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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 1-13419
FALCON BUILDING PRODUCTS, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 36-3931893
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
Two North Riverside Plaza
Chicago, Illinois 60606
(Address of Principal Executive Office)
(312) 906-9700
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the Registrant's classes
of common stock, as of the latest practicable date.
20,070,500 shares of Class A Common Stock as of July 31, 1996
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FALCON BUILDING PRODUCTS, INC.
FORM 10-Q
JUNE 30, 1996
INDEX
PART I. Financial Information:
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
Condensed Consolidated Statements of Income
Condensed Consolidated Statements of Cash Flows
Notes to Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
PART II. Other Information:
Item 6. Exhibits and Reports on Form 8-K
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FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN MILLIONS, EXCEPT SHARE DATA)
JUNE 30, DECEMBER 31,
1996 1995
(UNAUDITED) (RESTATED)
ASSETS
Current assets:
Cash and cash equivalents $ 4.3 $ 1.1
Accounts receivable, net -- 5.1
Inventories, net 66.3 56.9
Other current assets 34.9 9.7
Total current assets 105.5 72.8
Property, plant and equipment, net 93.7 88.7
Goodwill 53.3 39.4
Other long-term assets 9.6 9.9
Total assets $ 262.1 $ 210.8
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion long-term debt $ 15.2 $ 12.7
Accounts payable 46.7 37.5
Accrued liabilities 32.9 27.2
Total current liabilities 94.8 77.4
Long-term debt 130.7 110.9
Accrued employee benefit obligations 8.4 9.0
Other long-term liabilities 16.8 15.7
Total liabilities 250.7 213.0
Stockholders' equity:
Preferred stock, par value $1.00 per share,
10,000,000 shares authorized, none issued
and outstanding -- --
Class A stock, par value $.01 per share,
30,000,000 shares authorized, 20,070,500
shares issued and outstanding at
June 30, 1996, 6,070,500 shares issued and
outstanding at December 31, 1995 0.2 0.1
Class B stock, par value $.01 per share,
14,000,000 shares authorized, none issued
and outstanding at June 30, 1996, 14,000,000
shares issued and outstanding at
December 31, 1995 -- 0.1
Additional paid-in capital 18.0 18.0
Retained deficit (3.7) (17.2)
Pension liability adjustment (0.4) (0.4)
Unearned compensation (0.5) (0.6)
Notes receivable arising from stock purchase plan (2.2) (2.2)
Total stockholders' equity (deficit) 11.4 (2.2)
Total liabilities and stockholders' equity $ 262.1 $ 210.8
The accompanying notes are an integral part of
these condensed consolidated financial statements.
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FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN MILLIONS EXCEPT SHARE DATA)
(UNAUDITED)
QUARTER ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
1996 1995 1996 1995
Net Sales
Air Distribution Products $ 48.5 $ 42.5 $ 89.8 $ 82.5
Plumbing Fixtures 41.1 36.6 77.5 75.7
Air Power Products 78.8 37.6 145.4 71.3
Total 168.4 116.7 312.7 229.5
Cost of sales 137.9 93.7 257.0 183.8
Gross earnings 30.5 23.0 55.7 45.7
Selling, general and
administrative expenses 13.5 9.7 26.3 19.8
Securitization expenses 1.0 0.8 1.9 1.4
Operating income 16.0 12.5 27.5 24.5
Net interest expense 2.8 2.6 5.5 4.9
Income before income taxes 13.2 9.9 22.0 19.6
Provision for income taxes 5.1 3.9 8.5 7.5
Net income $ 8.1 $ 6.0 $ 13.5 $ 12.1
Net Income Per Share (a) $ 0.40 $ 0.30 $ 0.67 $ 0.60
(a) Based on shares outstanding of 20,070,500 in each period.
The accompanying notes are an integral part of
these condensed consolidated financial statements.
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FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN MILLIONS)
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 13.5 $ 12.1
Adjustments to reconcile net income to net cash from
operations:
Depreciation and amortization 8.2 7.2
Cash effect of changes in other working capital
balances, accrued employee benefit obligations,
and other long-term liabilities, excluding the
effects of acquisitions (11.9) (18.5)
Net cash from operating activities 9.8 0.8
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of businesses (18.8) (10.4)
Capital expenditures (8.6) (7.0)
Other (1.1) (1.2)
Net cash used in investing activities (28.5) (18.6)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings on debt 21.9 19.7
Net cash from financing activities 21.9 19.7
CHANGE IN CASH AND CASH EQUIVALENTS 3.2 1.9
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1.1 2.2
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 4.3 $ 4.1
The accompanying notes are an integral part of
these condensed consolidated financial statements.
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FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(UNAUDITED)
(1) SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION:
The accompanying unaudited Condensed Consolidated Financial Statements of
Falcon Building Products, Inc. (the "Company"), a subsidiary of Equity
Holdings Limited ("EHL"), have been prepared in accordance with generally
accepted accounting principles for interim financial information.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for a complete set
of financial statements. In the opinion of management, all adjustments
considered necessary, consisting only of normal recurring adjustments,
are included for fair presentation. Operating results for the quarter
ended June 30, 1996 are not necessarily indicative of results that may be
expected for the full year. The unaudited Condensed Consolidated
Financial Statements should be read in conjunction with the audited
Consolidated Financial Statements of the Company for the year ended
December 31, 1995. Certain amounts in the 1995 Balance Sheet have been
reclassified to be consistent with the 1996 presentation.
(2) INVENTORIES
Inventory consists of the following (in millions):
JUNE 30, DECEMBER 31,
1996 1995
(UNAUDITED)
Raw materials and supplies $ 26.5 $ 21.6
Work in process 12.3 10.0
Finished goods 27.5 25.3
$ 66.3 $ 56.9
(3) LONG-TERM DEBT
Long-term debt consists of the following (in millions):
JUNE 30, DECEMBER 31,
1996 1995
Bank Credit Facility
Revolver $ 53.0 $ 26.0
Term 90.0 95.0
Total 143.0 121.0
Other 2.9 2.6
Less: Current Portion (15.2) (12.7)
Total long-term $ 130.7 $ 110.9
At June 30, 1996, the Company was in compliance with all covenants of the
Bank Credit Facility. Availability under the revolving portion of this
facility was $85.9 million at June 30, 1996.
(4) STOCKHOLDERS' EQUITY
In May 1996, the Company's Class B stock was transferred from Eagle
Industries, Inc. ("Eagle") to EHL, another affiliate of Samuel Zell. As
a result of the transfer, the Class B shares were automatically converted
into Class A shares pursuant to provisions in the Company's charter.
(5) ACCOUNTS RECEIVABLE SECURITIZATION PROGRAM
Since January 1994, the Company has participated in Eagle's
securitization program, selling its receivables to Eagle, which in turn
sold certain of its receivables, including those acquired from the
Company, to a "Master Trust". Due to the number of business divestitures
at Eagle during the first quarter of 1996, Eagle decided to terminate its
securitization program. Eagle coordinated the termination of its program
with the Company to allow the Company to establish it own securitization
program.
In April 1996, the Company entered into receivable sale agreements with a
financial institution and its affiliate (collectively, the "Bank Group")
whereby it will sell, with limited recourse, on a continuous basis, an
undivided interest in all of its accounts receivable for cash, while
maintaining a residual interest in the receivables. Under these
agreements, which expire in 1999, the maximum amount of proceeds which
may be accessed at any one time is $85 million, subject to change based
on the level of eligible receivables. To establish this new
securitization program, the Company: (1) acquired a special purpose
company from Eagle to facilitate the establishment of the Falcon
securitization program; 2) acquired from the Master Trust the receivables
it had previously sold to Eagle; (3) immediately sold these re-acquired
receivables through the special purpose company to the Bank Group; and
(4) sold the receivables of two of its subsidiaries which were not
previously participating in the Eagle securitization program through the
special purpose company to the Bank Group. The Company paid $68.6
million to acquire its receivables from the Master Trust utilizing the
$55 million of proceeds received from selling these receivables to the
Bank Group plus a $14 million draw on the Company's revolving credit
facility. This $14 million represented the Company's residual interest
in the receivables sold to the Bank Group. Additionally, the Company
received $11 million in cash and retained a residual interest of $3
million from the initial sale of the receivables from subsidiaries not
previously participating in the Eagle securitization program. The
residual interest at June 30, 1996 was $24.8 million and is reflected in
other current assets in the Company's financial statements.
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FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
Following is a discussion of the results of operations of the Company and its
subsidiaries for the quarter ended June 30, 1996 as compared to the quarter
ended June 30, 1995 and should be read in conjunction with the Condensed
Consolidated Financial Statements included herein and the Company's Annual
Report on Form 10-K for the year ended December 31, 1995.
QUARTER ENDED JUNE 30, 1996 COMPARED TO QUARTER ENDED JUNE 30, 1995
The following table reflects the Company's results of operations for the
quarter ended June 30, 1996, compared to the results of 1995 (dollars in
millions):
QUARTER ENDED JUNE 30, 1996 1995
AMOUNT % OF SALES AMOUNT % OF SALES
Net sales $ 168.4 100.0% $ 116.7 100.0%
Gross Earnings 30.5 18.1 23.0 19.7
Operating income 16.0 9.5 12.5 10.7
Income before income taxes 13.2 7.8 9.9 8.5
Net income 8.1 4.8 6.0 5.1
Net sales for the quarter were $168.4 million, an increase of $51.7 million
over the second quarter of 1995. Excluding sales from acquisitions of $37.4
million, sales increased $14.3 million of which $13.2 million was due to
increased volume in all three base product categories while new air power
products accounted for $1.4 million of the increase.
Gross earnings increased $7.5 million from $23.0 million in 1995 to $30.5
million in 1996. Excluding acquisitions, increased margins and gross
earnings were realized as a result of a modest price increase in air
distribution products and a decline in major raw material costs from 1995
levels. Acquisitions, although at lower gross margins than traditional
product categories, added significantly to 1996 results.
Second quarter operating income was $16.0 million, an increase of $3.5
million from the $12.5 million recorded in the second quarter of 1995. The
gain in gross earnings of $7.5 million, noted above, was partially offset by
an increase in selling, general and administrative expense of $3.8 million.
The operating cost increases were primarily the result of increased marketing
and advertising expenses associated with the growth in retail activity.
Operating expenses as a percent of sales declined from 8.3% in 1995 to 8.0%
in 1996.
Income before income taxes of $13.2 million was $3.3 million higher than the
comparable 1995 results. The $3.5 million gain in operating income was
partially reduced by a $0.2 million increase in interest expense, primarily
as a result of increased third party debt incurred to fund acquisitions
earlier in the year.
Net income was $8.1 million for the quarter, an increase of $2.1 million over
1995 results of $6.0 million, resulting from the factors noted above, plus a
decrease in the effective tax rate to 38.6% from the 39.4% used in 1995. The
change in the effective tax rate reflects the current actual distribution of
income by state and the difference in state tax rates.
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995
The following table reflects the Company's results of operations for the six
months ended June 30, 1996, compared to the results of 1995 (dollars in
millions):
SIX MONTHS ENDED JUNE 30, 1996 1995
AMOUNT % OF SALES AMOUNT % OF SALES
Net sales $ 312.7 100.0% $ 229.5 100.0%
Gross Earnings 55.7 17.8 45.7 19.9
Operating income 27.5 8.8 24.5 10.7
Income before income taxes 22.0 7.0 19.6 8.5
Net income 13.5 4.3 12.1 5.3
Year-to-date net sales were $312.7 million, an increase of $83.2 million over
1995 comparable results. Acquisitions accounted for $70.2 million of the
increase, primarily from pressure washer sales at Ex-Cell Manufacturing
Company, Inc. New product sales from air power products totaled $5.9 million
for the period. Increased sales volume and mix variances in 1996 added an
incremental $7.0 million to 1995 sales levels. Only plumbing fixtures
declined in total sales, excluding acquisitions, primarily as a result of
strong price competition encountered to the high volume product lines. A
modest price increase in air distribution products and increased sales volume
in air power products generated sales growth of over 3% and 16%,
respectively, excluding acquisitions.
Gross earnings increased $10.0 million to $55.7 million over 1995 results,
primarily due to the increase volume. Gross margin declined from 19.9% to
17.8%, reflecting the difficult pricing environment being encountered in
plumbing fixtures and the lower margins realized on sales from acquisitions.
Operating income increased $3.0 million to $27.5 million, as a result of the
increase in gross earnings of $10.0 million, partially offset by increased
securitization expense of $0.5 million and increased selling, general and
administrative expenses of $6.5 million. The increased securitization
expense resulted from an increase in both the effective interest rate and in
average securitized trade receivables during the six month period.
Income before income taxes was $22.0 million, up from 1995 year-to-date of
$19.6 million. The $3.0 million increase in operating income noted above was
partially offset by increased third party interest expense of $0.6 million
resulting from increased debt used to fund acquisitions.
Net income was $13.5 million as a result of the factors noted above adjusted
for income taxes. The effective tax rate used in both periods was
approximately 38.5%.
LIQUIDITY AND CAPITAL RESOURCES
The Company believes that it will meet its working capital and capital
expenditure requirements in 1996 through a combination of operating cash
flows, availability under its senior credit facility and through funds
available under its newly established accounts receivable securitization
program. As discussed in Note 5 to the Company's Financial Statements, the
retained residual interest in the receivables under the new securitization
program is reflected in other current assets in the Company's financial
statements.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
4.1 Receivables Purchase Agreement as of May 2, 1996 among Centrally
Held Eagle Receivables Program, Inc., Falcon Building Products,
Inc., Market Street Funding Corporation and PNC Bank, National
Association.
4.2 Receivables Purchase Agreement as of May 2, 1996 among Centrally
Held Eagle Receivables Program, Inc., Falcon Building Products,
Inc., Certain Commercial Lending Institutions and PNC Bank,
National Association.
b) Reports on Form 8-K
99.1 Current Report on Form 8-K dated May 10, 1996 relative to the
issuance of a press release announcing the postponement of the
annual shareholder's meeting and the conversion of Class B stock
to Class A stock.
99.2 Current Report on Form 8-K dated May 16, 1996 relative to the
issuance of a press release announcing the purchase of certain
assets of Woodwinds, Inc.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FALCON BUILDING PRODUCTS, INC.
By: /s/ Sam A. Cottone
--------------------
Sam A. Cottone
Senior Vice President and
Chief Financial Officer
Dated: August 13, 1996
Exhibit 4.1
RECEIVABLES PURCHASE AGREEMENT
(Non-Designated Receivables)
dated as of May 2, 1996
among
CENTRALLY HELD EAGLE RECEIVABLES PROGRAM, INC.,
FALCON BUILDING PRODUCTS, INC.,
MARKET STREET FUNDING CORPORATION
and
PNC BANK, NATIONAL ASSOCIATION
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TABLE OF CONTENTS
ARTICLE I.
AMOUNTS AND TERMS OF THE PURCHASES
Section 1.1 Purchase Facility
Section 1.2 Making Purchases
Section 1.3 Purchased Interest Computation
Section 1.4 Settlement Procedures
Section 1.5 Fees
Section 1.6 Payments and Computations, Etc
Section 1.7 Dividing or Combining Portions of the Capital of
the Purchased Interest
Section 1.8 Increased Costs
Section 1.9 Requirements of Law
Section 1.10 Inability to Determine Eurodollar Rate
ARTICLE II.
REPRESENTATIONS AND WARRANTIES; COVENANTS;
TERMINATION EVENTS
Section 2.1 Representations and Warranties; Covenants
Section 2.2 Termination Events
ARTICLE III.
INDEMNIFICATION
Section 3.1 Indemnities by the Seller
Section 3.2 Indemnities by the Servicer
ARTICLE IV.
ADMINISTRATION AND COLLECTIONS
Section 4.1 Appointment of the Servicer
Section 4.2 Duties of the Servicer
Section 4.3 Lock-Box Arrangements
Section 4.4 Enforcement Rights
Section 4.5 Responsibilities of the Seller
Section 4.6 Servicing Fee
ARTICLE V.
MISCELLANEOUS
Section 5.1 Amendments, Etc.
Section 5.2 Notices, Etc.
Section 5.3 Assignability
Section 5.4 Costs, Expenses and Taxes
Section 5.5 No Proceedings; Limitation on Payments
Section 5.6 Confidentiality
Section 5.7 GOVERNING LAW AND JURISDICTION
Section 5.8 Execution in Counterparts
Section 5.9 Survival of Termination
Section 5.10 WAIVER OF JURY TRIAL
Section 5.11 Entire Agreement
Section 5.12 Headings
Section 5.13 Issuer's Liabilities
EXHIBIT I DEFINITIONS
EXHIBIT II CONDITIONS OF PURCHASES
EXHIBIT III REPRESENTATIONS AND WARRANTIES
EXHIBIT IV COVENANTS
EXHIBIT V TERMINATION EVENTS
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RECEIVABLES PURCHASE AGREEMENT
This RECEIVABLES PURCHASE AGREEMENT (Non-Designated Receivables) (as
amended, supplemented or otherwise modified from time to time, this
"Agreement") is entered into as of May 2, 1996 among CENTRALLY HELD EAGLE
RECEIVABLES PROGRAM, INC., a Delaware corporation, as seller (the "Seller"),
FALCON BUILDING PRODUCTS, INC., a Delaware corporation ("Falcon"), as initial
servicer (in such capacity, together with its successors and permitted
assigns in such capacity, the "Servicer"), MARKET STREET FUNDING CORPORATION,
a Delaware corporation (together with its successors and permitted assigns,
the "Issuer"), and PNC BANK, NATIONAL ASSOCIATION, a national banking
association ("PNC"), as administrator (in such capacity, together with its
successors and assigns in such capacity, the "Administrator").
PRELIMINARY STATEMENTS. Certain terms that are capitalized and used
throughout this Agreement are defined in Exhibit I to this Agreement.
References in the Exhibits hereto to "the Agreement" refer to this Agreement,
as amended, modified or supplemented from time to time.
The Seller desires to sell, transfer and assign an undivided variable
percentage interest in a pool of receivables, and the Issuer desires to
acquire such undivided variable percentage interest, as such percentage
interest shall be adjusted from time to time based upon, in part,
reinvestment payments that are made by the Issuer and additional incremental
payments made to the Seller.
In consideration of the mutual agreements, provisions and covenants
contained herein, the parties hereto agree as follows:
ARTICLE I.
AMOUNTS AND TERMS OF THE PURCHASES
Section 1.1. Purchase Facility (a) On the terms and conditions
hereinafter set forth, the Issuer hereby agrees to purchase, and make
reinvestments of, undivided percentage ownership interests with regard to the
Purchased Interest from the Seller from time to time from the date hereof to
the Facility Termination Date. Under no circumstances shall the Issuer make
any such purchase or reinvestment if, after giving effect to such purchase or
reinvestment, the aggregate outstanding Capital of the Purchased Interest
would exceed the Purchase Limit.
(b) The Seller may, upon at least 30 days' written notice to the
Administrator, terminate the purchase facility provided in this Section 1.1
in whole or, from time to time, irrevocably reduce in part the unused portion
of the Purchase Limit; provided, that each partial reduction shall be in the
amount of at least $5,000,000, or an integral multiple of $1,000,000 in
excess thereof, and that, unless terminated in whole, the Purchase Limit
shall in no event be reduced below $20,000,000.
Section 1.2. Making Purchases. (a) Each purchase (but not
reinvestment) of undivided percentage ownership interests with regard to the
Purchased Interest hereunder shall be made upon the Seller's irrevocable
written notice delivered to the Administrator in accordance with Section 5.2
(which notice must be received by the Administrator before 11:00 a.m., New
York City time): (i) three Business Days before the requested purchase date,
in the case of a purchase to be funded at the Alternate Rate and based upon
the Eurodollar Rate, (ii) two Business Days before the requested purchase
date, in the case of a purchase to be funded at the Alternate Rate and based
upon the Base Rate, and (iii) two Business Days before the requested purchase
date, in the case of a purchase to be funded at the CP Rate, which notice
shall specify: (A) the amount requested to be paid to the Seller (such
amount, which shall not be less than $5,000,000, being the Capital relating
to the undivided percentage ownership interest then being purchased), (B) the
date of such purchase (which shall be a Business Day) and (C) the desired
funding basis for such purchase (which shall be based upon the Eurodollar
Rate, the Base Rate or the CP Rate). If the Seller has requested that the
purchase be funded at the CP Rate, the Administrator shall promptly
thereafter notify the Seller whether the Issuer has exercised its discretion
not to fund such purchase with the issuance of Notes because such purchase
with the issuance of Notes would be economically inadvisable to the Issuer,
the Administrator, the Seller or any other similarly situated Person, or
otherwise not permitted, in which case the Seller shall be deemed to have
requested that the purchase be funded at the Alternate Rate and based upon
the Base Rate.
(b) On the date of each purchase (but not reinvestment) of undivided
percentage ownership interests with regard to the Purchased Interest
hereunder, the Issuer shall, upon satisfaction of the applicable conditions
set forth in Exhibit II hereto, make available to the Seller in same day
funds, at Harris Trust and Savings Bank, account # 207-190-0, ABA # 071-000-
288, an amount equal to the Capital relating to the undivided percentage
ownership interest then being purchased.
(c) Effective on the date of each purchase pursuant to this Section 1.2
and each reinvestment pursuant to Section 1.4, the Seller hereby sells and
assigns to the Issuer an undivided percentage ownership interest in: (i) each
Pool Receivable then existing, (ii) all Related Security with respect to such
Pool Receivables, and (iii) all Collections with respect to, and other
proceeds of, such Pool Receivables and Related Security.
(d) To secure all of the Seller's obligations (monetary or otherwise)
under this Agreement and the other Transaction Documents to which it is a
party, whether now or hereafter existing or arising, due or to become due,
direct or indirect, absolute or contingent, the Seller hereby grants to the
Issuer a security interest in all of the Seller's right, title and interest
(including any undivided interest of the Seller) in, to and under all of the
following, whether now or hereafter owned, existing or arising: (i) all Pool
Receivables, (ii) all Related Security with respect to such Pool Receivables,
(iii) all Collections with respect to such Pool Receivables, (iv) the Lock-
Box Accounts and all amounts on deposit therein, and all certificates and
instruments, if any, from time to time evidencing such Lock-Box Accounts and
amounts on deposit therein, (v) all rights (but none of the obligations) of
the Seller under its Sale Agreement with Falcon (including the rights of
Falcon against the Originators under the other Sale Agreement), and (vi) all
proceeds of, and all amounts received or receivable under any or all of, the
foregoing (collectively, the "Pool Assets"). The Issuer shall have, with
respect to the Pool Assets, and in addition to all the other rights and
remedies available to the Issuer, all the rights and remedies of a secured
party under any applicable UCC.
Section 1.3. Purchased Interest Computation. The Purchased Interest
shall be initially computed on the date of the initial purchase hereunder.
Thereafter, until the Termination Date, the Purchased Interest shall be
automatically recomputed (or deemed to be recomputed) on each Business Day
other than a Termination Day. The Purchased Interest as computed (or deemed
recomputed) as of the day before the Termination Date shall thereafter remain
constant. The Purchased Interest shall become zero when the Capital thereof
and Discount thereon shall have been paid in full, all the amounts owed by
the Seller and the Servicer hereunder to the Issuer, the Administrator and
any other Indemnified Party or Affected Person are paid in full, and the
Servicer shall have received the accrued Servicing Fee thereon.
Section 1.4. Settlement Procedures4. Settlement Procedures. (a)
Collection of the Pool Receivables shall be administered by the Servicer in
accordance with this Agreement. The Seller shall provide to the Servicer on a
timely basis all information needed for such administration, including notice
of the occurrence of any Termination Day and current computations of the
Purchased Interest.
(b) The Servicer shall, on each day on which Collections of Pool
Receivables are received (or deemed received) by the Seller or the Servicer:
(i) set aside and hold in trust (and, at the request of the
Administrator, segregate in a separate account approved by the
Administrator if, at the time of such request, there exists an Unmatured
Termination Event or a Termination Event or if the failure to so
segregate reasonably could be expected to cause a Material Adverse
Effect) for the Issuer, out of the Issuer's Share of such Collections,
first, an amount equal to the Discount accrued through such day for each
Portion of Capital and not previously set aside, second, an amount equal
to the fees set forth in the Fee Letter accrued and unpaid through such
day, and third, to the extent funds are available therefor, an amount
equal to the Issuer's Share of the Servicing Fee accrued through such
day and not previously set aside;
(ii) subject to Section 1.4(f), if such day is not a Termination
Day, remit to the Seller, on behalf of the Issuer, the remainder of the
Issuer's Share of such Collections; such remainder shall be
automatically reinvested in Pool Receivables, and in the Related
Security, Collections and other proceeds with respect thereto; provided,
however, that if the Purchased Interest would exceed 100%, then the
Servicer shall not reinvest, but shall set aside and hold in trust for
the Issuer (and shall, at the request of the Administrator, segregate in
a separate account approved by the Administrator if, at the time of such
request, there exists an Unmatured Termination Event or a Termination
Event or if the failure to so segregate reasonably could be expected to
cause a Material Adverse Effect) a portion of such Collections that,
together with the other Collections set aside pursuant to this clause
(ii), shall equal the amount necessary to reduce the Purchased Interest
to 100%;
(iii) if such day is a Termination Day, set aside, segregate and
hold in trust for the Issuer the entire remainder of the Issuer's Share
of the Collections; provided, that if amounts are set aside and held in
trust on any Termination Day and, thereafter, the conditions set forth
in Section 2 of Exhibit II are satisfied or waived by the Administrator,
such previously set aside amounts shall be reinvested in accordance with
clause (ii) above on the day of such subsequent satisfaction or waiver
of conditions; and
(iv) subject to the Issuer's security interest under Section
1.2(d), release to the Seller (subject to Section 1.4(f)) for its own
account any Collections in excess of: (x) amounts required to be
reinvested in accordance with clause (ii) or the proviso to clause (iii)
plus (y) the amounts that are required to be set aside pursuant to
clause (i), the proviso to clause (ii) and clause (iii), plus (z) the
Seller's Share of the Servicing Fee accrued and unpaid through such day
and all reasonable and appropriate out-of-pocket costs and expenses of
the Servicer for servicing, collecting and administering the Pool
Receivables.
(c) The Servicer shall deposit into the Administration Account (or such
other account designated by the Administrator), on the last day of each
Settlement Period (or on the Alternative Settlement Date, if applicable)
relating to a Portion of Capital, Collections held for the Issuer pursuant to
Section 1.4(b)(i) or Section 1.4(f) with respect to such Portion of Capital
plus the lesser of: (i) the amount of Collections then held for the Issuer
pursuant to Section 1.4(b)(ii) and Section 1.4(b)(iii) and (ii) such Portion
of Capital; provided, that if Falcon is the Servicer and the Administrator
has not notified Falcon that such right is revoked, Falcon may retain the
portion of the Collections set aside pursuant to Section 1.4(b)(i) that
represents the Issuer's Share of the Servicing Fee. On the last day of each
Settlement Period (or on the Alternative Settlement Date, if applicable)
relating to a Portion of Capital, the Administrator will notify the Servicer
by facsimile of the amount of Discount accrued with respect to such Portion
of Capital during such Settlement Period or portion thereof.
(d) Upon receipt of funds deposited into the Administration Account
pursuant to Section 1.4(c), the Administrator shall cause such funds to be
distributed as follows:
(i) if such distribution occurs on a day that is not a Termination
Day and the Purchased Interest does not exceed 100%, first to the Issuer
in payment in full of all accrued Discount and fees (other than
Servicing Fees) with respect to such Portion of Capital, and second, if
the Servicer has set aside amounts in respect of the Servicing Fee
pursuant to Section 1.4(b)(i) and has not retained such amounts pursuant
to Section 1.4(c), to the Servicer (payable in arrears on the last day
of each Settlement Period) in payment in full of the Issuer's Share of
accrued Servicing Fees so set aside with respect to such Portion of
Capital; and
(ii) if such distribution occurs on a Termination Day or on a day
when the Purchased Interest exceeds 100%, first to the Issuer in payment
in full of all accrued Discount with respect to such Portion of Capital,
second to the Issuer in payment in full of such Portion of Capital (or,
if such day is not a Termination Day, the amount necessary to reduce the
Purchased Interest to 100%), third, if Falcon or an Affiliate thereof is
not the Servicer, to the Servicer in payment in full of all accrued
Servicing Fees with respect to such Portion of Capital, fourth, if the
Capital and accrued Discount with respect to each Portion of Capital
have been reduced to zero, and all accrued Servicing Fees payable to the
Servicer (if other than Falcon or an Affiliate thereof) have been paid
in full, to the Issuer, the Administrator and any other Indemnified
Party or Affected Person in payment in full of any other amounts owed
thereto by the Seller hereunder and, fifth, unless such amount has been
retained by the Servicer pursuant to Section 1.4(c), then to the
Servicer (if the Servicer is Falcon or an Affiliate thereof) in payment
in full of the Issuer's Share of all accrued Servicing Fees.
Notwithstanding the foregoing, if the Seller has elected to reduce a Portion
of the Capital as of an Alternative Settlement Date pursuant to Section
1.4(f), on such Alternative Settlement Date the Servicer shall deposit into
the Administration Account (or such other account designated by the
Administrator) the portion of the Collections set aside pursuant to Section
1.4(f), and such amount shall be distributed to the Issuer in reduction of a
Portion of the Capital, as selected by the Issuer. After the Capital,
Discount, fees payable pursuant to the Fee Letter and Servicing Fees with
respect to the Purchased Interest, and any other amounts payable by the
Seller and the Servicer to the Issuer, the Administrator or any other
Indemnified Party or Affected Person hereunder, have been paid in full, all
additional Collections with respect to the Purchased Interest shall be paid
to the Seller for its own account.
(e) For the purposes of this Section 1.4:
(i) if on any day the Outstanding Balance of any Pool Receivable
is reduced or adjusted as a result of any defective, rejected, returned,
repossessed or foreclosed goods or services, or any revision,
cancellation, allowance, discount or other adjustment made by the Seller
or any Affiliate of the Seller, or any setoff or dispute between the
Seller or any Affiliate of the Seller and an Obligor, or the Seller
shall have received a Deemed Collection under the Sale Agreements (in
each case, other than in respect of any Special Program Allowances), the
Seller shall be deemed to have received on such day a Collection of such
Pool Receivable in the amount of such reduction, adjustment or Deemed
Collection;
(ii) if on any day any of the representations or warranties in
Section 1(h) or (o) of Exhibit III is not true with respect to any Pool
Receivable, the Seller shall be deemed to have received on such day a
Collection of such Pool Receivable in full;
(iii) except as provided in clause (i) or (ii) above, or as
otherwise required by applicable law or the relevant Contract, all
Collections received from an Obligor of any Receivable shall be applied
to the Receivables of such Obligor in the order of the age of such
Receivables, starting with the oldest such Receivable, unless such
Obligor designates in writing its payment for application to specific
Receivables;
(iv) if and to the extent the Administrator or the Issuer shall be
required for any reason to pay over to an Obligor (or any trustee,
receiver, custodian or similar official in any Insolvency Proceeding)
any amount received by it hereunder, such amount shall be deemed not to
have been so received by the Administrator or the Issuer but rather to
have been retained by the Seller and, accordingly, the Administrator or
the Issuer, as the case may be, shall have a claim against the Seller
for such amount, payable when and to the extent that any distribution
from or on behalf of such Obligor is made in respect thereof; and
(v) on the Termination Date, the Seller shall be deemed to have
received on such day Collections of Pool Receivables equal to: (A) the
aggregate amount by which the Pool Receivables relating to the Special
Program Allowances have been discounted, adjusted or otherwise reduced
as noted in clause (i) minus (B) the Special Program Allowances.
(f) If at any time the Seller shall wish to cause the reduction of a
Portion of Capital (but not to commence the liquidation, or reduction to
zero, of the entire Capital of the Purchased Interest), the Seller may do so
as follows:
(i) the Seller shall give the Administrator and the Servicer at
least two Business Days' prior written notice thereof (or at least three
Business Days with regard to an Alternative Settlement Date) (including
the amount of such proposed reduction and the proposed date on which
such reduction will commence),
(ii) on the proposed date of commencement of such reduction and on
each day thereafter, the Servicer shall cause Collections with respect
to such Portion of Capital not to be reinvested until the amount thereof
not so reinvested shall equal the desired amount of reduction, and
(iii) the Servicer shall hold such Collections in trust for the
Issuer, for payment to the Administrator on the last day of the current
Settlement Period relating to such Portion of Capital or on the next
Alternative Settlement Date (as specified by the Seller), and the
applicable Portion of Capital shall be deemed reduced in the amount to
be paid to the Administrator only when in fact finally so paid;
provided, that:
A. the amount of any such reduction shall be not less than
$1,000,000 and shall be an integral multiple of $250,000, and the entire
Capital of the Purchased Interest after giving effect to such reduction
shall be not less than $20,000,000 and shall be in an integral multiple
of $1,000,000,
B. the Seller shall choose a reduction amount, and the date of
commencement thereof, so that to the extent practicable such reduction
shall commence and conclude in the same Settlement Period, and
C. if two or more Portions of Capital are outstanding at the time
of any proposed reduction, such proposed reduction shall be applied,
unless the Seller shall otherwise specify in the notice given pursuant
to clause (f)(i), to the Portion of Capital with the shortest remaining
Settlement Period (or, if all such Portions of Capital have the same
Settlement Period, pro rata).
Section 1.5. Fees. The Seller shall pay to the Administrator certain
fees in the amounts and on the dates set forth in a letter dated May 2, 1996
among Falcon, the Seller and the Administrator (as such letter agreement may
be amended, supplemented or otherwise modified from time to time, the "Fee
Letter").
Section 1.6. Payments and Computations, Etc. (a) All amounts to be
paid or deposited by the Seller or the Servicer hereunder shall be paid or
deposited no later than noon (New York City time) on the day when due in same
day funds to the Administration Account. All amounts received after noon (New
York City time) will be deemed to have been received on the next Business
Day.
(b) The Seller or the Servicer, as the case may be, shall, to the
extent permitted by law, pay interest on any amount not paid or deposited by
the Seller or the Servicer, as the case may be, when due hereunder, at an
interest rate equal to 2.0% per annum above the Base Rate, payable on demand.
(c) All computations of interest under subsection (b) and all
computations of Discount, fees and other amounts hereunder shall be made on
the basis of a year of 360 (or 365 or 366, as applicable, with respect to
Discount calculated by reference to the Base Rate) days for the actual number
of days elapsed. Whenever any payment or deposit to be made hereunder shall
be due on a day other than a Business Day, such payment or deposit shall be
made on the next Business Day and such extension of time shall be included in
the computation of such payment or deposit.
Section 1.7. Dividing or Combining Portions of the Capital of the
Purchased Interest7. Dividing or Combining Portions of the Capital of the
Purchased Interest. The Seller may, on the last day of any Settlement Period,
pursuant to written notice delivered to the Administrator in accordance with
Section 5.2: (a) three Business Days before such last day in the case of a
Portion of Capital to be funded based upon the Eurodollar Rate and (b) two
Business Days before such last day in all other cases, either: (i) divide the
Capital of the Purchased Interest into two or more portions (each, a "Portion
of Capital"), which Portions of Capital may accrue Discount by reference to
different rates, equal, in aggregate, to the Capital of the Purchased
Interest; provided, that after giving effect to such division the amount of
each such Portion of Capital shall be not less than $1,000,000 and shall be
an integral multiple of $250,000, or (ii) combine any two or more Portions of
Capital outstanding on such last day and having Settlement Periods ending on
such last day into a single Portion of Capital equal to the aggregate of the
Capital of such Portions of Capital.
Section 1.8. Increased Costs. (a) If the Administrator, the Issuer,
any Purchaser, any other Program Support Provider or any of their respective
Affiliates (each an "Affected Person") reasonably determines that the
existence of or compliance with: (i) any law or regulation or any change
therein or in the interpretation or application thereof, in each case
adopted, issued or occurring after the date hereof, or (ii) any request,
guideline or directive from any central bank or other Governmental Authority
(whether or not having the force of law) issued or occurring after the date
of this Agreement, affects or would affect the amount of capital required or
expected to be maintained by such Affected Person, and such Affected Person
determines that the amount of such capital is increased by or based upon the
existence of any commitment to make purchases of (or otherwise to maintain
the investment in) Pool Receivables related to this Agreement or any related
liquidity facility, credit enhancement facility and other commitments of the
same type, then, upon demand by such Affected Person (with a copy to the
Administrator), the Seller shall immediately pay to the Administrator, for
the account of such Affected Person, from time to time as specified by such
Affected Person, additional amounts sufficient to compensate such Affected
Person in the light of such circumstances, to the extent that such Affected
Person reasonably determines such increase in capital to be allocable to the
existence of any of such commitments. A certificate as to such amounts
submitted to the Seller and the Administrator by such Affected Person shall
be conclusive and binding for all purposes, absent manifest error.
(b) If, due to either: (i) the introduction of or any change in or in
the interpretation of any law or regulation or (ii) compliance with any
guideline or request from any central bank or other Governmental Authority
(whether or not having the force of law), there shall be any increase in the
cost to any Affected Person of agreeing to purchase or purchasing, or
maintaining the ownership of, the Purchased Interest in respect of which
Discount is computed by reference to the Eurodollar Rate, then, upon demand
by such Affected Person, the Seller shall immediately pay to such Affected
Person, from time to time as specified by such Affected Person, additional
amounts sufficient to compensate such Affected Person for such increased
costs. A certificate as to such amounts submitted to the Seller and the
Administrator by such Affected Person shall be conclusive and binding for all
purposes, absent manifest error.
(c) If such increased costs affect the related Affected Person's
portfolio of financing transactions, such Affected Person shall use
reasonable averaging and attribution methods to allocate such increased costs
to the transactions contemplated by this Agreement.
Section 1.9. Requirements of Law. If any Affected Person reasonably
determines that the existence of or compliance with: (i) any law or
regulation or any change therein or in the interpretation or application
thereof, in each case adopted, issued or occurring after the date hereof, or
(ii) any request, guideline or directive from any central bank or other
Governmental Authority (whether or not having the force of law) issued or
occurring after the date of this Agreement:
(a) does or shall subject such Affected Person to any tax of any
kind whatsoever with respect to this Agreement, any increase in the
Purchased Interest or in the amount of Capital relating thereto, or does
or shall change the basis of taxation of payments to such Affected
Person on account of Collections, Discount or any other amounts payable
hereunder (excluding taxes imposed on the overall pre-tax net income of
such Affected Person, and franchise taxes imposed on such Affected
Person, by the jurisdiction under the laws of which such Affected Person
is organized or a political subdivision thereof);
(b) does or shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets
held by, or deposits or other liabilities in or for the account of,
purchases, advances or loans by, or other credit extended by, or any
other acquisition of funds by, any office of such Affected Person that
are not otherwise included in the determination of the Eurodollar Rate
or the Base Rate hereunder; or
(c) does or shall impose on such Affected Person any other
condition;
and the result of any of the foregoing is: (x) to increase the cost to such
Affected Person of acting as Administrator, or of agreeing to purchase or
purchasing or maintaining the ownership of undivided percentage ownership
interests with regard to the Purchased Interest (or interests therein) or any
Portion of Capital, or (y) to reduce any amount receivable hereunder (whether
directly or indirectly), then, in any such case, upon demand by such Affected
Person, the Seller shall immediately pay to such Affected Person additional
amounts necessary to compensate such Affected Person for such additional cost
or reduced amount receivable. All such amounts shall be payable as incurred.
