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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1996
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission file number 1-14084
BIG FLOWER PRESS HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-376-8322
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
3 East 54th Street
New York, New York 10022 (212) 521-1600
(Address of principal executive offices) (Registrant's telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
------------------- -----------------------------------------
Common Stock, $0.01 par value New York Stock Exchange
Series A Junior Preferred Stock New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [_]
The aggregate market value of voting stock held by non-affiliates on March
14, 1997 was $199,608,501. For purposes of the foregoing calculation only, all
directors and executive officers of the registrant have been deemed affiliates.
As of March 14, 1997, there were 16,754,261 shares of the registrant's
Common Stock, par value $0.01 per share, and 1,738,692 shares of the
registrant's Class B Common Stock, par value $0.01 per share, outstanding.
Documents Incorporated By Reference: None
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"CRAIGBOND," "CRAIGSEAL," "ELECTROWEB," "LEAP," "MAXCESS," "REPLICOLOR,"
"SCENT-SATIONAL," "SLAPSTICK," "WEBCRAFT," "WEBNETICS," "WIN-PACK," "WYSDOM" AND
"W (STYLIZED)" ARE REGISTERED TRADEMARKS OF BIG FLOWER PRESS HOLDINGS, INC. OR
ITS SUBSIDIARIES.
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PART I
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
This Annual Report on Form 10-K (the "Report") contains forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933.
Discussions containing such forward-looking statements may be found in Items 1,
3, and 7 hereof, as well as within this Report generally. In addition, when used
in this Report, the words "believes," "anticipates," "expects" and similar
expressions are intended to identify forward-looking statements. Such statements
are subject to a number of risks and uncertainties. Actual results in the future
could differ materially from those described in the forward-looking statements
as a result of many factors outside the control of Big Flower Press Holdings,
Inc. (which together with its subsidiaries is herein referred to as the
"Company" or "Big Flower" unless the context clearly implies otherwise),
including fluctuations in the cost of paper and other raw materials used by the
Company, changes in the advertising and printing markets, the financial
condition of the Company's customers, the general condition of the United States
economy, and the matters set forth in this Report generally. Consequently, such
forward-looking statements should be regarded solely as the Company's current
plans, estimates and beliefs. The Company does not undertake and specifically
declines any obligation to publicly release the results of any revisions to
these forward-looking statements that may be made to reflect any future events
or circumstances after the date of such statements or to reflect the occurrence
of anticipated or unanticipated events.
Item 1. Business
INTRODUCTION
The Company is a leading advertising and marketing services company with
three principal operating units: Treasure Chest Advertising Company, Inc. ("TC
Advertising"), Webcraft Technologies, Inc. ("Webcraft") and Laser Tech Color,
Inc. ("Laser Tech"). TC Advertising is a leading producer of advertising insert
programs for leading retailers and produces TV listing magazines, Sunday comics,
Sunday magazines and special supplements for many of the most widely circulated
U.S. newspapers. Webcraft is a market leader in producing highly customized
direct mail and specialty advertising products such as commercial games and
fragrance samplers. Laser Tech is a leading provider of outsourced, digital
premedia and content management services to retailers, advertising agencies, and
consumer product companies. The Company and its subsidiaries operate in the
advertising and marketing services industry, focusing their products and
services on three sectors of this industry. For information regarding the
revenues, operating profit and identifiable assets of the Company and its
subsidiaries for the year ended December 31, 1996, see "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
Note 1 to the Consolidated Financial Statements of Big Flower Press Holdings,
Inc. and Subsidiaries (the "Consolidated Financial Statements").
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On March 21, 1996, Big Flower's Board of Directors elected to change the
Company's fiscal year from a 12-month period ending June 30th to a calendar
year, effective with the period ended December 31, 1995. Unless otherwise
indicated, the references herein to fiscal years are to calendar years. In
addition, references herein to the financial information of Big Flower's
subsidiaries refer to such financial information as reflected in the
Consolidated Financial Statements. See Note 1 to the Consolidated Financial
Statements. Big Flower was incorporated in Delaware in 1993. Big Flower's
principal executive offices are located at 3 East 54th Street, New York, New
York 10022 and its telephone number is (212) 521-1600.
Industry Sectors
Market data used throughout this Report was obtained from industry
publications and internal Company estimates. While the Company believes such
information is reliable, the accuracy of such information has not been
independently verified and cannot be guaranteed.
Advertising Inserts. The Company believes that the advertising inserts
industry sector produces $8 to $9 billion per year, with approximately 50% of
the dollars for the production of inserts and the remaining balance for
distribution of the product. The Company believes th is industry sector will
continue to grow as non-traditional insert users have begun including inserts in
their media plans and traditional users such as retailers are spending more of
their advertising dollars in this medium.
The Company further believes advertising insert usage will expand as
advertisers require more versions of their inserts and targeted distribution
services for their messages. According to the Newspaper Association of America,
local retail advertising has changed to a greater reliance on inserts as
advertisers demand more targeting of their message, a distribution method that
run of press ("ROP") advertising is not capable of providing.
Direct Mail. The Company believes that in the individualized sector in
which Big Flower operates, customized direct mail expenditures account for $20.8
billion per year, with approximately 33% going to the production of direct mail
and the remainder to other services, including agency services, data analysis
and manipulation and creative development.
According to the 1996 Veronis, Suhler and Associates Communications
Industry Forecast, "More than three-quarters of U.S. companies use direct mail,
and most find it a powerful tool in meeting their marketing objectives. In
addition to generating sales directly, direct mail has proven to be effective in
explaining complex issues to consumers and business decision makers and in
introducing a new product or service."
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Premedia. The Company believes that the premedia industry sector exceeds
$5.3 billion per year. The business, which includes the traditional preparation
of materials for print such as promotional items and advertising inserts, has
recently expanded to include the capture, storage and manipulation of image
management and the management of facilities which house these services. The
Company believes that as its customers require more versions of their
advertising inserts and other advertising and marketing messages, the demand for
easy retrieval and manipulation of images will grow. In addition, there is a
growing pattern of outsourcing of facilities management of premedia services
from which the Company has been benefiting and expects to continue to benefit.
Industry Business Strategy
The Company's primary objective is to be the leading provider of marketing
and advertising services for retailers, national manufacturers and advertising
agencies. Key elements of the Company's strategy include the following:
Maximize Synergies Among Subsidiaries. Big Flower's management is
improving marketing and production efficiencies among the Company's subsidiaries
through a number of initiatives:
o Develop Advertising Solutions for Customers. The Company believes
that by combining the products and services of TC Advertising, Laser
Tech and Webcraft it can work with current and future customers to
develop cost-effective and comprehensive solutions to their
particular advertising and marketing needs. For example, store
openings present a challenge for retailers as they must identify new
customers and persuade those customers to change their current
shopping habits. For a recent store opening for a home improvement
retailer, Big Flower presented a five-piece plan that combined
Webcraft's and TC Advertising's products. The campaign involved two
"teaser" direct mail items, followed by an individualized,
highly-customized direct mail package that included a pre-approved
credit card for the customer. The fourth piece was a 72-page
advertising piece inserted in the local newspaper, followed later by
a large, glossy advertising insert. Big Flower has the expertise to
work with customers from inception of an advertising concept through
layout design and press run, to targeting and distribution of the
printed product, helping customers achieve their advertising goals
in a cost-effective manner. The Company believes that by integrating
its line of products with its digital premedia services, advertising
insert capabilities, geographic and demographic insert targeting
programs and highly customized direct mail and specialty products,
it offers its customers certain solutions not offered by the
Company's competitors.
o Maximize Cross-Selling Opportunities. Currently, TC Advertising
serves a large customer base of regional and national retailers,
while Webcraft's and
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Laser Tech's customer base consists mainly of national
manufacturers, advertising agencies and marketing companies. Big
Flower has established incentive compensation programs to promote
cross-selling of the entire Big Flower products and services lines.
For example, TC Advertising has begun providing advertising insert
programs to Webcraft's direct mail customers who are currently small
users of this medium, while Webcraft has begun to deliver targeted
direct mail advertising on behalf of TC Advertising's retail
clients. TC Advertising also has begun to provide Webcraft's
commercial games products to its retail customers. Laser Tech and
Webcraft also have similar cross-selling opportunities since many of
Laser Tech's customers use direct mail products and many of
Webcraft's and TC Advertising's customers require premedia work.
o Enhance Production Processes. The Company continues to pursue
initiatives to improve and develop its production activities. For
example, the Company has benefited from the coordination of its
premedia activity between Laser Tech and TC Advertising. The
premedia expertise Laser Tech has brought to the Company has been
helpful in developing Mfacilities management agreements through
which the Company has taken over responsibility for functions
previously done by its customers.
Develop National Digital Workflow Platform. The Company continues to
develop its nationwide digital network capability that employs
tele-communications technologies to connect TC Advertising's and Laser Tech's
facilities, enabling the Company and its customers to conceive, manipulate,
transmit, produce and distribute their advertising concepts seamlessly on a
national scale. The platform development is based on open-standard digital
communications technologies and is continuously defined by customers needs. It
currently connects customers and the production centers at all Laser Tech
facilities and 14 of the TC Advertising production facilities. Each TC
Advertising production facility is expert in meeting the rapid output premedia
requirements of highly-versioned insert advertising programs, using efficient
state of the art, digital page processing systems for rapid output and
production.
Strategic Acquisitions. Big Flower continues to review opportunities to
extend its businesses and markets in the advertising and marketing services
industry and to build its TC Advertising, Webcraft and Laser Tech business
units. Since its initial acquisitions of TC Advertising, Laser Tech and
Webcraft, Big Flower has expanded its products and services through a number of
strategic acquisitions that increased the span and scope of each of these
industry sectors.
o In April 1994, the Company acquired KTB Associates, Inc. ("KTB") and
Retail Graphics Holding Company ("Retail Graphics"), increasing TC
Advertising's capacity and broadening its customer base in the
advertising insert industry sector. In October 1996, the Company
completed the acquisition of PrintCo.,
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Inc. ("PrintCo"), a Michigan-based company specializing in
advertising insert programs and TV listing guides. This acquisition
added significant retail accounts to the Company's customer base and
PrintCo's new production lines brought needed capacity to TC
Advertising's central group. These additional production facilities
will also enhance the Company's ability to improve turnaround time
and reduce delivery costs.
o In October 1996, the Company acquired Scanforms, Inc. ("Scanforms"),
a full-service direct mail advertising company based in Bristol,
Pennsylvania. With the acquisition of Scanforms, the Company
expanded its customer base among leading financial service and
publishing companies as well as added additional high quality laser
personalization and short-run to its line of products and services.
The addition of Scanforms enables the Company to offer its customers
fast-turnaround products ranging from specialty applications in
regional markets to longer-run direct mail for nationwide targeted,
customized mailings.
o In October 1996, the Company acquired Pacific Color Connection, Inc.
("Pacific Color"), thereby enhancing its expertise in digital
premedia services as well as expanding its presence in California.
In the first half of 1996, Pacific Color launched two new
businesses, Innerlogic, specializing in Internet production
services, and Big Color, a large format advertising products group
that services the outdoor advertising industry. In addition, Pacific
Color's Pacific Display division produces large format direct
digital printing for banners, trade show displays and billboards up
to 16.6' x 96'. Furthermore, in December 1996, the Company acquired
Designer Color Systems, Ltd. ("DCS") and Digital Dimensions, Inc.
("DDI"), increasing its premedia presence in the Midwest and
enhancing its on-line digital imaging services. DDI's software,
which allows the Company's customers to store, browse, and retrieve
data and images from a centralized database and repository, will
enhance the Company's digital imaging services platform and support
the imaging needs of its customers. With the addition of DCS, the
Company has the capacity to design and produce interactive
multimedia systems for electronic catalogs and ordering systems as
well as provide Internet Web Site design and execution. Furthermore,
DCS's significant retail advertising insert and catalog production
expertise will enhance the Company's ability to service its retail
customer base.
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Organizational Structure
The following chart sets forth the current organizational structure of Big
Flower. Big Flower directly or indirectly owns 100% of all of its subsidiaries.
Any reference to TC Advertising, Webcraft or Laser Tech includes their
respective subsidiaries unless the context clearly dictates otherwise.
[GRAPHIC DEPICTING BIG FLOWER PRESS HOLDINGS, INC.
ORGANIZATIONAL CHART OMITTED]
Industry Sectors
ADVERTISING INSERT PROGRAMS AND NEWSPAPER PRODUCTS
The Company produces advertising insert programs for leading retailers and
produces Sunday magazines, TV listing guides and special supplements for some of
the most widely circulated U.S. newspapers. For the 1996 fiscal year, the
Company produced more than 22 billion advertising inserts, 1.6 billion Sunday
comics, 140 million locally edited Sunday magazines and 620 million TV listing
guides. The Company estimates that this represents 19%, 49%, 18% and 20%,
respectively, of the total advertising inserts, Sunday comics, Sunday magazines
and TV listing guides produced in the U.S. in 1996.
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The Company believes it is the largest producer of advertising insert programs
in the United States. TC Advertising, the Company's operating unit in this
industry sector, is headquartered in Baltimore, Maryland and operates a national
network of 18 production facilities.
Products and Services
Background. The Company believes the advertising insert programs industry
sector in the U.S. has grown at a faster rate in recent years than overall
newspaper advertising expenditures and exceeded $8 billion in 1996. Industry
research indicates that more than 75% of consumers read advertising inserts
appearing in their Sunday newspaper. In addition, between 40% and 50% of adult
readers use advertising inserts for making their purchasing decisions in key
retail categories.
Advertising Insert Programs. Advertising inserts are stand-alone
advertisements, generally in color, and display a broad range of products sold
by a single retailer or manufacturer. The primary users of advertising insert
programs are general merchandisers, specialty retailers, grocery stores, home
improvement centers and drug stores. Advertising inserts are placed in
newspapers, mailed to consumers or distributed in stores. Advertising inserts
can be produced in color on better quality paper than the reproductions that
typically appear in ROP newspapers. Advertising insert programs also allow users
to vary layout, artwork, design, trim size, paper types, color and formats. TC
Advertising's mix of printing capabilities, which include both heatset and cold
web offset presses, enables it to provide a variety of formats and designs to
meet the diverse needs of its retailing customer base. TC Advertising produces
advertising insert programs for leading U.S. retailers such as American Drug
Stores,; Circuit City; The Home Depot; J.C. Penney; Kmart; Lowe's Companies,
Inc.; Montgomery Ward; Safeway; Sears; Walgreens and Wal-Mart.
Other Newspaper Products and Other Publications. The Company produces TV
listing magazines, Sunday comics, Sunday magazines and special supplements for
over 300 newspapers, including approximately two-thirds of the 50 most widely
circulated newspapers in the United States.
TC Advertising is the largest single producer of newspaper TV listing
guides in the United States. As of December 31, 1996, TC Advertising produced
newspaper TV listing guides for 26 newspapers including The Baltimore Sun, The
Boston Globe, The Los Angeles Times, The Newark Star-Ledger, Newsday, The New
York Times, The Philadelphia Inquirer and The San Francisco Examiner.
TC Advertising is the largest producer of Sunday comics nationwide. As of
December 31, 1996, TC Advertising produced Sunday comics for approximately 275
newspapers, including The Atlanta Journal, The Baltimore Sun, The Denver Post,
The Los Angeles Times, The Miami Herald, The Newark Star-Ledger, The
Philadelphia Inquirer, and The San Francisco Examiner.
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Premedia Services. In connection with its advertising insert programs and
other newspaper publications, the Company offers a number of premedia services
including creative and composition, digital photography, image management, film
output, digital file transfer and facilities management.
Industry Sector Business Strategy
The Company's business strategy for this industry sector is to maximize
the effectiveness of the advertising insert medium for its customers. The result
of this strategy will assist TC Advertising's customers in delivering their
advertising and marketing messages on a cost efficient basis, and will drive
profitability for the Company in its core business of producing advertising
insert programs and newspaper publications. The cornerstone of this strategy is
the continued development of an organization that focuses on assisting customers
in maximizing the effectiveness of their advertising dollars. Key elements of
this strategy include:
Nationwide Versioning Capability. As the only advertising insert producer
offering a national network of both heatset and cold web offset production
facilities, TC Advertising is able to meet the diverse needs of its customers
and achieve significant cost and distribution advantages. TC Advertising
simultaneously produces major national advertising insert programs and other
products in multiple locations, thereby accelerating turnaround time and
reducing shipping costs to the customers' locations. Furthermore, this
nationwide network allows TC Advertising's customers to use a single advertising
insert producer to target specific distribution areas or distribute different
versions of an insert program in different targeted parts of the United States.
As the Company develops its national digital work-flow platform, TC Advertising
expects to improve efficiencies for insert versioning, improve the timeliness of
advertising inserts by reducing the production and distribution cycle time and
improve overall competitiveness of advertising inserts on a cost and timeliness
basis versus other advertising media.
Targeted Distribution Program. TC Advertising has developed a database
information system thatwhich enables advertisers to use insert programs to
target messages specifically to potential customers meeting the advertisers'
desired geographic, demographic and purchase pattern profiles, resulting in more
cost-effective advertising.
Measured Media Approach.. TC Advertising is marketing advertising insert
programs as a specific category of measured media, like radio or television. TC
Advertising believes that if insert programs are considered a specific measured
media category, TC Advertising may be in a better position to compete for
advertising budgets. To establish advertising insert programs as a specific
measured media category, TC Advertising has developed proprietary research that
positions the power of advertising inserts against other types of measured
media.
Competitive Cost Position. TC Advertising maintains stringent cost
controls and has implemented programs to enhance efficiency and improve
profitability in recent
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years. These programs have resulted in increased press speeds, reduced paper
waste and improved capacity utilization. As one of the largest consumers of
newsprint and ink in the United States, TC Advertising believes it is able to
achieve significant purchasing economies under most market conditions.
Production Load-Leveling. TC Advertising has implemented programs which
target the newspaper, grocery and other industry groups whose production needs
are weekly in frequency. Printing services for these industry groups create a
more balanced, load-leveling production environment, allowing TC Advertising to
improve planning and utilization of its production capacity. In addition, TC
Advertising is constantly refining its pressline configurations to optimize
equipment utilization, to improve operating efficiencies, and to improve service
and flexibility to meet the changing needs of its customers.
Sales and Customers
The Company's sales force in this industry sector is organized into
geographic and new business groups. Its four regional geographic groups in this
industry sector cover the eastern, central and western United States and with
the acquisition of PrintCo, TC Advertising has added the PrintCo group, which
covers the upper Midwest U.S. These sales professionals draw upon their industry
expertise, knowledge of retailing and the Company's production capabilities to
help customers achieve their advertising objectives on a cost-effective basis.
The Company's top ten customers in this industry sector, which accounted for 39%
of the Company's sales in this industry sector in 1996, were American Drug
Stores; Circuit City; The Home Depot; Kmart; Lowe's Companies, Inc.; Montgomery
Ward; Sears; Walgreens, Wal-Mart and Western Colorprint. No single customer
represented more than 6.3% of such sales in 1996. As of December 31, 1996, the
average length of the Company's relationship with such top ten customers was
approximately 12 years. Consistent with industry practice, TC Advertising
generally does not have long-term contracts with its customers requiring them to
use its products or services. The Company does not believe that the loss of any
single customer of TC Advertising would have a material adverse effect on the
Company's consolidated financial condition or results of operations.
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The following table presents the sales by type of customer as a percentage
of total TC Advertising sales:
Percentage of
TC Advertising
Customer Type Sales in 1996
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General merchandisers 23.6%
Grocery stores 15.8%
Specialty retail and furniture 15.3%
Home improvement centers 14.7%
Drug stores 11.2%
Non-retail products 3.6%
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Total advertising inserts 84.2%
Sunday comics 6.0%
Newspaper TV listing guides 5.9%
Other newspaper products and other publications 3.9%
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Total 100.0%
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Competition
This industry sector is highly fragmented, and TC Advertising competes
with numerous regional and local companies for the production of advertising
insert programs. TC Advertising also competes for national accounts with several
large producers, some of which have greater resources than the Company. TC
Advertising believes that it and four other companies account for approximately
50% of the advertising insert market in the United States, with more than 140
regional and local producers accounting for the balance. In addition, TC
Advertising's products compete with television, radio and other forms of print
media. Although some newspapers produce their own Sunday comics, TC
Advertising's one major competitor in this product line is Sullivan Graphics, a
division of Sullivan Communications, Inc. TC Advertising's newspaper TV listing
guides, Sunday magazine and newspaper supplement operations also face strong
competition both from other printers and newspapers. TC Advertising's major
competitors in these areas are R.R. Donnelley & Sons Company, Quebecor, Inc. and
Sullivan Communications, Inc. Although commercial printing in the United States
remains highly fragmented, recent technological developments and over-capacity
in the printing industry have increased industry consolidation and competitive
pressures. The principal methods of competition in these businesses are pricing,
quality, timeliness of delivery and customer service. Pricing is dependent in
large part upon the prices of paper and ink, which are the major components of
TC Advertising's products. Pricing is also influenced by shipping costs,
operating efficiencies and the ability to control costs. TC Advertising believes
that the introduction of new technologies and continued excess capacity in this
industry sector, combined with the
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cost pressures facing its customers resulting from among other things, the cost
of paper and postal rates, have resulted in downward pricing pressures and
increased competition in its core businesses. See "Raw Materials."
DIRECT MAIL AND OTHER ADVERTISING SERVICES
The Company produces highly-customized direct mail, fragrance samplers,
promotional stamps and commercial games. In addition, the Company produces
non-specialty products such as enhanced envelopes and government forms. The
Company's operating unit in this industry sector, Webcraft, is headquartered in
Horsham, Pennsylvania and has production facilities in Bristol and Chalfont
Pennsylvania, Newark and North Brunswick, New Jersey and Salisbury, Maryland.
Products and Services
Background
The Company believes that in the individualized direct mail industry
sector in which Webcraft operates, customized direct mail expenditures account
for $20.8 billion per year, with approximately 33% going to the production of
direct mail and the remainder to other services, including agency services, data
analysis and manipulation, and creative development. The compound annual growth
rate of direct mail advertising expenditures was 7.1% for the period 1991-1996.
This compares to a compound annual growth rate for overall advertising spending
of 6.2% for the period 1991-1996 according to the 1996 DMA/WEFA Group Study -
"Economic Impact: U.S. Direct Marketing Today." The Company believes more
advertisers will use personalized direct mail techniques as mailing list
databases grow in both volume of information stored and sophistication.
Specialty Production
Personalized Direct Mail. The majority of the Company's revenues in this
industry sector are derived from the in-line production of personalized
advertising mailings which are produced by ink-jet, laser and electropress
systems, integrated with an advanced data processing capability. Personalized
direct mail enables consumer goods and other marketers to communicate with their
customers on an individual-by-individual basis rather than relying on the broad
non-personalized mailings which typically generate lower response rates. The
Company can process and manipulate databases to enable its customers to target
direct mail recipients based on a combination of more than a dozen attributes,
including the recipient's age, gender, address, spending habits, such as type of
car owned, or whether the recipient is a pet owner. Personalized direct mail is
frequently used in conjunction with larger print, radio or television
promotional campaigns.
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The primary users of the Company's personalized direct mail products are
consumer goods and financial services companies and non-profit institutions.
Major customers include Chrysler Corp.; Dean Witter; Publishers Clearing House;
Reader's Digest Association, Inc.; RJR Nabisco Holdings Corp. and U.S. Sales.
Fragrance Samplers. Fragrance samplers are product samples, typically of
perfume, which are distributed to potential purchasers of the fragrance through
magazine inserts or as billing statement stuffers for major department stores.
Webcraft is a leading producer of highly specialized fragrance samplers because
of its ability to produce an accurate rendition of the perfume being marketed
and its technological expertise in the microencapsulation of the fragrance.
Webcraft recently patented technology that allows for multiple uses of a single
magazine scent strip. Webcraft's customers in fragrance samplers include Calvin
Klein, Inc.; Elizabeth Arden, Co. and Estee Lauder, Inc.
Commercial Games. Commercial games are typically used to increase traffic
to retail establishments by offering customers an opportunity to win various
prizes. For example, fast food restaurants give customers scratch-off tickets
which offer prizes ranging from a soft drink to cash. There are no significant
recurring customers in this area of Webcraft's business since commercial games
are used in specific promotional campaigns.
Stamps. Webcraft's stamp products include booklets and sheets of gummed,
round-hole perforated stamps. Webcraft produces stamps using special in-line
grinders that create the same quality of perforation found in U.S. postage
stamps. Webcraft believes that certain technologies it employs in producing
stamps, such as the ability to generate letters with attached stamp sheets, give
Webcraft a special advantage. Significant customers include The American Lung
Association; National Wildlife Federation; Publishers Clearing House and
Reader's Digest Association, Inc.
Non-Specialty Production
Other Products and Services. A significant portion of Webcraft's
non-specialty printingoduction involves the production of enhanced envelopes,
which are essentially simple printed products involving the formation of an
envelope such as catalog order forms, film mailers and airline ticket jackets.
Webcraft also produces specialty chemicals, adhesives and coatings. The Company
believes that in 1997, approximately 87% of these products will be sold to
industry customers and the remainder will be used internally.
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Industry Sector Business Strategy
The Company's business strategy in this industry sector is to increase
revenues and maximize profitability in its core business of direct mail products
and customized advertising products. The cornerstone of this strategy is to
improve the effectiveness of its customers' advertising products by developing
customized formats and offering complex personalization capabilities designed to
increase response rates. The key elements of this strategy include:
Technological Expertise. Webcraft believes that the continued development
of its production processes enables it to consistently provide high quality
products and services at competitive prices. Webcraft's technological focus is
on its in-line finishing process that combines the personalizing, folding,
cutting and collecting of several multi-color pieces into a formed envelope in
one step, shortening the time needed to produce complex finished products.
Additionally, its unique combination of format design, multi-stage
personalization and outer wrap (envelope) configurations often provides
customers with superior response rates to their direct marketing programs. These
same processes also enable Webcraft to provide its products more rapidly than
many of its competitors. Webcraft believes that these capabilities are becoming
increasingly important as lead time becomes more compressed and customers demand
faster turn around times to respond to time-sensitive market opportunities. In
addition, with the acquisition of Scanforms, Webcraft's ink-jet technology is
now complimented by Scanforms' laser imaging process. Furthermore, the
conversion of new customers from the more traditional method of laser imaging of
Scanforms to Webcraft's in-line method is made easier because Webcraft will
initially be able to provide services to these new customers in the laser
process they are familiar with before they are converted to Webcraft's in-line
method.
New Products. Webcraft will continue to work with its customers to develop
new products to meet their advertising needs. Webcraft's in-line process,
coupled with advanced design and personalization capabilities, give Webcraft an
advantage versus its competitors in designing effective improvements to its
customers' direct mail products. In addition, with the acquisition of Scanforms,
Webcraft now offers short-run direct mail capabilities.
Enter New Markets. Webcraft will also continue to develop new customers
and will work with Laser Tech and TC Advertising to target the retail industry.
Leverage Database Expertise. Webcraft intends to use its expertise in
managing database information to work with its customers to design more
cost-effective campaigns.
Cost Control and Productivity Improvements. Webcraft has developed a cost
control program which focuses on minimizing waste, reducing labor-intensive
processes and making its selling effort more efficient. In addition, management
has implemented several programs to improve profitability, including
reorganizing its management information systems and business acquisitions
systems, which allow Webcraft to utilize press time more effectively. Webcraft
has implemented a new order confirmation system
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that strengthens its relationships with its customers, by providing accurate and
detailed job specifications and electronic templates for ease of customer
formatting. Webcraft has also instituted a new make-ready program, resulting in
significant reduction of make-ready time. This has resulted in lowering set-up
costs and increasing total production capacity of the installed base of
equipment. Furthermore, the recent acquisition of Scanforms strengthens
Webcraft's position in the financial services market because it greatly expands
capacity for magnetic ink readable code checks products.
Sales and Customers
The Company employs 46 sales representatives in this industry sector. They
are based in 14 U.S. sales offices in 11 states and the District of Columbia.
While the majority of these sales are made directly to end users, the Company
also sells its direct mail products and services through advertising agencies,
brokers and other agents. The Company's principal customer groups include
consumer goods manufacturers, mail order and catalog publishers, fragrance
marketers, financial institutions, non-profit organizations and other government
agencies. HoldingsThe Company's ten largest customers in this industry sector
(including Calvin Klein, Inc.; Publishers Clearing House; RJR Nabisco Holdings
Corp. and U.S. Sales), accounted for approximately 32% of its sales in this
industry sector in 1996. On average, these customers had over a nine year
relationship with the Company.
Webcraft has a contract with the United States Postal Service to supply
Express Mail labels through May 1997. This contract provides for a pass through
of paper cost changes over the length of the contract through a formula provided
in the contract.
The balance of Webcraft's sales are typically covered by purchase orders
from the client and signed sales confirmations from Webcraft. These documents
detail the terms and conditions of sale. Prices typically vary from project to
project because each job is unique with its own variables, including run
quantity, dimensions of the printed piece, personalization, special materials
such as scratch off, die cuts and a number of other criteria. The Company does
not believe that the loss of any single customer of Webcraft would have a
material adverse effect on the Company's consolidated financial condition or
results of operations.
Competition
In this industry sector, the Company competes with a number of different
firms in each of its principal lines of direct mail business. The primary
competitive factors in its specialty markets are quality, flexibility, service,
timeliness of delivery and price. However, in certain non-specialty markets,
such as the enhanced envelope and government printing markets, price is often
the dominant factor. In the personalized direct mail product category, the
Company's major competitors are Banta Direct Marketing Group, a division of
Banta Corporation; Moore Response Marketing Services, a division of Moore
Business Forms, Inc.; Communicolor, a division of Standard Register Company; and
World Color Press, Inc. In the fragrance sampler line of business, the Company
believes that its major competitor is
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Arcade, Inc. The Company's primary competitor in commercial games products and
services is Dittler Brothers, Inc. In the production of stamps, the Company's
major competitors are Fleming- Potter Co., Connecticut Color, Inc. and
Cyril-Scott Company. In the non-specialty category, the products produced do not
have the same complexity as products produced in Webcraft's specialty printing
segmentrvices. Because of this lack of complexity, there are a number of
printers capable of competing with the Company in this area. Major competitors
in the non-specialty market include Cyril-Scott Company and Double Envelope
Corp. (Convertagraphics). Increases in printing press capacity in this segment
have led to over-capacity in recent years, with resulting pricing pressures
printers. Webcraft's management has responded to these pressures by lowering its
cost structure for producing non-specialty products.
Sale of Lottery Business
In December 1996, Webcraft sold the stock of Webcraft Games, Inc., its
lottery production subsidiary. This sale will enable Webcraft's management to
better focus on its core businesses. In addition, the sale has provided
expansion capability for direct mail production at Webcraft's North Brunswick
facility, a portion of which was previously used for lottery production. See
"Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations" and Note 4 to the Consolidated Financial Statements below.
PREMEDIA SERVICES
The Company provides a full line of digital premedia services for the
advertising, retail catalog and packaging industries. Services and technology
include digital photography studios, leading-edge desktop publishing and
client/server software and hardware, turnkey catalog and advertising insert
production, electronic retouching systems, large film output, Cyrel photopolymer
platemaking, and digital image management systems for high speed image
retrieval. The Company's operating unit in the premedia sector, Laser Tech, is
headquartered in Irving, Texas and has eleven production facilities in the U.S.
and manages four facilities at client locations.
Products and Services
Background. The Company believes that premedia products and services
exceed $5.3 billion annually, with compound annual growth rates approaching 5%
over the past three years. Laser Tech believes that the digital premedia sector
will continue to grow with the emergence of new distribution technologies such
as CD-ROM and the World Wide Web that use digitized images. Furthermore, the
acceleration of digital technologies used in premedia services has necessitated
greater data processing expertise and comparatively greater capital expenditure,
leading many businesses to outsource their premedia requirements.
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Electronic Premedia ("EPM") Operations. EPM involves the electronic
capture of black and white or full color pictures and image retouching combined
with text and graphics into a page layout suitable for distribution in a print
or new media format such as CD-ROM or the World Wide Web. The Company's
comprehensive line of EPM services include the following:
Digital Photography. The Company operates eight fully equipped digital
photography studios capable of capturing images greater than 100 megabytes
for an output print size of up to 20" x 30".
Electronic Retouching. The Company offers its customers high-end
facilities for electronic creation or retouching of visual images. The
resulting digital image can be output as color transparency or offset film
or distributed for Internet or CD-ROM publication.
Digital Image Scanning. The Company scans and color corrects
transparencies, photo prints or illustrations, then outputs the digital
image file to a variety of media for print or electronic distribution.
Page Assembly. The Company places digital image files into customer page
layouts to form finished printable advertising materials. These same
digital files can be re-formatted for output to digital media such as
Internet or multi-media. The Company utilizes MacIntosh(TM) and Windows
NT(TM) desktop publishing technologies as well as UNIX-based(TM)
client/server technologies from Silicon Graphics, Inc.; Sun Microsystems,
Inc.; Digital Equipment Corporation, Inc. and others.
Electronic Output. The Company outputs completed digital image files to a
variety of output media, including regular and oversize lithographic
films, color transparency, digital printing plate, digital new media such
as Internet or CD-ROM as well as direct digital color display graphics.
Proofing. For each digital image file produced, the Company offers a
variety of color proofing methods from direct digital methods in which the
digital file is output to a color proof prior to final media output, to
conventional analog proofs in which lithographic films are exposed onto
color proofing materials. The Company operates low cost remote digital
proofing facilities at many customer locations to provide the customer
virtually instantaneous access to final digital files.
Packaging. The Company offers full service specialized services to
packaging customers in image capture, art production, page assembly,
proofing and photopolymer platemaking tailored for both lithographic and
flexographic packaging products. Packaging products require different
skill sets and
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capabilities than advertising materials due to the varied manufacturing
technologies peculiar to consumer packaging reproduction.
Facilities Management. Laser Tech's Facilities Management division
specializes in providing on-site digital premedia services to agencies,
corporate advertisers or printers. Services may include only one or all of
Laser Tech's service offerings. Facilities Management sites typically
involve long-term contracts and minimum annual revenue commitments.
Digital Asset Management. The digital files that produce printed
advertising materials or digital new media materials must be organized,
stored and made available for re-use. The "file rooms" of yesterday are
giving way to electronic digital asset libraries for storage, retrieval
and reuse of digital files. Laser Tech has developed MAXCESS(TM) (Media
Access) application software to provide a turnkey technology solution to
advertisers who desire to manage their digital assets for re-use or
re-sale to third parties. Laser Tech's Image Technology Group is
developing additional enhancements to MAXCESS(TM) to add advertising
production capabilities to the original storage and retrieval platform.
The acquisition of DDI brought Vision Bank to the Laser Tech asset
management offering. Vision Bank is a low entry cost, scaleable enterprise
software solution for digital asset management.
Industry Sector Business Strategy
The Company's objective in this industry sector is to become the leading
provider of outsourced, digital premedia and content management services to
retailers, advertising agencies, and consumer product companies. Key elements of
this strategy include:
Develop Digital Image Management Networks. Laser Tech continues to develop
systems to provide its customers with greater access to and control over their
advertising images. Accordingly, it has formed the Image Technology Group to
develop an interactive image management system which links advertisers and
graphic designers with a database of images. The database enables them to avoid
re-creation costs and streamline production flows by creating, storing,
retrieving, and editing their advertisements through on-line connections from
their offices. Laser Tech continues to work with TC Advertising to integrate its
digital premedia communications network with TC Advertising's production
facilities.
Enter New Media Markets. Laser Tech is leveraging its electronic premedia
services into the emerging technology markets of electronic distribution of
information via the World Wide Web, CD ROM and other electronic delivery
methods. Laser Tech's traditional customer base is actively seeking to exploit
these emerging media distribution channels. Laser Tech believes that these new
distribution methods, combined with an increasing need for digital archiving and
retrieval of digital images, present significant growth opportunities for Laser
Tech.
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Expand Outsourcing Facilities. Laser Tech maintains multiple facilities in
major markets across the country as well as "outsourced services" sites on
customers' premises and at various TC Advertising production sites. Electronic
imaging hubs are being developed to service Laser Tech's regional and national
customer base. These hubs will provide first-line and overflow imaging
manufacturing support for regional and national sales efforts.
Leverage Existing Markets. In conjunction with TC Advertising, Laser Tech
is focusing on providing services to the substantial retail customer base of TC
Advertising, including electronic premedia services, image storage and retrieval
services, and customized application software for increased production
efficiency for both print and new media distribution channels. Furthermore, the
acquisition of DCS enhanced Laser Tech's ability to service its retail customer
base with DCS's significant retail advertising insert and catalog production
expertise.
Sales and Customers
The Company's premedia sales force is organized into four market
categories with 55 sales representatives in 13 offices. The Company's principal
customer groups in the premedia sector include magazine, retail catalog and
advertising insert producers, consumer product packaging manufacturers,
advertising agencies, and consumer goods manufacturers and retailers. The
largest of these customers include DDB Needham Worldwide; Kmart; Office Depot;
RJR Nabisco Holdings Corp.; Tyson Foods, Inc. and Wal-Mart. The Company does not
believe that the loss of any single customer of Laser Tech would have a material
adverse effect on the Company's consolidated financial condition or results of
operations.
Competition
The premedia industry sector is highly fragmented and undergoing a period
of consolidation. The Company's major competitors in this sector are Applied
Graphics Technologies, Inc., Wace USA and Schawk, Inc. The major competitive
factors in the premedia business are price, quality of finished products,
distribution capabilities, ongoing customer service and availability of time on
equipment which is appropriate in size and function for a given project. The
consolidation of customers within certain of the Company's premedia businesses
provides both greater competitive pricing pressures and opportunities for
increased volume solicitation.
ADDITIONAL COMPANY INFORMATION
Raw Materials
In 1996, Big Flower spent approximately $610 million on raw materials. The
primary raw materials required in the Company's printing operation are paper,
ink, plates
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and adhesives and in its premedia operations are film, chemicals, computer
supplies and proofing materials. The Company believes that there are adequate
sources of supply for its primary raw materials and that its relationships with
its suppliers yield improved quality, pricing and overall service to its
customers. Although there can be no assurance that the Company's sources of
supply for its paper will be adequate in all circumstances, in the event that
such sources are not adequate, the Company believes that alternative sources can
be developed in a timely manner.
The Company's results of operations depend to a large extent on the cost
of paper and the ability of the Company to pass along to its customers any
increases in these costs and remain competitive when there are decreases. In
recent years, the Company has substantially reduced the number of its suppliers
of paper and has formed stronger commercial relationships with such suppliers,
resulting in its ability to negotiate favorable price discounts and achieve more
assured sourcing of high quality paper that meets the Company's specifications.
In connection with its acquisition by Big Flower, TC Advertising entered
into a long-term ink supply agreement with a single supplier, effective July 31,
1993, pursuant to which it is obligated to purchase from such supplier a
substantial portion of its annual requirements for ink. The terms of this
agreement are confidential.
Webcraft also has an ink supply agreement with a supplier pursuant to
which Webcraft is obligated until August 1998 to purchase from such supplier not
less than 80% of Webcraft's annual requirements for ink for heatset and
flexographic inks at all plants operated by Webcraft. Price is determined on a
price per pound basis that is subject to adjustments based on competitive
pricing. In addition, Webcraft enjoys an incentive program based on annual
purchase levels.
The Company internally produces most of the adhesives needed for its
printing operations, through its adhesives and coatings subsidiary, Webcraft
Chemicals, Inc. ("Webcraft Chemicals"), but believes that there are other ready
sources for these products. This subsidiary also supplies a variety of specialty
chemicals for unusual format applications. Webcraft Chemicals is currently
working with other Big Flower companies to increase sales of adhesives, coatings
and other specialty chemicals to these potential customers.
Trade Names, Trademarks and Patents
The Company owns certain trade names, trademarks and patents used in its
business. The loss of any such trade name, trademark or patent would not have a
material adverse effect on the Company's consolidated financial condition or
results of operations.
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Seasonality
The advertising insert sector of the Company is seasonal in nature, with
activity increasing prior to the following advertising periods: Easter (March
15-April 15); Memorial Day (April 15-May 15); Back to School (July 15-August
15); and Thanksgiving/Christmas (October 1-December 15). On a monthly basis, the
Company's sales in this area are generally highest in April, May, October and
November. The remainder of the Company's products and services are not seasonal
in nature. Based on its historical experience, the Company expects its operating
results to be highest in the quarter ended December 31 and weakest in the
quarter ended March 31.
Governmental Regulations
The Company's business is subject to a variety of federal, state and local
laws, rules and regulations. The Company's production facilities are governed by
laws and regulations relating to workplace safety and worker health, primarily
the Occupational Safety and Health Act ("OSHA") and the regulations promulgated
thereunder. Except as described herein, the Company is not aware of any pending
legislation that in its view is likely to affect significantly the operations of
the Company's business. The Company believes that the operations of its
subsidiaries comply substantially with all applicable governmental rules and
regulations.
Environmental Matters
Certain of the Company's operations are subject to federal, state and
local environmental laws and regulations concerning the discharge, storage,
handling and disposal of hazardous or toxic substances. Such laws and
regulations provide for significant fines, penalties and liabilities, in certain
cases without regard to whether the owner or operator of the property knew of,
or was responsible for, the release or presence of such hazardous or toxic
substances. In addition, third parties may make claims against owners or
operators of properties for personal injuries and property damage associated
with releases of hazardous or toxic substances. The Company cannot predict what
environmental legislation or regulations will be enacted in the future or how
existing or future laws or regulations will be administered or interpreted. The
Company therefore cannot predict the amount of future expenditures which may be
required in order to comply with any environmental laws or regulations or to
satisfy any such claims. Based on currently available information, the Company
believes that its operations comply substantially with all applicable
environmental laws and regulations.
The Company's acquisition of Webcraft resulted in certain obligations
under the New Jersey Industrial Site Recovery Act, formerly known as the
Environmental Cleanup Responsibility Act (together, "ISRA"), which is triggered
by the transfer of industrial property. For the four New Jersey sites, the New
Jersey Department of Environmental Protection ("NJDEP") approved the transfer of
Webcraft's facilities without requiring any further investigatory or cleanup
work under ISRA. At two sites, Webcraft and the NJDEP
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agreed that Webcraft would continue to maintain financial guarantees that were
previously established pursuant to ISRA (in the amounts of $30,000 and
$1,000,000), continue site investigations that were already underway, and
institute remediation measures as appropriate, based on its investigations. At
the third site, Webcraft established a nominal financial guarantee which the
Company believes will be sufficient to cover the costs of investigating and
remediating contamination discovered there. At the fourth site, no financial
guarantee was required by the NJDEP, which has subsequently issued a letter
confirming that the ISRA matter is complete. The Company has obtained an
indemnification from the selling shareholders of Webcraft for certain costs
resulting from pre-existing conditions pertaining to Webcraft, including but not
limited to environmental matters. This indemnification is subject to certain
limitations, including threshold requirements and a maximum liability cap of
$4.8 million. With respect to Webcraft's ISRA obligations, the Company believes,
based on the indemnification agreement, as well as potential contribution from a
third party for contamination at one such site, and existing cost estimates for
all such sites, that its liability for such matters will not have a material
adverse effect on the Company's consolidated financial position or results of
operations. However, there can be no assurance that such matters will not
ultimately have such an effect.
TC Advertising and Webcraft have been identified as potentially
responsible parties ("PRPs") for the cleanup of contamination resulting from
disposals of hazardous waste pursuant to the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended ("CERCLA" or
"Superfund") and analogous state laws. Courts have interpreted CERCLA to impose
strict, joint and several liability upon all persons liable for response costs
at a cleanup site if the harm at the site is indivisible. This generally means
that each responsible party could be held liable for the entire costs of the
necessary response actions at a Superfund site. As a practical matter, however,
at sites where there are multiple PRPs for a cleanup, the costs of cleanup
typically are allocated, according to a volumetric or other standard, among the
parties. CERCLA also provides that responsible parties generally may seek
contribution for the costs of cleaning up a site from other responsible parties.
Thus, if one party is required to clean up an entire site, that party can seek
reimbursement or recovery of such costs from other responsible parties.
TC Advertising has been identified as a PRP at two sites pursuant to
CERCLA, and one additional site pursuant to analogous state environmental laws
and regulations, to which sites TC Advertising, among others, sent waste in the
past. TC Advertising believes that, with respect to one site, its liability will
not be material, and the Company has established a nominal reserve to cover any
such liability. With respect to the other two sites, TC Advertising believes
that it is, or may be responsible for a very minor portion, if any, of the total
cleanup costs at each such site. As a result, based on a review of the data
available to the Company regarding each such site, including the number and
viability of other PRPs, the minor volumes of waste which TC Advertising is
alleged to have contributed, the range of likely cleanup costs, and a comparison
of TC Advertising's alleged liability at each such site to settlements
previously reached by TC Advertising in similar cases, the Company believes that
such matters will not result in liabilities or expenditures that will have a
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material adverse effect on the Company's consolidated financial position or
results of operations. Nonetheless, because neither the final total cleanup
costs at each of the remaining sites have been ascertained nor TC Advertising's
final proportionate share determined, there can be no assurance that such
matters, or any similar liabilities that arise in the future, will not
ultimately have such an effect.
Webcraft has been identified as a PRP at two sites pursuant to CERCLA
and/or analogous state law, to which site Webcraft, among others, sent waste in
the past. Based on the minor volumes of waste which Webcraft is alleged to have
contributed, the range of likely cleanup costs, and the indemnification
agreement between the Company and the selling shareholders of Webcraft, the
Company believes that this matter will not result in liabilities or expenditures
that will have a material adverse effect on the Company's consolidated financial
position or results of operations. However, because neither the final total
cleanup costs at these sites have been ascertained nor Webcraft's final
proportionate share determined, there can be no assurance that such matters, or
any similar liabilities that arise in the future, will not ultimately have such
an effect.
In addition, in 1990, the United States Environmental Protection Agency
("EPA") identified Webcraft, among others, as a PRP pursuant to CERCLA for
regional groundwater contamination in the vicinity of Webcraft's Chalfont,
Pennsylvania facility. Webcraft responded to the EPA notice disclaiming any
responsibility for such contamination. As of the present time, Webcraft has
heard nothing further from EPA regarding this matter. Based on an
indemnification agreement with the prior site owner, as well as the
indemnification agreement with the selling shareholders of Webcraft, the Company
believes that its liability, if any, at this site will not have a material
adverse effect on the Company's consolidated financial position or results of
operations. However, because the nature of the claim has not been ascertained,
there can be no assurance that such matter will not ultimately have such an
effect.
Employees
As of March 1, 1997, the Company had approximately 6,410 employees, of
which approximately 1,413 were salaried and 4,997 were hourly. Most of
Webcraft's hourly employees at its North Brunswick and Newark, New Jersey
facilities are represented by the United Paper Workers International Union,
AFL-CIO. Webcraft entered into a new three-year contract with this union on
February 1, 1995. Under this agreement, represented employees will receive an
hourly base rate increase of 3% in 1997. The Company believes it has
satisfactory employee and labor relations.
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Item 2. Properties
The Company maintains a large number of diverse properties. Management
believes that these properties, taken as a whole, are generally well maintained
and are adequate for current and foreseeable business needs. The majority of
these properties are leased. Substantially all of the Company's materially
important physical properties are being fully utilized. The Company's properties
are covered by all-risk and liability insurance which the Company believes is
customary for the industry.
Executive Offices
Big Flower, TC Advertising, Webcraft and Laser Tech each lease their
executive offices in New York City, New York; Baltimore, Maryland; Horsham,
Pennsylvania and Irving, Texas, respectively. The lease terms for Big Flower's,
Webcraft's and Laser Tech's facilities expire in November 2006, February 1998
and September 1999, respectively. TC Advertising occupies its executive offices
pursuant to two leases that expire in December 2000 and December 2005,
respectively.
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Production Facilities
As of March 1, 1997, the Company owned 11 and leased 23 production
facilities, with lease terms expiring from September 30, 1997 to May 30, 2006,
as set forth below:
Approximate Land Title; If Leased,
TC Advertising Locations Square Footage Lease Term Expiration
- - ------------------------ -------------- ---------------------
Atlanta, GA(1) 100,057 Fee Ownership
Charlotte, NC 105,400 December 31, 2002
City of Industry, CA 103,000 September 30, 2001
Columbus, OH 141,185 December 31, 2004
Dallas, TX 90,000 September 30, 1997
East Longmeadow, MA 159,241 February 3, 2006
Elk Grove Village, IL 80,665 August 31, 2002
Greenville, MI 130,000 Fee Ownership
Lenexa, KS 90,000 Fee Ownership
Manassas, VA 108,120 February 28, 2003
Niles, MI 90,000 Fee Ownership
Pomona, CA 144,542 May 31, 2006
Portland, OR 125,250 October 31, 2002
Sacramento, CA 57,483 Fee Ownership
Saugerties, NY(1) 209,000 Fee Ownership
Salt Lake City, UT 55,000 October 31, 1997
San Antonio, TX 67,900 Fee Ownership
Tampa, FL 72,418 October 31, 1999
Webcraft Locations
Bristol, PA 132,000 Fee Ownership
Chalfont, PA 320,000 Fee Ownership
Newark, NJ 23,000 Fee Ownership
Newark, NJ 22,692 June 30, 1998
North Brunswick, NJ 296,000 Fee Ownership
Salisbury, MD 66,000 July 7, 1999
Laser Tech Locations
Atlanta, GA 15,588 February, 2001
Carlsbad, CA 8,500 December 1, 1998
Dallas, TX 15,000 September 30, 1997
Delray Beach, FL 2,500 February 28, 1998
Irvine, CA 13,000 October 9, 1998
Irving, TX 62,687 September 1, 1999
Mobile, AL 4,200 June 30, 2000
Salt Lake City, UT(2) 840 --
San Antonio, TX 7,927 October 31, 1997
San Francisco, CA 5,260 May 31, 2000
St. Louis, MO(1) 38,000 May 30, 2006
- - ----------
(1) Comprised of two adjacent facilities.
(2) Located within TC Advertising's Salt Lake City facility.
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Sales Offices and Other Facilities
As of March 1, 1997, the Company had 41 sales offices and five other
facilities in the cities listed below. The locations designated with an asterisk
are sales offices located in production facilities. All of the sales offices and
other facilities listed below are leased, with lease terms expiring fromMarch
31, 1997 to June 30, 2006, with the exception of the offices in Lenexa, Kansas,
which are owned.
TC Advertising Locations
- - ------------------------
Atlanta, GA Greenville, MI* Sewickley, PA
Charlotte, NC* Industry, CA(2) Salt Lake City, UT
Columbus, OH(2) Lenexa, KS* San Antonio, TX(2)
Dallas, TX* Norwell, MA Saugerties, NY*
Dayton, OH North Kansas City, MO(2) Seattle, WA
Elk Grove Village, IL* Portland, OR Tampa, FL*(3)
Glendora, CA(1),(4) Sacramento, CA Wilmington, DE
Webcraft Locations
- - ------------------
Atlanta, GA Detroit, MI Minneapolis, MN
Chicago, IL Greensboro, NC New York, NY
Columbus, OH Horsham, PA* North Brunswick, NJ*
Dallas, TX Los Angeles, CA San Francisco, CA
Washington, D.C.
Laser Tech Locations
- - --------------------
Atlanta, GA* Delray Beach, FL* Rosemont (Chicago), IL
Carlsbad, CA* Glendora, CA Salt Lake City, UT*
Cincinnati, OH Irvine, CA* San Antonio, TX*
Dallas, TX* Irving, TX* San Francisco, CA*
St. Louis, MO(4)*
- - ----------
(1) Engineering support services and sales office.
(2) Warehouse.
(3) Additional warehouse facility.
(4) Comprised of two facilities.
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Item 3. Legal Proceedings
Certain claims, suits and complaints which arise in the ordinary course of
the Company's business have been filed or are pending against the Company. The
Company believes that all such matters either are adequately reserved for, are
covered by insurance, or would not have a material adverse effect on the
Company's consolidated financial condition or results of operations, if
adversely determined against the Company.
Item 4. Submission of Matters to Vote of Security Holders
On November 7, 1996, the Company held its Annual Meeting of Stockholders.
At the Annual Meeting, Robert M. Kimmitt, Newton N. Minow and Edward M. Yorke
were elected to serve as Directors of the Company, each for a term of three
years. The following individuals continue to serve on the Company's Board of
Directors: R. Theodore Ammon, Leon D. Black, Peter G. Diamandis, Joan D. Manley
and Edward T. Reilly. At the Annual Meeting, the stockholders also approved the
appointment of Deloitte & Touche LLP as the Company's independent certified
public accountants.
The voting on the above matters is set forth below:
Election of Directors
Nominee Votes For Votes Withheld
- - ------- --------- --------------
Robert M. Kimmitt 13,709,469 167,050
Newton N. Minow 13,709,469 167,050
Edward M. Yorke 13,709,469 167,050
Proposal 2 - Ratification of the Appointment of Deloitte & Touche LLP: There
were 13,852,774 votes for, 2,020 against and 21,725 abstentions.
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PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Market Information for Common Stock
The Common Stock is traded on the New York Stock Exchange, Inc. under the
symbol "BGF". Each share of Common Stock is traded together with a right
entitling the holder to purchase one one-hundredth of a share of Series A Junior
Preferred Stock. There is no established public trading market for the Class B
Common Stock.
The Common Stock first traded on the New York Stock Exchange on November
22, 1995. Prior to November 22, 1995, there was no established trading market
for the Common Stock. Set forth below are the high and low sales prices for the
Common Stock for the period indicated, as reported in the consolidated
transaction reporting system.
Sales Price
-----------
High Low
---- ---
Fiscal 1996
First Quarter ended March 31 ............ $19-1/8 $10-7/8
Second Quarter ended June 30 ............ 14-5/8 11-7/8
Third Quarter ended September 30 ........ 14 12-1/2
Fourth Quarter ended December 31 ........ 18-3/4 12-1/4
Transition Period 1995
November 22, 1995 to December 31, 1995 .. $15-3/4 $ 15
Holders
As of March 14, 1997, there were approximately 226 holders of record of
the Common Stock and one holder of record of the Class B Common Stock.
Dividends
Big Flower has not paid cash dividends on its Common Stock and intends to
continue this policy for the foreseeable future and retain earnings for
repayment of indebtedness and investment in its business.
Because Big Flower is a holding company, holders of its debt and equity
securities, including holders of the Common Stock, are dependent primarily upon
the cash flow from Big Flower's subsidiaries for payment of principal, interest
and dividends. Potential dividends and other advances and transfers from Big
Flower's subsidiaries represent its most significant sources of cash flow.
Applicable state laws and the provisions of the debt instruments by which Big
Flower's principal subsidiaries are bound limit the ability of such companies to
declare dividends or
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otherwise provide funds to Big Flower. On November 28, 1995 Big Flower entered
into a revolving credit facility (as amended to date, the "Credit Agreement").
The Credit Agreement restricts the ability of TC Advertising, Webcraft and Laser
Tech to pay dividends to the Company and the Company's ability to pay dividends
to its stockholders, but allows cash dividends to the Company for operating
expenses in the ordinary course of business up to an initial amount of $10.0
million for Fiscal 1996, increasing by 10% for each year thereafter.
Additionally, the Credit Agreement permits dividends from Big Flower's
subsidiaries (a) to enable the Company to pay interest on its 10 3/4% Senior
Subordinated Notes due 2003 (the "10 3/4% Notes") (or refinancings thereof), to
pay dividends on certain issuances of preferred stock and to undertake certain
debt buybacks and (b) up to 25% of cumulative consolidated net income from March
19, 1996.
In addition, the indenture governing the 10 3/4% Notes imposes certain
restrictions on Big Flower's ability to pay dividends on its Common Stock.
For additional information regarding these debt instruments see "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources" and Notes 3 and 9 to the
Consolidated Financial Statements.
