviving entity, or dispose of all or
substantial portion of its assets, except as specifically permitted
under the Transaction Documents.
(o) Parent Undertaking. The Parent fails to perform its
obligations provided in the Parent Undertaking or the Parent
Undertaking at any time ceases to be in full force and effect.
(p) Royal Policy. The Royal Policy ceases to be in effect or any
claim is made in accordance with the terms thereof on the Royal Policy.
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Section 10.2 Effect of Termination Event.
(a) Optional Termination. Upon the occurrence of a Termination
Event (other than a Termination Event described in Section 10.1(d)),
the Administrative Agent may, and at the request of the Lender shall,
by notice to the Borrower (with a copy to the Collateral Agent and
Royal), declare all or any portion of the outstanding principal amount
of the Loans and other Obligations to be due and payable and/or the
Lender's Commitment (if not theretofore terminated) to be terminated,
whereupon the full unpaid amount of such Loans and other Obligations
shall become immediately due and payable, without further notice,
demand or presentment, and/or, as the case may be, the Lender's
Commitment shall terminate.
(b) Automatic Termination. Upon the occurrence of a Termination
Event described in Section 10.1(d), the Commitment Termination Date
shall be deemed to have occurred automatically, and all outstanding
Loans and all other Obligations shall become immediately and
automatically due and payable, all without presentment, demand,
protest, or notice of any kind.
ARTICLE XI
THE SERVICER
Section 11.1 KBK as Initial Servicer. The servicing, administering and
collection of the Receivables shall be conducted by the Person(s) designated
from time to time as the Servicer(s) under the Servicing Agreement (the
"Servicer"). KBK agrees to perform the duties and obligations of the Servicer
pursuant to the terms thereof and the other Transaction Documents.
Section 11.2 Certain Agreements of the Servicer.
(a) Change in Credit and Collection Policy. The Servicer shall
not, without the prior written consent of the Administrative Agent and
Royal, make any change in, or alter or otherwise modify in any material
respect, the Credit and Collection Policy; provided, however, that each
of the Administrative Agent and Royal shall be deemed to have given
such consent if the Administrative Agent and Royal have not given
notice to the Servicer of a decision to withhold such consent within
two weeks of receiving written notice of any such proposed
modification.
(b) Agreement Not to Resign. KBK acknowledges that the Lender, the
Administrative Agent, the Collateral Agent, the Liquidity Agent, Royal
have relied on KBK's agreement to act as the Servicer hereunder and
under the Servicing Agreement in their respective decisions to execute
and deliver the respective Transaction Documents to which they are
parties. In recognition of the foregoing, KBK agrees not to resign as
the Servicer
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voluntarily except under the circumstances described in, and in
accordance with, the Servicing Agreement.
(c) Designation of the Servicer. The Borrower agrees not to
designate any Person other than KBK as the Servicer without the prior
written consent of the Administrative Agent, the Liquidity Agent and
Royal.
(d) Termination. Except as otherwise provided in the Servicing
Agreement, the authorization of the Servicer to act on behalf of the
Borrower under this Agreement and the other Transaction Documents shall
terminate upon the replacement of the Servicer pursuant to the
Servicing Agreement.
ARTICLE XII
ADMINISTRATIVE AGENT AND COLLATERAL AGENT
Section 12.1 Authorization and Action. Pursuant to agreements entered
into with the Administrative Agent, the Lender has appointed and authorized the
Administrative Agent to take such action as agent on its behalf and to exercise
such powers under this Agreement as are delegated to the Administrative Agent by
the terms hereof, together with such powers as are reasonably incidental
thereto.
Section 12.2 The Administrative Agent's and the Collateral Agent's
Reliance, Etc. The Administrative Agent and the Collateral Agent, and their
respective directors, officers, agents or employees shall not be liable for any
action taken or omitted to be taken by it or them under or in connection with
the Transaction Documents, except for its or their own gross negligence or
willful misconduct. Without limiting the generality of the foregoing, each of
the Administrative Agent and the Collateral Agent: (a) may consult with legal
counsel (including counsel for the Borrower, KBK, the Servicer, the Backup
Servicer, the Custodian, Royal or each Hedge Counterparty), independent
certified public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants or experts; (b) makes no
warranty or representation to any Secured Party or any other holder of any
interest in the Loans and shall not be responsible to any Secured Party or any
such other holder for any statements, warranties or representations made in or
in connection with any Transaction Document; (c) shall not have any duty to
ascertain or to inquire as to the performance or observance of any of the terms,
covenants or conditions of any Transaction Document or to inspect the property
(including the books and records) of any party thereto; (d) shall not be
responsible to any Secured Party or any other holder of any interest in the
Loans for the due execution, legality, validity, enforceability, genuineness,
sufficiency or value of any Transaction Document; and (e) shall incur no
liability under or in respect of this Agreement by acting upon any notice
(including notice by telephone where permitted herein), consent, certificate or
other instrument or writing (which may be
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by facsimile or telex) in good faith believed by it to be genuine and signed or
sent by the proper party or parties.