A certificate from such Affected Person to the Seller and the Administrator
certifying, in reasonably specific detail, the basis for, calculation of, and
amount of such additional costs or reduced amount receivable shall be
conclusive and binding for all purposes, absent manifest error; provided,
however, that no Affected Person shall be required to disclose any
confidential or tax planning information in any such certificate.
Section 1.10. Inability to Determine Eurodollar Rate. If the
Administrator shall have determined before the first day of any Settlement
Period (which determination shall be conclusive and binding upon the parties
hereto), by reason of circumstances affecting the interbank Eurodollar
market, either that: (a) dollar deposits in the relevant amounts and for the
relevant Settlement Period are not available, (b) adequate and reasonable
means do not exist for ascertaining the Eurodollar Rate for such Settlement
Period or (c) the Eurodollar Rate determined pursuant hereto does not
accurately reflect the cost to the Issuer (as conclusively determined by the
Administrator) of maintaining any Portion of Capital during such Settlement
Period, the Administrator shall promptly give telephonic notice of such
determination, confirmed in writing, to the Seller before the first day of
such Settlement Period. Upon delivery of such notice: (i) no Portion of
Capital shall be funded thereafter at the Alternate Rate determined by
reference to the Eurodollar Rate unless and until the Administrator shall
have given notice to the Seller that the circumstances giving rise to such
determination no longer exist, and (ii) with respect to any outstanding
Portions of Capital then funded at the Alternate Rate determined by reference
to the Eurodollar Rate, such Alternate Rate shall automatically be converted
to the Alternate Rate determined by reference to the Base Rate at the
respective last days of the then-current Settlement Periods relating to such
Portions of Capital.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES; COVENANTS;
TERMINATION EVENTS
Section 2.1. Representations and Warranties; Covenants. Each of the
Seller and the Servicer hereby makes the representations and warranties, and
hereby agrees to perform and observe the covenants, applicable to it set
forth in Exhibits III and IV, respectively.
Section 2.2. Termination Events. If any of the Termination Events set
forth in Exhibit V shall occur, the Administrator may (at the direction of,
or with the consent of, the Majority Purchasers under the Liquidity Facility;
provided, that no such direction or consent shall be necessary if there are
no outstanding purchases under the Liquidity Facility), by notice to the
Seller, declare the Facility Termination Date to have occurred (in which case
the Facility Termination Date shall be deemed to have occurred); provided,
that automatically upon the occurrence of any event (without any requirement
for the passage of time or the giving of notice) described in paragraph
(f)(i) of Exhibit V, the Facility Termination Date shall occur. Upon any such
declaration, occurrence or deemed occurrence of the Facility Termination
Date, the Issuer and the Administrator shall have, in addition to the rights
and remedies that they may have under this Agreement, all other rights and
remedies provided after default under the UCC and under other applicable law,
which rights and remedies shall be cumulative.
ARTICLE III.
INDEMNIFICATION
Section 3.1. Indemnities by the Seller. Without limiting any other
rights that the Administrator, the Issuer, any Program Support Provider or
any of their respective Affiliates, employees, agents, successors,
transferees or assigns (each, an "Indemnified Party") may have hereunder or
under applicable law, the Seller hereby agrees to indemnify each Indemnified
Party from and against any and all claims, damages, expenses, losses and
liabilities (including Attorney Costs) (all of the foregoing being
collectively referred to as "Indemnified Amounts") arising out of or
resulting from this Agreement (whether directly or indirectly), the use of
proceeds of purchases or reinvestments, the ownership of the Purchased
Interest, or any interest therein, or in respect of any Receivable, Related
Security or Contract, excluding, however: (a) Indemnified Amounts to the
extent resulting from gross negligence or willful misconduct on the part of
such Indemnified Party, (b) recourse (except as otherwise specifically
provided in this Agreement) for Receivables that are uncollectible due to the
inability of the Obligor to pay, or (c) any overall net income taxes or
franchise taxes imposed on such Indemnified Party by the jurisdiction under
the laws of which such Indemnified Party is organized or any political
subdivision thereof. Without limiting or being limited by the foregoing, and
subject to the exclusions set forth in the preceding sentence, the Seller
shall pay on demand (which demand shall be accompanied by documentation of
the Indemnified Amounts, in reasonable detail) to each Indemnified Party any
and all amounts necessary to indemnify such Indemnified Party from and
against any and all Indemnified Amounts relating to or resulting from any of
the following:
(i) the failure of any Receivable included in the calculation of
the Net Receivables Pool Balance as an Eligible Receivable to be an
Eligible Receivable, the failure of any information contained in an
Information Package to be true and correct, or the failure of any other
information provided to the Issuer or the Administrator with respect to
Receivables or this Agreement to be true and correct;
(ii) the failure of any representation, warranty or statement made
or deemed made by the Seller (or any of its officers) under or in
connection with this Agreement to have been true and correct in all
respects when made;
(iii) the failure by the Seller to comply with any applicable law,
rule or regulation with respect to any Pool Receivable or the related
Contract, or the failure of any Pool Receivable or the related Contract
to conform to any such applicable law, rule or regulation;
(iv) the failure to vest in the Issuer a valid and enforceable:
(A) perfected undivided percentage ownership interest, to the extent of
the Purchased Interest, in the Receivables in, or purporting to be in,
the Receivables Pool and the other Pool Assets, and (B) first priority
perfected security interest in the Pool Assets, in each case, free and
clear of any Adverse Claim;
(v) the failure to have filed, 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
Receivables in, or purporting to be in, the Receivables Pool and the
other Pool Assets, whether at the time of any purchase or reinvestment
or at any subsequent time;
(vi) any dispute, claim, offset or defense (other than discharge
in bankruptcy of the Obligor) of the Obligor to the payment of any
Receivable in, or purporting to be in, the Receivables Pool (including a
defense based on such Receivable or the related Contract not being a
legal, valid and binding obligation of such Obligor enforceable against
it in accordance with its terms), or any other claim resulting from the
sale of the goods or services related to such Receivable or the
furnishing or failure to furnish such goods or services or relating to
collection activities with respect to such Receivable (if such
collection activities were performed by the Seller or any of its
Affiliates acting as Servicer or by any agent or independent contractor
retained by the Seller or any of its Affiliates);
(vii) any failure of the Seller (or any of its Affiliates acting
as the Servicer) to perform its duties or obligations in accordance with
the provisions hereof or under the Contracts;
(viii) any products liability or other claim, investigation,
litigation or proceeding arising out of or in connection with
merchandise, insurance or services that are the subject of any Contract;
(ix) the commingling of Collections at any time with other funds;
(x) the use of proceeds of purchases or reinvestments; or
(xi) any reduction in Capital as a result of the distribution of
Collections pursuant to Section 1.4(d), if all or a portion of such
distributions shall thereafter be rescinded or otherwise must be
returned for any reason.
Section 3.2. Indemnities by the Servicer. Without limiting any other
rights that the Administrator, the Issuer or any other Indemnified Party may
have hereunder or under applicable law, the Servicer hereby agrees to
indemnify each Indemnified Party from and against any and all Indemnified
Amounts arising out of or resulting from (whether directly or indirectly):
(a) the failure of any information contained in an Information Package to be
true and correct, or the failure of any other information provided to the
Issuer or the Administrator by, or on behalf of, the Servicer to be true and
correct, (b) the failure of any representation, warranty or statement made or
deemed made by the Servicer (or any of its officers) under or in connection
with this Agreement to have been true and correct in all respects when made,
(c) the failure by the Servicer to comply with any applicable law, rule or
regulation with respect to any Pool Receivable or the related Contract, (d)
any dispute, claim, offset or defense of the Obligor to the payment of any
Receivable in, or purporting to be in, the Receivables Pool resulting from or
related to the collection activities with respect to such Receivable, or (e)
any failure of the Servicer to perform its duties or obligations in
accordance with the provisions hereof.
ARTICLE IV.
ADMINISTRATION AND COLLECTIONS
Section 4.1. Appointment of the Servicer. (a) The servicing,
administering and collection of the Pool Receivables shall be conducted by
the Person so designated from time to time as the Servicer in accordance with
this Section. Until the Administrator gives notice to Falcon (in accordance
with this Section) of the designation of a new Servicer, Falcon is hereby
designated as, and hereby agrees to perform the duties and obligations of,
the Servicer pursuant to the terms hereof. Upon the occurrence of a
Termination Event, the Administrator may designate as Servicer any Person
(including itself) to succeed Falcon or any successor Servicer, on the
condition in each case that any such Person so designated shall agree to
perform the duties and obligations of the Servicer pursuant to the terms
hereof.
(b) Upon the designation of a successor Servicer as set forth in clause
(a), Falcon agrees that it will terminate its activities as Servicer
hereunder in a manner that the Administrator determines will facilitate the
transition of the performance of such activities to the new Servicer, and
Falcon shall cooperate with and assist such new Servicer. Such cooperation
shall include access to and transfer of records and use by the new Servicer
of all licenses, hardware or software necessary or desirable to collect the
Pool Receivables and the Related Security.
(c) Falcon acknowledges that, in making their decision to execute and
deliver this Agreement, the Administrator and the Issuer have relied on
Falcon's agreement to act as Servicer hereunder. Accordingly, Falcon agrees
that it will not voluntarily resign as Servicer.
(d) The Servicer may delegate its duties and obligations hereunder to
any subservicer (each, a "Sub-Servicer"); provided, that, in each such
delegation: (i) such Sub-Servicer shall agree in writing to perform the
duties and obligations of the Servicer pursuant to the terms hereof, (ii) the
Servicer shall remain primarily liable for the performance of the duties and
obligations so delegated, (iii) the Seller, the Administrator and the Issuer
shall have the right to look solely to the Servicer for performance and (iv)
the terms of any agreement with any Sub-Servicer shall provide that the
Administrator may terminate such agreement upon the termination of the
Servicer hereunder by giving notice of its desire to terminate such agreement
to the Servicer (and the Servicer shall provide appropriate notice to each
such Sub-Servicer); provided, however, that if any such delegation is to any
Person other than an Originator, the Administrator shall have consented in
writing in advance to such delegation.
Section 4.2. Duties of the Servicer. (a) The Servicer shall take or
cause to be taken all such action as may be necessary or advisable to
administer and collect each Pool Receivable from time to time, all in
accordance with this Agreement and all applicable laws, rules and
regulations, with reasonable care and diligence, and in accordance with the
Credit and Collection Policies. The Servicer shall set aside for the accounts
of the Seller and the Issuer the amount of the Collections to which each is
entitled in accordance with Article II. The Servicer may, in accordance with
the applicable Credit and Collection Policy, extend the maturity of any Pool
Receivable (but not beyond 30 days) and extend the maturity or adjust the
Outstanding Balance of any Defaulted Receivable as the Servicer may determine
to be appropriate to maximize Collections thereof; provided, however, that:
(i) such extension or adjustment shall not alter the status of such Pool
Receivable as a Delinquent Receivable or a Defaulted Receivable or limit the
rights of the Issuer or the Administrator under this Agreement and (ii) if a
Termination Event has occurred and Falcon or an Affiliate thereof is serving
as the Servicer, Falcon or such Affiliate may make such extension or
adjustment only upon the prior written approval of the Administrator. The
Seller shall deliver to the Servicer and the Servicer shall hold for the
benefit of the Seller and the Administrator (for the benefit of the Issuer
and individually), in accordance with their respective interests, all records
and documents (including computer tapes or disks) with respect to each Pool
Receivable. Notwithstanding anything to the contrary contained herein, the
Administrator may direct the Servicer (whether the Servicer is Falcon or any
other Person) to commence or settle any legal action to enforce collection of
any Pool Receivable or to foreclose upon or repossess any Related Security;
provided, however, that no such direction may be given unless either: (x) a
Termination Event has occurred or (y) the Administrator believes in good
faith that failure to commence, settle or effect such legal action,
foreclosure or repossession could adversely affect Receivables constituting a
material portion of the Pool Receivables.
(b) The Servicer shall, as soon as practicable following actual receipt
of collected funds, turn over to the Seller the collections of any
indebtedness that is not a Pool Receivable, less, if Falcon or an Affiliate
thereof is not the Servicer, all reasonable and appropriate out-of-pocket
costs and expenses of such Servicer of servicing, collecting and
administering such collections; provided, however, if Falcon or an Affiliate
thereof is not the Servicer, the Servicer shall not be under any obligation
to remit any such funds to the Seller unless and until the Servicer has
received from the Seller evidence satisfactory to the Administrator and the
Servicer that the Seller is entitled to such funds hereunder and under
applicable law. The Servicer, if other than Falcon or an Affiliate thereof,
shall, as soon as practicable upon demand, deliver to the Seller all records
in its possession that evidence or relate to any indebtedness that is not a
Pool Receivable, and copies of records in its possession that evidence or
relate to any indebtedness that is a Pool Receivable.
(c) Notwithstanding anything to the contrary contained in this Article,
the Servicer, if not Falcon or an Affiliate thereof, shall have no obligation
to collect, enforce or take any other action described in this Article with
respect to any indebtedness that is not a Pool Receivable other than to
deliver to the Seller the collections and documents with respect to any such
indebtedness as described in clause (b). It is expressly understood and
agreed by the parties that such Servicer's duties in respect of any
indebtedness that is not a Pool Receivable are set forth in this Section in
their entirety. Upon delivery by such Servicer to the Seller of funds or
records relating to any indebtedness that is not a Pool Receivable, such
Servicer shall have discharged in full all of its responsibilities to make
any such delivery.
(d) The Servicer's obligations hereunder shall terminate on the later
of: (i) the Facility Termination Date and (ii) the date on which all amounts
required to be paid to the Issuer, the Administrator and any other
Indemnified Party or Affected Person hereunder shall have been paid in full.
After such termination, if Falcon or an Affiliate thereof was not the
Servicer on the date of such termination, the Servicer shall promptly deliver
to the Seller all books, records and related materials that the Seller
previously provided to the Servicer, or that have been obtained by the
Servicer, in connection with this Agreement.
Section 4.3. Lock-Box Arrangements. Before the initial purchase
hereunder, the Seller shall enter into Lock-Box Agreements with all of the
Lock-Box Banks and deliver original counterparts thereof to the
Administrator. Upon the occurrence of a Termination Event, the Administrator
may at any time thereafter give notice to each Lock-Box Bank that the
Administrator is exercising its rights under the Lock-Box Agreements to do
any or all of the following: (a) to have the exclusive ownership and control
of the Lock-Box Accounts transferred to the Administrator and to exercise
exclusive dominion and control over the funds deposited therein, (b) to have
the proceeds that are sent to the respective Lock-Box Accounts be redirected
pursuant to the Administrator's instructions rather than deposited in the
applicable Lock-Box Account, and (c) to take any or all other actions
permitted under the applicable Lock-Box Agreement. The Seller hereby agrees
that if the Administrator at any time takes any action set forth in the
preceding sentence, the Administrator shall have exclusive control of the
proceeds (including Collections) of all Pool Receivables and the Seller
hereby further agrees to take any other action that the Administrator may
reasonably request to transfer such control. Any proceeds of Pool Receivables
received by the Seller or the Servicer thereafter shall be sent immediately
to the Administrator. The parties hereto hereby acknowledge that if at any
time the Administrator takes control of any Lock-Box Account, the
Administrator shall not have any rights to the funds therein in excess of the
unpaid amounts due to the Administrator, the Issuer or any other Person
hereunder and the Administrator shall distribute or cause to be distributed
such funds in accordance with Section 4.2(b) (including the proviso thereto)
and Article II (in each case as if such funds were held by the Servicer
thereunder).
Section 4.4. Enforcement Rights. (a) At any time following the
occurrence of a Termination Event:
(i) the Administrator may direct the Obligors that payment of all
amounts payable under any Pool Receivable is to be made directly to the
Administrator or its designee;
(ii) the Administrator may instruct the Seller or the Servicer to
give notice of the Issuer's interest in Pool Receivables to each
Obligor, which notice shall direct that payments be made directly to the
Administrator or its designee, and the Seller or the Servicer, as the
case may be, shall give such notice at the expense of the Seller or the
Servicer, as the case may be; provided, that if the Seller or the
Servicer, as the case may be, fails to so notify each Obligor, the
Administrator (at the Seller's or the Servicer's, as the case may be,
expense) may so notify the Obligors; and
(iii) the Administrator may request the Servicer to, and upon such
request the Servicer shall: (A) assemble all of the records necessary or
desirable to collect the Pool Receivables and the Related Security, and
transfer or license to a successor Servicer the use of all software
necessary or desirable to collect the Pool Receivables and the Related
Security, and make the same available to the Administrator or its
designee at a place selected by the Administrator, and (B) segregate all
cash, checks and other instruments received by it from time to time
constituting Collections in a manner acceptable to the Administrator
and, promptly upon receipt, remit all such cash, checks and instruments,
duly endorsed or with duly executed instruments of transfer, to the
Administrator or its designee.
(b) The Seller hereby authorizes the Administrator, and irrevocably
appoints the Administrator as its attorney-in-fact with full power of
substitution and with full authority in the place and stead of the Seller,
which appointment is coupled with an interest, to take any and all steps in
the name of the Seller and on behalf of the Seller necessary or desirable, in
the determination of the Administrator, after the occurrence of a Termination
Event, to collect any and all amounts or portions thereof due under any and
all Pool Assets, including endorsing the name of the Seller on checks and
other instruments representing Collections and enforcing such Pool Assets.
Notwithstanding anything to the contrary contained in this subsection, none
of the powers conferred upon such attorney-in-fact pursuant to the preceding
sentence shall subject such attorney-in-fact to any liability if any action
taken by it shall prove to be inadequate or invalid, nor shall they confer
any obligations upon such attorney-in-fact in any manner whatsoever.
Section 4.5. Responsibilities of the Seller. (a) Anything herein to
the contrary notwithstanding, the Seller shall: (i) perform all of its
obligations under the Contracts related to the Pool Receivables to the same
extent as if interests in such Pool Receivables had not been transferred
hereunder, and the exercise by the Administrator or the Issuer of their
respective rights hereunder shall not relieve the Seller from such
obligations, and (ii) pay when due any taxes, including any sales taxes
payable in connection with the Pool Receivables and their creation and
satisfaction. The Administrator and the Issuer shall not have any obligation
or liability with respect to any Pool Asset, nor shall either of them be
obligated to perform any of the obligations of the Seller, Falcon or the
Originators thereunder.
(b) Falcon hereby irrevocably agrees that if at any time it shall cease
to be the Servicer hereunder, it shall act (if the then-current Servicer so
requests) as the data-processing agent of the Servicer and, in such capacity,
Falcon shall conduct the data-processing functions of the administration of
the Receivables and the Collections thereon in substantially the same way
that Falcon conducted such data-processing functions while it acted as the
Servicer.
Section 4.6. Servicing Fee. (a) Subject to clause (b), the Servicer
shall be paid a fee equal to 0.25% per annum of the average aggregate
Outstanding Balance of the Pool Receivables. The Issuer's Share of such fee
shall be paid through the distributions contemplated by Section 1.4(d), and
the Seller's Share of such fee shall be paid by the Seller.
(b) If the Servicer ceases to be Falcon or an Affiliate thereof, the
servicing fee shall be the greater of: (i) the amount calculated pursuant to
clause (a) and (ii) an alternative amount specified by the successor Servicer
not to exceed 110% of the aggregate reasonable costs and expenses incurred by
such successor Servicer in connection with the performance of its obligations
as Servicer.
ARTICLE V.
MISCELLANEOUS
Section 5.1. Amendments, Etc. No amendment or waiver of any provision
of this Agreement or any other Transaction Document, or consent to any
departure by the Seller or the Servicer therefrom, shall be effective unless
in a writing signed by the Administrator, and, in the case of any amendment,
by the other parties thereto; and then such amendment, waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given; provided, however, that no such amendment shall be effective
until both Moody's and Standard & Poor's have notified the Servicer and the
Administrator in writing that such action will not result in a reduction or
withdrawal of the rating of any Notes. No failure on the part of the Issuer
or the Administrator to exercise, and no delay in exercising, any right
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any right hereunder preclude any other or further exercise
thereof or the exercise of any other right.
Section 5.2. Notices, Etc. All notices and other communications
hereunder shall, unless otherwise stated herein, be in writing (which shall
include facsimile communication) and be sent or delivered to each party
hereto at its address set forth under its name on the signature pages hereof
or at such other address as shall be designated by such party in a written
notice to the other parties hereto. Notices and communications by facsimile
shall be effective when sent (and shall be followed by hard copy sent by
first class mail), and notices and communications sent by other means shall
be effective when received.
Section 5.3. Assignability. (a) This Agreement and the Issuer's rights
and obligations herein (including ownership of the Purchased Interest or an
interest therein) shall be assignable, in whole or in part, by the Issuer and
its successors and assigns with the prior written consent of the Seller;
provided, however, that such consent shall not be unreasonably withheld; and
provided further, that no such consent shall be required if the assignment is
made to PNC, any Affiliate of PNC (other than a director or officer of PNC),
any Purchaser or other Program Support Provider or any Person that is: (i) in
the business of issuing Notes and (ii) associated with or administered by PNC
or any Affiliate of PNC. Each assignor may, in connection with the
assignment, disclose to the applicable assignee (that shall have agreed to be
bound by Section 5.6) any information relating to the Servicer, the Seller or
the Pool Receivables furnished to such assignor by or on behalf of the
Servicer, the Seller, the Issuer or the Administrator.
(b) The Issuer may at any time grant to one or more banks or other
institutions (each a "Purchaser") party to the Liquidity Agreement, or to any
other Program Support Provider, participating interests in the Purchased
Interest. In the event of any such grant by the Issuer of a participating
interest to a Purchaser or other Program Support Provider, the Issuer shall
remain responsible for the performance of its obligations hereunder. The
Seller agrees that each Purchaser or other Program Support Provider shall be
entitled to the benefits of Sections 1.8 and 1.9.
(c) This Agreement and the rights and obligations of the Administrator
hereunder shall be assignable, in whole or in part, by the Administrator and
its successors and assigns; provided, that, unless: (i) such assignment is to
an Affiliate of PNC, (ii) it becomes unlawful for PNC to serve as the
Administrator or (iii) a Termination Event exists, the Seller has consented
to such assignment, which consent shall not be unreasonably withheld.
(d) Except as provided in Section 4.1(d), neither the Seller nor the
Servicer may assign its rights or delegate its obligations hereunder or any
interest herein without the prior written consent of the Administrator.
(e) Without limiting any other rights that may be available under
applicable law, the rights of the Issuer may be enforced through it or by its
agents.
(f) Notwithstanding the other provisions of this Section, no assignee
pursuant to clause (a) or grantee pursuant to clause (b) (other than, in
either case, any Affiliate of PNC, any Purchaser that was party to the
Liquidity Agreement on the date hereof, any Purchaser that was party to the
Designated Receivables Agreement on the date hereof or any other Person as to
which the Seller has provided its consent pursuant to clause (a)) shall be
entitled to receive any greater amount pursuant to Sections 1.8 or 1.9 than
the assignor or grantor, as applicable, would have been entitled to receive
in respect of the Purchased Interest or rights and obligations herein.
Section 5.4. Costs, Expenses and Taxes. (a) In addition to the rights
of indemnification granted under Section 3.1, and subject to the Engagement
Letter and the Fee Letter, the Seller agrees to pay on demand (which demand
shall be accompanied by documentation thereof in reasonable detail) all costs
and expenses in connection with the preparation, execution, delivery and
administration (including periodic internal audits by the Administrator of
Pool Receivables) of this Agreement, the other Transaction Documents and the
other documents and agreements to be delivered hereunder (and all costs and
expenses in connection with any amendment, waiver or modification of any
thereof), including: (i) Attorney Costs for the Administrator, the Issuer and
their respective Affiliates and agents with respect thereto and with respect
to advising the Administrator, the Issuer and their respective Affiliates and
agents as to their rights and remedies under this Agreement and the other
Transaction Documents, and (ii) all costs and expenses (including Attorney
Costs), if any, of the Administrator, the Issuer and their respective
Affiliates and agents in connection with the enforcement of this Agreement
and the other Transaction Documents; provided, however, that the Seller shall
not be responsible for the costs and expenses (including Attorney Costs) of
Purchasers (in their capacities as such) under the Liquidity Agreement other
than such costs and expenses in connection with the enforcement of this
Agreement or any other Transaction Document.
(b) In addition, the Seller shall pay on demand any and all stamp and
other taxes and fees payable in connection with the execution, delivery,
filing and recording of this Agreement or the other documents or agreements
to be delivered hereunder, and agrees to save each Indemnified Party harmless
from and against any liabilities with respect to or resulting from any delay
in paying or omission to pay such taxes and fees.
Section 5.5. No Proceedings; Limitation on Payments. Each of the
Seller, the Servicer, the Administrator, each assignee of the Purchased
Interest or any interest therein, and each Person that enters into a
commitment to purchase the Purchased Interest or interests therein, hereby
covenants and agrees that it will not institute against, or join any other
Person in instituting against, the Issuer any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceeding, or other proceeding under
any federal or state bankruptcy or similar law, for one year and one day
after the latest maturing Note issued by the Issuer is paid in full.
Section 5.6. Confidentiality. Unless otherwise required by applicable
law, each of the Seller and the Servicer agrees to maintain the
confidentiality of this Agreement and the other Transaction Documents (and
all drafts thereof) in communications with third parties and otherwise;
provided, that this Agreement 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 Seller's legal counsel and auditors if they agree to
hold it confidential and (c) third parties to the extent such disclosure is
required by the Credit Facility. Unless otherwise required by applicable law,
each of the Administrator and the Issuer agrees to maintain the
confidentiality of non-public financial information regarding Falcon and its
subsidiaries and other non-public information marked as confidential by the
Servicer or the Seller; provided, that such information may be disclosed to:
(i) third parties to the extent such disclosure is made pursuant to a written
agreement of confidentiality in form and substance reasonably satisfactory to
Falcon, (ii) legal counsel and auditors of the Issuer or the Administrator if
they agree to hold it confidential, (iii) the rating agencies rating the
Notes, (iv) any Program Support Provider or potential Program Support
Provider, (v) any placement agent placing the Notes and (vi) any regulatory
authorities having jurisdiction over PNC, the Issuer, any Program Support
Provider or any Purchaser.
Section 5.7. GOVERNING LAW AND JURISDICTION. (a) THIS AGREEMENT SHALL
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW
YORK (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF),
EXCEPT TO THE EXTENT THAT THE PERFECTION (OR THE EFFECT OF PERFECTION OR NON-
PERFECTION) OF THE INTERESTS OF THE ISSUER IN THE POOL ASSETS IS GOVERNED BY
THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT
MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES
FOR THE SOUTHERN DISTRICT OF NEW YORK; AND, BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, EACH OF THE PARTIES HERETO CONSENTS, FOR ITSELF AND IN RESPECT OF
ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE
PARTIES HERETO IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT PERMITTED BY LAW,
ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE
GROUNDS OF FORUM NON CONVENIENS, THAT IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS
AGREEMENT OR ANY DOCUMENT RELATED HERETO. EACH OF THE PARTIES HERETO WAIVES
PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH SERVICE
MAY BE MADE BY ANY OTHER MEANS PERMITTED BY NEW YORK LAW.
Section 5.8. Execution in Counterparts. This Agreement may be executed
in any number of counterparts, each of which when so executed shall be deemed
to be an original and all of which when taken together shall constitute one
and the same agreement.
Section 5.9. Survival of Termination. The provisions of Sections 1.8,
1.9, 3.1, 3.2, 5.4, 5.5, 5.6, 5.7, 5.10 and 5.13 shall survive any
termination of this Agreement.
Section 5.10. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO WAIVES
THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE
BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR PARTIES, WHETHER
WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS OR OTHERWISE. EACH OF THE
PARTIES HERETO AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED
BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, EACH OF THE
PARTIES HERETO FURTHER AGREES THAT ITS RESPECTIVE RIGHT TO A TRIAL BY JURY IS
WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER
PROCEEDING THAT SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR
ENFORCEABILITY OF THIS AGREEMENT OR ANY PROVISION HEREOF. THIS WAIVER SHALL
APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO
THIS AGREEMENT.
Section 5.11. Entire Agreement. This Agreement and the other
Transaction Documents embody the entire agreement and understanding between
the parties hereto, and supersede all prior or contemporaneous agreements and
understandings of such Persons, verbal or written, relating to the subject
matter hereof and thereof, except for any prior arrangements made with
respect to the payment by the Issuer of (or any indemnification for) any
fees, costs or expenses payable to or incurred (or to be incurred) by or on
behalf of the Seller, the Servicer and the Administrator.
Section 5.12. Headings. The captions and headings of this Agreement
and in any Exhibit, Schedule or Annex hereto are for convenience of reference
only and shall not affect the interpretation hereof or thereof.
Section 5.13. Issuer's Liabilities. The obligations of the Issuer
under the Transaction Documents are solely the corporate obligations of the
Issuer. No recourse shall be had for any obligation or claim arising out of
or based upon any Transaction Document against any stockholder, employee,
officer, director or incorporator of the Issuer; provided, however, that this
Section shall not relieve any such Person of any liability it might otherwise
have for its own gross negligence or willful misconduct.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the
date first above written.
CENTRALLY HELD EAGLE RECEIVABLES
PROGRAM, INC.
By: /s/ Anthony Navitsky
-------------------
Name: Anthony Navitsky
Title: Vice President
Address:
Centrally Held Eagle Receivables
Program, Inc.
Two North Riverside Plaza
Suite 1100
Chicago, Illinois 60606
Attention: Anthony Navitsky
Telephone No.: (312) 906-6830
Facsimile No.: (312) 906-8372
FALCON BUILDING PRODUCTS, INC.
By: /s/ Gus J. Athas
----------------
Name: Gus J. Athas
Title: Senior Vice President
Address:
Falcon Building Products, Inc.
Two North Riverside Plaza
Suite 1100
Chicago, Illinois 60606
Attention: Anthony Navitsky
Telephone No.: (312) 906-6830
Facsimile No.: (312) 906-8372
MARKET STREET FUNDING CORPORATION
By: /s/ Douglas K. Johnson
-----------------------
Name: Douglas K. Johnson
Title: President
Address:
Market Street Funding Corporation
c/o AMACAR Group, L.L.C.
6707-D Fairview Road
Charlotte, North Carolina 28210
Attention: Douglas K. Johnson
Telephone No.: (704) 365-0569
Facsimile No.: (704) 365-1362
With a copy to:
PNC Bank, National Association
One PNC Plaza
249 Fifth Avenue
Pittsburgh, Pennsylvania 15220-2707
Attention: Robert O. Finley, Jr.
Telephone No.: (412) 762-2047
Facsimile No.: (412) 762-9184
PNC BANK, NATIONAL ASSOCIATION,
as Administrator
By: /s/ George Lula
---------------
Name: George Lula
Title: Executive Vice President
Address:
PNC Bank, National Association
One PNC Plaza
249 Fifth Avenue
Pittsburgh, Pennsylvania 15220-2707
Attention: Robert O. Finley, Jr.
Telephone No.: (412) 762-2047
Facsimile No.: (412) 762-9184
EXHIBIT I
DEFINITIONS
As used in the Agreement (including its Exhibits, Schedules and
Annexes), the following terms shall have the following meanings (such
meanings to be equally applicable to both the singular and plural forms of
the terms defined). Unless otherwise indicated, all Section, Annex, Exhibit
and Schedule references in this Exhibit are to Sections of and Annexes,
Exhibits and Schedules to the Agreement.
"Administration Account" means the account (account number 1002422076)
of the Administrator maintained at the office of PNC at One PNC Plaza, 249
Fifth Avenue, Pittsburgh, Pennsylvania 15220-2707, or such other account as
may be so designated in writing by the Administrator to the Servicer.
"Administrator" has the meaning set forth in the preamble to the
Agreement.
"Adverse Claim" means a lien, security interest or other charge or
encumbrance, or any other type of preferential arrangement; it being
understood that any thereof in favor of the Issuer or the Administrator (for
the benefit of the Issuer) shall not constitute an Adverse Claim.
"Affected Person" has the meaning set forth in Section 1.8 of the
Agreement.
"Affiliate" means, as to any Person, any other Person that, directly or
indirectly, is in control of, is controlled by or is under common control
with such Person or is a director or officer of such Person, except that with
respect to the Issuer, Affiliate shall mean the holder(s) of its capital
stock.
"Agreement" has the meaning set forth in the preamble to the Agreement.
"Alternate Rate" for any Settlement Period for any Portion of Capital of
the Purchased Interest means an interest rate per annum equal to, at the
Seller's option: (a) 0.50% per annum above the Eurodollar Rate for such
Settlement Period, or (b) the Base Rate for such Settlement Period; provided,
however, that in the case of:
(i) any Settlement Period on or before the first day of which the
Administrator shall have been notified by the Issuer, a Purchaser or any
other Program Support Provider that the introduction of or any change in
or in the interpretation of any law or regulation makes it unlawful, or
any central bank or other Governmental Authority asserts that it is
unlawful, for the Issuer, such Purchaser or other Program Support
Provider, as applicable, to fund any Portion of Capital based on the
Eurodollar Rate (and the Issuer, such Purchaser or other Program Support
Provider shall not have subsequently notified the Administrator that
such circumstances no longer exist),
(ii) any Settlement Period of one to (and including) 15 days,
(iii) any Settlement Period as to which: (A) the Administrator
does not receive notice before noon (New York City time) on: (1) the
second Business Day preceding the first day of such Settlement Period
that the Seller desires that the related Portion of Capital be funded at
the CP Rate or (2) the third Business Day preceding the first day of
such Settlement Period that the Seller desires that the related Portion
of Capital be funded at the Alternate Rate and based on the Eurodollar
Rate, or (B) the Seller has given the notice contemplated by clause
(A)(1) and the Administrator shall have notified the Seller that funding
the related Portion of Capital at the CP Rate is (in the Administrator's
sole discretion) economically inadvisable to the Issuer, the
Administrator, the Seller or any similarly situated Person or the Issuer
is not permitted to issue Notes to fund the Purchased Interest
hereunder, or
(iv) any Settlement Period relating to a Portion of Capital that
is less than $5,000,000,
the "Alternate Rate" for each such Settlement Period shall be an interest
rate per annum equal to the Base Rate in effect on each day of such
Settlement Period. The "Alternate Rate" for any day while a Termination Event
or Unmatured Termination Event exists shall be an interest rate equal to 2%
per annum above the Base Rate in effect on such day.
"Alternative Settlement Date" means the last Business Day of a Fiscal
Month.
"Attorney Costs" means and includes all reasonable fees and
disbursements of any law firm or other external counsel, the allocated cost
of internal legal services and all disbursements of internal counsel.
"Bankruptcy Code" means the United States Bankruptcy Reform Act of 1978
(11 U.S.C. Section 101, et seq.), as amended from time to time.
"Base Rate" means for any day, a fluctuating interest rate per annum as
shall be in effect from time to time, which rate shall be at all times equal
to the higher of:
(a) the rate of interest in effect for such day as publicly
announced from time to time by PNC in Pittsburgh, Pennsylvania as its
"prime rate." Such "prime rate" is set by PNC based upon various
factors, including PNC's costs and desired return, general economic
conditions and other factors, and is used as a reference point for
pricing some loans, which may be priced at, above or below such
announced rate; and
(b) 0.50% per annum above the latest Federal Funds Rate.
"Benefit Plan" means any employee benefit pension plan as defined in
Section 3(2) of ERISA in respect of which the Seller, any Originator, Falcon
or any ERISA Affiliate is, or at any time during the immediately preceding
six years was, an "employer" as defined in Section 3(5) of ERISA.
"Business Day" means any day (other than a Saturday or Sunday) on which:
(a) banks are not authorized or required to close in New York City, New York
or Pittsburgh, Pennsylvania, and (b) if this definition of "Business Day" is
utilized in connection with the Eurodollar Rate, dealings are carried out in
the London interbank market.
"Buyer Note" has the meaning set forth in the Sale Agreement between the
Seller and Falcon.
"Capital" means the amount paid to the Seller in respect of the
Purchased Interest by the Issuer pursuant to the Agreement, or such amount
divided or combined in accordance with Section 1.7 of the Agreement, in each
case reduced from time to time by Collections distributed and applied on
account of such Capital pursuant to Section 1.4(d) of the Agreement;
provided, that if such Capital shall have been reduced by any distribution
and thereafter all or a portion of such distribution is rescinded or must
otherwise be returned for any reason, such Capital shall be increased by the
amount of such rescinded or returned distribution as though it had not been
made.
"Change in Control" means that: (a) Falcon ceases to own, directly or
indirectly, 100% of the capital stock of the Seller, or a majority of the
capital stock of any Originator, free and clear of all Adverse Claims, (b)
the Samuel Zell Group shall cease to own, directly or indirectly, at least
20% of the combined voting power of Falcon's outstanding securities
ordinarily having the right to vote at elections of directors; provided, that
the failure by the Samuel Zell Group to own such a minimum percentage of
securities shall not be deemed a change of control hereunder if Falcon shall
have attained at least two of the following ratings on its long-term senior
unsecured debt securities: "BBB+" or better from Standard & Poor's, "Baa1" or
better from Moody's and "Baa1" from Duff & Phelps Credit Rating Co., (c)
Falcon shall directly or indirectly transfer, assign, convey or lease,
whether in one transaction or in a series of transactions, all or
substantially all of its assets (whether now owned or hereafter acquired) to
any other Person(s), or (d) Falcon shall be a party to any merger or
consolidation in which Falcon is not a surviving entity.
"Collections" means, with respect to any Pool Receivable: (a) all funds
that are received by any Originator, Falcon, the Seller or the Servicer in
payment of any amounts owed in respect of such Receivable (including purchase
price, finance charges, interest and all other charges), or applied to
amounts owed in respect of such Receivable (including insurance payments and
net proceeds of the sale or other disposition of repossessed goods or other
collateral or property of the related Obligor or any other Person directly or
indirectly liable for the payment of such Pool Receivable and available to be
applied thereon), (b) all Collections deemed to have been received pursuant
to Section 1.4(e) of the Agreement and (c) all other proceeds of such Pool
Receivable.