Item 6. Selected Financial Data
The following table sets forth selected financial data of predecessor TC
Advertising prior to its acquisition by Big Flower ("Predecessor TC
Advertising") and of Big Flower and its subsidiaries (including TC Advertising)
following Big Flower's acquisition of TC Advertising. The selected financial
data as of and for each of the two fiscal years in the periods ended June 30,
1993 and for the 42 days ended August 11, 1993 were derived from the audited
consolidated financial statements of Predecessor TC Advertising. The selected
financial data of Big Flower as of and for the 323 day period ended June 30,
1994, the fiscal year ended June 30, 1995, the six months ended December 31,
1995 and the year ended December 31, 1996 were derived from the audited
financial statements of Big Flower, restated for the merger with Scanforms. For
additional information, see the consolidated financial statements of Predecessor
TC Advertising and Big Flower and the notes thereto. The selected historical
financial data should also be read in conjunction with Item 7. "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
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<PAGE>
Selected Financial Data
(in thousands)
<TABLE>
<CAPTION>
Predecessor TC Advertising Big Flower
------------------------------- ----------------------------------------------
42 Days Six Months Year
Ended 323 Days Year Ended Ended
Year Ended June 30, August Ended Ended December December
---------------------- 11, June 30, June 30, 31, 31,
1992 1993 1993 1994 1995 1995 1996
--------- --------- -------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Data:
Net sales $ 536,113 $ 555,013 $ 59,584 $ 587,630 $ 920,149 $ 546,840 $ 1,201,860
Operating income 23,475 22,436 665 25,488 50,712 39,739 69,343
Interest expense (a) 9,249 6,792 578 19,735 37,452 19,076 36,165
Income (loss) before income taxes 7,696 10,204 (228) (549) 5,268 12,694 4,998
Income (loss) before extraordinary item 4,196 4,685 (139) (3,277) (1,612) 6,491 (3,285)
Extraordinary item, Net -- -- -- -- -- (19,248) (2,078)
Net income (loss) 4,196 4,685 (139) (3,277) (1,612) (12,757) (5,363)
Average shares outstanding 11,294 12,458 13,919 18,315
Other Data:
EBITDA (b) 37,115 34,560 1,901 54,238 93,699 58,372 122,588
Capital Expenditures 7,354 6,967 1,280 6,133 8,496 16,812 55,391
Cash flows provided by (used in) operating
activities (c) 19,017 21,823 (6,363) 31,514 47,597 27,881 135,936
Cash flows provided by (used in) investing
activities (c) (2,183) 10,708 (1,280) (270,223) (7,013) (19,050) (170,849)
Cash flows provided by (used in) financing
activities (c) (16,336) (31,453) 6,209 241,975 (39,789) (4,326) 29,941
Balance Sheet Data (at period end):
Working Capital $ 4,567 ($ 3,597) -- $ 25,198 $ 34,173 $ 29,797 ($30,821) (d)
Net property, plant and equipment 84,238 62,850 -- 152,306 137,081 145,323 296,426
Total assets 185,710 160,356 -- 521,461 502,939 573,393 749,742
Long-term debt, net of current portion 73,183 34,485 -- 331,940 301,935 274,161 430,766
Redeemable preferred stock of a subsidiary -- -- -- 16,913 19,357 -- --
Common stockholders' equity 27,595 32,663 -- 19,449 16,593 84,476 96,350
</TABLE>
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<PAGE>
(a) Interest expense excludes amortization of deferred financing fees of
Predecessor TC Advertising of $0.3 million, $2.4 million, and $0.1 million for
the twelve months ended June 30, 1992, the twelve months ended June 30 1993 and
for the 42 day period ended August 11, 1993, respectively, and of Big Flower of
$1.9 million, $3.4 million, $1.6 million and $1.8 million for the 323-day period
ended June 30, 1994, the fiscal year ended June 30, 1995, the six months ended
December 31, 1995 and the year ended December 31, 1996, respectively.
(b) "EBITDA" represents the sum of operating income, depreciation, amortization
of intangibles and merger costs. EBITDA is presented here to provide additional
information about the Company's ability to meet its future debt service, capital
expenditure and working capital requirements and should not be construed as a
better indicator of operating performance than income from operations as
determined in accordance with generally accepted accounting principles ("GAAP"),
or a better indicator of liquidity than cash flow from operating activities as
determined in accordance with GAAP.
(c) Cash flows from operating, investing and financing activities are
significantly affected by the acquisition of TC Advertising, KTB, Retail
Graphics, Webcraft and the other acquisitions which occurred in 1996. See the
consolidated statements of cash flows of Big Flower and the notes thereto
included elsewhere herein and Item 7. "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
(d) Working Capital for the year ended December 31, 1996 is affected by the A/R
Securitization (hereinafter defined). See discussion in Item 7. "Management's
Discussion and Analysis of Financial Condition and Results of
Operations-Liquidity and Capital Resources."
30
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Introduction
The discussion below relates to the consolidated financial condition and
results of operations of Big Flower, restated for the October 4, 1996 merger
with Scanforms, for the year ended December 31, 1996 , the six months ended
December 31, 1995, the fiscal year ended June 30, 1995 and the 323 days ended
June 30, 1994. All periods below have been restated for the merger with
Scanforms.
31
<PAGE>
<TABLE>
<CAPTION>
OPERATING DATA (In Thousands)
323 Days
Ended Year Ended 6 Months Ended 6 Months Ended Year Ended Year Ended
June 30, June 30, December 31, December 31, December 31, December 31,
1994 1995 1994 1995 1995 1996
--------- --------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 587,630 $ 920,149 $ 468,943 $ 546,840 $ 998,046 $ 1,201,860
Operating expenses:
Costs of production 497,570 775,033 396,893 459,788 837,928 971,789
Selling, general and
administrative 35,822 51,417 23,481 28,680 56,616 107,483
Depreciation 12,937 20,869 10,576 10,533 20,826 34,756
Amortization of intangibles 15,813 22,118 11,125 8,100 19,093 17,003
Merger costs 1,486
--------- --------- --------- --------- ----------- -----------
562,142 869,437 442,075 507,101 934,463 1,132,517
--------- --------- --------- --------- ----------- -----------
Operating income 25,488 50,712 26,868 39,739 63,583 69,343
--------- --------- --------- --------- ----------- -----------
Other expenses (income):
Interest expense 21,671 40,889 20,013 20,670 41,542 37,967
Interest income (53) (279) (43) (442) (678) (712)
Loss on sale of Webcraft Games, Inc. 14,277
Other, net 2,506 2,390 345 5,749 7,795 12,813
Preferred dividends of a
subsidiary 1,913 2,444 1,166 1,068 2,346
--------- --------- --------- --------- ----------- -----------
26,037 45,444 21,481 27,045 51,005 64,345
--------- --------- --------- --------- ----------- -----------
Income (loss) before
income taxes (549) 5,268 5,387 12,694 12,578 4,998
Income tax expense 2,728 6,880 3,333 6,203 9,750 8,283
--------- --------- --------- --------- ----------- -----------
Income (loss) before
extraordinary item (3,277) (1,612) 2,054 6,491 2,828 (3,285)
Extraordinary item, net (19,248) (19,248) (2,078)
--------- --------- --------- --------- ----------- -----------
Net income (loss) ($ 3,277) ($ 1,612) $ 2,054 ($ 12,757) ($ 16,420) ($ 5,363)
========= ========= ========= ========= =========== ===========
</TABLE>
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<PAGE>
General
The cost of paper is a principal factor in the Company's pricing to
certain customers and consequently the cost of paper significantly affects net
sales. The Company is generally able to pass increases in the cost of paper to
its customers, while declines in paper costs result in lower prices to
customers. Volatility in paper costs results in a corresponding volatility in
the Company's net sales, but generally does not affect volume or profits to any
significant extent.
Capacity in the paper industry has remained relatively stable in recent
years, increases or decreases in demand for paper have led to corresponding
pricing changes and, in periods of high demand, to limitations on the
availability of certain grades of paper, including grades utilized by the
Company. The Company believes that its strong relationships with major North
American paper suppliers should enable the Company to satisfy its paper
requirements on competitive terms even in periods of high demand.
During the soft retail advertising environment experienced during the
first three months of 1996, the Company experienced weaknesses in volumes and,
in some instances, prices. Although the retail advertising environment has
improved since the first quarter, the Company experienced the residual effects
of a soft retail advertising environment throughout the remainder of the year.
The Company's results of operations for the periods presented have been
significantly impacted by the amortization of intangible assets which arose as a
result of acquisitions. See Note 2 to the Consolidated Financial Statements.
Results of Operations
Comparison of the year ended December 31, 1996 with the year ended December 31,
1995
Net sales increased 20.4% or $203.8 million. The addition of the
operations of Laser Tech, Webcraft and their acquisitions for the year ended
December 31, 1996 generated an increase of approximately $302.5 million. This
increase was offset by a net decrease in TC Advertising's net sales after the
effect of the fourth quarter 1996 acquisition of PrintCo which generated
approximately $28.2 million in sales. Due to a soft retail advertising
environment, TC Advertising's volume was slightly below the prior year. In
addition, paper costs, which significantly affect net sales, were 42.2% of
the Company's net sales for the year ended December 31, 1996 compared to
49.8% of the Company's net sales for the year ended December 31, 1995. The
decrease in paper costs as a percent of sales is attributable to lower paper
prices and acquisitions where paper is less of a component of costs.
Operating income increased to $69.3 million in the year ended December 31,
1996 from $63.6 million in the year ended December 31, 1995, an increase of $5.8
million or 9.1%. Costs of production as a percent of sales decreased from 84.0%
to 80.9%, principally attributable to the inclusion in 1996 of the operations of
Laser Tech, Webcraft and their acquisitions. In addition, the
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<PAGE>
cost of paper had an effect on cost of production as a percent of sales for TC
Advertising. Selling, general and administrative costs increased approximately
$50.9 million to $107.5 million for the year ended December 31, 1996 compared to
$56.6 million for the year ended December 31, 1995. The addition of Laser Tech,
Webcraft and their acquisitions increased selling, general and administrative
costs by $53.5 million. Amortization of intangibles decreased by $2.1 million
from $19.1 million for the year ended December 31, 1995 to $17.0 million for the
year ended December 31, 1996. Certain intangibles related to the acquisition of
KTB and Retail Graphics became fully amortized during the year ended
December 31, 1995 offset by the amortization of the goodwill associated with
the 1996 acquisitions. Costs of $1.5 million incurred in connection with the
merger with Scanforms also affected operating income in the year ended
December 31, 1996.
Net interest expense for the year ended December 31, 1996 was $37.3
million compared to $40.9 million for the year ended December 31, 1995.
Amortization of deferred financing costs decreased $1.5 million from $3.3
million for the year ended December 31, 1995 to $1.8 million for the year ended
December 31, 1996. In connection with the initial public offering of Big Flower
(the "Offering") in November of 1995, the Company repurchased the remainder of
its 13 1/2% senior discount notes due 2004 (the "13 1/2 Notes"), 11% debentures
due 2005 ("11% Debentures") and a portion of the 10 3/4% Notes. Additional
borrowings in 1996 under the Company's revolving credit facility have been at
lower interest rates.
Other, net increased $5.0 million from $7.8 million for the year ended
December 31, 1995 to $12.8 million for the year ended December 31, 1996. The
increase principally reflects $5.2 million in non-recurring charges related to
the acquisition of Webcraft in March of 1996.
During the fourth quarter of 1996, the Company recorded a $14.3 million
loss on the disposition of its lottery production division, Webcraft Games, Inc.
Management believes that the disposition will enable the Company to focus on
Webcraft's growth-oriented products such as customized direct mail.
The extraordinary item, net of tax, of $2.1 million was due to early
extinguishment of debt subsequent to the acquisitions of Webcraft and PrintCo.
The effective income tax rate for the year ended December 31, 1996 and
1995 exceeded the federal statutory tax rate due primarily to amortization of
goodwill (which is not deductible for income tax purposes), preferred dividends
of a subsidiary, state income taxes and, in 1996, the loss on the sale of
Webcraft Games, Inc.
Net income for the year ended December 31, 1996, adjusted for
non-recurring charges of (i) approximately $2.7 million of compensation expenses
related to the acquisition of DCS and DDI, (ii) $1.5 million of merger expenses
associated with acquisition of Scanforms, (iii) a $14.3 million loss related to
the sale of Webcraft Games, Inc., (iv) $5.2 million of financing costs related
to the
34
<PAGE>
acquisition of Webcraft, and (v) a $2.1 million loss on debt extinquishment
subsequent to the acquisitions of Webcraft and Printco, would have been $14.4
million, or $0.78 cents per share.
Comparison of the six months ended December 31, 1995 with the six months ended
December 31, 1994
Net sales increased to $546.8 million for the six months ended December
31, 1995 from $468.9 million for the six months ended December 31, 1994, an
increase of $77.9 million or 16.6%. Volume increased approximately 1%. Paper
costs, which significantly affect net sales, were 51.9% of net sales for the six
months ended December 31, 1995, compared to 45.3% of net sales for the six
months ended December 31, 1994.
Operating income for the six months ended December 31, 1995 increased to
$39.7 million compared to $26.9 million for the six months ended December 31,
1994, an increase of $12.9 million or 47.9%. Despite higher paper costs, costs
of production as a percent of net sales decreased to 84.1% for the six months
ended December 31, 1995 from 84.6% for the six months ended December 31, 1994.
Variable costs (excluding paper and ink costs) were 6% lower for the six months
ended December 31, 1995 compared to the prior comparable period. These reduced
variable costs were the result of higher volume, efficiency improvements and
cost controls. The increase in operating income for the six months ended
December 31, 1995 was also favorably impacted by the addition of Laser Tech in
late November and improved operating performance at the facilities acquired with
KTB and Retail Graphics in April 1994. Amortization of intangibles for the six
months ended December 31, 1995 was $8.1 million compared to $11.1 million for
the six months ended December 31, 1994. Amortization of certain intangible
assets associated with the acquisitions of TC Advertising, KTB and Retail
Graphics was $3.4 million lower in the six months ended December 31, 1995
compared to the prior comparable period as several of these assets became fully
amortized. Offsetting the lower amortization of intangible assets in the six
months ended December 31, 1995 was an increase in the provision for doubtful
accounts of $1.6 million reflecting the higher volume and conditions in certain
sectors of the retail market and $2.7 million due to higher personnel and
related costs and the addition of Laser Tech operations since late November
1995.
Net interest expense for the six months ended December 31, 1995 was $20.2
million compared to $20.0 million for the six months ended December 31, 1994.
Amortization of deferred financing costs were $1.6 million for the six months
ended December 31, 1995 and $1.7 million for the six months ended December 31,
1994. Interest expense for the six months ended December 31, 1995 included $12.9
million in net interest on the 10 3/4% Notes and the 13 1/2% Notes, and $6.0
million in net interest on other debt, primarily under the Credit Agreement
entered into by TC Advertising in April 1994 (the "1994 Credit Agreement").
Other, net for the six months ended December 31, 1995 was $5.7 million
compared to $0.3 million for the six months ended December 31, 1994. The other ,
net, for the six months ended December 31, 1995 included $1.6 million for the
consolidation of two operating locations, and $3.7
35
<PAGE>
million to complete the relocation of TC Advertising's corporate office to
Baltimore, Maryland from Glendora, California.
The extraordinary item, net of tax, of $19.2 million was due to early
extinguishment of debt as discussed in "Liquidity and Capital Resources" below.
The effective income tax rate for the six months ended December 31, 1995
and 1994 exceeded the federal statutory tax rate due primarily to amortization
of goodwill (which is not deductible for income tax purposes), preferred
dividends of a subsidiary and state income taxes.
Net income for the six months ended December 31, 1995 and December 31,
1994 on a pro forma basis, reflecting the impact of the Offering of shares of
Common Stock and related transactions, would have been $10.1 million, or $0.56
cents per share, and $6.9 million, or $0.38 cents per share, respectively.
Excluding the effects of the second quarter charges for the consolidation of two
operating locations and to complete the relocation of TC Advertising's corporate
office, net income for the six months ended December 31, 1995 would have been
$13.3 million, or $.74 cents per share.
Comparison of twelve months ended June 30, 1995 with 323 days ended June 30,
1994
Net sales increased to $920.1 million for the twelve months ended June 30,
1995 from $587.6 million for the 323 days ended June 30, 1994 , an increase of
$332.5 million or 56.6%. The increase was primarily attributable to the
acquisition of KTB and Retail Graphics in April 1994, which produced $189.7
million of this increase.
Operating income for the year ended June 30, 1995 increased $25.2 million
or 99.0%. Cost of production as a percent of net sales decreased to 84.2% for
the year ended June 30, 1995 from 84.7% in the prior period. Variable costs
(excluding paper and ink costs) were lower for the twelve months ended June 30,
1995 compared to the prior period.
Liquidity and Capital Resources
The operations of the Company historically have been funded with
internally generated funds, term loans and borrowings under a revolving credit
facility.
The Company's current liabilities exceeded current assets by $30.8 million
at December 31, 1996 compared with working capital of $29.8 million at December
31, 1995, a decrease of $60.6 million. This decrease is attributable to an
agreement entered into by the Company in 1996, pursuant to which the Company can
sell fractional undivided beneficial interests in a designated pool of certain
eligible accounts receivable (the "A/R Securitization"). See Note 5 to the
Consolidated Financial Statements. Excluding the effects of the A/R
Securitization, working capital at December 31, 1996 would have been $49.0
million. The ratio of current assets to current
36
<PAGE>
liabilities as of December 31, 1996 was .84 to 1 (1.25 to 1 excluding the A/R
Securitization), and as of December 31, 1995 was 1.16 to 1.
Net cash provided by operating activities for the year ended December 31,
1996 was $135.9 million, an increase of $72.3 million from the prior comparable
period. This increase was primarily due to the net effect of the A/R
Securitization, effect of acquisitions made by the Company and a reduction in
paper inventories. Net cash used in investing activities were financed primarily
through borrowings under the Credit Agreement and the A/R Securitization.
Capital expenditures of $55.4 million and $20.6 million for the year ended
December 31, 1996 and 1995, respectively, were financed by cash from operations
and borrowings under TC Advertising's revolving credit facility.
On November 22, 1995, the Company consummated the Offering which consisted
of 6,724,688 shares of Common Stock, of which 5,500,000 shares were sold by Big
Flower and 1,224,688 shares were sold by selling stockholders. The net proceeds
of the Offering to Big Flower of $80.3 million were used to redeem on a pro rata
basis at a premium, a portion of the 13 1/2% Notes and a portion of the 10 3/4%
Notes. The remainder of the net proceeds, together with borrowings under the
Company's revolving credit agreement, were used to purchase at a premium the
remaining balance of the 13 1/2% Notes, purchase all of Big Flower's 11%
Debentures at 100% of principal amount, repay all amounts owed under the 1994
Credit Agreement, purchase all outstanding shares of the Company's preferred
stock and terminate Big Flower's interest rate swap agreement. The termination
of the swap agreement and the repayment of the 13 1/2% Notes, the 10 3/4% Notes
and the revolving credit agreement generated an extraordinary loss, net of tax,
of $19.2 million, for the premiums and the deferred financing costs associated
with the amounts repaid.
On November 28, 1995, TC Advertising entered into the Credit Agreement.
The Credit Agreement was amended and restated on March 19, 1996 to add a $75
million term loan. The revolving facility will be reduced by $33.3 million on
the last day of each 1998, 1999 and 2000 and will mature on the last day of
2001. Principal payments on the term loan of $0.75 million are due on the last
day of 1996 through 2001 and will mature on the last day of 2002. Interest on
revolving loans will be payable at TC Advertising's option (a) at a base rate
plus a margin which ranges from 0.00% to 1.25% or (b) at a Eurodollar-based rate
plus a margin which ranges from 0.50% to 2.25%. Interest on the term loan will
be payable at TC Advertising's option (a) at a base rate plus a margin of 1.50%
or (b) at a Eurodollar-based rate plus a margin of 2.50%. The Credit Agreement
also contains covenant requirements and certain dividend restrictions which are
customary for such financings.
The Company believes that internally-generated funds from operations, the
Credit Agreement and A/R Securitization will be sufficient to meet its operating
requirements.
Big Flower has grown through acquisitions, and expects to continue to seek
to acquire businesses in similar or complementary businesses. Such acquisitions
are likely to require the
37
<PAGE>
incurrence and/or assumption of indebtedness and/or obligations, the issuance of
equity securities or some combination thereof. In addition, Big Flower may from
time to time determine to sell or otherwise dispose of certain of its existing
businesses. Big Flower cannot predict if any such transactions will be
consummated, nor the terms or forms of consideration which might be required in
any such transactions.
Seasonality
TC Advertising's advertising circular business is seasonal in nature, with
activity increasing prior to the following advertising periods: Easter (March
15-April 15); Memorial Day (April 15-May 15); Back to School (July 15-August
15); and Thanksgiving/Christmas (October 1-December 15). On a monthly basis, TC
Advertising's sales are generally highest in April, May, October and November.
Sunday comics, newspaper TV listing guides, other newspaper products and other
publications are not seasonal in nature. Net sales for the Company by quarter
for the twelve months ended December 31, 1996 were 19%, 25%, 26% and 30% of
total net sales for the quarters ended March 31, June 30, September 30 and
December 31, respectively. Based on its historical experience and projected
operations, the Company expects its operating results to be highest in the
quarter ended December 31 and weakest in the quarter ended March 31.
Item 8. Financial Statements and Supplementary Data
Reference is made to the Index to Consolidated Financial Statements and
Schedules on page F-1 for Big Flower's consolidated financial statements and
notes thereto and supplementary schedules. All other schedules have been omitted
as not required or not applicable or because the information required to be
presented is included in the consolidated financial statements and related
notes.
Item 9. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
38
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
The following table sets forth certain information regarding the directors
and executive officers of the Company, all of whom are U.S. citizens.
Name Age Positions
- - ---- --- ---------
R. Theodore Ammon...........47 Class III Director; Chairman of the Board and
Chief Executive Officer
Leon D. Black ..............45 Class III Director
Peter G. Diamandis..........65 Class II Director
Robert M. Kimmitt...........49 Class I Director
Joan D. Manley..............64 Class II Director
Newton N. Minow.............71 Class I Director
Edward T. Reilly............50 Class III Director; President and Chief
Operating Officer
Edward M. Yorke.............38 Class I Director
Mark A. Angelson............46 Executive Vice President and General Counsel
and Secretary of the Board of Directors
Richard L. Ritchie..........50 Executive Vice President and Chief Financial
Officer
Certain information regarding each person listed above, including such
person's principal occupation during the past five years and current
directorships, is set forth below. Unless indicated otherwise, all directors and
executive officers have had the indicated principal occupations for the past
five years.
R. Theodore Ammon has been the Chairman of the Board and Chief Executive
Officer of Big Flower since its inception. Mr. Ammon was a General Partner of
Kohlberg Kravis Roberts & Co. (a New York and San Francisco-based investment
firm) from 1990 to 1992, and an executive of such firm prior to 1990. Mr. Ammon
is also a member of the Board of Directors of Host Marriott Corporation,
Foodbrands America, Inc., Culligan Water Technologies, Inc. and Samsonite
Corporation. In addition, Mr. Ammon serves on the Board of Directors of the New
York YMCA, Jazz at Lincoln Center and the Institute of International Education
and on the Board of Trustees of Bucknell University
Leon D. Black has been a Director of Big Flower since 1993. Mr. Black is
one of the founding principals of Apollo Advisors, L.P., which, together with
its affiliate, serves as managing general partner of Apollo Investment Fund,
L.P., AIF II, L.P. and Apollo Investment Fund III, L.P., private securities
investment funds, and of Lion Advisors, L.P., which acts as a financial advisor
to and representative for certain institutional investors with respect to
securities investments. Mr.
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<PAGE>
Black is a director of Converse, Inc., Culligan Water Technologies, Inc.,
Furniture Brands International, Inc., Samsonite Corporation, Telemundo Group,
Inc. and Vail Resorts, Inc.
Peter G. Diamandis has been a Director of Big Flower since September 1994.
Mr. Diamandis has been Vice Chairman of Donnelley Marketing, Inc., a marketing
company, since 1991 and has been the Chairman of TVSM, Inc., a magazine
publishing company, since 1991. From 1988 to 1991, Mr. Diamandis served as
President and Chief Executive Officer of Hachette Publications, which purchased
Diamandis Communications Inc. in 1988. From 1987 to 1988, Mr. Diamandis served
as Chairman, President and Chief Executive Officer of Diamandis Communications
Inc., a publisher of special interest magazines. In 1982, Mr. Diamandis joined
CBS Magazines ("CBS") as Vice President, Group Publisher, Women's Day, and
served as President of CBS from September 1983 to 1987. Mr. Diamandis serves on
the Board of Trustees of Bucknell University and the Board of Directors of the
Publishers Information Bureau.
Robert M. Kimmitt has been a Director of Big Flower since November 1996.
Since 1993, Mr. Kimmitt has been a managing director of Lehman Brothers and is
currently serving as the head of its Washington office. Prior to joining Lehman
Brothers, Mr. Kimmitt served from 1991 to 1993 as American Ambassador to
Germany, and from 1989 to 1991 as Under Secretary of State for Political
Affairs. He was a partner in the Washington office of Sidley & Austin from 1987
to 1989. Mr. Kimmitt served as a member of the National Security Council staff
at the White House from 1978 to 1985 and General Counsel of the Department of
the Treasury from 1985 to 1987. Mr. Kimmitt serves on the board of Mannesmann
Corporation of Duesseldorf, Germany, a global industrial, automotive, and
telecommunications company, and on the U.S. Group Council of BMW Corporation of
Munich, Germany.
Joan D. Manley has been a Director of Big Flower since September 1994. Ms.
Manley retired from Time Incorporated in 1984, where she had held numerous
positions since 1960. At the time of her retirement, Ms. Manley was Group Vice
President and a director of Time Incorporated. Ms. Manley serves on the Board of
Directors of Aon Corporation, Sara Lee Corporation and Viking Office Products,
Inc. and is a Trustee of the Keystone Center.
Newton N. Minow has been a Director of Big Flower since September 1996.
Since 1991, Mr. Minow has been counsel to the law firm of Sidley & Austin, where
he served as Partner from 1965 to 1991. He also served as Chairman of the
Federal Communications Commission from 1961 to 1963. He is a director of Sara
Lee Corporation, Aon Corporation, Manpower, Inc. and True North Communications,
Inc. Mr. Minow is former Chairman of the Carnegie Corporation of New York, a
Trustee and former Chairman of the Board of Trustees of The RAND Corporation,
and former Chairman of the Board of Governors of the Public Broadcasting
Service. Mr. Minow is also a Life Trustee of the University of Notre Dame and a
Life Trustee of Northwestern University.
Edward T. Reilly has been President and Chief Operating Officer of Big
Flower since March 1996 and a Director of the Company since June 1996. He is
also a director of TC
40
<PAGE>
Advertising, Laser Tech and Webcraft. Prior to joining Big Flower, Mr. Reilly
held a variety of executive positions with McGraw-Hill, Inc., a publishing and
communications company, in their Broadcast and Publication groups from 1968 to
1996, and served as President of McGraw-Hill Broadcasting from 1987 to 1996. Mr.
Reilly has been active in television industry affairs, having served as the
Chairman of the Television Bureau of Advertising and as a member of the Board of
Directors of the National Association of Broadcasters.
Edward M. Yorke has been a Director of Big Flower since 1993. He has been
an officer since 1992 of Apollo Advisors, L.P., which, together with its
affiliate, serves as managing general partner of Apollo Investment Fund, L.P.,
AIF II, L.P. and Apollo Investment Fund III, L.P., private securities investment
funds, and of Lion Advisors, L.P., which acts as financial advisor to and
representative for certain institutional investors with respect to securities
investments. From 1990 to 1992, Mr. Yorke was a vice president in the high yield
capital markets group of BT Securities Corp. Mr. Yorke is a director of Aris
Industries, Inc., Salant Corporation and Telemundo Group, Inc.
Mark A. Angelson has been Executive Vice President and General Counsel and
Secretary of the Board of Directors of Big Flower since March 1996. He is also a
director of TC Advertising, Laser Tech and Webcraft. Prior to joining Big
Flower, Mr. Angelson was a partner of the law firm Sidley & Austin from 1982 to
1996. Mr. Angelson was Co-Chair of Sidley's international operations, founder of
the firm's English law practice and manager of the firm's offices in Singapore,
New York and London. Mr. Angelson is admitted to practice law in the State of
New York, and as a solicitor in England and Wales. He is also a Trustee of
American School in London Foundation, Inc., a Fellow of Royal Society of Arts
and a member of the Advisory Board of Jobs for the Future, Inc.
Richard L. Ritchie has been Executive Vice President and Chief Financial
Officer of Big Flower since January 1997. Prior to joining Big Flower, Mr.
Ritchie served as Senior Vice President and Chief Financial Officer of
Harte-Hanks Communications, Inc. from 1986 to 1996.
The directors of the Company are divided into three classes, designated
Class I, Class II and Class III. Each class consists, as nearly as possible, of
one third of the total number of directors constituting the entire Board of
Directors. Currently, the Class I directors are Messrs. Kimmitt, Minow and
Yorke; the Class II directors are Mr. Diamandis and Ms. Manley; and the Class
III directors are Messrs. Ammon, Black and Reilly. The Class I directors were
initially elected, in the case of Mr. Kimmitt, and reelected, in the case of
Messrs. Minow and Yorke, at the 1996 Annual Meeting of Stockholders to hold
office until the date of the 1999 Annual Meeting of Stockholders; the initial
Class II directors were elected to hold office until the date of the 1997 Annual
Meeting of Stockholders; and the initial Class III directors were elected to
hold office until the date of the 1998 Annual Meeting of Stockholders and, in
each case, until his or her successor is elected and qualified and subject to
his or her prior death, resignation, retirement, disqualification or removal. At
each annual meeting of stockholders, successors to the class of directors whose
term expires at that annual meeting shall be elected for a three-year term. If
the number of directors is changed, any
41
<PAGE>
increase or decrease shall be apportioned among the classes so as to maintain
the number of directors in each class as nearly equal as possible, and any
additional directors of any class elected to fill a vacancy resulting from an
increase in such class shall hold office for a term that shall coincide with the
remaining term of that class, but in no case will a decrease in the number of
directors shorten the term of any incumbent director. The term of office of each
executive officer is until the organizational meeting of the Board of Directors
of the Company following the next annual meeting of the Company's stockholders
and until his successor is elected and qualified or until his prior death,
resignation, retirement, disqualification or removal.
Compensation of Directors
Directors of Big Flower who are also executive officers of Big Flower or
its subsidiaries do not receive any additional compensation for service as a
member of the Board of Directors of Big Flower or any of its committees. All
other directors of Big Flower are paid an annual fee of $25,000. For information
relating to compensation of the Company's management directors, see "Employment
Arrangements with Executive Officers" below.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires Big Flower's directors, executive officers, and
persons who own more than ten percent of Big Flower's Common Stock, to file
reports of ownership and changes in ownership on Forms 3, 4 and 5 with the
Securities and Exchange Commission (the "SEC") and the New York Stock Exchange.
Directors, executive officers and greater than ten percent stockholders are
required by the SEC regulations to furnish Big Flower with copies of all Forms
3, 4 and 5 they file.
Based solely on Big Flower's review of the copies of such forms it has
received, or written representations from certain reporting persons that no Form
5's were required for these persons, Big Flower believes that all its directors,
executive officers and greater than ten percent beneficial owners complied with
all filing requirements applicable to them with respect to Fiscal 1996 except
for the following inadvertent omission: Messrs. Angelson and Reilly did not file
a report within 10 days of commencing their employment with the Company with
respect to the grant of their stock options described below. When this
inadvertent omission was discovered, each of such individuals promptly filed the
appropriate reports.
42
<PAGE>
Item 11. Executive Compensation
The following table sets forth the compensation paid in respect of the
fiscal year ended December 31, 1996, the transition period from July 1, 1995 to
December 31, 1995 ("TP95") and for the fiscal years ended June 30, 1995 and June
30, 1994, to R. Theodore Ammon, the Chief Executive Officer of Big Flower, and
to each of the other most highly paid executive officers of the Company who were
serving as executive officers as of the end of Fiscal 1996 (the "Named Executive
Officers"). With the recent hiring of Mr. Ritchie as Chief Financial Officer of
Big Flower and the retirement of Mr. Scheller from his office as Vice Chairman
of the Company, the current executive officers of Big Flower are Messrs. Ammon,
Reilly, Angelson and Ritchie.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
------------------------------------------ Securities All Other
Other Annual Underlying Compensation
Name and Principal Position Period Salary ($) Bonus ($) Compensation ($) Options/SARs (#)(1) ($)(2)
- - --------------------------- ------ ---------- --------- ---------------- ------------------- ------
<S> <C> <C> <C> <C> <C> <C>
R. Theodore Ammon 1996 750,000 339,844 (3) -- 2,178
Chief Executive Officer TP95 344,750 114,844 (3) 300,000 --
of Big Flower 1995 643,750 392,600 (3) -- 2,310
1994 529,615 447,200 (3) -- --
Edward T. Reilly (4) 1996 375,000 287,000 (5) (3) 200,000 1,593
President and Chief TP95 -- -- -- -- --
Operating Officer 1995 -- -- -- -- --
of Big Flower 1994 -- -- -- -- --
Mark A. Angelson (4) 1996 315,000 225,000 343,982 (6) 150,000 --
Executive Vice President TP95 -- -- -- -- --
and General Counsel and 1995 -- -- -- -- --
Secretary of the Board 1994 -- -- -- -- --
of Big Flower
Sanford G. Scheller (7) 1996 150,012 -- 16,000 (8) -- --
Former Vice Chairman of TP95 75,000 -- -- -- --
Big Flower 1995 435,000 241,600 130,649 (9) -- 2,310
1994 423,310 275,200 -- 100,646 794
</TABLE>
- - ----------
(1) All stock option grants were made pursuant to the Big Flower Press
Holdings, Inc. Restated 1993 Stock Award and Incentive Plan (the "Plan")
and are described below under "Options Granted in Fiscal 1996" and
"Employment Arrangements with Executive Officers."
(2) Represents amounts contributed to 401(k) plan by the Company on behalf of
the Named Executive Officer.
(3) Perquisites and other personal benefits did not exceed the lesser of
$50,000 or 10% of the total annual salary and bonus reported under the
headings of "Salary" and "Bonus."
(footnotes continued on next page)
43
<PAGE>
(4) The Named Executive Officer began his employment with Big Flower in Fiscal
1996; therefore the Named Executive Officer did not receive any
compensation from Big Flower prior to that time.
(5) Includes a one-time signing bonus of $37,000 to reimburse Mr. Reilly for
certain costs incurred in connection with his leaving his previous
position.
(6) Includes relocation costs of $335,862 (including tax gross up).
(7) Mr. Scheller retired as Vice Chairman and Director of Big Flower on
November 7, 1996.
(8) Represents auto allowance.
(9) Represents $120,449 in relocation costs (including tax gross up) and
$10,200 in auto allowance.
Options Granted in Fiscal 1996
The following table sets forth certain information with respect to options
to purchase shares of Common Stock granted to the Named Executive Officers
during Fiscal 1996. The Company did not grant any stock appreciation rights to
any of the Named Executive Officers and no stock options were exercised by any
Named Executive Officer during Fiscal 1996.
Options Granted in Fiscal 1996
<TABLE>
<CAPTION>
Individual Grants
--------------------------------------------------------
Number of % of Total
Securities Options Grant Date Value
Underlying Granted to Exercise or ---------------------
Options Employees in Base Price Expiration Grant Date
Name Granted(#) Fiscal 1996 ($/Share) Date Present Value ($) (1)
- - ---- ---------- ----------- --------- ---- ---------------------
<S> <C> <C> <C> <C> <C>
Edward T. Reilly (2) 200,000 39% $12.75 3/29/06 1,659,900
Mark A. Angelson (3) 150,000 30% $12.625 3/21/06 1,216,940
</TABLE>
- - ----------
(1) These values were calculated using a Black-Scholes option pricing
model. The actual value, if any, that an executive may realize will
depend on the excess, if any, of the stock price over the exercise
price on the date the options are exercised, and no assurance exists
that the value realized by an executive will be at or near the value
estimated by the Black-Scholes model. The following assumptions were
used in the calculations:
(a) assumed option term of 10 years;
(b) stock price volatility factor of 0.5236;
(c) 6.50% annual discount rate;
(d) no dividend payment; and
(e) 3% discount to Black-Scholes ratio for each year an option
remains unvested.
(2) Mr. Reilly's options were granted on March 29, 1996. 20% of these
options vested on December 31, 1996. 20% of these options will vest
on each of December 31, 1997, 1998 and 1999 with the remaining 20%
vesting on the fourth anniversary of the Reilly Agreement (as
defined below). The exercise price of $12.75 was equal to the
closing price of Big Flower's Common Stock on the date of the grant
as reported on the New York Stock Exchange. The options will be
exercisable at any time between the date of vesting and the tenth
anniversary of the date of grant. See "Employment Arrangements with
Executive Officers" below.
(3) Mr. Angelson's options were granted on March 21, 1996. 10% of these
options vested on December 31, 1996. 15% of these options will vest
on the first anniversary of the Angelson Agreement (as defined
below) and 25% of these options will vest on each of the next three
anniversaries of the Angelson Agreement. The exercise price of
$12.625 was equal to the closing price of Big Flower's Common Stock
on the date of grant as reported on the New York Stock Exchange. The
options will be exercisable at any time between the date of vesting
and the tenth anniversary of the date of grant. See "Employment
Arrangements with Executive Officers" below.
44
<PAGE>
Option Values at End of Fiscal 1996
The following table sets forth certain information concerning the number
and the value at the end of Fiscal 1996 of unexercised in-the-money options to
purchase Common Stock granted to the Named Executive Officers as of the end of
Fiscal 1996. No stock appreciation rights have been granted to any of the Named
Executive Officers.
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Number of Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options Options
Shares at Fiscal 1996 End (#) at Fiscal 1996 End ($)
---------------------- ----------------------
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized ($) Unexercisable Unexercisable (1)
---- ------------ ------------ ------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
R. Theodore Ammon -0- -0- 100,000/200,000 275,000/550,000
Edward T. Reilly -0- -0- 40,000/160,000 240,000/960,000
Mark A. Angelson -0- -0- 15,000/135,000 91,875/826,875
Sanford S. Scheller (2) -0- -0- 100,646/0 1,563,032/0
</TABLE>
- - ----------
(1) Based on the closing price of $18.75 of Big Flower's Common Stock on
December 31, 1996, the last trading day of Fiscal 1996, less the exercise
price payable for such shares.
(2) Value of options does not include $.89 purchase price per optioned share
paid by Mr. Scheller to purchase such options.
45
<PAGE>
Supplemental Executive Retirement Plan
The following table sets forth annual amounts payable upon retirement
under TC Advertising's supplemental executive retirement plan (the "SERP").
PENSION PLAN TABLE
Years of Service
----------------------------------------------------------------
Remuneration 5 10 15 20 25 30
$150,000 $7,500 $15,000 $ 22,500 $ 30,000 $ 37,500 $ 45,000
175,000 8,750 17,500 26,250 35,000 43,750 52,500
200,000 10,000 20,000 30,000 40,000 50,000 60,000
225,000 11,250 22,500 33,750 45,000 56,250 67,500
250,000 12,500 25,000 37,500 50,000 62,500 75,000
275,000 13,750 27,500 41,250 55,000 68,750 82,500
300,000 15,000 30,000 45,000 60,000 75,000 90,000
500,000 25,000 50,000 75,000 100,000 125,000 150,000
600,000 30,000 60,000 90,000 120,000 150,000 180,000
700,000 35,000 70,000 105,000 140,000 175,000 210,000
800,000 40,000 80,000 120,000 160,000 700,000 240,000
900,000 45,000 90,000 135,000 180,000 225,000 270,000
The compensation covered by the SERP includes the executive's entire
annual base salary. Messrs. Ammon, Reilly and Angelson, currently have 3, 1 and
1 year/s of service, respectively. At the time of his retirement from the
Company, Mr. Scheller agreed to forego any claims for payment under the SERP in
exchange for certain other retirement benefits. See "Employment Arrangements
with Executive Officers" below. Benefits under the SERP are computed by
multiplying the participant's average salary for the last five years prior to
retirement by a percentage equal to one percent for each year of service up to a
maximum of 30 years. Benefits under the SERP are not subject to a deduction for
Social Security or other offset amounts.
46
<PAGE>
Employment Arrangements with Executive Officers
Ammon Employment Agreement. The Company has entered into an employment
agreement with Mr. Ammon, effective November 20, 1995 (the "Ammon Agreement"),
pursuant to which Mr. Ammon serves as Chairman of the Board and Chief Executive
Officer of the Company. The initial term of the Ammon Agreement is three years,
subject to automatic one-year extensions commencing on the second anniversary of
the Ammon Agreement, unless either the Company or Mr. Ammon provides specified
notice to the contrary. Mr. Ammon is required to devote to the Company the time
necessary for the effective conduct of his duties under the Ammon Agreement and
is permitted to engage in outside business interests that do not conflict with
such duties or otherwise compete with the Company. Mr. Ammon is entitled to
receive an initial base salary equal to $750,000 per year; an annual bonus
targeted at not less than 50% of base salary (assuming bonus targets under TC
Advertising's Executive Incentive Plan (the "EIP") are met); an annual payment
of $108,000 with respect to life insurance premiums; and certain fringe
benefits, including participation in the SERP. Mr. Ammon was granted an option
to purchase 300,000 shares of Common Stock (a) with a ten-year term, (b) at an
exercise price equal to $16.00 per share and (c) vesting ratably over a
three-year period. If Mr. Ammon's employment with the Company is terminated
other than for "cause" (as defined in the Ammon Agreement), Mr. Ammon will be
entitled to receive a supplemental retirement benefit, subject to certain
vesting and benefit accrual requirements and subject to being offset by amounts
payable under the SERP, of up to 50% of his final average compensation
(including salary and EIP bonus), which benefit would commence at age 60. Mr.
Ammon will have the right to terminate the Ammon Agreement in the event of the
material breach thereof by the Company or for other "good reason" (as defined in
the Ammon Agreement). In such event, or if the Company terminates Mr. Ammon's
employment without cause, (i) Mr. Ammon will be entitled generally to receive
the salary and bonus otherwise payable to him over the greater of (x) the
remaining term of the Ammon Agreement and (y) a period of six months; (ii) all
outstanding equity incentive awards (including stock options) would immediately
vest; (iii) Mr. Ammon would receive additional service credit for purposes of
the supplemental retirement benefit; and (iv) the life insurance and certain
fringe benefits would continue during the severance period. Upon the termination
of his employment following a "change in control" of the Company (as defined in
the Ammon Agreement), Mr. Ammon would (i) be entitled to receive a lump sum
amount equal to three times his base salary and bonus, (ii) become vested in all
outstanding equity incentive awards, (iii) have the right to receive a cash
payment equal to the spread on all outstanding stock options, (iv) receive a
lump sum payment with respect to foregone fringe benefits, (v) receive
additional service credit for purposes of the supplemental retirement benefit
and (vi) be entitled to a payment sufficient to offset the effects of any excise
tax imposed under Section 4999 of the Internal Revenue Code of 1986, as amended
(the "Code").
Reilly Employment Agreement. The Company has entered into an employment
agreement with Mr. Reilly, effective March 29, 1996 (the "Reilly Agreement"),
pursuant to which Mr. Reilly will serve as President and Chief Operating Officer
of the Company. The initial term of the Reilly Agreement is three years, subject
to automatic one-year extensions commencing on the second anniversary of the
Reilly Agreement, unless either the Company or Mr. Reilly provides specified
notice to the contrary. Mr. Reilly is required to devote to the Company all of
his working time, attention and efforts. Mr. Reilly is entitled to receive an
initial base salary of $500,000 per year; an annual bonus targeted at not less
than 50% of base salary
47
<PAGE>
(assuming bonus targets under the EIP are met), with a guaranteed annual bonus
of $250,000 payable with respect to Fiscal 1996; a signing bonus of $37,000 to
compensate Mr. Reilly with respect to the value of stock options granted by his
previous employer and forfeited in connection with his termination of employment
therewith; and certain fringe benefits, including participation in the SERP. Mr.
Reilly has been granted an option to purchase 200,000 shares of Common Stock (a)
with a ten-year term, (b) at an exercise price of $12.75 per share, and (c)
vesting in installments of 20% each on December 31, 1996, 1997, 1998, and 1999
and the remaining 20% on the fourth anniversary of the Reilly Agreement,
provided, that all such options will immediately vest upon the occurrence of a
"change in control" of the Company (as defined in the Reilly Agreement). Mr.
Reilly will have the right to terminate the Reilly Agreement in the event of the
material breach thereof by the Company or for other "good reason" (as defined in
the Reilly Agreement). In such event, or if the Company terminates Mr. Reilly's
employment without "cause" (as defined in the Reilly Agreement), (i) Mr. Reilly
will be entitled to receive a lump sum amount equal to the sum of (A) two times
the sum of (x) his then base salary plus (y) the highest annual performance
bonus Mr. Reilly received in the three years preceding such termination of
employment, plus (B) the present value of all fringe benefits payable under the
remaining term of the Reilly Agreement, (ii) all outstanding equity incentive
awards (including stock options) will immediately vest and remain exercisable
for a period of one year following the date of such termination (or, if earlier,
until the end of the option term), and (iii) Mr. Reilly would be entitled to
receive a payment sufficient to offset the effects of any excise tax imposed
under Section 4999 of the Code. During the term of the Reilly Agreement (and, in
the event Mr. Reilly terminates his employment other than for good reason or the
Company terminates Mr. Reilly's employment for cause, for a period of one year
beyond the expiration of the employment term), Mr. Reilly will be subject to
certain non-competition and non-solicitation requirements.
Angelson Employment Agreement. The Company has entered into an employment
agreement with Mr. Angelson, effective March 21, 1996 (the "Angelson
Agreement"), pursuant to which Mr. Angelson will serve as Executive Vice
President and General Counsel and Secretary of the Board of Directors of the
Company. The initial term of the Angelson Agreement is three years, subject to
automatic one-year extensions commencing on the second anniversary of the
Angelson Agreement, unless either the Company or Mr. Angelson provides specified
notice to the contrary. Mr. Angelson is required to devote to the Company and
its affiliates all of his working time, attention and efforts. Mr. Angelson is
entitled to receive an initial base salary of $450,000 per year; an annual bonus
targeted at not less than 50% of base salary (assuming bonus targets under the
EIP are met), with a guaranteed annual bonus of $225,000 payable with respect to
Fiscal 1996; annual premium payments during the term of employment with respect
to a $2 million split-dollar life insurance policy or policies to be acquired
and owned by Mr. Angelson; and certain fringe benefits, including participation
in the SERP and payment of certain expenses in connection with Mr. Angelson's
relocation from London to New York. Mr. Angelson has been granted an option to
purchase 150,000 shares of Common Stock (a) with a ten-year term, (b) at an
exercise price of $12.625 per share, and (c) vesting in installments of 10% on
December 31, 1996, 15% on the first anniversary of the Angelson Agreement and
25% on each of the next three anniversaries of the Angelson Agreement, provided,
that all such options will immediately vest upon the occurrence of a "change in
control" of the Company (as defined in the Angelson Agreement). Mr. Angelson
will have the right to terminate the Angelson Agreement in the event of the
material breach thereof by the Company or for other "good reason" (as defined in
the Angelson Agreement). In such event, or
48
<PAGE>
if the Company terminates Mr. Angelson's employment without "cause" (as defined
in the Angelson Agreement), (i) Mr. Angelson will be entitled to receive a lump
sum amount equal to the sum of (A) two times the sum of (x) his then base salary
plus (y) the highest annual performance bonus Mr. Angelson received in the three
years preceding such termination of employment, plus (B) the present value of
all insurance premium payments and other fringe benefits payable under the
remaining term of the Angelson Agreement, (ii) all outstanding equity incentive
awards (including stock options) will immediately vest and remain exercisable
for a period of one year following the date of such termination (or, if earlier,
until the end of the option term), and (iii) Mr. Angelson would be entitled to
receive a payment sufficient to offset the effects of any excise tax imposed
under Section 4999 of the Code. During the term of the Angelson Agreement (and,
in the event Mr. Angelson terminates his employment other than for good reason
or the Company terminates Mr. Angelson's employment for cause, for a period of
one year beyond the expiration of the employment term), Mr. Angelson will be
subject to certain non-competition and non-solicitation requirements.
Ritchie Employment Arrangements. The Company entered into a letter
agreement with Mr. Ritchie, on December 13, 1996, pursuant to which Mr. Ritchie
will serve as Executive Vice President and Chief Financial Officer of the
Company. Mr. Ritchie is required to devote to the Company all of his working
time, attention and efforts. In the event that Mr. Ritchie's employment should
be terminated by the Company other than for "cause" (as defined in the Executive
Severance Agreement discussed below) prior to a "change in control" of the
Company (as defined in the Executive Severance Agreement discussed below), Mr.
Ritchie will be entitled to a payment equal to one year's base salary. Mr.
Ritchie is entitled to receive an initial base salary of $400,000 per year; an
annual bonus targeted at not less than 50% of base salary (assuming bonus
targets under the EIP are met); and certain fringe benefits, including
participation in the SERP and payment of certain expenses in connection with his
relocation from Texas to New York. On January 6, 1997, Mr. Ritchie was granted
an option to purchase 100,000 shares of Common Stock (a) with a ten-year term,
(b) at an exercise price of $18.00 per share, and (c) vesting in installments of
25% on January 6 of each of 1998, 1999, 2000 and 2001, provided that all such
options will immediately vest upon the occurrence of a "change in control" of
the Company. In addition, the Company has entered into a severance agreement
with Mr. Ritchie, effective January 6, 1997 (the "Executive Severance
Agreement"), which provides that if Mr. Ritchie's employment is terminated by
the Company other than for "cause" or by Mr. Ritchie for "good reason" (as
defined in the Executive Severance Agreement) following a "change in control" of
the Company, Mr. Ritchie will receive a lump sum amount equal to two times the
sum of (x) the greater of his annual base salary in effect immediately prior to
the termination of employment and his annual base salary in effect immediately
prior to the "change in control" and (y) the greater of the target bonus for Mr.
Ritchie under the EIP in the year immediately preceding that in which the
termination occurs and the average such bonus for the three years immediately
preceding the "change in control." In addition, (i) all outstanding stock
incentive awards (including stock options) will immediately vest and remain
exercisable until at least 90 days following the "change in control," and (ii)
Mr. Ritchie would be entitled to two years of continued medical and other
insurance benefits. The total amount of benefits payable to Mr. Ritchie would be
limited to the extent necessary to preserve the Company's deduction pursuant to
Section 280G of the Code.
49
<PAGE>
Scheller Retirement Agreement. In February 1996, Big Flower, TC
Advertising and Mr. Scheller entered into a retirement agreement (the
"Retirement Agreement") to memorialize the terms of Mr. Scheller's retirement
from TC Advertising. The Retirement Agreement provides that Mr. Scheller will
receive (i) payments equal to $12,501 per month for a period of 15 years
commencing on the date of termination of his employment with TC Advertising,
which occurred in June 1995, and (ii) certain perquisites, including certain
medical insurance payments. Furthermore, the Company agreed that all of Mr.
Scheller's options became fully exercisable and vested on March 1, 1996.
Compensation Committee Interlocks and Insider Participation
The Company's Compensation Committee during Fiscal 1996 prior to November
7, 1996 consisted of Messrs. Scheller (Chairman), Black and Diamandis, and
following such date consisted of Messrs. Diamandis (Chairman), Black, Kimmitt
and Minow. There were no interlocks involving members of the Compensation
Committee.
50
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth the beneficial ownership as of March 14,
1997 by each person known by the Company to be the beneficial owner of more than
5% of the outstanding shares of Common Stock (constituting the only class of
voting stock of the Company), each director of the Company, each Named Executive
Officer, and all directors and current executive officers as a group.
<TABLE>
<CAPTION>
Shares Beneficially Owned
-------------------------------------------
Amount and Nature of
Name and Address of Beneficial Owner Ownership (a) Percentage of Class
- - ------------------------------------ ------------- -------------------
<S> <C> <C>
R. Theodore Ammon (b) ........................... 2,317,144 13.8%
c/o Big Flower Press Holdings, Inc.
3 East 54th Street
New York, New York 10022
Apollo Big Flower Partners, L.P. ................ 4,470,922 26.7%
c/o Apollo Advisors, L.P.
Two Manhattanville Road
Purchase, New York 10577
BT Investment Partners, Inc. (c) ................ 1,738,692 9.4%
280 Park Avenue
New York, New York 10017
Goldman, Sachs & Co. (d) ........................ 2,056,882 12.3%
85 Broad Street
New York, New York 10004
Leon D. Black (e) ............................... -- --
c/o Apollo Management, L.P.
1301 Avenue of the Americas
New York, New York 10019
Peter G. Diamandis (f) .......................... 13,400 *
700 Canal Street
Stamford, Connecticut 06902
Robert M. Kimmitt (f) ........................... 13,400 *
c/o Lehman Brothers
800 Connecticut Ave., N.W
Suite 1200
Washington, D.C. 20006
Joan D. Manley (f) .............................. 13,400 *
P.O. Box 1353
Dillon, Colorado 80435
Newton N. Minow (g) ............................ 23,400 *
c/o Sidley & Austin
One First National Plaza
Suite 4800
Chicago, Illinois 60603
Edward T. Reilly (h) ............................ 47,800 *
c/o Big Flower Press Holdings, Inc.
3 East 54th Street
New York, New York 10022
Edward M. Yorke (e) ............................. -- --
c/o Apollo Management, L.P.
1301 Avenue of the Americas
New York, New York 10019
</TABLE>
- - ----------
* Less than one percent.
51
<PAGE>
<TABLE>
<CAPTION>
Shares Beneficially Owned
-------------------------------------------
Amount and Nature of
Name and Address of Beneficial Owner Ownership (a) Percentage of Class
- - ------------------------------------ ------------- -------------------
<S> <C> <C>
Mark A. Angelson (i) ............................ 42,700 *
c/o Big Flower Press Holdings, Inc.
3 East 54th Street
New York, New York 10022
Richard L. Ritchie .............................. -- --
c/o Big Flower Press Holdings, Inc.
3 East 54th Street
New York, New York 10022
Sanford G. Scheller (j) ......................... 260,672 1.6%
c/o Treasure Chest Advertising Company, Inc.
13000 Sawgrass Village--Suite 28
Ponte Vedra Beach, Florida 32082
All directors and current executive officers as a
group (10 persons) (e) (k) ................. 2,471,244 14.6%
</TABLE>
- - ----------
* Less than one percent.
(a) This column includes shares which directors and executive officers have
the right to acquire within 60 days. Except as otherwise indicated, each
person and entity has sole voting and dispositive power with respect to
the shares set forth in the table.
(b) Includes (x) 6,000 shares held by Mr. Ammon as general partner of a
partnership in which certain family members are the limited partners and
have 99% of the economic interests, (y) options to purchase 100,000 shares
of Common Stock which are presently exercisable and (z) 200 shares owned
by Mr. Ammon's minor children, as to which Mr. Ammon disclaims beneficial
ownership. Additionally, Mr. Ammon holds unvested options to purchase
200,000 shares of Common Stock, subject to vesting ratably in November
1997 and November 1998.
(c) Represents shares of Class B Common Stock of the Company, which are not
voting but are convertible into shares of Common Stock under certain
circumstances.
(d) Shares are held for various customers of Goldman, Sachs & Co.
(e) Does not include shares owned by Apollo Big Flower Partners, L.P.
("Apollo"). Mr. Black and Mr. Yorke are officers of Apollo Capital
Management, Inc., the general partner of Apollo Advisors, L.P., the
managing general partner of AIF II, L.P., which in turn acts as the
general partner of Apollo. Messrs. Black and Yorke expressly disclaim
beneficial ownership with respect to such shares.
(f) Represents options to purchase 13,400 shares of Common Stock which are
presently exercisable.
(g) Includes options to purchase 13,400 shares of Common Stock which are
presently exercisable.
(h) Includes options to purchase 40,000 shares of Common Stock which are
presently exercisable.
(i) Includes options to purchase 37,500 shares of Common Stock which are
either presently exercisable or will become exercisable within 60 days.
(j) Includes options to purchase 100,646 shares of Common Stock which are
presently exercisable.