Section 12.3 The Liquidity Agent, the Collateral Agent, the
Administrative Agent and Affiliates. The Liquidity Agent, the Collateral Agent,
the Administrative Agent and any of their respective Affiliates may generally
engage in any kind of business with the Borrower, KBK, the Servicer, the Backup
Servicer, Custodian, or each Hedge Counterparty or any of their respective
Affiliates and any Person who may do business with or own securities thereof,
all as if they were not the Administrative Agent, the Collateral Agent and the
Liquidity Agent, respectively, and without any duty to account therefor to any
Secured Party or any other holder of an interest in the Collateral.
Section 12.4 Appointment and Powers of the Collateral Agent. The
Secured Parties party hereto hereby appoint the Collateral Agent as their agent
hereunder and hereby authorize the Collateral Agent to take such action on their
behalf and to exercise such rights, remedies, powers and privileges hereunder as
are specifically authorized to be exercised by the Collateral Agent by the terms
hereof, together with such rights, remedies, powers and privileges as are
reasonably incidental thereto. The Secured Parties agree that the Collateral
Agent shall not be required to exercise any discretion or take any action or
refrain from taking any action in its capacity as the Collateral Agent, but
shall only be required to act or refrain from acting in such capacity (and shall
be fully protected in so acting or refraining from acting) upon the instruction
of the Administrative Agent (or if the Royal Policy remains in effect, the
instruction of Royal (with prior written consent of the Administrative Agent)).
The Collateral Agent shall be entitled to retain experts and to act in reliance
upon the advice of such experts concerning all matters pertaining to the
agencies hereby created and its duties hereunder, and shall not be liable for
any action taken or omitted to be taken by it in good faith in accordance with
the advice of such experts selected by it. The relationship between the
Collateral Agent and each of the Secured Parties is that of the Collateral Agent
and principal only, and nothing herein shall be deemed to constitute the
Collateral Agent a trustee for any of the Secured Parties or impose on the
Collateral Agent any obligations other than those for which express provision is
made herein.
If the Collateral Agent receives unclear or conflicting instructions,
it shall be entitled to refrain from taking action until clear or
non-conflicting instructions are received, but shall inform the instructing
party or parties promptly of its decision to refrain from taking such action.
Except as required by the specific terms of this Agreement, the Collateral Agent
shall have no duty to exercise any right, power, remedy or privilege granted to
it hereby, or to take any affirmative action hereunder, unless directed to do so
by the Administrative Agent (or if the Royal Policy remains in effect, by Royal
(with prior written consent of the Administrative Agent) (and shall be fully
protected in acting or refraining from acting pursuant to such directions which
shall be binding on the Secured Parties), and shall not, without the prior
approval of the Administrative Agent or Royal, as applicable, waive any default
on the part of the Borrower or the Servicer. Notwithstanding anything herein to
the contrary, the Collateral Agent shall not be required to take any action (i)
which the Collateral Agent has determined will expose the Collateral Agent to
personal or financial liability, unless indemnified
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to its satisfaction, or (ii) which is contrary to this Agreement, the other
Transaction Documents, or applicable law.
The Collateral Agent shall be entitled to rely on any
communication, instrument, paper or other document reasonably believed by it to
be genuine and correct and to have been given, signed or sent by the proper
Person or Persons. The Collateral Agent shall be entitled to assume that no
Termination Event shall have occurred and be continuing, unless an officer of
the Collateral Agent has actual knowledge thereof or the Collateral Agent has
received written notice thereof from the Secured Parties.
Section 12.5 The Collateral Agent and Employees of the Collateral
Agent.
(a) No provision of this Agreement shall require the Collateral
Agent to expend or risk its own funds or otherwise incur any financial
or other liability in the performance of any duties hereunder or in the
exercise of any rights and powers hereunder.