"Concentration Percentage" means, for any Obligor:
(a) if the long-term senior unsecured debt securities of such
Obligor are: (i) Investment Grade but are rated no higher than "BBB" by
Standard & Poor's or "Baa2" by Moody's, 2%, (ii) rated "BBB+" or "A-" by
Standard & Poor's and "Baa1" or "A1" by Moody's, 3%, or (iii) rated "A"
or better by Standard & Poor's and "A2" or better by Moody's, 6%,
(b) if such Obligor's long-term senior unsecured debt securities
are not rated by Standard & Poor's and Moody's, but its short-term
obligations are: (i) rated "A-3" by Standard & Poor's or "P-3" by
Moody's, 2%, (ii) rated at least "A-2" by Standard & Poor's and "P-2" by
Moody's, 3%, or (iii) rated "A-1" by Standard & Poor's and "P-1" by
Moody's, 6%, or
(c) otherwise, 1.5%.
"Consolidated Originator" means a group of Originators, which may
consist of one Originator, comprised of all those Originators that are
consolidated together for the purposes of one of such Originator's financial
statements.
"Contract" means, with respect to any Receivable, any and all contracts,
understandings, instruments, agreements, leases, invoices, notes or other
writings pursuant to which such Receivable arises or that evidence such
Receivable or under which an Obligor becomes or is obligated to make payment
in respect of such Receivable.
"CP Rate" for any Settlement Period for any Portion of Capital means a
rate per annum calculated by the Administrator equal to: (a) the rate (or if
more than one rate, the weighted average of the rates) at which Notes of the
Issuer on each day during such period have been sold by any placement agent
or commercial paper dealer selected by the Administrator on behalf of the
Issuer; provided, that if such rate(s) is a discount rate(s), then the CP
Rate shall be the rate (or if more than one rate, the weighted average of the
rates) resulting from converting such discount rate(s) to an interest-bearing
equivalent rate per annum, plus (b) the commissions and charges charged by
such placement agent or commercial paper dealer with respect to such Notes,
expressed as a percentage of the face amount of such Notes and converted to
an interest-bearing equivalent rate per annum.
"Credit and Collection Policy" means, as the context may require, those
receivables credit and collection policies and practices of each Originator
in effect on the date of the Agreement and described in Schedule I to the
Agreement, as modified in compliance with the Agreement.
"Credit Facility" means the Amended and Restated Credit Agreement, dated
as of June 30, 1995, among Falcon, as Borrower, the lenders from time to time
party thereto, Chemical Bank, as Administrative Agent, and Citicorp North
America, Inc., as Collateral Agent.
"Days' Sales Outstanding" means, for any Settlement Period: (a) the
Outstanding Balance of all Pool Receivables at the end of such Settlement
Period divided by (b)(i) the aggregate credit sales made (other than sales
creating Designated Receivables) by all the Originators during the three
Fiscal Months ended on or before the last day of such Settlement Period
divided by (ii) the number of days in such three-month period.
"Debt" means: (a) indebtedness for borrowed money, (b) obligations
evidenced by bonds, debentures, notes or other similar instruments, (c)
obligations to pay the deferred purchase price of property or services, (d)
obligations as lessee under leases that shall have been or should be, in
accordance with generally accepted accounting principles, recorded as capital
leases, (e) obligations under direct or indirect guaranties in respect of,
and obligations (contingent or otherwise) to purchase or otherwise acquire,
or otherwise to assure a creditor against loss in respect of, indebtedness or
obligations of others of the kinds referred to in clauses (a) through (d),
and (f) liabilities in respect of unfunded vested benefits under plans
covered by Title IV of ERISA.
"Deemed Collection" has the meaning assigned thereto in the Sale
Agreements.
"Default Ratio" means the ratio (expressed as a percentage and rounded
to the nearest 1/100 of 1%, with 5/1000 of 1% rounded upward) computed as of
the last day of each Fiscal Month by dividing: (a) the aggregate Outstanding
Balance of all Pool Receivables that became Defaulted Receivables during such
month plus, without double counting, the aggregate Outstanding Balance of all
Pool Receivables as to which a payment, or part thereof, remained unpaid for
less than 91 days from the original due date for such payment and that was
written off as uncollectible during such month, by (b) the aggregate credit
sales (other than sales creating Designated Receivables) made by all the
Originators during the month that is five Fiscal Months before such month.
For purposes of calculating the Loss Reserve Percentage (Originator) for any
Consolidated Originator, the Default Ratio will be calculated as if such
Consolidated Originator were the only Originator hereunder.
"Defaulted Receivable" means a Receivable:
(a) as to which any payment, or part thereof, remains unpaid for
more than 90 days from the original due date for such payment; or
(b) as to which the Obligor thereof or any other Person obligated
thereon or owning any Related Security in respect thereof has taken any
action, or suffered any event to occur, of the type described in
paragraph (f)(i) of Exhibit V to the Agreement and that, consistent with
the applicable Credit and Collection Policy, would be written off the
Seller's books as uncollectible.
"Delinquency Ratio" means the ratio (expressed as a percentage and
rounded to the nearest 1/100 of 1%, with 5/1000 of 1% rounded upward)
computed as of the last day of each Fiscal Month by dividing: (a) the
aggregate Outstanding Balance of all Pool Receivables that were Delinquent
Receivables on such day by (b) the aggregate Outstanding Balance of all Pool
Receivables on such day.
"Delinquent Receivable" means a Pool Receivable as to which any payment,
or part thereof, remains unpaid for more than 60 days from the original due
date for such payment.
"Designated Receivable" means a Receivable designated on Schedule IV to
the Agreement, as such Schedule may be amended, supplemented or otherwise
modified from time to time.
"Designated Receivables Agreement" means the Receivables Purchase
Agreement (Designated Receivables), of even date herewith, among the Seller,
Servicer, the financial institutions parties thereto as purchasers, and PNC,
as agent, relating to the purchase and sale of Designated Receivables, as
such agreement may be amended, amended and restated, supplemented or
otherwise modified from time to time.
"Dilution Horizon" means, for any Fiscal Month, the ratio (expressed as
a percentage and rounded to the nearest 1/100th of 1%, with 5/1000 of 1%
rounded upward) of: (a) the aggregate credit sales (other than sales creating
Designated Receivables) made by all the Originators during the most recent
Fiscal Month and the preceding 15 days to (b) the aggregate Outstanding
Balance of the Eligible Receivables at the last day of such Fiscal Month.
"Dilution Ratio" means, for any Fiscal Month, the ratio (expressed as a
percentage and rounded to the nearest 1/100th of 1%, with 5/1000 of 1%
rounded upward) of: (a) the aggregate amount of payments made or owed by the
Seller pursuant to Section 1.4(e)(i) of the Agreement during such Fiscal
Month to (b) the aggregate credit sales (other than sales creating Designated
Receivables) made by all the Originators during the prior Fiscal Month. For
purposes of calculating the Dilution Reserve Percentage (Originator) and the
Spike Factor for any Consolidated Originator, the Dilution Ratio will be
calculated as if such Consolidated Originator were the only Originator
hereunder.
"Dilution Reserve" means, on any day, an amount equal to: (a) the
Capital at the close of business of the Servicer on such date multiplied by
(b)(i) the Dilution Reserve Percentage on such date divided by (ii) 100%
minus the Dilution Reserve Percentage on such date.
"Dilution Reserve Percentage" means, as of any date, the greater of: (a)
5% and (b) the Dilution Horizon times the sum of: (i) the weighted average of
each Consolidated Originator's Dilution Reserve Percentage (Originator) and
(ii) the weighted average of each Consolidated Originator's Spike Factor,
both calculated based upon the ratio of each Consolidated Originator's
originated Pool Receivables to the total Pool Receivables.
"Dilution Reserve Percentage (Originator)" means a percentage
(calculated for each Consolidated Originator as of the end of each Fiscal
Month) equal to: (a) 2 times (b) the rolling average Dilution Ratio
(calculated as if such Consolidated Originator were the only Originator
hereunder) for the twelve Fiscal Months then ended.
"Discount" means:
(a) for the Portion of Capital for any Settlement Period to the
extent the Issuer will be funding such Portion of Capital on the first
day of such Settlement Period through the issuance of Notes,
CPR x C x ED/360 + TF
(b) for the Portion of Capital for any Settlement Period to the
extent the Issuer will not be funding such Portion of Capital on the
first day of such Settlement Period through the issuance of Notes:
AR x C x ED/Year + TF
where:
AR = the Alternate Rate for the Portion of Capital for such
Settlement Period,
C = the Portion of Capital during such Settlement Period,
CPR = the CP Rate for the Portion of Capital for such
Settlement Period,
ED = the actual number of days during such Settlement Period,
Year = if such Portion of Capital is funded based upon: (i) the
Eurodollar Rate, 360 days, and (ii) the Base Rate, 365 or
366 days, as applicable, and
TF = the Termination Fee, if any, for the Portion of Capital
for such Settlement Period;
provided, that no provision of the Agreement shall require the payment or
permit the collection of Discount in excess of the maximum permitted by
applicable law; and provided further, that Discount for the Portion of
Capital shall not be considered paid by any distribution to the extent that
at any time all or a portion of such distribution is rescinded or must
otherwise be returned for any reason.
"EBITDA" means, with respect to Falcon and its consolidated subsidiaries
for any period: (a) consolidated net income for such period (excluding
undistributed earnings in Persons that are 50% or less owned, directly or
indirectly, by Falcon, the effect of any extrordinary or non-recurring gains
or losses and any gains or losses from the sale of assets) plus (b) to the
extent reflected in the consolidated income statement of Falcon for such
period, without duplication, the sum of: (i) Net Interest Expense, (ii)
federal, state and local income and franchise taxes, (iii) depreciation
expense, (iv) amortization expense and (v) any other noncash items that had
the effect of reducing consolidated net income for such period (but minus any
noncash items that had the effect of increasing consolidated net income for
such period).
"Eligible Receivable" means, at any time, a Pool Receivable:
(a) that is not a Designated Receivable and that the Obligor of
which is: (i) a United States resident or a resident of such other
jurisdiction as has been approved in writing by the Administrator;
provided, however, that if the Obligor of such Receivable is a resident
of a jurisdiction other than the United States, the Outstanding Balance
of such Receivable when added to the Outstanding Balance of all other
Receivables of Obligors that are not residents of the United States
shall not exceed 2% of the Net Receivables Pool Balance, (ii) not Eagle
Industries, Inc. or any of its subsidiaries, (iii) not a government or a
governmental subdivision or agency and (iv) not subject to any action of
the type described in paragraph (f)(i) of Exhibit V to the Agreement;
(b) that is denominated and payable only in U.S. dollars in the
United States;
(c) that has a stated maturity that is not more than 60 days after
the original due date of such Receivable; provided, however, that, if
permitted pursuant to the applicable Credit and Collection Policy, a
Receivable may have a stated maturity of up to 120 days after the
original due date of such Receivable so long as the Outstanding Balance
of such Receivable, when added to the Outstanding Balance of all other
Receivables with a stated maturity of greater than 60 days from the
original due date of such Receivable, shall not exceed 2% of the Net
Receivables Pool Balance.
(d) that arises from the sale and delivery of goods and services
in the ordinary course of an Originator's business;
(e) that arises under a duly authorized Contract that is in full
force and effect and that is a legal, valid and binding obligation of
the related Obligor, enforceable against such Obligor in accordance with
its terms;
(f) that conforms in all material respects with all applicable
laws, rulings and regulations in effect;
(g) that is not the subject of any asserted dispute, offset, hold
back defense, Adverse Claim or other claim;
(h) that satisfies all applicable requirements of the applicable
Credit and Collection Policy;
(i) that has not been modified, waived or restructured since its
creation, except as permitted pursuant to Section 4.2 of the Agreement;
(j) in which the Seller owns good and marketable title and that is
freely assignable by the Seller;
(k) for which the Issuer shall have a valid and enforceable
undivided percentage ownership interest, to the extent of the Purchased
Interest, and a valid and enforceable first priority perfected security
interest therein and in the Related Security and Collections with
respect thereto, in each case free and clear of any Adverse Claim;
(l) that constitutes an account as defined in the UCC, and that is
not evidenced by instruments or chattel paper;
(m) that is not a Defaulted Receivable or a Delinquent Receivable;
(n) for which neither the Originator thereof, the Seller nor the
Servicer has established any offset arrangements with the related
Obligor;
(o) for which Defaulted Receivables of the related Obligor do not
exceed 25% of the Outstanding Balance of all such Obligor's Receivables;
and
(p) that represents amounts earned and payable by the Obligor that
are not subject to the performance of additional services by the
Originator thereof.
"Engagement Letter" means the Engagement Letter, dated February 29,
1996, between PNC Securities Corp. and Falcon relating to the transactions
contemplated herein.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute of similar import,
together with the regulations thereunder, in each case as in effect from time
to time. References to sections of ERISA also refer to any successor
sections.
"ERISA Affiliate" means: (a) any corporation that is a member of the
same controlled group of corporations (within the meaning of Section 414(b)
of the Internal Revenue Code) as the Seller, any Originator or Falcon, (b) a
trade or business (whether or not incorporated) under common control (within
the meaning of Section 414(c) of the Internal Revenue Code) with the Seller,
any Originator or Falcon, (c) a member of the same affiliated service group
(within the meaning of Section 414(m) of the Internal Revenue Code) as the
Seller, any Originator, Falcon, any corporation described in clause (a) or
any trade or business described in clause (b), or (d) as to the Seller or any
of its Affiliates, Eagle Industrial Products Corporation and all other
Person(s) that are members of Eagle Industrial Products Corporation's
controlled group or under common control therewith (within the meaning of
Sections 414(b) and (c) of the Internal Revenue Code), but only until the
termination of the Agreement dated as of October 24, 1994 among the Pension
Benefit Guaranty Corporation, Falcon and certain of its Affiliates.
"Eurodollar Rate" means, for any Settlement Period, an interest rate per
annum (rounded upward to the nearest 1/16th of 1%) determined pursuant to the
following formula:
LIBOR _
100% - Eurodollar Rate Reserve Percentage
where "Eurodollar Rate Reserve Percentage" means, for any Settlement Period,
the maximum reserve percentage (expressed as a decimal, rounded upward to the
nearest 1/100th of 1%) in effect on the date LIBOR for such Settlement Period
is determined under regulations issued from time to time by the Federal
Reserve Board 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") having a term comparable to such Settlement Period.
"Excess Concentration" means, for each Obligor, the aggregate amount by
which the Outstanding Balance of Eligible Receivables of such Obligor then in
the Receivables Pool exceeds: (a) the Concentration Percentage for such
Obligor multiplied by (b) the Outstanding Balance of all Eligible Receivables
then in the Receivables Pool.
"Facility Termination Date" means the earliest to occur of: (a) May 2,
1999, (b) the date determined pursuant to Section 2.2 of the Agreement and
(c) the date the Purchase Limit reduces to zero pursuant to Section 1.1(b) of
the Agreement.
"Falcon" has the meaning set forth in the preamble to the Agreement.
"Federal Funds Rate" means, for any day, the per annum rate set forth in
the weekly statistical release designated as H.15(519), or any successor
publication, published by the Federal Reserve Board (including any such
successor, "H.15(519)") for such day opposite the caption "Federal Funds
(Effective)." If on any relevant day such rate is not yet published in
H.15(519), the rate for such day will be the rate set forth in the daily
statistical release designated as the Composite 3:30 p.m. Quotations for U.S.
Government Securities, or any successor publication, published by the Federal
Reserve Bank of New York (including any such successor, the "Composite 3:30
p.m. Quotations") for such day under the caption "Federal Funds Effective
Rate." If on any relevant day the appropriate rate is not yet published in
either H.15(519) or the Composite 3:30 p.m. Quotations, the rate for such day
will be the arithmetic mean as determined by the Administrator of the rates
for the last transaction in overnight Federal funds arranged before 9:00 a.m.
(New York time) on that day by each of three leading brokers of Federal funds
transactions in New York City selected by the Administrator.
"Federal Reserve Board" means the Board of Governors of the Federal
Reserve System, or any entity succeeding to any of its principal functions.
"Fee Letter" has the meaning set forth in Section 1.5 of the Agreement.
"Fiscal Month" means those periods described on Schedule V to the
Agreement.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any body or entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government, including any court, and any Person owned or
controlled, through stock or capital ownership or otherwise, by any of the
foregoing.
"Indemnified Amounts" has the meaning set forth in Section 3.1 of the
Agreement.
"Independent Director" has the meaning set forth in paragraph 3(c) of
Exhibit IV to the Agreement.
"Information Package" means a report, in substantially the form of Annex
B to the Agreement, furnished to the Administrator pursuant to the Agreement.
"Insolvency Proceeding" means: (a) any case, action or proceeding before
any court or other Governmental Authority relating to bankruptcy,
reorganization, insolvency, liquidations, receivership, dissolution, winding-
up or relief of debtors, or (b) any general assignment for the benefit of
creditors, composition, marshalling of assets for creditors, or other,
similar arrangement in respect of its creditors generally or any substantial
portion of its creditors; in each case undertaken under U.S. Federal, state
or foreign law, including the Bankruptcy Code.
"Interest Coverage Ratio" means, with respect to Falcon and its
consolidated subsidiaries for any period, the ratio of: (a) EBITDA for such
period to (b) Net Interest Expense for such period.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended from time to time, and any successor statute of similar import,
together with the regulations thereunder, in each case as in effect from time
to time. References to sections of the Internal Revenue Code also refer to
any successor sections.
"Investment Grade" means, with respect to any Person, a rating on its
long-term senior unsecured debt securities of: (a) at least "BBB-", or, if
such Person's long-term senior unsecured debt securities are not rated by
Standard & Poor's, a short-term rating of at least "A-3", by Standard &
Poor's and (b) at least "Baa3" by Moody's, or, if such Person's long-term
senior unsecured debt securities are not rated by Moody's, a short-term
rating of at least "P-3", by Moody's. However, if only one of Standard &
Poor's and Moody's maintains a rating on such Person's securities, such
rating shall be no lower than the ratings applied for the purposes of clauses
(a) and (b).
"Issuer" has the meaning set forth in the preamble to the Agreement.
"Issuer's Share" of any amount means such amount times the Purchased
Interest at the time of determination.
"LIBOR" means the rate of interest per annum determined by the
Administrator to be the arithmetic mean (rounded upward to the nearest 1/16th
of 1%) of the rates of interest per annum notified to the Administrator by
each Reference Bank as the rate of interest at which dollar deposits in the
approximate amount of the Capital associated with such Settlement Period
would be offered by major banks in the London interbank market to such
Reference Bank at its request at or about 11:00 a.m. (London time) on the
second Business Day before the commencement of such Settlement Period.
"Liquidity Agent" means PNC in its capacity as the Liquidity Agent
pursuant to the Liquidity Agreement.
"Liquidity Agreement" means the Liquidity Asset Purchase Agreement,
dated as of the date hereof, between the purchasers from time to time party
thereto, the Issuer and PNC, as Administrator and Liquidity Agent, as
amended, supplemented or otherwise modified from time to time.
"Lock-Box Account" means an account maintained at a bank or other
financial institution for the purpose of receiving Collections.
"Lock-Box Agreement" means an agreement, in substantially the form of
Annex A to the Agreement, among the Seller, the Servicer and a Lock-Box Bank.
"Lock-Box Bank" means any of the banks or other financial institutions
holding one or more Lock-Box Accounts.
"Loss Reserve" means, on any date, an amount equal to: (a) the Capital
at the close of business of the Servicer on such date multiplied by (b)(i)
the Loss Reserve Percentage on such date divided by (ii) 100% minus the Loss
Reserve Percentage on such date.
"Loss Reserve Percentage" means, on any date, the greater of: (a) 6% or
(b) the weighted average (calculated based upon the ratio of each
Consolidated Originator's originated Pool Receivables to the total Pool
Receivables) of each Consolidated Originator's Loss Reserve Percentage
(Originator).
"Loss Reserve Percentage (Originator)" means a percentage (calculated
for each Consolidated Originator as of the end of each Fiscal Month) equal
to: (a) 2 times (b) the highest average of the Default Ratios for any three
consecutive Fiscal Months during the twelve Fiscal Months then ended times
(c) the aggregate credit sales made (other than sales creating Designated
Receivables) during the four Fiscal Months then ended divided by (d) the
aggregate Outstanding Balance of Eligible Receivables as of such date; all
calculated as if such Consolidated Originator were the only Originator
hereunder.
"Material Adverse Effect" means, with respect to any event or
circumstance, a material adverse effect on:
(a) the assets, operations, business or financial condition of the
Seller, the Originators (taken together) or the Servicer, in each case
on a consolidated basis;
(b) the ability of any of the Seller, the Originators (taken
together) or the Servicer, in each case on a consolidated basis, to
perform its obligations under this Agreement or any other Transaction
Document to which it is a party;
(c) the validity or enforceability of this Agreement or any other
Transaction Document, or the validity, enforceability or collectibility
of a material portion of the Pool Receivables; or
(d) the status, perfection, enforceability or priority of the
Issuer's or the Seller's interest in the Pool Assets.
"Monthly Settlement Date" means the twelfth Business Day after each
Fiscal Month.
"Moody's" means Moody's Investors Service, Inc.
"Net Interest Expense" means: (a) interest expense for such period
(excluding the amortization of all fees payable in connection with the
incurrence of the Debt) plus (b) capitalized interest paid during such period
minus (c) interest received in cash in the United States during such period.
"Net Receivables Pool Balance" means, at any time: (a) the Outstanding
Balance of Eligible Receivables then in the Receivables Pool minus (b) the
Excess Concentration minus (c) the aggregate amount of Special Program
Allowances for all Originators at such time.
"Notes" means short-term promissory notes issued or to be issued by the
Issuer to fund its investments in accounts receivable or other financial
assets.
"Obligor" means, with respect to any Receivable, the Person obligated to
make payments pursuant to the Contract relating to such Receivable.
"Originator" has the meaning set forth in the Sale Agreements.
"Outstanding Balance" of any Receivable at any time means the then
outstanding principal balance thereof.
"Permitted Debt" has the meaning set forth in Section 1(o) of Exhibit IV
to the Agreement.
"Person" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association,
joint venture, limited liability company or other entity, or a government or
any political subdivision or agency thereof.
"PNC" has the meaning set forth in the preamble to the Agreement.
"Pool Assets" has the meaning set forth in Section 1.2(d) of the
Agreement.
"Pool Receivable" means a Receivable in the Receivables Pool.
"Portion of Capital" has the meaning set forth in Section 1.7 of the
Agreement. In addition, at any time when the Capital of the Purchased
Interest is not divided into two or more such portions, "Portion of Capital"
means 100% of the Capital.
"Program Support Agreement" means and includes the Liquidity Agreement
and any other agreement entered into by any Program Support Provider
providing for: (a) the issuance of one or more letters of credit for the
account of the Issuer, (b) the issuance of one or more surety bonds for which
the Issuer is obligated to reimburse the applicable Program Support Provider
for any drawings thereunder, (c) the sale by the Issuer to any Program
Support Provider of the Purchased Interest (or portions thereof) and/or (d)
the making of loans and/or other extensions of credit to the Issuer in
connection with the Issuer's Receivables-securitization program contemplated
in the Agreement, together with any letter of credit, surety bond or other
instrument issued thereunder (but excluding any discretionary advance
facility provided by the Administrator).
"Program Support Provider" means and includes any Purchaser and any
other Person (other than any customer of the Issuer) now or hereafter
extending credit or having a commitment to extend credit to or for the
account of, or to make purchases from, the Issuer, or issuing a letter of
credit, surety bond or other instrument to support any obligations arising
under or in connection with the Issuer's securitization program.
"Purchase Limit" means $45,000,000, as such amount may be reduced
pursuant to Section 1.1(b) of the Agreement. References to the unused portion
of the Purchase Limit shall mean, at any time, the Purchase Limit minus the
then outstanding Capital.
"Purchased Interest" means, at any time, the undivided percentage
ownership interest in: (a) each and every Pool Receivable now existing or
hereafter arising, other than any Pool Receivable that arises on or after the
Facility Termination Date, (b) all Related Security with respect to such Pool
Receivables, and (c) all Collections with respect to, and other proceeds of,
such Pool Receivables and Related Security. Such undivided percentage
interest shall be computed as:
C + LR + DR + YR
NRPB
where:
C = the Capital at the time of computation,
LR = the Loss Reserve at the time of computation,
DR = the Dilution Reserve at the time of computation,
YR = the Yield Reserve at the time of computation, and
NRPB = the Net Receivables Pool Balance at the time of
computation.
The Purchased Interest shall be determined from time to time pursuant to
Section 1.3 of the Agreement.
"Purchaser" has the meaning set forth in Section 5.3(b) of the
Agreement.
"Purchaser's Yield" means, for any Settlement Period, the Discount plus
all Fees payable under the Fee Letter accrued or to accrue during such
Settlement Period, expressed as a percentage of Capital and converted to an
interest-bearing equivalent rate per annum.
"Receivable" means any indebtedness and other obligations owed to the
Seller, Falcon or any Originator by, or any right of the Seller, Falcon or
any Originator to payment from or on behalf of, an Obligor, whether
constituting an account, chattel paper, instrument or general intangible,
arising in connection with the sale of goods or the rendering of services by
an Originator, and includes the obligation to pay any finance charges, fees
and other charges with respect thereto. Indebtedness and other obligations
arising from any one transaction, including indebtedness and other
obligations represented by an individual invoice or agreement, shall
constitute a Receivable separate from a Receivable consisting of the
indebtedness and other obligations arising from any other transaction.
"Receivables Pool" means, at any time, all of the then outstanding
Receivables purchased by the Seller pursuant to the Sale Agreement between
the Seller and Falcon, other than Designated Receivables.
"Reference Bank" means PNC.
"Related Security" means, with respect to any Receivable:
(a) all of the Seller's, Falcon's and the Originator thereof's
interest in any goods (including returned goods), and documentation of
title evidencing the shipment or storage of any goods (including
returned goods), relating to any sale giving rise to such Receivable;
(b) all other security interests or liens and property subject
thereto from time to time purporting to secure payment of such
Receivable, whether pursuant to the Contract related to such Receivable
or otherwise, together with all UCC financing statements or similar
filings relating thereto; and
(c) all of the Seller's, Falcon's and any Originator's rights,
interests and claims under the Contracts and all guaranties,
indemnities, insurance and other agreements (including the related
Contract) or arrangements of whatever character from time to time
supporting or securing payment of such Receivable or otherwise relating
to such Receivable, whether pursuant to the Contract related to such
Receivable or otherwise.
"Sale Agreement" means any of: (a) the Contribution and Sale Agreement,
dated as of the date hereof, between the Seller and Falcon, and (b) the
Receivables Sale and Servicing Agreement, dated as of the date hereof,
between Falcon and the Originators, as either such agreement may be amended,
amended and restated, supplemented or otherwise modified from time to time.
"Samuel Zell Group" means Samuel Zell, Ann Lurie, any trust created for
the benefit of Samuel Zell or Ann Lurie or their families, and any of their
affiliates (as such term is defined in Rule 12b-2 of the Securities Exchange
Act of 1934).
"Seller" has the meaning set forth in the preamble to the Agreement.
"Seller's Share" of any amount means the greater of: (a) $0 and (b) such
amount minus the Issuer's Share.
"Servicer" has the meaning set forth in the preamble to the Agreement.
"Servicing Fee" shall mean the fee referred to in Section 4.6 of the
Agreement.
"Settlement Period" for each Portion of Capital means: (a) before the
Termination Date: (i) initially the period commencing on the date of a
purchase pursuant to Section 1.2 of the Agreement and ending on (but not
including) the next Monthly Settlement Date (or Alternative Settlement Date,
if applicable), and (ii) thereafter, each period commencing on such Monthly
Settlement Date (or Alternative Settlement Date, if applicable) and ending on
(but not including) the next Monthly Settlement Date, and (b) on and after
the Termination Date, such period (including a period of one day) as shall be
selected from time to time by the Administrator or, in the absence of any
such selection, each period of 30 days from the last day of the preceding
Settlement Period.
"Special Program Allowance" means, with respect to the Pool Receivables
originated by any Originator at any time, the aggregate amount of such Pool
Receivables attributable to cash discounts, volume rebates or advertising
allowances permitted to be set-off against payments due in respect of such
Pool Receivables as reflected in the books and records of such Originator at
such time.
"Spike Factor" means, for any Fiscal Month for each Consolidated
Originator, the positive difference, if any, between: (a) the highest average
Dilution Ratio for any two consecutive Fiscal Months during the twelve
previous Fiscal Months and (b) the average Dilution Ratio for such twelve
months, both calculated as if such Consolidated Originator were the only
Originator hereunder.
"Standard & Poor's" means Standard & Poor's Ratings Services, a division
of The McGraw-Hill Companies, Inc.
"Termination Date" means the earlier of: (a) the Business Day that the
Seller so designates by written notice to the Administrator pursuant to
Section 1.1(b) of the Agreement and (b) the Facility Termination Date.
"Termination Day" means: (a) each day on which the conditions set forth
in Section 2 of Exhibit II to the Agreement are not satisfied or (b) each day
that occurs on or after the Termination Date.
"Termination Event" has the meaning specified in Exhibit V to the
Agreement.
"Termination Fee" means, for any Settlement Period during which a
Termination Day occurs, the amount, if any, by which: (a) the additional
Discount (calculated without taking into account any Termination Fee or any
shortened duration of such Settlement Period pursuant to the definition
thereof) that would have accrued during such Settlement Period on the
reductions of Capital relating to such Settlement Period had such reductions
not been made, exceeds (b) the income, if any, received by the Issuer from
investing the proceeds of such reductions of Capital, as determined by the
Administrator, which determination shall be binding and conclusive for all
purposes, absent manifest error.
"Transaction Documents" means the Agreement, the Designated Receivables
Agreement, the Lock-Box Agreements, the Liquidity Agreement, the Fee Letter,
the Engagement Letter, the Sale Agreements and all other certificates,
instruments, UCC financing statements, reports, notices, agreements and
documents executed or delivered under or in connection with the Agreement, in
each case as the same may be amended, supplemented or otherwise modified from
time to time in accordance with the Agreement.
"UCC" means the Uniform Commercial Code as from time to time in effect
in the applicable jurisdiction.
"Unmatured Termination Event" means an event that, with the giving of
notice or lapse of time, or both, would constitute a Termination Event (it
being understood that any nonpayment, event or condition of the type
described in paragraph (j) of Exhibit V that permits the acceleration of the
maturity of any Permitted Debt, which acceleration has not been required,
shall constitute an Unmatured Termination Event).
"Yield Reserve" means, at any time:
(PY/360 x 2(DSO) x Capital) + SF
where:
PY = the Purchaser's Yield computed for the most recent
Settlement Period,
DSO = the most recent Days' Sales Outstanding, and
SF = the accrued and unpaid Servicing Fee.
Other Terms. All accounting terms not specifically defined herein shall
be construed in accordance with generally accepted accounting principles. All
terms used in Article 9 of the UCC in the State of New York, and not
specifically defined herein, are used herein as defined in such Article 9.
Unless the context otherwise requires, "or" means "and/or," and "including"
(and with correlative meaning "include" and "includes") means including
without limiting the generality of any description preceding such term.
EXHIBIT II
CONDITIONS OF PURCHASES
1. Conditions Precedent to Initial Purchase. The initial purchase
under the Agreement is subject to the conditions precedent that the
Administrator shall have received on or before the date of such purchase the
following, each in form and substance (including the date thereof)
satisfactory to the Administrator:
(a) A counterpart of the Agreement duly executed by the Seller and the
Servicer, and a counterpart of the Sale Agreements duly executed by the
Seller, Falcon and the Originators, as applicable.
(b) Certified copies of: (i) the resolutions of the Board of Directors
of each of the Seller, the Originators and Falcon authorizing the execution,
delivery and performance by the Seller, such Originator and Falcon, as the
case may be, of the Agreement and the other Transaction Documents to which it
is a party, (ii) all documents evidencing other necessary corporate action
and governmental approvals, if any, with respect to the Agreement and the
other Transaction Documents and (iii) the certificate of incorporation and by-
laws of each of the Seller, each Originator and Falcon.
(c) A certificate of the Secretary or Assistant Secretary of each of
the Seller, the Originators and Falcon certifying the names and true
signatures of its officers who are authorized to sign the Agreement and the
other Transaction Documents. Until the Administrator receives a subsequent
incumbency certificate from the Seller, an Originator or Falcon, as the case
may be, the Administrator shall be entitled to rely on the last such
certificate delivered to it by the Seller, an Originator or Falcon, as the
case may be.
(d) Acknowledgment copies, or time stamped receipt copies, of proper
financing statements, duly filed on or before the date of such initial
purchase under the UCC of all jurisdictions that the Administrator may deem
necessary or desirable in order to perfect the interests of the Seller,
Falcon and the Issuer contemplated by the Agreement and the Sale Agreements.
(e) Acknowledgment copies, or time-stamped receipt copies, of proper
financing statements, if any, necessary to release all security interests and
other rights of any Person in the Receivables, Contracts or Related Security
previously granted by the Originators, Falcon or the Seller.
(f) Completed UCC search reports, dated on or shortly before the date
of such initial purchase, listing the financing statements referred to in
subsection (e) above and all other effective financing statements filed in
the jurisdictions referred to in subsection (e) above that name the
Originators, Falcon or the Seller as debtor, together with copies of such
other financing statements, and similar search reports with respect to
judgment liens, federal tax liens and liens of the Pension Benefit Guaranty
Corporation in such jurisdictions as the Administrator may request, showing
no Adverse Claims on any Pool Assets.
(g) Copies of executed Lock-Box Agreements with the Lock-Box Banks.
(h) Favorable opinions, in form and substance reasonably satisfactory
to the Administrator, of: (i) Mayer, Brown & Platt, counsel for the Seller
and the Servicer, and (ii) Gus J. Athas, internal counsel for the Seller and
the Servicer.
(i) Satisfactory results of a review and audit (performed by
representatives of the Administrator) of the Servicer's collection, operating
and reporting systems, the Credit and Collection Policy of each Originator,
historical receivables data and accounts, including satisfactory results of a
review of the Servicer's operating location(s) and satisfactory review and
approval of the Eligible Receivables in existence on the date of the initial
purchase under the Agreement.
(j) A pro forma Information Package representing the performance of the
Receivables Pool for the Fiscal Month before closing.
(k) Evidence of payment by the Seller of all accrued and unpaid fees
(including those contemplated by the Fee Letter), costs and expenses to the
extent then due and payable on the date thereof, including any such costs,
fees and expenses arising under or referenced in Section 5.4 of the Agreement
and, in each case, payable in accordance with the Engagement Letter and the
Fee Letter.
(l) The Fee Letter duly executed by the Seller and the Servicer.
(m) Good standing certificates with respect to each of the Seller, the
Originators and the Servicer issued by the Secretaries of State (or similar
official) of the states of each such Person's organization and principal
place of business.
(n) Letters from each of the rating agencies then rating the Notes
confirming the rating of such Notes after giving effect to the transaction
contemplated by the Agreement.
(o) The Liquidity Agreement and all other Transaction Documents duly
executed by the parties thereto.
(p) Such other approvals, opinions or documents as the Administrator or
Issuer may reasonably request.
2. Conditions Precedent to All Purchases and Reinvestments. Each
purchase (except as to clause (a), including the initial purchase) and each
reinvestment shall be subject to the further conditions precedent that:
(a) in the case of each purchase, the Servicer shall have delivered to
the Administrator on or before such purchase, in form and substance
satisfactory to the Administrator, a completed pro forma Information Package
to reflect the level of Capital and related reserves after such subsequent
purchase;
(b) on the date of such purchase or reinvestment the following
statements shall be true (and acceptance of the proceeds of such purchase or
reinvestment shall be deemed a representation and warranty by the Seller that
such statements are then true):
(i) the representations and warranties contained in Exhibit III to
the Agreement are true and correct in all material respects on and as of
the date of such purchase or reinvestment as though made on and as of
such date; and
(ii) no event has occurred and is continuing, or would result from
such purchase or reinvestment, that constitutes a Termination Event or
an Unmatured Termination Event;
provided, however, that the existence of an Unmatured Termination Event
(other than an Unmatured Termination Event of the type described in clause
(i) of Exhibit V to the Agreement or resulting from the failure of the Seller
or the Servicer to deliver any Information Package when due) shall not
prohibit any reinvestment or purchase on any day that does not cause the
Capital, after giving effect to such reinvestment or purchase, to exceed the
Capital as of the opening of business on such day.
EXHIBIT III
REPRESENTATIONS AND WARRANTIES
1. Representations and Warranties of the Seller. The Seller represents
and warrants as follows:
(a) The Seller is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware, and is duly
qualified to do business, and is in good standing, as a foreign corporation
in every jurisdiction where the nature of its business requires it to be so
qualified, except where the failure to be so qualified would not have a
Material Adverse Effect.
(b) The execution, delivery and performance by the Seller of the
Agreement and the other Transaction Documents to which it is a party,
including the Seller's use of the proceeds of purchases and reinvestments:
(i) are within the Seller's corporate powers, (ii) have been duly authorized
by all necessary corporate action, (iii) do not contravene or result in a
default under or conflict with: (1) the Seller's charter or by-laws, (2) any
law, rule or regulation applicable to the Seller, (3) any contractual
restriction binding on or affecting the Seller or its property or (4) any
order, writ, judgment, award, injunction or decree binding on or affecting
the Seller or its property, and (iv) do not result in or require the creation
of any Adverse Claim upon or with respect to any of its properties. The
Agreement and the other Transaction Documents to which it is a party have
been duly executed and delivered by the Seller.
(c) No authorization, approval or other action by, and no notice to or
filing with, any Governmental Authority or other Person is required for the
due execution, delivery and performance by the Seller of the Agreement or any
other Transaction Document to which it is a party, other than the Uniform
Commercial Code filings referred to in Exhibit II to the Agreement, all of
which shall have been filed on or before the date of the first purchase
hereunder, and the approval of the Administrative Agent under the Credit
Facility, which approval has been obtained and continues in full force and
effect.
(d) Each of the Agreement and the other Transaction Documents to which
it is a party constitutes the legal, valid and binding obligation of the
Seller enforceable against the Seller in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization or
other similar laws from time to time in effect affecting the enforcement of
creditors' rights generally and by general principles of equity, regardless
of whether such enforceability is considered in a proceeding in equity or at
law.
(e) The balance sheets of the Seller as at December 31, 1995, and the
related statements of income and retained earnings of the Seller for the
fiscal year then ended, copies of which have been furnished to the
Administrator, fairly present the financial condition of the Seller as at
such date and the results of the operations of the Seller for the period
ended on such date, all in accordance with generally accepted accounting
principles consistently applied, and since December 31, 1995 there has been
no Material Adverse Effect.