(k) Includes options to purchase 231,100 shares of Common Stock which are
presently exercisable and does not include shares or options held by Mr.
Scheller, who is no longer an executive officer of the Company.
Item 13. Certain Relationships and Related Transactions
During Fiscal 1996, the Company paid approximately (x) $830,000 in fees to
BT Securities Corporation, an affiliate of BT Investment Partners, Inc.
("BTIP"), for advice and
52
<PAGE>
underwriting services in connection with certain of the Company's debt and (y)
$2,240,000 to Bankers Trust Company, an affiliate of BTIP, in connection with
its role as agent and lender under the Credit Agreement.
53
<PAGE>
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a)(1) Financial Statements - Reference is made to Section "1" of the
Index to Consolidated Financial Statements and Schedules on page
F-1.
(a)(2) Financial Statement Schedules - Reference is made to Section "1" of
the Index to Consolidated Financial Statements and Schedules on
page F-1. All other schedules have been omitted as not required or
not applicable or because the information required to be presented
is included in the financial statements and related notes.
(a)(3) Exhibits - The following exhibits are filed as a part of this
report or incorporated by reference and will be furnished to any
security holder upon request for such exhibit and payment of any
reasonable expenses incurred by the Company. Send any such request
to the Company at 3 East 54th Street, New York, New York 10022;
Attention: Secretary.
54
<PAGE>
Exhibit
No. Description
- - ------- -----------
2.1 Agreement and Plan of Merger, dated as of May 10, 1993, by and among
Robert E. Milhous, The Robert E. Milhous Trust, Paul B. Milhous, The Paul
Ballard Milhous Trust, Treasure Chest Advertising Company, Inc., Big
Flower Press, Inc. and TCA Merger Corp.(1)
2.2 Amendment to Agreement and Plan of Merger, dated as of July 30, 1993, by
and among Robert E. Milhous, The Robert E. Milhous Trust, Paul B. Milhous,
The Paul Ballard Milhous Trust, Treasure Chest Advertising Company, Inc.,
Big Flower Press, Inc. and TCA Merger Corp.(2)
2.3 Stock Purchase Agreement, dated as of January 14, 1994, by and among Lee
A. Thompson, John G. Brown and BFP Holdings Corp.(3)
2.4 Stock Purchase Agreement, dated as of January 14, 1994, by and among Gary
W. Pestello, Thomas G. Hansen and BFP Holdings Corp.(3)
2.5 Asset Purchase Agreement, dated as of January 14, 1994, by and between BFP
Holdings Corp. and D. Enterprises, Inc.(3)
2.6 Assignment and Assumption Agreement, dated April 5, 1994, by and between
BFP Holdings Corp. and Treasure Chest Advertising Company, Inc.(5)
2.7 Purchase and Sale Agreement, dated as of March 16, 1994, by and among BFP
Holdings Corp., KTB Associates, Inc., Tomsons Properties, TKB Properties,
Thomas Clemente, Brian Clemente and Joseph Clemente.(4)
2.8 Stock Purchase Agreement, dated as of November 27, 1995, between Big
Flower Press, Inc. and Brian Mason.(10)
2.9 Agreement and Plan of Merger, dated February 1, 1996, among Big Flower
Press Holdings, Inc., WTI Acquisition Corp., and Webcraft Technologies,
Inc.(10)
2.10 Agreement and Plan of Merger, dated as of July 31, 1996, by and among Big
Flower Press Holdings, Inc., Scanforms, Inc. and Scanforms Acquisition
Corp.(15)
2.11 Purchase Agreement, dated as of October 1, 1996, by and between Treasure
Chest Advertising Company, Inc., the stockholders of PrintCo., Inc. named
therein, Park Properties and the partners in Park Properties named
therein. (16)
2.12 Stock Purchase Agreement, dated as of October 1, 1996, among Laser Tech
Color, Inc. and the stockholders of Pacific Color Connection, Inc. named
therein.(16)
3.1 Restated Certificate of Incorporation of Big Flower Press Holdings, Inc.
filed on December 19, 1995.(10)
3.2 Certificate of Designation, Preferences and Rights of Series A Junior
Preferred Stock of Big Press Holdings, Inc. filed on November 28,
1995.(10)
3.3 Amended and Restated Bylaws of Big Flower Press Holdings, Inc.(10)
4.1 Rights Agreement, dated November 28, 1995, between Big Flower Press
Holdings, Inc. and the Bank of New York, as rights agent.(10)
55
<PAGE>
Exhibit
No. Description
- - ------- -----------
10.1 Credit Agreement, dated as of November 28, 1995, and amended and restated
as of March 19, 1996, among Big Flower Press Holdings, Inc., Treasure
Chest Advertising Company, Inc., the financial institutions named therein,
Bank of America NT & SA, The Industrial Bank of Japan, Limited and
NationsBank, N.A., as Co-Agents, Credit Suisse, as Documentation Agent,
and Bankers Trust Company, as Administrative Agent (the "Credit
Agreement"). (13)
10.2 First Amendment to the Credit Agreement, dated as of August 22, 1996,
among Big Flower Press Holdings, Inc., Treasure Chest Advertising Company,
Inc., the financial institutions named in the Credit Agreement, Bank of
America NT & SA, The Industrial Bank of Japan, Limited and NationsBank,
N.A., as Co-Agents, Credit Suisse, as Documentation Agent, and Bankers
Trust Company, as Administrative Agent.*
10.3 Second Amendment to the Credit Agreement, dated as of November 27, 1996,
among Big Flower Press Holdings, Inc., Treasure Chest Advertising Company,
Inc., the financial institutions named in the Credit Agreement, Bank of
America NT & SA, The Industrial Bank of Japan, Limited and NationsBank,
N.A., as Co-Agents, Credit Suisse, as Documentation Agent, and Bankers
Trust Company, as Administrative Agent.*
10.4 Indenture, dated as of August 1, 1993, by and between Big Flower Press,
Inc., as Issuer, and Shawmut Bank Connecticut, National Association, as
Trustee (the "1993 Indenture").(7)
10.5 First Supplemental Indenture, dated as of July 19, 1994, to the 1993
Indenture, by and between Big Flower Press, Inc., as Issuer, and Shawmut
Bank Connecticut, National Association, as Trustee.(8)
10.6 Second Supplemental Indenture, dated as of November 28, 1995, to the 1993
Indenture, by and between Big Flower Press Holdings, Inc., as Issuer, and
Shawmut Bank Connecticut, National Association, as Trustee.(14)
10.7 Indenture, dated as of April 15, 1994, between Big Flower Press, Inc. and
Shawmut Bank Connecticut, National Association, as Trustee (the "1994
Indenture").(5)
10.8 First Supplemental Indenture, dated as of November 28, 1995, to the 1994
Indenture, by and between Big Flower Press Holdings, Inc., as Issuer, and
Shawmut Bank Connecticut, National Association, as Trustee.(14)
10.9 Certificate Purchase Agreement (Series 1996-1), dated as of March 19,
1996, by BFP Receivables Corporation, Big Flower Press Holdings, Inc., the
Purchasers described therein, Credit Suisse, as Co-Agent, and Bankers
Trust Company, as Agent. (13)
10.10 Receivables Purchase Agreement, dated as of March 19, 1996, as amended as
of April 25, 1996, June 10, 1996 and September 24, 1996 (the "Receivables
Purchase Agreement"), among Big Flower Press Holdings, Inc., as initial
Servicer, certain subsidiaries of Big Flower Press Holdings, Inc., as
Sellers, and BFP Receivables Corporation, as Buyer.*
10.11 Amendment to the Receivables Purchase Agreement, dated January 31, 1997.*
- - ----------
* Being filed herewith.
56
<PAGE>
Exhibit
No. Description
- - ------- -----------
10.12 Big Flower Receivables Master Trust Pooling and Servicing Agreement, dated
as of March 19, 1996, as amended as of April 25, 1996, June 10, 1996 and
September 24, 1996, among BFP Receivables Corporation, as Transferor, Big
Flower Press Holdings, Inc., as Servicer, and Manufacturers and Traders
Trust Company, as Trustee (the "Pooling and Servicing Agreement"). *
10.13 Series 1996-2 Supplement to the Pooling and Servicing Agreement, dated as
of October 4, 1996, among BFP Receivables Corporation, as Transferor, Big
Flower Press Holdings, Inc., as Servicer, and Manufacturers and Traders
Trust Company, as Trustee.*
10.14 Series 1996-3 Supplement to the Pooling and Servicing Agreement, dated as
of October 4, 1996, among BFP Receivables Corporation, as Transferor, Big
Flower Press Holdings, Inc., as Servicer, and Manufacturers and Traders
Trust Company, as Trustee.*
10.15 Purchase Agreement (Series 1996-2), dated September 25, 1996, among Big
Flower Press Holdings, Inc., BFP Receivables Corporation, BT Securities
Corporation, Bankers Trust International PLC, and CS First Boston
Corporation.*
10.16 Certificate Purchase Agreement (Series 1996-3), dated as of October 4,
1996, among BFP Receivables Corporation, Big Flower Press Holdings, Inc.,
the purchasers described therein, and Caisse Nationale de Credit Agricole,
as Agent.*
10.17 Non-Competition Agreement, dated November 27, 1995, between Big Flower
Press Holdings, Inc. and Brian Mason.(10)
10.18 Non-Competition Agreement, dated as of April 27, 1994, by and among Lee A.
Thompson, BFP Holdings Corp., Treasure Chest Advertising Company, Inc. and
Retail Graphics Holding Company.(5)
10.19 Non-Competition Agreement, dated as of April 27, 1994, by and among John
G. Brown, BFP Holdings Corp., Treasure Chest Advertising Company, Inc. and
Retail Graphics Holding Company.(5)
10.20 Non-Competition Agreement, dated as of April 27, 1994, by and among Thomas
G. Hansen, BFP Holdings Corp., Treasure Chest Advertising Company, Inc.
and Retail Graphics Holding Company.(5)
10.21 Non-Competition Agreement, dated as of April 27, 1994, by and among Gary
W. Pestello, BFP Holdings Corp., Treasure Chest Advertising Company, Inc.
and Retail Graphics Holding Company.(5)
10.22 Non-Competition Agreement, dated April 27, 1994, by and between Brian T.
Clemente and Treasure Chest Advertising Company, Inc.*
10.23 Non-Competition Agreement, dated August 5, 1993, by and among Big Flower
Press, Inc., Robert E. Milhous and Paul B. Milhous, together with
assignment to Treasure Chest Advertising Company, Inc.(14)
10.24 Employment Agreement, effective March 21, 1996, by and between Mark A.
Angelson, Big Flower Press Holdings, Inc. and Treasure Chest Advertising
Company, Inc.(13)
- - ----------
* Being filed herewith.
57
<PAGE>
Exhibit
No. Description
- - ------- -----------
10.25 Employment Agreement, effective March 29, 1996, by and among Edward T.
Reilly, Big Flower Press Holdings, Inc. and Treasure Chest Advertising
Company, Inc.(13)
10.26 Employment Agreement, dated November 27, 1995, by and between Laser Tech
Color, Inc. and Damien Gough.(14)
10.27 Employment Agreement, dated November 20, 1995, by and between Big Flower
Press Holdings, Inc., Treasure Chest Advertising Company, Inc. and
Theodore Ammon.(10)
10.28 Executive Change in Control Severance Agreement, dated January 6, 1997, by
and between Big Flower Press Holdings, Inc. and Richard L. Ritchie.*
10.29 Letter Agreement, dated December 12, 1996, by and between Big Flower Press
Holdings, Inc. and Richard L. Ritchie.*
10.30 Employment Agreement, dated April 27, 1994, between Treasure Chest
Advertising Company, Inc. and Thomas R. Clemente.(5)
10.31 Employment Agreement, dated April 27, 1994, between Treasure Chest
Advertising Company, Inc. and Joseph T. Clemente.(5)
10.32 Employment Agreement, dated April 27, 1994, between Treasure Chest
Advertising Company, Inc. and Kevin Clemente.(5)
10.33 Agreement for Consulting Services and a Non-Qualified Retirement Benefit,
dated as of April 6, 1993, between Treasure Chest Advertising Company,
Inc. and Sanford G. Scheller.(6)
10.34 Agreement, dated as of February 1, 1996, by and among Sanford G. Scheller,
Big Flower Press Holdings, Inc. and Treasure Chest Advertising Company,
Inc.*
10.35 Treasure Chest Advertising Company, Inc. Executive Incentive Plan.(10)
10.36 Big Flower Press Holdings, Inc. Restated 1993 Stock Award and Incentive
Plan.(12)
10.37 Amendment No. 1 to Big Flower Press Holdings, Inc. Restated 1993 Stock
Award and Incentive Plan.(10)
10.38 Form of Treasure Chest Advertising Company, Inc.'s Supplemental Executive
Retirement Plan, effective January 1, 1994.(5)
10.39 Treasure Chest Advertising Company, Inc. Severance Benefit Plan, effective
as of June 1, 1989.(1)
10.40 Registration Rights Agreement, dated as of August 12, 1993, by and among
BFP Holdings Corp., each of the purchasers listed on Schedule 1 thereto,
Theodore Ammon, Berenson Minella & Company, and each other purchaser who
executed the agreement ("Registration Rights Agreement").(5)
10.41 Amendment to Registration Rights Agreement, dated as of April 27, 1994, by
and among BFP Holdings Corp., each of the purchasers listed on Schedule 1
thereto, Theodore Ammon, Berenson Minella & Company, and each other
purchaser who executed the agreement.(5)
- - ----------
* Being filed herewith.
58
<PAGE>
Exhibit
No. Description
- - ------- -----------
10.42 Boca Raton Letter Agreement, dated, May 10, 1993, by and among Robert E.
Milhous, Paul B. Milhous, Big Flower Press, Inc. and Treasure Chest
Advertising Company, Inc.(1)
10.43 Ink Supply Requirements Agreement, dated as of July 31, 1993, between
Treasure Chest Advertising Company, Inc. and Marpax, Inc. (the "Ink Supply
Agreement").(6)
10.44 Amendment to Ink Supply Agreement.(8)
10.45 Master Lease Agreement, dated December 21, 1993, between KTB Associates,
Inc. and Chase Equipment Leasing, Inc.(5)
10.4 Master Lease Agreement No. Atel/Trea3, dated as of August 31, 1993,
between ATEL Financial Corporation and Treasure Chest Advertising Company,
Inc.(5)
10.47 Master Lease, dated as of July 7, 1993, between General Electric Capital
Corporation and Treasure Chest Advertising Company, Inc.(5)
10.48 Master Lease, dated as of December 28, 1992, between ITT Capital Finance
division of ITT Commercial Finance Corp. and Treasure Chest Advertising
Company, Inc.(9)
10.49 Master Equipment Lease Agreement, dated as of July 28, 1992, between AT&T
Commercial Finance Corporation and Treasure Chest Advertising Company,
Inc.(5)
10.50 Master Lease Agreement, dated May 16, 1991, between KTB Associates, Inc.
and Chase Lincoln Lease/Way, Inc.(5)
10.51 Master Lease Agreement, dated June 22, 1990, between KTB Associates, Inc.
and Chase Lincoln Lease/Way, Inc.(5)
10.52 Master Lease, dated as of June 21, 1991 (and as amended through 08/31/93),
between The CIT Group/Equipment Financing, Inc. and Treasure Chest
Advertising Company, Inc.(5)
21.1 Subsidiaries of Big Flower Press Holdings, Inc.*
23.1 Consent of Deloitte & Touche LLP (included in their opinion appearing on
page F-2 hereof).
27.1 Financial Data Schedule for the year ended December 31, 1996, submitted to
the Securities and Exchange Commission in electronic format.*
- - ----------
(footnotes)
* Being flied herewith.
(1) Incorporated by reference to TCA Holdings Corp., Form S-1, filed on
May 26, 1993 (File # 33-63392).
(2) Incorporated by reference to Big Flower Press, Inc., Amendment No. 3
to the Form S-1, filed on August 4, 1993 (File # 33-63392).
(3) Incorporated by reference to Big Flower Press, Inc., Form 8-K, dated
as of January 24, 1994 (File # 33-63392).
59
<PAGE>
(footnotes continued from previous page)
(4) Incorporated by reference to Big Flower Press, Inc., Form 8-K, dated
as of April 27, 1994 (File # 33-63392).
(5) Incorporated by reference to BFP Holdings Corp., Form S-1, filed on
May 26, 1994 (File # 33-79406).
(6) Incorporated by reference to Big Flower Press, Inc., Amendment No. 2
to the Form S-1, filed on July 19, 1993 (File #33-63392).
(7) Incorporated by reference to Big Flower Press, Inc., Form 10-Q, for
the quarterly period ended September 30, 1993 (File # 33-63392).
(8) Incorporated by reference to BFP Holdings, Corp., Amendment No. 2 to
Form S-1, filed on August 2, 1994 (File # 33-79406).
(9) Incorporated by reference to Big Flower Press Holdings, Inc. Form S-1,
filed on September 19, 1995 (File # 33-97082).
(10) Incorporated by reference to Big Flower Press Holdings, Inc. Form
10-Q, for the quarterly period ended December 31, 1995 (File # 1-14084).
(11) Incorporated by reference to Big Flower Press Holdings, Inc.,
Amendment No. 2 to the Form S-1, filed on November 14, 1995 (File
#33-97082).
(12) Incorporated by reference to Big Flower Press Holdings, Inc., Form
10-K, for the fiscal year ended June 30, 1995 (File #33-79406).
(13) Incorporated by reference to Big Flower Press Holdings, Inc., Form
10-Q, filed on May 15, 1996 (Accession # 0000912057-96-009947).
(14) Incorporated by reference to Big Flower Press Holdings, Inc., Form
10-K, for the transition period from July 1, 1995 to December 31, 1995
(File # 1-14084).
(15) Incorporated by reference to Annex I to the Proxy
Statement/Prospectus dated September 6, 1996, forming part of the
Registration Statement on Form S-4 (Registration No. 333-11225) of Big
Flower Press Holdings, Inc.
(16) Incorporated by reference to Big Flower Press Holdings, Inc. Form
8-K, dated October 1, 1996, concerning Big Flower Press Holdings, Inc.'s
acquisitions of PrintCo., Inc., Scanforms, Inc. and Pacific Color
Connection, Inc. (File # 1-14084).
60
<PAGE>
(b) Form of Reports on Form 8-K.
During the period from October 1, 1996 to December 31, 1996, the
Registrant filed the following reports on Form 8-K:
(i) Current Report on Form 8-K, dated October 1, 1996, concerning
the Registrant's acquisitions of PrintCo., Inc., Scanforms,
Inc., and Pacific Color Connection, Inc.; and
(ii) Current Report on Form 8-K/A, dated October 1, 1996, amending
the Form 8-K which was filed on October 1, 1996, to include
certain pro forma financial data.
(c) The exhibits required by Item 601 of Regulation S-K filed as part of
this report or incorporated herein by reference are listed in Item
14(a)(3) above, and the exhibits filed herewith are listed on the
Index to Exhibits which accompanies this report.
(d) See Item 14(a)(2) of this report.
61
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
BIG FLOWER PRESS HOLDINGS, INC.
(Registrant)
By /s/ R. Theodore Ammon
-------------------------------------
R. Theodore Ammon
Chairman and Chief Executive Officer
Dated: March 24, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant in the capacities and on the dates indicated.
Signature Titles Date
--------- ------ ----
/s/ R. Theodore Ammon Chairman, Chief Executive March 24, 1997
- - ----------------------------- Officer and Director (Principal
(R. Theodore Ammon) Executive Officer)
/s/ Edward T. Reilly President, Chief Operating March 24, 1997
- - ----------------------------- Officer and Director (Principal
(Edward T. Reilly) Operating Officer)
/s/ Richard L. Ritchie Executive Vice President and March 24, 1997
- - ----------------------------- Chief Financial Officer
(Richard L. Ritchie) (Principal Financial and
Accounting Officer)
/s/ Leon D. Black Director March 19, 1997
- - -----------------------------
(Leon D. Black)
/s/ Peter G. Diamandis Director March 25, 1997
- - -----------------------------
(Peter G. Diamandis)
/s/ Robert M. Kimmitt Director March 25, 1997
- - -----------------------------
(Robert M. Kimmitt)
/s/ Joan D. Manley Director March 25, 1997
- - -----------------------------
(Joan D. Manley)
/s/ Newton N. Minow Director March 25, 1997
- - -----------------------------
(Newton N. Minow)
/s/ Edward M. Yorke Director March 25, 1997
- - -----------------------------
(Edward M. Yorke)
62
<PAGE>
BIG FLOWER PRESS HOLDINGS, INC.
INDEX TO CONSOLIDATED
FINANCIAL STATEMENTS AND SCHEDULES
1. Financial Statements:
F-2 Independent Auditors' Report.
F-3 Consolidated Balance Sheets - December 31, 1996 and 1995.
F-4 Consolidated Statements of Operations for the Year Ended December 31,
1996, the Six Months Ended December 31, 1995, the Year Ended June 30, 1995
and the 323 Days Ended June 30, 1994.
F-5 Consolidated Statements of Stockholders' Equity for the Year Ended
December 31, 1996, the Six Months Ended December 31, 1995, the Year Ended
June 30, 1995 and the 323 Days Ended June 30, 1994.
F-6 Consolidated Statements of Cash Flows for the Year Ended December 31,
1996, the Six Months Ended December 31, 1995, the Year Ended June 30, 1995
and the 323 Days Ended June 30, 1994.
F-8 Notes to Consolidated Financial Statements.
2. Financial Statement Schedules:
F-24 Independent Auditors' Report on Financial Statement Schedules.
F-25 I. Condensed Financial information of Big Flower for the Year Ended
December 31, 1996, the Six Months Ended December 31, 1995, the Year Ended
June 30, 1995 and the 323 Days Ended June 30, 1994.
F-29 II. Valuation and Qualifying Accounts and Reserves for the 323 Days Ended
June 30, 1994, the Year Ended June 30, 1995, the Six Months Ended December
31, 1995 and the Year Ended December 31, 1996.
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders of
Big Flower Press Holdings, Inc.:
We have audited the accompanying consolidated balance sheets of Big Flower Press
Holdings, Inc. and subsidiaries ("Big Flower") as of December 31, 1996 and 1995
and the related consolidated statements of operations, stockholders' equity, and
cash flows for the year ended December 31, 1996, the six months ended December
31, 1995, the year ended June 30, 1995, and the 323 days ended June 30, 1994.
These financial statements are the responsibility of Big Flower's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Big Flower at December 31, 1996 and
1995, and the results of its operations and its cash flows for the year ended
December 31, 1996, the six months ended December 31, 1995, the year ended June
30, 1995, and the 323 days ended June 30, 1994 in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
Baltimore, Maryland
February 14, 1997
INDEPENDENT AUDITORS' CONSENT
to Incorporation by Reference to Registration Statements
on Form S-3 and Form S-8
We consent to the reference in Big Flower Press Holdings, Inc.'s Registration
Statement No. 333-14637 on Form S-8 and Registration No. 033-97082 on Form S-3
of our report dated February 14, 1997 and appearing on page F-2 of the Annual
Report on Form 10-K for the year ended December 31, 1996.
DELOITTE & TOUCHE LLP
Baltimore, Maryland
March 25, 1997
F-2
<PAGE>
BIG FLOWER PRESS HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
==============================================================================================
December 31,
In thousands, except per share data and share amounts 1996 1995
==============================================================================================
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 4,200 $ 9,172
Accounts receivable, net of allowance for doubtful
accounts of $8,580 and $7,768, respectively 105,270 136,547
Inventories 30,126 43,055
Prepaid expenses and other current assets 5,622 5,693
Deferred income taxes and income tax receivable 17,286 22,872
--------- ---------
Total current assets 162,504 217,339
Property, plant and equipment, net of accumulated
depreciation of $87,993 and $53,133, respectively 296,426 145,323
Other assets, net of accumulated amortization
of $47,168 and $32,885, respectively 290,812 210,731
--------- ---------
TOTAL ASSETS $ 749,742 $ 573,393
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable $ 18,119
Current portion of long-term debt $ 1,376 4,070
Accounts payable 116,513 112,101
Compensation and benefits payable 38,087 18,823
Other current liabilities 37,349 34,429
--------- ---------
Total current liabilities 193,325 187,542
Revolving credit facility 227,365 144,500
Long-term debt, net of current portion 203,401 129,661
Deferred income taxes 13,073 15,833
Other long-term liabilities 16,228 10,370
--------- ---------
Total liabilities 653,392 487,906
--------- ---------
Common stock subject to redemption 1,011
---------
Stockholders' equity:
Common stock - authorized 50,000,000; $.01 par value; issued
16,880,061 and 15,495,398, respectively 169 155
Class B common stock - authorized 2,500,000; $.01 par value;
issued 1,738,692 17 17
Additional paid-in capital 119,019 102,300
Accumulated deficit (21,514) (16,151)
Other (1,341) (1,845)
--------- ---------
Total stockholders' equity 96,350 84,476
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 749,742 $ 573,393
========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE>
BIG FLOWER PRESS HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
In thousands, except per share amounts
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Six Months Year 323 Days
Ended Ended Ended Ended
December 31, December 31, June 30, June 30,
1996 1995 1995 1994
<S> <C> <C> <C> <C>
Net sales $ 1,201,860 $ 546,840 $ 920,149 $ 587,630
Operating expenses:
Costs of production 971,789 459,788 775,033 497,570
Selling, general and administrative 107,483 28,680 51,417 35,822
Depreciation 34,756 10,533 20,869 12,937
Amortization of intangibles 17,003 8,100 22,118 15,813
Merger costs 1,486
------------ ------------ ------------ ------------
1,132,517 507,101 869,437 562,142
------------ ------------ ------------ ------------
Operating income 69,343 39,739 50,712 25,488
------------ ------------ ------------ ------------
Other expenses (income):
Interest expense 37,967 20,670 40,889 21,671
Interest income (712) (442) (279) (53)
Loss on sale of Webcraft Games, Inc. 14,277
Other, net 12,813 5,749 2,390 2,506
Preferred dividends of a subsidiary 1,068 2,444 1,913
------------ ------------ ------------ ------------
64,345 27,045 45,444 26,037
------------ ------------ ------------ ------------
Income (loss) before income taxes 4,998 12,694 5,268 (549)
Income tax expense 8,283 6,203 6,880 2,728
------------ ------------ ------------ ------------
Income (loss) before extraordinary
item (3,285) 6,491 (1,612) (3,277)
Extraordinary item, net of income
taxes of $1,400 and $11,300, respectively (2,078) (19,248)
------------ ------------ ------------ ------------
Net loss $ (5,363) (12,757) $ (1,612) $ (3,277)
============ ============ ============
Premium on redemption of
preferred stock of a subsidiary (1,682)
------------
Net loss attributable to common stockholders $ (14,439)
============
Income (loss) per common and
common equivalent share:
Income (loss) before extraordinary
item $ (0.18) $ 0.34 $ (0.13) $ (0.29)
Extraordinary item, net (0.11) (1.38)
------------ ------------ ------------ ------------
Net loss $ (0.29) $ (1.04) $ (0.13) $ (0.29)
============ ============ ============ ============
Weighted average shares
outstanding 18,314,654 13,919,244 12,458,104 11,294,258
============ ============ ============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
BIG FLOWER PRESS HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
In thousands, except share amounts
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Sub-
Additional Accum- Stockholder cription
Shares Common Paid-In ulated Note Notes
Outstanding Stock Capital Deficit Receivable Receivable
---------- -------- --------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, AUGUST 12, 1993 3,975,000 $ 40 $ 15,460
Adjustments for Scanforms
pooling of interests 1,549,489 15 1,408 $ 1,495 $ (407)
---------- -------- --------- -------- ------- --------
BALANCE, AUGUST 12, 1993, as restated 5,524,489 55 16,868 1,495 (407)
Stock split (1.072472 to 1) 288,076 3 (3)
Issuance of common stock 612,344 6 4,709
Net loss, as restated (3,277)
---------- -------- --------- -------- ------- --------
BALANCE, JUNE 30, 1994 6,424,909 64 21,574 (1,782) (407)
Net loss, as restated (1,612)
Unearned compensation 1,412
Amortization of unearned compensation
Reclassification of common
stock subject to redemption (1,340)
---------- -------- --------- -------- ------- --------
BALANCE, JUNE 30, 1995 6,424,909 64 21,646 (3,394) (407)
Stock split (2 to 1) 4,875,420 49 (49)
Net issuance of common stock 5,500,000 55 80,355
Net loss, as restated (12,757)
Premium on redemption of preferred
stock of a subsidiary (1,682)
Amortization of unearned compensation
Reclassification of common
stock subject to redemption 433,761 4 2,030 $ (263)
---------- -------- --------- -------- ------- --------
BALANCE, DECEMBER 31, 1995 17,234,090 172 102,300 (16,151) (407) (263)
Issuance of common stock 894,579 9 15,212
Net loss (5,363)
Amortization of unearned compensation
Repayment of note 6 190
Reclassification of common stock
subject to redemption 488,584 5 1,504 (495)
Stock option exercise 1,500 3
---------- -------- --------- -------- ------- --------
BALANCE, DECEMBER 31, 1996 18,618,753 $ 186 $ 119,019 $(21,514) $ (401) $ (568)
========== ======== ========= ======== ======= ========
</TABLE>
Unearned
Compen-
sation Total
-------- -------
BALANCE, AUGUST 12, 1993 $ 15,500
Adjustments for Scanforms
pooling of interests 2,511
-------- -------
BALANCE, AUGUST 12, 1993, as restated 18,011
Stock split (1.072472 to 1)
Issuance of common stock 4,715
Net loss, as restated (3,277)
-------- -------
BALANCE, JUNE 30, 1994 19,449
Net loss, as restated (1,612)
Unearned compensation $ (1,412)
Amortization of unearned compensation 96 96
Reclassification of common
stock subject to redemption (1,340)
-------- -------
BALANCE, JUNE 30, 1995 (1,316) 16,593
Stock split (2 to 1)
Net issuance of common stock 80,410
Net loss, as restated (12,757)
Premium on redemption of preferred
stock of a subsidiary (1,682)
Amortization of unearned compensation 141 141
Reclassification of common
stock subject to redemption 1,771
-------- -------
BALANCE, DECEMBER 31, 1995 (1,175) 84,476
Issuance of common stock 15,221
Net loss (5,363)
Amortization of unearned compensation 803 803
Repayment of note 196
Reclassification of common stock
subject to redemption 1,014
Stock option exercise 3
-------- -------
BALANCE, DECEMBER 31, 1996 $ (372) $96,350
======== =======
See Notes to Consolidated Financial Statements.
F-5
<PAGE>
BIG FLOWER PRESS HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
In thousands
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Six Months Year 323 Days
Ended Ended Ended Ended
December 31, December 31, June 30, June 30,
1996 1995 1995 1994
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss $ (5,363) $(12,757) $ (1,612) $ (3,277)
Adjustments to reconcile net
loss to net cash provided by
operating activities:
Provision for doubtful accounts 658 2,538 1,770 (296)
Deferred income taxes 2,548 5 (5,348) 487
Depreciation and amortization 51,759 18,633 42,987 28,750
Deferred interest 144 3,603 7,768 2,375
Amortization of deferred financing costs 3,002 1,598 3,494 1,958
Preferred dividends of a subsidiary 1,068 2,444 1,913
(Gain) loss on disposition of property,
plant and equipment 315 219 409 (543)
Cost of accounts receivable sales 5,300
Loss on sale of Webcraft Games, Inc. 14,277
Extraordinary item, net 2,078 19,248
Changes in operating assets and liabilities
(excluding effect of acquisitions):
Decrease (increase) in accounts receivable 4,580 (28,922) 4,794 (18,006)
Proceeds from sale of accounts receivable 91,567
Decrease (increase) in inventories 26,371 6,677 (23,655) (113)
Decrease (increase) in prepaid expenses
and other current assets 2,423 (996) 2,665 (909)
(Increase) decrease in other assets (4,933) 547 47 575
(Decrease) increase in accounts payable,
compensation and benefits payable
and other liabilities (58,790) 16,420 11,834 18,600
--------- -------- --------- ---------
Net cash provided by operating activities 135,936 27,881 47,597 31,514
--------- -------- --------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Capital expenditures (55,391) (16,812) (8,496) (6,133)
Proceeds from sale of property, plant
and equipment and divested assets 6,681 344 1,479 1,107
Collection of related-party notes 5 2 4 17,796
Purchase of other tangible assets (102,356)
Acquisitions of business, net of cash
acquired (122,144) (2,584) (180,637)
--------- -------- --------- ---------
Net cash used in investing activities (170,849) (19,050) (7,013) (270,223)
--------- -------- --------- ---------
(Continued)
</TABLE>
See Notes to Consolidated Financial Statements.
F-6
<PAGE>
BIG FLOWER PRESS HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
In thousands
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Six Months Year 323 Days
Ended Ended Ended Ended
December 31, December 31, June 30, June 30,
1996 1995 1995 1994
<S> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING
ACTIVITIES:
Payments for long-term debt (153,514) (200,046) (6,999) (59,682)
Proceeds from issuance of long-term
debt 75,000 255 4,187 288,327
Net borrowings (repayments) under
lines of credit 82,865 134,253 (30,777) 21,671
Increase (decrease) in cash overdraft 26,713 10,215 (5,698) (8,542)
Deferred financing costs (1,313) (7,306) (302) (21,787)
Proceeds from issuance of common
stock 190 80,410 572 22,089
Other (772) (101)
Purchase of redeemable preferred
stock of a subsidiary (22,107)
--------- --------- -------- ---------
Net cash provided by (used in)
financing activities 29,941 (4,326) (39,789) 241,975
--------- --------- -------- ---------
NET (DECREASE) INCREASE IN
CASH AND CASH EQUIVALENTS (4,972) 4,505 795 3,266
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 9,172 4,667 3,872 606
--------- --------- -------- ---------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 4,200 $ 9,172 $ 4,667 $ 3,872
========= ========= ======== =========
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Interest paid $ 34,835 $ 23,343 $ 26,983 $ 12,180
Income taxes paid $ 10,494 $ 7,098 $ 9,261 $ 2,023
</TABLE>
See Notes to Consolidated Financial Statements.
F-7
<PAGE>
BIG FLOWER PRESS HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Big Flower Press Holdings, Inc. ("Big Flower", and together with its
subsidiaries, the "Company") is a leading advertising and marketing
services company with three principal operating units: Treasure Chest
Advertising Company, Inc. ("TC Advertising"), Webcraft Technologies, Inc.
("Webcraft"), and Laser Tech Color, Inc. ("Laser Tech"). TC Advertising is
a leading producer of advertising insert programs for leading retailers
and produces TV listing magazines, Sunday comics, Sunday magazines and
special supplements for many of the most widely circulated U. S.
newspapers. Webcraft is a market leader in producing highly customized
direct mail and specialty advertising products such as commercial games
and fragrance samplers. Laser Tech is a leading provider of outsourced,
digital premedia and content management services to retailers, advertising
agencies, and consumer product companies. The Company and its subsidiaries
operate in the advertising and marketing services area. On August 12,
1993, the Company acquired TC Advertising (the "TCA Acquisition"). Prior
to the TCA Acquisition, the Company did not have any significant assets or
liabilities or engage in any activities other than those incident to the
Company's formation, the acquisition and the financing related to the TCA
Acquisition.
The financial statements of the Company have been restated, for all
periods presented, for the merger with Scanforms, hereinafter defined, on
October 4, 1996.
Change in Fiscal Year - Effective July 1, 1995, the Company changed its
fiscal year-end from June 30 to December 31. The Company retained its June
30 year-end for income tax reporting purposes.
Principles of Consolidation - The consolidated financial statements
include the accounts of the Company and its wholly owned subsidiaries. All
material intercompany accounts and transactions have been eliminated.
Revenue Recognition - Revenue is recognized on a units-of-work-performed
method. Accordingly, revenue and the related unbilled accounts receivable
are recognized for partially completed orders in process and orders
completed but not yet delivered to customers.
Cash and Cash Equivalents - Cash equivalents include all investments with
initial maturities of 90 days or less.
Inventories - Inventories are priced at the lower of cost or market. Cost
has been determined on the first-in, first-out method.
Property, Plant and Equipment - Property, plant and equipment are stated
at cost. Depreciation and amortization are computed using the
straight-line method over the estimated useful lives of the assets or the
remaining terms of the leases for leasehold improvements, whichever is
shorter.
Intangible Assets - The Company periodically reviews the recoverability of
intangible assets to determine if there has been any permanent impairment.
This assessment is performed based on the estimated future cash flows
compared with the carrying value of the asset. If impairment is indicated,
a writedown to fair value (normally measured by discounting estimated cash
flows) would be taken.
F-8
<PAGE>
Income Taxes - The Company accounts for income taxes using Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income
Taxes". Under SFAS No. 109, deferred income taxes reflect the net tax
effects of temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts used for
income tax purposes, and operating loss and tax credit carryforwards.
Net Income (Loss) per Common and Common Equivalent Share - Per share
information is computed using the weighted average number of shares of
common stock outstanding and dilutive common equivalent shares from stock
options using the treasury stock method. Common equivalent shares for all
common stock and options issued within one year prior to the Offering,
hereinafter defined, have been calculated using the treasury stock method
and have been treated as outstanding for all periods prior to the
Offering. Per share information for all periods has been retroactively
adjusted to reflect the 2 for 1 stock split immediately prior to the
Offering. Supplemental income per share before extraordinary item for the
six months ended December 31, 1995 reflecting the impact of the Offering
and related transactions was $0.56.
Fair Value of Financial Instruments:
Cash and Cash Equivalents, Accounts Receivable and Accounts Payable -
The carrying amounts approximate fair value because of the short
maturities of these instruments.
Revolving Credit Facility and Term Loan - The carrying amounts
approximate fair value because their interest rates are based on
variable reference rates.
Long-Term Debt (Excluding Revolving Credit Facility and Term Loan) -
The aggregate fair value at December 31, 1996 and 1995 approximates
$133.9 million and $134.3 million, respectively.
Concentration of Credit Risk - Financial instruments which subject the
Company to credit risk consist primarily of accounts receivable.
Concentration of credit risk with respect to accounts receivable is
generally diversified due to the large number of entities comprising the
Company's customer base and their geographic dispersion. The Company
performs ongoing credit evaluations of its customers and maintains an
allowance for doubtful accounts.
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
New Accounting Pronouncements - The Company is required to adopt SFAS No.
125 "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities" for transfers and servicing of financial
assets and extinguishments of liabilities after December 31, 1996.
Management does not believe this statement will have a material effect on
the financial statements.
Reclassifications - Certain amounts for prior periods have been
reclassified to conform to the current period presentation.
F-9
<PAGE>
2. ACQUISITIONS
On January 24, 1994 and March 16, 1994, Big Flower entered into definitive
agreements (the "Agreements") to acquire Retail Graphics Holding Company
("Retail Graphics") and KTB Associates, Inc. ("KTB"), respectively.
Pursuant to the Agreements on April 27, 1994, TC Advertising acquired (i)
all of the issued and outstanding shares of common stock of Retail
Graphics for an aggregate consideration of $39.1 million; (ii) certain
printing equipment leased by Retail Graphics from D. Enterprises, Inc., an
affiliate of Retail Graphics, for an aggregate consideration of $32.4
million; (iii) all of the issued and outstanding shares of common stock of
KTB for an aggregate consideration of $34.6 million and (iv) certain fee
interests in real property from Tomsons Properties and TKB Properties,
affiliates of KTB, for an aggregate consideration of $4.8 million. Assets
acquired, excluding intangible assets, totaled $139.7 million and
liabilities assumed were $63.4 million.
On November 27, 1995, the Company acquired Laser Tech. The purchase price
was comprised of (i) $3.0 million paid on the closing date of such
transaction, (ii) a $13.6 million note which matured in January 1996 and
(iii) and a $4.5 million note which converted into 281,250 shares of
common stock in January 1996. Assets acquired, excluding intangible
assets, totaled $34.7 million and liabilities assumed were $13.6 million.
On March 19, 1996, the Company acquired Webcraft for approximately $111.0
million, of which (i) approximately $4.0 million represented a portion of
the proceeds received by Webcraft in connection with the settlement of a
certain patent litigation and (ii) $4.8 million was deposited in escrow to
fund any claims for indemnification of the Company. Assets acquired,
excluding intangible assets, were $198.1 million and liabilities assumed
were $156.4 million.
During the fourth quarter of 1996, the Company consummated the acquisition
of all of the outstanding capital stock of PrintCo., Inc. ("PrintCo"),
Pacific Color Connection, Inc. ("Pacific Color"), Designer Color Systems,
Ltd. ("Designer Color") and Digital Dimensions, Inc. ("Digital
Dimensions"). The aggregate purchase price of these acquisitions was
approximately $46.5 million in cash, a $2 million note and .5 million
shares of common stock with an approximate market value of $9 million.
Assets acquired, excluding intangible assets, totaled $67.9 million and
liabilities assumed were $41.9 million.
The acquisitions of KTB, Retail Graphics, Laser Tech, Webcraft, PrintCo,
Pacific Color, Designer Color and Digital Dimensions have been accounted
for as purchases. The cost has been allocated to the acquired companies'
assets and liabilities based on their relative fair values as of the
closing dates of the acquisitions, based on valuations and other studies.
A portion of the excess of the purchase cost over the historical book
value of the net assets acquired was allocated to specific identified
intangibles and the remainder, representing goodwill of $173.4 million is
being amortized over 40 years. The valuation and other studies for
PrintCo, Pacific Color, Designer Color and Digital Dimensions are not yet
complete. Management does not believe any adjustments will be material.
Subsequent to the acquisition of each of Webcraft and PrintCo, the Company
decided to repurchase substantially all of their respective outstanding
debt at a premium which generated an aggregate extraordinary loss of $2.1
million, net of aggregate income tax benefit of $1.4 million.
F-10
<PAGE>
The following supplemental unaudited pro forma information has been
prepared as though the acquisitions of Laser Tech, Webcraft, PrintCo,
Pacific Color, Designer Color and Digital Dimensions had occurred at
January 1, 1995 (in thousands, except per share data):
Net sales $ 1,357,101 $ 1,418,659
Income before extraordinary item 1,775 12,348
Net loss (304) (6,900)
Net loss per common and common
equivalent share (0.02) (0.49)
On October 4, 1996, Big Flower consummated the acquisition of Scanforms,
Inc., a Delaware corporation ("Scanforms"), as a result of which Scanforms
became a wholly owned subsidiary of Webcraft. Big Flower issued rights to
receive 1,549,489 full shares of its common stock in exchange for all the
outstanding common stock of Scanforms. The merger of Scanforms was
accounted for as a pooling of interests. Accordingly, the Company's
consolidated financial statements have been restated to include the
results of Scanforms for all periods presented.
Combined and separate results of Big Flower and Scanforms during the
periods preceding the merger were as follows (in thousands):
<TABLE>
<CAPTION>
Nine Months Six Months 323 Days
Ended Ended Year Ended Ended
September 30, December 31, June 30, June 30,
1996 1995 1995 1994
<S> <C> <C> <C> <C>
Net sales:
Big Flower $ 822,046 $ 532,352 $ 896,595 $ 565,046
Scanforms 22,240 14,488 23,554 22,584
--------- --------- --------- ---------
As restated $ 844,286 $ 546,840 $ 920,149 $ 587,630
========= ========= ========= =========
Extraordinary item:
Big Flower $ 1,892 $ 19,248
Scanforms
--------- ---------
As restated $ 1,892 $ 19,248
========= =========
Net income (loss):
Big Flower $ (2,257) $ (14,192) $ (3,046) $ (4,442)
Scanforms 1,533 1,435 1,434 1,165
--------- --------- --------- ---------
As restated $ (724) $ (12,757) $ (1,612) $ (3,277)
========= ========= ========= =========
</TABLE>
3. RECAPITALIZATION AND OFFERING
On November 22, 1995, Big Flower consummated an initial public offering
(the "Offering") of 6,724,688 shares of its common stock, of which
5,500,000 shares were sold by Big Flower and 1,224,688 shares were sold by
selling stockholders. The net proceeds of the Offering to Big Flower of
$80.3 million were used to redeem on a pro rata basis at a premium, a
portion of the 13-1/2% senior discount notes due 2004 (the "13-1/2%
Notes"), and a portion of each of the 10-3/4% Notes, as defined in Note 9,
and of the BFP Notes, as defined in Note 9. The remainder of the net
proceeds, together with borrowings under the New
F-11
<PAGE>
Credit Agreement as defined in Note 9, were used to purchase at a premium
the remaining balance of the 13-1/2% Notes, purchase all of Big Flower's
11% debentures due on August 2, 2005 (the "11% Debentures") at 100% of
principal amount, repay all amounts owed under TC Advertising's amended
credit agreement, purchase all outstanding shares of the Company's
preferred stock and terminate the Company's interest rate swap agreements
(see Note 9). The termination of the swap agreements and the repayment of
the 13-1/2% Notes, the 10-3/4% Notes, the BFP Notes and the amended credit
agreement generated an extraordinary loss of $19.2 million (net of income
tax benefit of $11.3 million), for the premiums and the deferred financing
costs associated with the amounts repaid.
Simultaneously with the consummation of the Offering, the outstanding
shares of Class B common stock, Class C common stock and Class D common
stock (except for 869,346 shares of Class B common stock) were converted
to shares of common stock on a share-for-share basis. In addition, the
Company declared a 2 for 1 stock split, effected in the form of a
dividend, on its then-outstanding shares, and the then-outstanding options
to purchase shares of Class C common stock became options to purchase
shares of common stock at the rate of two shares of common stock for each
share of Class C common stock underlying such options. In addition, the
put rights of the holders of vested Class C common stock expired.
4. SALE OF WEBCRAFT GAMES, INC.
On December 23, 1996, Webcraft sold the stock of its lottery production
division, Webcraft Games, Inc. ("Games") for approximately $6.7 million in
cash, subject to post closing adjustments based on the net working capital
of Games. A loss of approximately $14.3 million was recorded in the fourth
quarter in connection with the sale.
5. ACCOUNTS RECEIVABLE
Accounts receivable are summarized as follows (in thousands):
December 31, December 31,
1996 1995
Trade - billed $ 90,989 $ 135,350
Trade - unbilled 13,786 6,524
Other receivables 9,075 2,441
--------- ---------
113,850 144,315
Allowance for doubtful accounts (8,580) (7,768)
--------- ---------
$ 105,270 $ 136,547
========= =========
In addition to the Company's obligations under the Restated Credit
Agreement (hereinafter defined), on October 4, 1996 the Company entered
into a six-year agreement (the "A/R Securitization") pursuant to which it
may sell fractional undivided beneficial interests in a designated pool of
certain eligible accounts receivable. The maximum allowable amount of
receivables to be sold is $150 million. The amount outstanding at any
measurement date varies based upon the level of eligible receivables.
Under the terms of the agreement, the Company has retained substantially
the same risk of credit loss as if the receivables had not been sold and,
accordingly, the full amount of the allowance for doubtful accounts has
been retained. At December 31, 1996, a $79.8 million interest had been
sold under the A/R Securitization and is reflected as a reduction of
accounts receivables. Fees of this program vary based on a Eurodollar rate
plus an average margin of 3/8% per annum on the amount of interest sold.
This rate is lower than the rate
F-12
<PAGE>
under the Company's existing credit agreement (see Note 9). These costs,
which were approximately $5.3 million for the year ended December 31,
1996, are included in other, net in the accompanying consolidated
statements of operations.
6. INVENTORIES
Inventories are summarized as follows (in thousands):
December 31, December 31,
1996 1995
Paper $22,315 $38,823
Ink 1,040 1,468
Other 6,771 2,764
------- -------
$30,126 $43,055
======= =======
7. PROPERTY, PLANT AND EQUIPMENT
The cost and the related useful lives used are as follows (in thousands):
<TABLE>
<CAPTION>
Estimated
Useful Life December 31, December 31,
(in Years) 1996 1995
<S> <C> <C> <C>
Land $ 6,952 $ 3,769
Machinery and equipment 5 to 12 268,899 140,910
Buildings and leasehold improvements 3 to 30 62,104 34,341
Furniture and fixtures 5 to 10 9,036 6,445
Vehicles 3 to 4 1,198 472
Construction in progress and deposits
on equipment purchases 36,230 12,519
-------- --------
384,419 198,456
Accumulated depreciation and
amortization (87,993) (53,133)
-------- --------
$296,426 $145,323
======== ========
</TABLE>
F-13
<PAGE>
8. OTHER ASSETS
Other assets are summarized below and are primarily amortized using the
straight-line method over the following periods (in thousands):
December 31, December 31,
Years 1996 1995
Customer backlog 1 to 2 $ 3,050
Ink contracts 7.5 $ 7,799 7,799
Deferred financing fees 6 to 7 14,899 13,950
Non-compete agreements 5 40,085 38,585
Goodwill 40 257,429 169,024
-------- --------
320,212 232,408
Accumulated amortization (47,168) (32,885)
-------- --------
Net amortizable other assets 273,044 199,523
Other 17,768 11,208
-------- --------
$290,812 $210,731
======== ========
9. REVOLVING CREDIT FACILITY AND LONG-TERM DEBT
On November 28, 1995, TC Advertising entered into a six-year $350.0
million revolving credit facility (the "New Credit Agreement"). The New
Credit Agreement was amended and restated on March 19, 1996 (as amended to
date, the "Restated Credit Agreement") to add a $75 million term loan. Big
Flower, Webcraft, Laser Tech and their subsidiaries are guarantors under
the Restated Credit Agreement and are jointly and severally liable
thereunder. The revolving credit facility will be reduced by $33.3 million
on the last day of 1998, 1999 and 2000 and will mature on the last day of
2001. Principal payments on the term loan of $0.75 million are due on the
last day of 1996 through 2001 and will mature on the last day of 2002.
Interest on revolving loans will be payable at TC Advertising's option (a)
at a base rate plus a margin which ranges from 0.00% to 1.25% or (b) at a
Eurodollar-based rate plus a margin which ranges from 0.50% to 2.25%.
Interest on the term loan will be payable at TC Advertising's option (a)
at a base rate plus a margin of 1.50% or (b) at a Eurodollar-based rate
plus a margin of 2.50%. The Restated Credit Agreement also contains
covenant requirements which are customary for such financings. The
Restated Credit Agreement restricts the ability of Big Flower subsidiaries
to pay dividends to the Company and the Company's ability to pay dividends
to its stockholders but allows cash dividends to the Company for operating
expenses in the ordinary course of business up to an amount which starts
at $10.0 million for the calendar year 1996 and increases 10% each year.
Additionally, dividends are permitted (a) to enable the Company to pay
interest on the 10-3/4% Notes and the BFP Notes (or refinancing thereof),
to pay dividends on certain issuances of preferred stock and to undertake
certain debt buybacks and (b) up to 25% of the consolidated net income for
the prior year. At December 31, 1996, the annual weighted average interest
rate on borrowings under both facilities provided by the Restated Credit
Agreement was 7.35%.
In connection with the acquisition of TC Advertising, the Company issued
$150 million of 10-3/4% senior subordinated notes due 2003 (the "10-3/4%
Notes"). Interest on the 10-3/4% Notes is payable semiannually on each
February 1 and August 1. In connection with the acquisition of KTB and
Retail Graphics, the Company issued $40 million of senior subordinated
notes due 2003 (the "BFP Notes") at a discount of $2.8 million. The annual
effective interest rate on the BFP Notes was 11.74%.
The 10-3/4% Notes and BFP Notes are subject to certain covenants,
including restrictions on dividends, which are customary for such
financings.
F-14
<PAGE>
In connection with the acquisition of TC Advertising, on August 12, 1993,
Big Flower issued $15 million principal amount of the 11% Debentures.
Interest on the debentures was payable semiannually on each February 1 and
August 1. As permitted by the governing indenture, interest payments could
be made, in kind, through the issuance of additional securities on each
payment date or cash, subject to certain conditions and requirements.
In connection with the acquisition of KTB and Retail Graphics, Big Flower
issued $76.5 million principal amount of the 13-1/2% Notes at a
substantial discount. The annual effective interest rate on these notes
was 14.58%, which was payable semiannually on each April 15 and October
15, commencing on October 15, 1999.
In connection with the Offering (see Note 3), the 11% Debentures, the
13-1/2% Notes and a portion of each of the 10-3/4% Notes and of the BFP
Notes were repaid.
A summary of long-term debt (excluding the revolving credit facilities) is
as follows (in thousands):
December 31, December 31,
1996 1995
10-3/4% Notes and BFP Notes $ 125,166 $ 125,022
Term loan 74,250
Other notes 5,361 8,709
--------- ---------
204,777 133,731
Current portion (1,376) (4,070)
--------- ---------
$ 203,401 $ 129,661
========= =========
Future minimum payments on long-term debt (excluding the revolving credit
facility) are as follows (in thousands):
1998 $ 2,416
1999 1,781
2000 1,109
2001 929
Thereafter 197,166
--------
Total $203,401
========
F-15
<PAGE>
10. LEASES
Facilities and certain equipment are leased under agreements that expire
at various dates through 2006. Rental expense under operating leases for
the year ended December 31, 1996, the six months ended December 31, 1995,
the year ended June 30, 1995, and the 323 days ended June 30, 1994 was
$32,691,000, $17,083,000, $28,241,000, and $15,415,000, respectively.
Minimum annual rentals under all noncancelable operating leases (net of
subleases) are as follows (in thousands):
1997 $ 31,182
1998 23,546
1999 18,688
2000 12,002
2001 7,287
Thereafter 14,165
--------
$106,870
========
Commitments under the lease agreements also extend in most instances to
property taxes, insurance and maintenance and certain leases contain
escalation clauses and extension options.
11. INCOME TAXES
The provision (benefit) for income taxes consists of the following
components (in thousands):
<TABLE>
<CAPTION>
Six Months Year 323 Days
Year Ended Ended Ended Ended
December 31, December 31, June 30, June 30,
1996 1995 1995 1994
<S> <C> <C> <C> <C>
Current:
Federal $ (741) $ 4,642 $ 8,561 $ 854
State (317) 1,556 3,667 1,387
------- -------- -------- -------
(1,058) 6,198 12,228 2,241
------- -------- -------- -------
Deferred:
Federal 8,938 123 (3,644) (26)
State 403 (118) (1,704) 513
------- -------- -------- -------
9,341 5 (5,348) 487
------- -------- -------- -------
Total provision for income tax $ 8,283 $ 6,203 $ 6,880 $ 2,728
======= ======== ======== =======
</TABLE>
F-16
<PAGE>
The following is a reconciliation, stated as a percentage of pretax income
(loss), of the U.S. statutory federal income tax rate to the effective tax
rate:
<TABLE>
<CAPTION>
Six Months Year 323 Days
Year Ended Ended Ended Ended
December 31, December 31, June 30, June 30,
1996 1995 1995 1994
<S> <C> <C> <C> <C>
Income taxes computed at 35.0% 35.0% 35.0% (35.0)%
federal statutory rate
Amortization and write-off of goodwill 97.7 5.5 39.1 169.3
Preferred dividends of a
subsidiary 3.4 19.8 144.4
State income taxes, net of
federal income tax benefits 20.2 3.1 28.4 167.3
Original issue discount 1.3 7.3
Non deductible acquisition expenses 9.7
Other non deductible expenses 3.0 0.6 1.0 50.9
----- ---- ----- -----
165.6% 48.9% 130.6% 496.9%
===== ==== ===== =====
</TABLE>
The increase in effective tax rate for the year ended December 31, 1996 is
principally attributable to the goodwill write-off associated with the
sale of Games.
At June 30, 1996, alternative minimum tax credit carryforwards were
approximately $5 million, state investment tax credit carryforwards were
approximately $1.5 million (which expire at June 30, 2001), and federal
net operating loss carryforwards were approximately $51 million (which
expire at various dates through 2010).