(b) The Collateral Agent makes no representation as to, and shall
have no responsibility for, the correctness of any statement contained
in, or the validity or sufficiency of, this Agreement or any documents
or instruments referred to in this Agreement or the sufficiency or
effectiveness of any collateral assigned by this Agreement or as to or
for the validity or collectibility of any obligation contemplated by
this Agreement. The Collateral Agent shall not be accountable for the
use or application by any person of disbursements properly made by the
Collateral Agent in conformity with the provisions of this Agreement.
(c) The Collateral Agent may exercise any of its duties hereunder
by or through agents or employees. The possession of the Collateral by
such agents or employees shall be deemed to be the possession of the
Collateral Agent.
(d) The provisions of this Section shall survive the termination
of this Agreement and the resignation of the Collateral Agent
hereunder.
Section 12.6 Successor Agent. The Collateral Agent acting hereunder at
any time may resign by an instrument in writing addressed and delivered, 30 days
prior to the effectiveness of such resignation, to each of the Liquidity
Providers, the Liquidity Agent, the Administrative Agent, the Lender, Royal and
the Borrower, and may be removed at any time with cause by an instrument in
writing duly executed by or on behalf of the Liquidity Agent or Royal. Subject
to the provisions hereof, the Liquidity Agent and Royal shall also have the
right to appoint a successor Collateral Agent upon any such resignation or
removal, by an instrument of substitution complying with the requirements of
applicable law, or, in the absence of any such requirements, without any
formality other than appointment and designation in writing. Upon the making and
acceptance of such appointment, the execution and delivery by such successor
Collateral Agent of a ratifying instrument
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pursuant to which such successor Collateral Agent agrees to assume the duties
and obligations imposed on the Collateral Agent by the terms of this Agreement,
and the delivery to such successor Collateral Agent of the Collateral, and
documents and instruments then held by the retiring the Collateral Agent, such
successor Collateral Agent shall thereupon succeed to and become vested with all
the estate, rights, powers, remedies, privileges, immunities, indemnities,
duties and obligations hereby granted to or conferred or imposed upon the
retiring the Collateral Agent, and one such appointment and designation shall
not exhaust the right to appoint and designate further successor Collateral
Agents hereunder. No removal or resignation of the Collateral Agent shall be
effective unless and until a successor Collateral Agent has been duly appointed,
and the appointment of such successor Collateral Agent has been accepted by such
successor Collateral Agent. If no successor Collateral Agent shall be appointed
within 90 days following the resignation or removal the Collateral Agent, the
parties agree to submit to the applicable court for appointment of the successor
Collateral Agent. No Collateral Agent shall be discharged from its duties or
obligations hereunder until the Collateral and documents and instruments then
held by such retiring the Collateral Agent shall have been transferred or
delivered to the successor Collateral Agent in its capacity as bank or trust
company, until such retiring the Collateral Agent shall have executed and
delivered to the successor Collateral Agent appropriate instruments substituting
such successor Collateral Agent for purposes of this Agreement and assigning the
retiring the Collateral Agent's interest in the Collateral, to the successor
Collateral Agent. If no successor Collateral Agent shall be appointed, as
aforesaid, or, if appointed, shall not have accepted its appointment, within 30
days after notice of resignation or removal of the retiring the Collateral
Agent, then, subject to the provisions hereof, the retiring Collateral Agent may
appoint a successor Collateral Agent with the written consent of the Liquidity
Agent and Royal. Each such successor Collateral Agent shall provide the
Borrower, the Administrative Agent, the Lender, each Liquidity Provider, the
Liquidity Agent and Royal with its address and telephone numbers.
Notwithstanding the resignation or removal of the Collateral Agent hereunder,
the provisions of this Article XII shall continue to inure to the benefit of
such retiring Collateral Agent in respect of any action taken or omitted to be
taken by such retiring the Collateral Agent in its capacity as such while it was
the Collateral Agent under this Agreement. The Borrower shall provide prompt
notice to each Rating Agency and the Administrative Agent of the appointment of
a successor Collateral Agent. Any corporation into which the Collateral Agent
may be merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Collateral Agent shall be a party, or any corporation succeeding to
substantially all the corporate trust business of the Collateral Agent, shall be
the successor of the Collateral Agent hereunder without the execution or filing
of any paper or any further act on the part of the parties thereto, anything
herein to the contrary notwithstanding.