(f) There is no pending or, to the best knowledge of the Seller,
threatened action or proceeding affecting the Seller before any Governmental
Authority or arbitrator.
(g) No proceeds of any purchase or reinvestment will be used to acquire
any equity security of a class that is registered pursuant to Section 12 of
the Securities Exchange Act of 1934.
(h) The Seller is the legal and beneficial owner of the Pool
Receivables and Related Security, free and clear of any Adverse Claim. Upon
each purchase or reinvestment, the Issuer shall acquire a valid and
enforceable perfected undivided percentage ownership interest, to the extent
of the Purchased Interest, in each Pool Receivable then existing or
thereafter arising and in the Related Security, Collections and other
proceeds with respect thereto, free and clear of any Adverse Claim. The
Agreement creates a security interest in favor of the Issuer in the Pool
Assets, and the Issuer has a first priority perfected security interest in
the Pool Assets, free and clear of any Adverse Claims. No effective financing
statement or other instrument similar in effect covering any Pool Asset is on
file in any recording office, except those filed in favor of the Seller and
Falcon pursuant to the Sale Agreements and the Issuer relating to the
Agreement.
(i) Each Information Package (if prepared by the Seller or one of its
Affiliates, or to the extent that information contained therein is supplied
by the Seller or an Affiliate), information, exhibit, financial statement,
document, book, record or report furnished or to be furnished at any time by
or on behalf of the Seller to the Administrator in connection with the
Agreement or any other Transaction Document to which it is a party is or will
be complete and accurate in all material respects as of its date or (except
as otherwise disclosed to the Administrator at such time) as of the date so
furnished.
(j) The principal place of business and chief executive office (as such
terms are used in the UCC) of the Seller and the office where the Seller
keeps its records concerning the Receivables are located at the address
referred to in Sections 1(b) and 2(b) of Exhibit IV to the Agreement.
(k) The names and addresses of all the Lock-Box Banks, together with
the account numbers of the Lock-Box Accounts at such Lock-Box Banks, are
specified in Schedule II to the Agreement (or at such other Lock-Box Banks
and/or with such other Lock-Box Accounts as have been notified to the
Administrator in accordance with the Agreement) and all Lock-Box Accounts are
subject to Lock-Box Agreements.
(l) The Seller is not in violation of any order of any court,
arbitrator or Governmental Authority.
(m) Neither the Seller nor any Affiliate of the Seller has any direct
or indirect ownership or other financial interest in the Issuer.
(n) No proceeds of any purchase or reinvestment will be used for any
purpose that violates any applicable law, rule or regulation, including
Regulations G or U of the Federal Reserve Board.
(o) Each Pool Receivable included as an Eligible Receivable in the
calculation of the Net Receivables Pool Balance is an Eligible Receivable.
(p) No event has occurred and is continuing, or would result from a
purchase in respect of, or reinvestment in respect of, the Purchased Interest
or from the application of the proceeds therefrom, that constitutes a
Termination Event or an Unmatured Termination Event.
(q) The Seller has accounted for each sale of undivided percentage
ownership interests in Receivables in its books and financial statements as
sales, consistent with generally accepted accounting principles.
(r) The Seller has complied in all material respects with the Credit
and Collection Policy of each Originator with regard to each Receivable
originated by such Originator.
(s) The Seller has complied in all material respects with all of the
terms, covenants and agreements contained in the Agreement and the other
Transaction Documents that are applicable to it.
(t) The Seller's complete corporate name is set forth in the preamble
to the Agreement, and the Seller does not use and has not during the last six
years used any other corporate name, trade name, doing-business name or
fictitious name, except as set forth on Schedule III to the Agreement and
except for names first used after the date of the Agreement and set forth in
a notice delivered to the Administrator pursuant to Section 1(l)(v) of
Exhibit IV to the Agreement.
2. Representations and Warranties of the Servicer. The Servicer
represents and warrants as follows:
(a) The Servicer is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware, and is duly
qualified to do business, and is in good standing, as a foreign corporation
in every jurisdiction where the nature of its business requires it to be so
qualified, except where the failure to be so qualified would not have a
Material Adverse Effect.
(b) The execution, delivery and performance by the Servicer of the
Agreement and the other Transaction Documents to which it is a party,
including the Servicer's use of the proceeds of purchases and reinvestments:
(i) are within the Servicer's corporate powers, (ii) have been duly
authorized by all necessary corporate action, (iii) do not contravene or
result in a default under or conflict with: (1) the Servicer's charter or by-
laws, (2) any law, rule or regulation applicable to the Servicer, (3) any
contractual restriction binding on or affecting the Servicer or its property
or (4) any order, writ, judgment, award, injunction or decree binding on or
affecting the Servicer or its property, and (iv) do not result in or require
the creation of any Adverse Claim upon or with respect to any of its
properties. The Agreement and the other Transaction Documents to which it is
a party have been duly executed and delivered by the Servicer.
(c) No authorization, approval or other action by, and no notice to or
filing with, any Governmental Authority or other Person is required for the
due execution, delivery and performance by the Servicer of the Agreement or
any other Transaction Document to which it is a party.
(d) Each of the Agreement and the other Transaction Documents to which
it is a party constitutes the legal, valid and binding obligation of the
Servicer enforceable against the Servicer in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization or other similar laws from time to time in effect affecting
the enforcement of creditors' rights generally and by general principles of
equity, regardless of whether such enforceability is considered in a
proceeding in equity or at law.
(e) The balance sheets of the Servicer and its consolidated
subsidiaries as at December 31, 1995, and the related statements of income
and retained earnings of the Servicer and its consolidated subsidiaries for
the fiscal year then ended, copies of which have been furnished to the
Administrator, fairly present the financial condition of the Servicer and its
consolidated subsidiaries as at such date and the results of the operations
of the Servicer and its subsidiaries for the period ended on such date, all
in accordance with generally accepted accounting principles consistently
applied, and since December 31, 1995 there has been no Material Adverse
Effect.
(f) Except as disclosed in the most recent audited financial statements
of Falcon furnished to the Administrator, there is no pending or, to the best
knowledge of the Servicer, threatened action or proceeding affecting the
Servicer or any of its subsidiaries before any Governmental Authority or
arbitrator that could have a Material Adverse Effect.
(g) No proceeds of any purchase or reinvestment will be used to acquire
any equity security of a class that is registered pursuant to Section 12 of
the Securities Exchange Act of 1934.
(h) Each Information Package (if prepared by the Servicer or one of its
Affiliates, or to the extent that information contained therein is supplied
by the Servicer or an Affiliate), information, exhibit, financial statement,
document, book, record or report furnished or to be furnished at any time by
or on behalf of the Servicer to the Administrator in connection with the
Agreement is or will be complete and accurate in all material respects as of
its date or (except as otherwise disclosed to the Administrator at such time)
as of the date so furnished.
(i) The principal place of business and chief executive office (as such
terms are used in the UCC) of the Servicer and the office where the Servicer
keeps its records concerning the Receivables are located at the address
referred to in Section 2(b) of Exhibit IV to the Agreement.
(j) The Servicer is not in violation of any order of any court,
arbitrator or Governmental Authority.
(k) Neither the Servicer nor any Affiliate of the Servicer has any
direct or indirect ownership or other financial interest in the Issuer.
(l) The Servicer has complied in all material respects with the Credit
and Collection Policy of each Originator with regard to each Receivable
originated by such Originator.
(m) The Servicer has complied in all material respects with all of the
terms, covenants and agreements contained in the Agreement and the other
Transaction Documents that are applicable to it.
EXHIBIT IV
COVENANTS
1. Covenants of the Seller. Until the latest of the Facility
Termination Date, the date on which no Capital of or Discount in respect of
the Purchased Interest shall be outstanding or the date all other amounts
owed by the Seller under the Agreement to the Issuer, the Administrator and
any other Indemnified Party or Affected Person shall be paid in full:
(a) Compliance with Laws, Etc. The Seller shall comply in all material
respects with all applicable laws, rules, regulations and orders, and
preserve and maintain its corporate existence, rights, franchises,
qualifications and privileges, except to the extent that the failure so to
comply with such laws, rules and regulations or the failure so to preserve
and maintain such rights, franchises, qualifications and privileges would not
have a Material Adverse Effect.
(b) Offices, Records and Books of Account, Etc. The Seller: (i) shall
keep its principal place of business and chief executive office (as such
terms or similar terms are used in the UCC) and the office where it keeps its
records concerning the Receivables at the address of the Seller set forth
under its name on the signature page to the Agreement or, pursuant to clause
(l)(v) below, at any other locations in jurisdictions where all actions
reasonably requested by the Administrator to protect and perfect the interest
of the Issuer in the Receivables and related items (including the Pool
Assets) have been taken and completed and (ii) shall provide the
Administrator with at least 30 days' written notice before making any change
in the Seller's name or making any other change in the Seller's identity or
corporate structure (including a Change in Control) that could render any UCC
financing statement filed in connection with this Agreement "seriously
misleading" as such term (or similar term) is used in the UCC; each notice to
the Administrator pursuant to this sentence shall set forth the applicable
change and the effective date thereof. The Seller also will maintain and
implement (or cause the Servicer to maintain and implement) administrative
and operating procedures (including an ability to recreate records evidencing
Receivables and related Contracts in the event of the destruction of the
originals thereof), and keep and maintain (or cause the Servicer to keep and
maintain) all documents, books, records, computer tapes and disks and other
information reasonably necessary or advisable for the collection of all
Receivables (including records adequate to permit the daily identification of
each Receivable and all Collections of and adjustments to each existing
Receivable). Notwithstanding the above, in no event shall the Seller have or
maintain, or be a partner in any partnership that has or maintains, its
jurisdiction of organization, principal place of business or principal assets
in any of the states of Colorado, Kansas, New Mexico, Oklahoma, Utah or
Wyoming.
(c) Performance and Compliance with Contracts and Credit and Collection
Policy. The Seller shall (and shall cause the Servicer to), at its expense,
timely and fully perform and comply with all material provisions, covenants
and other promises required to be observed by it under the Contracts related
to the Receivables, and timely and fully comply in all material respects with
the applicable Credit and Collection Policies with regard to each Receivable
and the related Contract.
(d) Ownership Interest, Etc. The Seller shall (and shall cause the
Servicer to), at its expense, take all action necessary or desirable to
establish and maintain a valid and enforceable undivided percentage ownership
interest, to the extent of the Purchased Interest, in the Pool Receivables,
the Related Security and Collections with respect thereto, and a first
priority perfected security interest in the Pool Assets, in each case free
and clear of any Adverse Claim, in favor of the Issuer, including taking such
action to perfect, protect or more fully evidence the interest of the Issuer
as the Issuer, through the Administrator, may reasonably request.
(e) Sales, Liens, Etc. The Seller shall not sell, assign (by operation
of law or otherwise) or otherwise dispose of, or create or suffer to exist
any Adverse Claim upon or with respect to, any or all of its right, title or
interest in, to or under any Pool Assets (including the Seller's undivided
interest in any Receivable, Related Security or Collections, or upon or with
respect to any account to which any Collections of any Receivables are sent),
or assign any right to receive income in respect of any items contemplated by
this paragraph.
(f) Extension or Amendment of Receivables. Except as provided in the
Agreement, the Seller shall not, and shall not permit the Servicer to, extend
the maturity or adjust the Outstanding Balance or otherwise modify the terms
of any Pool Receivable, or amend, modify or waive any term or condition of
any related Contract.
(g) Change in Business or Credit and Collection Policy. The Seller
shall not make (or permit any Originator to make) any material change in the
character of its business or in any Credit and Collection Policy, or any
change in any Credit and Collection Policy that would have a Material Adverse
Effect. The Seller shall not make (or permit any Originator to make) any
other change in any Credit and Collection Policy without giving prior written
notice thereof to the Administrator.
(h) Audits. The Seller shall (and shall cause Falcon and each
Originator to), from time to time during regular business hours as reasonably
requested in advance (unless a Termination Event or Unmatured Termination
Event exists) by the Administrator, permit the Administrator, or its agents
or representatives: (i) to examine and make copies of and abstracts from all
books, records and documents (including computer tapes and disks) in the
possession or under the control of the Seller (or Falcon or any such
Originator) relating to Receivables and the Related Security, including the
related Contracts, and (ii) to visit the offices and properties of the
Seller, Falcon or the Originators for the purpose of examining such materials
described in clause (i) above, and to discuss matters relating to Receivables
and the Related Security or the Seller's, Falcon's or the Originators'
performance hereunder or under the Contracts with any of the officers,
employees, agents or contractors of the Seller, Falcon or the Originators
having knowledge of such matters.
(i) Change in Lock-Box Banks, Lock-Box Accounts and Payment
Instructions to Obligors. The Seller shall not, and shall not permit the
Servicer, Falcon (if not the Servicer) or any Originator to, add or terminate
any bank as a Lock-Box Bank or any account as a Lock-Box Account from those
listed in Schedule II to the Agreement, or make any change in its
instructions to Obligors regarding payments to be made to the Seller, the
Originators, the Servicer or any Lock-Box Account (or related post office
box), unless the Administrator shall have consented thereto in writing and
the Administrator shall have received copies of all agreements and documents
(including Lock-Box Agreements) that it may request in connection therewith.
(j) Deposits to Lock-Box Accounts. The Seller shall (or shall cause the
Servicer to): (i) instruct all Obligors (other than Obligors on a Receivable
originated by Ex-Cell Manufacturing Company, Inc.) to make payments of all
Receivables to one or more Lock-Box Accounts or to post office boxes to which
only Lock-Box Banks have access (and shall instruct the Lock-Box Banks to
cause all items and amounts relating to such Receivables received in such
post office boxes to be removed and deposited into a Lock-Box Account on a
daily basis), and (ii) deposit, or cause to be deposited, any Collections
received by it, the Servicer or any Originator into Lock-Box Accounts not
later than one Business Day after receipt thereof. Each Lock-Box Account
(other than the Lock-Box Account to which Collections are deposited by Ex-
Cell Manufacturing Company, Inc.) shall at all times be subject to a Lock-Box
Agreement. The Seller will not (and will not permit the Servicer to) deposit
or otherwise credit, or cause or permit to be so deposited or credited, to
any Lock-Box Account cash or cash proceeds other than Collections.
(k) Marking of Records. At its expense, the Seller shall: (i) mark (or
cause the Servicer to mark) its master data processing records relating to
Pool Receivables and related Contracts, including with a legend evidencing
that the undivided percentage ownership interests with regard to the
Purchased Interest related to such Receivables and related Contracts have
been sold in accordance with the Agreement, and (ii) cause Falcon and each
Originator so to mark their master data processing records pursuant to the
Sale Agreements.
(l) Reporting Requirements. The Seller will provide to the
Administrator (in multiple copies, if requested by the Administrator) the
following:
(i) as soon as available and in any event within 105 days after
the end of each fiscal year of the Seller, a copy of the annual report
for such year for the Seller, containing unaudited financial statements
for such year certified as to accuracy by the Chief Financial Officer or
Treasurer of the Seller;
(ii) as soon as possible and in any event within five days after
the occurrence of each Termination Event or Unmatured Termination Event,
a statement of the chief financial officer of the Seller setting forth
details of such Termination Event or Unmatured Termination Event and the
action that the Seller has taken and proposes to take with respect
thereto;
(iii) promptly after the sending or filing thereof, copies of all
reports that the Seller sends to any of its security holders, and copies
of all reports and registration statements that the Seller or any
subsidiary files with the Securities and Exchange Commission or any
national securities exchange;
(iv) promptly after the filing or receiving thereof, copies of all
reports and notices that the Seller or any Affiliate files under ERISA
with the Internal Revenue Service, the Pension Benefit Guaranty
Corporation or the U.S. Department of Labor or that the Seller or any
Affiliate receives from any of the foregoing or from any multiemployer
plan (within the meaning of Section 4001(a)(3) of ERISA) to which the
Seller or any of its Affiliates is or was, within the preceding five
years, a contributing employer, in each case in respect of the
assessment of withdrawal liability or an event or condition that could,
in the aggregate, result in the imposition of liability on the Seller
and/or any such Affiliate;
(v) at least thirty days before any change in the Seller's name or
any other change requiring the amendment of UCC financing statements, a
notice setting forth such changes and the effective date thereof;
(vi) promptly after the Seller obtains knowledge thereof, notice
of any: (A) litigation, investigation or proceeding that may exist at
any time between the Seller and any Person or (B) litigation or
proceeding relating to any Transaction Document;
(vii) promptly after the occurrence thereof, notice of a material
adverse change in the business, operations, property or financial or
other condition of the Seller, the Servicer or any Originator; and
(viii) such other information respecting the Receivables or the
condition or operations, financial or otherwise, of the Seller or any of
its Affiliates as the Administrator may from time to time reasonably
request;
(m) Certain Agreements. Without the prior written consent of the
Administrator, the Seller will not (and will not permit Falcon or any
Originator to) amend, modify, waive, revoke or terminate any Transaction
Document to which it is a party or any provision of its certificate of
incorporation or by-laws.
(n) Restricted Payments. (i) Except pursuant to clause (ii) below, the
Seller will not: (A) purchase or redeem any shares of its capital stock,
(B) declare or pay any dividend or set aside any funds for any such purpose,
(C) prepay, purchase or redeem any Debt, (D) lend or advance any funds or
(E) repay any loans or advances to, for or from any of its Affiliates (the
amounts described in clauses (A) through (E) being referred to as "Restricted
Payments").
(ii) Subject to the limitations set forth in clause (iii) below,
the Seller may make Restricted Payments so long as such Restricted
Payments are made only in one or more of the following ways: (A) the
Seller may make cash payments (including prepayments) on the Buyer Note
in accordance with its terms, and (B) if no amounts are then outstanding
under the Buyer Note, the Seller may declare and pay dividends.
(iii) The Seller may make Restricted Payments only out of the
funds it receives pursuant to Sections 1.4(b)(ii) and (iv) of the
Agreement. Furthermore, the Seller shall not pay, make or declare: (A)
any dividend if, after giving effect thereto, the Seller's tangible net
worth would be less than $5,000,000, or (B) any Restricted Payment
(including any dividend) if, after giving effect thereto, any
Termination Event or Unmatured Termination Event shall have occurred and
be continuing.
(o) Other Business. The Seller will not: (i) engage in any business
other than the transactions contemplated by the Transaction Documents, (ii)
create, incur or permit to exist any Debt of any kind (or cause or permit to
be issued for its account any letters of credit or bankers' acceptances)
other than pursuant to this Agreement, the Sale Agreement between the Seller
and Falcon or the Designated Receivables Agreement (the "Permitted Debt"), or
(iii) form any subsidiary or make any investments in any other Person;
provided, however, that the Seller shall be permitted to incur minimal
obligations to the extent necessary for the day-to-day operations of the
Seller (such as expenses for stationery, audits, maintenance of legal status,
etc.).
(p) Use of Seller's Share of Collections. The Seller shall apply the
Seller's Share of Collections to make payments in the following order of
priority: (i) the payment of its expenses (including all obligations payable
to the Issuer and the Administrator under the Agreement and under the Fee
Letter), (ii) the payment of accrued and unpaid interest on the Buyer Note
and (iii) other legal and valid corporate purposes.
(q) Purchased Interest. Both before and after each purchase or
reinvestment pursuant to the Agreement, the Purchased Interest will not be
greater than 100%.
(r) Tangible Net Worth. The Seller will not permit its tangible net
worth, at any time, to be less than $5,000,000.
(s) Interest Coverage Ratio. If the Credit Facility is no longer in
existence, Falcon will not permit the Interest Coverage Ratio calculated at
the end of each fiscal quarter (as calculated for the four fiscal quarters
then ended) to be less than 4.0 to 1.0.
2. Covenants of the Servicer. Until the latest of the Facility
Termination Date, the date on which no Capital of or Discount in respect of
the Purchased Interest shall be outstanding or the date all other amounts
owed by the Seller under the Agreement to the Issuer, the Administrator and
any other Indemnified Party or Affected Person shall be paid in full:
(a) Compliance with Laws, Etc. The Servicer shall comply in all
material respects with all applicable laws, rules, regulations and orders,
and preserve and maintain its corporate existence, rights, franchises,
qualifications and privileges, except to the extent that the failure so to
comply with such laws, rules and regulations or the failure so to preserve
and maintain such existence, rights, franchises, qualifications and
privileges would not have a Material Adverse Effect.
(b) Offices, Records and Books of Account, Etc. The Servicer shall keep
its principal place of business and chief executive office (as such terms or
similar terms are used in the UCC) and the office where it keeps its records
concerning the Receivables at the address of the Servicer set forth under its
name on the signature page to the Agreement or, upon at least 30 days' prior
written notice of a proposed change to the Administrator, at any other
locations in jurisdictions where all actions reasonably requested by the
Administrator to protect and perfect the interest of the Issuer in the
Receivables and related items (including the Pool Assets) have been taken and
completed. The Servicer also will maintain and implement administrative and
operating procedures (including an ability to recreate records evidencing
Receivables and related Contracts in the event of the destruction of the
originals thereof), and keep and maintain all documents, books, records,
computer tapes and disks and other information reasonably necessary or
advisable for the collection of all Receivables (including records adequate
to permit the daily identification of each Receivable and all Collections of
and adjustments to each existing Receivable).
(c) Performance and Compliance with Contracts and Credit and Collection
Policy. The Servicer shall, at its expense, timely and fully perform and
comply with all material provisions, covenants and other promises required to
be observed by it under the Contracts related to the Receivables, and timely
and fully comply in all material respects with the Credit and Collection
Policy with regard to each Receivable and the related Contract.
(d) Extension or Amendment of Receivables. Except as provided in the
Agreement, the Servicer shall not extend the maturity or adjust the
Outstanding Balance or otherwise modify the terms of any Pool Receivable, or
amend, modify or waive any term or condition of any related Contract.
(e) Change in Business or Credit and Collection Policy. The Servicer
shall not make any material change in the character of its business or in any
Credit and Collection Policy, or any change in any Credit and Collection
Policy that would have a Material Adverse Effect. The Servicer shall not make
any other change in any Credit and Collection Policy without giving prior
written notice thereof to the Administrator.
(f) Audits. The Servicer shall, from time to time during regular
business hours as reasonably requested in advance (unless a Termination Event
or Unmatured Termination Event exists) by the Administrator, permit the
Administrator, or its agents or representatives: (i) to examine and make
copies of and abstracts from all books, records and documents (including
computer tapes and disks) in the possession or under the control of the
Servicer relating to Receivables and the Related Security, including the
related Contracts, and (ii) to visit the offices and properties of the
Servicer for the purpose of examining such materials described in clause (i)
above, and to discuss matters relating to Receivables and the Related
Security or the Servicer's performance hereunder or under the Contracts with
any of the officers, employees, agents or contractors of the Servicer having
knowledge of such matters.
(g) Change in Lock-Box Banks, Lock-Box Accounts and Payment
Instructions to Obligors. The Servicer shall not, and shall not permit any
Originator to, add or terminate any bank as a Lock-Box Bank or any account as
a Lock-Box Account from those listed in Schedule II to the Agreement, or make
any change in its instructions to Obligors regarding payments to be made to
the Servicer or any Lock-Box Account (or related post office box), unless the
Administrator shall have consented thereto in writing and the Administrator
shall have received copies of all agreements and documents (including Lock-
Box Agreements) that it may request in connection therewith.
(h) Deposits to Lock-Box Accounts. The Servicer shall: (i) instruct all
Obligors (other than Obligors on a Receivable originated by Ex-Cell
Manufacturing Company, Inc.) to make payments of all Receivables to one or
more Lock-Box Accounts or to post office boxes to which only Lock-Box Banks
have access (and shall instruct the Lock-Box Banks to cause all items and
amounts relating to such Receivables received in such post office boxes to be
removed and deposited into a Lock-Box Account on a daily basis), and (ii)
deposit, or cause to be deposited, any Collections received by it into Lock-
Box Accounts not later than one Business Day after receipt thereof. Each Lock-
Box Account (other than the Lock-Box Account to which Collections are
deposited by Ex-Cell Manufacturing Company, Inc.) shall at all times be
subject to a Lock-Box Agreement. The Servicer will not deposit or otherwise
credit, or cause or permit to be so deposited or credited, to any Lock-Box
Account cash or cash proceeds other than Collections.
(i) Marking of Records. At its expense, the Servicer shall mark its
master data processing records relating to Pool Receivables and related
Contracts, including with a legend evidencing that the undivided percentage
ownership interests with regard to the Purchased Interest related to such
Receivables and related Contracts have been sold in accordance with the
Agreement.
(j) Reporting Requirements. The Servicer will provide to the
Administrator (in multiple copies, if requested by the Administrator) the
following:
(i) as soon as available and in any event within 50 days after the
end of the first three quarters of each fiscal year of the Servicer,
balance sheets of the Servicer and its consolidated subsidiaries as of
the end of such quarter and statements of income and retained earnings
of the Servicer and its consolidated subsidiaries for the period
commencing at the end of the previous fiscal year and ending with the
end of such quarter, certified by the chief financial officer of the
Servicer (which financial statements the Administrator will furnish to
Moody's);
(ii) as soon as available and in any event within 105 days after
the end of each fiscal year of the Servicer, a copy of the annual report
for such year for the Servicer and its consolidated subsidiaries,
containing financial statements for such year audited by Arthur Andersen
LLP or other independent certified public accountants acceptable to the
Administrator;
(iii) as soon as available and in any event not later than the
twelfth Business Day after the last day of each Fiscal Month, an
Information Package as of the last day of such month; within six
Business Days of a request by the Administrator, an Information Package
for such period as is specified by the Administrator (but in no event
more frequently then weekly);
(iv) as soon as possible and in any event within five days after
the occurrence of each Termination Event or Unmatured Termination Event,
a statement of the chief financial officer of the Servicer setting forth
details of such Termination Event or Unmatured Termination Event and the
action that the Servicer has taken and proposes to take with respect
thereto;
(v) promptly after the sending or filing thereof, copies of all
reports that the Servicer sends to any of its security holders, and
copies of all reports and registration statements that the Servicer or
any subsidiary files with the Securities and Exchange Commission or any
national securities exchange;
(vi) promptly after the filing or receiving thereof, copies of all
reports and notices that the Servicer or any Affiliate files under ERISA
with the Internal Revenue Service, the Pension Benefit Guaranty
Corporation or the U.S. Department of Labor or that the Servicer or any
Affiliate receives from any of the foregoing or from any multiemployer
plan (within the meaning of Section 4001(a)(3) of ERISA) to which the
Servicer or any Affiliate is or was, within the preceding five years, a
contributing employer, in each case in respect of the assessment of
withdrawal liability or an event or condition that could, in the
aggregate, result in the imposition of liability on the Servicer and/or
any such Affiliate;
(vii) at least thirty days before any change in the Servicer's
name or any other change requiring the amendment of UCC financing
statements, a notice setting forth such changes and the effective date
thereof;
(viii) promptly after the Servicer obtains knowledge thereof,
notice of any: (A) litigation, investigation or proceeding that may
exist at any time between the Servicer and any Governmental Authority
that, if not cured or if adversely determined, as the case may be, would
have a Material Adverse Effect, (B) litigation or proceeding adversely
affecting the Servicer or any of its subsidiaries in which the amount
involved is $2,000,000 or more and not covered by insurance or in which
injunctive or similar relief is sought, or (C) litigation or proceeding
relating to any Transaction Document;
(ix) promptly after the occurrence thereof, notice of a material
adverse change in the business, operations, property or financial or
other condition of the Servicer or any of its subsidiaries;
(x) promptly after the occurrence thereof, notice of any default
under the Credit Facility (which notice Falcon will furnish to Moody's);
and
(xi) such other information respecting the Receivables or the
condition or operations, financial or otherwise, of the Servicer or any
of its Affiliates as the Administrator may from time to time reasonably
request.
3. Separate Existence. Each of the Seller and Falcon hereby
acknowledges that the Purchasers, the Issuer and the Administrator are
entering into the transactions contemplated by this Agreement and the other
Transaction Documents in reliance upon the Seller's identity as a legal
entity separate from Falcon. Therefore, from and after the date hereof, each
of the Seller and Falcon shall take all steps specifically required by the
Agreement or reasonably required by the Administrator to continue the
Seller's identity as a separate legal entity and to make it apparent to third
Persons that the Seller is an entity with assets and liabilities distinct
from those of Falcon and any other Person, and is not a division of Falcon or
any other Person. Without limiting the generality of the foregoing and in
addition to and consistent with the other covenants set forth herein, each of
the Seller and Falcon shall take such actions as shall be required in order
that:
(a) The Seller will be a limited purpose corporation whose primary
activities are restricted in its certificate of incorporation to: (i)
purchasing or otherwise acquiring from Falcon, owning, holding, granting
security interests or selling interests in Pool Assets, (ii) entering
into agreements for the selling and servicing of the Receivables Pool,
and (iii) conducting such other activities as it deems necessary or
appropriate to carry out its primary activities;
(b) The Seller shall not engage in any business or activity, or
incur any indebtedness or liability, other than as expressly permitted
by the Transaction Documents;
(c) Not less than one member of the Seller's Board of Directors
(the "Independent Director") shall be an individual who is not a direct,
indirect or beneficial stockholder, officer, director, employee,
affiliate, associate or supplier of Falcon or any of its Affiliates. The
certificate of incorporation of the Seller shall provide that: (i) the
Seller's Board of Directors shall not approve, or take any other action
to cause the filing of, a voluntary bankruptcy petition with respect to
the Seller unless the Independent Director shall approve the taking of
such action in writing before the taking of such action, and (ii) such
provision cannot be amended without the prior written consent of the
Independent Director;
(d) The Independent Director shall not at any time serve as a
trustee in bankruptcy for the Seller, Falcon or any Affiliate thereof;
(e) Any employee, consultant or agent of the Seller will be
compensated from the Seller's funds for services provided to the Seller.
The Seller will not engage any agents other than its attorneys, auditors
and other professionals, and a servicer and any other agent contemplated
by the Transaction Documents for the Receivables Pool, which servicer
will be fully compensated for its services by payment of the Servicing
Fee, and a manager, which manager will be fully compensated from the
Seller's funds;
(f) The Seller will contract with the Servicer to perform for the
Seller all operations required on a daily basis to service the
Receivables Pool. The Seller will pay the Servicer the Servicing Fee
pursuant hereto. The Seller will not incur any material indirect or
overhead expenses for items shared with Falcon (or any other Affiliate
thereof) that are not reflected in the Servicing Fee or the fee to
Falcon in its role as manager for the Seller. To the extent, if any,
that the Seller (or any Affiliate thereof) shares items of expenses not
reflected in the Servicing Fee or the manager's fee, such as legal,
auditing and other professional services, such expenses will be
allocated to the extent practical on the basis of actual use or the
value of services rendered, and otherwise on a basis reasonably related
to the actual use or the value of services rendered; it being understood
that Falcon shall pay all expenses relating to the preparation,
negotiation, execution and delivery of the Transaction Documents,
including legal, agency and other fees;
(g) The Seller's operating expenses will not be paid by Falcon or
any other Affiliate thereof;
(h) The Seller will have its own separate stationery;
(i) The Seller's books and records will be maintained separately
from those of Falcon and any other Affiliate thereof;
(j) All financial statements of Falcon or any Affiliate thereof
that are consolidated to include Seller will contain detailed notes
clearly stating that: (i) a special purpose corporation exists as a
subsidiary of Falcon, and (ii) Falcon has sold receivables and other
related assets to such special purpose subsidiary that, in turn, has
sold undivided interests therein to certain financial institutions and
other entities;
(k) The Seller's assets will be maintained in a manner that
facilitates their identification and segregation from those of Falcon or
any Affiliate thereof;
(l) The Seller will strictly observe corporate formalities in its
dealings with Falcon or any Affiliate thereof, and funds or other assets
of the Seller will not be commingled with those of Falcon or any
Affiliate thereof except as permitted by the Agreement in connection
with servicing the Pool Receivables. The Seller shall not maintain joint
bank accounts or other depository accounts to which Falcon or any
Affiliate thereof (other than Falcon in its capacity as the Servicer)
has independent access. The Seller is not named, and has not entered
into any agreement to be named, directly or indirectly, as a direct or
contingent beneficiary or loss payee on any insurance policy with
respect to any loss relating to the property of Falcon or any subsidiary
or affiliate of Falcon. The Seller will pay to the appropriate Affiliate
the marginal increase or, in the absence of such increase, the market
amount of its portion of the premium payable with respect to any
insurance policy that covers the Seller and such Affiliate; and
(m) The Seller will maintain arm's-length relationships with
Falcon (and any Affiliate thereof). Any Person that renders or otherwise
furnishes services to the Seller will be compensated by the Seller at
market rates for such services it renders or otherwise furnishes to the
Seller. Neither the Seller nor Falcon 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. The Seller and
Falcon will immediately correct any known misrepresentation with respect
to the foregoing, and they will not operate or purport to operate as an
integrated single economic unit with respect to each other or in their
dealing with any other entity.
EXHIBIT V
TERMINATION EVENTS
Each of the following shall be a "Termination Event":
(a)(i) The Seller or the Servicer (if Falcon or any of its Affiliates)
shall fail to perform or observe any term, covenant or agreement under the
Agreement or any other Transaction Document and, except as set forth in
clause (ii) or (iii) or clause (b), such failure shall continue for 30 days,
(ii) the Seller or the Servicer shall fail to make when due any payment or
deposit to be made by it under the Agreement and such payment or deposit
shall remain unmade for two Business Days or (iii) Falcon shall resign as
Servicer, and no successor Servicer reasonably satisfactory to the
Administrator shall have been appointed;
(b) Falcon shall fail to transfer to any successor Servicer when
required any rights pursuant to the Agreement that Falcon then has as
Servicer;
(c) Any representation or warranty made or deemed made by the Seller or
the Servicer (or any of their respective officers) under or in connection
with the Agreement or any other Transaction Document, or any information or
report delivered by the Seller or the Servicer pursuant to the Agreement or
any other Transaction Document, shall prove to have been incorrect or untrue
in any material respect when made or deemed made or delivered, and shall
remain incorrect or untrue 30 days after notice to the Seller or the Servicer
of such inaccuracy;
(d) The Seller or the Servicer shall fail to deliver the Information
Package pursuant to the Agreement, and such failure shall remain unremedied
for five days;
(e) The Agreement or any purchase or reinvestment pursuant to the
Agreement shall for any reason: (i) cease to create, or the Purchased
Interest shall for any reason cease to be, a valid and enforceable perfected
undivided percentage ownership interest to the extent of the Purchased
Interest in each Pool Receivable, the Related Security and Collections with
respect thereto, free and clear of any Adverse Claim, or (ii) cease to create
with respect to the Pool Assets, or the interest of the Issuer with respect
to such Pool Assets shall cease to be, a valid and enforceable first priority
perfected security interest, free and clear of any Adverse Claim;
(f)(i) The Seller or Falcon shall generally not pay its debts as such
debts become due, or shall admit in writing its inability to pay its debts
generally, or shall make a general assignment for the benefit of creditors;
or any proceeding shall be instituted by or against the Seller or Falcon
seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation,
winding up, reorganization, arrangement, adjustment, protection, relief or
composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking the entry of an
order for relief or the appointment of a receiver, trustee, custodian or
other similar official for it or for any substantial part of its property
and, in the case of any such proceeding instituted against it (but not
instituted by it), either such proceeding shall remain undismissed or
unstayed for a period of 60 days, or any of the actions sought in such
proceeding (including the entry of an order for relief against, or the
appointment of a receiver, trustee, custodian or other similar official for,
it or for any substantial part of its property) shall occur; or the Seller or
Falcon shall take any corporate action to authorize any of the actions set
forth above in this paragraph; or
(ii) Any Originator shall generally not pay its debts as such
debts become due, or shall admit in writing its inability to pay its
debts generally, or shall make a general assignment for the benefit of
creditors; or any proceeding shall be instituted by or against such
Originator seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment
of a receiver, trustee, custodian or other similar official for it or
for any substantial part of its property and, in the case of any such
proceeding instituted against it (but not instituted by it), either such
proceeding shall remain undismissed or unstayed for a period of 60 days,
or any of the actions sought in such proceeding (including the entry of
an order for relief against, or the appointment of a receiver, trustee,
custodian or other similar official for, it or for any substantial part
of its property) shall occur; or such Originator shall take any
corporate action to authorize any of the actions set forth above in this
paragraph;
(g)(i) The Default Ratio shall exceed 1.5% or the Delinquency Ratio
shall exceed 4.25%, or (ii) the average for three consecutive Fiscal Months
of: (A) the Default Ratio shall exceed 1.25%, (B) the Delinquency Ratio shall
exceed 4.00%, or (C) the Dilution Ratio shall exceed 4.75%;
(h) A Change-in-Control shall occur;
(i) The Purchased Interest shall exceed 100% and such circumstance
shall not have been cured within five Business Days;
(j) Falcon or any of its subsidiaries shall fail to pay any principal
of or premium or interest on any of its Permitted Debt that is outstanding in
a principal amount of at least $5,000,000 in the aggregate when the same
becomes due and payable (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise), and such failure shall continue after the
applicable grace period, if any, specified in the agreement, mortgage,
indenture or instrument relating to such Permitted Debt (and shall have not
been waived); or any other event shall occur or condition shall exist under
any agreement, mortgage, indenture or instrument relating to any such
Permitted Debt and shall continue after the applicable grace period, if any,
specified in such agreement, mortgage, indenture or instrument (and shall
have not been waived), if, in either case, the effect of such non-payment,
event or condition is to accelerate the maturity of such Permitted Debt; or
any such Permitted Debt shall be declared to be due and payable, or required
to be prepaid (other than by a regularly scheduled required prepayment),
redeemed, purchased or defeased, or an offer to repay, redeem, purchase or
defease such Permitted Debt shall be required to be made, in each case before
the stated maturity thereof;
(k) Either: (i) a contribution failure shall occur with respect to any
Benefit Plan sufficient to give rise to a lien under Section 302(f) of ERISA,
(ii) the Internal Revenue Service shall, or shall indicate its intention in
writing to the Seller, any Originator, Falcon or any ERISA Affiliate to, file
a notice of lien asserting a claim or claims of $100,000 or more in the
aggregate pursuant to the Internal Revenue Code with regard to any of the
assets of Seller, any Originator, Falcon or any ERISA Affiliate and such lien
shall have been filed and not released within 10 days, or (iii) the Pension
Benefit Guaranty Corporation shall, or shall indicate its intention in
writing to the Seller, any Originator, Falcon or any ERISA Affiliate to,
either file a notice of lien asserting a claim pursuant to ERISA with regard
to any assets of the Seller, any Originator, Falcon or any ERISA Affiliate or
terminate any Benefit Plan that has unfunded benefit liabilities, or any
steps shall have been taken to terminate any Benefit Plan subject to Title IV
of ERISA so as to result in any liability in excess of $1,000,000 and such
lien shall have been filed and not released within 10 days; or
(l) A Termination Event under the Designated Receivables Agreement
exists.