The tax effects of significant items comprising the Company's deferred
income taxes are as follows (in thousands):
December 31, December 31,
1996 1995
Tax credit carryfoward $ 7,158 $ 3,630
Net operating loss carryforward 13,870 1,202
Bad debt reserve 3,869 3,200
Nonqualified plan 3,515 2,210
Workers' compensation 3,737 2,295
Health insurance 1,328 990
Other deductible differences 13,273 8,508
Relocation accrual 574 1,629
-------- --------
47,324 23,664
-------- --------
Depreciation (34,936) (24,303)
Intangible assets (267) (248)
Other taxable differences (1,647) (1,657)
-------- --------
(36,850) (26,208)
-------- --------
Valuation allowance (6,261) (1,124)
-------- --------
Net deferred income tax asset and (liability) $ 4,213 $ (3,668)
======== ========
The change in the valuation allowance is a result of acquisitions in the
current year.
F-17
<PAGE>
12. COMMITMENTS AND CONTINGENCIES
The Company has letters of credit of $14.5 million outstanding at December
31, 1996. A significant portion of the letters of credit relate to Games.
See Note 4. As part of the sale of Games, the purchaser is required to
issue substitute letters of credit at which time the Company will be
released from such letters of credit. The remainder of the letters of
credit relate to worker's compensation programs.
Certain key employees are covered under severance plan agreements
requiring varying payouts upon termination under certain circumstances.
Certain claims, suits and allegations that arise in the ordinary course of
business and certain environmental claims have been filed or are pending
against the Company. Management believes that all such matters in the
aggregate would not have a material effect on the Company's consolidated
financial position or results of operations if disposed of unfavorably.
13. EMPLOYEE STOCK OWNERSHIP TRUST
TC Advertising had an employee stock ownership plan for the benefit of
employees, which terminated in 1995. Under the terms of the plan,
contributions were made to an employee stock ownership trust ("ESOT") at
the discretion of TC Advertising's Board of Directors. The ESOT agreement
required the trust assets to be invested primarily in common stock of TC
Advertising. During the 323 days ended June 30, 1994, TC Advertising
contributed $3.6 million to the ESOT.
14. RETIREMENT PLANS
The Company maintains defined benefit pension plans covering substantially
all the employees of Webcraft. Webcraft Retirement Income Plan benefits
are generally calculated according to a benefit formula based on age,
total years and months of credited service and last five years average
compensation. Webcraft Service Related Pension Plan benefits are
calculated by multiplying years of credited service times a specific
dollar amount. The Company's policy is to fund the Employee Retirement
Income Security Act minimum required contribution. Net periodic pension
cost for the year ended December 31, 1996 included the following
components (in thousands):
Service costs $ 708
Interest cost 945
Actual return on assets (836)
-----
Net periodic pension cost $ 817
=====
F-18
<PAGE>
The funded status of the Webcraft plans at December 31, 1996 is presented
below (in thousands):
Actuarial present value of benefit obligations:
Vested benefit obligation $16,222
Nonvested benefit obligation 399
-------
Accumulated benefit obligation $16,621
=======
Projected benefit obligation $17,322
Plan assets at fair value 13,214
-------
Projected benefit obligations in excess of plan assets 4,108
Unrecognized gain 892
-------
Accrued pension liability $ 5,000
=======
The valuation of the projected benefit obligation of the plans at December
31, 1996 assumed a weighted average discount rate of 7.75%, expected long
term rate of return of 9% and annual compensation increase rate of 3.75%.
Plan assets consist of a variety of insurance company separate accounts
which invest primarily in common stock and corporate and government debt
securities.
TC Advertising maintains a Supplemental Executive Retirement Plan to
provide benefits to certain management and highly compensated employees.
Amounts under this unfunded defined benefit plan vest at 10% per year
beginning with the participants' sixth year of service. Benefits are
payable after the participants reach age 65. Participants may elect early
retirement benefits beginning at age 62 or after attaining 15 years of
service and 55 years of age. The liability under this plan is accrued over
the participants' remaining periods of employment so that, on the date of
their retirement, the then-present value of the annual future payments
will have been accrued. Retirement plan expense was approximately
$257,000, $578,000, $600,000 and $450,000 for the 323 days ended June 30,
1994, the year ended June 30, 1995, the six months ended December 31,
1995, and the year ended December 31, 1996, which included interest costs
of approximately $158,000, $352,000, $199,000, and $315,000 respectively.
Included in other long-term liabilities in the accompanying balance sheet
as of December 31, 1996 and 1995 are $6,102,000 and $5,874,000,
respectively, representing the projected actuarial present value of the
unfunded benefit obligation related to this plan. As of December 31, 1996
and 1995, a discount rate of 7.0% was used in determining this benefit
obligation.
In addition, TC Advertising established a Deferred Compensation Plan,
effective February 1, 1994, in which certain management, highly
compensated employees and certain former employees may defer up to 100% of
their total compensation through the date of their retirement. Included in
long-term liabilities in the accompanying balance sheet as of December 31,
1996 and 1995 is $2,137,000 and $1,325,000, respectively, representing
deferred compensation.
401(k) Plan - The Company maintains 401(k) and other investment plans for
eligible employees. The Company recorded $1,233,000, $2,426,000,
$1,383,000 and $3,135,000 in expense for the 323 days ended June 30, 1994,
the year ended June 30, 1995, the six months ended December 31, 1995, and
the year ended December 31, 1996, respectively.
F-19
<PAGE>
15. OTHER, NET
Other, net consisted of the following (in thousands):
<TABLE>
<CAPTION>
Year Six Months Year 323 Days
Ended Ended Ended Ended
December 31, December 31, June 30, June 30,
1996 1995 1995 1994
<S> <C> <C> <C> <C>
(Gain) loss on disposition of
property, plant and equipment $ 368 $ 219 $ 397 $ (551)
Cost of A/R Securitization 5,300
Acquisition financing costs 5,199
Contribution to ESOT 3,597
Plant closure 790 1,600
Office relocation 3,700 1,690
Other items, net 1,156 230 303 (540)
------- ------ ------ ------
$12,813 $5,749 $2,390 $2,506
======= ====== ====== ======
</TABLE>
16. STOCKHOLDERS' EQUITY
In connection with the TCA Acquisition, on August 12, 1993, Big Flower
received $15,500,000 from the issuance and sale of 1,080,000 and 2,895,000
shares of Class A common stock and Class B common stock at $5.00 and $3.49
per share, respectively.
During the 323 days ended June 30, 1994, Big Flower's board of directors
approved Management Stock Subscription Agreements (the "Subscription
Agreements") whereby certain officers, management personnel and key
employees purchased 400,000 shares of Big Flower Class C common stock at a
price of $5.00 per share. In conjunction with the terms of the
Subscription Agreements, Big Flower received $829,000 of 8% promissory
notes, due seven years from the date of issuance or upon the earlier
termination of the employee's employment with the Company, which are
secured by the stock issued. The promissory notes are included in the
accompanying balance sheet as a subscription notes receivable. Prior to
June 30, 1994, the Company repurchased 21,664 shares of Class C common
stock. In connection with the acquisition of KTB and Retail Graphics, the
Company issued 67,030 shares of Big Flower Class C common stock to the
former shareholders of KTB for $500,000. Also in connection with the
acquisition of KTB and Retail Graphics, Big Flower received $4,715,000
from the issuance and sale of 612,344 shares of Class D common stock at
$7.70 per share.
During the year ended June 30, 1995, the Company issued 98,242 additional
shares of Class C common stock to certain officers, management personnel
and key employees at a price of $7.46 per share and repurchased 111,429
shares of Class C common stock. In connection with the issuance, the
Company received $287,000 in 8% promissory notes with the terms described
above.
In connection with the Offering, the Class A common stock was redesignated
as common stock; the Class B, Class C and Class D common stock were
converted into common stock (except for 869,346 shares of Class B common
stock); and the Company declared a 2 for 1 stock split effected in the
form of a dividend (see Note 3).
F-20
<PAGE>
The Board of Directors declared a dividend distribution of one right (a
"Right") for each outstanding share of common stock immediately following
the Offering. Each Right entitles the holder to purchase from the Company
a unit consisting of one-one-hundredth of a share of Series A Junior
Preferred Stock at an exercise price of $55 per unit in an event that
certain entities acquire a required percentage of the Company's
outstanding stock.
17. COMMON STOCK SUBJECT TO REDEMPTION AND STOCK AWARD AND INCENTIVE PLAN
The Big Flower Press Holdings, Inc. Restated 1993 Stock Award and
Incentive Plan (the "1993 Stock Plan") authorized options to purchase
shares of common stock (Class C common stock for options granted prior to
the Offering). Options under the 1993 Stock Plan generally expire in ten
years, and become exercisable at varying times. The Class C common stock
shares and options were restricted as to their transfer until November 28,
1996. Big Flower also has an option ("Call Option") to repurchase Class C
common stock and exercisable Class C common stock options held by any
management investor terminated for any reason other than death, permanent
disability, or retirement. Under the 1993 Stock Plan, 3,484,114 shares of
common stock are authorized for issuance and 1,198,523 are available for
issuance.
The excess of the market value of Class C common shares and options over
the related cost and exercise price at the time of issuance was recorded
as unearned compensation in a separate component of stockholders' equity
and is amortized to expense over the vesting period, which is no more than
five years.
Transactions under the 1993 Stock Plan for the periods indicated were as
follows:
Weighted
Number Average
of Shares Exercise Price
Outstanding at August 12, 1993
Granted 232,000 $ 5.00
Stock split 16,814
Expired or canceled (12,565) $ 4.66
---------
Outstanding at June 30, 1994 236,249 $ 4.66
Granted 70,380 $ 7.46
Expired or canceled (25,752) $ 5.29
---------
Outstanding at June 30, 1995 280,877 $ 5.29
Granted 300,000 $ 16.00
Stock split 280,877
---------
Outstanding at December 31, 1995 861,754 $ 7.30
Granted 506,953 $ 10.59
Exercised (1,500) $ 2.33
Expired or canceled (3,961) $ 12.63
---------
Outstanding at December 31, 1996 1,363,246 $ 8.51
=========
Exercisable at December 31, 1996 639,327 $ 5.99
=========
The exercise price of options outstanding at December 31, 1996 ranges from
$.68 to $16.00.
F-21
<PAGE>
The Company applies APB Opinion No. 25 and related interpretations in
accounting for the 1993 Stock Plan. Accordingly, no compensation has been
recognized for the 1993 Stock Plan. Had compensation costs for the 1993
Stock Plan been determined based on the fair value at the grant date
forward under that plan consistent with SFAS No. 123, "Accounting for
Stock-Based Compensation", the Company's net income would have been
reduced to the pro forma amounts below (in thousands except share data):
Year
Ended
December 31,
1996
Net loss As reported $ (5,363)
Pro forma $ (6,521)
Loss per common and
common equivalent share:
Loss before
extraordinary item As reported $ (0.18)
Pro forma $ (0.24)
Net loss As reported $ (0.29)
Pro forma $ (0.36)
No adjustment to the Company's net income is required for 1995. The fair
value of options granted during 1996 is estimated on the date of grant
using the Black-Scholes option pricing model with the following
assumptions, (i) expected volatility of 52.36%, (ii) risk free interest
rate of 6.5%, (iii) expected life of 10 years, and (iv) dividend yield of
0%.
18. QUARTERLY FINANCIAL INFORMATION - UNAUDITED
Summarized quarterly financial information is as follows (in thousands
except for per share data):
<TABLE>
<CAPTION>
First Second Third Fourth
Year Ended December 31, 1996, Quarter Quarter Quarter Quarter
as restated
<S> <C> <C> <C> <C>
Net sales $ 229,128 $301,910 $313,248 $ 357,574
Income (loss) before income taxes (9,046) 4,811 7,204 2,029
Income (loss) before extraordinary item (4,423) 2,556 3,035 (4,453)
Extraordinary item, net 1,892 186
Net income (loss) (6,315) 2,556 3,035 (4,639)
Net income (loss) per common and
common equivalent share:
Income before extraordinary item (0.24) 0.14 0.16 (0.25)
Extraordinary item, net (0.10) (0.01)
Net income (loss) (0.34) 0.14 0.16 (0.26)
</TABLE>
F-22
<PAGE>
First Second
Six Months ended December 31, 1995, Quarter Quarter
as restated
Net sales $ 247,988 $ 298,852
Income (loss) before income taxes 5,863 6,831
Income before extraordinary item 2,835 3,656
Extraordinary item, net (19,248)
Net income (loss) 2,835 (15,592)
Net income per common and common
equivalent share:
Income before extraordinary item 0.22 0.13
Extraordinary item, net (1.27)
Net income (loss) 0.22 (1.14)
<TABLE>
<CAPTION>
First Second Third Fourth
Year Ended June 30, 1995, Quarter Quarter Quarter Quarter
as restated
<S> <C> <C> <C> <C>
Net sales $ 215,416 $253,527 $ 212,736 $ 238,470
Income (loss) before income taxes 99 5,284 (1,037) 922
Net income (loss) (766) 2,816 (1,529) (2,133)
Net income (loss) per common
and common equivalent share (0.06) 0.23 (0.12) (0.17)
</TABLE>
******
F-23
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders of
Big Flower Press Holdings, Inc.:
We have audited the consolidated financial statements of Big Flower Press
Holdings, Inc. and subsidiaries ( the "Company") as of December 31, 1996 and
1995 and for the year ended December 31, 1996, the six months ended December 31,
1995, the year ended June 30, 1995, and the 323 days ended June 30, 1994, and
have issued our report thereon dated February 14, 1997; such report is included
elsewhere in this Form 10-K. Our audits also included the financial statement
schedules listed in Item 14. These financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion based on our audits. In our opinion, such financial statement schedules,
when considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Baltimore, Maryland
February 14, 1997
F-24
<PAGE>
BIG FLOWER PRESS HOLDINGS, INC.
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
In thousands
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months 323 Days
Year Ended Ended Year Ended Ended
December 31, December 31, June 30, June 30,
1996 1995 1995 1994
<S> <C> <C> <C>
Selling, general and administrative expense $ (8,107) $ (938) $ (602)
Interest expense, net (6,129) (10,335) (7,957) $(2,485)
Preferred dividends of a subsidiary (1,068)
-------- -------- ------- -------
Loss before income taxes (14,236) (12,341) (8,559) (2,485)
Benefit for income taxes 7,081 3,943 2,891 845
-------- -------- ------- -------
(7,155) (8,398) (5,668) (1,640)
Equity in income (loss) of subsidiaries 1,792 14,889 4,056 (1,637)
-------- -------- ------- -------
Income (loss) before extraordinary item (5,363) 6,491 (1,612) (3,277)
Extraordinary item, net (19,248)
-------- -------- ------- -------
Net loss (5,363) (12,757) (1,612) (3,277)
Accumulated earnings (deficit)
at beginning of period (16,151) (3,394) (1,782) 1,495
-------- -------- ------- -------
Accumulated earnings (deficit)
at end of period $(21,514) $(16,151) $(3,394) $(1,782)
======== ======== ======= =======
</TABLE>
See Notes to condensed financial information.
F-25
<PAGE>
BIG FLOWER PRESS HOLDINGS, INC.
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED STATEMENTS OF CASH FLOWS
In thousands
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months 323 Days
Year Ended Ended Year Ended Ended
December 31, December 31, June 30, June 30,
1996 1995 1995 1994
<S> <C> <C> <C> <C>
Cash flows (used in) provided by operating activities:
Net loss $ (5,363) $ (12,757) $ (1,612) $(3,277)
Adjustments to reconcile net loss to net cash (used in)
provided by operating
activities:
Noncash interest expense 758 3,603 7,595 2,375
Preferred dividends of a subsidiary 1,068
Equity in (income) loss of subsidiaries (1,792) (14,889) (4,056) 1,637
Extraordinary item, net 19,248
Amortization 947 827 307 46
Deferred income taxes 161 (678) (2,269) (550)
Accounts receivable/payable - affiliate 3,730 (2,063) 352 (38)
Other, net (958) (1,028) (293) (172)
--------- --------- -------- -------
Net cash flows (used in) provided by operating
activities (2,517) (6,669) 24 21
--------- --------- -------- -------
Cash flows provided by (used in) investing activities:
Investment in subsidiaries (3,000) (69,993)
Distributions from subsidiary 1,325 101,595
--------- --------- -------
Net cash flows provided by (used in) investing
activities 1,325 98,595 (69,993)
--------- --------- -------
Cash flows (used in) provided by financing activities:
Proceeds from issuance of debt 50,285
Repayment of debt (146,721)
Proceeds from issuance of common stock 80,250 733 22,715
Payments for repurchase of common stock (772) (101)
Purchase of redeemable preferred stock (22,107)
Issuance of promissory notes 2,000
Repayment of promissory notes (2,000)
Deferred financing costs (2,220) (102) (2,736)
--------- -------- -------
Net cash flows (used in) provided by financing
activities (90,798) (141) 70,163
--------- -------- -------
Net change in cash and cash equivalents (1,192) 1,128 (117) 191
Cash and cash equivalents at beginning of period 1,202 74 191
--------- --------- -------- -------
Cash and cash equivalents at end of period $ 10 $ 1,202 $ 74 $ 191
========= ========= ======== =======
</TABLE>
See Notes to condensed financial information.
F-26
<PAGE>
BIG FLOWER PRESS HOLDINGS, INC.
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED BALANCE SHEETS
In thousands
- - --------------------------------------------------------------------------------
December 31, December 31,
ASSETS 1996 1995
Current assets:
Cash and cash equivalents $ 10 $ 1,202
Prepaid expenses 98
Accounts receivable - affiliate 3,730
--------- ---------
Total current assets 108 4,932
Investment in and advances to subsidiaries 222,626 225,130
Deferred income taxes 196 357
Other assets 5,762 7,289
--------- ---------
$ 228,692 $ 237,708
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 18,119
Other current liabilities $ 6,207 7,915
--------- ---------
Total current liabilities 6,207 26,034
--------- ---------
Long-term debt 125,166 125,022
Common stock subject to redemption 1,506
Stockholders' equity:
Common stock 186 172
Additional paid-in capital 119,019 102,300
Accumulated deficit (21,514) (16,151)
Unearned compensation (372) (1,175)
--------- ---------
Total stockholders' equity 97,319 85,146
--------- ---------
$ 228,692 $ 237,708
========= =========
See Notes to condensed financial information.
F-27
<PAGE>
BIG FLOWER PRESS HOLDINGS, INC.
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
NOTES TO CONDENSED FINANCIAL INFORMATION
- - --------------------------------------------------------------------------------
1. LONG-TERM DEBT
See Note 9 to the consolidated financial statements for details of
long-term debt.
2. INVESTMENT IN SUBSIDIARIES
The Company accounts for its investment in subsidiaries using the equity
method.
******
F-28
<PAGE>
BIG FLOWER PRESS HOLDINGS, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
323 DAYS ENDED JUNE 30, 1994, YEAR ENDED JUNE 30, 1995,
SIX MONTHS ENDED DECEMBER 31, 1995 AND YEAR ENDED DECEMBER 31, 1996
In thousands
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Balance at Charged to Balance
Beginning Costs and at end
of Period Expenses Deductions of Period
<S> <C> <C> <C> <C>
323 days ended June 30, 1994:
Allowance for loss on accounts receivable $5,708 $ 815 (b) $ (849) (a) $5,674
Year ended June 30, 1995:
Allowance for loss on accounts receivable $5,674 $1,770 $(1,701) (a) $5,743
Six Months Ended December 31, 1995:
Allowance for loss on accounts receivable $5,743 $2,802 (c) $ (777) (a) $7,768
Year ended December 31, 1996:
Allowance for loss on accounts receivable $7,768 $2,431 (d) (1,619) (a) $8,580
</TABLE>
a) Represents write-offs of uncollectible amounts, net of recoveries on
accounts previously written off.
b) Includes $1,111 for KTB and Retail Graphics as of acquisition date.
c) Includes $264 for Laser Tech as of acquisition date.
d) Includes $1,773 for Webcraft, Designer Color, Digital Dimensions, Pacific
Color and PrintCo as of acquisition date.
F-29
<PAGE>
Exhibit 10.2
FIRST AMENDMENT TO CREDIT AGREEMENT
FIRST AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), dated as of
August 22, 1996, among BIG FLOWER PRESS HOLDINGS, INC. ("Holdings"), TREASURE
CHEST ADVERTISING COMPANY, INC. (the "Borrower"), the financial institutions
party to the Credit Agreement referred to below (the "Banks"), BANK OF AMERICA
NT & SA, THE INDUSTRIAL BANK OF JAPAN, LIMITED and NATIONSBANK, N.A., as
Co-Agents (the "Co-Agents"), CREDIT SUISSE, as Documentation Agent (the
"Documentation Agent"), and BANKERS TRUST COMPANY, as Administrative Agent (the
"Administrative Agent") for the Banks. All capitalized terms used herein and not
otherwise defined shall have the respective meanings provided such terms in the
Credit Agreement.
W I T N E S S E T H :
WHEREAS, Holdings, the Borrower, the Banks, the Co-Agents, the
Documentation Agent and the Administrative Agent are parties to a Credit
Agreement, dated as of November 28, 1995 and amended and restated as of March
19, 1996 (as in effect on the date hereof, the "Credit Agreement");
WHEREAS, the Borrower desires to purchase 100% of the capital stock
of Printco, Inc., a Michigan corporation ("Printco"), and certain related assets
owned by Park Properties, a Michigan general partnership ("Park Properties"), in
a transaction (the "Printco Acquisition") which, after giving effect to this
Amendment, will constitute a Permitted Acquisition effected in accordance with
the requirements of the Credit Agreement;
WHEREAS, WTI desires to acquire 100% of the capital stock of
Scanforms, Inc., a Delaware corporation ("Scanforms"), in a transaction (the
"Scanforms Acquisition") which, after giving effect to this Amendment, will
constitute a Permitted Acquisition effected in accordance with the requirements
of the Credit Agreement;
WHEREAS, Holdings and the Borrower have requested certain amendments
to the Credit Agreement in connection with the transactions described in the two
preceding recitals and to effect certain other changes to the Credit Agreement;
and
WHEREAS, the parties hereto wish to amend the Credit Agreement as
herein provided;
NOW, THEREFORE, it is agreed:
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<PAGE>
I. Amendments and Modifications to Credit Agreement.
1. Section 2.01(c) of the Credit Agreement is hereby amended by
deleting the amount "$35,000,000" appearing therein and by inserting in lieu
thereof the amount "$45,000,000".
2. Section 4.02(f) of the Credit Agreement is hereby amended by (i)
deleting the word "and" at the end of clause (iii) appearing in the second
parenthetical of said Section and inserting a comma in lieu thereof and (ii)
inserting the following new clause (v) immediately after the phrase "this
Section 4.02(f)":
"and (v) sales or transfers of assets to the extent permitted by Section
9.02(xvi)".
3. Section 7.19 of the Credit Agreement is hereby amended by adding
the following new sentence at the end of clause (b) thereof:
"Notwithstanding anything to the contrary contained above, to the extent
the representation and warranty contained in this clause (b) relates to
any Subsidiary of Holdings for any period prior to the acquisition thereof
by Holdings pursuant to a Permitted Acquisition, such representation and
warranty is made to the best knowledge of Holdings and the Borrower."
4. Section 8.14(a)(iii) of the Credit Agreement is hereby amended by
inserting the phrase ", provided that if financial statements for the last month
of the fiscal quarter most recently ended have not yet been delivered (and were
not required to be delivered) pursuant to Section 8.01(a), then compliance with
the covenants described above shall instead be tested for the period of four
consecutive fiscal quarters (taken as one accounting period) most recently ended
for which financial statements have been delivered (or were required to be
delivered) pursuant to Section 8.01(b) or (c), as the case may be" immediately
after the phrase "accounting period) most recently ended" appearing therein.
5. Section 8.14(a)(v) of the Credit Agreement is hereby amended by
inserting the phrase "(excluding increased income and other taxes for periods to
occur after the consummation of the respective Permitted Transaction as a result
of the increased income of the entity to be acquired pursuant to the respective
Permitted Transaction)" immediately after the phrase "materially increased tax"
appearing therein.
6. Section 8.14(a)(xi) of the Credit Agreement is hereby amended by
deleting the number "(I)" appearing therein and by deleting the phrase "(II) the
sum of . . . $20,000,000" appearing therein.
7. Section 8.14(b) of the Credit Agreement is hereby amended by
deleting the parenthetical contained therein and by inserting in lieu thereof
the phrase "(except capital stock of (x) an Unrestricted Subsidiary owned by
another Unrestricted
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<PAGE>
Subsidiary and (y) a Shell Corporation so long as same remains a Shell
Corporation in accordance with the definition thereof contained herein)".
8. Section 8.19 of the Credit Agreement is hereby amended by
deleting the phrase "In connection therewith, it" appearing in the second
sentence of said Section and inserting in lieu thereof the word "It".
9. The Banks hereby acknowledge and agree that the Printco
Acquisition may be effected by the Borrower pursuant to a Permitted Acquisition
which, after giving effect to this Amendment, complies in all respects with the
requirements of the Credit Agreement (including, without limitation, Sections
8.11, 8.14, 9.11 and 9.12 thereof).
10. The Banks hereby acknowledge and agree that the Scanforms
Acquisition may be effected as a Permitted Acquisition in accordance with all
applicable requirements with the Credit Agreement, including, without
limitation, Sections 8.11, 8.14, 9.11 and 9.12 thereof; provided that,
notwithstanding anything to the contrary contained in the Credit Agreement, the
following deviations from the requirements of the Credit Agreement shall be
permitted (and only such deviations shall be permitted) in connection with the
Scanforms Acquisition so long as same otherwise meets all applicable
requirements for a Permitted Acquisition pursuant to the Credit Agreement:
(i) the Scanforms Acquisition may be effected by the merger of
Scanforms into a newly-formed direct Wholly-Owned Subsidiary of either WTI
or Holdings, provided that if the Scanforms Acquisition is effected by
such a merger into a direct Wholly-Owned Subsidiary of Holdings, (x) any
financing required from the Borrower for such Permitted Acquisition shall
be extended to WTI pursuant to Permitted Acquisition Loans made in
accordance with the requirements of Section 9.05(xxii) of the Credit
Agreement, it being understood and agreed that (notwithstanding anything
to the contrary contained in the Credit Agreement), WTI shall be permitted
to advance such funds to Holdings and/or to Scanforms to the extent needed
by Holdings and/or Scanforms to effect the Scanforms Acquisition and (y)
immediately after giving effect to the consummation of said merger, the
stock of Scanforms as the surviving corporation thereof shall be
contributed to WTI (at which time any inter-company loans made by WTI to
Holdings as described in preceding clause (x) shall be extinguished or
assumed by Scanforms) and shall thereafter constitute a direct
Wholly-Owned Subsidiary of WTI;
(ii) the Banks hereby waive any requirement for a determination by
the Agents pursuant to Section 8.14(a)(x) of the Credit Agreement in
connection with the Scanforms Acquisition, although the Borrower shall
remain obligated to provide the certification required thereby; and
(iii) in connection with the Scanforms Acquisition, the Scanforms
Non-Compete Agreement may be entered into by Holdings and/or one or more
of its
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<PAGE>
Subsidiaries with Mr. Robert Samans, President of Scanforms, so long as
the payments by Holdings and its Subsidiaries pursuant thereto do not
exceed $2,500,000 in the aggregate and if such payments are structured as
a promissory note, the aggregate principal amount of such promissory note
does not exceed $2,500,000, with interest accruing thereon at a rate not
to exceed 9% per annum.
The Scansforms Non-Compete Agreement described above shall be permitted to be
entered into in connection with the Scanforms Acquisition, but shall be included
as Indebtedness for purposes of determining compliance with Section 9 of the
Credit Agreement (including, without limitation, Sections 9.08 and 9.09
thereof). The creation of a Wholly-Owned Subsidiary of Holdings to effect the
Scanforms Acquisition as contemplated by preceding clause (i) shall be
permitted, so long as such creation complies with all applicable requirements of
the Credit Agreement (including, without limitation, Section 9.11 thereof),
except for the fact that such Wholly-Owned Subsidiary is initially directly
owned by Holdings, rather than WTI.
11. Section 9.01 of the Credit Agreement is hereby amended by (i)
inserting the text "(x)" immediately following the phrase "Liens on" appearing
in clause (xvii) of said Section and (ii) inserting the following text
immediately after the phrase "Receivables Documents" appearing in clause (xvii)
of said Section:
"and (y) any amounts representing proceeds of securities issued in
connection with the Receivables Facility which are on deposit in any
account established under the Receivables Facility to the extent the funds
from time to time on deposit in such account are included within the
definition of Transferred Assets (as defined in Section 2.1 of the
Receivables Pooling Agreement as originally in effect)".
12. Section 9.02 of the Credit Agreement is hereby amended by
deleting the word "and" appearing at the end of clause (xiv) thereof, deleting
clause (xv) thereof in its entirety and by inserting in lieu thereof the
following new clauses (xv), (xvi) and (xvii):
"(xv) transfers of assets between Holdings and any of Holdings'
Wholly-Owned Domestic Subsidiaries which are Guarantors or between such
Subsidiaries of Holdings, provided that (I) the aggregate fair market
value of all such transferred assets does not exceed $25,000,000 and (II)
the Borrower shall certify to the Agents that the transferred assets are
expected to be more productive if transferred as specified, in cases where
the fair market value of the transferred assets exceeds $1,000,000;
(xvi) each of Holdings and its Subsidiaries may sell or otherwise transfer
and rent or lease back property if the fair market value of all such
property so sold or transferred and rented or leased back pursuant to this
clause (xvi) in any fiscal year does not exceed $5,000,000 in the
aggregate; and
(xvii) (x) Holdings and its Subsidiaries may enter into agreements to
effect
-4-
<PAGE>
acquisitions and dispositions of stock or assets so long as the respective
transaction is permitted pursuant to the foregoing provisions of this
Section 9.02 and (y) Holdings and its Subsidiaries may enter into
agreements to effect acquisitions and dispositions of capital stock or
assets in transactions not permitted by the provisions of this Section
9.02 at the time the respective agreement is entered into; provided that
in the case of each agreement of the type referenced in this clause (y)
such agreement shall be expressly conditioned upon obtaining the requisite
consent of the Required Banks under this Agreement as a condition
precedent to the consummation of the respective transaction and, if for
any reason the transaction is not consummated because of a failure to
obtain such consent, the aggregate liability of Holdings and its
Subsidiaries under any such agreement shall not exceed $500,000."
13. Section 9.03(ii) of the Credit Agreement is hereby amended by
(x) inserting the phrase ", to pay for capital improvements" immediately after
the phrase "operating expenses in ordinary course of business" appearing therein
and (y) deleting the amount "$5,000,000" appearing in the first proviso to said
Section and inserting in lieu thereof the amount "$10,000,000".
14. Section 9.04(vii) is hereby amended by deleting the phrase
"provided further, that in no event . . . $33,000,000;" appearing therein.
15. Section 9.04 of the Credit Agreement is hereby further amended
by (x) deleting the word "and" appearing at the end of clause (xvi) thereof, (y)
deleting the period appearing at the end of clause (xvii) thereof and inserting
a semi-colon in lieu thereof and (z) adding the following new clauses (xviii)
and (xix) immediately after clause (xvii) thereof:
"(xviii) additional unsecured Indebtedness of Holdings and/or its
Subsidiaries, including Indebtedness incurred in connection with the
Scanforms Non-Compete Agreement, so long as the aggregate outstanding
amount of such Indebtedness at no time exceeds $15,000,000; and
(xix) Indebtedness of Holdings and/or its Subsidiaries under Currency
Agreements, in each case so long as the respective Currency Agreement is
reasonably related to revenues or payments of Holdings and/or its
Subsidiaries in the respective currency subject to the Currency Agreement
and is entered into for non-speculative purposes."
16. Section 9.05 of the Credit Agreement is hereby amended by (a) in
clause (vi) thereof, inserting the phrase "and its Subsidiaries" immediately
after the word "Holdings" appearing therein, (b) in clause (xiii) thereof,
deleting the amount "$45,000,000" appearing therein and by inserting in lieu
thereof the amount "$50,000,000", (c) deleting the word "and" appearing at the
end of clause (xxiii) thereof, (d) deleting the period at the end of clause
(xxiv) thereof and inserting a semi-colon in lieu thereof and (e)
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<PAGE>
inserting the following new clauses (xxv), (xxvi) and (xxvii) immediately at the
end thereof:
"(xxv) Holdings and/or it Subsidiaries may enter into Currency Agreements
in accordance with the requirements contained in Section 9.04(xix);
(xxvi) additional Investments may exist from time to time consisting of
capital contributions to the Receivables Subsidiary made solely through a
reduction in the principal amount of any intercompany note then payable to
the Borrower by the Receivables Subsidiary, so long as (x) all capital
stock of the Receivables Subsidiary is pledged pursuant to the Pledge and
Security Agreement, (y) any such intercompany note (to the extent same is
not reduced to $0) is pledged pursuant to the Pledge and Security
Agreement and (z) the aggregate amount of all such capital contributions
shall not exceed $15 million; and
(xxvii) other Investments by Holdings and/or its Subsidiaries shall be
permitted, so long as the net aggregate amount of such Investments (after
giving effect to any dividends or other returns of capital on the
respective such Investments) does not exceed $5,000,000 at any one time
outstanding."
17. Section 9.09 of the Credit Agreement is hereby amended by (i)
deleting the phrase "4.25 to 1.0 through and including March 31, 1997 and 4.00
to 1.0 thereafter" appearing in said Section and inserting in lieu thereof the
text "4.50 to 1.0 through and including December 31, 1998 and 4.25 to 1.0
thereafter" and (ii) inserting the phrase "(or 4.10 to 1.00 in the case of a
Permitted Acquisition effected prior to December 31, 1997)" immediately after
the phrase "greater than 4.00 to 1.00" appearing in the proviso thereto.
18. Section 9.10(b) is hereby amended by adding the following new
clause immediately at the end of first sentence thereof:
"and (z) so long as no Default or Event of Default is then in existence,
the Existing Indebtedness outstanding as of the First Amendment Effective
Date to Fleet Credit Corporation and/or MetLife Capital Corporation in an
aggregate principal amount not to exceed $1,000,000 may be repaid or
prepaid, so long as no premium is paid in connection therewith".
19. Section 9.11 of the Credit Agreement is hereby amended by adding
the phrase "(other than a Shell Corporation, so long as it remains a Shell
Corporation)" immediately after the phrase "Restatement Effective Date any
Subsidiary" appearing therein.
20. The definition of "Attributed Receivables Facility Indebtedness"
appearing in Section 11.01 of the Credit Agreement is hereby amended by adding
the following proviso at the end of said definition:
"; provided that such principal amount shall be net of amounts of cash and
Cash
-6-
<PAGE>
Equivalents on deposit in any principal funding or equalization account
established pursuant to the Receivables Facility which, if the Receivables
Facility were structured as a secured lending arrangement rather than as a
facility for the sale of Receivables Facility Assets, would collateralize
the Indebtedness issued thereunder".
21. The definition of "Change of Control" appearing in Section 11.01
of the Credit Agreement is hereby amended by deleting subclause (a) of clause
(iii) thereof in its entirety and by inserting in lieu thereof the following new
subclause:
"(a) the Ammon Permitted Holders shall cease to own the lesser of at least
(A) 1,000,000 shares (adjusted for any stock splits or similar occurrences
after the First Amendment Effective Date) of the outstanding common stock
of Holdings or (B) 6.5% of the outstanding common stock of Holdings,".
22. The definition of "Indebtedness" appearing in Section 11.01 of
the Credit Agreement is hereby amended by adding the phrase ", any Currency
Agreement" immediately after the phrase "Interest Rate Protection Agreement"
appearing therein.
23. The definition of "L/C Supportable Indebtedness" appearing in
Section 11.01 of the Credit Agreement is hereby amended by (x) inserting
"Holdings," immediately prior to the word "WTI" in clause (i) of such
definition, (y) inserting the word "Holdings," immediately prior to the word
"Borrower" in clause (ii) of such definition and (z) inserting the following new
proviso immediately at the end thereof:
"; provided that in no event shall L/C Supportable Indebtedness include
any Indebtedness for borrowed money of Holdings".
24. The definition of "L/C Supportable Obligations" appearing in
Section 11.01 of the Credit Agreement is hereby amended by (x) inserting the
word "Holdings," immediately before the word "Borrower" appearing therein and
(y) inserting the following new proviso immediately at the end thereof:
"; provided that in no case shall L/C Supportable Obligations include
Indebtedness for borrowed money of Holdings".
25. The definition of "Permitted Acquisition" appearing in Section
11.01 of the Credit Agreement is hereby amended by (w) adding the phrase "(in
each case, together with any related assets used in the business, division or
product line of the Person so acquired)" immediately after the phrase "100% of
the capital stock of any such Person" appearing therein, (x) in the second
sentence thereof, deleting the phrase "in the immediately preceding sentence"
appearing therein and inserting in lieu thereof the word "above", (y) adding the
following new sentence immediately after the first sentence of said definition:
"For purposes of determining compliance with the immediately preceding
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<PAGE>
sentence, Indebtedness acquired pursuant to any Permitted Acquisition and
repaid promptly after (and in any event within 30 days after the date of)
the consummation of the respected Permitted Acquisition shall not be
included as outstanding Indebtedness of Holdings or its Subsidiaries for
purposes of determining compliance with Section 8.14 and the covenants
contained in Section 9, but shall instead be treated as consideration
(paid in cash or, if satisfied through the issuance of common stock or
Qualified Preferred Stock as permitted above, consideration paid in common
stock or Qualified Preferred Stock, as the case may be) paid in connection
with such Permitted Acquisition."
and (z) adding the phrase "and (z) in determining whether each of the Printco
Acquisition and the Scanforms Acquisition is a Permitted Acquisition, effect
shall be given to the provisions of the First Amendment relating thereto"
immediately at the end of clause (y) of the last sentence of said definition.
26. The definition of "Receivables Facility Assets" appearing in
Section 11.01 of the Credit Agreement is hereby amended by inserting the
following parenthetical immediately after the phrase "involving accounts
receivable" appearing in clause (iv) of said definition:
"(which may include amounts, which do not constitute proceeds of any
account receivable included in the Receivables Facility, paid by an
account receivable obligor which are credited to a bank account
established under the Receivables Facility, so long as such amounts, upon
identification by the servicer under the Receivables Facility as not
constituting proceeds of an account receivable included in the Receivables
Facility, may be released from any Lien granted under the Receivables
Facility)".
27. The definition of "Receivables Facility Financing Costs"
appearing in Section 11.01 of the Credit Agreement is hereby amended by adding
the following proviso at the end of said definition:
"; provided that such total consolidated interest and fee expense shall be
net of consolidated interest and fee expense arising in respect of amounts
on deposit in any principal funding or equalization account established
pursuant to the Receivables Facility which, if same were structured as a
secured lending arrangement rather than a facility for the sale of
Receivables Facility Assets, would collateralize the Indebtedness issued
thereunder".
28. Section 11.01 of the Credit Agreement is hereby further amended
by inserting in appropriate alphabetical order the following new definitions:
"Currency Agreement" shall mean any obligations of any Person
pursuant to any foreign exchange contract, currency swap agreement or
other similar agreement or arrangement designed to protect such Person or
any of its Subsidiaries or
-8-
<PAGE>
Affiliates against fluctuations in currency values.
"First Amendment" shall the mean the First Amendment to this
Agreement, dated as of August 22, 1996.
"First Amendment Effective Date" shall mean the First Amendment
Effective Date under, and as defined in, the First Amendment.
"Park Properties" shall mean Park Properties, a Michigan general
partnership.
"Printco" shall mean Printco, Inc., a Michigan corporation.
"Printco Acquisition" shall mean (i) the purchase by the Borrower of
100% of the outstanding common stock of Printco and all outstanding
options to purchase shares of such common stock and (ii) the Borrower's
acquisition of certain related assets and liabilities from Park
Properties.
"Scanforms" shall mean Scanforms, Inc., a Delaware corporation.
"Scanforms Acquisition" shall mean the acquisition by Holdings or
WTI of 100% of the equity interests in Scanforms, which acquisition shall
be effected by the merger of a newly-formed Wholly-Owned Subsidiary of
Holdings or WTI, as the case may, into Scanforms; provided that if
Scanforms is acquired by a direct Wholly-Owned Subsidiary of Holdings,
then immediately after the consummation of the Scanforms Acquisition the
stock of the surviving corporation of the merger described above shall be
contributed to WTI after which Scanforms shall be a direct Wholly-Owned
Subsidiary of WTI.
"Scanforms Non-Compete Agreement" shall mean a non-compete agreement
entered into by Holdings and/or one or more of its Subsidiaries with Mr.
Robert Samans, President of Scanforms, in connection with the Scanforms
Acquisition.
"Shell Corporation" shall mean any corporation established to effect
a Permitted Acquisition which has not yet occurred, so long as the
aggregate amount of assets at any time held by all Shell Corporations at
any time in existence does not exceed $100,000. At the time of the
consummation of the respective Permitted Acquisition or at such time as
the assets of any corporation which was a Shell Corporation exceed
$100,000, such corporation shall cease to be a Shell Corporation. At such
time as the assets of all corporations which theretofore constitute Shell
Corporations exceed $100,000 in the aggregate, the Borrower shall notify
the Administrative Agent as to which corporations shall cease to
constitute Shell Corporations or, in the absence of such designation, all
such corporations shall at such time cease to be Shell Corporations.
-9-
<PAGE>
II. Miscellaneous Provisions.
I. In order to induce the Banks to enter into this Amendment, the
Borrower hereby represents and warrants that:
(a) no Default or Event of Default exists as of the First Amendment
Effective Date, both before and after giving effect to this Amendment; and
(b) all of the representations and warranties contained in the
Credit Agreement and the other Credit Documents are true and correct in
all material respects on the First Amendment Effective Date both before
and after giving effect to this Amendment, with the same effect as though
such representations and warranties had been made on and as of the First
Amendment Effective Date (it being understood that any representation or
warranty made as of a specific date shall be true and correct in all
material respects as of such specific date).
2. This Amendment is limited as specified and shall not constitute a
modification, acceptance or waiver of any other provision of the Credit
Agreement or any other Credit Document.
3. This Amendment may be executed in any number of counterparts and
by the different parties hereto on separate counterparts, each of which
counterparts when executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A complete set of
counterparts shall be lodged with the Borrower and the Administrative Agent.
4. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE
STATE OF NEW YORK.
5. This Amendment shall become effective on the date (the "First
Amendment Effective Date") when each of Holdings, the Borrower, each Subsidiary
Guarantor and the Required Banks shall have signed a counterpart hereof (whether
the same or different counterparts) and shall have delivered (including by way
of facsimile transmission) the same to the Administrative Agent at its Notice
Office.
6. From and after the First Amendment Effective Date, all references
in the Credit Agreement and each of the other Credit Documents to the Credit
Agreement shall be deemed to be references to the Credit Agreement as amended
hereby.
* * *
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Amendment as of the date first
above written.
BIG FLOWER PRESS HOLDINGS, INC.
By /s/ Mark A. Angelson
----------------------------------
Title: Executive Vice President
TREASURE CHEST ADVERTISING
COMPANY, INC.
By /s/ Mark A. Angelson
----------------------------------
Title: Secretary
BANKERS TRUST COMPANY,
Individually and
as Administrative Agent
By /s/ Christopher Kinslow
----------------------------------
Title: Vice President
<PAGE>
CREDIT SUISSE,
Individually
By /s/ Joel Glodowski
----------------------------------
Title: member of senior management
By /s/ Chris T. Hogan
----------------------------------
Title: Associate
CREDIT SUISSE,
as Documentation Agent
By /s/ Joel Glodowski
----------------------------------
Title: member of senior management
By /s/ Chris T. Hogan
----------------------------------
Title: Associate
ABN AMRO BANK N.V.,
NEW YORK BRANCH
By /s/ Thomas Rogers
----------------------------------
Title: Assistant Vice President
By /s/ Frances O'Reilly Logan
----------------------------------
Title: Vice President
BANK OF AMERICA NT & SA
By /s/ John M. Varnell
----------------------------------
Title: Managing Director
BANK OF IRELAND
<PAGE>
By /s/ Paddy Dowling
----------------------------------
Title: Account Manager
THE BANK OF NEW YORK
By /s/ Gregory Shefrin
----------------------------------
Title: Vice President
CORESTATES BANK
By /s/ Melina Lang
----------------------------------
Title: Vice President
COMERICA BANK
By /s/ Tamara J. Gurne
----------------------------------
Title: Account Officer
CREDIT LYONNAIS -
NEW YORK BRANCH
By /s/ Fred Haddad
----------------------------------
Title: Senior Vice President
CREDIT LYONNAIS -
CAYMAN ISLAND BRANCH
By /s/ Fred Haddad
----------------------------------
Title: Authorized Signature
DAI-ICHI KANGYO BANK, LIMITED
By
----------------------------------
Title:
<PAGE>
DRESDNER BANK AG, New York and Grand Cayman Branches
By /s/ Andrew K. Mittag and Richard W. Conroy
-------------------------------------------
Title: Vice President
THE FUJI BANK, LIMITED
By /s/ Teui Teramoto
----------------------------------
Title: Vice President and Manager
GIROCREDIT BANK AG DER
SPARKASSEN, GRAND CAYMAN
ISLAND BRANCH
By /s/ John Redding
----------------------------------
Title: Vice President
THE INDUSTRIAL BANK OF JAPAN, LIMITED
By /s/ Junri Oda
-------------------------------
Title: Senior Vice President and Senior Manager
THE LTCB TRUST COMPANY
By /s/ Rene O. LeBlanc
----------------------------------
Title: Senior Vice President
MERRILL LYNCH SENIOR FLOATING
RATE FUND, INC.
By /s/ Anthony R. Clemente
----------------------------------
Title: Authorized Signatory
<PAGE>
BANK OF TOKYO-MITSUBISHI TRUST
LIMITED, successor to merger to The
Mitsubishi Bank, Limited
By /s/ Randy Szuck
----------------------------------
Title: Attorney-in-Fact
THE MITSUBISHI TRUST AND
BANKING CORPORATION
By /s/ Patricia Loret de Mola
----------------------------------
Title: Senior Vice President
NATIONSBANK, N.A.
By /s/ Michael R. Heredia
----------------------------------
Title: Vice President
SANWA BANK CALIFORNIA
By /s/ Mary King
----------------------------------
Title: Vice President
SENIOR HIGH INCOME PORTFOLIO, INC.
By /s/ Anthony R. Clemente
----------------------------------
Title: Authorized Signatory
SUMITOMO BANK OF CALIFORNIA
By /s/ Robert M. Iritani
----------------------------------
Title: Vice President
<PAGE>
UNION BANK CORPORATE BANKING
By /s/ Robert Pile
----------------------------------
Title: Vice President
VAN KAMPEN AMERICAN CAPITAL
PRIME RATE INCOME TRUST
By /s/ Jeffrey W. Maillet
----------------------------------
Title: Senior Vice President
MERRILL LYNCH PRIME RATE
PORTFOLIO
BY: MERRILL LYNCH ASSET
MANAGEMENT, L.P., as Investment
Advisor
By /s/ Anthony R. Clemente
----------------------------------
Title: Authorized Signatory
CERES FINANCE LTD.
By /s/ Darren Riley
----------------------------------
Title: Director
KEYPORT LIFE INSURANCE
COMPANY
BY: Chancellor Senior Secured
Management, Inc. as Portfolio Advisor
By /s/ Gregory L. Smith
----------------------------------
<PAGE>
Title: Vice President
MEDICAL LIABILITY MUTUAL
INSURANCE COMPANY
BY: Chancellor Senior Secured
Management, Inc. as Investment Manager
By /s/ Gregory L. Smith
----------------------------------
Title: Vice President
PRIME INCOME TRUST
By /s/ Rafael Scolari
----------------------------------
Title: V.P. Portfolio Manager
The undersigned, each being a Subsidiary Guarantor under, and as defined,
the Credit Agreement referred to in the foregoing First Amendment, hereby
consents and agrees to the provisions of the foregoing First Amendment and
acknowledges that the extensions of credit pursuant to the Credit Agreement, as
amended by the foregoing First Amendment, shall continue to be entitled to the
full benefits of all Credit Documents (as defined in the Credit Agreement)
executed by such Subsidiary Guarantor.
BF AVIATION CORP
By /s/ Mark A. Angelson
-----------------------------------
Title: Secretary
LASER TECH COLOR, INC.
By /s/ Mark A. Angelson
----------------------------------
Title: Secretary
LEVELCO 84, L.P.
<PAGE>
By: TREASURE CHEST ADVERTISING, INC.,
its general partner
By /s/ Rick Frier
-----------------------------------
Title: Vice President and Treasurer
TREASURE CHEST ADVERTISING
COMPANY OF NEW YORK, INC.
By /s/ Rick Frier
-----------------------------------
Title: Vice President and Treasurer
TREASURE CHEST ADVERTISING
COMPANY OF TEXAS, INC.
By /s/ Rick Frier
-----------------------------------
Title: Vice President and Treasurer
TREASURE CHEST ADVERTISING
HOLDING COMPANY OF TEXAS, INC.
By /s/ Rick Frier
-----------------------------------
Title: Vice President and Treasurer
WEBCRAFT TECHNOLOGIES, INC.
By /s/ Tom Gardner
-----------------------------------
Title: Senior Vice President
Finance, CFO
WEBCRAFT GAMES, INC.
<PAGE>
By /s/ Tom Gardner
-----------------------------------
Title: Senior Vice President
Admin., Treasurer
WEBTECH HOLDINGS, INC.
By /s/ Tom Gardner
-----------------------------------
Title: Senior Vice President, CFO
WEBCRAFT CHEMICALS d/b/a
CRAIG ADHESIVES & COATING CO.
By /s/ Roy Bergquist
-----------------------------------
Title: President and Treasurer
KSS TRANSPORTATION CORP.
By /s/ Tom Gardner
-----------------------------------
Title: President
<PAGE>
WEBCRAFT INVESTORS, INC.
By /s/ Tom Gardner
-----------------------------------
Title: Senior Vice President & CFO
WEBCRAFT MIDWEST, INC.
By /s/ Tom Gardner
-----------------------------------
Title: Senior Vice President & CFO
<PAGE>
Exhibit 10.3
SECOND AMENDMENT TO CREDIT AGREEMENT
SECOND AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), dated as of
November 27, 1996, among BIG FLOWER PRESS HOLDINGS, INC. ("Holdings"), TREASURE
CHEST ADVERTISING COMPANY, INC. (the "Borrower"), the financial institutions
party to the Credit Agreement (as defined below) (the "Banks"), BANK OF AMERICA
NT & SA, THE INDUSTRIAL BANK OF JAPAN, LIMITED and NATIONSBANK, N.A., as
Co-Agents (the "Co-Agents"), CREDIT SUISSE, as Documentation Agent (the
"Documentation Agent"), and BANKERS TRUST COMPANY, as Administrative Agent (the
"Administrative Agent") for the Banks. All capitalized terms used herein and not
otherwise defined shall have the respective meanings provided such terms in the
Credit Agreement.
W I T N E S S E T H :
WHEREAS, Holdings, the Borrower, the Banks, the Co-Agents, the
Documentation Agent and the Administrative Agent are parties to a Credit
Agreement, dated as of November 28, 1995 and amended and restated as of March
19, 1996 (as amended, modified or supplemented to the date hereof, the "Credit
Agreement");
WHEREAS, Laser Tech Color, Inc., a Wholly-Owned Subsidiary of
Holdings ("Laser Tech"), desires to purchase 100% of the capital stock of
Digital Dimensions, Inc., a Missouri corporation ("DDI"), in a transaction (the
"DDI Acquisition") which, after giving effect to this Amendment, will constitute
a Permitted Acquisition effected in accordance with the requirements of the
Credit Agreement;
WHEREAS, Laser Tech desires to (i) acquire 100% of the capital stock
of Designer Color Systems, Ltd., a Missouri corporation ("DCS"), pursuant to a
merger of DCS with and into Laser Tech, with Laser Tech as the surviving
corporation of such merger and (ii) contribute all of the assets and liabilities
of DCS acquired pursuant to said merger to a newly-created Wholly-Owned
Subsidiary of Laser Tech (the transactions described in clauses (i) and (ii),
collectively, the "DCS Acquisition"), which transaction, after giving effect to
this Amendment, will constitute a Permitted Acquisition effected in accordance
with the requirements of the Credit Agreement;
WHEREAS, Holdings and the Borrower have requested certain amendments
to the Credit Agreement in connection with the transactions described in the two
preceding recitals; and
WHEREAS, the parties hereto wish to amend the Credit Agreement as
-1-
<PAGE>
herein provided;
NOW, THEREFORE, it is agreed:
I. Amendments and Modifications to Credit Agreement.
1. The Banks hereby acknowledge and agree that the DDI Acquisition
may be effected as a Permitted Acquisition so long as same meets all applicable
requirements for a Permitted Acquisition under the Credit Agreement (including,
without limitation, Sections 8.11, 8.14, 9.11 and 9.12 thereof); provided that,
notwithstanding anything to the contrary contained in the Credit Agreement, the
Banks hereby waive any requirement for a determination by the Agents pursuant to
Section 8.14(a)(xi) of the Credit Agreement in connection with the DDI
Acquisition, although the Borrower shall remain obligated to provide the
certification required thereby.
2. The Banks hereby acknowledge and agree that the DCS Acquisition
may be effected as a Permitted Acquisition in accordance with all applicable
requirements of the Credit Agreement (including, without limitation, Sections
8.11, 8.14, 9.11 and 9.12 thereof); provided that, notwithstanding anything to
the contrary contained in the Credit Agreement, the following deviations from
the requirements of the Credit Agreement shall be permitted (and only such
deviations shall be permitted) in connection with the DCS Acquisition so long as
same otherwise meets all applicable requirements for a Permitted Acquisition
pursuant to the Credit Agreement:
(i) the DCS Acquisition may be effected in accordance with the
requirements of the definition thereof;
(ii) Holdings and/or Laser Tech may make cash payments to certain
employees of DCS pursuant to a stay-in-place incentive bonus arrangement
(the "DCS Bonus Arrangement"), so long as (x) no Default or Event of
Default then exists or would result therefrom, (y) the cash payments by
Holdings and/or Laser Tech pursuant thereto do not exceed $750,000 in the
aggregate (the "DCS Cash Incentive Amount") and (z) prior to the making of
such payments, the DCS Cash Incentive Amount is included as Indebtedness
for purposes of determining compliance with Section 9 of the Credit
Agreement (including, without limitation, Sections 9.08 and 9.09 thereof);
and
(iii) the Banks hereby waive any requirement for a determination by
the Agents pursuant to Section 8.14(a)(xi) of the Credit Agreement in
connection with the DCS Acquisition, although the Borrower shall remain
obligated to provide the certification required thereby.
3. Section 9.04 of the Credit Agreement is hereby amended by
inserting the phrase "and the DCS Bonus Arrangement" immediately following the
text "in
-2-
<PAGE>
connection with the Scanforms Non-Compete Agreement" appearing in
clause (xviii) thereof.
4. The definition of "Consolidated EBITDA" appearing in Section
11.01 of the Credit Agreement is hereby amended by inserting the following new
clause (v) immediately following the phrase "adding thereto" appearing in said
definition:
"(v) to the extent Consolidated EBITDA is being determined for any period
that includes all or any portion of the six-month period ended March 31,
1997, then to the extent that Consolidated EBITDA (whether directly or
through reductions to Consolidated Net Income) has been reduced by not
more than (I) $750,000 in cash payments pursuant to the DCS Bonus
Arrangement, (II) $1,750,000 in incentive payments in the form of Holdings
Common Stock issued to employees of DCS pursuant to the DCS Bonus
Arrangement and (III) $75,000 in incentive payments in the form of
Holdings Common Stock issued to employees of DDI pursuant to the DDI Bonus
Arrangement, in each case in such six-month period, the aggregate amount
of such reductions,".
5. The definition of "Permitted Acquisition" appearing in Section
11.01 of the Credit Agreement is hereby amended by deleting clause (z) thereof
in its entirety and inserting in lieu thereof the following new clause (z):
"(z) in determining whether each of the Printco Acquisition, the Scanforms
Acquisition, the DDI Acquisition and the DCS Acquisition is a Permitted
Acquisition, effect shall be given to the provisions of the First
Amendment and the Second Amendment relating thereto".