Section 12.7 Delegation of Duties. The Administrative Agent or the
Collateral Agent may execute any of its duties hereunder through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Administrative Agent or the Collateral
Agent shall not be responsible for the negligence or misconduct of the Custodian
or any other agents or attorneys-in-fact selected by it with reasonable care.
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ARTICLE XIII
ASSIGNMENTS
Section 13.1 Restrictions on Assignments. Neither the Borrower nor KBK
may assign its rights or obligations hereunder or any interest herein without
the prior written consent of the Lender, the Administrative Agent, the Liquidity
Agent and Royal. The Lender may not assign its rights hereunder, any Loan or the
Lender Note (or any portion thereof) to any Person without the prior written
consent of the Borrower, the Administrative Agent and the Liquidity Agent;
provided, however, that
(a) the Lender may assign all or any part of its rights and
interests in the Transaction Documents, together with all or any part
of its interest in the Loans, to the Liquidity Agent, to any Liquidity
Provider, or to any "bankruptcy remote" or commercial paper special
purpose entity the business of which is administered by the
Administrative Agent or the Liquidity Agent and which will be able to
issue commercial paper notes rated at least P-1 by Moody's (or the
equivalent thereof by another nationally recognized statistical rating
organization); and
(b) the Lender may assign and grant a security interest in all of
its rights in the Transaction Documents, together with all of its
rights and interest in the Loans, to its collateral agent, to secure
the Lender's obligations under or in connection with the Commercial
Paper Notes, the Liquidity Agreement, and certain other obligations of
the Lender incurred in connection with the funding of the Loans
hereunder, which assignment and grant of a security interest shall not
be considered an "assignment" for purposes of this Section 13.1 or,
prior to the enforcement of such security interest, for purposes of any
other provision of this Agreement.
Within five Business Days after notice to the Borrower, the
Administrative Agent, Liquidity Agent of any proposed assignment for which
consent is required, the Borrower, the Administrative Agent and the Liquidity
Agent agree to provide consent or non-consent thereto. If the Borrower, the
Administrative Agent, the Liquidity Agent does not consent to such an assignment
by the Lender, then the Lender may immediately assign the Loan (or portion
thereof) that was subject to such proposal to any Liquidity Provider or any
Affiliate of any Liquidity Provider.
Section 13.2 Documentation. Any assignor shall deliver to each assignee
an assignment, in such form as such assignor, the related assignee, the
Administrative Agent, Royal and Liquidity Agent may agree, duly executed by such
assignor, assigning any such Loan to the assignee, and such assignor shall
promptly execute and deliver all further instruments and documents, and take all
further action, that the assignee may reasonably request, in order to perfect,
protect or more fully evidence the
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assignee's right, title and interest in connection with such assignment, and to
enable the assignee to exercise or enforce any rights in connection with such
assignment.
Section 13.3 Rights of Assignee of the Lender. Upon the foreclosure of
any assignment of any Loans made for security purposes, or upon any other
assignment of any Loan from the Lender pursuant to this Article XIII, the
respective assignee receiving such assignment shall have all of the rights of
the Lender hereunder with respect to such Loans and all references to the
Lender, as an Affected Party, in Section 6.1 shall be deemed to apply to such
assignee.
Section 13.4 Notice of Assignment by the Lender. The Lender shall
provide notice to the Borrower and Royal of any assignment hereunder by the
Lender to any assignee (other than to a Liquidity Provider). The Lender
authorizes the Administrative Agent to, and the Administrative Agent agrees that
it shall, endorse the Lender Note to reflect any assignments made pursuant to
this Article XIII or otherwise.