Exhibit 4.2
RECEIVABLES PURCHASE AGREEMENT
(Designated Receivables)
dated as of May 2, 1996
among
CENTRALLY HELD EAGLE RECEIVABLES PROGRAM, INC.,
FALCON BUILDING PRODUCTS, INC.,
CERTAIN COMMERCIAL LENDING INSTITUTIONS,
as Purchasers,
and
PNC BANK, NATIONAL ASSOCIATION
<PAGE>
TABLE OF CONTENTS
ARTICLE I.
AMOUNTS AND TERMS OF THE PURCHASES
Section 1.1 Purchase Facility
Section 1.2 Making Purchases
Section 1.3 Purchased Interest Computation
Section 1.4 Settlement Procedures
Section 1.5 Fees
Section 1.6 Payments and Computations, Etc
Section 1.7 Dividing or Combining Portions of the Capital of
the Purchased Interest
Section 1.8 Increased Costs
Section 1.9 Requirements of Law
Section 1.10 Inability to Determine Eurodollar Rate
Section 1.11 Register; Information Regarding Purchasers
ARTICLE II.
REPRESENTATIONS AND WARRANTIES; COVENANTS;
TERMINATION EVENTS
Section 2.1 Representations and Warranties; Covenants
Section 2.2 Termination Events
ARTICLE III.
INDEMNIFICATION
Section 3.1 Indemnities by the Seller
Section 3.2 Indemnities by the Servicer
ARTICLE IV.
ADMINISTRATION AND COLLECTIONS
Section 4.1 Appointment of the Servicer
Section 4.2 Duties of the Servicer
Section 4.3 Lock-Box Arrangements
Section 4.4 Enforcement Rights
Section 4.5 Responsibilities of the Seller
Section 4.6 Servicing Fee
ARTICLE V.
THE AGENT
SECTION 5.1 Appointment and Authorization
SECTION 5.2 Delegation of Duties
SECTION 5.3 Liability of Agent
SECTION 5.4 Reliance by the Agent
SECTION 5.5 Notice of Termination Events
SECTION 5.6 Credit Decision
SECTION 5.7 Indemnification
SECTION 5.8 The Agent in Individual Capacity
SECTION 5.9 Successor Agent
SECTION 5.10 Withholding Tax
ARTICLE VI.
MISCELLANEOUS
Section 6.1 Amendments, Etc.
Section 6.2 Notices, Etc
Section 6.3 Assignability
Section 6.4 Costs, Expenses and Taxes
Section 6.5 Confidentiality
Section 6.6 GOVERNING LAW AND JURISDICTION
Section 6.7 Execution in Counterparts
Section 6.8 Survival of Termination
Section 6.9 WAIVER OF JURY TRIAL
Section 6.10 Entire Agreement
Section 6.11 Headings
Section 6.12 Purchasers' Liabilities
EXHIBIT I DEFINITIONS
EXHIBIT II CONDITIONS OF PURCHASES
EXHIBIT III REPRESENTATIONS AND WARRANTIES
EXHIBIT IV COVENANTS
EXHIBIT V TERMINATION EVENTS
EXHIBIT VI ASSIGNMENT
<PAGE>
RECEIVABLES PURCHASE AGREEMENT
This RECEIVABLES PURCHASE AGREEMENT (as amended, supplemented or
otherwise modified from time to time, this "Agreement") is entered into as of
May 2, 1996 among CENTRALLY HELD EAGLE RECEIVABLES PROGRAM, INC., a Delaware
corporation, as seller (the "Seller"), FALCON BUILDING PRODUCTS, INC., a
Delaware corporation ("Falcon"), as initial servicer (in such capacity,
together with its successors and permitted assigns in such capacity, the
"Servicer"), the various financial institutions as are or may become parties
hereto, as purchasers (each, a "Purchaser"), and PNC BANK, NATIONAL
ASSOCIATION, a national banking association ("PNC"), as agent for the
Purchasers (in such capacity, together with its successors and assigns in
such capacity, the "Agent").
PRELIMINARY STATEMENTS. Certain terms that are capitalized and used
throughout this Agreement are defined in Exhibit I to this Agreement.
References in the Exhibits hereto to "the Agreement" refer to this Agreement,
as amended, modified or supplemented from time to time.
The Seller desires to sell, transfer and assign an undivided variable
percentage interest in a pool of receivables, and the Purchasers desire to
acquire such undivided variable percentage interest, as such percentage
interest shall be adjusted from time to time based upon, in part,
reinvestment payments that are made by the Purchasers and additional
incremental payments made to the Seller.
In consideration of the mutual agreements, provisions and covenants
contained herein, the parties hereto agree as follows:
ARTICLE I.
AMOUNTS AND TERMS OF THE PURCHASES
Section 1.1. Purchase Facility. (a) On the terms and conditions
hereinafter set forth, the Purchasers hereby agree to purchase (ratably in
accordance with their respective Percentages), and make reinvestments of,
undivided percentage ownership interests with regard to the Purchased
Interest from the Seller from time to time from the date hereof to the
Facility Termination Date. Under no circumstances shall the Purchasers make
any such purchase or reinvestment if, after giving effect to such purchase or
reinvestment, the aggregate outstanding Capital of the Purchased Interest:
(i) would exceed the Purchase Limit or (ii) with respect to any Purchaser's
interest therein, such Purchaser's Percentage of the Purchase Limit.
(b) The Seller may, upon at least 30 days' written notice to the Agent,
terminate the purchase facility provided in this Section 1.1 in whole or,
from time to time, irrevocably reduce in part the unused portion of the
Purchase Limit; provided, that each partial reduction shall be in the amount
of at least $5,000,000, or an integral multiple of $1,000,000 in excess
thereof, and that, unless terminated in whole, the Purchase Limit shall in no
event be reduced below $20,000,000.
Section 1.2. Making Purchases. (a) Each purchase (but not
reinvestment) of undivided percentage ownership interests with regard to the
Purchased Interest hereunder shall be made upon the Seller's irrevocable
written notice delivered to the Agent in accordance with Section 6.2 (which
notice must be received by the Agent before 11:00 a.m., New York City time):
(i) three Business Days before the requested purchase date, in the case of a
purchase to be funded at the Alternate Rate and based upon the Eurodollar
Rate, and (ii) two Business Days before the requested purchase date, in the
case of a purchase to be funded at the Alternate Rate and based upon the Base
Rate, which notice shall specify: (A) the amount requested to be paid to the
Seller (such amount, which shall not be less than $5,000,000, being the
Capital relating to the undivided percentage ownership interest then being
purchased), (B) the date of such purchase (which shall be a Business Day),
(C) the desired funding basis for such purchase (which shall be based upon
the Eurodollar Rate or the Base Rate), and (D) the duration of the initial
Fixed Period(s) for such purchase.
(b) On or before noon (New York City time) on the date of each purchase
(but not reinvestment) of undivided percentage ownership interests with
regard to the Purchased Interest hereunder, the Purchasers shall, upon
satisfaction of the applicable conditions set forth in Exhibit II hereto,
deposit the amount of their respective purchases in immediately available
funds to the Agent's Account. After its receipt of such funds, the Agent
shall make available to the Seller in same day funds, at Harris Trust and
Savings Bank, account # 207-190-0, ABA # 071-000-288, an amount equal to the
Capital relating to the undivided percentage ownership interest then being
purchased.
(c) Effective on the date of each purchase pursuant to this Section 1.2
and each reinvestment pursuant to Section 1.4, the Seller hereby sells and
assigns to the Agent (for the benefit of the Purchasers) an undivided
percentage ownership interest in: (i) each Pool Receivable then existing,
(ii) all Related Security with respect to such Pool Receivables, and (iii)
all Collections with respect to, and other proceeds of, such Pool Receivables
and Related Security.
(d) To secure all of the Seller's obligations (monetary or otherwise)
under this Agreement and the other Transaction Documents to which it is a
party, whether now or hereafter existing or arising, due or to become due,
direct or indirect, absolute or contingent, the Seller hereby grants to the
Agent (for the benefit of the Purchasers) a security interest in all of the
Seller's right, title and interest (including any undivided interest of the
Seller) in, to and under all of the following, whether now or hereafter
owned, existing or arising: (i) all Pool Receivables, (ii) all Related
Security with respect to such Pool Receivables, (iii) all Collections with
respect to such Pool Receivables, (iv) the Lock-Box Accounts and all amounts
on deposit therein, and all certificates and instruments, if any, from time
to time evidencing such Lock-Box Accounts and amounts on deposit therein, (v)
all rights (but none of the obligations) of the Seller under its Sale
Agreement with Falcon (including the rights of Falcon against the Originators
under the other Sale Agreement), and (vi) all proceeds of, and all amounts
received or receivable under any or all of, the foregoing (collectively, the
"Pool Assets"). The Agent (for the benefit of the Purchasers) shall have,
with respect to the Pool Assets, and in addition to all the other rights and
remedies available to the Agent, all the rights and remedies of a secured
party under any applicable UCC.
(e) Each Purchaser's obligation shall be several, such that the failure
of any Purchaser to make available to the Agent (for the Seller) any funds in
connection with any purchase shall not relieve any other Purchaser of its
obligation, if any, hereunder to make funds available on the date of such
purchase. Further, if any Purchaser fails to satisfy its obligation to make
purchases hereunder, upon receipt of notice of such failure from the Agent
(which notice the Agent agrees to provide), the non-defaulting Purchasers
shall purchase the defaulting Purchaser's Percentage in the related Purchased
Interest pro rata in proportion to their relative Percentages (determined
without regard to the Percentage of the defaulting Purchaser); provided,
however, that no such Purchaser shall be required to make Purchases to the
extent that such Purchases would cause the aggregate amount of Capital
invested by such Purchaser to exceed its Percentage of the aggregate Purchase
Limit.
(f) Unless the Agent shall have received notice from a Purchaser on the
date of any Purchase before 10:00 a.m. (New York City time) that the
Purchaser will not make available to the Agent the amount of that Purchaser's
Percentage of the purchase price, the Agent may assume that each Purchaser
has made such amount available to the Agent on the purchase date and may (but
shall not be obligated to), in reliance upon such assumption, make available
to the Seller on such date a corresponding amount. If and to the extent any
Purchaser shall not have made its full amount available to the Agent, and the
Agent in such circumstances has made available to the Seller the
corresponding amount, that Purchaser shall on the next Business Day make such
amount available to the Agent, together with interest at the applicable
Federal Funds Rate for each day during such period. A certificate of the
Agent submitted to any Purchaser with respect to amounts owing under this
paragraph shall be conclusive, absent manifest error. If such amount is so
made available, such payment to the Agent shall constitute such Purchaser's
purchase on the date of purchase for all purposes of this Agreement. If such
amount is not made available to the Agent on the next Business Day (including
from amounts funded by the non-defaulting Purchasers pursuant to clause (e)),
the Agent shall notify the Seller of such failure to fund and, upon demand by
the Agent, the Seller shall pay such amount to the Agent for the Agent's
account, together with interest at the applicable Federal Funds Rate for each
day during such period.
Section 1.3. Purchased Interest Computation. The Purchased Interest
shall be initially computed on the date of the initial purchase hereunder.
Thereafter, until the Termination Date, the Purchased Interest shall be
automatically recomputed (or deemed to be recomputed) on each Business Day
other than a Termination Day. The Purchased Interest as computed (or deemed
recomputed) as of the day before the Termination Date shall thereafter remain
constant. The Purchased Interest shall become zero when the Capital thereof
and Discount thereon shall have been paid in full, all the amounts owed by
the Seller and the Servicer hereunder to the Purchasers, the Agent and any
other Indemnified Party or Affected Person are paid in full, and the Servicer
shall have received the accrued Servicing Fee thereon.
Section 1.4. Settlement Procedures. (a) Collection of the Pool
Receivables shall be administered by the Servicer in accordance with this
Agreement. The Seller shall provide to the Servicer on a timely basis all
information needed for such administration, including notice of the
occurrence of any Termination Day and current computations of the Purchased
Interest.
(b) The Servicer shall, on each day on which Collections of Pool
Receivables are received (or deemed received) by the Seller or the Servicer:
(i) set aside and hold in trust (and, at the request of the Agent,
segregate in a separate account approved by the Agent if, at the time of
such request, there exists an Unmatured Termination Event or a
Termination Event or if the failure to so segregate reasonably could be
expected to cause a Material Adverse Effect) for the Purchasers, out of
the Purchasers' Share of such Collections, first, an amount equal to the
Discount accrued through such day for each Portion of Capital and not
previously set aside, second, an amount equal to the fees set forth in
the Fee Letter accrued and unpaid through such day, and third, to the
extent funds are available therefor, an amount equal to the Purchasers'
Share of the Servicing Fee accrued through such day and not previously
set aside;
(ii) subject to Section 1.4(f), if such day is not a Termination
Day, remit to the Seller, on behalf of the Purchasers, the remainder of
the Purchasers' Share of such Collections; such remainder shall be
automatically reinvested in Pool Receivables, and in the Related
Security, Collections and other proceeds with respect thereto; provided,
however, that if the Purchased Interest would exceed 100%, then the
Servicer shall not reinvest, but shall set aside and hold in trust for
the Issuer (and shall, at the request of the Agent, segregate in a
separate account approved by the Agent if, at the time of such request,
there exists an Unmatured Termination Event or Termination Event or if
the failure to so segregate reasonably could be expected to cause a
Material Adverse Effect) a portion of such Collections that, together
with the other Collections set aside pursuant to this clause (ii), shall
equal the amount necessary to reduce the Purchased Interest to 100%;
(iii) if such day is a Termination Day, set aside, segregate and
hold in trust for the Purchasers the entire remainder of the Purchasers'
Share of the Collections; provided, that if amounts are set aside and
held in trust on any Termination Day and, thereafter, the conditions set
forth in Section 2 of Exhibit II are satisfied or waived by the Agent,
such previously set aside amounts shall be reinvested in accordance with
clause (ii) above on the day of such subsequent satisfaction or waiver
of conditions; and
(iv) subject to the Agent's security interest under Section
1.2(d), release to the Seller (subject to Section 1.4(f)) for its own
account any Collections in excess of: (x) amounts required to be
reinvested in accordance with clause (ii) or the proviso to clause (iii)
plus (y) the amounts that are required to be set aside pursuant to
clause (i), the proviso to clause (ii) and clause (iii), plus (z) the
Seller's Share of the Servicing Fee accrued and unpaid through such day
and all reasonable and appropriate out-of-pocket costs and expenses of
the Servicer for servicing, collecting and administering the Pool
Receivables.
(c) The Servicer shall deposit into the Agent's Account (or such other
account designated by the Agent), on the last day of each Fixed Period
relating to a Portion of Capital, Collections held for the Purchasers
pursuant to Section 1.4(b)(i) or Section 1.4(f) with respect to such Portion
of Capital plus the lesser of: (i) the amount of Collections then held for
the Purchasers pursuant to Section 1.4(b)(ii) and Section 1.4(b)(iii) and
(ii) such Portion of Capital. On the last day of each Fixed Period relating
to a Portion of Capital, the Agent will notify the Servicer by facsimile of
the amount of Discount accrued with respect to such Portion of Capital during
such Fixed Period.
(d) Upon receipt of funds deposited into the Agent's Account pursuant
to Section 1.4(c), the Agent shall cause such funds to be distributed as
follows:
(i) if such distribution occurs on a day that is not a Termination
Day and the Purchased Interest does not exceed 100%, first to the
Purchasers (no later than 4:00 p.m. (New York City time)) pro rata in
accordance with their Percentages in payment in full of all accrued
Discount and fees (other than Servicing Fees) with respect to such
Portion of Capital, and second, if the Servicer has set aside amounts in
respect of the Servicing Fee pursuant to Section 1.4(b)(i), to the
Servicer (payable in arrears on the last day of each Fixed Period) in
payment in full of the Purchasers' Share of accrued Servicing Fees so
set aside with respect to such Portion of Capital; and
(ii) if such distribution occurs on a Termination Day or on a day
when the Purchased Interest exceeds 100%, first to the Purchasers (no
later than 4:00 p.m. (New York City time) pro rata in accordance with
their Percentages in payment in full of all accrued Discount with
respect to such Portion of Capital, second to the Purchasers (no later
than 4:00 p.m. (New York City time)) pro rata in accordance with their
Percentages in payment in full of such Portion of Capital (or, if such
day is not a Termination Day, the amount necessary to reduce the
Purchased Interest to 100%), third, if Falcon or an Affiliate thereof is
not the Servicer, to the Servicer in payment in full of all accrued
Servicing Fees with respect to such Portion of Capital, fourth, if the
Capital and accrued Discount with respect to each Portion of Capital
have been reduced to zero, and all accrued Servicing Fees payable to the
Servicer (if other than Falcon or an Affiliate thereof) have been paid
in full, to the Purchasers, the Agent and any other Indemnified Party or
Affected Person in payment in full of any other amounts owed thereto by
the Seller hereunder.
After the Capital, Discount, fees payable pursuant to the Fee Letter and
Servicing Fees with respect to the Purchased Interest, and any other amounts
payable by the Seller and the Servicer to the Purchasers, the Agent or any
other Indemnified Party or Affected Person hereunder, have been paid in full,
all additional Collections with respect to the Purchased Interest shall be
paid to the Seller for its own account.
(e) For the purposes of this Section 1.4:
(i) if on any day the Outstanding Balance of any Pool Receivable
is reduced or adjusted as a result of any defective, rejected, returned,
repossessed or foreclosed goods or services, or any revision,
cancellation, allowance, discount or other adjustment made by the Seller
or any Affiliate of the Seller, or any setoff or dispute between the
Seller or any Affiliate of the Seller and an Obligor, or the Seller
shall have received a Deemed Collection under the Sale Agreements (in
each case, other than in respect of any Special Program Allowances), the
Seller shall be deemed to have received on such day a Collection of such
Pool Receivable in the amount of such reduction, adjustment or Deemed
Collection;
(ii) if on any day any of the representations or warranties in
Section 1(h) or (n) of Exhibit III is not true with respect to any Pool
Receivable, the Seller shall be deemed to have received on such day a
Collection of such Pool Receivable in full;
(iii) except as provided in clause (i) or (ii) above, or as
otherwise required by applicable law or the relevant Contract, all
Collections received from an Obligor of any Receivable shall be applied
to the Receivables of such Obligor in the order of the age of such
Receivables, starting with the oldest such Receivable, unless such
Obligor designates in writing its payment for application to specific
Receivables;
(iv) if and to the extent the Agent or the Purchasers shall be
required for any reason to pay over to an Obligor (or any trustee,
receiver, custodian or similar official in any Insolvency Proceeding)
any amount received by it hereunder, such amount shall be deemed not to
have been so received by the Agent or the Purchasers but rather to have
been retained by the Seller and, accordingly, the Agent or the
Purchasers, as the case may be, shall have a claim against the Seller
for such amount, payable when and to the extent that any distribution
from or on behalf of such Obligor is made in respect thereof; and
(v) on the Termination Date, the Seller shall be deemed to have
received on such day Collections of Pool Receivables equal to: (A) the
aggregate amount by which the Pool Receivables relating to the Special
Program Allowances have been discounted, adjusted or otherwise reduced
as noted in clause (i) minus (B) the Special Program Allowances.
(f) If at any time the Seller shall wish to cause the reduction of a
Portion of Capital (but not to commence the liquidation, or reduction to
zero, of the entire Capital of the Purchased Interest), the Seller may do so
as follows:
(i) the Seller shall give the Agent and the Servicer at least two
Business Days' prior written notice thereof (including the amount of
such proposed reduction and the proposed date on which such reduction
will commence),
(ii) on the proposed date of commencement of such reduction and on
each day thereafter, the Servicer shall cause Collections with respect
to such Portion of Capital not to be reinvested until the amount thereof
not so reinvested shall equal the desired amount of reduction, and
(iii) the Servicer shall hold such Collections in trust for the
Purchasers, for payment to the Agent on the last day of the current
Fixed Period relating to such Portion of Capital (as specified by the
Seller), and the applicable Portion of Capital shall be deemed reduced
in the amount to be paid to the Agent only when in fact finally so paid;
provided, that:
A. the amount of any such reduction shall be not less than
$1,000,000 and shall be an integral multiple of $250,000, and the entire
Capital of the Purchased Interest after giving effect to such reduction
shall be not less than $20,000,000 and shall be in an integral multiple
of $1,000,000, and
B. the Seller shall choose a reduction amount, and the date of
commencement thereof, so that to the extent practicable such reduction
shall commence and conclude in the same Fixed Period, and
C. if two or more Portions of Capital are outstanding at the time
of any proposed reduction, such proposed reduction shall be applied,
unless the Seller shall otherwise specify in the notice given pursuant
to clause (f)(i), to the Portion of Capital with the shortest remaining
Fixed Period (or, if all such Portions of Capital have the same Fixed
Period, pro rata).
Section 1.5. Fees. (a) The Seller shall pay to the Agent certain fees
in the amounts and on the dates set forth in a letter dated May 2, 1996 among
Falcon, the Seller and the Agent (as such letter agreement may be amended,
supplemented or otherwise modified from time to time, the "Fee Letter").
(b) In addition to the fees described in clause (a), from the date
hereof to the Facility Termination Date, the Seller agrees to pay the Agent
for the account of the Purchasers a commitment fee for each day in an amount
equal to: (a) 0.125% per annum times (b) the Purchase Limit minus the Capital
on such day. Such fee shall be paid in arrears, from the date hereof until
the Facility Termination Date, on each Monthly Settlement Date (as such term
most recently was used in the Non-Designated Receivables Agreement) and on
the Facility Termination Date, in the amount of such fee that shall have
accrued during such period (or portion thereof) then ending for which no such
fee shall have been paid.
Section 1.6. Payments and Computations, Etc. (a) All amounts to be
paid or deposited by the Seller or the Servicer hereunder shall be paid or
deposited no later than noon (New York City time) on the day when due in same
day funds to the Agent's Account. All amounts received after noon (New York
City time) will be deemed to have been received on the next Business Day.
(b) The Seller or the Servicer, as the case may be, shall, to the
extent permitted by law, pay interest on any amount not paid or deposited by
the Seller or the Servicer, as the case may be, when due hereunder, at an
interest rate equal to 2.0% per annum above the Base Rate, payable on demand.
(c) All computations of interest under subsection (b) and all
computations of Discount, fees and other amounts hereunder shall be made on
the basis of a year of 360 (or 365 or 366, as applicable, with respect to
Discount calculated by reference to the Base Rate) days for the actual number
of days elapsed. Whenever any payment or deposit to be made hereunder shall
be due on a day other than a Business Day, such payment or deposit shall be
made on the next Business Day and such extension of time shall be included in
the computation of such payment or deposit.
Section 1.7. Dividing or Combining Portions of the Capital of the
Purchased Interest. The Seller may, on the last day of any Fixed Period,
pursuant to written notice delivered to the Agent in accordance with Section
6.2: (a) three Business Days before such last day in the case of a Portion of
Capital to be funded based upon the Eurodollar Rate and (b) two Business Days
before such last day in all other cases, either: (i) divide the Capital of
the Purchased Interest into two or more portions (each, a "Portion of
Capital"), which Portions of Capital may accrue Discount by reference to
different rates, equal, in aggregate, to the Capital of the Purchased
Interest; provided, that after giving effect to such division the amount of
each such Portion of Capital shall be not less than $1,000,000 and shall be
an integral multiple of $250,000, or (ii) combine any two or more Portions of
Capital outstanding on such last day and having Fixed Periods ending on such
last day into a single Portion of Capital equal to the aggregate of the
Capital of such Portions of Capital.
Section 1.8. Increased Costs. (a) If the Agent, any Purchaser or any
of their respective Affiliates (each an "Affected Person") reasonably
determines that the existence of or compliance with: (i) any law or
regulation or any change therein or in the interpretation or application
thereof, in each case adopted, issued or occurring after the date hereof, or
(ii) any request, guideline or directive from any central bank or other
Governmental Authority (whether or not having the force of law) issued or
occurring after the date of this Agreement, affects or would affect the
amount of capital required or expected to be maintained by such Affected
Person, and such Affected Person determines that the amount of such capital
is increased by or based upon the existence of any commitment to make
purchases of (or otherwise to maintain the investment in) Pool Receivables
related to this Agreement, then, upon demand by such Affected Person (with a
copy to the Agent), the Seller shall immediately pay to the Agent, for the
account of such Affected Person, from time to time as specified by such
Affected Person, additional amounts sufficient to compensate such Affected
Person in the light of such circumstances, to the extent that such Affected
Person reasonably determines such increase in capital to be allocable to the
existence of any of such commitments. A certificate as to such amounts
submitted to the Seller and the Agent by such Affected Person shall be
conclusive and binding for all purposes, absent manifest error.
(b) If, due to either: (i) the introduction of or any change in or in
the interpretation of any law or regulation or (ii) compliance with any
guideline or request from any central bank or other Governmental Authority
(whether or not having the force of law), there shall be any increase in the
cost to any Affected Person of agreeing to purchase or purchasing, or
maintaining the ownership of, the Purchased Interest in respect of which
Discount is computed by reference to the Eurodollar Rate, then, upon demand
by such Affected Person, the Seller shall immediately pay to such Affected
Person, from time to time as specified by such Affected Person, additional
amounts sufficient to compensate such Affected Person for such increased
costs. A certificate as to such amounts submitted to the Seller and the Agent
by such Affected Person shall be conclusive and binding for all purposes,
absent manifest error.
(c) If such increased costs affect the related Affected Person's
portfolio of financing transactions, such Affected Person shall use
reasonable averaging and attribution methods to allocate such increased costs
to the transactions contemplated by this Agreement.
Section 1.9. Requirements of Law. If any Affected Person reasonably
determines that the existence of or compliance with: (i) any law or
regulation or any change therein or in the interpretation or application
thereof, in each case adopted, issued or occurring after the date hereof, or
(ii) any request, guideline or directive from any central bank or other
Governmental Authority (whether or not having the force of law) issued or
occurring after the date of this Agreement:
(a) does or shall subject such Affected Person to any tax of any
kind whatsoever with respect to this Agreement, any increase in the
Purchased Interest or in the amount of Capital relating thereto, or does
or shall change the basis of taxation of payments to such Affected
Person on account of Collections, Discount or any other amounts payable
hereunder (excluding taxes imposed on the overall pre-tax net income of
such Affected Person, and franchise taxes imposed on such Affected
Person, by the jurisdiction under the laws of which such Affected Person
is organized or a political subdivision thereof);
(b) does or shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets
held by, or deposits or other liabilities in or for the account of,
purchases, advances or loans by, or other credit extended by, or any
other acquisition of funds by, any office of such Affected Person that
are not otherwise included in the determination of the Eurodollar Rate
or the Base Rate hereunder; or
(c) does or shall impose on such Affected Person any other
condition;
and the result of any of the foregoing is: (x) to increase the cost to such
Affected Person of acting as Agent, or of agreeing to purchase or purchasing
or maintaining the ownership of undivided percentage ownership interests with
regard to the Purchased Interest (or interests therein) or any Portion of
Capital, or (y) to reduce any amount receivable hereunder (whether directly
or indirectly), then, in any such case, upon demand by such Affected Person,
the Seller shall immediately pay to such Affected Person additional amounts
necessary to compensate such Affected Person for such additional cost or
reduced amount receivable. All such amounts shall be payable as incurred. A
certificate from such Affected Person to the Seller and the Agent certifying,
in reasonably specific detail, the basis for, calculation of, and amount of
such additional costs or reduced amount receivable shall be conclusive and
binding for all purposes, absent manifest error; provided, however, that no
Affected Person shall be required to disclose any confidential or tax
planning information in any such certificate.
Section 1.10. Inability to Determine Eurodollar Rate. If the Agent
shall have determined before the first day of any Fixed Period (which
determination shall be conclusive and binding upon the parties hereto) by
reason of circumstances affecting the interbank Eurodollar market, either
that: (a) dollar deposits in the relevant amounts and for the relevant Fixed
Period are not available, (b) adequate and reasonable means do not exist for
ascertaining the Eurodollar Rate for such Fixed Period or (c) the Eurodollar
Rate determined pursuant hereto does not accurately reflect the cost to the
Purchasers (as conclusively determined by the Agent) of maintaining any
Portion of Capital during such Fixed Period, the Agent shall promptly give
telephonic notice of such determination, confirmed in writing, to the Seller
before the first day of such Fixed Period. Upon delivery of such notice: (i)
no Portion of Capital shall be funded thereafter at the Eurodollar Rate
unless and until the Agent shall have given notice to the Seller that the
circumstances giving rise to such determination no longer exist, and (ii)
with respect to any outstanding Portions of Capital then funded at the
Alternate Rate determined by reference to the Eurodollar Rate, such Alternate
Rate shall automatically be converted to the Alternate Rate determined by
reference to the Base Rate at the respective last days of the then-current
Fixed Periods relating to such Portions of Capital.
Section 1.11. Register; Information Regarding Purchasers. The Agent
will maintain at its address set forth on the signature page hereof a copy of
this Agreement and all counterpart signature pages hereto, each Assignment
delivered to and accepted by it, each notice of revision to the allocation of
each Purchaser's Percentage and a register (the "Register") for the
recordation of the names and addresses of the Purchasers, their Percentages
and effective dates, the Facility Termination Date, the aggregate outstanding
Capital allocable to Portions of Capital owned by each Purchaser from time to
time and the purchase price relating thereto. The entries in the Register
shall be conclusive and binding for all purposes absent manifest error, and
the parties hereto may treat each Person whose name is recorded in the
Register as a Purchaser hereunder for all purposes of this Agreement. The
Register shall be available for inspection by any Purchaser at any reasonable
time during normal business hours and from time to time upon reasonable prior
notice.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES; COVENANTS;
TERMINATION EVENTS
Section 2.1. Representations and Warranties; Covenants. Each of the
Seller and the Servicer hereby makes the representations and warranties, and
hereby agrees to perform and observe the covenants, applicable to it set
forth in Exhibits III and IV, respectively.
Section 2.2. Termination Events. If any of the Termination Events set
forth in Exhibit V shall occur, the Agent may (at the direction of, or with
the consent of, the Required Purchasers), by notice to the Seller, declare
the Facility Termination Date to have occurred (in which case the Facility
Termination Date shall be deemed to have occurred); provided, that
automatically upon the occurrence of any event (without any requirement for
the passage of time or the giving of notice) described in paragraph (f)(i) of
Exhibit V, the Facility Termination Date shall occur. Upon any such
declaration, occurrence or deemed occurrence of the Facility Termination
Date, the Purchasers and the Agent shall have, in addition to the rights and
remedies that they may have under this Agreement, all other rights and
remedies provided after default under the UCC and under other applicable law,
which rights and remedies shall be cumulative.
ARTICLE III.
INDEMNIFICATION
Section 3.1. Indemnities by the Seller. Without limiting any other
rights that the Agent, the Purchasers or any of their respective Affiliates,
employees, agents, successors, transferees or assigns (each, an "Indemnified
Party") may have hereunder or under applicable law, the Seller hereby agrees
to indemnify each Indemnified Party from and against any and all claims,
damages, expenses, losses and liabilities (including Attorney Costs) (all of
the foregoing being collectively referred to as "Indemnified Amounts")
arising out of or resulting from this Agreement (whether directly or
indirectly), the use of proceeds of purchases or reinvestments, the ownership
of the Purchased Interest, or any interest therein, or in respect of any
Receivable, Related Security or Contract, excluding, however: (a) Indemnified
Amounts to the extent resulting from gross negligence or willful misconduct
on the part of such Indemnified Party, (b) recourse (except as otherwise
specifically provided in this Agreement) for Receivables that are
uncollectible due to the inability of the Obligor to pay, or (c) any overall
net income taxes or franchise taxes imposed on such Indemnified Party by the
jurisdiction under the laws of which such Indemnified Party is organized or
any political subdivision thereof. Without limiting or being limited by the
foregoing, and subject to the exclusions set forth in the preceding sentence,
the Seller shall pay on demand (which demand shall be accompanied by
documentation of the Indemnified Amounts, in reasonable detail) to each
Indemnified Party any and all amounts necessary to indemnify such Indemnified
Party from and against any and all Indemnified Amounts relating to or
resulting from any of the following:
(i) the failure of any Receivable included in the calculation of
the Net Receivables Pool Balance as an Eligible Receivable to be an
Eligible Receivable, the failure of any information contained in an
Information Package to be true and correct, or the failure of any other
information provided to the Purchasers or the Agent with respect to
Receivables or this Agreement to be true and correct;
(ii) the failure of any representation, warranty or statement made
or deemed made by the Seller (or any of its officers) under or in
connection with this Agreement to have been true and correct in all
respects when made;
(iii) the failure by the Seller to comply with any applicable law,
rule or regulation with respect to any Pool Receivable or the related
Contract, or the failure of any Pool Receivable or the related Contract
to conform to any such applicable law, rule or regulation;
(iv) the failure to vest in the Agent (for the benefit of the
Purchasers) a valid and enforceable: (A) perfected undivided percentage
ownership interest, to the extent of the Purchased Interest, in the
Receivables in, or purporting to be in, the Receivables Pool and the
other Pool Assets, and (B) first priority perfected security interest in
the Pool Assets, in each case, free and clear of any Adverse Claim;
(v) the failure to have filed, 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
Receivables in, or purporting to be in, the Receivables Pool and the
other Pool Assets, whether at the time of any purchase or reinvestment
or at any subsequent time;
(vi) any dispute, claim, offset or defense (other than discharge
in bankruptcy of the Obligor) of the Obligor to the payment of any
Receivable in, or purporting to be in, the Receivables Pool (including a
defense based on such Receivable or the related Contract not being a
legal, valid and binding obligation of such Obligor enforceable against
it in accordance with its terms), or any other claim resulting from the
sale of the goods or services related to such Receivable or the
furnishing or failure to furnish such goods or services or relating to
collection activities with respect to such Receivable (if such
collection activities were performed by the Seller or any of its
Affiliates acting as Servicer or by any agent or independent contractor
retained by the Seller or any of its Affiliates);
(vii) any failure of the Seller (or any of its Affiliates acting
as the Servicer) to perform its duties or obligations in accordance with
the provisions hereof or under the Contracts;
(viii) any products liability or other claim, investigation,
litigation or proceeding arising out of or in connection with
merchandise, insurance or services that are the subject of any Contract;
(ix) the commingling of Collections at any time with other funds;
(x) the use of proceeds of purchases or reinvestments; or
(xi) any reduction in Capital as a result of the distribution of
Collections pursuant to Section 1.4(d), if all or a portion of such
distributions shall thereafter be rescinded or otherwise must be
returned for any reason.
Section 3.2. Indemnities by the Servicer. Without limiting any other
rights that the Agent, the Purchasers or any other Indemnified Party may have
hereunder or under applicable law, the Servicer hereby agrees to indemnify
each Indemnified Party from and against any and all Indemnified Amounts
arising out of or resulting from (whether directly or indirectly): (a) the
failure of any information contained in an Information Package to be true and
correct, or the failure of any other information provided to the Purchasers
or the Agent by, or on behalf of, the Servicer to be true and correct, (b)
the failure of any representation, warranty or statement made or deemed made
by the Servicer (or any of its officers) under or in connection with this
Agreement to have been true and correct in all respects when made, (c) the
failure by the Servicer to comply with any applicable law, rule or regulation
with respect to any Pool Receivable or the related Contract, (d) any dispute,
claim, offset or defense of the Obligor to the payment of any Receivable in,
or purporting to be in, the Receivables Pool resulting from or related to the
collection activities with respect to such Receivable, or (e) any failure of
the Servicer to perform its duties or obligations in accordance with the
provisions hereof.
ARTICLE IV.
ADMINISTRATION AND COLLECTIONS
Section 4.1. Appointment of the Servicer. (a) The servicing,
administering and collection of the Pool Receivables shall be conducted by
the Person so designated from time to time as the Servicer in accordance with
this Section. Until the Agent gives notice to Falcon (in accordance with this
Section) of the designation of a new Servicer, Falcon is hereby designated
as, and hereby agrees to perform the duties and obligations of, the Servicer
pursuant to the terms hereof. Upon the occurrence of a Termination Event, the
Agent (at the direction of the Required Purchasers) may designate as Servicer
any Person (including itself if the Agent consents to such designation) to
succeed Falcon or any successor Servicer, on the condition in each case that
any such Person so designated shall agree to perform the duties and
obligations of the Servicer pursuant to the terms hereof.
(b) Upon the designation of a successor Servicer as set forth in clause
(a), Falcon agrees that it will terminate its activities as Servicer
hereunder in a manner that the Agent determines will facilitate the
transition of the performance of such activities to the new Servicer, and
Falcon shall cooperate with and assist such new Servicer. Such cooperation
shall include access to and transfer of records and use by the new Servicer
of all licenses, hardware or software necessary or desirable to collect the
Pool Receivables and the Related Security.
(c) Falcon acknowledges that, in making their decision to execute and
deliver this Agreement, the Agent and the Purchasers have relied on Falcon's
agreement to act as Servicer hereunder. Accordingly, Falcon agrees that it
will not voluntarily resign as Servicer.
(d) The Servicer may delegate its duties and obligations hereunder to
any subservicer (each, a "Sub-Servicer"); provided, that, in each such
delegation: (i) such Sub-Servicer shall agree in writing to perform the
duties and obligations of the Servicer pursuant to the terms hereof, (ii) the
Servicer shall remain primarily liable for the performance of the duties and
obligations so delegated, (iii) the Seller, the Agent and the Purchasers
shall have the right to look solely to the Servicer for performance and (iv)
the terms of any agreement with any Sub-Servicer shall provide that the Agent
may terminate such agreement upon the termination of the Servicer hereunder
by giving notice of its desire to terminate such agreement to the Servicer
(and the Servicer shall provide appropriate notice to each such Sub-
Servicer); provided, however, that if any such delegation is to any Person
other than an Originator, the Agent shall have consented in writing in
advance to such delegation.