6. Section 11.01 of the Credit Agreement is hereby further amended
by inserting in appropriate alphabetical order the following new definitions:
"DCS" shall mean Digital Color Systems, Ltd., a Missouri
corporation.
"DCS Acquisition" shall mean (i) the acquisition by Laser Tech of
100% of the equity interests in DCS, which acquisition shall be effected
by the merger of DCS with and into Laser Tech, with Laser Tech as the
surviving corporation of said merger and (ii) the contribution of all of
the assets and liabilities of DCS so acquired to a newly-created
Wholly-Owned Subsidiary of Laser Tech.
"DCS Bonus Arrangement" shall mean a stay-in-place incentive bonus
arrangement between Holdings and/or Laser Tech and certain employees of
DCS.
"DDI" shall mean Digital Dimensions, Inc., a Missouri corporation.
"DDI Acquisition" shall mean the purchase by Laser Tech of 100% of
the
-3-
<PAGE>
outstanding common stock of DDI.
"DDI Bonus Arrangement" shall mean a stay-in-place incentive bonus
arrangement between Holdings and/or Laser Tech and certain employees of
DDI.
"Second Amendment" shall the mean the Second Amendment to this
Agreement, dated as of November 27, 1996.
"Second Amendment Effective Date" shall mean the Second Amendment
Effective Date under, and as defined in, the Second Amendment.
II. Miscellaneous Provisions.
I. In order to induce the Banks to enter into this Amendment, the
Borrower hereby represents and warrants that:
(a) no Default or Event of Default exists as of the Second Amendment
Effective Date, both before and after giving effect to this Amendment; and
(b) all of the representations and warranties contained in the
Credit Agreement and the other Credit Documents are true and correct in
all material respects on the Second Amendment Effective Date both before
and after giving effect to this Amendment, with the same effect as though
such representations and warranties had been made on and as of the Second
Amendment Effective Date (it being understood that any representation or
warranty made as of a specific date shall be true and correct in all
material respects as of such specific date).
2. This Amendment is limited as specified and shall not constitute a
modification, acceptance or waiver of any other provision of the Credit
Agreement or any other Credit Document.
3. This Amendment may be executed in any number of counterparts and
by the different parties hereto on separate counterparts, each of which
counterparts when executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A complete set of
counterparts shall be lodged with the Borrower and the Administrative Agent.
4. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE
STATE OF NEW YORK.
5. This Amendment shall become effective on the date (the "Second
Amendment Effective Date") when each of Holdings, the Borrower and the Required
Banks shall have signed a counterpart hereof (whether the same or different
counterparts) and shall
-4-
<PAGE>
have delivered (including by way of facsimile transmission) the same to the
Administrative Agent at its Notice Office.
6. From and after the Second Amendment Effective Date, all
references in the Credit Agreement and each of the other Credit Documents to the
Credit Agreement shall be deemed to be references to the Credit Agreement as
amended hereby.
* * *
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Amendment as of the date first
above written.
BIG FLOWER PRESS HOLDINGS, INC.
By /s/ Mark A. Angelson
-----------------------------------
Title: Executive Vice President
TREASURE CHEST ADVERTISING
COMPANY, INC.
By /s/ Mark A. Angelson
-----------------------------------
Title: Secretary
BANKERS TRUST COMPANY,
Individually and
as Administrative Agent
By /s/ Tim Morris
-----------------------------------
Title: Vice President
<PAGE>
CREDIT SUISSE,
Individually
By /s/ Joel Glodowski
-----------------------------------
Title: member of senior management
By /s/ Chris T. Hogan
-----------------------------------
Title: Associate
CREDIT SUISSE,
as Documentation Agent
By /s/ Joel Glodowski
-----------------------------------
Title: member of senior management
By /s/ Chris T. Hogan
-----------------------------------
Title: Associate
ABN AMRO BANK N.V.,
NEW YORK BRANCH
By /s/ Thomas Rogers
-----------------------------------
Title: Assistant Vice President
By /s/ Frances O'Reilly Logan
-----------------------------------
Title: Vice President
BANK OF AMERICA NT & SA
By /s/ Scott L. Faber
-----------------------------------
Title: Vice President
BANK OF IRELAND
<PAGE>
By /s/ Paddy Dowling
-----------------------------------
Title: Account Manager
THE BANK OF NEW YORK
By /s/ Gregory Shefrin
-----------------------------------
Title: Vice President
BANK OF TOKYO-MITSUBISHI LIMITED
By /s/ Paul P. Malecki
-----------------------------------
Title: Vice President
CERES FINANCE LTD.
By /s/ Darren Riley
-----------------------------------
Title: Director
CORESTATES BANK
By /s/ Melina Lang
-----------------------------------
Title: Vice President
COMERICA BANK
By /s/ Tamara J. Gurne
-----------------------------------
Title: Account Officer
CREDIT LYONNAIS -
NEW YORK BRANCH
By /s/ Fred Haddad
-----------------------------------
<PAGE>
Title: Senior Vice President
CREDIT LYONNAIS -
CAYMAN ISLAND BRANCH
By /s/ Fred Haddad
-----------------------------------
Title: Authorized Signature
DAI-ICHI KANGYO BANK, LIMITED
By __________________________________
Title:
DRESDNER BANK AG, New York and
Grand Cayman Branches
By _________________________________
Title:
THE FUJI BANK, LIMITED
By /s/ Teui Teramoto
-----------------------------------
Title: Vice President and Manager
GIROCREDIT BANK AG DER
SPARKASSEN, GRAND CAYMAN
ISLAND BRANCH
By /s/ John Redding
-----------------------------------
Title: Vice President
THE INDUSTRIAL BANK OF JAPAN, LIMITED
<PAGE>
By /s/ Junri Oda
----------------------------------------
Title: Senior Vice President and Senior
Manager
KEYPORT LIFE INSURANCE
COMPANY
BY: Chancellor LGT Senior Secured
Management Inc. as Portfolio Advisor
By /s/ Christopher A. Bondy
-----------------------------------
Title: Vice President
THE LTCB TRUST COMPANY
By /s/ Rene O. LeBlanc
-----------------------------------
Title: Senior Vice President
MEDICAL LIABILITY MUTUAL INSURANCE
COMPANY
BY: Chancellor LGT Senior Secured
Management, Inc. as Investment Manager
By /s/ Christopher A. Bondy
-----------------------------------
Title: Vice President
MERRILL LYNCH PRIME RATE
PORTFOLIO
BY: MERRILL LYNCH ASSET
MANAGEMENT, L.P., as Investment
Advisor
By /s/ Anthony R. Clemente
-----------------------------------
Title: Authorized Signatory
MERRILL LYNCH SENIOR FLOATING
RATE FUND, INC.
<PAGE>
By /s/ Anthony R. Clemente
-----------------------------------
Title: Authorized Signatory
THE MITSUBISHI TRUST AND
BANKING CORPORATION
By /s/ Patricia Loret de Mola
-----------------------------------
Title: Senior Vice President
NATIONSBANK, N.A.
By /s/ Michael R. Heredia
---------------------------------
Title: Vice President
SUMITOMO BANK OF CALIFORNIA
By /s/ Robert M. Iritani
---------------------------------
Title: Vice President
UNION BANK OF CALIFORNIA, N.A.
By /s/ Pasha Moghaddam
---------------------------------
Title: Vice President
VAN KAMPEN AMERICAN CAPITAL
PRIME RATE INCOME TRUST
By /s/ Jeffrey W. Maillet
---------------------------------
Title: Senior Vice President
<PAGE>
Exhibit 10.10
================================================================================
RECEIVABLES PURCHASE AGREEMENT
dated as of March 19, 1996
(as amended as of April 25, 1996, June 10, 1996
and September 24, 1996)
among
BIG FLOWER PRESS HOLDINGS, INC.,
as initial Servicer
and
CERTAIN SUBSIDIARIES OF BIG FLOWER
PRESS HOLDINGS, INC.,
as Sellers
and
BFP RECEIVABLES CORPORATION,
as Buyer
================================================================================
<PAGE>
TABLE OF CONTENTS
ARTICLE I
AGREEMENT TO PURCHASE AND SELL
SECTION 1.1 Agreement to Purchase and Sell.................... 1
SECTION 1.2 Timing of Purchases............................... 2
SECTION 1.3 Consideration for Purchases....................... 2
SECTION 1.4 No Recourse....................................... 2
SECTION 1.5 No Assumption of Obligations Relating to
Receivables, Related Assets or Contracts.......... 3
SECTION 1.6 True Sales........................................ 3
SECTION 1.7 Addition of Sellers............................... 3
SECTION 1.8 Termination of Status as a Seller................. 4
SECTION 1.9 Contribution of Receivables....................... 6
ARTICLE II
CALCULATION OF PURCHASE PRICE
SECTION 2.1 Calculation of Purchase Price..................... 6
SECTION 2.2 Definitions and Calculations Related to
Purchase Price Percentage......................... 7
ARTICLE III
PAYMENT OF PURCHASE PRICE; SERVICING, ETC.
SECTION 3.1 ................................................... 9
SECTION 3.2 The Buyer Notes................................... 12
SECTION 3.3 Application of Collections and Other Funds........ 12
SECTION 3.4 Servicing of Receivables and Related Assets....... 13
SECTION 3.5 Adjustments for Noncomplying Receivables,
Dilution and Cash Discounts....................... 13
SECTION 3.6 Payments and Computations, Etc.................... 14
ARTICLE IV
CONDITIONS TO PURCHASES
SECTION 4.1 Conditions Precedent to Initial Purchase.......... 14
SECTION 4.2 Certification as to Representations and
Warranties........................................ 16
SECTION 4.3 Effect of Payment of Purchase Price............... 16
<PAGE>
Page
----
ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.1 Representations and Warranties of the Sellers..... 16
SECTION 5.2 Representations and Warranties of Buyer........... 23
ARTICLE VI
GENERAL COVENANTS OF THE SELLERS
SECTION 6.1 Affirmative Covenants............................. 23
SECTION 6.2 Reporting Requirements............................ 27
SECTION 6.3 Negative Covenants................................ 29
ARTICLE VII
ADDITIONAL RIGHTS AND OBLIGATIONS IN
RESPECT OF THE SPECIFIED ASSETS
SECTION 7.1 Rights of Buyer................................... 32
SECTION 7.2 Responsibilities of the Sellers................... 32
SECTION 7.3 Further Action Evidencing Purchases............... 33
SECTION 7.4 Collection of Receivables; Rights of Buyer and
Its Assignees..................................... 34
ARTICLE VIII
TERMINATION
SECTION 8.1 Termination by the Sellers........................ 35
SECTION 8.2 Automatic Termination............................. 35
ARTICLE IX
INDEMNIFICATION
SECTION 9.1 Indemnities by the Sellers........................ 36
ARTICLE X
MISCELLANEOUS
SECTION 10.1 Amendments; Waivers, Etc......................... 38
ii
<PAGE>
Page
----
SECTION 10.2 Notices, Etc.................................... 39
SECTION 10.3 Cumulative Remedies............................. 39
SECTION 10.4 Binding Effect; Assignability; Survival of
Provisions...................................... 39
SECTION 10.5 Governing Law................................... 40
SECTION 10.6 Costs, Expenses and Taxes....................... 40
SECTION 10.7 Submission to Jurisdiction...................... 40
SECTION 10.8 Waiver of Jury Trial............................ 41
SECTION 10.9 Integration..................................... 41
SECTION 10.10 Counterparts.................................... 41
SECTION 10.11 Acknowledgment and Consent...................... 41
SECTION 10.12 No Partnership or Joint Venture................. 42
SECTION 10.13 No Proceedings.................................. 42
SECTION 10.14 Severability of Provisions...................... 43
SECTION 10.15 Recourse to Buyer............................... 43
EXHIBITS
EXHIBIT A Form of Buyer Note
EXHIBIT B Form of Seller Assignment Certificate
SCHEDULES
SCHEDULE 1 Litigation and Other Proceedings
SCHEDULE 2 Changes in Financial Condition
SCHEDULE 3 Offices of the Sellers where Records are Maintained
SCHEDULE 4 Legal Names, Trade Names and Names Under Which the
Companies Do Business
SCHEDULE 5 Software Programs and Licenses
APPENDIX
APPENDIX A Definitions
iii
<PAGE>
This RECEIVABLES PURCHASE AGREEMENT, dated as of March 19, 1996 (this
"Agreement"), is made among BIG FLOWER PRESS HOLDINGS, INC., as initial Servicer
("Big Flower" or "Servicer"), certain direct or indirect domestic subsidiaries
of Big Flower that are listed on the signature pages hereto or that become party
hereto in accordance with the terms hereof (the "Sellers"), and BFP RECEIVABLES
CORPORATION, a Delaware corporation ("Buyer"). Except as otherwise defined
herein, capitalized terms have the meanings that Appendix A assigns to them, and
this Agreement shall be interpreted in accordance with the conventions set forth
in Part B of Appendix A.
WHEREAS, pursuant to the Pooling Agreement, Buyer intends to transfer its
interests in the Receivables sold pursuant hereto, together with Receivables
contributed to Buyer by Treasure Chest from time to time, to the Trust in order
to, among other things, finance its purchases hereunder;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, agree as follows:
ARTICLE I
AGREEMENT TO PURCHASE AND SELL
SECTION I.1 Agreement to Purchase and Sell. Each Seller hereby sells,
transfers, assigns, sets over and otherwise conveys to Buyer and Buyer agrees to
purchase from each Seller, at the times set forth in Section 1.2, all of such
Seller's right, title and interest in, to and under:
(a) all Receivables of such Seller (other than Contributed
Receivables) that existed and were owing to such Seller as at the closing
of such Seller's business on the Initial Cut-Off Date,
(b) all Receivables created by such Seller that arise during the
period from and including the closing of such Seller's business on the
Initial Cut-Off Date to but excluding the Purchase Termination Date,
(c) all Related Security with respect to such Receivables
of such Seller,
(d) all proceeds of the foregoing, including all funds received by
any
<PAGE>
Person in payment of any amounts owed (including invoice prices, finance
charges, interest and all other charges, if any) in respect of any
Receivable described above or Related Security with respect to any such
Receivable, or otherwise applied to repay or discharge any such Receivable
(including insurance payments that a Seller or Servicer applies in the
ordinary course of its business to amounts owed in respect of any such
Receivable and net proceeds of any sale or other disposition of
repossessed goods that were the subject of any such Receivable) or other
collateral or property of any Obligor or any other party directly or
indirectly liable for payment of such Receivables, and
(e) all checks, wire transfers, monies and other items of any type
whatsoever deposited into the Bank Accounts, whether or not such items
constitute proceeds of Receivables and whether such items are now existing
or hereafter arising or acquired, and
(f) all Records relating to any of the foregoing.
As used herein, (i) "Purchased Receivables" means the items listed above
in clauses (a) and (b), (ii) "Related Purchased Assets" means the items listed
above in clauses (c), (d) and (e), (iii) "Related Assets" means the Related
Purchased Assets and the Related Contributed Assets, (iv) "Purchased Assets"
means the Purchased Receivables and the Related Purchased Assets, and (v)
"Specified Assets" means the Purchased Receivables, the Contributed Receivables
and the Related Assets.
SECTION I.2 Timing of Purchases.
(a) Initial First Issuance Date Purchases. All of the Purchased Assets of
each Seller that existed at the closing of such Seller's business on the Initial
Cut-Off Date shall be sold automatically to Buyer on the First Issuance Date.
(b) Regular Purchases. Except to the extent otherwise provided in Section
8.2 or (with respect to any Seller) Section 1.8, after the closing of a Seller's
business on the Initial Cut-Off Date until the closing of such Seller's business
on the Business Day immediately preceding the Purchase Termination Date, all
Receivables and the Related Assets of each Seller shall be sold automatically to
Buyer pursuant hereto immediately (and without further action by any Person)
upon the creation of the Receivable.
SECTION I.3 Consideration for Purchases. On the terms and subject to the
conditions set forth in this Agreement, Buyer agrees to make Purchase Price
payments to the Sellers in accordance with Article III.
page 2
<PAGE>
SECTION I.4 No Recourse. Except as specifically provided in this
Agreement, the sale and purchase of Purchased Assets under this Agreement shall
be without recourse to the Sellers; it being understood that (i) each Seller
shall be liable to Buyer for all representations, warranties, covenants and
indemnities made by such Seller pursuant to the terms of this Agreement, all of
which obligations are limited so as not to constitute recourse to such Seller
for the credit risk of the Obligors, and (ii) Big Flower shall be liable to
Buyer to the extent specified in the Seller Guaranty.
SECTION I.5 No Assumption of Obligations Relating to Receivables, Related
Assets or Contracts. None of Buyer, the Servicer nor the Trustee shall have any
obligation or liability to any Obligor or other customer or client of a Seller
(including any obligation to perform any of the obligations of such Seller under
any Receivable, related Contracts or any other related purchase orders or other
agreements). No such obligation or liability is intended to be assumed by Buyer,
the Servicer or the Trustee hereunder, and any assumption is expressly
disclaimed.
SECTION I.6 True Sales. The Sellers and Buyer intend the transfers of
Receivables hereunder to be true sales by the Sellers to Buyer that are absolute
and irrevocable and that provide Buyer with the full benefits of ownership of
the Receivables, and none of the Sellers nor Buyer intends the transactions
contemplated hereunder to be, or for any purpose to be characterized as, loans
from Buyer to any Seller.
It is, further, not the intention of Buyer or any Seller that the
conveyance of the Specified Assets by such Seller be deemed a grant of a
security interest in the Specified Assets by such Seller to Buyer to secure a
debt or other obligation of such Seller. However, in the event that,
notwithstanding the intent of the parties, any Specified Assets are property of
any Seller's estate, then (i) this Agreement also shall be deemed to be and
hereby is a security agreement within the meaning of the UCC, and (ii) the
conveyance by such Seller provided for in this Agreement shall be deemed to be a
grant by such Seller to Buyer of, and such Seller hereby grants to Buyer, a
security interest in and to all of such Seller's right, title and interest in,
to and under the Specified Assets to secure (1) the rights of Buyer hereunder
and (2) a loan by Buyer to such Seller in the amount of the related Purchase
Price of the Purchased Assets sold by it or the Unpaid Balance of any
Contributed Receivables and the Related Contributed Assets, as the case may be.
Each Seller and Buyer shall, to the extent consistent with this Agreement, take
such actions as may be necessary to ensure that, if this Agreement were deemed
to create a security interest in the Specified Assets, such security interest
would be deemed to be a perfected security interest of first priority (subject
to
page 3
<PAGE>
Permitted Adverse Claims) in favor of Buyer under applicable law and will be
maintained as such throughout the term of this Agreement.
SECTION I.7 Addition of Sellers. Any Domestic Subsidiary of Big Flower may
become a Seller hereunder and sell its accounts receivable and property of the
types that constitute Related Assets hereunder to Buyer if (x) the last sentence
of this Section applies or (y) the Modification Condition is satisfied with
respect to such addition. Big Flower and such Domestic Subsidiary of Big Flower
that is proposed to be added as a Seller shall give to Buyer, the Trustee and
the Rating Agencies not less than 30 days' (or such shorter number of days as is
acceptable to Trustee) prior written notice of the effective date of the
addition of such Domestic Subsidiary as a Seller. Once the notice has been
given, any addition of a Domestic Subsidiary of Big Flower as a Seller pursuant
to this section shall become effective on the first Business Day following the
expiration of the notice period (or such later date as may be specified in the
notice) on which (i) the Modification Condition has been satisfied, (ii) the
Servicer shall have delivered to the Trustee a supplement to the Monthly Report
then in effect as described in Section 3.5(e) of the Pooling Agreement and shall
have confirmed in writing to the Trustee that the Seller Guaranty covers
Obligations of such Seller, and (iii) such Domestic Subsidiary and the parties
hereto shall have executed and delivered the agreements, instruments and other
documents and the amendments or other modifications to the Transaction
Documents, in form and substance reasonably satisfactory to Buyer and the
Trustee, that Buyer or the Trustee reasonably determines are necessary or
appropriate to effect the addition. The Modification Condition need not be
satisfied as to any new Seller if (x) the new Seller is in the same line of
business as one or more existing Sellers or a related line of business, (y) the
aggregate Unpaid Balance of the new Seller's outstanding Receivables on the last
Cut-Off Date prior to the day that it becomes a Seller is less than 5% of the
aggregate Unpaid Balance of all Receivables on such Cut-Off Date and (z) no more
than two other Persons have become Sellers during the preceding twelve months
without satisfaction of the Modification Condition (or, if no outstanding
Investor Certificates are rated, written approval of the Trustee).
SECTION I.8 Termination of Status as a Seller. (a) At any time when more
than one Person is a Seller, a Seller may terminate its obligation to sell its
Receivables and Related Assets to Buyer if:
(i) the Seller (a "Terminating Seller") shall have given Buyer not
less than 30 days' prior written notice of its intention to terminate the
obligations, which notice shall be given by Buyer to the Trustee and the
Rating Agencies (the date on which such notice is given being the
"Terminating Seller Notice
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Date"),
(ii) an Authorized Officer of the Terminating Seller shall have
certified that the termination by the Terminating Seller of its status as
a Seller will not have a Material Adverse Effect,
(iii) both immediately before and after giving effect to the
termination by the Terminating Seller, no Early Amortization Event or
Unmatured Early Amortization Event shall have occurred and be continuing
or shall reasonably be expected to occur; and
(iv) either the Terminating Seller will cease to be a Domestic
Subsidiary of Big Flower concurrently with the effectiveness of such
termination, or such Terminating Seller is a Permitted Terminating Seller;
provided that this subclause (iv) may be waived by Investor
Certificateholders that evidence more than 50% of the outstanding
principal amount of the Investor Certificates if the Modification
Condition is satisfied.
"Permitted Terminating Seller" means a Terminating Seller that satisfies
the following requirements:
(x) the aggregate Unpaid Balance of such Terminating Seller's
Receivables on the Cut-Off Date immediately preceding the Terminating
Seller Notice Date would not exceed 20% of the aggregate Unpaid Balance of
all Receivables, calculated as of such Cut-Off Date, and (y) the aggregate
Unpaid Balance of such Terminating Seller's Receivables on such Cut-Off
Date, together with the Previously Terminated Seller Amount, would not
exceed 25% of the sum of the Previously Terminated Seller Amount and the
aggregate Unpaid Balance of all Receivables (calculated as of such Cut-Off
Date).
"Previously Terminated Seller Amount" means, on any day, the aggregate
Unpaid Balance of Receivables originated by all Sellers previously terminated
pursuant to this subsection 1.8(a), calculated with respect to any Seller as of
the Cut-Off Date immediately preceding its Terminating Seller Notice Date.
(b) Any termination by a Seller shall become effective on the first
Business Day that follows the day on which the requirements of clause (a) shall
have been satisfied (or such later date specified in the notice or certificate
referred to in the clauses). Any termination by a Seller shall terminate its
rights and obligations to sell Receivables and Related Assets hereunder to Buyer
and Buyer's agreement, with
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respect to the Terminating Seller, to purchase the Receivables and Related
Assets; provided, however, that the termination shall not relieve the
Terminating Seller of any of its other Obligations, to the extent the
Obligations relate to Receivables (and Related Assets with respect thereto)
originated by the Terminating Seller prior to the effective date of the
termination.
(c) Notwithstanding the foregoing, a Seller's rights and obligations to
sell its Receivables and Related Assets to Buyer shall terminate immediately if
such Seller ceases to be a Domestic Subsidiary of Big Flower; provided, however,
that the termination shall not relieve such Seller of any of its other
Obligations, to the extent the Obligations relate to Receivables (and Related
Assets with respect thereto) originated by such Seller prior to the effective
date of the termination.
SECTION I.9 Contribution of Receivables. Treasure Chest hereby transfers
to Buyer, as a contribution to the capital of Buyer, all its right, title and
interest in, to and under:
(a) $43,794,245 of Receivables of Treasure Chest having, among the
existing Receivables, the oldest invoiced date as of the closing of
Treasure Chest's business on the Initial Cut-Off Date (the
"Contributed Receivables"),
(b) all Related Security with respect to the Contributed Receivables,
(c) all proceeds of the foregoing, including all funds received by any
Person in payment of any amounts owed (including invoice prices,
finance charges, interest and all other charges, if any) in respect
of any Contributed Receivable or Related Security with respect to
any such Contributed Receivable, or otherwise applied to repay or
discharge any such Contributed Receivable (including insurance
payments that Treasure Chest or Servicer applies in the ordinary
course of its business to amounts owed in respect of any such
Contributed Receivable and net proceeds of any sale or other
disposition or repossessed goods that were the subject of any such
Contributed Receivable) or other collateral or property of any
Obligor or any other party directly or indirectly liable for payment
of such Contributed Receivables, and
(d) all Records relating to any of the foregoing (the items listed above
in clauses (b), (c) and (d) being referred to herein as the "Related
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Contributed Assets."
ARTICLE II
CALCULATION OF PURCHASE PRICE
SECTION II.1 Calculation of Purchase Price. (a) On each Business Day
(including the First Issuance Date), the Servicer shall deliver to Buyer, the
Trustee, Big Flower and Treasure Chest a Daily Report with respect to Buyer's
purchases of Receivables from the Sellers:
(i) that are to be made on the First Issuance Date (in the case of
the Daily Report to be delivered on the First Issuance Date) or
(ii) that were made on the immediately preceding Business Day (in
the case of each subsequent Daily Report).
(b) On each day when Receivables are purchased by Buyer from a Seller
pursuant to Article I, the "Purchase Price" to be paid to such Seller on such
day for the Purchased Receivables and Related Purchased Assets that are to be
sold by such Seller on such day shall be determined in accordance with the
following formula:
PP = AUB x PPP
where:
PP = the aggregate Purchase Price for the Purchased Receivables
and Related Purchased Assets to be purchased from such Seller
on such day.
AUB = the "Aggregate Unpaid Balance" of the Purchased
Receivables that are to be purchased from such Seller
on such day. For purposes of this calculation,
"Aggregate Unpaid Balance" shall mean (i) for
purposes of calculating the Purchase Price to be paid
to such Seller on the First Issuance Date, the sum of
the Unpaid Balance of each Receivable generated by
such Seller, as measured as at the closing of such
Seller's business on the Initial Cut-Off Date, and
(ii) for purposes of calculating the Purchase Price
on each Business Day thereafter, the sum of the
Unpaid Balance of each Receivable to be purchased
from such Seller on
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such day, calculated at the time of the Receivable's sale to
Buyer.
PPP = the Purchase Price Percentage applicable to the Receivables
to be purchased on such day, as determined pursuant to Section
2.2.
SECTION II.2 Definitions and Calculations Related to Purchase
Price Percentage.
(a) "Purchase Price Percentage" for the Receivables to be sold by a Seller
on any day during a Distribution Period shall mean the percentage determined in
accordance with the following formula:
PPP = 100% - (LD + PDRR)
where:
PPP = the Purchase Price Percentage in effect during such
Distribution Period.
LD = the Loss Discount (expressed as a percentage) in effect
during such Distribution Period, as determined pursuant to
subsection (b) below.
PDRR = the Purchase Discount Reserve Ratio (expressed as a
percentage) in effect during such Distribution Period as
determined on such day pursuant to subsection (c) below.
The Purchase Price Percentage, the Loss Discount and the Purchase Discount
Reserve Ratio shall be recomputed by the Servicer on each Report Date, in each
case as of the then most recent Cut-Off Date, and shall become effective on the
next Distribution Date.
(b) "Loss Discount" in effect during such Distribution Period means a
percentage equal to the Loss to Liquidation Ratio as in effect during such
Distribution Period (expressed as a percentage) as in effect on such day (it
being understood that the allocation of certain miscellaneous items will be
required to be estimated for this purpose).
(c) "Purchase Discount Reserve Ratio" for the Receivables to be sold on
any day shall mean a percentage determined in accordance with the following
formula:
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PDRR = (TD/360 x DR) + PD
where:
PDRR = the Purchase Discount Reserve Ratio in effect during such
Distribution Period.
TD = the Turnover Days during the Calculation Period preceding
the first day of such Distribution Period.
DR = the Discount Rate (expressed as a percentage) in effect
during such Distribution Period as determined pursuant to
subsection (d) below.
PD = a profit discount equal to .20%.
(d) "Discount Rate" for the Receivables to be sold on any day during a
Distribution Period shall mean a fraction (expressed as a percentage) having (i)
a numerator equal to 12, multiplied by an amount equal to the accrued Carrying
Costs for the Calculation Period preceding the first day of such Distribution
Period, and (ii) a denominator equal to the aggregate Unpaid Balance of the
Receivables as of the last day of the Calculation Period preceding the first day
of such Distribution Period.
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ARTICLE III
PAYMENT OF PURCHASE PRICE; SERVICING, ETC.
SECTION III.1 Purchase Price Payments. (a) On the First Issuance Date and
on the Business Day following each day on which any Receivables and Related
Assets are purchased by Buyer pursuant to Article I, on the terms and subject to
the conditions of this Agreement, Buyer shall pay to the Sellers the Purchase
Price for the Receivables and Related Assets purchased on such day by Buyer by
(i) making a cash payment to Servicer (for the account of the Sellers) to the
extent that Buyer has cash available to make the payment pursuant to Section 3.3
and (ii) if the Purchase Price to be paid for the Receivables and Related Assets
of any Seller exceeds the amount of any cash payment for the account of such
Seller on such day pursuant to clause (i), by (x) automatically increasing the
principal amount outstanding under the relevant Buyer Notes by the amount of the
excess or (y) at the option of Treasure Chest (as evidenced by notice to
Servicer), only in the case of Treasure Chest as Seller, such excess shall be
considered to have been contributed to Buyer by Treasure Chest as a capital
contribution.
The obligation of Buyer to pay the Purchase Price for Receivables that has
been deferred pursuant to the preceding paragraph shall be evidenced by Buyer
Notes. Each Seller agrees that, prior to the Seller Maturity Date, Buyer shall
be required to make payments in respect of the payment obligations evidenced by
the Buyer Notes only to the extent that it has cash available under Section 3.3.
(b) Except as provided in a Supplement or PI Agreement, on each Business
Day, the "Noncomplying Receivables and Dilution Adjustment" shall be equal to
the difference (whether the difference is positive or negative) between (i) the
sum of (A) the aggregate Seller Dilution Adjustments in respect of all Sellers,
if any, for the immediately preceding Business Day, as shown in the Daily Report
for such day, plus (B) the aggregate Seller Noncomplying Receivables Adjustments
in respect of all Sellers, if any, for the immediately preceding Business Day,
as shown in the Daily Report for such day, in the case of each of clauses (A)
and (B), as the amounts are determined pursuant to Section 3.5, minus (ii) the
amount of the payments (if any) that Buyer shall have received on the
immediately preceding Business Day on account of any Seller Noncomplying
Receivables that had been the subject of an earlier Seller Noncomplying
Receivables Adjustment. If the Noncomplying Receivables and Dilution Adjustment
is positive on any day, Buyer shall reduce the Purchase Price payable on such
day pursuant to subsection (a) above by the amount of the Noncomplying
Receivables and Dilution Adjustment. If instead the Noncomplying
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Receivables and Dilution Adjustment is negative on any day, Buyer shall increase
the Purchase Price payable pursuant to subsection (a) above on such day by the
amount of the Noncomplying Receivables and Dilution Adjustment.
(c) If on any day the sum of the Seller Dilution Adjustments and the
Seller Noncomplying Receivables Adjustments in respect of any Seller (as
determined pursuant to Section 3.5), less any amounts in clause (b)(ii)
allocated to such Seller, exceeds the Purchase Price payable by Buyer to such
Seller pursuant to subsection (a) above on such day, or if such day falls on or
after the Purchase Termination Date, then the principal amount of such Seller's
Buyer Note shall be reduced automatically by the amount of such excess.
(d) If, on any day prior to the Purchase Termination Date, the principal
amount of a Seller's Buyer Note is zero and such Seller is not a Terminating
Seller, then the amount of the excess of the sum of the Seller Dilution
Adjustments and the Seller Noncomplying Receivables Adjustments in respect of
such Seller (as determined pursuant to Section 3.5), less any amounts in clause
(b)(ii) allocated to such Seller, on such day over the Purchase Price payable by
Buyer to Servicer (for the account of such Seller) on such day pursuant to
subsection (a) above (the "Purchase Price Credit") shall be credited against the
Purchase Price payable by Buyer for subsequent Purchases of Receivables and
Related Assets of such Seller by Buyer. If any such Purchase Price Credit has
not been fully applied on or prior to the fifth Business Day (or a mutually
agreed upon earlier day) after the creation of such Purchase Price Credit, then,
on the Business Day that follows the end of the five Business Day (or shorter)
period, such Seller shall pay to Buyer in cash the remaining unapplied amount of
the Purchase Price Credit.
(e) If, on any day on or after the Purchase Termination Date, or, with
respect to any Seller, the date such Seller becomes a Terminating Seller, the
principal amount of any Seller's Buyer Note has been reduced to zero, an amount
equal to the sum of any Seller Dilution Adjustments and the Seller Noncomplying
Receivables Adjustments, if any, in respect of such Seller (as determined
pursuant to Section 3.5), less any amounts in clause (b)(ii) allocated to such
Seller, shall be paid by such Seller to Buyer in cash on the next succeeding
Business Day.
(f) If, on any day, the amounts, if any, allocated to any Seller pursuant
to clause (b)(ii) above exceed the sum of any Seller Dilution Adjustments and
the Seller Noncomplying Receivables Adjustments, if any, in respect of such
Seller (as determined pursuant to Section 3.5) for such day, then Buyer shall
either (i) pay Servicer (for the account of such Seller) in cash the amount of
such excess, or (ii) if
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Buyer does not have sufficient cash to pay such amount in full, increase the
principal amount of such Seller's Buyer Note by the amount of such excess that
is not paid in cash to Servicer.
(g) Amounts received by Servicer pursuant to this Section 3.1 shall be
allocated among the Sellers in accordance with Section 3.3, and the Seller
Dilution Adjustments and the Seller Noncomplying Receivables Adjustments in
respect of each such Seller (as determined pursuant to Section 3.5). Servicer
shall maintain a bookkeeping account (the "Seller Account") for purposes of
tracking:
(i) the Purchase Price payable to each Seller in respect of
Receivables sold by it to Buyer (including the extent to which cash and
non-cash payments made by Buyer should be allocated to each Seller),
(ii) the extent to which such Purchase Price should be reduced on
account of such Seller's Seller Dilution Adjustments and Seller
Noncomplying Receivables Adjustments (including any allocation of a
Purchase Price Credit),
(iii) if a Seller makes cash payments in respect of the Noncomplying
Receivables and Dilution Adjustment (including any payment in respect of a
Purchase Price Credit), the obligation of each other Seller to reimburse
such Seller for its proportionate share thereof,
(iv) if Purchase Price payments attributable to a Seller's
Receivables have been reduced on account of another Seller's Seller
Dilution Adjustment or the Seller Noncomplying Receivables Adjustment, the
obligation of such other Seller to reimburse the
Seller subject to such reduction,
(v) the extent to which payments (whether cash or non-cash) by Buyer
in respect of a negative Noncomplying Receivables and Dilution Adjustment
should be allocated to each Seller, and
(vi) cash payments made to and by each Seller in respect of the
items described above.
Servicer shall maintain sufficient records with respect to the Seller
Account such that, on any day, it would be able to calculate each of the items
set forth above. Intercompany accounts among Sellers resulting from the items
described above will be settled in accordance with the intercompany cash
management system customarily
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employed by Big Flower and its Subsidiaries.
SECTION III.2 The Buyer Notes. (a) On the First Issuance Date, Buyer will
deliver to each Seller a promissory note, substantially in the form of Exhibit
A, payable to the order of such Seller (each such promissory note, as the same
may be amended, supplemented, endorsed or otherwise modified from time to time,
together with any promissory note issued from time to time in substitution
therefor or renewal thereof in accordance with the Transaction Documents, being
herein called a "Buyer Note"), that is subordinated to all Senior Interests now
or hereafter arising under or in connection with the Pooling Agreement. Each
Buyer Note is payable in full on the date that is one year and one day after the
date on which all Investor Certificates and Purchased Interests have been repaid
in full and the Revolving Periods for all Investor Certificates and Purchased
Interests have terminated (the "Seller Maturity Date"). Each Buyer Note bears
interest at a rate per annum equal to the rate publicly announced by the Trustee
from time to time as its "reference" rate, determined as of each Cut-Off Date.
Buyer may prepay all or part of the outstanding balance of any Buyer Note from
time to time without any premium or penalty, unless the prepayment would result
in a default in Buyer's payment of any other amount required to be paid by it
under any Transaction Document.
(b) Big Flower (or its designee) shall hold all Buyer Notes for the
benefit of the Sellers and shall make all appropriate recordkeeping entries with
respect to the Buyer Notes or otherwise to reflect the payments on and
adjustment of the Buyer Notes. Big Flower's books and records shall constitute
rebuttable presumptive evidence of the principal amount of and accrued interest
on each Buyer Note at any time. Each Seller hereby irrevocably authorizes Big
Flower to mark its Buyer Note "CANCELLED" and return it to Buyer upon the final
payment thereof.
SECTION III.3 Application of Collections and Other Funds. If, on any day,
Buyer receives proceeds of transfers pursuant to the Pooling Agreement, Buyer
shall apply the funds as follows:
(a) first, to pay its existing expenses and to set aside funds for
the payment of expenses that are then accrued (in each case to the extent
such expenses are permitted to exist under Section 7.2(l) of the Pooling
Agreement).
(b) second, to pay the Purchase Price pursuant to Section 3.1 for
Receivables and Related Assets purchased by Buyer from the Sellers on such
day (in the case of the First Issuance Date) or the next preceding
Business Day, and
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(c) third, in such order as Buyer may elect, (A) to repay amounts
owed by Buyer to the Sellers under the Buyer Notes, (B) to pay amounts
owed pursuant to Section 3.1(f), or (C) to declare and pay dividends to
Treasure Chest to the extent permitted by law.
SECTION III.4 Servicing of Receivables and Related Assets. Consistent with
Buyer's ownership of the Receivables and the Related Assets, as between the
parties to this Agreement, Buyer shall have the sole right to service,
administer and collect the Receivables, to assign the right and to delegate the
right to others. Without limiting the generality of Section 10.11, each Seller
hereby acknowledges and agrees that Buyer shall assign to the Trustee for the
benefit of the Investor Certificateholders and Purchasers the rights and
interests of Buyer hereunder and agrees to cooperate fully with the Servicer and
the Trustee in the exercise of the rights. As more fully described in Section
7.4(b) and in the Pooling Agreement, the Trustee may exercise the rights in the
place of Buyer (as assignee or otherwise) only after the designation of a
Servicer other than Big Flower pursuant to Section 10.2 of the Pooling
Agreement.
At Trustee's request, each Seller will (A) assemble all of the Records
that are necessary or appropriate to collect the Receivables and Related
Transferred Assets, and shall make the same available to Trustee at one or more
places selected by Trustee or its designee, (B) segregate all cash, checks and
other instruments received by it from time to time constituting Collections in a
manner acceptable to Trustee and shall, promptly upon receipt (and in no event
later than the second Business Day following receipt), remit all such cash,
checks and instruments, duly endorsed or with duly executed instruments of
transfer, to a Bank Account or the Master Collection Account and (C) permit,
upon not less than two Business Days' prior written notice, any Successor
Servicer and its agents, employees and assignees access to their respective
facilities and their respective Records.
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SECTION III.5 Adjustments for Noncomplying Receivables, Dilution and Cash
Discounts. (a) If at any time any of Buyer, Servicer, the Trustee or a Seller
shall determine that (i) any Receivable identified by Servicer as an Eligible
Receivable on the date of Purchase thereof by Buyer or the contribution thereof
to Buyer was in fact a Seller Noncomplying Receivable on such date, (ii) any of
the representations and warranties made by the related Seller in Section 5.1(k)
with respect to such Receivable was not true on such date, or (iii) the
representation and warranty made by the related Seller, in its capacity as
Sub-Servicer, in Section 5.3(b) with respect to such Receivable was not true on
such date, such Seller shall be deemed to have received on the date of such
determination a Collection of the Receivable in an amount equal to the Unpaid
Balance of the Receivable (the sum of all such amounts for such Seller on any
day being called the "Seller Noncomplying Receivables Adjustment" for such
Seller for such day), and such Seller Noncomplying Receivables Adjustment shall
be settled in the manner provided for in Section 3.1.
(b) If on any day the aggregate Unpaid Balance of the Receivables sold or
contributed to Buyer on or before such date by a Seller is reduced in any manner
described in the definition of "Dilution" (the total of the reductions being
called the "Seller Dilution Adjustment" for the Seller for such day), then such
Seller shall be deemed to have received on such day a Collection of Receivables
in the amount of the Seller Dilution Adjustment and such Seller Dilution
Adjustment shall be settled in the manner provided in Section 3.1.
SECTION III.6 Payments and Computations, Etc. (a) All amounts to be paid
by a Seller to Buyer hereunder shall be paid in accordance with the terms hereof
no later than 1:00 p.m., New York City time, on the day when due in Dollars in
immediately available funds to an account that Buyer shall from time to time
specify in writing. Payments received by Buyer after such time shall be deemed
to have been received on the next Business Day. In the event that any payment
becomes due on a day that is not a Business Day, then the payment shall be made
on the next Business Day. Each Seller shall, to the extent permitted by law, pay
to Buyer, on demand, interest on all amounts not paid when due hereunder at 2%
per annum above the interest rate on the applicable Buyer Note in effect on the
date the payment was due; provided, however, that the interest rate shall not at
any time exceed the maximum rate permitted by applicable law. All computations
of interest payable hereunder shall be made on the basis of a year of 360 days
for the actual number of days (including the first but excluding the last day)
elapsed.
(b) All amounts to be paid by Buyer to a Seller hereunder shall be paid to
Servicer (for the account of the applicable Seller) no later than 4:00 p.m., New
York
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City time, on the day when due in Dollars in immediately available funds to an
account that Big Flower shall from time to time specify in writing. Payments
received by Servicer after such time shall be deemed to have been received on
the next Business Day. Servicer shall promptly remit payments received by it in
immediately available funds to such account as the applicable Seller shall from
time to time specify in writing. In the event that any payment becomes due on a
day that is not a Business Day, then such payment shall be made on the next
Business Day in accordance with the terms of the applicable Buyer Note.
ARTICLE IV
CONDITIONS TO PURCHASES
SECTION IV.1 Conditions Precedent to Initial Purchase. The initial
purchase hereunder is subject to the conditions precedent that (i) each of the
conditions precedent to the execution, delivery and effectiveness of each other
Transaction Document (other than a condition precedent in any other Transaction
Document relating to the effectiveness of this Agreement) shall have been
fulfilled to the satisfaction of Buyer, and (ii) Buyer shall have received (or
in the case of subsection (f) below, shall have delivered) each of the
following, on or before the First Issuance Date, each (unless otherwise
indicated) dated the date hereof or the First Issuance Date and each in form and
substance satisfactory to Buyer:
(a) Seller Assignment Certificates. A Seller Assignment Certificate
from each Seller in the form of Exhibit B, duly completed, executed and
delivered by such Seller,
(b) Resolutions. A copy of the resolutions of the Board of Directors
of each Seller approving this Agreement and the other Transaction
Documents to be delivered by it hereunder and the transactions
contemplated hereby and thereby and addressing such other matters as may
be required by Buyer, certified by its Secretary or Assistant Secretary,
each as of a recent date acceptable to Buyer,
(c) Good Standing Certificate of each Seller; Certificates as to
Foreign Qualification of each Seller. A good standing certificate for each
Seller, issued as of a recent date by the Secretary of State of the
jurisdiction of its incorporation and of each state in which such Seller
transacts business, is required to be in good standing and where the
failure to be in good standing would have a substantial likelihood of
having a Material Adverse Effect,
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(d) Incumbency Certificate. A certificate of the Secretary or
Assistant Secretary of each Seller certifying, as of a recent date
reasonably acceptable to Buyer, the names and true signatures of the
officers authorized on such Seller's behalf to sign the Transaction
Documents to be delivered by such Seller (on which certificate Buyer, the
Trustee and the Servicer may conclusively rely until such time as Buyer
shall receive from such Seller (with a copy to the Trustee and the
Servicer), a revised certificate meeting the requirements of this
subsection),
(e) Other Transaction Documents. Original copies, executed by each
of the parties thereto in such reasonable number as shall be specified by
Buyer, of each of the other Transaction Documents to be executed and
delivered in connection herewith,
(f) Buyer Notes. The Buyer Notes, executed by Buyer, and
(g) License Agreements. Duly executed and counterparts of (i)
software license agreements between each Seller or Servicer that uses its
own proprietary software in the origination or servicing of Receivables or
Related Assets and Buyer, and (ii) amendments to any license agreement
between a Seller or Servicer and any third party vendor, adding any
substitute Servicer as a licensee.
SECTION IV.2 Certification as to Representations and Warranties. Each
Seller, by accepting the Purchase Price paid for each Purchase, shall be deemed
to have certified, with respect to the Receivables and Related Assets to be sold
by it on such day, that its representations and warranties contained in Article
V (excluding, with respect to any day after the First Issuance Date, Section
5.1(i)) are true and correct on and as of such day, with the same effect as
though made on and as of such day.
SECTION IV.3 Effect of Payment of Purchase Price. Upon the payment of the
Purchase Price (whether in cash or by an increase in a Buyer Note or, in the
case of Treasure Chest as a Seller, by a capital contribution, in each case
pursuant to Section 3.1) for any Purchase, title to the Receivables and the
Related Assets included in the Purchase shall vest in Buyer, whether or not the
conditions precedent to the Purchase were in fact satisfied; provided, however,
that Buyer shall not be deemed to have waived any claim it may have under this
Agreement for the failure by a Seller in fact to satisfy any such condition
precedent.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION V.1 Representations and Warranties of the Sellers. In order to
induce Buyer to enter into this Agreement and to make purchases hereunder, each
Seller hereby makes the representations and warranties set forth in this section
with respect to itself at the times and to the extent set forth in Section 4.2
(it being understood that only Treasure Chest makes the representations and
warranties set forth below with respect to any Contributed Receivables and
Related Assets with respect thereto).
(a) Organization and Good Standing. Such Seller is a corporation
duly organized and validly existing and in good standing under the laws of
the jurisdiction of its incorporation and has full power and authority to
own its properties and to conduct its business as the properties presently
are owned and the business presently is conducted. Such Seller had at all
relevant times, and now has, all necessary power, authority, and legal
right to own, sell and (if applicable) contribute its Receivables and the
Related Assets.
(b) Due Qualification. Such Seller is duly qualified to do business
and is in good standing as a foreign corporation (or is exempt from such
requirements), and has obtained all necessary licenses and approvals, in
all jurisdictions in which the ownership or lease of property or the
conduct of its business requires qualification, licenses or approvals and
where the failure so to qualify, to obtain the licenses and approvals or
to preserve and maintain the qualification, licenses or approvals would
have a substantial likelihood of having a Material Adverse Effect.
(c) Power and Authority; Due Authorization. Such Seller has (i) all
necessary power and authority to (A) execute and deliver this Agreement
and the other Transaction Documents to which it is a party, (B) perform
its obligations under this Agreement and the other Transaction Documents
to which it is a party, and (C) sell, assign and (if applicable)
contribute the Receivables and the Related Assets on the terms and subject
to the conditions herein and therein provided and (ii) duly authorized by
all necessary action such sale, assignment and (if applicable)
contribution and the execution, delivery and performance of this Agreement
and the other Transaction Documents to which it is a party and the
consummation of the transactions provided for in this
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Agreement and the other Transaction Documents to which it is a party.
(d) Valid Sale; Binding Obligations. Each sale of Receivables and
Related Assets made by such Seller pursuant to this Agreement, and each
contribution of Receivables and Related Assets made to Buyer, shall
constitute a valid sale (except in the case of Contributed Receivables and
Related Assets with respect to such Contributed Receivables), transfer,
and assignment of all of such Seller's right, title and interest in, to
and under such Receivables and the Related Assets of such Seller to Buyer
that is perfected and of first priority under the UCC and otherwise,
enforceable against creditors of, and purchasers from, such Seller and
free and clear of any Adverse Claim (other than any Permitted Adverse
Claim, any Adverse Claim arising solely as a result of any action taken by
Buyer hereunder or by the Trustee under the Pooling Agreement or any
Special New Jersey EPA Claim); and this Agreement constitutes, and each
other Transaction Document to which such Seller is a party when duly
executed and delivered will constitute, a legal, valid and binding
obligation of such Seller, enforceable against it in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity,
regardless of whether enforceability is considered in a proceeding in
equity or at law.
(e) No Conflict or Violation. The execution, delivery and
performance of, and the consummation of the transactions contemplated by,
this Agreement and the other Transaction Documents to be signed by such
Seller and the fulfillment of the terms hereof and thereof will not (i)
conflict with, violate, result in any breach of any of the terms and
provisions of, or constitute (with or without notice or lapse of time or
both) a default under, (A) its Certificate of Incorporation or Bylaws or
(B) any indenture, loan agreement, mortgage, deed of trust or other
material agreement or instrument to which such Seller is a party or by
which it or any of its properties is bound, (ii) result in the creation or
imposition of any Adverse Claim upon any of the Receivables or Related
Assets other than pursuant to this Agreement and the other Transaction
Documents, or (iii) conflict with or violate any federal, state, local or
foreign law or any decision, decree, order, rule or regulation applicable
to it or any of its properties of any court or of any federal, state,
local or foreign regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over it or any of its
properties, which conflict, violation, breach, default or Adverse Claim,
individually or in the aggregate, would have a substantial likelihood of
having a Material Adverse Effect.
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(f) Litigation and Other Proceedings. Except as described in
Schedule 1, (i) there is no action, suit, proceeding or investigation
pending or, to the best knowledge of such Seller, threatened against it
before any court, regulatory body, arbitrator, administrative agency or
other tribunal or governmental instrumentality and (ii) it is not subject
to any order, judgment, decree, injunction, stipulation or consent order
of or with any court or other government authority that, in the case of
each of clauses (i) and (ii), (A) asserts the invalidity of this Agreement
or any other Transaction Document, (B) seeks to prevent the sale,
assignment or contribution of any Receivables or Related Assets by such
Seller to Buyer, the issuance of the applicable Seller Assignment
Certificate or the consummation of any of the transactions contemplated by
this Agreement or any other Transaction Document, (C) seeks any
determination or ruling that would materially and adversely affect the
performance by such Seller of its obligations under this Agreement or any
other Transaction Document or the validity or enforceability of this
Agreement or any other Transaction Document, (D) seeks to affect adversely
the income tax attributes of the purchases hereunder or the applicable
Seller Assignment Certificate, in the case of each of the foregoing
whether under the United States Federal income tax system or any state
income tax system, or (E) individually or in the aggregate for all such
actions, suits, proceedings and investigations would have a substantial
likelihood of having a Material Adverse Effect.
(g) Government Approvals. All authorizations, consents, orders and
approvals of, or other action by, any Governmental Authority that are
required to be obtained by such Seller, and all notices to and filings
(except, in respect of enforceability against a federal Governmental
Authority, any filings under the Assignment of Claims Act and any consents
required by states with respect to any Receivables arising from state and
local Governmental Authorities so long as such Receivables are not
reported as Eligible Receivables), with any Governmental Authority that
are required to be made by it, in the case of each of the foregoing in
connection with the conveyance of Receivables and Related Assets or the
due execution, delivery and performance by such Seller of this Agreement,
such Seller's Seller Assignment Certificate or any other Transaction
Document to which it is a party and the consummation of the transactions
contemplated by this Agreement, have been obtained or made and are in full
force and effect, except where the failure to obtain or make any such
authorization, consent, order, approval, notice or filing, individually or
in the aggregate for all such failures, would not reasonably be expected
to have a Material Adverse Effect.
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(h) Bulk Sales Act. No transaction contemplated by this Agreement or
any other Transaction Document requires compliance with, or will be
subject to avoidance under, any bulk sales act or similar law.
(i) Financial Condition. The representations and warranties
contained in Section 7.05 of the Big Flower Credit Agreement are true and
correct as of the date hereof, and such representations and warranties are
incorporated herein by reference; provided that references therein to the
"Banks" shall be deemed to include the Purchasers.
(j) Margin Regulations. No use of any funds obtained by such Seller
under this Agreement will conflict with or contravene any of Regulations
G, T, U and X promulgated by the Federal Reserve Board from time to time.
(k) Quality of Title.
(i) Immediately before each purchase to be made by Buyer
hereunder and (in the case of Treasure Chest) each contribution to
be made hereunder to Buyer, each Receivable and Related Asset of
such Seller that is then to be transferred to Buyer thereunder, and
the related Contracts, shall be owned by such Seller free and clear
of any Adverse Claim (other than any Permitted Adverse Claim, any
Adverse Claim arising solely as the result of any action taken by
Buyer hereunder or by the Trustee under the Pooling Agreement or any
Special New Jersey EPA Claim); provided that the existence of an
Adverse Claim that is released on the First Issuance Date (upon
application of the proceeds of the issuance of Certificates on that
date) shall not constitute a breach of this representation and
warranty; and such Seller shall have made all filings and shall have
taken all other action under applicable law in each relevant
jurisdiction in order to protect and perfect the ownership interest
of Buyer and its successors in the Receivables and Related Assets
against all creditors of, and purchasers from, such Seller.
(ii) Whenever Buyer makes a purchase hereunder from such
Seller or (in the case of Treasure Chest) accepts a contribution
hereunder from such Seller, it shall have acquired a valid and
perfected first priority ownership interest in each Transferred
Asset, free and clear of any Adverse Claim (other than any Permitted
Adverse Claim, any Adverse Claim arising solely as the result of any
action taken by Buyer
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hereunder or by the Trustee under the Pooling Agreement or any
Special New Jersey EPA Claim).
(iii) No effective financing statement or other instrument
similar in effect that covers all or part of any Receivable
originated by such Seller, any interest therein or any Related Asset
with respect thereto is on file in any recording office except
financing statements as to termination statements or releases that
are filed on the First Issuance Date or first Business Day after the
First Issuance Date and (x) such as may be filed (A) in favor of
such Seller in accordance with the Contracts, (B) in favor of Buyer
pursuant to this Agreement and (C) in favor of the Trustee, for the
benefit of the Investor Certificateholders and Purchasers, in
accordance with the Pooling Agreement and (y) such as may have been
identified to Buyer prior to the First Issuance Date and termination
statements relating to which have been placed with LEXIS Document
Services (or a similar service acceptable to the Trustee) for filing
within two Business Days of the First Issuance Date. No effective
financing statement or instrument similar in effect relating to
perfection that covers any inventory of such Seller that might give
rise to Receivables is on file in any recording office except for
(so long as an Intercreditor Agreement is in effect) financing
statements or instruments in favor of creditors of such Seller bound
by such Intercreditor Agreement.
(iv) No Purchase by Buyer from such Seller (and, in the case
of Treasure Chest, no capital contribution to Buyer whether or not
made in connection with a Purchase) constitutes a fraudulent
transfer or fraudulent conveyance under the United States Bankruptcy
Code or applicable state bankruptcy or insolvency laws or is
otherwise void or voidable or subject to subordination under similar
laws or principles or for any other reason.
(v) Each Purchase by Buyer from such Seller constitutes a true
and valid sale of the Receivables and Related Assets under
applicable state law and true and valid assignments and transfers
for consideration (and not merely a pledge of the Receivables and
Related Assets for security purposes), enforceable against the
creditors of such Seller, and no Receivables or Related Assets
transferred to Buyer hereunder shall constitute property of such
Seller.
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(l) Eligible Receivables. On the date of each purchase of
Receivables hereunder from such Seller (or, in the case of Treasure Chest)
contribution from such Seller, each such Receivable, unless otherwise
identified to Buyer and the Trustee by the Servicer in the Daily Report
for such date, is an Eligible Receivable.
(m) Accuracy of Information. All written information furnished by or
on behalf of such Seller to Buyer, Servicer or the Trustee pursuant to or
in connection with any Transaction Document or any transaction
contemplated herein or therein shall not contain any untrue statement of a
material fact or omit to state material facts necessary to make the
statements made not misleading, in each case on the date the statement was
made and in light of the circumstances under which the statements were
made or the information was furnished.