ARTICLE XIV
INDEMNIFICATION
Section 14.1 General Indemnity of the Borrower. Without limiting any
other rights which any such Person may have hereunder or under applicable law,
the Borrower hereby agrees to indemnify the Administrative Agent, the Collateral
Agent, the Liquidity Agent, the Lender, Royal, each Liquidity Provider, each
Hedge Counterparty, the Custodian, the Backup Servicer and each of their
respective successors, transferees, participants and assigns and all officers,
directors, shareholders, controlling persons, employees and agents of any of the
foregoing (each of the foregoing Persons being individually called an
"Indemnified Party"), forthwith on demand, from and against any and all damages,
losses, claims, liabilities and related costs and expenses, including reasonable
attorneys' fees and disbursements (all of the foregoing being collectively
called "Indemnified Amounts") awarded against or incurred by any of them arising
out of or relating to any Transaction Document or the transactions contemplated
thereby or the use of proceeds therefrom by the Borrower, including (without
limitation) in respect of the funding of any Loan or in respect of any
Receivable, excluding, however, (a) Indemnified Amounts to the extent determined
by a court of competent jurisdiction to have resulted from gross negligence or
willful misconduct on the part of such Indemnified Party and (b) any tax upon or
measured by net income (except those described in Section 6.1(a)) on any
Indemnified Party. Without limiting the foregoing, but subject to the exclusions
(a) through (b) above, the Borrower agrees to indemnify each Indemnified Party
for Indemnified Amounts arising out of or relating to:
(a) the grant of a security interest to the Collateral Agent
pursuant to the Security Agreement;
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(b) the breach of any representation or warranty made by the
Borrower (or any of its respective officers) under or in connection
with this Agreement or the other Transaction Documents, any Monthly
Report, Borrowing Base Certificate or any other information, report or
certificate delivered by the Borrower pursuant hereto or thereto, which
shall have been false or incorrect in any material respect when made or
deemed made;
(c) the failure by the Borrower to comply in any material way with
any applicable law, rule or regulation with respect to any Collateral,
or the nonconformity of any Receivable with any such applicable law,
rule or regulation;
(d) the failure to vest and maintain vested in the Collateral
Agent a first-priority perfected security interest in all the
Collateral, free and clear of any Adverse Claim, other than an Adverse
Claim arising under the Transaction Documents;
(e) the failure to file, or any delay in filing, financing
statements or other similar instruments or documents under the UCC of
any applicable jurisdiction or other applicable laws with respect to
any Collateral;
(f) any dispute, claim, offset or defense (other than discharge in
bankruptcy) of an Obligor to the payment of any 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);
(g) any claim in connection with any Obligor Collateral related to
the Receivables;
(h) subject to Section 6.1, any tax or governmental fee or charge
(but not including taxes upon or measured by net income), all interest
and penalties thereon or with respect thereto, and all out-of-pocket
costs and expenses, including the reasonable fees and expenses of
counsel in defending against the same, which may arise by reason of the
making, maintenance or funding, directly or indirectly, of any Loan, or
any other interest in the Collateral; or
(i) the commingling of the proceeds of Collateral at any time with
other funds.
Section 14.2 Indemnity of the Servicer. Without limiting any other
rights which any such Person may have hereunder or under applicable law, KBK, as
the Servicer, hereby agrees to indemnify each Indemnified Party forthwith on
demand, from and against any and all Indemnified Amounts awarded against or
incurred by any of them arising out of or relating to the failure of KBK to
perform its obligations under any Transaction Document, excluding, however, (a)
Indemnified Amounts to the extent determined by a court of competent
jurisdiction to have resulted from gross negligence or willful misconduct on the
part of such Indemnified Party. Without limiting the foregoing, but subject
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to the exclusions in clause (a) above, KBK, as the Servicer, agrees to indemnify
each Indemnified Party for Indemnified Amounts arising out of or relating to:
(a) the breach of any representation or warranty made by KBK (or
any of its respective officers) under or in connection with this
Agreement or the other Transaction Documents, any Monthly Report,
Borrowing Base Certificate or any other information, report or
certificate delivered by the Servicer pursuant hereto or thereto, which
shall have been false or incorrect in any material respect when made or
deemed made;
(b) the failure by KBK to comply in any material way with any
applicable law, rule or regulation with respect to any Receivable or
any related Obligor Collateral or the nonconformity of any Receivable
with any such applicable law, rule or regulation;
(c) any failure of KBK, as the Servicer, or otherwise, to perform
its duties or obligations in accordance with the provisions of Section
11, the provisions of the Servicing Agreement or any provision
contained in any other Transaction Document; or
(d) the commingling of the proceeds of Collateral at any time with
other funds.
Section 14.3 Contribution.
(a) If for any reason the indemnification provided above in
Section 14.1 is unavailable to an Indemnified Party or is insufficient
to hold an Indemnified Party harmless, then Borrower shall contribute
to the amount paid or payable by such Indemnified Party as a result of
such loss, claim, damage or liability in such proportion as is
appropriate to reflect not only the relative benefits received by such
Indemnified Party, on the one hand, and the Borrower, on the other
hand, but also the relative fault of such Indemnified Party, on the one
hand, and Borrower, on the other hand, as well as any other relevant
equitable considerations.