Section 4.2. Duties of the Servicer. (a) The Servicer shall take or
cause to be taken all such action as may be necessary or advisable to
administer and collect each Pool Receivable from time to time, all in
accordance with this Agreement and all applicable laws, rules and
regulations, with reasonable care and diligence, and in accordance with the
Credit and Collection Policies. The Servicer shall set aside for the accounts
of the Seller and the Purchasers the amount of the Collections to which each
is entitled in accordance with Article II. The Servicer may, in accordance
with the applicable Credit and Collection Policy, extend the maturity of any
Pool Receivable (but not beyond 30 days) and extend the maturity or adjust
the Outstanding Balance of any defaulted Pool Receivable as the Servicer may
determine to be appropriate to maximize Collections thereof; provided,
however, that: (i) such extension or adjustment shall not alter the status of
such Pool Receivable as a Delinquent Receivable or limit the rights of the
Purchasers or the Agent under this Agreement and (ii) if a Termination Event
has occurred and Falcon or an Affiliate thereof is serving as the Servicer,
Falcon or such Affiliate may make such extension or adjustment only upon the
prior written approval of the Agent. The Seller shall deliver to the Servicer
and the Servicer shall hold for the benefit of the Seller and the Agent (for
the benefit of the Purchasers and individually), in accordance with their
respective interests, all records and documents (including computer tapes or
disks) with respect to each Pool Receivable. Notwithstanding anything to the
contrary contained herein, the Agent may direct the Servicer (whether the
Servicer is Falcon or any other Person) to commence or settle any legal
action to enforce collection of any Pool Receivable or to foreclose upon or
repossess any Related Security; provided, however, that no such direction may
be given unless either: (x) a Termination Event has occurred or (y) the Agent
believes in good faith that failure to commence, settle or effect such legal
action, foreclosure or repossession could adversely affect Receivables
constituting a material portion of the Pool Receivables.
(b) The Servicer shall, as soon as practicable following actual receipt
of collected funds, turn over to the Seller the collections of any
indebtedness that is not a Pool Receivable, less, if Falcon or an Affiliate
thereof is not the Servicer, all reasonable and appropriate out-of-pocket
costs and expenses of such Servicer of servicing, collecting and
administering such collections; provided, however, if Falcon or an Affiliate
thereof is not the Servicer, the Servicer shall not be under any obligation
to remit any such funds to the Seller unless and until the Servicer has
received from the Seller evidence satisfactory to the Agent and the Servicer
that the Seller is entitled to such funds hereunder and under applicable law.
The Servicer, if other than Falcon or an Affiliate thereof, shall, as soon as
practicable upon demand, deliver to the Seller all records in its possession
that evidence or relate to any indebtedness that is not a Pool Receivable,
and copies of records in its possession that evidence or relate to any
indebtedness that is a Pool Receivable.
(c) Notwithstanding anything to the contrary contained in this Article,
the Servicer, if not Falcon or an Affiliate thereof, shall have no obligation
to collect, enforce or take any other action described in this Article with
respect to any indebtedness that is not a Pool Receivable other than to
deliver to the Seller the collections and documents with respect to any such
indebtedness as described in clause (b). It is expressly understood and
agreed by the parties that such Servicer's duties in respect of any
indebtedness that is not a Pool Receivable are set forth in this Section in
their entirety. Upon delivery by such Servicer to the Seller of funds or
records relating to any indebtedness that is not a Pool Receivable, such
Servicer shall have discharged in full all of its responsibilities to make
any such delivery.
(d) The Servicer's obligations hereunder shall terminate on the later
of: (i) the Facility Termination Date and (ii) the date on which all amounts
required to be paid to the Purchasers, the Agent and any other Indemnified
Party or Affected Person hereunder shall have been paid in full.
After such termination, if Falcon or an Affiliate thereof was not the
Servicer on the date of such termination, the Servicer shall promptly deliver
to the Seller all books, records and related materials that the Seller
previously provided to the Servicer, or that have been obtained by the
Servicer, in connection with this Agreement.
Section 4.3. Lock-Box Arrangements. Before the initial purchase
hereunder, the Seller shall enter into Lock-Box Agreements with all of the
Lock-Box Banks and deliver original counterparts thereof to the Agent. Upon
the occurrence of a Termination Event, the Agent may at any time thereafter
give notice to each Lock-Box Bank that the Agent is exercising its rights
under the Lock-Box Agreements to do any or all of the following: (a) to have
the exclusive ownership and control of the Lock-Box Accounts transferred to
the Agent and to exercise exclusive dominion and control over the funds
deposited therein, (b) to have the proceeds that are sent to the respective
Lock-Box Accounts be redirected pursuant to the Agent's instructions rather
than deposited in the applicable Lock-Box Account, and (c) to take any or all
other actions permitted under the applicable Lock-Box Agreement. The Seller
hereby agrees that if the Agent at any time takes any action set forth in the
preceding sentence, the Agent shall have exclusive control of the proceeds
(including Collections) of all Pool Receivables and the Seller hereby further
agrees to take any other action that the Agent may reasonably request to
transfer such control. Any proceeds of Pool Receivables received by the
Seller or the Servicer thereafter shall be sent immediately to the Agent. The
parties hereto hereby acknowledge that if at any time the Agent takes control
of any Lock-Box Account, the Agent shall not have any rights to the funds
therein in excess of the unpaid amounts due to the Agent, the Purchasers or
any other Person hereunder and the Agent shall distribute or cause to be
distributed such funds in accordance with Section 4.2(b) (including the
proviso thereto) and Article II (in each case as if such funds were held by
the Servicer thereunder).
Section 4.4. Enforcement Rights. (a) At any time following the
occurrence of a Termination Event:
(i) the Agent may direct the Obligors that payment of all amounts
payable under any Pool Receivable is to be made directly to the Agent or
its designee;
(ii) the Agent may instruct the Seller or the Servicer to give
notice of the Agent's and the Purchasers' interest in Pool Receivables
to each Obligor, which notice shall direct that payments be made
directly to the Agent or its designee, and the Seller or the Servicer,
as the case may be, shall give such notice at the expense of the Seller
or the Servicer, as the case may be; provided, that if the Seller or the
Servicer, as the case may be, fails to so notify each Obligor, the Agent
(at the Seller's or the Servicer's, as the case may be, expense) may so
notify the Obligors; and
(iii) the Agent may request the Servicer to, and upon such request
the Servicer shall: (A) assemble all of the records necessary or
desirable to collect the Pool Receivables and the Related Security, and
transfer or license to a successor Servicer the use of all software
necessary or desirable to collect the Pool Receivables and the Related
Security, and make the same available to the Agent or its designee at a
place selected by the Agent, and (B) segregate all cash, checks and
other instruments received by it from time to time constituting
Collections in a manner acceptable to the Agent and, promptly upon
receipt, remit all such cash, checks and instruments, duly endorsed or
with duly executed instruments of transfer, to the Agent or its
designee.
(b) The Seller hereby authorizes the Agent, and irrevocably appoints
the Agent as its attorney-in-fact with full power of substitution and with
full authority in the place and stead of the Seller, which appointment is
coupled with an interest, to take any and all steps in the name of the Seller
and on behalf of the Seller necessary or desirable, in the determination of
the Agent, after the occurrence of a Termination Event, to collect any and
all amounts or portions thereof due under any and all Pool Assets, including
endorsing the name of the Seller on checks and other instruments representing
Collections and enforcing such Pool Assets. Notwithstanding anything to the
contrary contained in this subsection, none of the powers conferred upon such
attorney-in-fact pursuant to the preceding sentence shall subject such
attorney-in-fact to any liability if any action taken by it shall prove to be
inadequate or invalid, nor shall they confer any obligations upon such
attorney-in-fact in any manner whatsoever.
Section 4.5. Responsibilities of the Seller. (a) Anything herein to
the contrary notwithstanding, the Seller shall: (i) perform all of its
obligations under the Contracts related to the Pool Receivables to the same
extent as if interests in such Pool Receivables had not been transferred
hereunder, and the exercise by the Agent or the Purchasers of their
respective rights hereunder shall not relieve the Seller from such
obligations, and (ii) pay when due any taxes, including any sales taxes
payable in connection with the Pool Receivables and their creation and
satisfaction. The Agent and the Purchasers shall not have any obligation or
liability with respect to any Pool Asset, nor shall any of them be obligated
to perform any of the obligations of the Seller, Falcon or the Originators
thereunder.
(b) Falcon hereby irrevocably agrees that if at any time it shall cease
to be the Servicer hereunder, it shall act (if the then-current Servicer so
requests) as the data-processing agent of the Servicer and, in such capacity,
Falcon shall conduct the data-processing functions of the administration of
the Receivables and the Collections thereon in substantially the same way
that Falcon conducted such data-processing functions while it acted as the
Servicer.
Section 4.6. Servicing Fee. (a) If Falcon or an Affiliate thereof is
the Servicer, 0%.
(b) If the Servicer ceases to be Falcon or an Affiliate thereof, the
servicing fee shall be the greater of: (i) 0.25% per annum of the average
aggregate Outstanding Balance of the Pool Receivables and (ii) an alternative
amount specified by the successor Servicer not to exceed 110% of the
aggregate reasonable costs and expenses incurred by such successor Servicer
in connection with the performance of its obligations as Servicer.
ARTICLE V.
THE AGENT
SECTION 5.1. Appointment and Authorization. Each Purchaser hereby
irrevocably appoints, designates and authorizes the Agent to take such action
on its behalf under this Agreement and each other Transaction Document, and
to exercise such powers and perform such duties as are expressly delegated to
it by this Agreement or any other Transaction Document, together with such
powers as are reasonably incidental thereto. Notwithstanding any provision to
the contrary contained elsewhere in this Agreement or in any other
Transaction Document, the Agent shall not have any duties or responsibilities
except those expressly set forth herein, nor shall the Agent have or be
deemed to have any fiduciary relationship with any Purchaser, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities
shall be read into this Agreement or any other Transaction Document or
otherwise exist against the Agent.
SECTION 5.2. Delegation of Duties. The Agent may execute any of its
duties under this Agreement or any other Transaction Document by or through
agents, employees or attorneys-in-fact, and shall be entitled to advice of
counsel concerning all matters pertaining to such duties. The Agent shall not
be responsible to the Purchasers for the negligence or misconduct of any
agent or attorney-in-fact that it selects with reasonable care.
SECTION 5.3. Liability of Agent. None of the Agent or any of its
Affiliates, officers, directors, employees, agents or attorneys-in-fact
(each, an "Agent-Related Person") shall: (a) be liable for any action taken
or omitted to be taken by any of them under or in connection with this
Agreement or any other Transaction Document or the transactions contemplated
hereby or thereby (except for its own gross negligence or willful
misconduct), or (b) be responsible in any manner to any of the Purchasers
for: (i) any recital, statement, representation or warranty made by an
Originator, the Seller, the Servicer or any Affiliate of the Seller, the
Servicer or any officer thereof, contained in this Agreement, any other
Transaction Document or any certificate, report, statement or other document
referred to or provided for in, or received by the Agent under or in
connection with, this Agreement or any other Transaction Document, (ii) the
validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any other Transaction Document, or (iii) any failure of an
Originator, the Seller, the Servicer or any other party to any Transaction
Document to perform its obligations hereunder or thereunder. No Agent-Related
Person shall be under any obligation to any Purchaser to ascertain or to
inquire as to the observance or performance of any of the agreements
contained in, or conditions of, this Agreement or any other Transaction
Document, or to inspect the properties, books or records of any Originator,
the Seller, the Servicer or any of an Originator's, Seller's or Servicer's
Affiliates.
SECTION 5.4. Reliance by the Agent. (a) The Agent shall be entitled
to rely, and shall be fully protected in relying, upon any writing,
resolution, notice, consent, certificate, affidavit, letter, telegram,
facsimile, telex or telephone message, statement or other document or
conversation believed by it to be genuine and correct and to have been
signed, sent or made by the proper Person(s), and upon advice and statements
of legal counsel (including counsel to an Originator, the Seller or the
Servicer), independent accountants and other experts selected by the Agent.
The Agent shall be fully justified in failing or refusing to take any action
under this Agreement or any other Transaction Document unless it shall first
receive such advice or concurrence of Purchasers owning more than 50% of the
Purchased Interest (the "Required Purchasers") as it deems appropriate and,
if it so requests, it shall first be indemnified to its satisfaction by the
Purchasers against any and all liability and expense that may be incurred by
it by reason of taking or continuing to take any such action. The Agent shall
in all cases be fully protected in acting, or in refraining from acting,
under this Agreement or any other Transaction Document in accordance with a
request or consent of the Required Purchasers and such request and any action
taken or failure to act pursuant thereto shall be binding upon all of the
Purchasers.
(b) Each Purchaser that has executed this Agreement shall be deemed to
have consented to, approved or accepted, or to be satisfied with, each
document or other matter either sent by the Agent to such Purchaser for
consent, approval, acceptance or satisfaction, or required thereunder to be
consented to or approved by or acceptable or satisfactory to such Purchaser.
SECTION 5.5. Notice of Termination Events. The Agent shall not be
deemed to have knowledge or notice of the occurrence of any Termination
Event, except with respect to defaults in any payment in respect of Capital
and Discount and fees required to be paid to the Agent for the account of the
Purchasers, unless the Agent shall have received written notice from a
Purchaser, the Seller or the Servicer referring to this Agreement, describing
such Termination Event and stating that such notice is a "notice of
Termination Event." The Agent will notify the Purchasers of its receipt of
any such notice. The Agent shall take such action with respect to such
Termination Event as may be requested by the Required Purchasers; provided,
however, that unless and until the Agent has received any such request, the
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Termination Event as it shall deem
advisable or in the best interest of the Purchasers.
SECTION 5.6. Credit Decision. Each Purchaser acknowledges that none of
the Agent-Related Persons has made any representation or warranty to it, and
that no act by the Agent hereinafter taken, including any review of the
affairs of the Originators, the Seller, the Servicer and any of their
respective Affiliates, shall be deemed to constitute any representation or
warranty by any Agent-Related Person to any Purchaser. Each Purchaser
represents to the Agent that it has, independently and without reliance upon
any Agent-Related Person and based on such documents and information as it
has deemed appropriate, made its own appraisal of and investigation into the
business, prospects, operations, property, financial and other condition and
creditworthiness of the Originators, the Seller, the Servicer and their
respective Affiliates, and all applicable bank regulatory laws relating to
the transactions contemplated hereby, and made its own decision to enter into
this Agreement and to extend credit to the Seller hereunder. Each Purchaser
also represents that it will, independently and without reliance upon any
Agent-Related Person and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement
and the other Transaction Documents, and to make such investigations as it
deems necessary to inform itself as to the business, prospects, operations,
property, financial and other condition and creditworthiness of the
Originators, the Seller and the Servicer. Except for notices, reports and
other documents expressly herein required to be furnished to the Purchasers
by the Agent, the Agent shall not have any duty or responsibility to provide
any Purchaser with any credit or other information concerning the business,
prospects, operations, property, financial and other condition or
creditworthiness of an Originator, the Seller or the Servicer that may come
into the possession of any of the Agent-Related Persons.
SECTION 5.7. Indemnification. Whether or not the transactions
contemplated hereby are consummated, the Purchasers shall indemnify upon
demand the Agent-Related Persons (to the extent not reimbursed by or on
behalf of the Seller and without limiting the obligation of the Seller to do
so), pro rata in accordance with their Percentages, from and against any and
all damages; provided, however, that no Purchaser shall be liable for the
payment to the Agent-Related Persons of any portion of such damages resulting
solely from such Person's gross negligence or willful misconduct. Without
limitation of the foregoing, each Purchaser shall reimburse the Agent upon
demand for its ratable share of any costs or out-of-pocket expenses
(including Attorney Costs) incurred by the Agent in connection with the
preparation, execution, delivery, administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings or otherwise)
of, or legal advice in respect of rights or responsibilities under, this
Agreement, any other Transaction Document or any document contemplated by or
referred to herein or therein, to the extent that the Agent is not reimbursed
for such expenses by or on behalf of the Seller. The undertaking in this
Section shall survive the repurchase by the Seller of all of the undivided
percentage ownership interests of the Purchased Interest purchased by the
Purchasers hereunder and the resignation or replacement of the Agent.
SECTION 5.8. The Agent in Individual Capacity. PNC and its Affiliates
may make loans to, issue letters of credit for the account of, accept
deposits from, acquire equity interests in and generally engage in any kind
of banking, trust, financial advisory, underwriting or other business with an
Originator, the Seller, the Servicer and their respective Affiliates as
though PNC were not the Agent hereunder and without notice to or consent of
the Purchasers. The Purchasers acknowledge that, pursuant to such activities,
PNC or its Affiliates may receive information regarding the Originators, the
Seller, the Servicer or their respective Affiliates (including information
that may be subject to confidentiality obligations in favor of the
Originators, the Seller, the Servicer or any such Affiliate) and acknowledge
that PNC shall be under no obligation to provide such information to them.
With respect to its undivided percentage ownership interests in the Purchased
Interest, PNC shall have the same rights and powers under this Agreement as
any other Purchaser and may exercise the same as though it were not the
Agent, and the terms "Purchaser" and "Purchaser" include PNC in its
individual capacity.
SECTION 5.9. Successor Agent. (a) The Agent may, and at the request
of the Required Purchasers shall, resign as Agent upon 30 days' notice to the
Purchasers. If the Agent resigns under this Agreement, the Required
Purchasers shall appoint from among the Purchasers a successor agent, which
successor agent shall be approved by the Seller. If no successor agent is
appointed before the effective date of the resignation of the Agent, the
Agent may appoint, after consulting with the Purchasers and with the Seller's
approval (which approval shall not be unreasonably withheld), a successor
agent from among the Purchasers. Upon the acceptance of its appointment as
successor agent hereunder, such successor agent shall succeed to all the
rights, powers and duties of the retiring Agent, the term "Agent" shall mean
such successor agent and the retiring Agent's appointment, powers and duties
as Agent shall be terminated. After any retiring Agent's resignation
hereunder as Agent, the provisions of this Article V and Section 1.8 shall
inure to its benefit as to any actions taken or omitted to be taken by it
while it was Agent under this Agreement. If no successor agent has accepted
appointment as Agent by the date that is 30 days after a retiring Agent's
notice of resignation, the retiring Agent's resignation shall nevertheless
thereupon become effective and the Purchasers shall perform all of the duties
of the Agent hereunder until such time, if any, as the Required Purchasers
appoint a successor agent as provided for above.
(b) This Agreement and the rights and obligations of the Agent
hereunder shall be assignable, in whole or in part, by the Agent and its
successors and assigns; provided, that, unless: (i) such assignment is to an
Affiliate of PNC, (ii) it becomes unlawful for PNC to serve as the Agent or
(iii) a Termination Event exists, the Seller has consented to such
assignment, which consent shall not be unreasonably withheld.
SECTION 5.10. Withholding Tax. (a) If any Purchaser is a "foreign
corporation, partnership or trust" within the meaning of the Internal Revenue
Code, and such Purchaser claims exemption from, or a reduction of, U.S.
withholding tax under Sections 1441 or 1442 of the Internal Revenue Code,
such Purchaser agrees with and in favor of the Agent, to deliver to the
Agent:
(i) if such Purchaser claims an exemption from, or a reduction of,
withholding tax under a United States tax treaty, properly completed IRS
Forms 1001 and W-8 before the payment of any interest in the first
calendar year and before the payment of any interest in each third
succeeding calendar year during which interest may be paid under this
Agreement;
(ii) if such Purchaser claims that interest paid under this
Agreement is exempt from United States withholding tax because it is
effectively connected with a United States trade or business of such
Purchaser, two properly completed and executed copies of IRS Form 4224
before the payment of any interest is due in the first taxable year of
such Purchaser and in each succeeding taxable year of such Purchaser
during which interest may be paid under this Agreement, and IRS Form W-
9; and
(iii) such other form or forms as may be required under the
Internal Revenue Code or other laws of the United States as a condition
to exemption from, or reduction of, United States withholding tax.
(b) Such Purchaser agrees to promptly notify the Agent of any change in
circumstances that would modify or render invalid any claimed exemption or
reduction.
(c) If any Purchaser claims exemption from, or reduction of,
withholding tax under a United States tax treaty by providing IRS Form 1001
and such Purchaser sells, assigns, grants a participation in, or otherwise
transfers all or part of its undivided percentage ownership interests of the
Purchased Interest, such Purchaser agrees to notify the Agent of the
percentage amount in which it is no longer the beneficial owner of its
undivided percentage ownership interests of the Purchased Interest. To the
extent of such percentage amount, the Agent will treat such Purchaser's IRS
Form 1001 as no longer valid.
(d) If any Purchaser claiming exemption from United States withholding
tax by filing IRS Form 4224 with the Agent sells, assigns, grants a
participation in, or otherwise transfers all or part of its undivided
percentage ownership interests of the Purchased Interest, such Purchaser
agrees to undertake sole responsibility for complying with the withholding
tax requirements imposed by Sections 1441 and 1442 of the Internal Revenue
Code.
(e) If any Purchaser is entitled to a reduction in the applicable
withholding tax, the Agent may withhold from any interest payment to such
Purchaser an amount equivalent to the applicable withholding tax after taking
into account such reduction. If the forms or other documentation required by
clause (a) are not delivered to the Agent, then the Agent may withhold from
any interest payment to such Purchaser not providing such forms or other
documentation an amount equivalent to the applicable withholding tax.
(f) If the IRS or any other Governmental Authority asserts a claim that
the Agent did not properly withhold tax from amounts paid to or for the
account of any Purchaser (because the appropriate form was not delivered, was
not properly executed, or because such Purchaser failed to notify the Agent
of a change in circumstances that rendered the exemption from, or reduction
of, withholding tax ineffective, or for any other reason) such Purchaser
shall indemnify the Agent fully for all amounts paid, directly or indirectly,
by the Agent as tax or otherwise, including penalties and interest, and
including any taxes imposed by any jurisdiction on the amounts payable to the
Agent under this Section, together with all costs and expenses (including
Attorney Costs). The obligation of the Purchasers under this paragraph shall
survive the repurchase by the Seller of all of the undivided percentage
ownership interests of the Purchased Interest purchased by the Purchasers
hereunder and the resignation or replacement of the Agent.
ARTICLE VI.
MISCELLANEOUS
Section 6.1. Amendments, Etc. (a) Subject to clauses (b), (c) and (d),
no amendment or waiver of any provision of this Agreement or any other
Transaction Document, or consent to any departure by the Seller or the
Servicer therefrom, shall be effective unless in a writing signed by the
Agent, and, in the case of any amendment, by the other parties thereto; and
then such amendment, waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given. No failure on
the part of the Purchasers or the Agent to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of any right hereunder preclude any other or
further exercise thereof or the exercise of any other right.
(b) Notwithstanding clause (a), the Agent shall not, without the prior
written consent of all Purchasers, amend, modify or waive any provision of
this Agreement that would:
(i) reduce the amount of Capital or Discount that is payable on
account of the Purchased Interest or delay any scheduled date for
payment thereof,
(ii) modify the reserve requirements for uncollectible Receivables
(including dilution reserves) or Discount,
(iii) modify any yield protection or indemnity provision that
inures to the benefit of the Purchasers, or
(iv) reduce the amount of fees that a Purchaser is to receive
hereunder.
(c) Notwithstanding clause (a), the Agent shall not, without the prior
written consent of the affected Purchaser, increase the amount of the
Purchased Limit that such Purchaser is required to fund.
(d) Notwithstanding clause (a), the Agent shall not, without the prior
written consent of the Required Purchasers, amend, modify or waive any other
material provision of this Agreement.
Section 6.2. Notices, Etc. All notices and other communications
hereunder shall, unless otherwise stated herein, be in writing (which shall
include facsimile communication) and be sent or delivered to each party
hereto at its address set forth under its name on the signature pages hereof
or at such other address as shall be designated by such party in a written
notice to the other parties hereto. Notices and communications by facsimile
shall be effective when sent (and shall be followed by hard copy sent by
first class mail), and notices and communications sent by other means shall
be effective when received.
Section 6.3. Assignability. (a) Each of the Persons who has executed
as an "Assignee" an Assignment in the form of Exhibit VI (each, an
"Assignment") shall become a party hereto and shall become a Purchaser
hereunder upon: (i) satisfaction of the conditions set forth in clause (b),
(ii) acceptance and recording of the Assignment by the Agent in the Register,
(iii) the occurrence of the effective date of such Person's Percentage (as
set forth in such Assignment) and (iv) the prior written consent of the Agent
and the Seller to such assignment (which consent shall not be unreasonably
withheld); provided, that no such consent shall be required if such
assignment is made by such Purchaser to any of its Affiliates or any other
existing Purchaser.
(b) Each Purchaser may assign and delegate to any Eligible Assignee all
or a portion of its rights and obligations under this Agreement (including
ownership of the Purchased Interest); provided, however, that:
(i) each such assignment shall be of a constant, and not a
varying, percentage of the aggregate rights and obligations of the
assigning Purchaser under this Agreement (including its Percentage and
any Portion of Capital owned by it),
(ii) the amount of its Percentage being assigned pursuant to such
assignment (plus its Purchase Commitment under the Liquidity Facility
that is being assigned to the assignee contemporaneously therewith)
shall in no event be less than $5,000,000 and shall be in an integral
multiple of $1,000,000, and, unless such assigning Purchaser is
assigning its entire Percentage, such assigning Purchaser's Percentage
of the Purchase Limit after giving effect to such assignment shall in no
event be less than $5,000,000,
(iii) the parties to each such assignment shall execute and
deliver an Assignment to the Agent, for its acceptance and recording in
the Register.
Upon such execution, delivery, acceptance and recording, from and after the
effective date specified in the Assignment: (x) the assignee thereunder shall
be a party hereto and, to the extent that rights and obligations hereunder
have been assigned to it pursuant to this Agreement, have the rights and
obligations of a Purchaser hereunder, and (y) the assigning Purchaser shall,
to the extent that rights and obligations hereunder have been assigned by it
pursuant to this Agreement, relinquish its rights (other than the right to
receive payments that accrued in favor of such Purchaser before such
assignment) and be released from its obligations under this Agreement (and,
if such Assignment provides for an assignment of all such assigning
Purchaser's Percentage, such Purchaser shall cease to be a party hereto).
(c) Upon receipt by the Agent of an Assignment executed by an assigning
Purchaser and by an assignee who is an Eligible Assignee, and the
satisfaction of the other conditions set forth in clauses (a) and (b), the
Agent shall: (i) accept such Assignment, (ii) record the information
contained therein in the Register and (iii) give prompt notice thereof to the
Seller. The assigning Purchaser shall pay to the Agent an assigning fee equal
to $2,500 for each assignment hereunder.
(d) Except as provided in Section 4.1(d), neither the Seller nor the
Servicer may assign its rights or delegate its obligations hereunder or any
interest herein without the prior written consent of the Required Purchasers.
(e) Without limiting any other rights that may be available under
applicable law, the rights of any Purchaser may be enforced through it or by
its agents.
Section 6.4. Costs, Expenses and Taxes. (a) In addition to the rights
of indemnification granted under Section 3.1, and subject to the Engagement
Letter and the Fee Letter, the Seller agrees to pay on demand (which demand
shall be accompanied by documentation thereof in reasonable detail) all costs
and expenses incurred by the Agent in connection with the preparation,
execution, delivery and administration (including periodic internal audits by
the Agent of Pool Receivables) of this Agreement, the other Transaction
Documents and the other documents and agreements to be delivered hereunder
(and all costs and expenses in connection with any amendment, waiver or
modification of any thereof), including: (i) Attorney Costs for the Agent and
its Affiliates and agents with respect thereto and with respect to advising
the Agent and its Affiliates and agents as to their rights and remedies under
this Agreement and the other Transaction Documents, and (ii) all costs and
expenses (including Attorney Costs), if any, of the Agent, the Purchasers and
their respective Affiliates and agents in connection with the enforcement of
this Agreement and the other Transaction Documents; provided, however, that
the Seller shall not be responsible for the costs and expenses (including
Attorney Costs) of Purchasers (in their capacities as such) under the
Liquidity Agreement other than such costs and expenses in connection with the
enforcement of this Agreement or any other Transaction Document.
(b) In addition, the Seller shall pay on demand any and all stamp and
other taxes and fees payable in connection with the execution, delivery,
filing and recording of this Agreement or the other documents or agreements
to be delivered hereunder, and agrees to save each Indemnified Party harmless
from and against any liabilities with respect to or resulting from any delay
in paying or omission to pay such taxes and fees.
Section 6.5. Confidentiality. Unless otherwise required by applicable
law, each of the Seller and the Servicer agrees to maintain the
confidentiality of this Agreement and the other Transaction Documents (and
all drafts thereof) in communications with third parties and otherwise;
provided, that this Agreement 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 Agent,
(b) the Seller's legal counsel and auditors if they agree to hold it
confidential and (c) third parties to the extent such disclosure is required
by the Credit Facility. Unless otherwise required by applicable law, each of
the Agent and the Purchasers agrees to maintain the confidentiality of non-
public financial information regarding Falcon and its subsidiaries and other
non-public information marked as confidential by the Servicer or the Seller;
provided, that such information may be disclosed to: (i) third parties to the
extent such disclosure is made pursuant to a written agreement of
confidentiality in form and substance reasonably satisfactory to Falcon, (ii)
legal counsel and auditors of the Purchasers or the Agent if they agree to
hold it confidential and (iii) any regulatory authorities having jurisdiction
over PNC or any of the Purchasers.
Section 6.6. GOVERNING LAW AND JURISDICTION. (a) THIS AGREEMENT SHALL
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW
YORK (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF),
EXCEPT TO THE EXTENT THAT THE PERFECTION (OR THE EFFECT OF PERFECTION OR NON-
PERFECTION) OF THE INTERESTS OF THE AGENT (FOR THE BENEFIT OF THE PURCHASERS)
IN THE POOL ASSETS IS GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE
STATE OF NEW YORK.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT
MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES
FOR THE SOUTHERN DISTRICT OF NEW YORK; AND, BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, EACH OF THE PARTIES HERETO CONSENTS, FOR ITSELF AND IN RESPECT OF
ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE
PARTIES HERETO IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT PERMITTED BY LAW,
ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE
GROUNDS OF FORUM NON CONVENIENS, THAT IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS
AGREEMENT OR ANY DOCUMENT RELATED HERETO. EACH OF THE PARTIES HERETO WAIVES
PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH SERVICE
MAY BE MADE BY ANY OTHER MEANS PERMITTED BY NEW YORK LAW.
Section 6.7. Execution in Counterparts. This Agreement may be executed
in any number of counterparts, each of which when so executed shall be deemed
to be an original and all of which when taken together shall constitute one
and the same agreement.
Section 6.8. Survival of Termination. The provisions of Sections 1.8,
1.10, 3.1, 3.2, 6.4, 6.5, 6.6, 6.9 and 6.12 shall survive any termination of
this Agreement.
Section 6.9. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO WAIVES
THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE
BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR PARTIES, WHETHER
WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS OR OTHERWISE. EACH OF THE
PARTIES HERETO AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED
BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, EACH OF THE
PARTIES HERETO FURTHER AGREES THAT ITS RESPECTIVE RIGHT TO A TRIAL BY JURY IS
WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER
PROCEEDING THAT SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR
ENFORCEABILITY OF THIS AGREEMENT OR ANY PROVISION HEREOF. THIS WAIVER SHALL
APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO
THIS AGREEMENT.
Section 6.10. Entire Agreement. This Agreement and the other
Transaction Documents embody the entire agreement and understanding between
the parties hereto, and supersede all prior or contemporaneous agreements and
understandings of such Persons, verbal or written, relating to the subject
matter hereof and thereof, except for any prior arrangements made with
respect to the payment by the Purchasers of (or any indemnification for) any
fees, costs or expenses payable to or incurred (or to be incurred) by or on
behalf of the Seller, the Servicer and the Agent.
Section 6.11. Headings. The captions and headings of this Agreement
and in any Exhibit, Schedule or Annex hereto are for convenience of reference
only and shall not affect the interpretation hereof or thereof.
Section 6.12. Purchasers' Liabilities. The obligations of each of the
Purchasers under the Transaction Documents are solely the corporate
obligations of such Purchaser. No recourse shall be had for any obligation or
claim arising out of or based upon any Transaction Document against any
stockholder, employee, officer, director or incorporator of any Purchaser;
provided, however, that this Section shall not relieve any such Person of any
liability it might otherwise have for its own gross negligence or willful
misconduct.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the
date first above written.
CENTRALLY HELD EAGLE RECEIVABLES
PROGRAM, INC.
By: /s/ Anthony Navitsky
--------------------
Name: Anthony Navitsky
Title: Vice President
Address:
Centrally Held Eagle Receivables
Program, Inc.
Two North Riverside Plaza
Suite 1100
Chicago, Illinois 60606
Attention: Anthony Navitsky
Telephone No.: (312) 906-6830
Facsimile No.: (312) 906-8372
FALCON BUILDING PRODUCTS, INC.
By: /s/ Gus J. Athas
----------------
Name: Gus J. Athas
Title: Senior Vice President
Address:
Falcon Building Products, Inc.
Two North Riverside Plaza
Suite 1100
Chicago, Illinois 60606
Attention: Anthony Navitsky
Telephone No.: (312) 906-6830
Facsimile No.: (312) 906-8372
PNC BANK, NATIONAL ASSOCIATION, as Agent
By: /s/ William S. Richards
-----------------------
Name: William S. Richards, Jr.
Title: Vice President
Address:
PNC Bank, National Association
Multi-Bank Loan Administration
One PNC Plaza, 4th Floor Annex
249 Fifth Avenue
Pittsburgh, Pennsylvania 15220-2707
Attention: Arlene Ohler
Telephone No.: (412) 762-3627
Facsimile No.: (412) 762-8672
PURCHASERS: PNC BANK, NATIONAL ASSOCIATION
By: /s/ William S. Richards
-----------------------
Name: William S. Richards, Jr.
Title: Vice President
Address:
PNC Bank, National Association
Multi-Bank Loan Administration
One PNC Plaza, 4th Floor Annex
249 Fifth Avenue
Pittsburgh, Pennsylvania 15220-2707
Attention: Arlene Ohler
Telephone No.: (412) 762-3627
Facsimile No.: (412) 762-8672
With a copy to:
PNC Bank, National Association
One PNC Plaza
249 Fifth Avenue
Pittsburgh, Pennsylvania 15220-2707
Attention: Robert O. Finley, Jr.
Telephone No.: (412) 762-2047
Facsimile No.: (412) 762-9184
CAISSE NATIONALE DE CREDIT AGRICOLE
By: /s/ Katherine L. Abbott
-----------------------
Name: Katherine L. Abbott
Title: First Vice President
Address:
Caisse Nationale de Credit Agricole
55 East Monroe Street
Suite 4700
Chicago, Illinois 60603-5702
Attention: Kathleen Martens
Telephone No.: (312) 917-7444
Facsimile No.: (312) 372-3455
HARRIS TRUST AND SAVINGS BANK
By: /s/ John M. Dillon
-------------------
Name: John M. Dillon
Title: Vice President
Address:
Harris Trust and Savings Bank
111 West Monroe Street
Floor 2W
Chicago, Illinois 60690
Attention: John M. Dillon
Emerging Majors-Illinois
Telephone No.: (312) 461-6780
Facsimile No.: (312) 461-2591
EXHIBIT I
DEFINITIONS
As used in the Agreement (including its Exhibits, Schedules and
Annexes), the following terms shall have the following meanings (such
meanings to be equally applicable to both the singular and plural forms of
the terms defined). Unless otherwise indicated, all Section, Annex, Exhibit
and Schedule references in this Exhibit are to Sections of and Annexes,
Exhibits and Schedules to the Agreement.
"Adverse Claim" means a lien, security interest or other charge or
encumbrance, or any other type of preferential arrangement; it being
understood that any thereof in favor of the Purchasers or the Agent (for the
benefit of the Purchasers) shall not constitute an Adverse Claim.
"Affected Person" has the meaning set forth in Section 1.8 of the
Agreement.
"Affiliate" means, as to any Person, any other Person that, directly or
indirectly, is in control of, is controlled by or is under common control
with such Person or is a director or officer of such Person, except that with
respect to each of the Purchasers, Affiliate shall mean the holder(s) of its
capital stock.
"Agent" has the meaning set forth in the preamble to the Agreement.
"Agent-Related Person" has the meaning set forth in Section 5.3 of the
Agreement.
"Agent's Account" means the account (ABA #043-000-096, account number GL
19606890) of the Agent maintained at the office of PNC at One PNC Plaza, 249
Fifth Avenue, Pittsburgh, Pennsylvania 15220-2707, or such other account as
may be so designated in writing by the Agent to the Purchasers.
"Agreement" has the meaning set forth in the preamble to the Agreement.
"Alternate Rate" for any Fixed Period for any Portion of Capital of the
Purchased Interest means an interest rate per annum equal to, at the Seller's
option: (a) the Applicable Yield Margin per annum above the Eurodollar Rate
for such Fixed Period, or (b) the Base Rate for such Fixed Period; provided,
however, that in the case of:
(i) any Fixed Period on or before the first day of which the Agent
shall have been notified by a Purchaser that the introduction of or any
change in or in the interpretation of any law or regulation makes it
unlawful, or any central bank or other Governmental Authority asserts
that it is unlawful, for such Purchaser to fund any Portion of Capital
based on the Eurodollar Rate (and such Purchaser shall not have
subsequently notified the Agent that such circumstances no longer
exist),
(ii) any Fixed Period of one to (and including) 29 days,
(iii) any Fixed Period as to which the Agent does not receive
notice before noon (New York City time) on the third Business Day
preceding the first day of such Fixed Period that the Seller desires
that the related Portion of Capital be funded at the Alternate Rate and
based on the Eurodollar Rate, or
(iv) any Fixed Period relating to a Portion of Capital that is
less than $5,000,000,
the "Alternate Rate" for each such Fixed Period shall be an interest rate per
annum equal to the Base Rate in effect on each day of such Fixed Period. The
"Alternate Rate" for any day while a Termination Event or Unmatured
Termination Event exists shall be an interest rate equal to 2% per annum
above the Base Rate in effect on such day.
"Applicable Yield Margin" means, with respect to the Alternate Rate
based upon the Eurodollar Rate for any Fixed Period, the rate per annum set
forth opposite the "Weighted Average Assigned Value" below as of the
beginning of such Fixed Period:
Weighted Average Applicable
Assigned Value Yield Margin
5.90 to 6.00 0.27500%
4.90 to <5.90 0.27500%
3.90 to <4.90 0.27500%
2.90 to <3.90 0.27500%
1.90 to <2.90 0.35000%
<1.90 0.35000%
"Assignment" has the meaning set forth in Section 6.3(a) of the
Agreement.
"Attorney Costs" means and includes all reasonable fees and
disbursements of any law firm or other external counsel, the allocated cost
of internal legal services and all disbursements of internal counsel.
"Bankruptcy Code" means the United States Bankruptcy Reform Act of 1978
(11 U.S.C. Section 101, et seq.), as amended from time to time.
"Base Rate" means for any day, a fluctuating interest rate per annum as
shall be in effect from time to time, which rate shall be at all times equal
to the higher of:
(a) the rate of interest in effect for such day as publicly
announced from time to time by PNC in Pittsburgh, Pennsylvania as its
"prime rate." Such "prime rate" is set by PNC based upon various
factors, including PNC's costs and desired return, general economic
conditions and other factors, and is used as a reference point for
pricing some loans, which may be priced at, above or below such
announced rate; and
(b) 0.50% per annum above the latest Federal Funds Rate.