(n) Offices. The principal place of business and chief executive
office of such Seller is located at the address set forth under such
Seller's signature hereto, and any other location which has been such
Seller's principal place of business or chief executive office during the
past four months or in which such Seller keeps (or has kept during the
past four months) Records, Contracts, purchase orders and agreements
related to the Receivables or Related Assets (and all original documents
relating thereto) is specified in Schedule 3 (or at such other locations,
notified to the Servicer and the Trustee in accordance with Section
6.1(f), in jurisdictions where all action required pursuant to Section 7.3
has been taken and completed).
(o) Account Banks and Payment Instructions. The names and addresses
of all the banks, together with the account numbers of the accounts at the
banks, into which Collections are paid as of the First Issuance Date have
been accurately identified to Buyer in a letter from such Seller to Buyer
dated the First Issuance Date or have been specified in the notices as
shall have been delivered thereafter pursuant to Section 6.3(c). Each
Account Bank has executed and delivered an Account Agreement to Buyer and
the Trustee. Such Seller has instructed all Obligors to submit all
payments on the Receivables and Related Assets directly to one of the
Lockbox Accounts, subject to such exceptions as are permitted under
Section 3.3 of the Pooling Agreement. Any payments not made directly to
the Account Banks will be forwarded to the Account Banks within two
Business Days.
(p) [intentionally omitted].
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(q) Compliance with Applicable Laws. Such Seller is in compliance
with the requirements of all applicable laws, rules, regulations and
orders of all Governmental Authorities (federal, state, local or foreign,
and including environmental laws), a violation of any of which,
individually or in the aggregate for all such violations, would have a
substantial likelihood of having a Material Adverse Effect.
(r) Legal Names. Except as set forth in Schedule 4, since January 1,
1990 such Seller has not been known by any legal name other than its
corporate name as of the date hereof, except to the extent permitted
otherwise pursuant to Section 6.3(e), nor has such Seller been the subject
of any merger or other corporate reorganization since January 1, 1990 that
resulted in a change of name, identity or corporate structure. Such Seller
uses no trade names other than its actual corporate name and the trade
names set forth in Schedule 4.
(s) Investment Company Act. Such Seller is not, and is not
controlled by, an "investment company" registered or required to be
registered under the Investment Company Act of 1940, as amended.
(t) Taxes. Such Seller has filed or caused to be filed all tax
returns and reports required by law to have been filed by it and has paid
all taxes, assessments and governmental charges thereby shown to be owing,
except any such taxes, assessments or charges (i) that are being
diligently contested in good faith by appropriate proceedings, (ii) for
which adequate reserves in accordance with GAAP shall have been set aside
on its books and (iii) with respect to which no Adverse Claim, except
Permitted Adverse Claims, has been imposed upon any Receivables or Related
Assets.
(u) Software Programs. Each software program, and any license or
other agreement relating to such program, used in the origination or
servicing of Receivables and Related Assets is described in Schedule 5.
SECTION V.2 Representations and Warranties of Buyer. From the date hereof
until the Purchase Termination Date, Buyer hereby represents and warrants that
(a)(i) this Agreement has been duly authorized, executed and delivered by Buyer
and (ii) constitutes the legal, valid and binding obligation of Buyer,
enforceable against it in accordance with its terms, except as enforceability
may be limited by bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity, regardless of whether
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enforceability is considered in a proceeding in equity or at law, and (b) the
execution, delivery and performance of this Agreement does not violate any
applicable law or any agreement to which Buyer is a party or by which its
properties are bound.
SECTION V.3 Representations and Warranties of Servicer. In order to induce
Buyer to enter into this Agreement and to make purchases hereunder:
(a) Servicer and each Seller, in its capacity as a Sub-Servicer,
hereby represents and warrants as to itself that all information furnished
by or on behalf of such Person to Buyer, Servicer or the Trustee pursuant
to or in connection with any Transaction Document or any transaction
contemplated herein or therein shall not contain any untrue statement of a
material fact or omit to state material facts necessary to make the
statements made not misleading in each case on the date the statement was
made and in light of the circumstances under which the statements were
made or the information was furnished; and
(b) without limiting the foregoing, each Seller, in its capacity as
a Sub-Servicer, hereby represents and warrants as to itself that on the
date of each Daily Report or Monthly Report that identifies a Receivable
originated by such Seller as an Eligible Receivable, such Receivable is an
Eligible Receivable.
ARTICLE VI
GENERAL COVENANTS OF THE SELLERS
SECTION VI.1 Affirmative Covenants. From the First Issuance Date until the
first day following the Purchase Termination Date on which all Obligations of
the Sellers shall have been finally and fully paid and performed and the
Invested Amount for each Series or Purchased Interest shall have been reduced to
zero, unless Buyer shall otherwise give its prior written consent, each Seller
hereby agrees that it will perform the covenants and agreements set forth in
this section.
(a) Compliance with Laws, Etc. Such Seller will comply in all
material respects with all applicable laws, rules, regulations, judgments,
decrees and orders (including those relating to the Receivables, the
Related Assets, the related Contracts of such Seller and any other
agreements related thereto), in each case to the extent the failure to
comply, individually or in the aggregate for all such failures, would have
a substantial likelihood of having a Material Adverse Effect.
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(b) Preservation of Corporate Existence. Such Seller will preserve
and maintain its corporate existence, rights, franchises and privileges in
the jurisdiction of its incorporation, and qualify and remain qualified in
good standing as a foreign corporation in each jurisdiction where the
failure to preserve and maintain such existence, rights, franchises,
privileges and qualifications would have a substantial likelihood of
having a Material Adverse Effect.
(c) Receivables Reviews. Such Seller shall, during regular business
hours upon not less than five Business Days' prior notice, permit Buyer
and its agents or representatives, at the expense of such Seller, (i) to
examine and make copies of and abstracts from, and to conduct accounting
reviews of, all Records in the possession or under the control of such
Seller relating to the Receivables or Related Assets generated by such
Seller, and (ii) to visit the offices and properties of such Seller for
the purpose of examining the materials described in clause (i) above, and
to discuss matters relating to any Receivables or any Related Assets of
such Seller or such Seller's performance hereunder with any of the
Authorized Officers of such Seller or, with the prior consent of an
Authorized Officer of such Seller, with employees of such Seller having
knowledge of such matters (the examinations set forth in the foregoing
clauses (i) and (ii) being herein called a "Seller Receivables Review").
Buyer and its agents or representatives shall be entitled to conduct
Seller Receivables Reviews whenever Buyer, in its reasonable judgment,
deems it appropriate; provided, that prior to the occurrence and
continuance of an Early Amortization Event, Buyer (or its agent or
representative) shall give such Seller at least five Business Days' prior
notice of any Seller Receivables Review, and Buyer shall have the right to
request a Seller Receivables Review not more than once in any calendar
year.
(d) Keeping of Records and Books of Account. Such Seller shall
maintain and implement administrative and operating procedures (including
an ability to recreate records evidencing its Receivables and Related
Assets in the event of the destruction of the originals thereof), and
shall keep and maintain all documents, books, records and other
information that, in the reasonable determination of Buyer and the
Trustee, are necessary or advisable in accordance with prudent industry
practice and custom for transactions of this type for the collection of
all Receivables and the Related Assets. Upon the reasonable request of
Buyer made at any time after the occurrence and continuance of a Servicer
Default, such Seller will deliver copies of all books
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and records maintained pursuant to this subsection to the Trustee. Such
Seller shall maintain at all times accurate and complete books, records
and accounts relating to the Receivables, Related Assets and Contracts and
all Collections thereon in which timely entries shall be made. Such books
and records shall be marked to indicate the sales of all Receivables and
Related Assets hereunder and shall include (i) all payments received and
all credits and extensions granted with respect to the Receivables and
(ii) the return, rejection, repossession, or stoppage in transit of any
merchandise, the sale of which has given rise to a Receivable that has
been purchased by or contributed to Buyer.
(e) Performance and Compliance with Receivables and Contracts. Such
Seller will, at its expense, timely and fully perform and comply with all
provisions, covenants and other promises required to be observed by it
under the Contracts of such Seller related to the Receivables and Related
Assets, in each case to the extent failure to perform or comply would have
a substantial likelihood of having a Material Adverse Effect.
(f) Location of Records and Offices. Such Seller will keep its
principal place of business and chief executive office, and the offices
where it keeps all Records related to the Receivables and the Related
Assets (and all original documents relating thereto), at the addresses
referred to in Schedule 3 or, upon not less than 30 days' prior written
notice given by such Seller to Buyer, the Trustee and the Rating Agencies,
at such other locations in jurisdictions where all action required by
Section 7.3 shall have been taken and completed.
(g) Credit and Collection Policies. Such Seller will comply in all
material respects with its Credit and Collection Policy in regard to each
Receivable of such Seller and the Related Assets and the Contracts related
to each such Receivable, where the failure so to comply, individually or
in the aggregate for all such failures, would have a substantial
likelihood of having a Material Adverse Effect.
(h) Separate Corporate Existence of Buyer. Such Seller hereby
acknowledges that the Trustee, on behalf of the Trust, is entering into
the transactions contemplated by the Transaction Documents in reliance
upon Buyer's identity as a legal entity separate from such Seller and the
other Big Flower Persons. Therefore, from and after the date hereof until
the first day following the Purchase Termination Date on which all
Obligations shall have been fully paid and performed and the Invested
Amount for each Series or Purchased Interest shall have been reduced to
zero, such Seller will, and will
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cause each other Big Flower Person to, take all reasonable steps to
continue their respective identities as separate legal entities and to
make it apparent to third Persons that each is an entity with assets and
liabilities distinct from those of Buyer and that Buyer is not a division
of the Servicer, such Seller, Big Flower or any other Person. Without
limiting the foregoing, Big Flower and each Seller will, and will cause
each other Big Flower Person to, operate, conduct their respective
businesses and otherwise act in a manner which is consistent with the
factual assumptions in each of the opinions of Skadden, Arps, Slate,
Meagher & Flom dated the date hereof regarding certain substantive
consolidation and true sale issues.
(i) Payment Instructions to Obligors. Such Seller will instruct all
Obligors to submit all payments either (i) to one of the lockboxes
maintained at the Lockbox Banks for deposit in a Lockbox Account or to a
Concentration Account or (ii) directly to one of the Lockbox Accounts,
subject in each case to such exceptions as are permitted under Section 3.3
of the Pooling Agreement.
(j) Segregation of Collections. Such Seller shall use reasonable
efforts to minimize the deposit of any funds other than Collections into
any of the Lockbox Accounts and, to the extent that any such funds
nevertheless are deposited into any of the Lockbox Accounts, shall
promptly identify any such funds, or shall cause the funds to be so
identified, to Buyer, the Servicer and the Trustee (following which
notice, Buyer shall cause the Servicer to return all the funds to such
Seller).
(k) Identification of Eligible Receivables. Such Seller will (i)
establish and maintain such procedures as are necessary for determining no
less frequently than each Business Day whether each Receivable qualifies
as an Eligible Receivable, and for identifying, on any Business Day, all
Receivables to be sold on that date that are not Eligible Receivables, and
(ii) except as permitted in Section 3.5(c) of the Pooling Agreement,
notify Buyer prior to the occurrence of a Purchase if a Receivable to be
sold hereunder will, to such Seller's knowledge, not be an Eligible
Receivable as of the date of Purchase.
(l) Accuracy of Information. All written information furnished on
and after the First Issuance Date by or on behalf of such Seller to Buyer,
the Servicer or the Trustee pursuant to or in connection with any
Transaction Document or any transaction contemplated herein or therein
shall not contain any untrue statement of a material fact or omit to state
material facts necessary to make the statements made not misleading, in
each case on the date the
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statement was made and in light of the circumstances under which the
statements were made or the information was furnished.
(m) Taxes. File or cause to be filed, and cause each Person with
whom it shares consolidated tax liability to file, all Federal, state and
local tax returns that are required to be filed by it (except where the
failure to file such returns does not have a substantial likelihood of
having a Material Adverse Effect) and pay or cause to be paid all taxes
shown to be due and payable on taxes or assessments (except only such
taxes or assessments the validity of which are being contested in good
faith by appropriate proceedings and with respect to which such Seller
shall have set aside adequate reserves on its books in accordance with
GAAP and which proceedings do not have a substantial likelihood of having
a Material Adverse Effect).
(n) Software Licenses. Cause all software licenses or similar
agreements used by the Sellers or Servicer in the origination or servicing
of Receivables to expressly permit use by any substitute Servicer of the
materials subject to such licenses or agreements.
(o) Webcraft Account Agreements. By no later than 5:00 p.m., New
York City time, on Friday, March 22, 1996, cause (i) a Lockbox Agreement
to be executed with a Lockbox Bank for payments by Obligors in respect of
all Receivables originated by Webcraft Technologies, Inc. and (ii) a
Blocked Account Agreement to be executed with a Blocked Account Bank for
the remittance of payments by Webcraft Chemicals, Inc. and by Obligors in
respect of all Receivables originated by Webcraft Chemicals, Inc.
SECTION VI.2 Reporting Requirements. From the First Issuance Date until
the first day following the Purchase Termination Date on which all Obligations
of the Sellers shall have been finally and fully paid and performed and the
Invested Amount for each Series or Purchased Interest shall have been reduced to
zero, such Seller agrees that it will, unless Buyer and the Trustee shall
otherwise give prior written consent, and (with respect to the notices described
below in subsections (c) and (d)) unless the Modification Condition has been
satisfied), furnish to Buyer and the Trustee (and in the case of the notices
described below in subsections (c), (d) and (f), to the Rating Agencies):
(a) Quarterly Financial Statements. Within 50 days after the end of
each of the first three fiscal quarters of each fiscal year of Big Flower,
copies of
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the unaudited consolidated balance sheets of Big Flower and its
consolidated Subsidiaries as at the end of the fiscal quarter and the
related unaudited statements of earnings and cash flows, in each case for
the fiscal quarter and for the period from the beginning of the fiscal
year through the end of such fiscal quarter, prepared in accordance with
GAAP consistently applied throughout the periods reflected therein and
certified (subject to year end adjustments and the omission of footnotes)
by the chief financial officer or chief accounting officer of Big Flower,
(b) Annual Financial Statements. As soon as possible and in any
event within 95 days after the end of each fiscal year of Big Flower, a
copy of the audited consolidated balance sheet of Big Flower and its
consolidated Subsidiaries as at the end of the fiscal year and the related
statements of earnings, stockholders' equity and cash flows of Big Flower
and its consolidated Subsidiaries for the fiscal year, setting forth in
each case in comparative form the corresponding figures for the preceding
fiscal year and prepared in accordance with GAAP consistently applied
throughout the periods reflected therein, certified, without Impermissible
Qualification, by Deloitte & Touche (or such other independent certified
public accountants of a nationally recognized standing in the United
States of America as shall be selected by Big Flower),
(c) Early Amortization Events. As soon as possible, and in any event
within five Business Days after an Authorized Officer of such Seller has
obtained knowledge of the occurrence of any Early Amortization Event or
any Unmatured Early Amortization Event, a written statement of an
Authorized Officer of such Seller describing the event and the action that
such Seller proposes to take with respect thereto, in each case in
reasonable detail,
(d) Material Adverse Effect. As soon as possible and in any event
within five Business Days after an Authorized Officer of such Seller has
knowledge thereof, written notice that describes in reasonable detail any
event or occurrence that, individually or in the aggregate for all such
events or occurrences, has had, or that would have a substantial
likelihood of having, a Material Adverse Effect,
(e) Proceedings. As soon as possible and in any event within five
Business Days after an Authorized Officer of such Seller has knowledge
thereof, written notice of (i) any litigation, investigation or proceeding
of the type described in Section 5.1(f) not previously disclosed to Buyer
and (ii) any
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judgment, settlement or other final disposition with respect to any such
previously disclosed litigation, investigation or proceeding, and
(f) Other. Promptly, from time to time, (i) such other information,
documents, records or reports respecting the Receivables or the Related
Assets or (ii) such other publicly available information respecting the
condition or operations, financial or otherwise, of such Seller, in each
case as Buyer may from time to time reasonably request in order to protect
the interests of Buyer, the Trustee or the Certificateholders under or as
contemplated by this Agreement.
SECTION VI.3 Negative Covenants. From the First Issuance Date until the
first day following the Purchase Termination Date on which all Obligations of
the Sellers shall have been finally and fully paid and performed and the
Invested Amount for each Series or Purchased Interest shall have been reduced to
zero, unless Buyer shall otherwise give its prior written consent, each Seller
hereby agrees that it will perform the covenants and agreements set forth in
this section.
(a) Sales, Liens, Etc. Except as otherwise provided herein or in the
Pooling Agreement, such Seller will not (i)(A) sell, assign (by operation
of law or otherwise) or otherwise transfer to any Person, (B) pledge any
interest in, (C) grant, create, incur, assume or permit to exist any
Adverse Claim (other than Permitted Adverse Claims or Special New Jersey
EPA Claims) to or in favor of any Person upon or with respect to, or (D)
cause to be filed any financing statement or equivalent document relating
to perfection with respect to any Transferred Asset or any Contract
related to any Receivable, or upon or with respect to any lockbox or
account to which any Collections of any such Receivable or any Related
Assets are sent or any interest therein, or (ii) assign to any Person any
right to receive income from or in respect of any of the foregoing.
In the event that such Seller fails to keep any Specified Assets
free and clear of any Adverse Claim (other than a Permitted Adverse Claim,
any Adverse Claims arising hereunder, and other Adverse Claims permitted
by any other Transaction Document), Buyer may (without limiting its other
rights with respect to such Seller's breach of its obligations hereunder)
make reasonable expenditures necessary to release the Adverse Claim. Buyer
shall be entitled to indemnification for any such expenditures pursuant to
the indemnification provisions of Article IX. Alternatively, Buyer may
deduct such expenditures as an offset to the Purchase Price owed to such
Seller hereunder.
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Such Seller will not pledge or grant any security interest in its
inventory, the Buyer Note or the capital stock of Buyer unless prior to
any pledge or grant such Seller, Buyer, the Trustee and the Person for
whose benefits the pledge or grant is being made have entered into an
Intercreditor Agreement; provided, however, that any Buyer Note and/or the
capital stock of Buyer may be pledged pursuant to the Big Flower Credit
Agreement.
(b) Extension or Amendment of Receivables; Change in Credit and
Collection Policy or Contracts. Such Seller will not, (i) without the
prior written consent of Buyer and the Trustee, which consent will not be
unreasonably withheld, extend, amend or otherwise modify the terms of any
Receivable or Contract in a manner that would have a substantial
likelihood of having a Material Adverse Effect or (ii) change the terms
and provisions of the Credit and Collection Policy in any material respect
unless (x) with respect to collection policies, the change is made with
the prior written approval of the Trustee, Buyer and each Agent for any
Purchaser and the Modification Condition is satisfied with respect
thereto, (y) with respect to collection procedures, the change is made
with prior written notice to the Trustee, Buyer and each Purchaser Agent
and no Material Adverse Effect would result and (z) with respect to
accounting policies relating to Receivables that have become Write-Offs,
the change is made in accordance with GAAP.
(c) Change in Payment Instructions to Obligors. Such Seller will not
(i) add or terminate any bank as an Account Bank from those listed in the
letter referred to in Section 5.1(o) unless, prior to any such addition or
termination, Buyer, the Trustee and the Rating Agencies shall have
received not less than ten Business Days' prior written notice of the
addition or termination and, not less than ten Business Days prior to the
effective date of any such proposed addition or termination, Buyer and the
Trustee shall have received (A) counterparts of the applicable type of
Account Agreement with each new Account Bank, duly executed by such new
Account Bank and all other parties thereto and (B) copies of all other
agreements and documents signed by the Account Bank and such other parties
with respect to any new Bank Account, all of which agreements and
documents shall be reasonably satisfactory in form and substance to Buyer
and the Trustee, or (ii) make any change in its instructions to Obligors,
given in accordance with Section 5.1(o), regarding payments to be made to
such Seller or payments to be made to any Account Bank, other than changes
in the instructions that direct Obligors to make payments to another Bank
Account at such Account Bank or another Account Bank or to the Master
Collection
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Account.
(d) Mergers, Acquisitions, Sales, etc. Except for (i) mergers or
consolidations in which such Seller is the surviving Person, (ii) mergers
or consolidations of a Subsidiary of Big Flower into such Seller or (iii)
mergers or consolidations in which the surviving Person expressly assumes
the performance of this Agreement and the Modification Condition shall
have been satisfied with respect to the consolidation or merger, the
Seller will not be a constituent corporation to any merger or
consolidation. Such Seller will give the Rating Agencies and the Trustee
notice of any such permitted merger or consolidation promptly following
completion thereof. Unless the Modification Condition is satisfied, such
Seller will not, 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 or sell or assign, with or without
recourse, any Receivables or Related Assets, in each case other than
pursuant to this Agreement.
(e) Change in Name. Such Seller will not (i) change its corporate
name or (ii) change the name under or by which it does business in any
manner that would or may make any financing statement filed by such Seller
in accordance herewith seriously misleading within the meaning of Section
9-402(7) of an applicable enactment of the UCC, in each case unless such
Seller shall have given Buyer, the Servicer, the Trustee and the Rating
Agencies 30 days' prior written notice thereof and unless, prior to any
change in name, such Seller shall have taken and completed all action
required by Section 7.3.
(f) Certificate of Incorporation. Such Seller will not cause Buyer
to amend Articles III, IV, XII(g), XII(h) or XIV, of its Certificate of
Incorporation without the Trustee's prior written consent, which consent
will not be unreasonably withheld or delayed.
(g) Amendments to Transaction Documents. Such Seller will not amend
or otherwise modify or supplement any Transaction Document to which it is
a party unless (i) Buyer shall have given its prior written consent to
each amendment, modification or supplement and (ii) the Modification
Condition shall have been satisfied.
(h) Accounting for Purchases. Such Seller shall prepare its
financial statements in accordance with GAAP, and any financial statements
that are made publicly available and which are consolidated to include
Buyer will
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contain footnotes stating that such Seller has sold or contributed its
Receivables to Buyer and that the assets of Buyer will not be available to
Big Flower and its subsidiaries unless Buyer's liabilities have been paid
in full. Such Seller shall not prepare any financial statements that
account for the transactions contemplated in this Agreement in any manner
other than as a sale of the Purchased Assets by such Seller to Buyer, or
in any other respect account for or treat the transactions contemplated in
this Agreement (including but not limited to accounting and, where taxes
are not consolidated, for tax reporting purposes) in any manner other than
as a sale of the Purchased Assets by such Seller to Buyer.
ARTICLE VII
ADDITIONAL RIGHTS AND OBLIGATIONS IN
RESPECT OF THE SPECIFIED ASSETS
SECTION VII.1 Rights of Buyer. (a) Subject to Section 7.4(b), each Seller
hereby authorizes Buyer, the Servicer and/or their respective designees to take
any and all steps in such Seller's name and on behalf of such Seller that Buyer,
the Servicer and/or their respective designees determine are reasonably
necessary or appropriate to collect all amounts due under any and all Specified
Assets, including endorsing the name of such Seller on checks and other
instruments representing Collections and enforcing such Seller's rights under
such Specified Assets.
(b) Except as set forth in Section 3.1 with respect to Seller Noncomplying
Receivables, Buyer shall have no obligation to account for any Specified Asset
to any Seller. Buyer shall have no obligation to account for, or to return
Collections, or any interest or other finance charge collected pursuant thereto,
to any Seller, irrespective of whether such Collections and charges are in
excess of the Purchase Price for the Purchased Assets.
(c) Buyer shall have the unrestricted right to further assign, transfer,
deliver, hypothecate, subdivide or otherwise deal with the Specified Assets, and
all of Buyer's right, title and interest in, to and under this Agreement, on
whatever terms Buyer shall determine, pursuant to the Pooling Agreement or
otherwise.
(d) Buyer shall have the sole right to retain any gains or profits created
by buying, selling or holding the Specified Assets and shall have the sole risk
of and responsibility for losses or damages created by such buying, selling or
holding.
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SECTION VII.2 Responsibilities of the Sellers. Anything herein to the
contrary notwithstanding, each Seller hereby agrees:
(a) to deliver directly to the Servicer (for Buyer's account),
within two Business Days after receipt thereof, any Collections that it
receives, in the form so received, and agrees that all such Collections
shall be deemed to be received in trust for Buyer and shall be maintained
and segregated separate and apart from all other funds and moneys of such
Seller until delivery of such Collections to the Servicer; provided,
however, that until the Trust is terminated pursuant to Section 12.1 of
the Pooling Agreement, Buyer hereby directs each Seller and each Seller
hereby agrees, to make any delivery of Collections pursuant to this
Section 7.2(a) directly to the Trustee by deposit to one of the Bank
Accounts or the Master Collection Account,
(b) to perform all of its obligations hereunder and under the
Contracts related to the Receivables and Related Assets to the same extent
as if the Receivables had not been sold hereunder, and the exercise by
Buyer or its designee or assignee of Buyer's rights hereunder or in
connection herewith shall not relieve such Seller from any of its
obligations under the Contracts or Related Assets related to the
Receivables,
(c) that it hereby grants to Buyer an irrevocable power of attorney,
with full power of substitution, coupled with an interest, to take in the
name of such Seller all steps necessary or advisable to endorse, negotiate
or otherwise realize on any writing or other right of any kind held or
transmitted by such Seller or transmitted or received by Buyer (whether or
not from such Seller) in connection with any Transferred Asset, and
(d) to the extent that such Seller does not own the computer
software that such Seller uses to account for Receivables, such Seller
shall provide Buyer and the Trustee with such licenses, sublicenses and/or
assignments of contracts as Buyer or the Trustee shall require with regard
to all services and computer hardware or software used by such Seller that
relate to the servicing of the Specified Assets.
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SECTION VII.3 Further Action Evidencing Purchases. Each Seller agrees that
from time to time, at its expense, it will promptly, upon reasonable request by
Buyer, Servicer or Trustee, execute and deliver all further instruments and
documents, and take all further action, in order to perfect, protect or more
fully evidence the purchase by Buyer or contribution to Buyer of the Receivables
and the Related Assets under this Agreement, or to enable Buyer to exercise or
enforce any of its rights under any Transaction Document. Each Seller further
agrees that from time to time, at its expense, it will promptly, upon request,
take all action that Buyer, the Servicer or the Trustee may reasonably request
in order to perfect, protect or more fully evidence the purchase or contribution
of the Receivables and the Related Assets or to enable Buyer or the Trustee (as
the assignee of Buyer) to exercise or enforce any of its rights hereunder or
under any other Transaction Document. Without limiting the generality of the
foregoing, upon the request of Buyer, each Seller will:
(a) execute and file such financing or continuation statements, or
amendments thereto or assignments thereof, and such other instruments or
notices, as Buyer or the Trustee may reasonably determine to be necessary
or appropriate, and
(b) mark the master data processing records evidencing the
Receivables with the following legend:
"THE RECEIVABLES DESCRIBED HEREIN HAVE BEEN SOLD TO BFP RECEIVABLES
CORPORATION ("BFP") PURSUANT TO A RECEIVABLES PURCHASE AGREEMENT,
DATED AS OF MARCH 19, 1996, AMONG TREASURE CHEST ADVERTISING
COMPANY, INC., CERTAIN OTHER SUBSIDIARIES OF BIG FLOWER PRESS
HOLDINGS, INC. ("BIG FLOWER") AND BFP; AND SUCH RECEIVABLES HAVE
BEEN TRANSFERRED TO THE BIG FLOWER MASTER TRUST PURSUANT TO A
POOLING AND SERVICING AGREEMENT, DATED AS OF MARCH 19, 1996, AMONG
BFP, AS TRANSFEROR, BIG FLOWER, AS THE INITIAL SERVICER, AND
MANUFACTURERS AND TRADERS TRUST COMPANY, AS TRUSTEE."
Each Seller hereby authorizes Buyer or its designee to file one or more
financing or continuation statements, and amendments thereto and assignments
thereof, relative to all or any of the Receivables and Related Assets of such
Seller, in each case whether now existing or hereafter generated by such Seller.
Except for material
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performance obligations of such Seller to any Obligor hereunder or under any of
the Contracts, if (i) such Seller fails to perform any of its agreements or
obligations under this Agreement and does not remedy the failure within the
applicable cure period, if any, and (ii) Buyer in good faith reasonably believes
that the performance of such agreements and obligations is necessary or
appropriate to protect its interests under this Agreement, then Buyer or its
designee may (but shall not be required to) perform, or cause performance of,
such agreement or obligation and the reasonable expenses of Buyer or its
designee or assignee incurred in connection with such performance shall be
payable by such Seller as provided in Section 9.1.
SECTION VII.4 Collection of Receivables; Rights of Buyer and Its
Assignees. (a) Each Seller hereby transfers to the Trustee (as transferee of
Buyer's interest in the Specified Assets) the ownership of, and the exclusive
dominion and control over, each of the Bank Accounts and all related lockboxes
owned by such Seller, and such Seller hereby agrees to take any further action
that Buyer or the Trustee may reasonably request in order to effect or complete
the transfer. Each Seller further agrees to use reasonable efforts to prevent
funds other than proceeds of the Specified Assets from being deposited in any
Bank Account.
(b) Buyer may, at any time after an Early Amortization Event or Servicer
Default, direct the Obligors of Receivables, or any of them, to pay all amounts
payable under any Transferred Asset directly to the Trustee or its designees.
Furthermore, each Seller shall, at the request of Buyer and at such Seller's
expense, promptly give notice of the Trust's interest in the Receivables of the
Obligor and the Related Assets to each such Obligor and direct that payments be
made directly to the Trustee or its designee, which notice shall be acceptable
in form and substance to Buyer. In addition, each Seller hereby authorizes Buyer
to take any and all steps in such Seller's name and on its behalf that are
necessary or desirable, in the reasonable determination of Buyer, to collect all
amounts due under any and all Specified Assets, including endorsing such
Seller's name on checks and other instruments representing Collections and
enforcing the Specified Assets and the Contracts related to the Receivables. The
Trustee may exercise any of the foregoing rights in the place of Buyer (as
assignee or otherwise) at any time following the designation of a Servicer other
than Big Flower pursuant to Section 10.2 of the Pooling Agreement.
(c) At any time when (i) an Early Amortization Event shall have occurred
and remain continuing or (ii) a Servicer other than Big Flower has been
designated pursuant to Section 10.2 of the Pooling Agreement, each Seller shall,
at Buyer's request, assemble all of the Records that evidence the Receivables
and Related Assets originated by such Seller and the Contracts related to the
Receivables, or that are otherwise
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necessary or desirable to collect the Receivables or Related Assets, and make
the same available to Buyer or the Trustee at a place selected by the Trustee or
its designee.
ARTICLE VIII
TERMINATION
SECTION VIII.1 Termination by the Sellers. Prior to the commencement of an
Amortization Period or Early Amortization Period in respect of any Series or
Purchased Interest, the Sellers may terminate all of their agreements to sell
Receivables hereunder to Buyer by giving Buyer and the Trustee not less than
thirty days' prior written notice of their election not to continue to sell
Receivables to Buyer; provided that such notice must be given as to all Sellers
and provided further, that such notice shall specify the effective date of
termination. The Trustee shall notify the Certificateholders of all Series
within five Business Days of receiving any such termination notice.
SECTION VIII.2 Automatic Termination. (a) The agreement of each Seller to
sell Receivables hereunder, and the agreement of Buyer to purchase Receivables
from such Seller hereunder, shall terminate automatically upon the first date on
which all Series and Purchased Interests are in accumulation, amortization or
early amortization periods; provided, however, that if, at any time prior to
such date, an event specified in the definition of Bankruptcy Event occurs
(without regard to the 60 day grace period specified in paragraph (a) of that
definition) as a result of a bankruptcy proceeding being filed against a Seller,
then on and after the date on which such bankruptcy proceeding is filed until
the dismissal of the proceeding Buyer shall not purchase Receivables and Related
Assets from such Seller.
(b) If the Internal Revenue Service or the PBGC files one or more Tax or
ERISA Liens against the assets of any Seller or Transferor (including
Receivables), then Buyer shall not purchase any Receivables or Related Assets
from such Seller (or from any Seller if such Lien is filed against Transferor).
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ARTICLE IX
INDEMNIFICATION
SECTION IX.1 Indemnities by the Sellers. Without limiting any other rights
that any RPA Indemnified Party (as defined below) may have hereunder or under
applicable law, each Seller agrees to indemnify Buyer, each of its successors,
permitted transferees and assigns, and all officers, directors, shareholders,
controlling Persons, employees and agents of any of the foregoing (each of the
foregoing Persons being individually called a "RPA Indemnified Party"),
forthwith on demand, from and against any and all damages, losses, claims
(whether on account of settlements or otherwise), judgments, liabilities and
related reasonable costs and expenses (including reasonable attorneys' fees and
disbursements) awarded against or incurred by any of them arising out of or as a
result of any of the following (all of the foregoing being collectively called
"RPA Indemnified Losses"):
(a) any representation or warranty made in writing by such Seller
(or any of its Authorized Officers) under any of the Transaction
Documents, any Monthly Report, any Daily Report or any other information
or report delivered by or on behalf of such Seller or the Servicer with
respect to such Seller or the Receivables or Related Assets originated by
such Seller (including without limitation any representation, warranty,
information or report relied upon by Buyer in connection with the offering
or sale of any Certificate or Purchased Interest), that contained any
untrue statement of a material fact or omitted to state material facts
necessary to make the statements not misleading when made,
(b) the failure by such Seller to comply with any applicable law,
rule or regulation with respect to any Receivable or any Related Asset or
to comply with any Contract related thereto, or the nonconformity of any
Receivable, the related Contract or any Related Assets with any such
applicable law, rule or regulation,
(c) the failure to vest and maintain vested in Buyer a first
priority perfected ownership interest in the Receivables originated by
such Seller, the Related Assets, the related Collections and the proceeds
of each of the foregoing, free and clear of any Adverse Claim (other than
an Adverse Claim created in favor of Buyer pursuant to this Agreement or
in favor of the Trustee pursuant to the Pooling Agreement), whether
existing at the time of the sale of such Receivable or at any time
thereafter and without regard to whether such Adverse Claim was a
Permitted Adverse Claim or a Special New Jersey EPA
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Claim,
(d) any failure of such Seller to perform its duties or obligations
in accordance with the provisions of the Transaction Documents,
(e) any products liability claim, personal injury or property damage
suit, environmental liability claim or any other claim or action by a
party other than Buyer of whatever sort, whether sounding in tort,
contract or any other legal theory, arising out of or in connection with
the goods or services that are the subject of any Specified Assets with
respect thereto or Collections thereof,
(f) the failure to file, or any delay in filing, financing
statements or other similar instruments or documents under the UCC of any
applicable jurisdiction or other applicable laws with respect to any
Specified Assets or Collections, whether at the time of any sale or at any
subsequent time,
(g) any dispute, claim, offset or defense (other than the discharge
in bankruptcy) of an Obligor to the payment of any Receivable originated
by such Seller or Related Asset, or purported Receivable or Related Asset,
including a defense based on such Receivable's or the related Contract's
not being a legal, valid and binding obligation of the Obligor enforceable
against it in accordance with its terms, and
(h) any tax or governmental fee or charge (other than franchise
taxes and taxes on or measured by the net income of Buyer or any of its
assignees), all interest and penalties thereon or with respect thereto,
and all reasonable out-of-pocket costs and expenses, including the
reasonable fees and expenses of counsel in defending against the same,
that may arise by reason of the purchase or ownership of the Receivables
originated by such Seller or any Related Asset connected with any such
Receivables.
Notwithstanding the foregoing (and with respect to clause (ii) below, without
prejudice to the rights that Buyer may have pursuant to the other provisions of
this Agreement or the provisions of any of the other Transaction Documents), in
no event shall any RPA Indemnified Party be indemnified for any RPA Indemnified
Losses (i) resulting from gross negligence or willful misconduct on the part of
the RPA Indemnified Party, (ii) to the extent the same includes losses in
respect of Receivables and reimbursement therefor that would constitute credit
recourse to such Seller for the amount of any Receivable or Related Asset not
paid by the related Obligor, (iii) resulting from the action or omission of the
Servicer (unless the Servicer is a Big Flower Person), (iv) to
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the extent the same are or result from lost profits, (v) to the extent the same
are or result from taxes on or measured by the net income of the RPA Indemnified
Party and (vi) to the extent the same constitute consequential, special or
punitive damages.
If for any reason the indemnification provided above in this section is
unavailable to a RPA Indemnified Party or is insufficient to hold a RPA
Indemnified Party harmless, then such Seller shall contribute to the maximum
amount payable or paid to the RPA Indemnified Party as a result of the loss,
claim, damage or liability in such proportion as is appropriate to reflect not
only the relative benefits received by the RPA Indemnified Party on the one hand
and such Seller on the other hand, but also the relative fault of the RPA
Indemnified Party (if any) and such Seller and any other relevant equitable
considerations.
ARTICLE X
MISCELLANEOUS
SECTION X.1 Amendments; Waivers, Etc. (a) The provisions of this Agreement
may from time to time be amended, modified or waived, if such amendment,
modification or waiver is in writing and signed by Buyer and each Seller (with
respect to an amendment) or by Buyer (with respect to a waiver or consent by it)
and, in the case of any amendment, modification or waiver, to the extent
provided in Section 7.2(j) of the Pooling Agreement, by the Trustee, and then
any such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given. If any outstanding Investor
Certificates or Purchased Interests have been rated, this Agreement shall not be
amended unless Buyer shall have delivered the proposed amendment to the Rating
Agencies at least ten Business Days (or such shorter period as shall be
acceptable to each of them) prior to the execution and delivery thereof and the
Modification Condition has been satisfied with respect to such amendment.
(b) No failure or delay on the part of Buyer, any RPA Indemnified Party,
or the Trustee or any other third party beneficiary referred to in Section
10.11(a) in exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such power or right
preclude any other or further exercise thereof or the exercise of any other
power or right. No notice to or demand on any Seller in any case shall entitle
it to any notice or demand in similar or other circumstances. No waiver or
approval by Buyer or the Trustee under this Agreement shall, except as may
otherwise be stated in the waiver or approval, be applicable to
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subsequent transactions. No waiver or approval under this Agreement shall
require any similar or dissimilar waiver or approval thereafter to be granted
hereunder.
SECTION X.2 Notices, Etc. All notices and other communications provided
for hereunder shall, unless otherwise stated herein, be in writing (including
facsimile communication) and shall be personally delivered or sent by certified
mail, postage prepaid, by facsimile or by overnight courier, to the intended
party at the address or facsimile number of such party set forth under its name
on the signature pages hereof or at such other address or facsimile number as
shall be designated by the party in a written notice to the other parties hereto
given in accordance with this section. Copies of all notices and other
communications provided for hereunder shall be delivered to the Trustee and the
Rating Agencies at their respective addresses for notices set forth in the
Pooling Agreement. All notices and communications provided for hereunder shall
be effective, (a) if personally delivered, when received, (b) if sent by
certified mail, four Business Days after having been deposited in the mail,
postage prepaid and properly addressed, (c) if transmitted by facsimile, when
sent, receipt confirmed by telephone or electronic means and (d) if sent by
overnight courier, two Business Days after having been given to the courier
unless sooner received by the addressee.
SECTION X.3 Cumulative Remedies. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law. Without limiting
the foregoing, each Seller hereby authorizes Buyer, at any time and from time to
time, to the fullest extent permitted by law, to set-off, against any
Obligations of any Seller to Buyer that are then due and payable or that are not
then due and payable from a Seller to Buyer but have then accrued, any and all
indebtedness or other obligations at any time owing to any Seller by Buyer to or
for the credit or the account of any Seller or that are not then due and payable
from Buyer to a Seller but have then accrued.
SECTION X.4 Binding Effect; Assignability; Survival of Provisions. This
Agreement shall be binding upon and inure to the benefit of Buyer and the
Sellers and their respective successors and permitted assigns. No Seller may
assign any of its rights hereunder or any interest herein without (i) the prior
written consent of Buyer and the Trustee and (ii) the satisfaction of the
Modification Condition. This Agreement shall create and constitute the
continuing obligations of the parties hereto in accordance with its terms, and
shall remain in full force and effect until the first date following the
Purchase Termination Date, but not later than the date on which the Trust is
terminated pursuant to Section 12.1 of the Pooling Agreement, on which all
Obligations shall have been finally and fully paid and performed or such other
time as the parties hereto shall agree and as to which the Trustee (at the
direction of the Majority Investors) shall have given its prior written consent,
which consent shall not be unreasonably withheld or
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delayed. The rights and remedies with respect to any breach of any
representation and warranty made by a Seller pursuant to Article V and the
indemnification and payment provisions of Article IX and Section 10.6 shall be
continuing and shall survive any termination of this Agreement.
SECTION X.5 Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF LAWS
PRINCIPLES, EXCEPT TO THE EXTENT THAT THE PERFECTION OF THE INTERESTS OF BUYER
IN THE RECEIVABLES AND THE RELATED ASSETS ARE GOVERNED BY THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF NEW YORK.
SECTION X.6 Costs, Expenses and Taxes. In addition to the obligations of
the Sellers under Article IX, the Sellers agree jointly and severally to pay on
demand:
(a) all reasonable out-of-pocket and other costs and expenses in
connection with the enforcement of this Agreement, the Seller Assignment
Certificates or the other Transaction Documents by Buyer or any successor
in interest to Buyer, and
(b) all stamp and other taxes and fees payable or determined to be
payable in connection with the execution and delivery, and the filing and
recording, of this Agreement or the other Transaction Documents, and
agrees to indemnify each RPA Indemnified Party against any liabilities
with respect to or resulting from any delay in paying or omission to pay
the taxes and fees.
SECTION X.7 Submission to Jurisdiction. Each party hereto hereby
irrevocably submits to the non-exclusive jurisdiction of any New York State or
Federal Court sitting in the Borough of Manhattan in the City of New York, New
York over any action or proceeding arising out of or relating to the Transaction
Documents, and hereby (A) irrevocably agrees that all claims in respect of the
action or proceeding may be heard and determined in the State or Federal Court,
(B) irrevocably waives, to the fullest extent it may effectively do so, the
defense of an inconvenient forum to the maintenance of the action or proceeding,
and (C) Buyer, irrevocably appoints LEXIS Document Services, Inc. (the "Process
Agent"), with an office on the date hereof at 150 East 58th Street, New York,
New York 10155, as its agent to receive on behalf of it and its property service
of copies of the summons and complaint and any other process that may be served
in any action or proceeding. The service may be made by mailing or delivering a
copy of
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the process to Buyer or the applicable Seller in care of the Process Agent at
the Process Agent's above address, and Buyer and each Seller hereby irrevocably
authorizes and directs the Process Agent to accept the service on its behalf.
As an alternative method of service, each of Buyer and the Sellers also
irrevocably consents to the service of any and all process in any action or
proceeding by the mailing of copies of the process to Buyer or a Seller (as
applicable) at its address specified herein. Nothing in this section shall
affect the right of any party hereto to serve legal process in any other manner
permitted by law or affect the right of any party hereto to bring any action or
proceeding against the other party or any of its properties in the courts of any
other jurisdiction.
SECTION X.8 Waiver of Jury Trial. Each party hereto waives any right to a
trial by jury in any action or proceeding to enforce or defend any rights under
or relating to the Transaction Documents or any amendment, instrument, document
or agreement delivered or that may in the future be delivered in connection
therewith or arising from any course of conduct, course of dealing, statements
(whether verbal or written), actions of either of the parties hereto or any
other relationship existing in connection with the Transaction Documents, and
agrees that any such action or proceeding shall be tried before a court and not
before a jury.
SECTION X.9 Integration. This Agreement and the other Transaction
Documents contain a final and complete integration of all prior expressions by
the parties hereto with respect to the subject matter hereof and thereof and
shall together constitute the entire agreement between the parties hereto with
respect to the subject matter hereof and thereof, superseding all prior oral or
written understandings.
SECTION X.10 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which
together shall constitute one and the same agreement.
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SECTION X.11 Acknowledgment and Consent. (a) The Sellers acknowledge that,
contemporaneously herewith, Buyer is selling, transferring, assigning, setting
over and otherwise conveying to the Trust all of Buyer's right, title and
interest in, to and under the Specified Assets, this Agreement and all of the
other Transaction Documents pursuant to Sections 2.1 and 2.4 of the Pooling
Agreement. The Sellers hereby consent to the sale, transfer, assignment, set
over and conveyance to the Trust by Buyer of all right, title and interest of
Buyer in, to and under the Specified Assets, this Agreement and the other
Transaction Documents, and all of Buyer's rights, remedies, powers and
privileges, and all claims of Buyer against the Sellers, under or with respect
to this Agreement and the other Transaction Documents (whether arising pursuant
to the terms of this Agreement or otherwise available at law or in equity),
including (i) the right of Buyer, at any time, to enforce this Agreement against
the Sellers and the obligations of the Sellers hereunder, (ii) the right to
consent to or direct the appointment of a successor to the Servicer at the times
and upon the conditions set forth in the Pooling Agreement, and (iii) the right,
at any time, to give or withhold any and all consents, requests, notices,
directions, approvals, demands, extensions or waivers under or with respect to
this Agreement, any other Transaction Document or the obligations in respect of
the Sellers thereunder to the same extent as Buyer may do. Each of the parties
hereto acknowledges and agrees that the Trustee and the Trust are third party
beneficiaries of the rights of Buyer arising hereunder and under the other
Transaction Documents to which any Seller is a party. Each Seller hereby
acknowledges and agrees that it has no claim to or interest in any of the Bank
Accounts or the Trust Accounts.
(b) The Sellers hereby agree to execute all agreements, instruments and
documents, and to take all other action, that Buyer or the Trustee reasonably
determines is necessary or appropriate to evidence its consent described in
subsection (a) above. To the extent that Buyer, individually or through the
Servicer, has granted or grants powers of attorney to the Trustee under the
Pooling Agreement, the Sellers hereby grant a corresponding power of attorney on
the same terms to Buyer. The Sellers hereby acknowledge and agree that Buyer, in
all of its capacities, shall assign to the Trustee for the benefit of the
Certificateholders the powers of attorney and other rights and interests granted
by the Sellers to Buyer hereunder and agrees to cooperate fully with the Trustee
in the exercise of the rights.
SECTION X.12 No Partnership or Joint Venture. Nothing contained in this
Agreement shall be deemed or construed by the parties hereto or by any third
person to create the relationship of principal and agent or of partnership or of
joint venture.
SECTION X.13 No Proceedings. Each Seller hereby agrees that it will not
page 45
<PAGE>
institute against Buyer or the Trust, or join any other Person in instituting
against Buyer or the Trust, any insolvency proceeding (namely, any proceeding of
the type referred to in the definition of Event of Bankruptcy) so long as any
Investor Certificates issued by the Trust shall be outstanding or there shall
not have elapsed one year plus one day since the last day on which any such
Investor Certificates shall have been outstanding. The foregoing shall not limit
the right of a Seller to file any claim in or otherwise take any action with
respect to any insolvency proceeding that was instituted against Buyer or the
Trust by any Person other than a Seller or any other Big Flower Person (provided
that no such action may be taken by a Seller until such proceeding has continued
undismissed, unstayed and in effect for a period of 10 days).
SECTION X.14 Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement or any of the other
Transaction Documents shall for any reason whatsoever be held invalid, then the
unenforceable covenants, agreements, provisions or terms shall be deemed
severable from the remaining covenants, agreements, provisions or terms of this
Agreement or the other Transaction Documents (as applicable) and shall in no way
affect the validity or enforceability of the other provisions of this Agreement
or any of the other Transaction Documents.
SECTION X.15 Recourse to Buyer. Except to the extent expressly provided
otherwise in the Transaction Documents, the obligations of Buyer under the
Transaction Documents to which it is a party are solely the obligations of
Buyer. No recourse shall be had for payment of any fee payable by or other
obligation of or claim against Buyer that arises out of any Transaction Document
to which Buyer is a party against any director, officer or employee of Buyer.
The provisions of this section shall survive the termination of this Agreement.
[Remainder of page intentionally left blank.]
page 46
<PAGE>
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.
TREASURE CHEST ADVERTISING COMPANY, INC.,
as Seller
By: /s/ Rick Frier
Title: Vice President
Address: 250 W. Pratt Street
Baltimore, Maryland 21201
Attention: Rick Frier
Telephone: 410-361-8352
Facsimile: 410-528-9287
WEBCRAFT TECHNOLOGIES, INC., as Seller
By: /s/ Thomas Gardner
Title: Vice President
Address: Route 1 & Adams Station
North Brunswick, New Jersey
08902
Attention: Joe DiPiano
Telephone: 908-422-2835
Facsimile: 908-422-2805
WEBCRAFT CHEMICALS, INC., as Seller
By: /s/ Thomas Gardner
Title: Vice President
Address: 80 Wheeler Point Road
Newark, New Jersey 07105
Attention: Joe DiPiano
Telephone: 908-422-2835
Facsimile: 908-422-2805
<PAGE>
LASER TECH COLOR, INC., as Seller
By: /s/ Debra L. Sanders
Title: Chief Financial
Officer/Treasurer
Address: 2010 Westridge Drive
Irving, Texas 75038
Attention: Debra Sanders
Telephone: 214-714-4800
Facsimile: 214-714-0339
BFP RECEIVABLES CORPORATION,
as the Buyer
By: /s/ Rick Frier
Title: Vice President
Address: 250 W. Pratt Street
Baltimore, Maryland 21201
Attention: Rick Frier
Telephone: 410-361-8352
Facsimile: 410-528-9287
BIG FLOWER PRESS HOLDINGS, INC.
as initial Servicer
By: /s/ David Mait
Title: Vice President
Address: 3 East 54th Street, 19th Floor
New York, New York 10022
Attention: David Mait
Telephone: 212-521-1611
Facsimile: 212-223-4074
<PAGE>
STATE OF NEW YORK )
) SS.
COUNTY OF NEW YORK )
On the 18th day of March, 1996 before me personally came Rick Frier to me
known, who, being by me duly sworn, did depose and say that he resides at
Ellicott City, Maryland; that he is a Vice President-Treasurer of Treasure Chest
Advertising Company, Inc., a Delaware corporation, the corporation described in
and that executed the foregoing instrument; and that he signed his name thereto
by order of the board of directors of the corporation.
Given under my hand and notarial seal, this 18th day of March, 1996.
/s/ Douglas Culhane
--------------------------
Notary Public
Type or
Print Name: Douglas Culhane
My commission expires:
August 1, 1996
<PAGE>
STATE OF NEW YORK )
) SS.
COUNTY OF NEW YORK )
On the 18th day of March, 1996 before me personally came Thomas Gardner to
me known, who, being by me duly sworn, did depose and say that he resides at
Haverford, Pennsylvania; that he is a Vice President of Webcraft Technologies,
Inc., a Delaware corporation, the corporation described in and that executed the
foregoing instrument; and that he signed his name thereto by order of the board
of directors of the corporation.
Given under my hand and notarial seal, this 18th day of March, 1996.
/s/ Douglas Culhane
------------------------------
Notary Public
Type or
Print Name: Douglas Culhane
My commission expires:
August 1, 1996
<PAGE>
STATE OF NEW YORK )
) SS.
COUNTY OF NEW YORK )
On the 18th day of March, 1996 before me personally came Thomas Gardner to
me known, who, being by me duly sworn, did depose and say that he resides at
Haverford, Pennsylvania; that he is a Vice President of Webcraft Chemicals,
Inc., a New Jersey corporation, the corporation described in and that executed
the foregoing instrument; and that he signed his name thereto by order of the
board of directors of the corporation.
Given under my hand and notarial seal, this 18th day of March, 1996.
/s/ Douglas Culhane
----------------------------
Notary Public
Type or
Print Name: Douglas Culhane
My commission expires:
August 1, 1996
<PAGE>
STATE OF TEXAS )
) SS.
COUNTY OF DALLAS )
On the 13th day of March, 1996 before me personally came Debra Sanders to
me known, who, being by me duly sworn, did depose and say that she resides at
DeSoto, Texas; that she is a Chief Financial Officer/Treasurer of Laser Tech
Color, Inc., a Delaware corporation, the corporation described in and that
executed the foregoing instrument; and that he signed his name thereto by order
of the board of directors of the corporation.
Given under my hand and notarial seal, this 13th day of March, 1996.
/s/ Debbie Davis
-----------------------------
Notary Public
Type or
Print Name: Debbie Davis
My commission expires:
December 22, 1999
<PAGE>
STATE OF NEW YORK )
) SS.
COUNTY OF NEW YORK )
On the 18th day of March, 1996 before me personally came Rick Frier to me
known, who, being by me duly sworn, did depose and say that he resides at
Ellicott City, Maryland; that he is the Vice President of BFP RECEIVABLES
CORPORATION, a Delaware corporation, the corporation described in and that
executed the foregoing instrument; and that he signed his name thereto by order
of the board of directors of the corporation.
Given under my hand and notarial seal, this 18th day of March, 1996.
/s/ Douglas Culhane
---------------------------------
Notary Public
Type or
Print Name: Douglas Culhane
My commission expires:
August 1, 1996
<PAGE>
STATE OF NEW YORK )
) SS.
COUNTY OF NEW YORK )
On the 18th day of March, 1996 before me personally came David Mait to me
known, who, being by me duly sworn, did depose and say that he resides at
Wyckoff, New Jersey; that he is the Vice President of BIG FLOWER PRESS HOLDINGS,
INC., a Delaware corporation, the corporation described in and that executed the
foregoing instrument; and that he signed his name thereto by order of the board
of directors of the corporation.
Given under my hand and notarial seal, this 18th day of March, 1996.
/s/ Michael A. Morris
--------------------------------
Notary Public
Type or
Print Name: Michael A. Morris
My commission expires:
October 23, 1997
<PAGE>
EXHIBIT A
FORM OF BUYER NOTE
____________, 1996
FOR VALUE RECEIVED, the undersigned, BFP RECEIVABLES CORPORATION, a
Delaware corporation ("Buyer"), promises to pay to _________________________, a
____________ corporation (the "Seller" and together with its successors and
assigns, the "Holder"), on the terms and subject to the conditions set forth in
this promissory note (this "Note") and in the Receivables Purchase Agreement of
even date herewith (the "Agreement") among Buyer, BIG FLOWER PRESS HOLDINGS,
INC. ("Big Flower"), as Servicer and certain Subsidiaries of Big Flower, as
Sellers, an amount equal to the aggregate deferred Purchase Price owed by Buyer
to the Seller pursuant to Article III of the Agreement. Such amount, as shown in
the records of the Servicer, will be rebuttable presumptive evidence of the
principal amount and interest owing under this Note.
I Purchase Agreement. This Note is a Buyer Note described in, and is
subject to the terms and conditions set forth in, the Agreement. Reference is
hereby made to the Agreement for a statement of certain other rights and
obligations of Buyer and the Seller.
2. Rules of Construction; Definitions. Certain rules of construction
governing the interpretation of this Note are set forth in Appendix A to the
Agreement and, except as otherwise specifically provided herein, capitalized
terms used but not defined herein have the meanings ascribed to them in Appendix
A to the Agreement. In addition, as used herein, the following terms have the
following meanings:
"Bankruptcy Proceedings" means any dissolution, winding up,
liquidation, readjustment, reorganization or other similar event relating
to Buyer, whether voluntary or involuntary, partial or complete, and
whether in bankruptcy, insolvency, receivership or other similar
proceedings, or upon an assignment for the benefit of creditors, or any
other marshalling of the assets and liabilities of Buyer or any sale of
all or substantially all of the assets of Buyer; provided, however, that
none of the following shall constitute a "Bankruptcy Proceeding" so long
as no bankruptcy, insolvency, receivership or other similar proceedings
shall have been commenced by or against Buyer and is continuing: (i) the
commencement of an amortization period, accumulation
<PAGE>
period or early amortization period, (ii) the allocation and distribution
of Collections and other amounts during an amortization period,
accumulation period or early amortization period in accordance with the
terms of the Pooling Agreement and (iii) the liquidation, dissolution and
winding up of Buyer during an amortization period, accumulation period or
early amortization period in accordance with the Pooling Agreement after
the termination of the Pooling Agreement in accordance with Section 12.1
thereof.