(b) If for any reason the indemnification provided above in
Section 14.2 is unavailable to an Indemnified Party or is insufficient
to hold an Indemnified Party harmless, then KBK, as Servicer, shall
contribute to the amount paid or payable by such Indemnified Party as a
result of such loss, claim, damage or liability in such proportion as
is appropriate to reflect not only the relative benefits received by
such Indemnified Party, on the one hand, and KBK, as Servicer, on the
other hand, but also the relative fault of such Indemnified Party, on
the one hand, and KBK, as Servicer, on the other hand, as well as any
other relevant equitable considerations.
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ARTICLE XV
MISCELLANEOUS
Section 15.1 No Waiver; Remedies. No failure on the part of the Lender,
the Administrative Agent, the Collateral Agent, the Lender, the Backup Servicer,
the Liquidity Agent, any other Affected Party to exercise, and no delay in
exercising, any right, power or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise by any of them of any right,
power or remedy hereunder preclude any other or further exercise thereof, or the
exercise of any other right, power or remedy. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law. Without limiting
the foregoing, each of DG Bank and the Liquidity Providers is hereby authorized
by Borrower at any time and from time to time, to the fullest extent permitted
by law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other indebtedness at any
time owing by DG Bank and the Liquidity Providers to or for the credit or the
account of Borrower, to any Obligations now or hereafter existing under this
Agreement.
Section 15.2 Amendments, Etc. No amendment, modification or waiver of,
or consent with respect to, any provision of this Agreement and any Schedules
hereto or the Lender Note shall in any event be effective unless the same shall
be in writing and signed and delivered by each of the parties hereto and
consented by the Hedge Counterparty and Royal, and then any such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given; provided, however, that no material amendment of this
Agreement (other than an amendment to extend the Scheduled Commitment
Termination Date) shall be effective unless the Lender (or the Administrative
Agent on its behalf) shall have received written confirmation by the Rating
Agencies that such amendment shall not cause the rating on the then outstanding
Commercial Paper Notes to be downgraded or withdrawn; and provided, further,
that the Administrative Agent Fee Letter as in effect on the date hereof
supplements this Agreement, but execution thereof does not need to be consented
to by the Hedge Counterparty or Royal.
Section 15.3 Notices, Etc. All notices and other communications
provided for hereunder shall, unless otherwise stated herein, be in writing
(including facsimile communication) and shall be personally delivered or sent by
certified mail, postage prepaid, or by facsimile, to the intended party at the
address or facsimile number of such party set forth under its name on the
signature pages hereof or at such other address or facsimile number as shall be
designated by such party in a written notice to the other parties hereto. All
such notices and communications shall be effective, (a) if personally delivered,
when received, (b) if sent by certified mail, three Business Days after having
been deposited in the mail, postage prepaid, (c) if sent by overnight courier,
one Business Day after having been given to such courier, and (d) if transmitted
by facsimile, when sent, receipt confirmed by telephone or electronic means, in
each case, except that notices and communications pursuant to Section 2.2 shall
not be effective until received.
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Section 15.4 Costs, Expenses and Taxes. In addition to its obligations
under Section 14.1, the Borrower agrees to pay on demand:
(a) (i) all reasonable costs and expenses incurred by the
Administrative Agent, the Collateral Agent, the Lender, the Backup
Servicer, the Liquidity Agent, each Liquidity Provider and Royal in
connection with the negotiation, preparation, execution and delivery of
this Agreement, the Lender Note, each other Transaction Document or
Program Documents and any amendments, consents or waivers executed in
connection therewith, including, without limitation, the fees and
expenses of the Rating Agencies and the reasonable fees and expenses of
counsel to any of such Persons (including reasonable fees and expenses
of independent accountants, examiners and auditors) incurred in
connection with any of the foregoing or in advising such Persons as to
their respective rights and remedies thereunder, and (ii) all costs and
expenses incurred by the Administrative Agent, the Collateral Agent,
the Lender, the Backup Servicer, the Liquidity Agent, each Liquidity
Provider and Royal in connection with the enforcement of, or any actual
or claimed breach of, this Agreement, the Lender Note or the other
Transaction Documents or Program Documents, including, without
limitation, the reasonable fees and expenses of counsel to any of such
Persons incurred in connection therewith; and
(b) all stamp and other taxes and fees payable or determined to be
payable in connection with the execution, delivery, filing and
recording of this Agreement, the Notes, the other Transaction
Documents, or (to the extent directly related to this Agreement) the
Program Documents, and agrees to indemnify each Indemnified Party
against any liabilities with respect to or resulting from any delay in
paying or omission to pay such taxes and fees.