"Benefit Plan" means any employee benefit pension plan as defined in
Section 3(2) of ERISA in respect of which the Seller, any Originator, Falcon
or any ERISA Affiliate is, or at any time during the immediately preceding
six years was, an "employer" as defined in Section 3(5) of ERISA.
"Business Day" means any day (other than a Saturday or Sunday) on which:
(a) banks are not authorized or required to close in New York City, New York
or Pittsburgh, Pennsylvania, and (b) if this definition of "Business Day" is
utilized in connection with the Eurodollar Rate, dealings are carried out in
the London interbank market.
"Buyer Note" has the meaning set forth in the Sale Agreement between the
Seller and Falcon.
"Capital" means the amount paid to the Seller in respect of the
Purchased Interest by the Purchasers pursuant to the Agreement, or such
amount divided or combined in accordance with Section 1.7 of the Agreement,
in each case reduced from time to time by Collections distributed and applied
on account of such Capital pursuant to Section 1.4(d) of the Agreement;
provided, that if such Capital shall have been reduced by any distribution
and thereafter all or a portion of such distribution is rescinded or must
otherwise be returned for any reason, such Capital shall be increased by the
amount of such rescinded or returned distribution as though it had not been
made.
"Change in Control" means that: (a) Falcon ceases to own, directly or
indirectly, 100% of the capital stock of the Seller, or a majority of the
capital stock of any Originator, free and clear of all Adverse Claims, (b)
the Samuel Zell Group shall cease to own, directly or indirectly, at least
20% of the combined voting power of Falcon's outstanding securities
ordinarily having the right to vote at elections of directors; provided, that
the failure by the Samuel Zell Group to own such a minimum percentage of
securities shall not be deemed a change of control hereunder if Falcon shall
have attained at least two of the following ratings on its long-term senior
unsecured debt securities: "BBB+" or better from Standard & Poor's, "Baa1" or
better from Moody's and "Baa1" from Duff & Phelps Credit Rating Co., (c)
Falcon shall directly or indirectly transfer, assign, convey or lease,
whether in one transaction or in a series of transactions, all or
substantially all of its assets (whether now owned or hereafter acquired) to
any other Person(s), or (d) Falcon shall be a party to any merger or
consolidation in which Falcon is not a surviving entity.
"Collections" means, with respect to any Pool Receivable: (a) all funds
that are received by any Originator, Falcon, the Seller or the Servicer in
payment of any amounts owed in respect of such Receivable (including purchase
price, finance charges, interest and all other charges), or applied to
amounts owed in respect of such Receivable (including insurance payments and
net proceeds of the sale or other disposition of repossessed goods or other
collateral or property of the related Obligor or any other Person directly or
indirectly liable for the payment of such Pool Receivable and available to be
applied thereon), (b) all Collections deemed to have been received pursuant
to Section 1.4(e) of the Agreement and (c) all other proceeds of such Pool
Receivable.
"Contract" means, with respect to any Receivable, any and all contracts,
understandings, instruments, agreements, leases, invoices, notes or other
writings pursuant to which such Receivable arises or that evidence such
Receivable or under which an Obligor becomes or is obligated to make payment
in respect of such Receivable.
"Credit and Collection Policy" means, as the context may require, those
receivables credit and collection policies and practices of each Originator
in effect on the date of the Agreement and described in Schedule I to the
Agreement, as modified in compliance with the Agreement.
"Credit Facility" means the Amended and Restated Credit Agreement, dated
as of June 30, 1995, among Falcon, as Borrower, the lenders from time to time
party thereto, Chemical Bank, as Administrative Agent, and Citicorp North
America, Inc., as Collateral Agent.
"Days' Sales Outstanding" means: (a) the Outstanding Balance of all Pool
Receivables at the end of a Fiscal Month divided by (b)(i) the aggregate
amount of Designated Receivables created during the three Fiscal Months ended
on or before the last day of such Fiscal Month divided by (ii) the number of
days in such three-month period.
"Debt" means: (a) indebtedness for borrowed money, (b) obligations
evidenced by bonds, debentures, notes or other similar instruments, (c)
obligations to pay the deferred purchase price of property or services, (d)
obligations as lessee under leases that shall have been or should be, in
accordance with generally accepted accounting principles, recorded as capital
leases, (e) obligations under direct or indirect guaranties in respect of,
and obligations (contingent or otherwise) to purchase or otherwise acquire,
or otherwise to assure a creditor against loss in respect of, indebtedness or
obligations of others of the kinds referred to in clauses (a) through (d),
and (f) liabilities in respect of unfunded vested benefits under plans
covered by Title IV of ERISA.
"Deemed Collection" has the meaning assigned thereto in the Sale
Agreements.
"Delinquency Ratio" means the ratio (expressed as a percentage and
rounded to the nearest 1/100 of 1%, with 5/1000 of 1% rounded upward)
computed as of the last day of each Fiscal Month by dividing: (a) the
aggregate Outstanding Balance of all Pool Receivables that were Delinquent
Receivables on such day by (b) the aggregate Outstanding Balance of all Pool
Receivables on such day.
"Delinquent Receivable" means a Pool Receivable as to which any payment,
or part thereof, remains unpaid for more than 60 days from the original due
date for such payment.
"Designated Receivable" means a Receivable designated on Schedule IV to
the Agreement, as such Schedule may be amended, supplemented or otherwise
modified from time to time.
"Dilution Horizon" means, for any Fiscal Month, the ratio (expressed as
a percentage and rounded to the nearest 1/100th of 1%, with 5/1000 of 1%
rounded upward) of: (a) the aggregate amount of Designated Receivables
created during the most recent Fiscal Month and the preceding 15 days to (b)
the aggregate Outstanding Balance of the Eligible Receivables at the last day
of such Fiscal Month.
"Dilution Ratio" means, for any Fiscal Month, the ratio (expressed as a
percentage and rounded to the nearest 1/100th of 1%, with 5/1000 of 1%
rounded upward) of: (a) the aggregate amount of payments made or owed by the
Seller pursuant to Section 1.4(e)(i) of the Agreement during such Fiscal
Month to (b) the aggregate amount of Designated Receivables created during
the prior Fiscal Month.
"Dilution Reserve" means, on any day, an amount equal to: (a) the
Capital at the close of business of the Servicer on such date multiplied by
(b)(i) the Dilution Reserve Percentage on such date divided by (ii) 100%
minus the Dilution Reserve Percentage on such date.
"Dilution Reserve Percentage" means, as of any date, the greater of: (a)
5% and (b) the Dilution Horizon times the sum of: (i) 2 times the rolling
average Dilution Ratio for the preceding twelve Fiscal Months and (ii) the
Spike Factor.
"Discount" means, for the Portion of Capital for any Fixed Period:
AR x C x ED/Year + TF
where:
AR = the Alternate Rate for the Portion of Capital for such
Fixed Period,
C = the Portion of Capital during such Fixed Period,
ED = the actual number of days during such Fixed Period,
Year = if such Portion of Capital is funded based upon: (i) the
Eurodollar Rate, 360 days, and (ii) the Base Rate, 365 or
366 days, as applicable, and
TF = the Termination Fee, if any, for the Portion of Capital
for such Fixed Period;
provided, that no provision of the Agreement shall require the payment or
permit the collection of Discount in excess of the maximum permitted by
applicable law; and provided further, that Discount for the Portion of
Capital shall not be considered paid by any distribution to the extent that
at any time all or a portion of such distribution is rescinded or must
otherwise be returned for any reason.
"EBITDA" means, with respect to Falcon and its consolidated subsidiaries
for any period: (a) consolidated net income for such period (excluding
undistributed earnings in Persons that are 50% or less owned, directly or
indirectly, by Falcon, the effect of any extrordinary or non-recurring gains
or losses and any gains or losses from the sale of assets) plus (b) to the
extent reflected in the consolidated income statement of Falcon for such
period, without duplication, the sum of: (i) Net Interest Expense, (ii)
federal, state and local income and franchise taxes, (iii) depreciation
expense, (iv) amortization expense and (v) any other noncash items that had
the effect of reducing consolidated net income for such period (but minus any
noncash items that had the effect of increasing consolidated net income for
such period).
"Eligible Assignee" means any commercial bank or commercial paper
conduit.
"Eligible Receivable" means, at any time, a Pool Receivable:
(a) the Obligor of which is not subject to any action of the type
described in paragraph (f)(i) of Exhibit V to the Agreement;
(b) that is denominated and payable only in U.S. dollars in the
United States;
(c) that has a stated maturity that is not more than 60 days after
the original due date of such Receivable;
(d) that arises from the sale and delivery of goods and services
in the ordinary course of an Originator's business;
(e) that arises under a duly authorized Contract that is in full
force and effect and that is a legal, valid and binding obligation of
the related Obligor, enforceable against such Obligor in accordance with
its terms;
(f) that conforms in all material respects with all applicable
laws, rulings and regulations in effect;
(g) that is not the subject of any asserted dispute, offset, hold
back defense, Adverse Claim or other claim;
(h) that satisfies all applicable requirements of the applicable
Credit and Collection Policy;
(i) that has not been modified, waived or restructured since its
creation, except as permitted pursuant to Section 4.2 of the Agreement;
(j) in which the Seller owns good and marketable title and that is
freely assignable by the Seller;
(k) for which the Purchasers shall have a valid and enforceable
undivided percentage ownership interest, to the extent of the Purchased
Interest, and the Agent (for the benefit of the Purchasers) shall have a
valid and enforceable first priority perfected security interest therein
and in the Related Security and Collections with respect thereto, in
each case free and clear of any Adverse Claim;
(l) that constitutes an account as defined in the UCC, and that is
not evidenced by instruments or chattel paper;
(m) that is not a Delinquent Receivable;
(n) for which neither the Originator thereof, the Seller nor the
Servicer has established any offset arrangements with the related
Obligor;
(o) that represents amounts earned and payable by the Obligor that
are not subject to the performance of additional services by the
Originator thereof; and
(p) the Obligor of which is rated Investment Grade.
"Engagement Letter" means the Engagement Letter, dated February 29,
1996, between PNC Securities Corp. and Falcon relating to the transactions
contemplated herein.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute of similar import,
together with the regulations thereunder, in each case as in effect from time
to time. References to sections of ERISA also refer to any successor
sections.
"ERISA Affiliate" means: (a) any corporation that is a member of the
same controlled group of corporations (within the meaning of Section 414(b)
of the Internal Revenue Code) as the Seller, any Originator or Falcon, (b) a
trade or business (whether or not incorporated) under common control (within
the meaning of Section 414(c) of the Internal Revenue Code) with the Seller,
any Originator or Falcon, (c) a member of the same affiliated service group
(within the meaning of Section 414(m) of the Internal Revenue Code) as the
Seller, any Originator, Falcon, any corporation described in clause (a) or
any trade or business described in clause (b), or (d) as to the Seller or any
of its Affiliates, Eagle Industrial Products Corporation and all other
Person(s) that are members of Eagle Industrial Products Corporation's
controlled group or under common control therewith (within the meaning of
Sections 414(b) and (c) of the Internal Revenue Code), but only until the
termination of the Agreement dated as of October 24, 1994 among the Pension
Benefit Guaranty Corporation, Falcon and certain of its Affiliates.
"Eurodollar Rate" means, for any Fixed Period, an interest rate per
annum (rounded upward to the nearest 1/16th of 1%) determined pursuant to the
following formula:
LIBOR _
100% - Eurodollar Rate Reserve Percentage
where "Eurodollar Rate Reserve Percentage" means, for any Fixed Period, the
maximum reserve percentage (expressed as a decimal, rounded upward to the
nearest 1/100th of 1%) in effect on the date LIBOR for such Fixed Period is
determined under regulations issued from time to time by the Federal Reserve
Board 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") having a term comparable to such Fixed Period.
"Facility Termination Date" means the earliest to occur of: (a) May 2,
1999, (b) the date determined pursuant to Section 2.2 of the Agreement and
(c) the date the Purchase Limit reduces to zero pursuant to Section 1.1(b) of
the Agreement.
"Falcon" has the meaning set forth in the preamble to the Agreement.
"Federal Funds Rate" means, for any day, the per annum rate set forth in
the weekly statistical release designated as H.15(519), or any successor
publication, published by the Federal Reserve Board (including any such
successor, "H.15(519)") for such day opposite the caption "Federal Funds
(Effective)." If on any relevant day such rate is not yet published in
H.15(519), the rate for such day will be the rate set forth in the daily
statistical release designated as the Composite 3:30 p.m. Quotations for U.S.
Government Securities, or any successor publication, published by the Federal
Reserve Bank of New York (including any such successor, the "Composite 3:30
p.m. Quotations") for such day under the caption "Federal Funds Effective
Rate." If on any relevant day the appropriate rate is not yet published in
either H.15(519) or the Composite 3:30 p.m. Quotations, the rate for such day
will be the arithmetic mean as determined by the Agent of the rates for the
last transaction in overnight Federal funds arranged before 9:00 a.m. (New
York time) on that day by each of three leading brokers of Federal funds
transactions in New York City selected by the Agent.
"Federal Reserve Board" means the Board of Governors of the Federal
Reserve System, or any entity succeeding to any of its principal functions.
"Fee Letter" has the meaning set forth in Section 1.5 of the Agreement.
"Fiscal Month" means those periods described on Schedule V to the
Agreement.
"Fixed Period" means, with respect to each Portion of Capital:
(a) initially, the period commencing on the date of a purchase and
ending such number of days as the Seller shall select, subject to the
approval of the Agent pursuant to Section 1.2 of the Agreement, up to 90
days after such date; and
(b) thereafter, each period commencing on the last day of the
preceding Fixed Period and ending such number of days (not to exceed 90
days) as the Seller shall select, subject to the approval of the Agent
pursuant to Section 1.2 of the Agreement, on notice by the Seller
received by the Agent (including notice by telephone, confirmed in
writing) not later than 11:00 a.m. (New York City time) on such last
day; except, that if the Agent shall not have received such notice or
approved such period on or before such time, such period shall be one
day; provided, that
(i) any Fixed Period in respect of which Discount is computed
by reference to the Alternate Rate based upon the Eurodollar Rate
shall be a period of one, two or three Fiscal Months, as the Seller
may select as provided above;
(ii) any Fixed Period (other than of one day) that would
otherwise end on a day that is not a Business Day shall be extended
to the next Business Day; provided, however, if Discount in respect
of such Fixed Period is computed by reference to the Eurodollar
Rate, and such Fixed Period would otherwise end on a day that is
not a Business Day, and there is no subsequent Business Day in the
same Fiscal Month as such day, such Fixed Period shall end on the
preceding Business Day;
(iii) in the case of any Fixed Period of one day: (A) if such
Fixed Period is the initial Fixed Period for a purchase, such Fixed
Period shall be the day of purchase of the Purchased Interest; and
(B) thereafter, shall: (x) if the preceding Fixed Period is more
than one day, be the last day of such preceding Fixed Period, and
(y) if the preceding Fixed Period is one day, be the day after such
preceding Fixed Period; and (C) if such Fixed Period occurs on a
day preceding a day that is not a Business Day, such Fixed Period
shall be extended to the next Business Day; and
(iv) in the case of any Fixed Period for any Portion of
Capital of the Purchased Interest that commences before the
Termination Date and would otherwise end on a date occurring after
the Termination Date, such Fixed Period shall end on the
Termination Date and the duration of each Fixed Period that
commences on or after the Termination Date shall be of such
duration as shall be selected from time to time by the Agent or, in
the absence of any such selection, each period of 30 days from the
last day of the preceding Fixed Period.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any body or entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government, including any court, and any Person owned or
controlled, through stock or capital ownership or otherwise, by any of the
foregoing.
"Indemnified Amounts" has the meaning set forth in Section 3.1 of the
Agreement.
"Independent Director" has the meaning set forth in paragraph 3(c) of
Exhibit IV to the Agreement.
"Information Package" means a report, in substantially the form of Annex
A to the Agreement, furnished to the Agent pursuant to the Agreement.
"Insolvency Proceeding" means: (a) any case, action or proceeding before
any court or other Governmental Authority relating to bankruptcy,
reorganization, insolvency, liquidations, receivership, dissolution, winding-
up or relief of debtors, or (b) any general assignment for the benefit of
creditors, composition, marshalling of assets for creditors, or other,
similar arrangement in respect of its creditors generally or any substantial
portion of its creditors; in each case undertaken under U.S. Federal, state
or foreign law, including the Bankruptcy Code.
"Interest Coverage Ratio" means, with respect to Falcon and its
consolidated subsidiaries for any period, the ratio of: (a) EBITDA for such
period to (b) Net Interest Expense for such period.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended from time to time, and any successor statute of similar import,
together with the regulations thereunder, in each case as in effect from time
to time. References to sections of the Internal Revenue Code also refer to
any successor sections.
"Investment Grade" means, with respect to any Person, a rating on its
long-term senior unsecured debt securities of: (a) at least "BBB-", or, if
such Person's long-term senior unsecured debt securities are not rated by
Standard & Poor's, a short-term rating of at least "A-3", by Standard &
Poor's and (b) at least "Baa3" by Moody's, or, if such Person's long-term
senior unsecured debt securities are not rated by Moody's, a short-term
rating of at least "P-3", by Moody's. However, if only one of Standard &
Poor's and Moody's maintains a rating on such Person's securities, such
rating shall be no lower than the ratings applied for the purposes of clauses
(a) and (b).
"LIBOR" means the rate of interest per annum determined by the Agent to
be the arithmetic mean (rounded upward to the nearest 1/16th of 1%) of the
rates of interest per annum notified to the Agent by each Reference Bank as
the rate of interest at which dollar deposits in the approximate amount of
the Capital associated with such Fixed Period would be offered by major banks
in the London interbank market to such Reference Bank at its request at or
about 11:00 a.m. (London time) on the second Business Day before the
commencement of such Fixed Period.
"Lock-Box Account" means an account maintained at a bank or other
financial institution for the purpose of receiving Collections.
"Lock-Box Agreement" means an agreement, in substantially the form of
Annex A to the Non-Designated Receivables Agreement, among the Seller, the
Servicer and a Lock-Box Bank.
"Lock-Box Bank" means any of the banks or other financial institutions
holding one or more Lock-Box Accounts.
"Material Adverse Effect" means, with respect to any event or
circumstance, a material adverse effect on:
(a) the assets, operations, business or financial condition of the
Seller, the Originators (taken together) or the Servicer, in each case
on a consolidated basis;
(b) the ability of any of the Seller, the Originators (taken
together) or the Servicer, in each case on a consolidated basis, to
perform its obligations under this Agreement or any other Transaction
Document to which it is a party;
(c) the validity or enforceability of this Agreement or any other
Transaction Document, or the validity, enforceability or collectibility
of a material portion of the Pool Receivables; or
(d) the status, perfection, enforceability or priority of the
Agent's, the Purchasers' or the Seller's interest in the Pool Assets.
"Moody's" means Moody's Investors Service, Inc.
"Net Interest Expense" means: (a) interest expense for such period
(excluding the amortization of all fees payable in connection with the
incurrence of the Debt) plus (b) capitalized interest paid during such period
minus (c) interest received in cash in the United States during such period.
"Net Receivables Pool Balance" means, at any time, the Outstanding
Balance of Eligible Receivables then in the Receivables Pool minus the
aggregate amount of Special Program Allowances for all Originators at such
time.
"Non-Designated Receivables Agreement" means the Receivables Purchase
Agreement (Non-Designated Receivables), of even date herewith, among the
Seller, Servicer, Market Street Funding Corporation, as purchaser, and PNC,
as administrator, relating to the purchase and sale of Receivables other than
the Designated Receivables, as such agreement may be amended, amended and
restated, supplemented or otherwise modified from time to time.
"Obligor" means, with respect to any Receivable, the Person obligated to
make payments pursuant to the Contract relating to such Receivable.
"Originator" has the meaning set forth in the Sale Agreements.
"Outstanding Balance" of any Receivable at any time means the then
outstanding principal balance thereof.
"Percentage" means: (a) with respect to any Purchaser that is a party
hereto as of the date hereof, the percentage set forth on Annex B, as reduced
by any assignment entered into with a permitted assignee, or (b) with respect
to any assignee, the amount of the assignor's Percentage purchased by such
assignee as set forth in the relevant Assignment.
"Permitted Debt" has the meaning set forth in Section 1(o) of Exhibit IV
to the Agreement.
"Person" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association,
joint venture, limited liability company or other entity, or a government or
any political subdivision or agency thereof.
"PNC" has the meaning set forth in the preamble to the Agreement.
"Pool Assets" has the meaning set forth in Section 1.2(d) of the
Agreement.
"Pool Receivable" means a Receivable in the Receivables Pool.
"Portion of Capital" has the meaning set forth in Section 1.7 of the
Agreement. In addition, at any time when the Capital of the Purchased
Interest is not divided into two or more such portions, "Portion of Capital"
means 100% of the Capital.
"Purchase Limit" means the amount designated as such on Annex B, as such
amount may be reduced pursuant to Section 1.1(b) of the Agreement. References
to the unused portion of the Purchase Limit shall mean, at any time, the
Purchase Limit minus the then outstanding Capital.
"Purchased Interest" means, at any time, the undivided percentage
ownership interest in: (a) each and every Pool Receivable now existing or
hereafter arising, other than any Pool Receivable that arises on or after the
Facility Termination Date, (b) all Related Security with respect to such Pool
Receivables, and (c) all Collections with respect to, and other proceeds of,
such Pool Receivables and Related Security. Such undivided percentage
interest shall be computed as:
C + DR + YR
NRPB
where:
C = the Capital at the time of computation,
DR = the Dilution Reserve at the time of computation,
YR = the Yield Reserve at the time of computation, and
NRPB = the Net Receivables Pool Balance at the time of
computation.
The Purchased Interest shall be determined from time to time pursuant to
Section 1.3 of the Agreement.
"Purchaser" has the meaning set forth in the preamble to the Agreement.
"Purchasers' Share" of any amount means such amount times the Purchased
Interest at the time of determination.
"Purchaser's Yield" means, for any period, the Discount, expressed as a
percentage of Capital and converted to an interest-bearing equivalent rate
per annum.
"Receivable" means any indebtedness and other obligations owed to the
Seller, Falcon or any Originator by, or any right of the Seller, Falcon or
any Originator to payment from or on behalf of, an Obligor, whether
constituting an account, chattel paper, instrument or general intangible,
arising in connection with the sale of goods or the rendering of services by
an Originator, and includes the obligation to pay any finance charges, fees
and other charges with respect thereto. Indebtedness and other obligations
arising from any one transaction, including indebtedness and other
obligations represented by an individual invoice or agreement, shall
constitute a Receivable separate from a Receivable consisting of the
indebtedness and other obligations arising from any other transaction.
"Receivables Pool" means, at any time, all of the then outstanding
Designated Receivables purchased by the Seller pursuant to the Sale
Agreements between the Seller and Falcon.
"Reference Bank" means PNC.
"Register" has the meaning set forth in Section 1.11 of the Agreement.
"Related Security" means, with respect to any Receivable:
(a) all of the Seller's, Falcon's and the Originator thereof's
interest in any goods (including returned goods), and documentation of
title evidencing the shipment or storage of any goods (including
returned goods), relating to any sale giving rise to such Receivable;
(b) all other security interests or liens and property subject
thereto from time to time purporting to secure payment of such
Receivable, whether pursuant to the Contract related to such Receivable
or otherwise, together with all UCC financing statements or similar
filings relating thereto; and
(c) all of the Seller's, Falcon's and any Originator's rights,
interests and claims under the Contracts and all guaranties,
indemnities, insurance and other agreements (including the related
Contract) or arrangements of whatever character from time to time
supporting or securing payment of such Receivable or otherwise relating
to such Receivable, whether pursuant to the Contract related to such
Receivable or otherwise.
"Required Purchasers" has the meaning set forth in Section 5.4(a) of the
Agreement.
"Sale Agreement" means any of: (a) the Contribution and Sale Agreement,
dated as of the date hereof, between the Seller and Falcon, and (b) the
Receivables Sale and Servicing Agreement, dated as of the date hereof,
between Falcon and the Originators, as either such agreement may be amended,
amended and restated, supplemented or otherwise modified from time to time.
"Samuel Zell Group" means Samuel Zell, Ann Lurie, any trust created for
the benefit of Samuel Zell or Ann Lurie or their families, and any of their
affiliates (as such term is defined in Rule 12b-2 of the Securities Exchange
Act of 1934).
"Seller" has the meaning set forth in the preamble to the Agreement.
"Seller's Share" of any amount means the greater of: (a) $0 and (b) such
amount minus the Purchasers' Share.
"Servicer" has the meaning set forth in the preamble to the Agreement.
"Servicing Fee" shall mean the fee referred to in Section 4.6 of the
Agreement.
"Special Program Allowance" means, with respect to the Pool Receivables
originated by any Originator at any time, the aggregate amount of such Pool
Receivables attributable to cash discounts, volume rebates or advertising
allowances permitted to be set-off against payments due in respect of such
Pool Receivables as reflected in the books and records of such Originator at
such time.
"Spike Factor" means, for any Fiscal Month, the positive difference, if
any, between: (a) the highest average Dilution Ratio for any two consecutive
Fiscal Months during the twelve previous Fiscal Months and (b) the average
Dilution Ratio for such twelve months.
"Standard & Poor's" means Standard & Poor's Ratings Services, a division
of The McGraw-Hill Companies, Inc.
"Termination Date" means the earlier of: (a) the Business Day that the
Seller so designates by written notice to the Agent pursuant to Section
1.1(b) of the Agreement and (b) the Facility Termination Date.
"Termination Day" means: (a) each day on which the conditions set forth
in Section 2 of Exhibit II to the Agreement are not satisfied or (b) each day
that occurs on or after the Termination Date.
"Termination Event" has the meaning specified in Exhibit V to the
Agreement.
"Termination Fee" means, for any Fixed Period during which a Termination
Day occurs, the amount, if any, by which: (a) the additional Discount
(calculated without taking into account any Termination Fee or any shortened
duration of such Fixed Period pursuant to the definition thereof) that would
have accrued during such Fixed Period on the reductions of Capital relating
to such Fixed Period had such reductions not been made, exceeds (b) the
income, if any, received by the Purchasers from investing the proceeds of
such reductions of Capital, as determined by the Agent, which determination
shall be binding and conclusive for all purposes, absent manifest error.
"Transaction Documents" means the Agreement, the Non-Designated
Receivables Agreement, the Lock-Box Agreements, the Fee Letter, the
Engagement Letter, the Sale Agreements and all other certificates,
instruments, UCC financing statements, reports, notices, agreements and
documents executed or delivered under or in connection with the Agreement, in
each case as the same may be amended, supplemented or otherwise modified from
time to time in accordance with the Agreement.
"UCC" means the Uniform Commercial Code as from time to time in effect
in the applicable jurisdiction.
"Unmatured Termination Event" means an event that, with the giving of
notice or lapse of time, or both, would constitute a Termination Event (it
being understood that any nonpayment, event or condition of the type
described in paragraph (j) of Exhibit V that permits the acceleration of the
maturity of any Permitted Debt, which acceleration has not been required,
shall constitute an Unmatured Termination Event).
"Weighted Average" means, for each Obligor of Designated Receivables, a
ratio (expressed as a percentage and computed as of the last day of each
Fiscal Month) equal to: (a) the Outstanding Balance of the Pool Receivables
owed by such Obligor as of the end of such Fiscal Month divided by (b) the
aggregate Outstanding Balances of all Pool Receivables as of the end of such
Fiscal month.
"Weighted Average Assigned Value" means the sum of the following amounts
computed for each Obligor of Designated Receivables: (a) the most recent
Weighted Average for such Obligor multiplied by (b) the "Assigned Value" set
forth below opposite the then-current Investment Grade ratings assigned to
such Obligor, as follows:
Debt Rating Assigned Value
A+/A1 6.00
A/A2 5.00
A-/A3 4.00
BBB+/Baa1 3.00
BBB/Baa2 2.00
BBB-/Baa3 1.00;
or, if such Obligor's long-term public senior unsecured debt securities are
not rated by Standard & Poor's and Moody's:
Debt Rating Assigned Value
A-1/P-1 5.50
A-2/P-2 3.50
A-3/P-3 1.50;
provided, however, that if, in either case, such rating agencies' ratings are
split between two of the above categories, the "Assigned Value" for such
Obligor shall be the arithmetic average of the two relevant "Assigned Values"
for such rating categories.
"Yield Reserve" means, at any time:
(PY/360 x 2(DSO) x Capital) + SF
where:
PY = the Purchaser's Yield computed for the most recent
Settlement Period,
DSO = the most recent Days' Sales Outstanding, and
SF = the accrued and unpaid Servicing Fee.
Other Terms. All accounting terms not specifically defined herein shall
be construed in accordance with generally accepted accounting principles. All
terms used in Article 9 of the UCC in the State of New York, and not
specifically defined herein, are used herein as defined in such Article 9.
Unless the context otherwise requires, "or" means "and/or," and "including"
(and with correlative meaning "include" and "includes") means including
without limiting the generality of any description preceding such term.
EXHIBIT II
CONDITIONS OF PURCHASES
1. Conditions Precedent to Initial Purchase. The initial purchase
under the Agreement is subject to the conditions precedent that the Agent
shall have received on or before the date of such purchase the following,
each in form and substance (including the date thereof) satisfactory to the
Agent:
(a) A counterpart of the Agreement duly executed by the Seller and the
Servicer, and a counterpart of the Sale Agreements duly executed by the
Seller, Falcon and the Originators, as applicable.
(b) Certified copies of: (i) the resolutions of the Board of Directors
of each of the Seller, the Originators and Falcon authorizing the execution,
delivery and performance by the Seller, such Originator and Falcon, as the
case may be, of the Agreement and the other Transaction Documents to which it
is a party, (ii) all documents evidencing other necessary corporate action
and governmental approvals, if any, with respect to the Agreement and the
other Transaction Documents and (iii) the certificate of incorporation and by-
laws of each of the Seller, each Originator and Falcon.
(c) A certificate of the Secretary or Assistant Secretary of each of
the Seller, the Originators and Falcon certifying the names and true
signatures of its officers who are authorized to sign the Agreement and the
other Transaction Documents. Until the Agent receives a subsequent incumbency
certificate from the Seller, an Originator or Falcon, as the case may be, the
Agent shall be entitled to rely on the last such certificate delivered to it
by the Seller, an Originator or Falcon, as the case may be.
(d) Acknowledgment copies, or time stamped receipt copies, of proper
financing statements, duly filed on or before the date of such initial
purchase under the UCC of all jurisdictions that the Agent may deem necessary
or desirable in order to perfect the interests of the Seller, Falcon, the
Agent and the Purchasers contemplated by the Agreement and the Sale
Agreements.
(e) Acknowledgment copies, or time-stamped receipt copies, of proper
financing statements, if any, necessary to release all security interests and
other rights of any Person in the Receivables, Contracts or Related Security
previously granted by the Originators, Falcon or the Seller.
(f) Completed UCC search reports, dated on or shortly before the date
of such initial purchase, listing the financing statements referred to in
subsection (e) above and all other effective financing statements filed in
the jurisdictions referred to in subsection (e) above that name the
Originators, Falcon or the Seller as debtor, together with copies of such
other financing statements, and similar search reports with respect to
judgment liens, federal tax liens and liens of the Pension Benefit Guaranty
Corporation in such jurisdictions as the Agent may request, showing no
Adverse Claims on any of the Pool Assets.
(g) Copies of executed Lock-Box Agreements with the Lock-Box Banks.
(h) Favorable opinions, in form and substance reasonably satisfactory
to the Administrator, of: (i) Mayer, Brown & Platt, counsel for the Seller
and the Servicer, and (ii) Gus J. Athas, internal counsel for the Seller and
the Servicer.
(i) Satisfactory results of a review and audit (performed by
representatives of the Agent) of the Servicer's collection, operating and
reporting systems, the Credit and Collection Policy of each Originator,
historical receivables data and accounts, including satisfactory results of a
review of the Servicer's operating location(s) and satisfactory review and
approval of the Eligible Receivables in existence on the date of the initial
purchase under the Agreement.
(j) A pro forma Information Package representing the performance of the
Receivables Pool for the Fiscal Month before closing.
(k) Evidence of payment by the Seller of all accrued and unpaid fees
(including those contemplated by the Fee Letter), costs and expenses to the
extent then due and payable on the date thereof, including any such costs,
fees and expenses arising under or referenced in Section 6.4 of the Agreement
and, in each case, payable in accordance with the Engagement Letter and the
Fee Letter.
(l) The Fee Letter duly executed by the Seller and the Servicer.
(m) Good standing certificates with respect to each of the Seller, the
Originators and the Servicer issued by the Secretaries of State (or similar
official) of the states of each such Person's organization and principal
place of business.
(n) Such other approvals, opinions or documents as the Agent may
reasonably request.
2. Conditions Precedent to All Purchases and Reinvestments. Each
purchase (except as to clause (a), including the initial purchase) and each
reinvestment shall be subject to the further conditions precedent that:
(a) in the case of each purchase, the Servicer shall have delivered to
the Agent on or before such purchase, in form and substance satisfactory to
the Agent, a completed pro forma Information Package to reflect the level of
Capital and related reserves after such subsequent purchase;
(b) on the date of such purchase or reinvestment the following
statements shall be true (and acceptance of the proceeds of such purchase or
reinvestment shall be deemed a representation and warranty by the Seller that
such statements are then true):
(i) the representations and warranties contained in Exhibit III to
the Agreement are true and correct in all material respects on and as of
the date of such purchase or reinvestment as though made on and as of
such date; and
(ii) no event has occurred and is continuing, or would result from
such purchase or reinvestment, that constitutes a Termination Event or
an Unmatured Termination Event;
provided, however, that the existence of an Unmatured Termination Event
(other than an Unmatured Termination Event of the type described in clause
(i) of Exhibit V to the Agreement or resulting from the failure of the Seller
or the Servicer to deliver any Information Package when due) shall not
prohibit any reinvestment or purchase on any day that does not cause the
Capital, after giving effect to such reinvestment or purchase, to exceed the
Capital as of the opening of business on such day.
EXHIBIT III
REPRESENTATIONS AND WARRANTIES
1. Representations and Warranties of the Seller. The Seller represents
and warrants as follows:
(a) The Seller is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware, and is duly
qualified to do business, and is in good standing, as a foreign corporation
in every jurisdiction where the nature of its business requires it to be so
qualified, except where the failure to be so qualified would not have a
Material Adverse Effect.
(b) The execution, delivery and performance by the Seller of the
Agreement and the other Transaction Documents to which it is a party,
including the Seller's use of the proceeds of purchases and reinvestments:
(i) are within the Seller's corporate powers, (ii) have been duly authorized
by all necessary corporate action, (iii) do not contravene or result in a
default under or conflict with: (1) the Seller's charter or by-laws, (2) any
law, rule or regulation applicable to the Seller, (3) any contractual
restriction binding on or affecting the Seller or its property or (4) any
order, writ, judgment, award, injunction or decree binding on or affecting
the Seller or its property, and (iv) do not result in or require the creation
of any Adverse Claim upon or with respect to any of its properties. The
Agreement and the other Transaction Documents to which it is a party have
been duly executed and delivered by the Seller.
(c) No authorization, approval or other action by, and no notice to or
filing with, any Governmental Authority or other Person is required for the
due execution, delivery and performance by the Seller of the Agreement or any
other Transaction Document to which it is a party, other than the Uniform
Commercial Code filings referred to in Exhibit II to the Agreement, all of
which shall have been filed on or before the date of the first purchase
hereunder, and the approval of the Administrative Agent under the Credit
Facility, which approval has been obtained and continues in full force and
effect.
(d) Each of the Agreement and the other Transaction Documents to which
it is a party constitutes the legal, valid and binding obligation of the
Seller enforceable against the Seller in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization or
other similar laws from time to time in effect affecting the enforcement of
creditors' rights generally and by general principles of equity, regardless
of whether such enforceability is considered in a proceeding in equity or at
law.
(e) The balance sheets of the Seller as at December 31, 1995, and the
related statements of income and retained earnings of the Seller for the
fiscal year then ended, copies of which have been furnished to the Agent,
fairly present the financial condition of the Seller as at such date and the
results of the operations of the Seller for the period ended on such date,
all in accordance with generally accepted accounting principles consistently
applied, and since December 31, 1995 there has been no Material Adverse
Effect.
(f) There is no pending or, to the best knowledge of the Seller,
threatened action or proceeding affecting the Seller before any Governmental
Authority or arbitrator.
(g) No proceeds of any purchase or reinvestment will be used to acquire
any equity security of a class that is registered pursuant to Section 12 of
the Securities Exchange Act of 1934.
(h) The Seller is the legal and beneficial owner of the Pool
Receivables and Related Security, free and clear of any Adverse Claim. Upon
each purchase or reinvestment, the Agent (for the benefit of the Purchasers)
shall acquire a valid and enforceable perfected undivided percentage
ownership interest, to the extent of the Purchased Interest, in each Pool
Receivable then existing or thereafter arising and in the Related Security,
Collections and other proceeds with respect thereto, free and clear of any
Adverse Claim. The Agreement creates a security interest in favor of the
Agent (for the benefit of the Purchasers) in the Pool Assets, and the Agent
(for the benefit of the Purchasers) has a first priority perfected security
interest in the Pool Assets, free and clear of any Adverse Claims. No
effective financing statement or other instrument similar in effect covering
any Pool Asset is on file in any recording office, except those filed in
favor of the Seller and Falcon pursuant to the Sale Agreements and the Agent
relating to the Agreement.
(i) Each Information Package (if prepared by the Seller or one of its
Affiliates, or to the extent that information contained therein is supplied
by the Seller or an Affiliate), information, exhibit, financial statement,
document, book, record or report furnished or to be furnished at any time by
or on behalf of the Seller to the Agent in connection with the Agreement or
any other Transaction Document to which it is a party is or will be complete
and accurate in all material respects as of its date or (except as otherwise
disclosed to the Agent at such time) as of the date so furnished.
(j) The principal place of business and chief executive office (as such
terms are used in the UCC) of the Seller and the office where the Seller
keeps its records concerning the Receivables are located at the address
referred to in Sections 1(b) and 2(b) of Exhibit IV to the Agreement.
(k) The names and addresses of all the Lock-Box Banks, together with
the account numbers of the Lock-Box Accounts at such Lock-Box Banks, are
specified in Schedule II to the Agreement (or at such other Lock-Box Banks
and/or with such other Lock-Box Accounts as have been notified to the Agent
in accordance with the Agreement) and all Lock-Box Accounts are subject to
Lock-Box Agreements.
(l) The Seller is not in violation of any order of any court,
arbitrator or Governmental Authority.