"Final Maturity Date" means the date occurring one year and one day
after the Final Scheduled Payment Date of the latest maturing Series or
Purchased Interest from time to time outstanding.
"Highest Lawful Rate" has the meaning set forth in paragraph 9.
"Junior Liabilities" means all obligations of Buyer to the Holder
under this Note.
"Reference Rate" means, with respect to any day occurring in a
Calculation Period, the rate of interest publicly announced from time to
time by the Manufacturers and Traders Trust Company as its "reference
rate" and in effect on the first day of such Calculation Period, as
determined by the Servicer.
"Senior Interests" means all obligations of Buyer to the Trustee or
the Investor Certificateholders under or in connection with the
Transaction Documents, whether direct or indirect, absolute or contingent,
now or hereafter existing, or due or to become due, including without
limitation interest or other amounts due or to become due after an Event
of Bankruptcy.
"Subordination Provisions" means, collectively, the provisions of
paragraph 7.
3. Interest. Subject to the Subordination Provisions, Buyer promises to
pay interest on the aggregate unpaid principal amount of this Note outstanding
on each day at an adjustable rate per annum equal to the Reference Rate in
effect on such day.
4. Interest Payment Dates. (a) Subject to the Subordination Provisions,
Buyer shall pay accrued interest on this Note on each Distribution Date and on
the Final Maturity Date. Buyer also shall pay accrued interest on the principal
amount of each prepayment hereof on the date of such prepayment.
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<PAGE>
(b) Notwithstanding the provisions of paragraph 4(a), in the event that on
the date an interest payment is due hereunder the amount of funds available
therefor pursuant to Section 3.3 of the Agreement is insufficient to pay any
amount due pursuant to paragraph 4(a), then interest shall be payable only to
the extent that funds are available therefor in accordance with Section 3.3 of
the Agreement, and any amount not paid because funds are not available in
accordance with said Section 3.3 shall not constitute a claim (as defined in
ss.101 of the Bankruptcy Code) against or corporate obligation of Buyer for any
such insufficiency. All interest on this Note that is not paid when due pursuant
to this paragraph shall be payable on the next date on which an interest payment
on this Note is due and on which funds are available therefor pursuant to
Section 3.3 of the Agreement, and all such unpaid interest shall accrue interest
at the Reference Rate until paid in full.
5. Basis of Computation. Interest accrued hereunder shall be computed for
the actual number of days elapsed on the basis of a 360-day year.
6. Principal Payment Dates. Subject to the Subordination Provisions, any
unpaid principal of this Note shall only become due and payable on the Final
Maturity Date. Subject to the Subordination Provisions, the principal amount of
and accrued interest on this Note may be prepaid on any Business Day without
premium or penalty; provided, that no prepayment shall be made by Buyer to the
extent that such prepayment would result in a default in the payment of any
other amount required to be paid by Buyer under any Transaction Document.
7. Subordination Provisions. Buyer covenants and agrees, and the Holder,
by its acceptance of this Note, likewise covenants and agrees, that the payment
of all Junior Liabilities is hereby expressly subordinated in right of payment
to the payment and performance of the Senior Interests to the extent and in the
manner set forth in this paragraph:
(a) In the event of any Bankruptcy Proceeding, the Senior Interests
shall first be paid and performed in full and in cash before the Holder
shall be entitled to receive and to retain any payment or distribution in
respect of the Junior Liabilities. In order to implement the foregoing:
(i) all payments and distributions of any kind or character in respect of
the Junior Liabilities to which the Holder would be entitled except for
this clause (a) shall be made directly to the Trustee (for the benefit of
itself and the Investor Certificateholders), and (ii) if a Bankruptcy
Proceeding has been commenced, the Holder shall promptly file a claim or
claims, in the form required in any
page 3
<PAGE>
Bankruptcy Proceedings, for the full outstanding amount of the Junior
Liabilities, and shall use commercially reasonable efforts to cause said
claim or claims to be approved and all payments and other distributions in
respect thereof to be made directly to the Trustee (for the benefit of
itself and the Investor Certificateholders) until the Senior Interests
shall have been paid and performed in full and in cash.
(b) In the event that the Holder receives any payment or other
distribution of any kind or character from Buyer or from any other source
whatsoever, in payment of the Junior Liabilities, after the commencement
of any Bankruptcy Proceeding, such payment or other distribution shall be
received in trust for the Trustee and the Investor Certificateholders and
shall be turned over by the Holder to the Trustee forthwith.
(c) Upon the final indefeasible payment in full and in cash of all
Senior Interests, the Holder shall be subrogated to the rights of the
Trustee and the Investor Certificateholders to receive payments or
distributions from Buyer that are applicable to the Senior Interests until
the Junior Liabilities are paid in full.
(d) These Subordination Provisions are intended solely for the
purpose of defining the relative rights of the Holder, on the one hand,
and the Trustee and the Investor Certificateholders on the other hand.
Nothing contained in these Subordination Provisions or elsewhere in this
Note is intended to or shall impair, as between Buyer, its creditors
(other than the Trustee and the Investor Certificateholders) and the
Holder, Buyer's obligation, which is unconditional and absolute, to pay
the Junior Liabilities as and when the same shall become due and payable
in accordance with the terms hereof and of the Agreement or to affect the
relative rights of the Holder and creditors of Buyer (other than the
Trustee and the Investor Certificateholders).
(e) The Holder shall not, until the Senior Interests have been
finally paid and performed in full and in cash, (i) cancel, waive,
forgive, transfer or assign, or commence legal proceedings to enforce or
collect, or subordinate to any obligation of Buyer (other than to the
Senior Interests), howsoever created, arising or evidenced, whether direct
or indirect, absolute or contingent, or now or hereafter existing, or due
or to become due, the Junior Liabilities or any rights in respect hereof
or (ii) convert the Junior Liabilities into an equity interest in Buyer,
unless, in the case of each of clauses (i) and (ii), the Holder shall have
received the prior written consent of the Trustee in each case.
page 4
<PAGE>
(f) The Holder shall not, without the advance written consent of the
Trustee, commence, or join with any other Person in commencing, any
Bankruptcy Proceedings with respect to Buyer until at least one year and
one day shall have passed after the Senior Interests shall have been
finally paid and performed in full and in cash; provided, however, that
the Holder shall at all times have the right to file any claim in or
otherwise take any action with respect to any insolvency proceeding
instituted against Buyer by any Person other than the Holder or any other
Big Flower Person (provided that no such action may be taken by the Holder
until such proceeding has continued undismissed, unstayed and in effect
for a period of 10 days).
(g) If, at any time, any payment (in whole or in part) made with
respect to any Senior Interest is rescinded or must be restored or
returned by a Certificateholder (whether in connection with any Bankruptcy
Proceedings or otherwise), these Subordination Provisions shall continue
to be effective or shall be reinstated, as the case may be, as though such
payment had not been made.
(h) Each of the Trustee and the Investor Certificateholders may,
from time to time, in its sole discretion, without notice to the Holder,
and without waiving any of its rights under these Subordination
Provisions, take any or all of the following actions: (i) retain or obtain
an interest in any property to secure any of the Senior Interests, (ii)
retain or obtain the primary or secondary obligations of any other obligor
or obligors with respect to any of the Senior Interests, (iii) extend or
renew for one or more periods (whether or not longer than the original
period), alter, increase or exchange any of the Senior Interests, or
release or compromise any obligation of any nature with respect to any of
the Senior Interests, (iv) amend, supplement, amend and restate, or
otherwise modify any Transaction Document to which it is a party, and (v)
release its security interest in, or surrender, release or permit any
substitution or exchange for all or any part of any rights or property
securing any of the Senior Interests, or extend or renew for one or more
periods (whether or not longer than the original period), or release,
compromise, alter or exchange any obligations of any nature of any obligor
with respect to any such rights or property.
(i) The Holder hereby waives: (i) notice of acceptance of these
Subordination Provisions by the Trustee or any of the Investor
Certificateholders, (ii) notice of the existence, creation, non-payment or
non-performance of all or any of the Senior Interests, and (iii) all
diligence in enforcement, collection or protection of, or realization
upon, the Senior Interests, or any thereof, or any security therefor.
page 5
<PAGE>
(j) These Subordination Provisions constitute a continuing offer
from Buyer to all Persons who become the holders of, or who continue to
hold, Senior Interests, and these Subordination Provisions are made for
the benefit of the Trustee and the Investor Certificateholders, and the
Trustee may proceed to enforce such provisions on behalf of each of such
Persons.
8. General. No failure or delay on the part of the Holder in exercising
any power or right hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power or right preclude any other or
further exercise thereof or the exercise of any other power or right. No
amendment, modification or waiver of, or consent with respect to, any provision
of this Note shall in any event be effective unless (a) the same shall be in
writing and signed and delivered by Buyer and the Seller, and (b) all consents
required for such actions under the Transaction Documents shall have been
received by the appropriate Persons.
9. Limitation on Interest. Notwithstanding anything in this Note to the
contrary, Buyer shall never be required to pay unearned interest on any amount
outstanding hereunder, and shall never be required to pay interest on the
principal amount outstanding hereunder, at a rate in excess of the maximum
nonusurious interest rate that may be contracted for, charged or received under
applicable federal or state law (such maximum rate being herein called the
"Highest Lawful Rate"). If the effective rate of interest that would otherwise
be payable under this Note would exceed the Highest Lawful Rate, or the Holder
shall receive any unearned interest or shall receive monies that are deemed to
constitute interest that would increase the effective rate of interest payable
by Buyer under this Note to a rate in excess of the Highest Lawful Rate, then
(a) the amount of interest that would otherwise be payable by Buyer under this
Note shall be reduced to the amount allowed by applicable law, and (b) any
unearned interest paid by Buyer or any interest paid by Buyer in excess of the
Highest Lawful Rate shall be refunded to Buyer. Without limitation of the
foregoing, all calculations of the rate of interest contracted for, charged or
received by the Holder under this Note that are made for the purpose of
determining whether such rate exceeds the Highest Lawful Rate shall be made, to
the extent permitted by applicable usury laws (now or hereafter enacted), by
amortizing, prorating and spreading in equal parts during the actual period
during which any amount has been outstanding hereunder all interest at any time
contracted for, charged or received by the Holder in connection herewith. If at
any time and from time to time (i) the amount of interest payable to the Holder
on any date shall be computed at the Highest Lawful Rate pursuant to the
provisions of the foregoing sentence, and (ii) in respect of any subsequent
interest computation period the amount of interest otherwise payable to the
Holder would be
page 6
<PAGE>
less than the amount of interest payable to the Holder computed at the Highest
Lawful Rate, then the amount of interest payable to the Holder in respect of
such subsequent interest computation period shall continue to be computed at the
Highest Lawful Rate until the total amount of interest payable to the Holder
shall equal the total amount of interest that would have been payable to the
Holder if the total amount of interest had been computed without giving effect
to the provisions of the foregoing sentence.
10. No Negotiation. This Note is not negotiable.
11. Governing Law. THIS NOTE SHALL BE DEEMED TO BE A CONTRACT MADE UNDER
AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK
WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.
12. Security Interest. The Seller may grant a security interest in or
otherwise pledge this Note as security, and any Person to whom such security
interest is granted or to whom this Note is pledged shall be bound by, and for
all purposes takes this Note subject to, the restrictions and other provisions
(including the Subordination Provisions) set forth herein.
13. Captions. Paragraph captions used in this Note are provided solely for
convenience of reference and shall not affect the meaning or interpretation of
any provision of this Note.
BFP RECEIVABLES CORPORATION
By: ____________________________________
Title:___________________________________
<PAGE>
EXHIBIT B
FORM OF
SELLER ASSIGNMENT CERTIFICATE
Reference is made to the Receivables Purchase Agreement of even date
herewith (as the same may be amended, supplemented, amended and restated or
otherwise modified from time to time, the "Agreement") between
__________________, ___________________ and BFP RECEIVABLES CORPORATION
("Buyer"). Unless otherwise defined herein, capitalized terms used herein have
the meanings provided in Appendix A to the Agreement.
The undersigned (the "Seller") hereby sells, transfers, assigns, sets over
and conveys unto Buyer and its successors and assigns all right, title and
interest of the Seller in, to and under:
(a) each Receivable of the Seller (other than Contributed
Receivables) that existed and was owing to the Seller as at the closing of
the Seller's business on the Initial Cut-Off Date,
(b) each Receivable created by the Seller (other than Contributed
Receivables) that arises during the period from and including the closing
of the Seller's business on the Initial Cut-Off Date to but excluding the
Purchase Termination Date,
(c) all Related Security with respect to all Receivables (other than
Contributed Receivables) of the Seller,
(d) all proceeds of the foregoing, including all funds received by
any Person in payment of any amounts owed (including invoice prices,
finance charges, interest and all other charges, if any) in respect of any
Receivable described above (other than a Contributed Receivable) or
Related Security with respect to any such Receivable, or otherwise applied
to repay or discharge any such Receivable (including insurance payments
that the Seller or the Servicer applies in the ordinary course of its
business to amounts owed in respect of any such Receivable (it being
understood that property insurance covering inventory is not so applied
and is not included in this grant) and net proceeds of any sale or other
disposition of repossessed goods that were the subject of any such
Receivable) or other collateral or property of any Obligor or any other
party
page 1
<PAGE>
directly or indirectly liable for payment of such Receivables), and
(e) all Records relating to any of the foregoing.
This Seller Assignment Certificate is made without recourse but on the
terms and subject to the conditions set forth in the Transaction Documents to
which the Seller is a party. The Seller acknowledges and agrees that Buyer is
accepting this Seller Assignment Certificate in reliance on the representations,
warranties and covenants of the Seller contained in the Transaction Documents to
which the Seller is a party.
THIS SELLER ASSIGNMENT CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH
THE AGREEMENT AND THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
CONFLICT OF LAWS PRINCIPLES.
IN WITNESS WHEREOF, the undersigned has caused this Seller Assignment
Certificate to be duly executed and delivered by its duly Authorized Officer
this _____ day of _______________, 1996.
[SELLER FULL NAME]
By: ____________________________________
Title:_________________________________
page 2
<PAGE>
APPENDIX A
[Same as Appendix A to Pooling Agreement]
<PAGE>
Exhibit 10.11
AMENDMENT TO PURCHASE AGREEMENT
This AMENDMENT dated as of January 31, 1997 (the "Amendment") to the
RECEIVABLES PURCHASE AGREEMENT, dated as of March 19, 1996, as previously
amended as of April 25, 1996, June 10, 1996 and September 24, 1996 (the
"Purchase Agreement"), is made among BIG FLOWER PRESS HOLDINGS, INC., a Delaware
corporation as initial servicer ("Big Flower"), PRINTCO., INC., a Michigan
corporation ("PrintCo"), certain other direct or indirect domestic subsidiaries
of Big Flower that are listed on the signature pages hereto (such subsidiaries,
with PrintCo, being collectively referred to herein as the "Sellers"), and BFP
RECEIVABLES CORPORATION, a Delaware corporation ("Buyer"). Capitalized terms
have the meanings that Appendix A to the Purchase Agreement assigns to them,
except as otherwise defined in this Amendment, and this Amendment shall be
interpreted in accordance with the conventions set forth in Part B of such
Appendix A.
WHEREAS, Buyer intends pursuant to the Pooling Agreement to transfer
its interests in the Receivables, being sold to Buyer pursuant to the Purchase
Agreement and hereunder, to the Trust in order to, among other things, finance
its purchases under the Purchase Agreement and hereunder; and
WHEREAS, PrintCo has become a Domestic Subsidiary of Big Flower; and
Big Flower, Buyer, PrintCo and the other Sellers each desire pursuant to the
terms of this Amendment to add PrintCo as a Seller under, and party to, the
Purchase Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, agree as follows:
SECTION 1. Addition of PrintCo as a Seller. Each of the parties
hereto agrees that PrintCo shall be added as of the Addition Date (as defined
herein) as a party to, and as a Seller under, the Purchase Agreement subject to
all of the terms and conditions thereof and the obligations, covenants and
warranties of a Seller thereunder to the same extent as if PrintCo were an
original party thereto and a Seller thereunder, except as may be expressly
provided otherwise in this Amendment.
SECTION 2. Amendments to the Purchase Agreement. From and
after the Addition Date:
(a) The term "First Issuance Date" shall mean, with respect to the
Receivables of PrintCo, the Addition Date;
<PAGE>
(b) The term "Sellers" shall include PrintCo;
(c) Schedules 1 through 5 to the Purchase Agreement shall be deemed
to include Schedules 1A through 5A attached hereto; and
(d) The "Addition Date" shall be the first Business Day following
the close of the Calculation Period that includes January 1997.
SECTION 3. Effectiveness. The amendments provided for by this
Amendment shall become effective upon receipt by Buyer (and receipt of copies
thereof by the Trustee) of the following, in each case in form and substance
satisfactory to the Buyer:
(a) Confirmation from the Rating Agencies to the effect that the
addition of the Receivables of PrintCo as contemplated hereby will not
result in a reduction or withdrawal of any ratings in effect with respect
to any outstanding Investor Certificates;
(b) Counterparts of this Amendment, duly executed by the parties
hereto;
(c) A Seller Assignment Certificate, duly executed by PrintCo;
(d) A Confirmation of Guaranty with respect to PrintCo's
Obligations, duly executed by Big Flower;
(e) A supplement to the Monthly Report as described in Section
3.5(e) of the Pooling Agreement; and
(f) A copy of the UCC-1 financing statement with respect to the
Receivables of PrintCo, naming PrintCo as debtor, Buyer as secured party
and the Trustee as the assignee of the secured party, file-stamped by the
Michigan filing office to evidence the filing thereof.
SECTION 4. Purchase Agreement in Full Force and Effect as Amended.
Except as specifically amended hereby, all of the terms and conditions of the
Purchase Agreement shall remain in full force and effect. All references to the
Purchase Agreement in any other document or instrument shall be deemed to mean
such Purchase Agreement as amended by this Amendment. This Amendment shall not
constitute a novation of the Purchase Agreement, but shall constitute an
amendment thereof. The parties hereto agree to be bound by the terms and
obligations of the Purchase Agreement, as amended by this Amendment, as though
the terms and obligations of the Purchase Agreement were set forth herein.
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<PAGE>
SECTION 5. Counterparts. This Amendment may be executed in any
number of counterparts and by separate parties hereto on separate counterparts,
each of which when executed shall be deemed an original, but all such
counterparts taken together shall constitute one and the same instrument.
SECTION 6. Governing Law. THIS AMENDMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 7. Notices, Etc. Supplementing Section 10.2 (Notices) in the
Purchase Agreement, the address or facsimile number of PrintCo is as set forth
under its name on the signature page hereof.
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed
by their respective officers thereunto duly authorized, as of the date first
above written.
WEBCRAFT CHEMICALS, INC. TREASURE CHEST ADVERTISING
COMPANY, INC.
By: /s/ Mark A. Angelson By: /s/ Mark A. Angelson
-------------------------- ---------------------------
Title: Secretary Title: Secretary
LASER TECH COLOR, INC. WEBCRAFT TECHNOLOGIES, INC.
By: /s/ Mark A. Angelson By: /s/ Mark A. Angelson
-------------------------- ---------------------------
Title: Secretary Title: Secretary
BFP RECEIVABLES CORPORATION PRINTCO., INC.
By: /s/ Rick Frier By: /s/ Mark A. Angelson
-------------------------- ---------------------------
Title: Vice President Title: Secretary
Address: 1321 East Van Deinse Street
BIG FLOWER PRESS Greenville, Michigan 48838
HOLDINGS, INC. Attention: Richard Ellafrits
Telephone: (616) 754-3672
Facsimile: (616) 754-6577
By: /s/ Mark A. Angelson
--------------------------
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<PAGE>
Title: Executive Vice President
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<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 29th day of January, 1997 before me personally came Mark Angelson
to me known, who, being by me duly sworn, did depose and say that he resides at
New York, New York; that he is Secretary of PrintCo., Inc., a Michigan
corporation, the corporation described in and that executed the foregoing
instrument; and that he signed his name thereto by order of the board of
directors of the corporation.
Given under my hand and notarial seal, this 29th day of January, 1997.
/s/ Jeff Bell
-------------------------
Notary Public
Type or
Print Name: Jeff Bell
No. 5066715
My commission expires:
September 30, 1998
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<PAGE>
Exhibit 10.12
================================================================================
BIG FLOWER RECEIVABLES MASTER TRUST
POOLING AND SERVICING AGREEMENT
dated as of March 19, 1996
(as amended as of April 25, 1996, June 10, 1996
and September 24, 1996)
among
BFP RECEIVABLES CORPORATION,
as Transferor,
BIG FLOWER PRESS HOLDINGS, INC.,
as Servicer,
and
MANUFACTURERS AND TRADERS TRUST COMPANY,
as Trustee
================================================================================
<PAGE>
TABLE OF CONTENTS
ARTICLE I DEFINITIONS
SECTION 1.1 Definitions.................................. 1
ARTICLE II CONVEYANCE OF ASSETS
SECTION 2.1 Creation of the Trust; Conveyance of
Certain Assets.............................. 1
SECTION 2.2 Acceptance by Trustee........................ 3
SECTION 2.3 Representations and Warranties of Transferor
Relating to the Transferred Assets.......... 3
SECTION 2.4 No Assumption of Obligations Relating to
Receivables, Related Transferred Assets or
Contracts................................... 5
SECTION 2.5 Conveyance of Purchased Interests............ 5
SECTION 2.6 Reconveyance of Certain Receivables.......... 5
ARTICLE III ADMINISTRATION AND SERVICING
SECTION 3.1 Acceptance of Appointment; Other Matters..... 6
SECTION 3.2 Duties of Servicer and Transferor............ 7
SECTION 3.3 Lockbox, Concentration and Blocked Accounts.. 11
SECTION 3.4 Servicing Compensation....................... 14
SECTION 3.5 Records of Servicer and Reports to be
Prepared by Servicer........................ 15
SECTION 3.6 Monthly Servicer's Certificate............... 17
SECTION 3.7 Servicing Report of Independent Public
Accountants; Forms 10-Q and 10-K............ 17
SECTION 3.8 Rights of Trustee............................ 18
SECTION 3.9 Ongoing Responsibilities of Big Flower....... 20
SECTION 3.10 Further Action Evidencing Transfers......... 21
ARTICLE IV RIGHTS OF CERTIFICATEHOLDERS;
ALLOCATIONS
SECTION 4.1 Rights of Certificateholders................. 21
SECTION 4.2 Establishment of Transaction Accounts........ 22
SECTION 4.3 Trust-Level Calculations and Funds
Allocations................................. 24
SECTION 4.4 Investment of Funds in Transaction Accounts.. 25
SECTION 4.5 Attachment of Transaction Accounts........... 25
<PAGE>
ARTICLE V DISTRIBUTIONS AND REPORTS
ARTICLE VI THE CERTIFICATES
SECTION 6.1 The Certificates............................. 25
SECTION 6.2 Authentication of Certificates............... 26
SECTION 6.3 Registration of Transfer and Exchange of
Certificates................................ 27
SECTION 6.4 Mutilated, Destroyed, Lost or Stolen
Certificates................................ 29
SECTION 6.5 Persons Deemed Owners........................ 30
SECTION 6.6 Appointment of Paying Agent.................. 30
SECTION 6.7 Access to List of Certificateholders' Names
and Addresses............................... 31
SECTION 6.8 Authenticating Agent......................... 32
SECTION 6.9 Tax Treatment................................ 33
SECTION 6.10 Issuance of Additional Series of
Certificates and Sales of Purchased
Interests.................................. 33
SECTION 6.11 Book-Entry Certificates..................... 38
SECTION 6.12 Notices to Clearing Agency.................. 43
SECTION 6.13 Definitive Certificates..................... 43
SECTION 6.14 Letter of Representations................... 44
ARTICLE VII TRANSFEROR
SECTION 7.1 Representations and Warranties of Transferor
Relating to Transferor and the Transaction
Documents................................... 44
SECTION 7.2 Covenants of Transferor...................... 47
SECTION 7.3 Indemnification by Transferor................ 55
ARTICLE VIII SERVICER
SECTION 8.1 Representations and Warranties of Servicer... 56
SECTION 8.2 Covenants of Servicer........................ 59
SECTION 8.3 Merger or Consolidation of, or Assumption
of the Obligations of, Servicer............. 59
SECTION 8.4 Indemnification by Servicer.................. 60
SECTION 8.5 Servicer Liability........................... 61
SECTION 8.6 Limitation on Liability of Servicer and
Others...................................... 61
ARTICLE IX EARLY AMORTIZATION EVENTS;
TERMINATION BY SELLERS
SECTION 9.1 Early Amortization Events.................... 62
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<PAGE>
SECTION 9.2 Remedies..................................... 62
SECTION 9.3 Additional Rights Upon the Occurrence of
Certain Events.............................. 62
SECTION 9.4 Termination By Sellers....................... 64
ARTICLE X SERVICER DEFAULTS
SECTION 10.1 Servicer Defaults........................... 64
SECTION 10.2 Trustee to Act; Appointment of Successor.... 66
SECTION 10.3 Notification of Servicer Default;
Notification of Appointment of Successor
Servicer................................... 68
ARTICLE XI TRUSTEE
SECTION 11.1 Duties of Trustee........................... 69
SECTION 11.2 Certain Matters Affecting Trustee........... 72
SECTION 11.3 Limitation on Liability of Trustee.......... 74
SECTION 11.4 Trustee May Deal with Other Parties......... 75
SECTION 11.5 Servicer To Pay Trustee's Fees and Expenses. 76
SECTION 11.6 Eligibility Requirements for Trustee........ 76
SECTION 11.7 Resignation or Removal of Trustee........... 77
SECTION 11.8 Successor Trustee........................... 78
SECTION 11.9 Merger or Consolidation of Trustee.......... 78
SECTION 11.10 Appointment of Co-Trustee or Separate
Trustee.................................... 79
SECTION 11.11 Tax Returns................................ 80
SECTION 11.12 Trustee May Enforce Claims Without
Possession of Certificates................ 80
SECTION 11.13 Suits for Enforcement...................... 81
SECTION 11.14 Rights of Transferor To Direct Trustee..... 81
SECTION 11.15 Representations and Warranties of Trustee.. 82
SECTION 11.16 Maintenance of Office or Agency............ 83
ARTICLE XII TERMINATION
SECTION 12.1 Termination of Trust........................ 83
SECTION 12.2 Final Distribution.......................... 84
SECTION 12.3 Rights Upon Termination of the Trust........ 85
SECTION 12.4 Optional Repurchase of Investor Interests... 85
ARTICLE XIII MISCELLANEOUS PROVISIONS
SECTION 13.1 Amendment, Waiver, Etc...................... 86
SECTION 13.2 Actions by Certificateholders and
Purchasers................................. 89
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<PAGE>
SECTION 13.3 Limitation on Rights of Certificateholders.. 90
SECTION 13.4 Limitation on Rights of Purchasers.......... 91
SECTION 13.5 Governing Law............................... 92
SECTION 13.6 Notices..................................... 92
SECTION 13.7 Severability of Provisions.................. 93
SECTION 13.8 Certificates Nonassessable and Fully Paid... 93
SECTION 13.9 Nonpetition Covenant........................ 93
SECTION 13.10 No Waiver; Cumulative Remedies............. 94
SECTION 13.11 Counterparts............................... 94
SECTION 13.12 Third-Party Beneficiaries.................. 94
SECTION 13.13 Integration................................ 95
SECTION 13.14 Binding Effect; Assignability; Survival of
Provisions................................ 95
SECTION 13.15 Recourse to Transferor..................... 95
SECTION 13.16 Recourse to Transferred Assets............. 95
SECTION 13.17 Submission to Jurisdiction................. 96
SECTION 13.18 Waiver of Jury Trial....................... 96
SECTION 13.19 Certain Partial Releases................... 96
-iv-
<PAGE>
EXHIBITS
EXHIBIT A-1 Form of Lockbox Account Letter Agreement
EXHIBIT A-2 Form of Blocked Account Letter Agreement
EXHIBIT B Form of Concentration Account Letter Agreement
EXHIBIT C Form of Monthly Servicer's Certificate
EXHIBIT D Annual Agreed-Upon Procedures
EXHIBIT E Form of Transferor Certificate
EXHIBIT F Form of Certificate to be Given by Certificate Owner
EXHIBIT G Form of Certificate to be Given by Euroclear or Cedel
EXHIBIT H Form of Certificate to be Given by Transferee of
Beneficial Interest in a Regulation S Temporary
Book-Entry Certificate
EXHIBIT I Form of Transfer Certificate for Exchange or
Transfer from 144A Book-Entry Certificate to
Regulation S Book-Entry Certificate
EXHIBIT J Form of Placement Agent Exchange Instructions
EXHIBIT K Form of Annual Servicer Certificate
EXHIBIT L Form of Quitclaim Bill of Sale
SCHEDULES
SCHEDULE 1 Account Banks - Lockbox Banks/Blocked Account
Banks/Concentration Banks
APPENDIX
APPENDIX A Definitions
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<PAGE>
This POOLING AND SERVICING AGREEMENT, dated as of March 19, 1996 (this
"Agreement"), is made among BFP RECEIVABLES CORPORATION, a Delaware corporation
("Transferor"), BIG FLOWER PRESS HOLDINGS, INC., a Delaware corporation ("Big
Flower"), and MANUFACTURERS AND TRADERS TRUST COMPANY, a New York banking
corporation, as Trustee.
ARTICLE I DEFINITIONS
SECTION I.1 Definitions. Capitalized terms used in this Agreement have the
meanings that Appendix A assigns to them, and this Agreement shall be
interpreted in accordance with Part B of Appendix A.
ARTICLE II CONVEYANCE OF ASSETS
SECTION II.1 Creation of the Trust; Conveyance of Certain Assets. (a)
Transferor hereby transfers, assigns, sets over, grants and otherwise conveys to
Trustee, in its capacity as representative of the Certificateholders and the
Purchasers, without recourse (except as expressly provided herein), all of its
right, title and interest in, to and under, (i) all Receivables that have been
or are hereafter transferred (whether by sale or contribution) by the Sellers to
Transferor, (ii) all Related Assets, (iii) all of Transferor's rights under the
Seller Transaction Documents (the property described in clauses (ii) and (iii)
being called the "Related Transferred Assets"), (iv) all funds from time to time
on deposit in each of the Transaction Accounts (including funds deposited in a
Transaction Account in connection with the issuance of any prefunded Series) and
all funds from time to time on deposit in each of the Bank Accounts, whether or
not representing Collections on, or other proceeds of, the foregoing and, in
each case, all certificates and instruments, if any, from time to time
evidencing such funds, all investments made with such funds, all claims
thereunder or in connection therewith and all interest, dividends, monies,
instruments, securities and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
of the foregoing, (v) any Enhancement obtained for the benefit of any Series or
Purchased Interest and (vi) all moneys due or to become due and all amounts
received or receivable with respect to any of the foregoing and all proceeds of
the foregoing. Such property, whether now existing or hereafter acquired, shall
constitute the assets of the Trust (collectively, the "Transferred Assets"). The
foregoing transfer, assignment, setover, grant and conveyance to the Trust shall
be made to Trustee, on behalf of the Trust, and each reference in this Agreement
to such transfer, assignment, setover and conveyance shall be construed
accordingly.
<PAGE>
(b) In connection with the transfer described in subsection (a),
Transferor and Servicer shall record and file or cause to be recorded and filed,
as an expense of Servicer paid out of the Servicing Fee, financing statements
with respect to the Transferred Assets meeting the requirements of applicable
state law in such manner and in such jurisdictions as are necessary to perfect
the transfer and assignment of the Transferred Assets to the Trust. In
connection with the transfer described in subsection (a), Transferor and
Servicer further agree to deliver to Trustee each Transferred Asset (including
any original documents or instruments included in the Transferred Assets as are
necessary to effect such transfer) in which the transfer of an interest is
perfected under the UCC or otherwise by possession. Transferor or Servicer shall
deliver each such Transferred Asset to Trustee, as an expense of Servicer paid
out of the Servicing Fee, immediately upon the transfer of any such Transferred
Asset to Trustee pursuant to subsection (a).
(c) In connection with the transfer described above in subsection (a),
Servicer shall, on behalf of Transferor, as an expense of Servicer paid out of
the Servicing Fee, on or prior to the First Issuance Date, mark the master data
processing records evidencing the Receivables with the following legend:
"THE RECEIVABLES DESCRIBED HEREIN HAVE BEEN SOLD TO BFP RECEIVABLES
CORPORATION ("BFP") PURSUANT TO A RECEIVABLES PURCHASE AGREEMENT, DATED AS
OF MARCH 19, 1996, AMONG TREASURE CHEST ADVERTISING COMPANY, INC., CERTAIN
OTHER SUBSIDIARIES OF BIG FLOWER PRESS HOLDINGS, INC. ("BIG FLOWER"), AS
SELLERS, BIG FLOWER, AS SERVICER, AND BFP, AS BUYER; AND SUCH RECEIVABLES
HAVE BEEN TRANSFERRED TO THE BIG FLOWER RECEIVABLES MASTER TRUST PURSUANT
TO A POOLING AND SERVICING AGREEMENT, DATED AS OF MARCH 19, 1996, AMONG
BFP, AS TRANSFEROR, BIG FLOWER, AS SERVICER, AND MANUFACTURERS AND TRADERS
TRUST COMPANY, AS TRUSTEE."
(d) Upon the request of Transferor, Trustee will cause Certificates in
authorized denominations evidencing the entire interest in the Trust to be duly
authenticated and delivered to or upon the order of Transferor pursuant to
Section 6.2. Pursuant to the Transferor Certificate, Transferor shall be
entitled to receive current and deferred transfer payments at the times and in
the amounts specified in the various Supplements and PI Agreements executed from
time to time.
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<PAGE>
(e) If the transfer, assignment, set-over, grant and conveyance described
in subsection (a) of this Section 2.1 are deemed to create a security interest
in the property described in that Section, Transferor hereby grants to the
Trustee, for the benefit of the Trustee, the Certificateholders and the
Purchasers, a security interest in that property (which shall be deemed to be a
first perfected security interest and shall secure Transferor's obligations
under the Transaction Documents, the Certificates and the Purchased Interests),
and agrees that this Agreement shall constitute a security agreement under
applicable law.
SECTION II.2 Acceptance by Trustee. Trustee hereby acknowledges its
acceptance on behalf of the Trust of all right, title and interest to the
Transferred Assets and declares that it shall maintain such right, title and
interest, upon the trust herein set forth, for the benefit of all
Certificateholders and Purchasers, on the terms and subject to the conditions
hereinafter set forth.
SECTION II.3 Representations and Warranties of Transferor Relating to the
Transferred Assets.
(a) Representations and Warranties. At the time that any Receivable or
Related Asset is transferred by Transferor to the Trust, Transferor hereby
represents and warrants that:
(i) Quality of Title. (A) Immediately before each transfer to be
made by Transferor hereunder, each Receivable and Related Transferred
Asset that was then to be transferred to the Trust hereunder was owned by
Transferor free and clear of any Adverse Claim (other than any Permitted
Adverse Claim or any Special New Jersey EPA Claim); and, within two
Business Days after the First Issuance Date, Transferor and Servicer made,
or caused to be made, all filings and took all other action under
applicable law in each relevant jurisdiction in order to protect and
perfect the Trust's interest in such Receivables, such Related Transferred
Assets and the funds in the Transaction Accounts against all creditors of,
and purchasers from, Transferor and the Sellers.
(B) Each transfer of Receivables and other Transferred Assets by
Transferor to the Trust pursuant to this Agreement constitutes a valid
transfer and assignment to the Trust of all right, title and interest of
Transferor in the Receivables and the Related Transferred Assets, free and
clear of any Adverse Claim (other than any Permitted Adverse Claim or any
Special New Jersey EPA Claim), and constitutes either an absolute transfer
of such property to the Trust or a grant of a first
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<PAGE>
priority perfected security interest in such property to the Trust.
Whenever the Trust accepts a transfer of a Receivable or a Related
Transferred Asset hereunder, it shall have acquired a valid and perfected
first priority interest in such Receivable or Related Transferred Asset
free and clear of any Adverse Claim (other than any Permitted Adverse
Claim or any Special New Jersey EPA Claim).
(C) No effective financing statement or other instrument similar in
effect that covers all or part of any Transferred Asset or any interest in
any proceeds thereof is on file in any recording office except financing
statements as to which termination statements or releases are filed within
three Business Days after the First Issuance Date and except filings
relating to any Permitted Adverse Claim or any Special New Jersey EPA
Claim.
(D) No acquisition of any Receivable or Related Transferred Asset
by Transferor or the Trust constitutes a fraudulent transfer or fraudulent
conveyance under the United States Bankruptcy Code or applicable state
bankruptcy or insolvency laws or is otherwise void or voidable or subject
to subordination under similar laws or principles or for any other reason.
(ii) Governmental Approvals. With respect to each Receivable and
Related Transferred Asset, all consents, licenses, approvals or
authorizations of, or notices to or registrations, declarations or filings
with, any Governmental Authority required to be obtained, effected or made
by the Sellers, Servicer or Transferor in connection with the conveyance
of the Receivable and Related Transferred Asset by the Sellers to
Transferor, or by Transferor to the Trust, have been duly obtained,
effected or given and are in full force and effect.
(iii) Eligible Receivables. (A) On the date on which the applicable
Seller transfers a Receivable to Transferor, and Transferor transfers such
Receivable to the Trust, unless otherwise identified by Servicer in the
Daily Report for such date, such Receivable is an Eligible Receivable, and
(B) on the date of each Daily Report or Monthly Report that identifies a
Receivable as an Eligible Receivable, such Receivable is an Eligible
Receivable.
(b) Notice of Breach. The representations and warranties set forth in
subsection (a) shall survive the transfer of the Receivables and the Related
Transferred Assets to the Trust. Upon discovery by Transferor, Servicer or
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<PAGE>
Trustee of a breach of any of the representations and warranties set forth in
subsection (a), the party discovering the breach shall give written notice to
the others within four Business Days following the discovery; provided, however,
that if such breach arises from a Seller's failure to perform its obligations
under the Purchase Agreement and such failure is of the type that may be cured
by settlement of a Seller Non-Complying Receivables Adjustment or Seller
Dilution Adjustment under Sections 3.1 and 3.5 of the Purchase Agreement, and
such settlement shall have (in fact) been made, then no breach shall be deemed
to have occurred under this Agreement. Trustee's obligations in respect of
discovering any breach are limited as provided in Section 11.2(g).
SECTION II.4 No Assumption of Obligations Relating to Receivables, Related
Transferred Assets or Contracts. The transfer, assignment, set over, grant and
conveyance described in Section 2.1 does not constitute and is not intended to
result in a creation or an assumption by the Trust, Trustee or any Investor
Certificateholder of any obligation of Servicer, Transferor, the applicable
Seller or any other Person in connection with the Receivables or the Related
Transferred Assets or under the related Contracts or any other agreement or
instrument relating thereto. None of Trustee, the Trust or any Investor
Certificateholder shall have any obligation or liability to any Obligor.
SECTION II.5 Conveyance of Purchased Interests. Pursuant to the terms of a
PI Agreement, Trustee, on behalf of the Trust, from time to time may sell,
transfer, assign, set over and otherwise convey Purchased Interests to a
Purchaser or an Agent for the account of a Purchaser; and Trustee, on behalf of
the Trust, is authorized and directed (subject to the applicable terms of
Section 6.10), upon the written request of Transferor, to enter into one or more
PI Agreements in the form annexed to each such written request. Pursuant to a PI
Agreement, Collections allocated to Purchased Interests may be reinvested and
such Purchased Interests may be recomputed, each from time to time as provided
therein.
SECTION II.6 Reconveyance of Certain Receivables. (a) The Transferor may,
upon five Business Days written notice ("Reconveyance Notice") direct the
Trustee to convey to the applicable Seller certain of the Receivables sold to
Transferor by such Seller ("Reconveyance Receivables"); provided that on the
date of the Reconveyance Notice (i) the Receivables specified therein shall be
Seller Noncomplying Receivables, and shall have been Seller Noncomplying
Receivables on the date initially transferred pursuant to the Purchase
Agreement, (ii) any Seller Noncomplying Receivables Adjustment required to be
made in respect of such Receivables pursuant to Section 3.5(a) of the Purchase
Agreement shall have been made, and (iii) no Early Amortization
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<PAGE>
Event or Unmatured Early Amortization Event shall be in effect; and provided,
further that on the date of conveyance by the Trustee to the applicable Seller
of any Reconveyance Receivables, (x) such Reconveyance Receivables are sold by
such Seller to a Person other than Transferor or any Big Flower Person and (y)
the Obligors of such Receivables shall have been instructed to make all payments
in respect of their receivables to a location other than to any of the Bank
Accounts.
(b) Any Reconveyance Notice shall specify the consideration to be paid to
the Trust by the applicable Seller in respect of the Reconveyance Receivables,
which shall be equal to (i) the difference between (A) the Purchase Price paid
by Transferor to the Seller for such Receivables and (B) any Collections
received in respect of such Receivables, in the case of Reconveyance Receivables
which were Seller Noncomplying Receivables on the date such Receivables were
sold to Transferor and (ii) the difference between (C) the Purchase Price for
such Receivables, (D) and the sum of the Seller Noncomplying Receivables
Adjustment paid in respect of such Receivables and any Collections received in
respect of such Receivables, in the case of Receivables which were reported as
Eligible Receivables on the date they were sold to Transferor, but which
subsequently were determined to have been Seller Noncomplying Receivables on
such date.
(c) Upon receipt of such notice the Trustee shall execute and deliver to
the applicable Seller a Quitclaim Bill of Sale in the form attached hereto as
Exhibit L.
(d) The Trustee shall deposit the consideration specified in the
Reconveyance Notice into the Master Collection Account upon receipt thereof.
ARTICLE III ADMINISTRATION AND SERVICING
SECTION III.1 Acceptance of Appointment; Other Matters.
(a) Designation of Servicer. The servicing, administering and collection
of the Receivables and the Related Transferred Assets shall be conducted by the
Person designated as Servicer hereunder from time to time in accordance with
this section. Until Transferor gives a Termination Notice to Big Flower pursuant
to Section 10.1, Big Flower is designated (and agrees to act) as Servicer.
(b) Delegation of Certain Servicing Activities. In the ordinary course of
business, Servicer may at any time delegate its duties hereunder with respect to
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<PAGE>
the Receivables and the Related Transferred Assets to any Person. Each Person to
whom any such duties are delegated in accordance with this Section is called a
"Sub-Servicer". Notwithstanding any such delegation, Servicer shall remain
liable for the performance of all duties and obligations of Servicer pursuant to
the terms of this Agreement and the other Transaction Documents. The fees and
expenses of any Sub-Servicers shall be as agreed between Servicer and the
Sub-Servicers from time to time and none of the Trust, Trustee or the
Certificateholders shall have any responsibility therefor. Upon any termination
of a Servicer pursuant to Section 10.1, all Sub-Servicers designated pursuant to
this subsection by such Servicer shall automatically also be terminated.
(c) Termination. (i) The designation of Servicer (and each Sub-Servicer)
under this Agreement shall automatically terminate upon termination of the Trust
pursuant to Section 12.1.
(ii) Provided that no Servicer Default or Early Amortization Event shall
have occurred which is continuing, Transferor (with the prior written consent of
the Required Series Holders for each outstanding Series) may terminate all of
the rights and obligations of Servicer as servicer hereunder. No termination of
any Person acting as Servicer pursuant to this clause (ii) above shall become
effective until the Trustee or another Successor Servicer shall have assumed the
responsibilities and obligations of Servicer in accordance with Section 10.2.
Trustee shall give prompt notice to the Rating Agencies of the appointment of
any Successor Servicer.
(d) Resignation of Servicer. Big Flower shall not resign as Servicer
unless it determines that (i) the performance of its duties is no longer
permissible under applicable law and (ii) there is no reasonable action that it
could take to make the performance of its duties permissible under applicable
law. If Big Flower determines that it must resign for the reasons stated above,
it shall, prior to the tendering of its resignation, deliver to Trustee an
Opinion of Counsel confirming the satisfaction of the conditions set forth in
clause (i) of the preceding sentence. No resignation by Big Flower shall become
effective until Trustee or another Successor Servicer shall have assumed the
responsibilities and obligations of Servicer in accordance with Section 10.2.
Trustee shall give prompt notice to the Rating Agencies of the appointment of
any Successor Servicer.
SECTION III.2 Duties of Servicer and Transferor.
(a) Duties of Servicer in General. Servicer shall service the Receivables
and the Related Transferred Assets and, subject to the terms and provisions of
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this Agreement, shall have full power and authority, acting alone or through any
Sub-Servicer, to do any and all things in connection with such servicing that it
may deem necessary or appropriate. Trustee shall execute and deliver to Servicer
any powers of attorney or other instruments or documents that are prepared by
Servicer and stated in an Officer's Certificate to be, and shall furnish
Servicer with any documents in its possession, necessary or appropriate to
enable Servicer to carry out its servicing duties. Servicer shall exercise the
same care and apply the same policies with respect to the collection and
servicing of the Receivables and the Related Transferred Assets that it would
exercise and apply if it owned such Receivables and the Related Transferred
Assets, all in substantial compliance with applicable law and in accordance with
the Credit and Collection Policy.
Servicer shall take or cause to be taken (and shall cause each
Sub-Servicer (if any) to take or cause to be taken) all such actions as Servicer
deems necessary or appropriate to collect each Receivable and Related
Transferred Asset, all in accordance with applicable law and the Credit and
Collection Policy.
Without limiting the generality of the foregoing and subject to the next
preceding paragraph and Section 10.1, Servicer or its designee is hereby
authorized and empowered, unless such power and authority is revoked by Trustee
on account of the occurrence of a Servicer Default, (i) to instruct Trustee to
make withdrawals and payments from the Transaction Accounts as set forth in this
Agreement, (ii) to execute and deliver, on behalf of the Trust for the benefit
of the Certificateholders and Purchasers, any and all instruments of
satisfaction or cancellation, or of partial or full release or discharge, and
all other comparable instruments, with respect to the Receivables and the
Related Transferred Assets, (iii) to make any filings, reports, notices,
applications and registrations with, and to seek any consents or authorizations
from, the Securities and Exchange Commission and any state securities authority
on behalf of the Trust as may be necessary or appropriate to comply with any
federal or state securities laws or reporting requirements or other laws or
regulations, and (iv) to the extent permitted under and in compliance with the
Credit and Collection Policy and with all applicable laws, rules, regulations,
judgments, orders and decrees of courts and other governmental authorities
(whether federal, state, local or foreign) and all other tribunals, to commence
or settle collection proceedings with respect to the Receivables and otherwise
to enforce the rights and interests of the Trust and the Certificateholders and
Purchasers in, to and under the Receivables or Related Transferred Assets (as
applicable).
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(b) Identification and Transfer of Collections. Servicer shall cause
Collections and all other Transferred Assets that consist of cash or cash
equivalents to be deposited into the Bank Accounts and the Transaction Accounts
pursuant to the terms and provisions of Section 3.3 and Article IV. Following
notification from any Seller to Servicer or discovery by Servicer that any
amounts that are not Collections of a Receivable or a Related Transferred Asset
have been deposited into a Bank Account or the Master Collection Account,
Servicer shall cause all such amounts to be segregated, apart and in different
accounts, from the Bank Accounts and the Transaction Accounts. Servicer and, to
the extent applicable, Trustee shall hold all such funds in trust, separate and
apart from such Person's other funds. On each Business Day, after such
misapplied collections have been reasonably identified by Servicer to Trustee,
Servicer shall instruct Trustee to, and Trustee shall, turn over to the
appropriate Lockbox Bank, applicable Seller or other applicable Big Flower
Person (or their designees) all such misapplied collections less all reasonable
and appropriate out-of-pocket costs and expenses, if any, incurred by Servicer
in collecting such receivables.
All payments made by an Obligor that is obligated to make payments with
respect to both Receivables included in the Transferred Assets and Receivables
not included in the Transferred Assets shall be applied against the Receivables,
if any, that are designated by such Obligor by reference to the applicable
invoice as the Receivables with respect to which such payments should be
applied. In the absence of such designation, such payments shall be applied
first against the oldest outstanding Receivables owed by such Obligor.
Following notification from a Lockbox Bank that any item has been returned
or is uncollected and that such Lockbox Bank has not been otherwise reimbursed
pursuant to the terms of the applicable Lockbox Agreement for any amounts it
credited to the relevant Lockbox Account (and then transferred to the Master
Collection Account), Servicer shall instruct Trustee to, and Trustee shall, turn
over to such Lockbox Bank Collections in such amount from Collections on deposit
in the Master Collection Account.
(c) Modification of Receivables, Etc. So long as no Servicer Default shall
have occurred and be continuing, Servicer may adjust, and may permit each
Sub-Servicer to adjust, in accordance with Section 3.2(a) and the Credit and
Collection Policy, the Unpaid Balance of any Receivable, or otherwise modify the
terms of any Receivable or amend, modify or waive any term or condition of any
Contract related thereto, all as it may determine to be appropriate to maximize
collection thereof. Servicer shall, or shall cause the applicable Sub-Servicer
to, write off Receivables from time to time in
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accordance with the Credit and Collection Policy.
(d) Documents and Records. At any time when Big Flower is not Servicer,
Transferor, to the extent that it is entitled to do so under the Purchase
Agreement, shall, upon the request of the then-acting Servicer, cause the
applicable Seller to deliver to Servicer, and Servicer shall hold in trust for
Transferor and Trustee in accordance with their respective interests, all
Records that evidence or relate to the Receivables and Related Transferred
Assets of the applicable Seller.
(e) Certain Duties to the Sellers. Servicer, if other than Big Flower,
shall, as soon as practicable after a demand by any Seller, deliver to the
Seller all documents, instruments and records in its possession that evidence or
relate to accounts receivable of the Seller or other Big Flower Persons that are
not Receivables or Related Transferred Assets, and copies of all documents,
instruments and records in its possession that evidence or relate to Receivables
and Related Transferred Assets.
(f) Identification of Eligible Receivables. The initial Servicer will (i)
establish and maintain such procedures as are necessary for determining no less
frequently than each Business Day whether each Receivable qualifies as an
Eligible Receivable, and for identifying, on any Business Day, all Receivables
that are not Eligible Receivables, and (ii) include in each Daily Report
information that shows whether, and to what extent, the Receivables described in
such Daily Report are Eligible Receivables.
(g) Authorization to Act as Transferor's Agent. Without limiting the
generality of subsection (a), Transferor hereby appoints Servicer as its agent
for the following purposes: (i) specifying accounts to which payments are to be
made to Transferor, (ii) making transfers among, and deposits to and withdrawals
from, all deposit accounts of Transferor for the purposes described in the
Transaction Documents, and (iii) arranging payment by Transferor of all fees,
expenses and other amounts payable by Transferor pursuant to the Transaction
Documents. Transferor irrevocably agrees that (A) it shall be bound by all
actions taken by Servicer pursuant to the preceding sentence, and (B) Trustee
and the banks holding all deposit accounts of Transferor are entitled to accept
submissions, determinations, selections, specifications, transfers, deposits and
withdrawal requests, and payments from Servicer on behalf of Transferor.
(h) Grant of Power of Attorney. Transferor and Trustee hereby each grant
to Servicer a power of attorney, with full power of substitution, to take in
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the name of Transferor and Trustee all steps that are necessary or appropriate
to endorse, negotiate, deposit or otherwise realize on any writing of any kind
held or transmitted by Transferor or transmitted or received by Trustee (whether
or not from Transferor) in connection with any Receivable or Related Transferred
Asset. The power of attorney that Transferor and Trustee have granted to
Servicer may be revoked by Trustee, and shall be revoked by Transferor, on the
date on which Trustee shall be entitled to exercise the powers granted to
Trustee pursuant to Section 3.8(b). In exercising its power granted hereby,
Servicer shall take directions from Trustee, if any, arising out of the exercise
of the rights granted under Section 11.14.
(i) Turnover of Collections. If Servicer, Transferor or any of their
respective agents or representatives shall at any time receive any cash, checks
or other instruments constituting Collections, such recipient shall segregate
such payments and hold such payments in trust for Trustee and shall, promptly
upon receipt (and in any event within two Business Days following receipt),
remit all such cash, checks and instruments, duly endorsed or with duly executed
instruments of transfer, to a Bank Account or the Master Collection Account.
(j) Annual Statement as to Compliance. Servicer will deliver to Trustee
and each Rating Agency on or before March 31 of each year, beginning with March
31, 1997 an Officer's Certificate, in substantially the form of Exhibit K,
stating, as to each signer thereof, that (i) a review of the activities of the
Servicer during the preceding calendar year and of performance under this
Agreement has been made under such officer's supervision and (ii) to the best of
such officer's knowledge, based on such review, the Servicer has fulfilled all
its obligations under this Agreement throughout such year, or, if there has been
a default in the fulfillment of any such obligation, specifying each such
default known to such officer and the nature and status thereof and remedies
therefor being pursued.
SECTION III.3 Lockbox, Concentration and Blocked Accounts. (a) Each
Lockbox Account shall be subject to a Lockbox Agreement substantially in the
form of Exhibit A-1, and each Blocked Account shall be subject to a Blocked
Account Agreement substantially in the form of Exhibit A-2. Unless instructed
otherwise by Servicer (or, after the occurrence and continuance of an Early
Amortization Event, Trustee), each Lockbox Bank and Blocked Account Bank shall
be instructed by Servicer to remit, on a daily basis (but subject to such bank's
customary funds availability schedule), all amounts deposited in the Lockbox
Accounts or Blocked Accounts maintained with it to a Concentration Account or
the Master Collection Account. Any Concentration Account shall be maintained in
the name of Trustee on behalf of the Trust pursuant to a
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Concentration Account Agreement substantially in the form of Exhibit B. Except
as provided in this Agreement and the applicable Account Agreements, none of any
Seller, Transferor, Servicer, or any Person claiming by, through or under any
Seller, Transferor or Servicer shall have any control over the use of, or any
right to withdraw any item or amount from, any Lockbox Account, Blocked Account
or Concentration Account. Servicer and Trustee are each hereby irrevocably
authorized and empowered, as Transferor's attorney-in-fact, to endorse any item
deposited in a lockbox or presented for deposit in any Lockbox Account, Blocked
Account or Concentration Account requiring the endorsement of Transferor, which
authorization is coupled with an interest and is irrevocable. Each Lockbox
Account, Blocked Account and Concentration Account shall be an Eligible Deposit
Account.
(b) Servicer shall instruct (or shall cause the applicable Seller to
instruct) all Obligors to make all payments due to Transferor or the applicable
Seller relating to or constituting Collections (or any proceeds thereof) (i) to
lockboxes maintained at the Lockbox Banks for deposit in a Lockbox Account or a
Concentration Account or (ii) directly to a Lockbox Account. Notwithstanding the
foregoing, at any time when a Big Flower Person is acting as Servicer, Webcraft
Technologies, Inc. and Webcraft Chemicals, Inc. need not direct Obligors in
respect of Direct Pay Receivables to make payments to a Lockbox Account or a
Concentration Account if the following conditions are satisfied: (x) on each
Business Day each of Webcraft Technologies, Inc. and Webcraft Chemicals, Inc.
shall deposit all checks, money orders and other items delivered in respect of
such Direct Pay Receivables on the day such items are received (or if such day
is not a Business Day, on the next Business Day) in a Lockbox Account or a
Blocked Account that contains no funds other than Collections; and prior to such
deposit, each of Webcraft Technologies, Inc. and Webcraft Chemicals, Inc. shall
hold such items in trust for the benefit of the Trustee in the form received;
(y) each such Lockbox Account Bank or Blocked Account Bank shall have executed
and delivered a Lockbox Account Agreement or Blocked Account Agreement to the
Trustee; and (z) all available funds in each such Lockbox Account and Blocked
Account shall be transferred (by wire transfer or other means reasonably
acceptable to the Trustee) on each Business Day to either a Concentration
Account or the Master Collection Account. If Transferor or the applicable Seller
receives any Collections or any other payment of proceeds of any other Related
Transferred Asset (other than Direct Pay Receivables), Servicer shall cause such
recipient to (x) segregate such payment and hold it in trust for the benefit of
Trustee, and (y) as soon as practicable, but no later than the second Business
Day following receipt of such item by such Person, deposit such payment in a
Bank Account or the Master Collection Account. Servicer shall, and shall cause
Transferor and the
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applicable Seller to, use reasonable efforts to prevent the deposit of any
amounts other than Collections in any Bank Account.