Section 15.5 Binding Effect; Survival. This Agreement shall be binding
upon and inure to the benefit of the Borrower, KBK, the Collateral Agent, the
Liquidity Agent, the Lender, the Administrative Agent, and their respective
successors and assigns, and the provisions of Article IV, Article VI, Article
XIV and Article XV shall inure to the benefit of the Affected Parties and the
Indemnified Parties, respectively, and their respective successors and assigns;
provided, however, nothing in the foregoing shall be deemed to authorize any
assignment not permitted by Article XIII. This Agreement shall create and
constitute the continuing obligations of the parties hereto in accordance with
its terms, and shall remain in full force and effect until such time, after the
Commitment Termination Date when all Obligations have been finally and fully
paid and performed. The rights and remedies with respect to any breach of any
representation and warranty made by the Borrower or KBK pursuant to Article VIII
and the indemnification and payment provisions of Article XIV and Article VI,
Sections 15.4 and 15.11 shall be continuing and shall survive any termination of
this Agreement and any termination of KBK's rights to act as the Servicer
hereunder or under any other Transaction Document.
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Section 15.6 Captions and Cross References. The various captions
(including, without limitation, the table of contents) in this Agreement are
provided solely for convenience of reference and shall not affect the meaning or
interpretation of any provision of this Agreement. Unless otherwise indicated,
references in this Agreement to any Section, Appendix, Schedule or Exhibit are
to such Section of or Appendix, Schedule or Exhibit to this Agreement, as the
case may be, and references in any Section, subsection, or clause to any
subsection, clause or subclause are to such subsection, clause or subclause of
such Section, subsection or clause.
Section 15.7 Severability. Any provision of this 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 of this Agreement or affecting the
validity or enforceability of such provision in any other jurisdiction.
Section 15.8 GOVERNING LAW. THIS AGREEMENT AND THE LENDER NOTE SHALL BE
A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK
(WHICH SHALL BE DEEMED TO INCLUDE SECTIONS 5-1401 AND 5-1402 OF THE GENERAL
OBLIGATIONS LAW OF THE STATE OF NEW YORK) WITHOUT REGARD TO ANY OTHERWISE
APPLICABLE CONFLICT OF LAW PRINCIPLES OTHER THAN THOSE OF THE STATE OF NEW YORK.
Section 15.9 Counterparts. This Agreement may be executed by the
parties hereto in several counterparts, each of which shall be deemed to be an
original but all of which shall constitute together but one and the same
agreement.
Section 15.10 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT,
OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR
WRITTEN) OR ACTIONS OF BORROWER, KBK, THE ADMINISTRATIVE AGENT, THE COLLATERAL
AGENT, LENDER OR ANY OTHER AFFECTED PARTY. EACH OF BORROWER AND KBK ACKNOWLEDGES
AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS
PROVISION (AND EACH OTHER PROVISION OF EACH OTHER TRANSACTION DOCUMENT TO WHICH
IT IS A PARTY) AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE OTHER
PARTIES ENTERING INTO THIS AGREEMENT AND EACH SUCH OTHER TRANSACTION DOCUMENT.
Section 15.11 No Proceedings. The Borrower and KBK hereby agrees that
it will not institute against the Lender, or join any other Person in
instituting against the Lender, any insolvency proceeding (namely, any
proceeding of the type referred to in the definition of Event of Bankruptcy)
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Receivables Financing Agreement
<PAGE> 65
so long as any Commercial Paper Notes issued by the Lender shall be outstanding
or there shall not have elapsed one year plus one day since the last day on
which any such Commercial Paper Notes shall be outstanding. The provisions of
this Section 15.11 shall survive the termination hereof.
Section 15.12 Entire Agreement. This Agreement and the other
Transaction Documents executed and delivered herewith represent the final
agreement between the parties hereto and thereto and may not be contradicted by
evidence of prior, contemporaneous or subsequent oral agreements of the parties.
There are no unwritten oral agreements among the parties.