(m) No proceeds of any purchase or reinvestment will be used for any
purpose that violates any applicable law, rule or regulation, including
Regulations G or U of the Federal Reserve Board.
(n) Each Pool Receivable included as an Eligible Receivable in the
calculation of the Net Receivables Pool Balance is an Eligible Receivable.
(o) No event has occurred and is continuing, or would result from a
purchase in respect of, or reinvestment in respect of, the Purchased Interest
or from the application of the proceeds therefrom, that constitutes a
Termination Event or an Unmatured Termination Event.
(p) The Seller has accounted for each sale of undivided percentage
ownership interests in Receivables in its books and financial statements as
sales, consistent with generally accepted accounting principles.
(q) The Seller has complied in all material respects with the Credit
and Collection Policy of each Originator with regard to each Receivable
originated by such Originator.
(r) The Seller has complied in all material respects with all of the
terms, covenants and agreements contained in the Agreement and the other
Transaction Documents that are applicable to it.
(s) The Seller's complete corporate name is set forth in the preamble
to the Agreement, and the Seller does not use and has not during the last six
years used any other corporate name, trade name, doing-business name or
fictitious name, except as set forth on Schedule III to the Agreement and
except for names first used after the date of the Agreement and set forth in
a notice delivered to the Agent pursuant to Section 1(l)(v) of Exhibit IV to
the Agreement.
2. Representations and Warranties of the Servicer. The Servicer
represents and warrants as follows:
(a) The Servicer is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware, and is duly
qualified to do business, and is in good standing, as a foreign corporation
in every jurisdiction where the nature of its business requires it to be so
qualified, except where the failure to be so qualified would not have a
Material Adverse Effect.
(b) The execution, delivery and performance by the Servicer of the
Agreement and the other Transaction Documents to which it is a party,
including the Servicer's use of the proceeds of purchases and reinvestments:
(i) are within the Servicer's corporate powers, (ii) have been duly
authorized by all necessary corporate action, (iii) do not contravene or
result in a default under or conflict with: (1) the Servicer's charter or by-
laws, (2) any law, rule or regulation applicable to the Servicer, (3) any
contractual restriction binding on or affecting the Servicer or its property
or (4) any order, writ, judgment, award, injunction or decree binding on or
affecting the Servicer or its property, and (iv) do not result in or require
the creation of any Adverse Claim upon or with respect to any of its
properties. The Agreement and the other Transaction Documents to which it is
a party have been duly executed and delivered by the Servicer.
(c) No authorization, approval or other action by, and no notice to or
filing with, any Governmental Authority or other Person is required for the
due execution, delivery and performance by the Servicer of the Agreement or
any other Transaction Document to which it is a party.
(d) Each of the Agreement and the other Transaction Documents to which
it is a party constitutes the legal, valid and binding obligation of the
Servicer enforceable against the Servicer in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization or other similar laws from time to time in effect affecting
the enforcement of creditors' rights generally and by general principles of
equity, regardless of whether such enforceability is considered in a
proceeding in equity or at law.
(e) The balance sheets of the Servicer and its consolidated
subsidiaries as at December 31, 1995, and the related statements of income
and retained earnings of the Servicer and its consolidated subsidiaries for
the fiscal year then ended, copies of which have been furnished to the Agent,
fairly present the financial condition of the Servicer and its consolidated
subsidiaries as at such date and the results of the operations of the
Servicer and its subsidiaries for the period ended on such date, all in
accordance with generally accepted accounting principles consistently
applied, and since December 31, 1995 there has been no Material Adverse
Effect.
(f) Except as disclosed in the most recent audited financial statements
furnished to the Agent, there is no pending or, to the best knowledge of the
Servicer, threatened action or proceeding affecting the Servicer or any of
its subsidiaries before any Governmental Authority or arbitrator that could
have a Material Adverse Effect.
(g) No proceeds of any purchase or reinvestment will be used to acquire
any equity security of a class that is registered pursuant to Section 12 of
the Securities Exchange Act of 1934.
(h) Each Information Package (if prepared by the Servicer or one of its
Affiliates, or to the extent that information contained therein is supplied
by the Servicer or an Affiliate), information, exhibit, financial statement,
document, book, record or report furnished or to be furnished at any time by
or on behalf of the Servicer to the Agent in connection with the Agreement is
or will be complete and accurate in all material respects as of its date or
(except as otherwise disclosed to the Agent at such time) as of the date so
furnished.
(i) The principal place of business and chief executive office (as such
terms are used in the UCC) of the Servicer and the office where the Servicer
keeps its records concerning the Receivables are located at the address
referred to in Section 2(b) of Exhibit IV to the Agreement.
(j) The Servicer is not in violation of any order of any court,
arbitrator or Governmental Authority.
(k) The Servicer has complied in all material respects with the Credit
and Collection Policy of each Originator with regard to each Receivable
originated by such Originator.
(l) The Servicer has complied in all material respects with all of the
terms, covenants and agreements contained in the Agreement and the other
Transaction Documents that are applicable to it.
EXHIBIT IV
COVENANTS
1. Covenants of the Seller. Until the latest of the Facility
Termination Date, the date on which no Capital of or Discount in respect of
the Purchased Interest shall be outstanding or the date all other amounts
owed by the Seller under the Agreement to the Purchasers, the Agent and any
other Indemnified Party or Affected Person shall be paid in full:
(a) Compliance with Laws, Etc. The Seller shall comply in all material
respects with all applicable laws, rules, regulations and orders, and
preserve and maintain its corporate existence, rights, franchises,
qualifications and privileges, except to the extent that the failure so to
comply with such laws, rules and regulations or the failure so to preserve
and maintain such rights, franchises, qualifications and privileges would not
have a Material Adverse Effect.
(b) Offices, Records and Books of Account, Etc. The Seller: (i) shall
keep its principal place of business and chief executive office (as such
terms or similar terms are used in the UCC) and the office where it keeps its
records concerning the Receivables at the address of the Seller set forth
under its name on the signature page to the Agreement or, pursuant to clause
(l)(v) below, at any other locations in jurisdictions where all actions
reasonably requested by the Agent to protect and perfect the interest of the
Agent (for the benefit of the Purchasers) in the Receivables and related
items (including the Pool Assets) have been taken and completed and (ii)
shall provide the Agent with at least 30 days' written notice before making
any change in the Seller's name or making any other change in the Seller's
identity or corporate structure (including a Change in Control) that could
render any UCC financing statement filed in connection with this Agreement
"seriously misleading" as such term (or similar term) is used in the UCC;
each notice to the Agent pursuant to this sentence shall set forth the
applicable change and the effective date thereof. The Seller also will
maintain and implement (or cause the Servicer to maintain and implement)
administrative and operating procedures (including an ability to recreate
records evidencing Receivables and related Contracts in the event of the
destruction of the originals thereof), and keep and maintain (or cause the
Servicer to keep and maintain) all documents, books, records, computer tapes
and disks and other information reasonably necessary or advisable for the
collection of all Receivables (including records adequate to permit the daily
identification of each Receivable and all Collections of and adjustments to
each existing Receivable). Notwithstanding the above, in no event shall the
Seller have or maintain, or be a partner in any partnership that has or
maintains, its jurisdiction of organization, principal place of business or
principal assets in any of the states of Colorado, Kansas, New Mexico,
Oklahoma, Utah or Wyoming.
(c) Performance and Compliance with Contracts and Credit and Collection
Policy. The Seller shall (and shall cause the Servicer to), at its expense,
timely and fully perform and comply with all material provisions, covenants
and other promises required to be observed by it under the Contracts related
to the Receivables, and timely and fully comply in all material respects with
the applicable Credit and Collection Policies with regard to each Receivable
and the related Contract.
(d) Ownership Interest, Etc. The Seller shall (and shall cause the
Servicer to), at its expense, take all action necessary or desirable to
establish and maintain a valid and enforceable undivided percentage ownership
interest, to the extent of the Purchased Interest, in the Pool Receivables,
the Related Security and Collections with respect thereto, and a first
priority perfected security interest in the Pool Assets, in each case free
and clear of any Adverse Claim, in favor of the Agent (for the benefit of the
Purchasers), including taking such action to perfect, protect or more fully
evidence the interest of the Agent (for the benefit of the Purchasers) as the
Agent may reasonably request.
(e) Sales, Liens, Etc. The Seller shall not sell, assign (by operation
of law or otherwise) or otherwise dispose of, or create or suffer to exist
any Adverse Claim upon or with respect to, any or all of its right, title or
interest in, to or under any Pool Assets (including the Seller's undivided
interest in any Receivable, Related Security or Collections, or upon or with
respect to any account to which any Collections of any Receivables are sent),
or assign any right to receive income in respect of any items contemplated by
this paragraph.
(f) Extension or Amendment of Receivables. Except as provided in the
Agreement, the Seller shall not, and shall not permit the Servicer to, extend
the maturity or adjust the Outstanding Balance or otherwise modify the terms
of any Pool Receivable, or amend, modify or waive any term or condition of
any related Contract.
(g) Change in Business or Credit and Collection Policy. The Seller
shall not make (or permit any Originator to make) any material change in the
character of its business or in any Credit and Collection Policy, or any
change in any Credit and Collection Policy that would have a Material Adverse
Effect. The Seller shall not make (or permit any Originator to make) any
other change in any Credit and Collection Policy without giving prior written
notice thereof to the Agent.
(h) Audits. The Seller shall (and shall cause Falcon and each
Originator to), from time to time during regular business hours as reasonably
requested in advance (unless a Termination Event or Unmatured Termination
Event exists) by the Agent, permit the Agent, or its agents or
representatives: (i) to examine and make copies of and abstracts from all
books, records and documents (including computer tapes and disks) in the
possession or under the control of the Seller (or Falcon or any such
Originator) relating to Receivables and the Related Security, including the
related Contracts, and (ii) to visit the offices and properties of the
Seller, Falcon or the Originators for the purpose of examining such materials
described in clause (i) above, and to discuss matters relating to Receivables
and the Related Security or the Seller's, Falcon's or the Originators'
performance hereunder or under the Contracts with any of the officers,
employees, agents or contractors of the Seller, Falcon or the Originators
having knowledge of such matters.
(i) Change in Lock-Box Banks, Lock-Box Accounts and Payment
Instructions to Obligors. The Seller shall not, and shall not permit the
Servicer, Falcon (if not the Servicer) or any Originator to, add or terminate
any bank as a Lock-Box Bank or any account as a Lock-Box Account from those
listed in Schedule II to the Agreement, or make any change in its
instructions to Obligors regarding payments to be made to the Seller, the
Originators, the Servicer or any Lock-Box Account (or related post office
box), unless the Agent shall have consented thereto in writing and the Agent
shall have received copies of all agreements and documents (including Lock-
Box Agreements) that it may request in connection therewith.
(j) Deposits to Lock-Box Accounts. The Seller shall (or shall cause the
Servicer to): (i) instruct all Obligors (other than Obligors on a Receivable
originated by Ex-Cell Manufacturing Company, Inc.) to make payments of all
Receivables to one or more Lock-Box Accounts or to post office boxes to which
only Lock-Box Banks have access (and shall instruct the Lock-Box Banks to
cause all items and amounts relating to such Receivables received in such
post office boxes to be removed and deposited into a Lock-Box Account on a
daily basis), and (ii) deposit, or cause to be deposited, any Collections
received by it, the Servicer or any Originator into Lock-Box Accounts not
later than one Business Day after receipt thereof. Each Lock-Box Account
shall at all times be subject to a Lock-Box Agreement. The Seller will not
(and will not permit the Servicer to) deposit or otherwise credit, or cause
or permit to be so deposited or credited, to any Lock-Box Account cash or
cash proceeds other than Collections.
(k) Marking of Records. At its expense, the Seller shall: (i) mark (or
cause the Servicer to mark) its master data processing records relating to
Pool Receivables and related Contracts, including with a legend evidencing
that the undivided percentage ownership interests with regard to the
Purchased Interest related to such Receivables and related Contracts have
been sold in accordance with the Agreement, and (ii) cause Falcon and each
Originator so to mark their master data processing records pursuant to the
Sale Agreements.
(l) Reporting Requirements. The Seller will provide to the Agent (with
copies for each of the Purchasers) the following:
(i) as soon as available and in any event within 105 days after
the end of each fiscal year of the Seller, a copy of the annual report
for such year for the Seller, containing unaudited financial statements
for such year certified as to accuracy by the Chief Financial Officer or
Treasurer of the Seller;
(ii) as soon as possible and in any event within five days after
the occurrence of each Termination Event or Unmatured Termination Event,
a statement of the chief financial officer of the Seller setting forth
details of such Termination Event or Unmatured Termination Event and the
action that the Seller has taken and proposes to take with respect
thereto;
(iii) promptly after the sending or filing thereof, copies of all
reports that the Seller sends to any of its security holders, and copies
of all reports and registration statements that the Seller or any
subsidiary files with the Securities and Exchange Commission or any
national securities exchange;
(iv) promptly after the filing or receiving thereof, copies of all
reports and notices that the Seller or any Affiliate files under ERISA
with the Internal Revenue Service, the Pension Benefit Guaranty
Corporation or the U.S. Department of Labor or that the Seller or any
Affiliate receives from any of the foregoing or from any multiemployer
plan (within the meaning of Section 4001(a)(3) of ERISA) to which the
Seller or any of its Affiliates is or was, within the preceding five
years, a contributing employer, in each case in respect of the
assessment of withdrawal liability or an event or condition that could,
in the aggregate, result in the imposition of liability on the Seller
and/or any such Affiliate;
(v) at least thirty days before any change in the Seller's name or
any other change requiring the amendment of UCC financing statements, a
notice setting forth such changes and the effective date thereof;
(vi) promptly after the Seller obtains knowledge thereof, notice
of any: (A) litigation, investigation or proceeding that may exist at
any time between the Seller and any Person or (B) litigation or
proceeding relating to any Transaction Document;
(vii) promptly after the occurrence thereof, notice of a material
adverse change in the business, operations, property or financial or
other condition of the Seller, the Servicer or any Originator; and
(viii) such other information respecting the Receivables or the
condition or operations, financial or otherwise, of the Seller or any of
its Affiliates as the Agent may from time to time reasonably request.
(m) Certain Agreements. Without the prior written consent of the
Required Purchasers, the Seller will not (and will not permit Falcon or any
Originator to) amend, modify, waive, revoke or terminate any Transaction
Document to which it is a party or any provision of its certificate of
incorporation or by-laws.
(n) Restricted Payments. (i) Except pursuant to clause (ii) below, the
Seller will not: (A) purchase or redeem any shares of its capital stock,
(B) declare or pay any dividend or set aside any funds for any such purpose,
(C) prepay, purchase or redeem any Debt, (D) lend or advance any funds or
(E) repay any loans or advances to, for or from any of its Affiliates (the
amounts described in clauses (A) through (E) being referred to as "Restricted
Payments").
(ii) Subject to the limitations set forth in clause (iii) below,
the Seller may make Restricted Payments so long as such Restricted
Payments are made only in one or more of the following ways: (A) the
Seller may make cash payments (including prepayments) on the Buyer Note
in accordance with its terms, and (B) if no amounts are then outstanding
under the Buyer Note, the Seller may declare and pay dividends.
(iii) The Seller may make Restricted Payments only out of the
funds it receives pursuant to Sections 1.4(b)(ii) and (iv) of the
Agreement. Furthermore, the Seller shall not pay, make or declare: (A)
any dividend if, after giving effect thereto, the Seller's tangible net
worth would be less than $5,000,000, or (B) any Restricted Payment
(including any dividend) if, after giving effect thereto, any
Termination Event or Unmatured Termination Event shall have occurred and
be continuing.
(o) Other Business. The Seller will not: (i) engage in any business
other than the transactions contemplated by the Transaction Documents, (ii)
create, incur or permit to exist any Debt of any kind (or cause or permit to
be issued for its account any letters of credit or bankers' acceptances)
other than pursuant to this Agreement, the Sale Agreement between the Seller
and Falcon or the Non-Designated Receivables Agreement (the "Permitted
Debt"), or (iii) form any subsidiary or make any investments in any other
Person; provided, however, that the Seller shall be permitted to incur
minimal obligations to the extent necessary for the day-to-day operations of
the Seller (such as expenses for stationery, audits, maintenance of legal
status, etc.).
(p) Use of Seller's Share of Collections. The Seller shall apply the
Seller's Share of Collections to make payments in the following order of
priority: (i) the payment of its expenses (including all obligations payable
to the Purchasers and the Agent under the Agreement and under the Fee
Letter), (ii) the payment of accrued and unpaid interest on the Buyer Note
and (iii) other legal and valid corporate purposes.
(q) Purchased Interest. Both before and after each purchase or
reinvestment pursuant to the Agreement, the Purchased Interest will not be
greater than 100%.
(r) Tangible Net Worth. The Seller will not permit its tangible net
worth, at any time, to be less than $5,000,000.
(s) Interest Coverage Ratio. If the Credit Facility is no longer in
existence, Falcon will not permit the Interest Coverage Ratio calculated at
the end of each fiscal quarter (as calculated for the four fiscal quarters
then ended) to be less than 4.0 to 1.0.
2. Covenants of the Servicer. Until the latest of the Facility
Termination Date, the date on which no Capital of or Discount in respect of
the Purchased Interest shall be outstanding or the date all other amounts
owed by the Seller under the Agreement to the Purchasers, the Agent and any
other Indemnified Party or Affected Person shall be paid in full:
(a) Compliance with Laws, Etc. The Servicer shall comply in all
material respects with all applicable laws, rules, regulations and orders,
and preserve and maintain its corporate existence, rights, franchises,
qualifications and privileges, except to the extent that the failure so to
comply with such laws, rules and regulations or the failure so to preserve
and maintain such existence, rights, franchises, qualifications and
privileges would not have a Material Adverse Effect.
(b) Offices, Records and Books of Account, Etc. The Servicer shall keep
its principal place of business and chief executive office (as such terms or
similar terms are used in the UCC) and the office where it keeps its records
concerning the Receivables at the address of the Servicer set forth under its
name on the signature page to the Agreement or, upon at least 30 days' prior
written notice of a proposed change to the Agent, at any other locations in
jurisdictions where all actions reasonably requested by the Agent to protect
and perfect the interest of the Agent (for the benefit of the Purchasers) in
the Receivables and related items (including the Pool Assets) have been taken
and completed. The Servicer also will maintain and implement administrative
and operating procedures (including an ability to recreate records evidencing
Receivables and related Contracts in the event of the destruction of the
originals thereof), and keep and maintain all documents, books, records,
computer tapes and disks and other information reasonably necessary or
advisable for the collection of all Receivables (including records adequate
to permit the daily identification of each Receivable and all Collections of
and adjustments to each existing Receivable).
(c) Performance and Compliance with Contracts and Credit and Collection
Policy. The Servicer shall, at its expense, timely and fully perform and
comply with all material provisions, covenants and other promises required to
be observed by it under the Contracts related to the Receivables, and timely
and fully comply in all material respects with the Credit and Collection
Policy with regard to each Receivable and the related Contract.
(d) Extension or Amendment of Receivables. Except as provided in the
Agreement, the Servicer shall not extend the maturity or adjust the
Outstanding Balance or otherwise modify the terms of any Pool Receivable, or
amend, modify or waive any term or condition of any related Contract.
(e) Change in Business or Credit and Collection Policy. The Servicer
shall not make any material change in the character of its business or in any
Credit and Collection Policy, or any change in any Credit and Collection
Policy that would have a Material Adverse Effect. The Servicer shall not make
any other change in any Credit and Collection Policy without giving prior
written notice thereof to the Agent.
(f) Audits. The Servicer shall, from time to time during regular
business hours as reasonably requested in advance (unless a Termination Event
or Unmatured Termination Event exists) by the Agent, permit the Agent, or its
agents or representatives: (i) to examine and make copies of and abstracts
from all books, records and documents (including computer tapes and disks) in
the possession or under the control of the Servicer relating to Receivables
and the Related Security, including the related Contracts, and (ii) to visit
the offices and properties of the Servicer for the purpose of examining such
materials described in clause (i) above, and to discuss matters relating to
Receivables and the Related Security or the Servicer's performance hereunder
or under the Contracts with any of the officers, employees, agents or
contractors of the Servicer having knowledge of such matters.
(g) Change in Lock-Box Banks, Lock-Box Accounts and Payment
Instructions to Obligors. The Servicer shall not, and shall not permit any
Originator to, add or terminate any bank as a Lock-Box Bank or any account as
a Lock-Box Account from those listed in Schedule II to the Agreement, or make
any change in its instructions to Obligors regarding payments to be made to
the Servicer or any Lock-Box Account (or related post office box), unless the
Agent shall have consented thereto in writing and the Agent shall have
received copies of all agreements and documents (including Lock-Box
Agreements) that it may request in connection therewith.
(h) Deposits to Lock-Box Accounts. The Servicer shall: (i) instruct all
Obligors (other than Obligors on a Receivable originated by Ex-Cell
Manufacturing Company, Inc.) to make payments of all Receivables to one or
more Lock-Box Accounts or to post office boxes to which only Lock-Box Banks
have access (and shall instruct the Lock-Box Banks to cause all items and
amounts relating to such Receivables received in such post office boxes to be
removed and deposited into a Lock-Box Account on a daily basis), and (ii)
deposit, or cause to be deposited, any Collections received by it into Lock-
Box Accounts not later than one Business Day after receipt thereof. Each Lock-
Box Account (other than the Lock-Box Account to which Collections are
deposited by Ex-Cell Manufacturing Company, Inc.) shall at all times be
subject to a Lock-Box Agreement. The Servicer will not deposit or otherwise
credit, or cause or permit to be so deposited or credited, to any Lock-Box
Account cash or cash proceeds other than Collections.
(i) Marking of Records. At its expense, the Servicer shall mark its
master data processing records relating to Pool Receivables and related
Contracts, including with a legend evidencing that the undivided percentage
ownership interests with regard to the Purchased Interest related to such
Receivables and related Contracts have been sold in accordance with the
Agreement.
(j) Reporting Requirements. The Servicer will provide to the Agent
(with copies for each of the Purchasers) the following:
(i) as soon as available and in any event within 50 days after the
end of the first three quarters of each fiscal year of the Servicer,
balance sheets of the Servicer and its consolidated subsidiaries as of
the end of such quarter and statements of income and retained earnings
of the Servicer and its consolidated subsidiaries for the period
commencing at the end of the previous fiscal year and ending with the
end of such quarter, certified by the chief financial officer of the
Servicer (which financial statements the Administrator will furnish to
Moody's);
(ii) as soon as available and in any event within 105 days after
the end of each fiscal year of the Servicer, a copy of the annual report
for such year for the Servicer and its consolidated subsidiaries,
containing financial statements for such year audited by Arthur Andersen
LLP or other independent certified public accountants acceptable to the
Agent;
(iii) as soon as available and in any event not later than the
twelfth Business Day after the last day of each Fiscal Month, an
Information Package as of the last day of such month; within six
Business Days of a request by the Agent, an Information Package for such
period as is specified by the Agent (but in no event more frequently
then weekly);
(iv) as soon as possible and in any event within five days after
the occurrence of each Termination Event or Unmatured Termination Event,
a statement of the chief financial officer of the Servicer setting forth
details of such Termination Event or Unmatured Termination Event and the
action that the Servicer has taken and proposes to take with respect
thereto;
(v) promptly after the sending or filing thereof, copies of all
reports that the Servicer sends to any of its security holders, and
copies of all reports and registration statements that the Servicer or
any subsidiary files with the Securities and Exchange Commission or any
national securities exchange;
(vi) promptly after the filing or receiving thereof, copies of all
reports and notices that the Servicer or any Affiliate files under ERISA
with the Internal Revenue Service, the Pension Benefit Guaranty
Corporation or the U.S. Department of Labor or that the Servicer or any
Affiliate receives from any of the foregoing or from any multiemployer
plan (within the meaning of Section 4001(a)(3) of ERISA) to which the
Servicer or any Affiliate is or was, within the preceding five years, a
contributing employer, in each case in respect of the assessment of
withdrawal liability or an event or condition that could, in the
aggregate, result in the imposition of liability on the Servicer and/or
any such Affiliate;
(vii) at least thirty days before any change in the Servicer's
name or any other change requiring the amendment of UCC financing
statements, a notice setting forth such changes and the effective date
thereof;
(viii) promptly after the Servicer obtains knowledge thereof,
notice of any: (A) litigation, investigation or proceeding that may
exist at any time between the Servicer and any Governmental Authority
that, if not cured or if adversely determined, as the case may be, would
have a Material Adverse Effect, (B) litigation or proceeding adversely
affecting the Servicer or any of its subsidiaries in which the amount
involved is $2,000,000 or more and not covered by insurance or in which
injunctive or similar relief is sought, or (C) litigation or proceeding
relating to any Transaction Document;
(ix) promptly after the occurrence thereof, notice of a material
adverse change in the business, operations, property or financial or
other condition of the Servicer or any of its subsidiaries;
(x) promptly after the occurrence thereof, notice of any default
under the Credit Facility (which notice Falcon will furnish to Moody's);
and and
(xi) such other information respecting the Receivables or the
condition or operations, financial or otherwise, of the Servicer or any
of its Affiliates as the Agent may from time to time reasonably request;
3. Separate Existence. Each of the Seller and Falcon hereby
acknowledges that the Purchasers and the Agent are entering into the
transactions contemplated by this Agreement and the other Transaction
Documents in reliance upon the Seller's identity as a legal entity separate
from Falcon. Therefore, from and after the date hereof, each of the Seller
and Falcon shall take all steps specifically required by the Agreement or
reasonably required by the Agent to continue the Seller's identity as a
separate legal entity and to make it apparent to third Persons that the
Seller is an entity with assets and liabilities distinct from those of Falcon
and any other Person, and is not a division of Falcon or any other Person.
Without limiting the generality of the foregoing and in addition to and
consistent with the other covenants set forth herein, each of the Seller and
Falcon shall take such actions as shall be required in order that:
(a) The Seller will be a limited purpose corporation whose primary
activities are restricted in its certificate of incorporation to: (i)
purchasing or otherwise acquiring from Falcon, owning, holding, granting
security interests or selling interests in Pool Assets, (ii) entering
into agreements for the selling and servicing of the Receivables Pool,
and (iii) conducting such other activities as it deems necessary or
appropriate to carry out its primary activities;
(b) The Seller shall not engage in any business or activity, or
incur any indebtedness or liability, other than as expressly permitted
by the Transaction Documents;
(c) Not less than one member of the Seller's Board of Directors
(the "Independent Director") shall be an individual who is not a direct,
indirect or beneficial stockholder, officer, director, employee,
affiliate, associate or supplier of Falcon or any of its Affiliates. The
certificate of incorporation of the Seller shall provide that: (i) the
Seller's Board of Directors shall not approve, or take any other action
to cause the filing of, a voluntary bankruptcy petition with respect to
the Seller unless the Independent Director shall approve the taking of
such action in writing before the taking of such action, and (ii) such
provision cannot be amended without the prior written consent of the
Independent Director;
(d) The Independent Director shall not at any time serve as a
trustee in bankruptcy for the Seller, Falcon or any Affiliate thereof;
(e) Any employee, consultant or agent of the Seller will be
compensated from the Seller's funds for services provided to the Seller.
The Seller will not engage any agents other than its attorneys, auditors
and other professionals, and a servicer and any other agent contemplated
by the Transaction Documents for the Receivables Pool, which servicer
(if other than Falcon or an Affiliate thereof) will be fully compensated
for its services by payment of the Servicing Fee, and a manager, which
manager will be fully compensated from the Seller's funds;
(f) The Seller will contract with the Servicer to perform for the
Seller all operations required on a daily basis to service the
Receivables Pool. The Seller will pay the Servicer the Servicing Fee
pursuant hereto. The Seller will not incur any material indirect or
overhead expenses for items shared with Falcon (or any other Affiliate
thereof) that are not reflected in the Servicing Fee or the fee to
Falcon in its role as manager for the Seller. To the extent, if any,
that the Seller (or any Affiliate thereof) shares items of expenses not
reflected in the Servicing Fee or the manager's fee, such as legal,
auditing and other professional services, such expenses will be
allocated to the extent practical on the basis of actual use or the
value of services rendered, and otherwise on a basis reasonably related
to the actual use or the value of services rendered; it being understood
that Falcon shall pay all expenses relating to the preparation,
negotiation, execution and delivery of the Transaction Documents,
including legal, agency and other fees;
(g) The Seller's operating expenses will not be paid by Falcon or
any other Affiliate thereof;
(h) The Seller will have its own separate stationery;
(i) The Seller's books and records will be maintained separately
from those of Falcon and any other Affiliate thereof;
(j) All financial statements of Falcon or any Affiliate thereof
that are consolidated to include Seller will contain detailed notes
clearly stating that: (i) a special purpose corporation exists as a
subsidiary of Falcon, and (ii) Falcon has sold receivables and other
related assets to such special purpose subsidiary that, in turn, has
sold undivided interests therein to certain financial institutions and
other entities;
(k) The Seller's assets will be maintained in a manner that
facilitates their identification and segregation from those of Falcon or
any Affiliate thereof;
(l) The Seller will strictly observe corporate formalities in its
dealings with Falcon or any Affiliate thereof, and funds or other assets
of the Seller will not be commingled with those of Falcon or any
Affiliate thereof except as permitted by the Agreement in connection
with servicing the Pool Receivables. The Seller shall not maintain joint
bank accounts or other depository accounts to which Falcon or any
Affiliate thereof (other than Falcon in its capacity as the Servicer)
has independent access. The Seller is not named, and has not entered
into any agreement to be named, directly or indirectly, as a direct or
contingent beneficiary or loss payee on any insurance policy with
respect to any loss relating to the property of Falcon or any subsidiary
or affiliate of Falcon. The Seller will pay to the appropriate Affiliate
the marginal increase or, in the absence of such increase, the market
amount of its portion of the premium payable with respect to any
insurance policy that covers the Seller and such Affiliate; and
(m) The Seller will maintain arm's-length relationships with
Falcon (and any Affiliate thereof). Any Person that renders or otherwise
furnishes services to the Seller will be compensated by the Seller at
market rates for such services it renders or otherwise furnishes to the
Seller. Neither the Seller nor Falcon 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. The Seller and
Falcon will immediately correct any known misrepresentation with respect
to the foregoing, and they will not operate or purport to operate as an
integrated single economic unit with respect to each other or in their
dealing with any other entity.
EXHIBIT V
TERMINATION EVENTS
Each of the following shall be a "Termination Event":
(a)(i) The Seller or the Servicer (if Falcon or any of its Affiliates)
shall fail to perform or observe any term, covenant or agreement under the
Agreement or any other Transaction Document and, except as set forth in
clause (ii) or (iii) or clause (b), such failure shall continue for 30 days,
(ii) the Seller or the Servicer shall fail to make when due any payment or
deposit to be made by it under the Agreement and such payment or deposit
shall remain unmade for two Business Days or (iii) Falcon shall resign as
Servicer, and no successor Servicer reasonably satisfactory to the Agent
shall have been appointed;
(b) Falcon shall fail to transfer to any successor Servicer when
required any rights pursuant to the Agreement that Falcon then has as
Servicer;
(c) Any representation or warranty made or deemed made by the Seller or
the Servicer (or any of their respective officers) under or in connection
with the Agreement or any other Transaction Document, or any information or
report delivered by the Seller or the Servicer pursuant to the Agreement or
any other Transaction Document, shall prove to have been incorrect or untrue
in any material respect when made or deemed made or delivered, and shall
remain incorrect or untrue 30 days after notice to the Seller or the Servicer
of such inaccuracy;
(d) The Seller or the Servicer shall fail to deliver the Information
Package pursuant to the Agreement, and such failure shall remain unremedied
for five days;
(e) The Agreement or any purchase or reinvestment pursuant to the
Agreement shall for any reason: (i) cease to create, or the Purchased
Interest shall for any reason cease to be, a valid and enforceable perfected
undivided percentage ownership interest to the extent of the Purchased
Interest in each Pool Receivable, the Related Security and Collections with
respect thereto, free and clear of any Adverse Claim, or (ii) cease to create
with respect to the Pool Assets, or the interest of the Agent (for the
benefit of the Purchasers) with respect to such Pool Assets shall cease to
be, a valid and enforceable first priority perfected security interest, free
and clear of any Adverse Claim;
(f)(i) The Seller or Falcon shall generally not pay its debts as such
debts become due, or shall admit in writing its inability to pay its debts
generally, or shall make a general assignment for the benefit of creditors;
or any proceeding shall be instituted by or against the Seller or Falcon
seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation,
winding up, reorganization, arrangement, adjustment, protection, relief or
composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking the entry of an
order for relief or the appointment of a receiver, trustee, custodian or
other similar official for it or for any substantial part of its property
and, in the case of any such proceeding instituted against it (but not
instituted by it), either such proceeding shall remain undismissed or
unstayed for a period of 60 days, or any of the actions sought in such
proceeding (including the entry of an order for relief against, or the
appointment of a receiver, trustee, custodian or other similar official for,
it or for any substantial part of its property) shall occur; or the Seller or
Falcon shall take any corporate action to authorize any of the actions set
forth above in this paragraph; or
(ii) Any Originator shall generally not pay its debts as such
debts become due, or shall admit in writing its inability to pay its
debts generally, or shall make a general assignment for the benefit of
creditors; or any proceeding shall be instituted by or against such
Originator seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment
of a receiver, trustee, custodian or other similar official for it or
for any substantial part of its property and, in the case of any such
proceeding instituted against it (but not instituted by it), either such
proceeding shall remain undismissed or unstayed for a period of 60 days,
or any of the actions sought in such proceeding (including the entry of
an order for relief against, or the appointment of a receiver, trustee,
custodian or other similar official for, it or for any substantial part
of its property) shall occur; or such Originator shall take any
corporate action to authorize any of the actions set forth above in this
paragraph;
(g) The average for three consecutive Fiscal Months of: (i) the
Delinquency Ratio shall exceed 3.75%, or (B) the Dilution Ratio shall exceed
9.00%;
(h) A Change-in-Control shall occur;
(i) The Purchased Interest shall exceed 100% and such circumstance
shall not have been cured within five Business Days;
(j) Falcon or any of its subsidiaries shall fail to pay any principal
of or premium or interest on any of its Permitted Debt that is outstanding in
a principal amount of at least $5,000,000 in the aggregate when the same
becomes due and payable (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise), and such failure shall continue after the
applicable grace period, if any, specified in the agreement, mortgage,
indenture or instrument relating to such Permitted Debt (and shall have not
been waived); or any other event shall occur or condition shall exist under
any agreement, mortgage, indenture or instrument relating to any such
Permitted Debt and shall continue after the applicable grace period, if any,
specified in such agreement, mortgage, indenture or instrument (and shall
have not been waived), if, in either case, the effect of such non-payment,
event or condition is to accelerate the maturity of such Permitted Debt; or
any such Permitted Debt shall be declared to be due and payable, or required
to be prepaid (other than by a regularly scheduled required prepayment),
redeemed, purchased or defeased, or an offer to repay, redeem, purchase or
defease such Permitted Debt shall be required to be made, in each case before
the stated maturity thereof;
(k) Either: (i) a contribution failure shall occur with respect to any
Benefit Plan sufficient to give rise to a lien under Section 302(f) of ERISA,
(ii) the Internal Revenue Service shall, or shall indicate its intention in
writing to the Seller, any Originator, Falcon or any ERISA Affiliate to, file
a notice of lien asserting a claim or claims of $100,000 or more in the
aggregate pursuant to the Internal Revenue Code with regard to any of the
assets of Seller, any Originator, Falcon or any ERISA Affiliate and such lien
shall have been filed and not released within 10 days, or (iii) the Pension
Benefit Guaranty Corporation shall, or shall indicate its intention in
writing to the Seller, any Originator, Falcon or any ERISA Affiliate to,
either file a notice of lien asserting a claim pursuant to ERISA with regard
to any assets of the Seller, any Originator, Falcon or any ERISA Affiliate or
terminate any Benefit Plan that has unfunded benefit liabilities, or any
steps shall have been taken to terminate any Benefit Plan subject to Title IV
of ERISA so as to result in any liability in excess of $1,000,000 and such
lien shall have been filed and not released within 10 days; or
(l) A Termination Event under the Non-Designated Receivables Agreement
exists.
EXHIBIT VI
ASSIGNMENT
ASSIGNMENT WITH RESPECT TO
CENTRALLY HELD EAGLE RECEIVABLES PROGRAM, INC.
RECEIVABLES PURCHASE AGREEMENT (DESIGNATED RECEIVABLES)
Dated ___________, 199__
Section 1.
Percentage assigned: _________%
Capital allocable to Percentage assigned: $_________
Capital allocable to Assignor's remaining
Percentage: $_________
Purchaser's Yield (if any) allocable to Percentage
assigned: $_________
Purchaser's Yield (if any) allocable to Assignor's
remaining Percentage: $_________
Section 2.
Assignee's Percentage: _________%
Assignor's remaining Percentage: _________%
Section 3.
Effective Date of this Assignment: ________, 199_
Upon execution and delivery of this Assignment by Assignor and Assignee,
satisfaction of the other conditions to assignment specified in Section 6.3
of the Receivables Purchase Agreement (Designated Receivables) referred to
below and acceptance and recording of this Assignment by the Agent
thereunder, from and after the effective date specified above, the Assignee
shall become a party to, and have the rights and obligations of a Purchaser
under, the Receivables Purchase Agreement (Designated Receivables), dated as
of April ___, 1996, among Centrally Held Eagle Receivables Program, Inc.,
Falcon Building Products, Inc., certain commercial lending institutions, as
Purchasers, and PNC Bank, National Association.
ASSIGNOR: (NAME OF ASSIGNOR)
By:
Name:
Title:
ASSIGNEE: (NAME OF ASSIGNEE)
By:
Name:
Title:
Address:
Attention:
Telephone:
Telecopy:
Accepted this _____ day of __________, 199___
PNC BANK, NATIONAL ASSOCIATION,
as Agent
By:
Name:
Title:
Consented to this _____ day of __________, 199_
CENTRALLY HELD EAGLE RECEIVABLES PROGRAM, INC.
By:
Name:
Title:
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
JUNE 30, 1996 QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 4
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 66
<CURRENT-ASSETS> 105
<PP&E> 177
<DEPRECIATION> (84)
<TOTAL-ASSETS> 262
<CURRENT-LIABILITIES> 95
<BONDS> 131
0
0
<COMMON> 0
<OTHER-SE> 11
<TOTAL-LIABILITY-AND-EQUITY> 262
<SALES> 313
<TOTAL-REVENUES> 313
<CGS> 257
<TOTAL-COSTS> 257
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6
<INCOME-PRETAX> 22
<INCOME-TAX> 8
<INCOME-CONTINUING> 14
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14
<EPS-PRIMARY> 0.67
<EPS-DILUTED> 0
</TABLE>