Section 15.13 Confidentiality. Each party hereto agrees to maintain the
confidentiality of this Agreement and the other Transaction Documents, and all
information obtained in connection herewith in respect of the Borrower, KBK, the
Lender, the Administrative Agent, the Collateral Agent, the Custodian, or Royal,
as applicable (collectively, the "Information"), provided, that this Agreement,
the Transaction Documents and the Information may be disclosed to: (a) third
parties to the extent such disclosure is made pursuant to a written agreement of
confidentiality in form and substance reasonably satisfactory to the
Administrator, (b) the legal counsel and auditors of such party if such counsel
or auditors agree to hold it confidential, (iii) the rating agencies rating the
Commercial Paper Notes to the extent such information relates to the Receivables
or the transactions contemplated by this Agreement, (iv) any Liquidity Provider
or potential Liquidity Provider (if they agree to hold it confidential) to the
extent such information relates to the Receivables or the transactions
contemplated by this Agreement, (v) any placement agent placing the Commercial
Paper Notes, (vi) in connection with the enforcement of the Transaction
Documents and (vii) any regulatory authorities having jurisdiction over the
party hereto or otherwise required by applicable law.
Section 15.14 Limited Recourse. Except as explicitly set forth herein,
no recourse under any Transaction Document shall be had against, and no
liability shall attach to, any trustee, officer, employee, director, Affiliate,
shareholder, partner, member or beneficiary, whether directly or indirectly, of
any party thereto, or any of their respective Affiliates. It is expressly agreed
and understood as a condition of (and in consideration for) the execution and
delivery of each Transaction Document that each Transaction Document is the
corporate obligation of the parties thereto, to the extent explicitly set forth
therein, and that none of any trustee, officer, employee, director, Affiliate,
shareholder, partner, member or beneficiary, whether directly or indirectly, of
any party shall have any liability for the performance or breach of performance
of any of the obligations under the Transaction Documents.
Section 15.15 Third Party Beneficiary. Each party hereto acknowledges
and agrees that Royal is a third party beneficiary under this Agreement and
shall have the full power to enforce its rights and benefits granted hereunder.
[SIGNATURE PAGES FOLLOWS]
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Receivables Financing Agreement
<PAGE> 66
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
KBK ACCEPTANCE COMPANY LP,
as the Borrower
By: /s/ ROBERT J. MCGEE
-------------------------------------
Name: Robert J. McGee
Title: President
2200 City Center II
301 Commerce Street
Fort Worth, TX 76102
Attention: Deborah Wilkinson
Telephone: (817) 258-6059
Facsimile: (817) 258-6143
S-1
Receivables Financing Agreement
<PAGE> 67
KBK FINANCIAL, INC.
By: /s/ DEBORAH B. WILKINSON
-------------------------------------
Name: Deborah B. Wilkinson
Title: Executive Vice President
2200 City Center II
301 Commerce Street
Fort Worth, TX 76102
Attention: Deborah Wilkinson, CFO
` Telephone: (817) 258-6174
Facsimile: (817) 258-6105
S-2
Receivables Financing Agreement
<PAGE> 68
AUTOBAHN FUNDING COMPANY L.L.C.,
as the Lender
By: DG BANK Deutsche Genossenschaftsbank AG,
as its attorney-in-fact
By: /s/ PATRICK PREECE
-------------------------------------
Name: Patrick Preece
Title: Vice President
By: /s/ RICHARD J. WISNIEWSKI
-------------------------------------
Name: Richard J. Wisniewski
Title: Vice President
Autobahn Funding Company L.L.C.
c/o DG BANK Deutsche Genossenschaftsbank AG
609 Fifth Avenue, Suite 911
New York, NY 10017
Attention: Patrick Preece
Telephone: (212) 745-1665
Facsimile: (212) 745-1661
S-3
Receivables Financing Agreement
<PAGE> 69
DG BANK DEUTSCHE
GENOSSENSCHAFTSBANK AG,
as the Administrative Agent
By: /s/ PATRICK PREECE
-------------------------------------
Name: Patrick Preece
Title: Vice President
By: /s/ RICHARD J. WISNIEWSKI
-------------------------------------
Name: Richard J. Wisniewski
Title: Vice President
DG BANK Deutsche Genossenschaftsbank AG
609 Fifth Avenue, Suite 911
New York, New York 10017
Attention: Patrick Preece
Telephone: (212) 745-1665
Facsimile: (212) 745-1661
Receivables Financing Agreement
<PAGE> 70
BANK ONE, N.A., as the Collateral Agent
By: /s/ SCOTT MILLER
-------------------------------------
Name: Scott Miller
Title: Authorized Signer
c/o Global Corporate Trust Services
100 East Broad Street, 8th Floor
Columbus, OH 43215
Attention: Scott Miller
Telephone: (614) 248-8699
Facsimile: (614) 248-5195
Receivables Financing Agreement