(c)(i) Servicer may, from time to time after the First Issuance Date,
designate a new account as a Lockbox Account, Blocked Account or a Concentration
Account, and such account shall become a Lockbox Account, Blocked Account or
Concentration Account (and the bank at which such account is maintained shall
become a Lockbox Bank, Blocked Account Bank or a Concentration Account Bank for
purposes of this Agreement); provided that Trustee shall have received not less
than 15 Business Days' (or such shorter number of days as is acceptable to
Trustee) prior written notice of the account and/or the bank that are proposed
to be added as a Bank Account or an Account Bank (as applicable) and, not less
than ten Business Days (or such shorter number of days as is acceptable to
Trustee) prior to the effective date of any such proposed addition, Trustee
shall have received (x) counterparts of a Lockbox Agreement, Blocked Account
Agreement or a Concentration Account Agreement, as applicable, with each new
Account Bank, duly executed by such new Account Bank and all other parties
thereto and (y) copies of all other agreements and documents signed by the new
Account Bank or such other parties with respect to any new Lockbox Account,
Blocked Account or Concentration Account, as applicable.
(ii) Servicer may, from time to time after the First Issuance Date,
terminate an account as a Lockbox Account, Blocked Account or a Concentration
Account or a bank as an Account Bank; provided that (x) no such termination
shall occur unless Trustee shall have received not less than ten Business Days'
(or such shorter number of days as is acceptable to Trustee) prior written
notice of the account and/or the bank that are proposed to be terminated as a
Bank Account or an Account Bank (as applicable) and, not less than ten Business
Days (or such shorter number of days as is acceptable to Trustee) prior to the
effective date of any such proposed termination, Trustee shall have received
counterparts of an agreement, duly executed by the applicable Account Bank and
reasonably satisfactory in form and substance to Trustee, pursuant to which such
Account Bank agrees that, if it receives any funds or items that constitute
Collections on or after the effective date of the termination of the applicable
Bank Account or the effective date of its termination as an Account Bank (as the
case may be), such Account Bank or former Account Bank (as applicable) shall
cause such funds and items to be delivered in the form received to another
lockbox or transferred to another Lockbox Account, Blocked Account,
Concentration Account or the Master Collection Account promptly after such
Account Bank or former Account Bank (as applicable) discovers that it has
received any such funds or items, and (y)
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notwithstanding clause (x), Transferor and Servicer may at any time establish
alternative collection procedures that do not require the use of Lockbox
Accounts or Blocked Accounts with the consent of each Agent and any Enhancement
Provider and upon satisfaction of the Modification Condition.
(d) Servicer shall instruct each Concentration Account Bank (if any), to
transfer on a daily basis (subject to such Concentration Account Bank's
customary funds availability schedule) in same day funds to the Master
Collection Account all collected funds on deposit in the Concentration Account
maintained with such Concentration Account Bank. All such transfers shall be
made in accordance with the relevant Concentration Account Agreement.
SECTION III.4 Servicing Compensation. As full compensation for its
servicing activities hereunder and under any Supplement or PI Agreement, and as
reimbursement for any expense incurred by it in connection therewith, Servicer
shall be entitled to receive a monthly servicing fee (the "Servicing Fee") in
respect of each Series and Purchased Interest, payable in arrears on each
Distribution Date in respect of each Distribution Period (or portion thereof)
during which that Series or Purchased Interest is outstanding. The Servicing Fee
in respect of any Series or Purchased Interest shall be payable solely as
provided in the related Supplement or PI Agreement.
Unless otherwise provided in the applicable Supplement or PI Agreement,
the Servicing Fee payable with respect to any Series or Purchased Interest shall
be calculated as follows. At any time when Big Flower or any of its Affiliates
is Servicer, the Servicing Fee for any Distribution Period shall be equal to
one-twelfth of the product of (a) 2%, multiplied by (b) the aggregate Unpaid
Balance of the Receivables as measured on the first Business Day of that
Distribution Period, multiplied by (c) the applicable Series Collection
Allocation Percentage. If Big Flower ceases to be Servicer, the Servicing Fee
for a Successor Servicer that is not a Big Flower Person shall be an amount
equal to the greater of (i) the amount calculated pursuant to the preceding
sentence and (ii) an alternative amount specified by such Servicer not exceeding
the sum of (x) 110% of the aggregate reasonable costs and expenses incurred by
such Servicer during such Distribution Period in connection with the performance
of its obligations under this Agreement and the other Transaction Documents, and
(y) the other costs and expenses that are to be paid out of the Servicing Fee,
as described in the next sentence; provided that the amount provided for in
clause (x) shall not exceed one-twelfth of 2% of the aggregate Unpaid Balance of
the Receivables as measured on the first Business Day of the Distribution
Period. The fees, costs and expenses of Trustee, the Paying Agent, any
authenticating agent, the Lockbox Banks, the Concentration Account Banks and the
Transfer
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Agent and Registrar, and certain other costs and expenses payable from the
Servicing Fee pursuant to other provisions of this Agreement, and all other fees
and expenses that are not expressly stated in this Agreement, any Series
Supplement or any PI Agreement to be payable by the Trust or Transferor, other
than Federal, state, local and foreign income and franchise taxes, if any, or
any interest or penalties with respect thereto, of the Trust, shall be paid out
of the Servicing Fee and shall be paid by Servicer from the funds that
constitute the Servicing Fee.
SECTION III.5 Records of Servicer and Reports to be Prepared by Servicer.
(a) Keeping of Records and Books of Account. Servicer shall maintain at
all times accurate and complete books, records and accounts relating to the
Receivables, Related Transferred Assets and Contracts of each Seller and all
Collections thereon in which timely entries shall be made. Servicer shall
maintain and implement administrative and operating procedures (including an
ability to generate duplicates of Records evidencing Receivables and the Related
Transferred Assets in the event of the destruction of the originals thereof),
and shall keep and maintain all documents, books, records and other information
that Servicer deems reasonably necessary for the collection of all Receivables
and Related Transferred Assets.
(b) Receivables Reviews. Servicer shall provide Trustee access to the
documentation regarding the Receivables when Trustee is required, in connection
with the enforcement of the rights of Certificateholders or the Purchasers or by
applicable statutes or regulations, to review such documentation, such access
being afforded without charge but only (i) upon reasonable request, (ii) during
normal business hours, (iii) subject to Servicer's normal security and
confidentiality procedures, (iv) at reasonably accessible offices in the
continental United States of America designated by Servicer and (v) upon five
Business Days' prior notice; provided that no notice shall be required if an
Early Amortization Event shall have occurred and be continuing; and provided,
further that no more than one such review during any calendar year shall be
conducted unless an Early Amortization Event shall have occurred and be
continuing.
(c) Daily Reports. Prior to 2:00 p.m., New York City time, on each
Business Day, Servicer shall prepare and deliver to Trustee and any Agent a
report relating to each outstanding Series and Purchased Interest, substantially
in the form specified by the applicable Supplement or PI Agreement or in such
other form as is reasonably acceptable to Trustee and Servicer (each such report
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being a "Daily Report") setting out, among other things, the Base Amount and
Series Collection Allocation Percentage for that Series or Purchased Interest as
of the end of business on the preceding Business Day; provided that if, on any
Business Day, Servicer is unable to prepare and deliver a Daily Report to
Trustee because of acts of God or the public enemy, riots, acts of war, acts of
terrorism, epidemics, fire, failure of communication lines, equipment or power
failure, computer systems failure, flood, embargoes, weather, earthquakes or
other unanticipated disruptions of Servicer's ability to monitor the origination
and/or preparation of Receivables, then (x) the Base Amount for purposes of each
outstanding Series and Purchased Interest shall be the lowest Base Amount shown
in the related Daily Reports delivered during the immediately preceding month
(such amount, an "Estimated Base Amount") and (y) the Series Collection
Allocation Percentage for that Series or Purchased Interest shall be the one
most recently reported. Servicer may use an Estimated Base Amount and the most
recently reported Series Collection Allocation Percentage to prepare the Daily
Report until the earlier to occur of (i) the day upon which disruption no longer
prevents Servicer from preparing the Daily Report using the actual data required
by the Daily Report and delivering it to Trustee, and (ii) the sixth Business
Day following the commencement of such disruption. Servicer shall notify each
Rating Agency promptly following its use of an Estimated Base Amount in any
Daily Report.
(d) Monthly Report. On each Report Date, Servicer shall prepare and
deliver to Trustee and the Rating Agencies a report relating to each outstanding
Series and Purchased Interest, substantially in the form specified by the
applicable Supplement or PI Agreement or in such other form as is reasonably
acceptable to Trustee and Servicer (each such report being a "Monthly Report").
(e) Notice of Seller Change Events; Supplements to Monthly Reports.
Sections 1.7 and 1.8 of the Purchase Agreement describe circumstances under
which (i) additional Sellers may be added to the Program and (ii) a Seller may
terminate its status as Seller under the Program (each such event being a
"Seller Change Event"). Those Sections of the Purchase Agreement require Big
Flower to give written notice to Transferor of the occurrence of a Seller Change
Event not less than 30 days prior to the occurrence thereof, and Transferor
hereby agrees to give prompt written notice of its receipt of any such notice to
Trustee and the Rating Agencies. If the notice is given to Trustee, within five
Business Days after the receipt of the notice by Trustee (or such later date, as
specified in the notice, on which the applicable Seller Change Event shall
become effective), Servicer shall deliver to Trustee and the Rating Agencies a
supplement to the Monthly Report then in effect for each outstanding Series or
Purchased Interest, which supplement shall show the calculation (complete with
the historical
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and/or pro forma receivables data necessary to do such calculation) of (A) the
Required Receivables and the applicable reserve ratios (as described in each
Supplement or PI Agreement) to reflect the addition of accounts receivable
originated by any Person that is being added to the Program as a Seller, and the
exclusion of any Receivables originated by any such Person that is terminating
its status as a Seller (as applicable), and (B) the Loss Discount and the
Purchase Discount Reserve Ratio for any such Person that is being added to the
Program as a Seller. For purposes of all calculations hereunder and under the
Purchase Agreement, the Required Receivables, such reserve ratios and (if
applicable) the Loss Discount and the Purchase Discount Reserve Ratio for the
relevant Person shown in such supplement shall supersede and/or supplement the
calculation of such items in the then outstanding Monthly Report, effective as
of the fifth Business Day following Trustee's receipt of such notice (or such
later date, as specified in such notice, on which the applicable Seller Change
Event shall become effective).
SECTION III.6 Monthly Servicer's Certificate. On each Report Date,
Servicer shall deliver to Trustee, the Paying Agent, Transferor and the Rating
Agencies a certificate of an Authorized Officer of Servicer substantially in the
form of Exhibit C, with such additions as may be required by any Supplement.
SECTION III.7 Servicing Report of Independent Public Accountants; Forms
10-Q and 10-K. (a)(i) On or before 120 days after the end of each fiscal year of
Transferor beginning with the end of Transferor's fiscal year 1996, Servicer
shall, as an expense of Servicer paid out of the Servicing Fee, cause Deloitte &
Touche or another firm of recognized independent public accountants that is
generally recognized as being among the "big six" (which may also render other
services to Servicer, the Sellers or Transferor) to furnish a report to Trustee,
Servicer, the Rating Agencies and Transferor (which report shall be addressed to
Trustee and shall relate to Transferor's most recently ended fiscal year). The
accountants' report shall set forth the results of their performance of the
procedures described in Exhibit D with respect to the Monthly Reports and Daily
Reports delivered to Trustee pursuant to Section 3.5 during the prior fiscal
year.
(ii) Each accountants' report shall state that the accountants have
compared the amounts contained in the Monthly Reports and a sample randomly
selected from all Daily Reports delivered to Trustee during the period covered
by the report with the records (including computer records) from which the
amounts were derived and that, on the basis of such comparison, the amounts are
in agreement with the documents and records, except for such exceptions as they
believe to be immaterial and such other exceptions as shall be set forth in
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the report. Except as provided otherwise in a Supplement, a copy of the report
may be obtained by any Investor Certificateholder by a request in writing to
Trustee addressed to the Corporate Trust Office.
(b) Promptly after the filing of such reports with the Securities and
Exchange Commission, Servicer shall provide each of the Rating Agencies with
copies of each Quarterly Report on Form 10-Q and each Annual Report on Form 10-K
of Servicer.
SECTION III.8 Rights of Trustee.
(a) Trustee has the exclusive dominion and control over the Bank Accounts,
and, until such time as the Trust shall have been terminated pursuant to Section
12.1 and all amounts owed under the Transaction Documents have been paid in
full, Transferor shall take any action that Trustee may reasonably request to
effect or evidence such dominion and control. At any time following the
occurrence of a Servicer Default, Trustee is hereby authorized to give notice to
the Account Banks, as provided in the Account Agreements, of the revocation of
Servicer's authority to give instructions or take any other actions with respect
to the Bank Accounts that Servicer would otherwise be authorized to give or to
take.
(b) At any time following the occurrence of a Servicer Default and the
termination of the then acting Servicer (until a Successor Servicer (if other
than Trustee) has been appointed):
(i) Trustee may direct any Obligors of Receivables to pay all
amounts payable under any Receivable or any Related Transferred Assets
directly to Trustee or its designee; provided that Trustee shall provide
the applicable Seller with a copy of such notice at least one Business Day
prior to sending it to any Obligor and consult in good faith with the
applicable Seller as to the text of the notice.
(ii) Trustee may direct any Seller to make payment of all amounts
payable to Transferor under any Transaction Document to which the Seller
is a party directly to Trustee or its designee.
(iii) Transferor and Servicer shall, at Trustee's request and as an
expense of Servicer paid out of the Servicing Fee, give notice of the
Trust's ownership of the Receivables and the Related Transferred Assets to
each Obligor and direct that payments be made directly to Trustee or its
designee.
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(iv) Transferor shall, and shall cause the Sellers to, at Trustee's
request, (A) assemble all of the Records that are necessary or appropriate
to collect the Receivables and Related Transferred Assets, and shall make
the same available to Trustee at one or more places selected by Trustee or
its designee, (B) segregate all cash, checks and other instruments
received by it from time to time constituting Collections in a manner
acceptable to Trustee and shall, promptly upon receipt (and, subject to
Section 3.2(i), in no event later than the second Business Day following
receipt), remit all such cash, checks and instruments, duly endorsed or
with duly executed instruments of transfer, to a Bank Account or the
Master Collection Account and (C) permit, upon not less than two Business
Days' prior written notice, any Successor Servicer and its agents,
employees and assignees access to their respective facilities and their
respective Records.
(c) Each of Transferor and Servicer hereby authorizes Trustee, from time
to time after the occurrence of a Servicer Default and the termination of the
then acting Servicer (until a Successor Servicer (if other than Trustee) has
been appointed), to take any and all steps in Transferor's name and on behalf of
Transferor and Servicer that are necessary or appropriate, in the reasonable
determination of Trustee, to collect all amounts due under any and all
Receivables or Related Transferred Assets, including endorsing the name of
Transferor or the applicable Seller on checks and other instruments representing
Collections and enforcing such Receivables and the Related Transferred Assets.
(d) Transferor hereby irrevocably appoints Trustee to act as Transferor's
attorney-in-fact, with full authority in the place and stead of Transferor and
in the name of Transferor or otherwise, from time to time after the occurrence
of a Servicer Default and the termination of the then acting Servicer (until a
Successor Servicer (if other than Trustee) has been appointed), to take (subject
to Section 11.14) any action and to execute any instrument or document that
Trustee, in its reasonable determination, may deem necessary to accomplish the
purposes of this Agreement, including:
(i) to ask, demand, collect, sue for, recover, compromise, receive
and give acquittance and receipts for moneys due and to become due under
or in respect of any Receivable or any Related Transferred Asset;
(ii) to receive, endorse, and collect any drafts or other
instruments, documents and chattel paper, in connection with clause (i);
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(iii) to file any claims or take any action or institute any
proceedings that Trustee in its reasonable determination may deem
necessary or appropriate for the collection of any of the Receivables or
any Related Transferred Asset or otherwise to enforce the rights of
Trustee and the Certificateholders with respect to any of the Receivables
or any Related Transferred Asset; and
(iv) to perform the affirmative obligations of Transferor under any
Transaction Document.
Transferor hereby acknowledges, consents and agrees that the power of attorney
granted pursuant to this Section is irrevocable and coupled with an interest.
SECTION III.9 Ongoing Responsibilities of Big Flower. Anything herein to
the contrary notwithstanding:
(a) If at any time Big Flower shall not be Servicer, Big Flower
shall deliver all Collections received or deemed received by it or its
Subsidiaries to Trustee no later than two Business Days after receipt or
deemed receipt thereof and Trustee shall distribute such Collections to
the same extent as if such Collections had actually been received from the
related Obligor on the applicable dates. So long as Big Flower or any of
its Subsidiaries shall hold any Collections or deemed Collections required
to be paid to Trustee, each of them shall hold such amounts in trust (and
separate and apart from its own funds) and shall clearly mark its records
to reflect such trust. Big Flower hereby grants to Trustee an irrevocable
power of attorney, with full power of substitution, coupled with an
interest, upon the occurrence of a Servicer Default, to take in the name
of Big Flower all steps necessary or appropriate to endorse, negotiate or
otherwise realize on any writing or other right of any kind held or
transmitted by Big Flower or transmitted and received by Trustee (whether
or not from Big Flower) in connection with any Receivable or Related
Transferred Asset.
(b) In addition, if at any time Big Flower shall not be Servicer,
Big Flower shall act (if the Successor Servicer so requests) as the data
processing agent of Servicer and, in such capacity, Big Flower shall
conduct (and shall cause any other necessary Persons to conduct) the data
processing functions of the administration of the Receivables, the Related
Transferred Assets and the Collections thereon in substantially the same
way that Big Flower (or its Sub-Servicers) conducted such data
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processing functions while Big Flower acted as Servicer. Big Flower and
each such other Person shall be entitled to reasonable compensation for
such service to be paid from the Servicing Fee.
(c) Notwithstanding any termination of Big Flower as Servicer
hereunder, Big Flower shall continue to indemnify Trustee on the terms set
out in Section 11.5 with respect to circumstances existing, or actions
taken or omitted, prior to such termination.
SECTION III.10 Further Action Evidencing Transfers. Servicer shall cause
all financing statements and continuation statements and any other necessary
documents relating to the right, title and interest of Trustee in and to the
Transferred Assets to be promptly recorded, registered and filed, and at all
times to be kept recorded, registered and filed, all in such manner and in such
places as may be required by law fully to preserve, maintain and protect the
right, title and interest of Trustee hereunder in and to all property comprising
the Transferred Assets. Servicer shall deliver to Trustee file-stamped copies
of, or filing receipts for, any document recorded, registered or filed as
provided above, as soon as available following such recording, registration or
filing. Transferor shall cooperate fully with Servicer in connection with the
obligations set forth above and will execute any and all documents that are
reasonably required to fulfill the intent of this section.
If Transferor or Servicer fails to perform any of its agreements or
obligations under any Transaction Document and does not remedy such failure
within the applicable cure period, if any, then Trustee or its designee may (but
shall not be required to) itself perform, or cause performance of, such
agreement or obligation, and the reasonable expenses of Trustee or its designee
incurred in connection therewith shall be payable by Servicer as provided in
Section 11.5 and (if applicable) by Transferor as provided in Section 7.3.
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ARTICLE IV RIGHTS OF CERTIFICATEHOLDERS; ALLOCATIONS
SECTION IV.1 Rights of Certificateholders. Each Series of Investor
Certificates shall collectively represent a fractional undivided beneficial
interest (as to any Series, the "Series Interest") in the Trust, and the amount
of that undivided beneficial interest shall equal the Series Collection
Allocation Percentage for that Series from time to time. Each Certificate within
a Series shall represent a partial ownership interest in the related Series
Interest, representing the right to receive, to the extent necessary to make the
required payments with respect to that Certificate at the times and in the
amounts specified in this Article IV and in the related Supplement, the portion
of Collections allocable to Investor Certificateholders of such Series pursuant
to this Agreement and such Supplement, funds on deposit in the Transaction
Accounts allocable to Investor Certificateholders of such Series and funds
available pursuant to any related Enhancement. Unless the applicable Supplement
or PI Agreement provides otherwise, the Investor Certificates of any Series or
class shall not represent any interest in any funds allocable to, or Enhancement
for the benefit of, any other Series or Purchased Interest. The Transferor
Certificate shall represent an interest in the Trust (the "Transferor Interest")
consisting of the right to receive current and deferred transfer payments in
respect of the various Series and Purchased Interests outstanding from time to
time at the times and in the amounts specified in the related Supplements and PI
Agreements.
SECTION IV.2 Establishment of Transaction Accounts. (a) On or prior to the
date of this Agreement, Trustee has established, and until the Trust is
terminated Trustee shall (except as expressly permitted or required below)
maintain, in the name of Trustee and for the benefit of the Certificateholders
and Purchasers, the following accounts:
(i) account no. 185611860, which shall be called the "Master
Collection Account" and into which all Collections and all other
Transferred Assets consisting of cash or cash equivalents shall be
transferred on a daily basis from the Bank Accounts;
(ii) account no. 185611951, which shall be called the "Carrying
Cost Account" and into which funds shall be allocated from time to time to
cover carrying costs of each Series and Purchased Interest (including
interest payable on, and the Servicing Fee allocated to, each Series and
Purchased Interest);
(iii) account no. 185612041, which shall be called the
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"Equalization Account" and into which funds will from time to time be
transferred from the Master Collection Account to compensate for
fluctuations in the Base Amounts for the outstanding Series and Purchased
Interests; and
(iv) account no. 185612132, which shall be called the "Principal
Funding Account" and into which funds will from time to time be
transferred in anticipation of distributions to the Holders of Investor
Certificates or Purchasers on account of their respective principal
investments.
(b) In addition, if an Early Amortization Period occurs with respect to
any Series or Purchased Interest, Trustee shall establish an additional account
which shall be called the "Holdback Account" and into which funds that would
otherwise be remitted by Trustee to the Transferor in respect of the Transferor
Certificate will be deposited to the extent so provided in the related
Supplement or PI Agreement.
(c) The Master Collection Account, the Carrying Cost Account, the
Equalization Account, the Principal Funding Account, any Holdback Account and
any additional accounts required by any Supplement or PI Agreement to be
established (unless otherwise indicated in such Supplement or PI Agreement) are
collectively called the "Transaction Accounts." Each of the Transaction Accounts
shall be established and maintained as an Eligible Deposit Account and shall
bear a designation clearly indicating that funds deposited therein are held for
the benefit of the Certificateholders and the Purchasers. If any Transaction
Account ceases to be an Eligible Deposit Account, Servicer shall cause Trustee
to open a substitute Transaction Account that is an Eligible Deposit Account and
transfer the funds in the existing Transaction Account to the substitute
Transaction Account, and thereafter all references in any Transaction Document
to the original Transaction Account shall be deemed instead to refer to the
substitute Transaction Account.
(d) The Master Collection Account, the Carrying Cost Account, the
Equalization Account, the Principal Funding Account and any Holdback Account
shall be held by Trustee for the benefit of all Certificateholders and
Purchasers. However, there shall be established within each of the Carrying Cost
Account, the Equalization Account, the Principal Funding Account and any
Holdback Account an administrative sub-account for each outstanding Series and
Purchased Interest. Funds allocated to the Carrying Cost Account, the
Equalization Account, the Principal Funding Account and any Holdback Account
pursuant to any Supplement or PI Agreement shall be allocated to the
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applicable Series' or Purchased Interest's sub-account and shall be available
solely to the holders of the Certificates in that Series or the Purchaser of
that Purchased Interest, as applicable, except to the extent that such funds are
subsequently reallocated to another Series or Purchased Interest, or the
Transferor, in accordance with the terms of the applicable Supplement or
Purchase Agreement and this Agreement. Any additional Transaction Accounts
established pursuant to any Supplement or PI Agreement shall be held by Trustee
for the benefit of only the related Series or Purchased Interest.
(e) Trustee shall possess (for its benefit and for the benefit of the
Certificateholders and the Purchasers) all right, title and interest in and to
all funds on deposit from time to time in each of the Transaction Accounts and
in all proceeds thereof. The Transaction Accounts shall be under the sole
dominion and control of Trustee for the benefit of the applicable
Certificateholders and/or Purchasers. Each of Servicer and Trustee agrees that
it shall have no right of setoff against, and no right otherwise to deduct from,
any funds held in any of the Transaction Accounts or the Bank Accounts for any
amount owed to it by the Trust, any party hereto or any Certificateholder or
Purchaser.
SECTION IV.3 Trust-Level Calculations and Funds Allocations.
(a) Allocation of Daily Collections. On each Business Day, Servicer shall
determine the amount of collected funds received (and expected to be received on
such Business Day as a result of transfers from the Account Banks) in the Master
Collection Account (other than funds that are required to be returned to Big
Flower Persons (or their designees) pursuant to Section 3.2(b)) since the
preceding Business Day, shall specify such amount of collected funds in the
Daily Report delivered to the Trustee on such Business Day and shall allocate to
each outstanding Series and Purchased Interest a share of such funds in an
amount equal to the product of the applicable Series Collection Allocation
Percentage and the amount of such funds. The portion of such funds allocated to
any Series or Purchased Interest shall be further allocated and otherwise dealt
with in accordance with the terms of the related Supplement or PI Agreement. In
addition, funds initially allocated to a Series or Purchased Interest on any
Business Day that are designated as Shared Investor Collections shall be
reallocated to other Series or Purchased Interests pro rata based upon the
respective Shortfalls (if any) of the other Series and Purchased Interests. If,
after Servicer's delivery of the Daily Report to the Trustee on any Business Day
Servicer determines that the amount of collected funds actually received in the
Master Collection Account is less or more than the amount specified in such
Daily Report (determined as described above), Servicer shall deliver a
supplemental written notice to the Trustee specifying the actual amount of
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collected funds on such Business Day, together with an adjusted allocation of
funds which takes into account such actual amount of collected funds. To the
extent the Trustee has not already distributed collected funds on any Business
Day in accordance with the Daily Report delivered on such Business Day, the
Trustee shall adjust the amounts distributed on such Business Day in accordance
with the instructions set forth in any supplemental written notice delivered
prior to 4:30 p.m., New York City time, on such Business Day.
(b) Allocation of Write-Offs and Dilution. In each Monthly Report relating
to a Series or Purchased Interest that is in an Early Amortization Period,
Servicer shall calculate the amount of (i) Write-Offs (net of Recoveries) and
(ii) Dilutions as to which no settlement payment has been made pursuant to
Section 3.3 of the Purchase Agreement, in each case during the related
Calculation Period (or the portion of that Calculation Period falling in the
Early Amortization Period) and shall allocate to such Series or Purchased
Interest a portion of the amounts referred to in clauses (i) and (ii) equal to
the product of each such amount and the related Series Loss Allocation
Percentage.
SECTION IV.4 Investment of Funds in Transaction Accounts. On any day when
there are any funds on deposit in any Transaction Account (after giving effect
to the allocations of such funds required by this Article IV and the various
Supplements and PI Agreements), and at such other times as investment is
practicable, Trustee, at the direction of Transferor (or Servicer on its behalf)
shall invest and reinvest monies on deposit in such Transaction Account (in the
name of Trustee) in such Eligible Investments as are specified in a notice from
Servicer, subject to the restrictions set forth hereinafter; provided however,
that whenever an Early Amortization Event shall be existing, such investments
shall be made at the direction of Servicer. All Eligible Investments made from
funds in any Transaction Account, and the interest, dividends and income
received thereon and therefrom and the net proceeds realized on the sale
thereof, shall be deposited in such Transaction Account. Trustee may liquidate
an Eligible Investment prior to maturity if such liquidation would not result in
a loss of all or part of the principal portion of such Eligible Investment or
if, prior to the maturity of such Eligible Investment, a default occurs in the
payment of principal, interest or any other amount with respect to such Eligible
Investment. In the absence of negligence of Trustee or willful misconduct by
Trustee, Trustee shall have no liability in connection with investment losses
incurred on Eligible Investments. It is intended for income tax purposes that
the income earned through investment of funds in the Transaction Accounts shall
be treated as income of Transferor.
SECTION IV.5 Attachment of Transaction Accounts. If Trustee receives
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written notice that any Transaction Account has or will become subject to any
writ, judgment, warrant of attachment, execution or similar process, Trustee
shall (notwithstanding any other provision of the Transaction Documents)
promptly notify Transferor, Servicer and the Certificateholders thereof, and
shall not deposit or transfer funds into such Transaction Account but shall
cause funds otherwise required to be deposited into such Transaction Account to
be held in another account pending distribution of such funds in the manner
required by the Transaction Documents.
ARTICLE V DISTRIBUTIONS AND REPORTS
DISTRIBUTIONS SHALL BE MADE, AND REPORTS SHALL BE PROVIDED, TO
CERTIFICATEHOLDERS AS SET FORTH IN THE APPLICABLE SUPPLEMENT.
ARTICLE VI THE CERTIFICATES
SECTION VI.1 The Certificates. The Investor Certificates in each Series
shall be substantially in the forms contemplated by the Supplements pursuant to
which the Investor Certificates are issued, and the Transferor Certificate shall
be substantially in the form of Exhibit E. Upon issuance, all Certificates shall
be executed and delivered by Transferor to Trustee for authentication and
redelivery as provided in Sections 6.2 and 6.10. Except to the extent provided
otherwise in an applicable Supplement, Investor Certificates shall be issued in
minimum denominations of $2,000,000 and in integral multiples of $100,000 and
shall not be subdivided for resale into Certificates smaller than a Certificate,
the initial offering price for which would have been at least $2,000,000.
Each Certificate issued as a Definitive Certificate shall be executed by
manual or facsimile signature on behalf of Transferor by its President,
Treasurer, Secretary or any Vice President or by any attorney-in-fact duly
authorized to execute the Definitive Certificate on behalf of any such officer.
The Definitive Certificates shall be authenticated on behalf of the Trust by
manual signature of a duly authorized signatory of Trustee. Definitive
Certificates bearing the manual or facsimile signature of the individual who
was, at the time when the signature was affixed, authorized to sign on behalf of
Transferor or the Trust (as applicable) shall be valid and binding,
notwithstanding that the individuals or any of them ceased to be so authorized
prior to the authentication and delivery of the Definitive Certificates or does
not hold such office on the date of issuance of such Definitive Certificates. No
Definitive Certificates shall be entitled to any benefit under this Agreement,
or
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be valid for any purpose, unless there appears on the Definitive Certificate a
certificate of authentication substantially in the form provided for herein
executed by or on behalf of Trustee by the manual signature of a duly authorized
signatory, and the certificate of authentication upon any Definitive Certificate
shall be conclusive evidence, and the only evidence, that the Definitive
Certificate has been duly authenticated and delivered hereunder and is entitled
to the benefits of this Agreement. Except as otherwise provided in the
applicable Supplement, all Definitive Certificates shall be dated the date of
their authentication.
As provided in any Supplement, Investor Certificates of any Series may be
offered and sold pursuant to an offering registered under the Securities Act or
issued and sold pursuant to an exemption from the Securities Act. Any Series
sold pursuant to a public offering registered under the Securities Act, Rule
144A, Regulation S or another exemption under the Securities Act may be
delivered in book-entry form as provided in Sections 6.11 and 6.12.
SECTION VI.2 Authentication of Certificates. Contemporaneously with the
initial assignment and transfer of Receivables and other Transferred Assets to
the Trust, Trustee shall authenticate and deliver the Transferor Certificate to
Transferor. On each Issuance Date, upon the order of Transferor, Trustee shall
authenticate and deliver to Transferor the Series of Certificates that are to be
issued originally on such Issuance Date pursuant to the applicable Supplement.
SECTION VI.3 Registration of Transfer and Exchange of Certificates. (a)
Trustee, as agent for Transferor, shall keep, or shall cause to be kept, at the
office or agency to be maintained in accordance with the provisions of Section
11.16, a register in written form or capable of being converted into written
form within a reasonable time (the "Certificate Register") in which, subject to
such reasonable regulations as it may prescribe, a transfer agent and registrar
(which may be Trustee) (the "Transfer Agent and Registrar") shall provide for
the registration of the Certificates and of transfers and exchanges of the
Certificates as herein provided. Transferor hereby appoints Trustee as the
initial Transfer Agent and Registrar.
Transferor, or Trustee as agent for Transferor, may revoke the appointment
as Transfer Agent and Registrar and remove the then-acting Transfer Agent and
Registrar if Trustee or Transferor (as applicable) determines in its sole
discretion that the then-acting Transfer Agent and Registrar has failed to
perform its obligations under this Agreement in any material respect. The
then-acting Transfer Agent and Registrar shall be permitted to resign as
Transfer Agent and Registrar upon 30 days' prior written notice to Trustee,
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Transferor and Servicer; provided that such resignation shall not be effective
and the then-acting Transfer Agent and Registrar shall continue to perform its
duties as Transfer Agent and Registrar until Trustee has appointed a successor
Transfer Agent and Registrar reasonably acceptable to Transferor and the Person
so appointed has given Trustee written notice that it accepts the appointment.
The provisions of Sections 11.1 through 11.5 shall apply to the Transfer Agent
and Registrar as if all references to "Trustee" in the applicable provisions of
Sections 11.1 through 11.5 were references to the Transfer Agent and Registrar.
It is intended that the registration of Certificates that is described in
this Section comply with the registration requirements contained in Section 163
of the Internal Revenue Code.
(b) No transfer of all or any part of the Transferor Certificate shall be
made unless (i) Transferor shall have given the Rating Agencies and Trustee
prior written notice of the proposed transfer, (ii) the Modification Condition
shall have been satisfied in connection with the proposed transfer and (iii)
Transferor shall have delivered to Trustee, the Rating Agencies, each Purchaser
and each Enhancement Provider a Tax Opinion for each outstanding Series of
Investor Certificates, Purchased Interest and Enhancement. To the extent any
interest in the Transferor Certificate is transferred pursuant to this Section
6.3(b), all payments to Transferor in respect of the Transferor Interest or the
Transferor Certificate thereafter shall be made pro rata to all Persons owning
any portion of the Transferor Certificate according to such percentages as are
set forth in the notice delivered pursuant to clause (i) above. Any attempted
transfer of all or any part of the Transferor Certificate other than as provided
above shall be void and of no effect.
(c) Subject to the requirements of subsection (e), if applicable, having
been fulfilled, upon surrender for registration of transfer of any Certificate,
and, in the case of Investor Certificates, at any office or agency of the
Transfer Agent and Registrar maintained for such purpose, Transferor shall
execute, and Trustee shall authenticate and deliver, in the name of the
designated transferee or transferees, one or more new Certificates of the
appropriate class and Series that are in authorized denominations of like
aggregate fractional interest in the related Series Interest that bear numbers
that are not contemporaneously outstanding.
At the option of an Investor Certificateholder, its Investor Certificates
may be exchanged for other Investor Certificates of the same class and Series
(and bearing the same interest rate as the Investor Certificate surrendered for
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registration of exchange) of authorized denominations of like aggregate
fractional interests in the related Series Interest and bearing numbers that are
not contemporaneously outstanding, upon surrender of the Investor Certificates
to be exchanged at any such office or agency. Whenever any Investor Certificates
are so surrendered for exchange, Transferor shall execute, and Trustee shall
authenticate and deliver, the appropriate number of Investor Certificates of the
class and Series that the Investor Certificateholder making the exchange is
entitled to receive. Every Investor Certificate presented or surrendered for
registration of transfer or exchange shall be accompanied by a written
instrument of transfer in a form satisfactory to Trustee or the Transfer Agent
and Registrar duly executed by the Certificateholder thereof or his
attorney-in-fact duly authorized in a writing delivered to the Transfer Agent
and Registrar.
No service charge shall be made for any registration of transfer or
exchange of Certificates, but the Transfer Agent and Registrar may require the
Certificateholder to cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of Investor Certificates.
All Certificates surrendered for registration of transfer and exchange
shall be cancelled and disposed of in a manner satisfactory to Trustee.
(d) Certificates may be surrendered for registration of transfer or
exchange at the office of the Transfer Agent and Registrar designated in Section
13.6.
(e) Unless otherwise provided in the applicable Supplement,
Certificateholders holding Definitive Certificates shall not sell, transfer or
otherwise dispose of the Certificates unless the sale, transfer or disposition
is being made pursuant to an exemption from the registration requirements of the
Securities Act and applicable state securities laws and, prior to the proposed
sale, transfer or disposition, the Certificateholder and the proposed transferee
each provide Trustee and Transferor with representations and, if requested by
Trustee or Transferor, an Opinion of Counsel concerning the proposed sale,
transfer or disposition and the availability of the exemption.
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(f) The Investor Certificates shall bear such restrictive legends as shall
be set forth in the applicable Supplements.
SECTION VI.4 Mutilated, Destroyed, Lost or Stolen Certificates. If (a) any
mutilated Certificate is surrendered to the Transfer Agent and Registrar, or the
Transfer Agent and Registrar receives evidence to its satisfaction of the
destruction, loss or theft of any Certificate and (b) there is delivered to the
Transfer Agent and Registrar and Trustee such security or indemnity as may be
required by them and Transferor to hold each of them, the Trust and Transferor
harmless, then, in the absence of notice to Trustee that such Certificate has
been acquired by a bona fide purchaser, Transferor shall execute and, upon the
request of Transferor, Trustee shall authenticate and deliver, in exchange for
or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a new
Certificate of like class, Series, tenor, terms and principal amount and bearing
a number that is not contemporaneously outstanding. In connection with the
issuance of any new Certificate under this section, Trustee or the Transfer
Agent and Registrar may require the payment by the Certificateholder of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
relation thereto and any other expenses (including the reasonable fees and
expenses of Trustee and Transfer Agent and Registrar) connected therewith. Any
duplicate Certificate issued pursuant to this section shall constitute
conclusive and indefeasible evidence of ownership of an interest in the Trust,
as if originally issued, whether or not the lost, stolen or destroyed
Certificate shall be enforceable by anyone, and shall be entitled to all the
benefits of this Agreement equally and proportionately with any and all
Certificates of the same class and Series that are duly issued hereunder.
SECTION VI.5 Persons Deemed Owners. Prior to due presentation of a
Certificate for registration of transfer, Transferor, Trustee, the Paying Agent,
the Transfer Agent and Registrar and any agent of any of them may treat the
Person in whose name any Certificate is registered as the owner of such
Certificate for the purpose of receiving distributions pursuant to Article V and
for all other purposes whatsoever, and none of Transferor, Trustee, the Paying
Agent, the Transfer Agent and Registrar or any agent of any of them shall be
affected by any notice to the contrary; provided that, in determining whether
the Holders of the requisite principal amount or stated amount (as applicable)
of Certificates or Purchased Interests have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Certificates and
Purchased Interests owned by Transferor, Servicer or any Affiliate thereof shall
be disregarded and deemed not to be outstanding, except that, in determining
whether Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Certificates and
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Purchased Interests that Trustee knows to be so owned shall be so disregarded.
Certificates and Purchased Interests so owned that have been pledged in good
faith shall not be disregarded and may be regarded as outstanding if the pledgee
establishes to the satisfaction of Trustee the pledgee's right so to act with
respect to such Certificates or Purchased Interests and that the pledgee is not
Transferor, Servicer or an Affiliate thereof.
SECTION VI.6 Appointment of Paying Agent. The Paying Agent initially shall
be Trustee. Transferor hereby appoints the Paying Agent as its agent to make
distributions to Certificateholders pursuant to the applicable Supplements and
to report the amounts of the distributions to Trustee. Any Paying Agent shall
have the revocable power to withdraw funds from the Master Collection Account
for the purpose of making the distributions. Trustee or, at any time when
Trustee is also the Paying Agent, Transferor may revoke such power of the Paying
Agent and remove the Paying Agent if Trustee or Transferor (as applicable)
determines in its sole discretion that the Paying Agent shall have failed to
perform its obligations under this Agreement in any material respect. The Paying
Agent shall be permitted to resign as Paying Agent upon 30 days' prior written
notice to Trustee, Transferor, Servicer and the Rating Agencies. Any resignation
or removal of the Paying Agent, and appointment of a successor Paying Agent,
shall not become effective until the appointment has been accepted by the
successor Paying Agent. If no successor Paying Agent shall have been appointed
and shall have accepted appointment within 30 days after the giving of the
notice of resignation, the resigning Paying Agent may petition any court of
competent jurisdiction to appoint a successor Paying Agent. In the event that
Trustee shall no longer be the Paying Agent, Trustee shall appoint a successor
Paying Agent (which shall be a bank or trust company) reasonably acceptable to
Transferor, which appointment shall be effective on the date on which the Person
so appointed gives Trustee written notice that it accepts the appointment.
Trustee shall cause the successor Paying Agent or any additional Paying Agent
appointed by Trustee to execute and deliver to Trustee an instrument in which it
shall agree with Trustee that, as Paying Agent, it will hold all sums, if any,
held for payment to the Certificateholders and Purchasers in trust for the
benefit of the Certificateholders and Purchasers entitled thereto until the sums
shall be paid to the Certificateholders and Purchasers. The Paying Agent shall
return all unclaimed funds to Trustee, and upon removal of a Paying Agent such
Paying Agent shall also return all funds in its possession to Trustee. The
provisions of Sections 11.1 through 11.5 shall apply to the Paying Agent as if
all references in the applicable provisions thereof to "Trustee" were references
to the Paying Agent.
SECTION VI.7 Access to List of Certificateholders' Names and
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Addresses. Trustee will furnish or cause to be furnished by the Transfer Agent
and Registrar to Transferor, Servicer, any Seller or the Paying Agent, within
two Business Days after receipt by Trustee of a written request therefor from
Servicer or the Paying Agent, a list in the form Servicer or the Paying Agent
may reasonably require of the names and addresses of the Certificateholders as
of the most recent Distribution Date. If any Holder or group of Holders of
Investor Certificates in any Series evidencing not less than 10% of the
aggregate unpaid principal amount of the Series (the "Applicant") applies in
writing to Trustee, and the application states that the Applicant desires to
communicate with other Certificateholders with respect to their rights under
this Agreement, any Supplement or the Certificates and is accompanied by a copy
of the communication that the Applicant proposes to transmit, then Trustee,
after having been adequately indemnified by the Applicant for its costs and
expenses, shall afford or shall cause the Transfer Agent and Registrar to afford
the Applicant access during normal business hours to the most recent list of
Certificateholders held by Trustee, within five Business Days after the receipt
of the application and indemnification. The list shall be as of a date no more
than 45 days prior to the date of receipt of the Applicant's request.
Every Certificateholder, by receiving and holding a Certificate, agrees
with Trustee that neither Trustee, the Transfer Agent and Registrar, Transferor,
Servicer, any Seller nor any of their respective agents shall be held
accountable by reason of the disclosure of any information as to the names and
addresses of the Certificateholders hereunder, regardless of the sources from
which the information was derived.
SECTION VI.8 Authenticating Agent. (a) Trustee may appoint one or more
authenticating agents with respect to the Certificates that shall be authorized
to act on behalf of Trustee in authenticating the Certificates in connection
with the issuance, delivery, registration of transfer, exchange or repayment of
the Certificates. Either Trustee or the authenticating agent, if any, then
appointed and acting on behalf of Trustee shall authenticate the Certificates.
Whenever reference is made in this Agreement to the authentication of
Certificates by Trustee or Trustee's certificate of authentication, such
reference shall be deemed to include authentication on behalf of Trustee by an
authenticating agent and a certificate of authentication executed on behalf of
Trustee by an authenticating agent. Each authenticating agent must be acceptable
to Transferor.
(b) Any institution succeeding to the corporate agency business of an
authenticating agent shall continue to be an authenticating agent without the
execution or filing of any document or any further act on the part of Trustee,
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the authenticating agent or any other Person.
(c) An authenticating agent may at any time resign by giving written
notice of resignation to Trustee and Transferor. Trustee may at any time
terminate the agency of an authenticating agent by giving notice of termination
to the authenticating agent and Transferor. Upon receiving a notice of
resignation or upon a termination, or in case at any time an authenticating
agent shall cease to be acceptable to Trustee or Transferor, Trustee may
promptly appoint a successor authenticating agent. Any successor authenticating
agent, upon acceptance of its appointment, shall become vested with all the
rights, powers and duties of its predecessor, with like effect as if originally
named as an authenticating agent. No successor authenticating agent shall be
appointed unless acceptable to Trustee and Transferor.
(d) Servicer agrees to pay to each authenticating agent (if any), as an
expense of Servicer paid out of the Servicing Fee, reasonable compensation from
time to time for services performed under this section.
(e) The provisions of Sections 11.1, 11.2 and 11.3 shall be applicable to
any authenticating agent as if the references in the applicable provisions
thereof to "Trustee" were references to the authenticating agent.
(f) Pursuant to an appointment made under this section, the Certificates
may have endorsed thereon, in lieu of Trustee's certificate of authentication,
an alternate certificate of authentication in substantially the following form:
"This is one of the Certificates described in the Supplement dated
as of __________ ___, 199_.
MANUFACTURERS AND TRADERS TRUST COMPANY, as
Trustee
By:_________________________
as Authenticating Agent
for Trustee,
By:_________________________
Authorized Officer."
SECTION VI.9 Tax Treatment. It is the intent of Transferor and the
Investor Certificateholders that, for purposes of Federal, state and local
income
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and franchise taxes and other taxes measured by or imposed on income, the
Investor Certificates will be treated as evidence of indebtedness secured by the
Transferred Assets and the Trust will not be characterized as an association
taxable as a corporation. Transferor, by entering into this Agreement, and each
Investor Certificateholder, by its acceptance of its Investor Certificate, agree
to treat the Investor Certificates as indebtedness (or, if so provided in the
applicable Supplement, an interest in a partnership) for purposes of Federal,
state and local income and franchise taxes and any other taxes measured by or
imposed on income. The provisions of this Agreement and all related Transaction
Documents shall be construed to further these intentions of the parties. In
accordance with the foregoing, Transferor agrees that it will report its income
for purposes of Federal, state and local income or franchise taxes, and any
other taxes measured by or imposed on income, on the basis that it is the owner
of the Receivables. Except to the extent otherwise required by applicable law or
any Governmental Authority, Trustee hereby agrees to treat the Trust as a
security device only, and shall not file tax returns or obtain an employer
identification number on behalf of the Trust.
SECTION VI.10 Issuance of Additional Series of Certificates and Sales of
Purchased Interests. (a) Transferor may from time to time issue and direct
Trustee to authenticate one or more classes of any newly issued Series of
Investor Certificates (a "New Issuance"). In addition, to the extent permitted
for any Series of Investor Certificates as specified in the related Supplement,
the Investor Certificateholders of the Series may tender their Investor
Certificates to Trustee, and Transferor may allocate a portion of the Transferor
Interest pursuant to the terms and conditions set forth in the Supplement, in
exchange for one or more newly issued Series of Investor Certificates (an
"Investor Exchange"). New Issuances and Investor Exchanges collectively are
referred to as "Issuances".
(b) Transferor may direct Trustee to authenticate an Issuance by notifying
Trustee, in writing, at least five Business Days (or such shorter period as
shall be acceptable to Trustee) in advance (an "Issuance Notice") of the date
upon which the Issuance is to occur (an "Issuance Date"). Any Issuance Notice
shall state the designation of any Series to be issued on the Issuance Date and,
with respect to each class or Series: (i) its initial invested amount (or the
method for calculating the initial invested amount), (ii) its interest rate (or
the method for allocating interest payments or other cash flows to the Series),
if any, and (iii) the Enhancement Provider, if any, with respect to the Series.
(c) On the Issuance Date, Transferor shall deliver to Trustee for
authentication under Section 6.2, and Trustee shall authenticate and deliver any
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such class or classes of Series of Investor Certificates only upon delivery to
it (and, in the case of item (iv) below, each Rating Agency, Purchaser and any
Enhancement Provider) of the following:
(i) a Supplement satisfying the criteria set forth in subsection (d)
and in form reasonably satisfactory to Trustee executed by Transferor and
Servicer and specifying the principal terms of the Series;
(ii) the applicable Enhancement, if any;
(iii) the agreement, if any, pursuant to which the Enhancement
Provider agrees to provide the Enhancement, if any;
(iv) a Tax Opinion for each outstanding Series of Investor
Certificates, Purchased Interest and Enhancement with respect to such
Issuance;
(v) evidence that the Modification Condition has been satisfied with
respect to such Issuance (unless such Issuance occurs on the First
Issuance Date);
(vi) for any Issuance other than an Issuance occurring on the First
Issuance Date, an Officer's Certificate of Transferor that on the Issuance
Date, after giving effect to the Issuance (and the repayment, on the date
of the Issuance, of any existing Investor Certificates with funds
(including proceeds of sale of the new Series) on deposit in the Principal
Funding Account), any requirements set out in the Supplement with respect
to any then-outstanding Series with respect to the amount of Certificates
that may not, by their terms, be transferred has been satisfied;
(vii) an Officer's Certificate of Servicer stating that no Early
Amortization Event or Unmatured Early Amortization Event has occurred and
is continuing and that there is not a substantial likelihood that the
Issuance would result in an Early Amortization Event or an Unmatured Early
Amortization Event at any time in the future;
(viii) in the case of an Investor Exchange, any Investor
Certificates that are being exchanged in connection therewith;
(ix) any other documents, certificates and Opinions of Counsel as
may be required by the applicable Supplement; and
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(x) an Officer's Certificate of Servicer to the effect that all
conditions specified in clauses (i) through (ix) have been satisfied.
Upon satisfaction of the conditions, Trustee shall cancel any applicable
Investor Certificates and issue, as provided above, the new Series of Investor
Certificates dated the Issuance Date. Any such Series of Investor Certificates
shall be substantially in the form specified in the related Supplement and shall
bear, upon its face, the designation for the Series to which it belongs, as
selected by Transferor. There is no limit to the number of Issuances that may be
made under this Agreement.
(d) In conjunction with an Issuance, the parties hereto shall execute a
Supplement, which shall specify the relevant terms with respect to any newly
issued Series of Investor Certificates, which may include: (i) its name or
designation, (ii) the initial invested amount or the method of calculating the
initial invested amount, (iii) the applicable interest rate (or formula for the
determination thereof), (iv) the Issuance Date, (v) the rating agency or
agencies rating the Series, if any, (vi) the name of the Clearing Agency, if
any, (vii) the interest payment date or dates and the date or dates from which
interest shall accrue, (viii) the method of allocating Collections with respect
to Receivables for the Series and, if applicable, with respect to any paired
Series and the method by which the principal amount of Investor Certificates of
the Series shall amortize or accrete and the method for allocating write-offs,
(ix) the names of any accounts to be used by the Series and the terms governing
the operation of any such account, (x) the terms of any Enhancement with respect
to the Series, (xi) the Enhancement Provider, if applicable, (xii) the base rate
applicable to the Series, (xiii) the terms on which the Certificates of the
Series may be repurchased or remarketed to other investors, (xiv) any deposit
into any account provided for the Series, (xv) the number of classes of the
Series, and if more than one class, the rights and priorities of each class,
(xvi) whether any fees, breakage payments or early termination payments will be
included in the funds available to be paid for the Series, (xvii) the
subordination of the Series to any other Series, (xviii) whether the Series will
be a part of a group or subject to being paired with any other Series, (xix)
whether the Series will be prefunded and (xx) any other relevant terms of the
Series. The terms of the Supplement may modify or amend the terms of this
Agreement or the Purchase Agreement (including the related definitions) solely
as applied to the new Series.
(e) Except as specified in any Supplement for the related Series, all
Investor Certificates of any Series shall rank pari passu and be equally and
ratably entitled as provided herein to the benefits hereof (except that the
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Enhancement provided for any Series shall not be available for any other Series)
without preference, priority or distinction on account of the actual time or
times of authentication and delivery, all in accordance with the terms and
provisions of this Agreement and the related Supplement.
(f) Transferor may from time to time direct Trustee, on behalf of the
Trust, to sell one or more Purchased Interests pursuant to, and direct Trustee
to enter into, a PI Agreement. No Purchased Interest shall represent any
interest in any Enhancement for the benefit of any Series, any class of Investor
Certificates or any other Purchased Interest, any Transaction Account
established pursuant to any Supplement or the PI Agreement relating to any other
Purchased Interest except to the extent set forth in the PI Agreement with
respect to such other Purchased Interest. Each PI Agreement may provide that no
Investor Certificateholder, Purchaser under any other PI Agreement or
Enhancement Provider shall be a third-party beneficiary thereof or have any
benefit or any legal or equitable right, remedy or claim under the PI Agreement.
(g) On or before the date of the initial sale of a Purchased Interest
pursuant to a particular PI Agreement, the parties hereto and the related
Purchaser will execute and deliver a PI Agreement that will specify the terms of
the Purchased Interest. The terms of the PI Agreement may modify or amend the
terms of this Agreement solely as applied to the Purchased Interest. The
obligation of Trustee to execute and deliver the related PI Agreement is subject
to the satisfaction of the following conditions:
(i) on or before the tenth Business Day (or a shorter period as
shall be acceptable to the parties) immediately preceding the related
Issuance Date, Transferor shall have given Trustee, Servicer, each Rating
Agency, each Purchaser and each Enhancement Provider (if any) written
notice of the sale of the Purchased Interest and the Issuance Date;
(ii) Transferor shall have delivered to Trustee the related PI
Agreement, in form satisfactory to Trustee, each executed by each party
thereto other than Trustee;
(iii) the Modification Condition shall have been satisfied with
respect to the sale;
(iv) the sale will not (A) contravene any provision of this
Agreement, any Supplement, any agreement pursuant to which any Enhancement
is provided or any PI Agreement (or any agreement related
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thereto) or (B) constitute, or result in (or have a substantial likelihood
that it will result, at any time in the future, in) the occurrence of, an
Early Amortization Event or an Unmatured Early Amortization Event;
(v) Transferor shall have delivered to Trustee, each Rating Agency,
each Purchaser and any Enhancement Provider, a Tax Opinion for each
outstanding Series of Investor Certificates, Purchased Interest and
Enhancement, dated the Issuance Date, with respect to the sale; and
(vi) Transferor shall have delivered to Trustee an Officer's
Certificate, dated the Issuance Date for such Purchased Interest, to the
effect that all conditions set forth in clauses (i) and (iv) of this
Section for the sale of the Purchased Interest and the execution and
delivery of the related PI Agreement has been satisfied.
Upon satisfaction of the above conditions, Trustee shall execute and, at the
written direction of Transferor, deliver the related PI Agreement and any
related documents that Transferor shall reasonably request. The terms of the PI
Agreement may modify or amend the terms of this Agreement or the Purchase
Agreement (including the related definitions) solely as applied to the new
Purchased Interest.
(h) Transferor may from time to time direct Trustee to extend any PI
Agreement, subject to the satisfaction of the following conditions:
(i) on or before the tenth Business Day (or a shorter period as
shall be acceptable to the parties) immediately preceding the date of the
extension, Transferor shall have given Trustee, Servicer, the Rating
Agency and any Enhancement Provider written notice of the extension and
the date on which the extension shall occur;
(ii) Transferor shall have delivered to Trustee the required
agreements, certificates, documents and filings, in form satisfactory to
Trustee, executed by each party thereto other than Trustee;
(iii) the extension will not (A) contravene any provision of this
Agreement, any Supplement, any agreement pursuant to which any Enhancement
is provided or any PI Agreement (or any agreement related thereto) or (B)
constitute, or result in the occurrence of, an Early Amortization Event or
an Unmatured Early Amortization;
(iv) Transferor shall have delivered to Trustee, the Rating
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Agency, each Purchaser and any Enhancement Provider a Tax Opinion for each
outstanding Series of Investor Certificates, Purchased Interest and
Enhancement, dated the date of the extension, with respect to the
extension;
(v) Transferor shall have delivered to Trustee an Officer's
Certificate, dated the date of the extension, to the effect that all
conditions set forth in clauses (i) and (iii) of this Section for the
extension of such PI Agreement and the execution and delivery of the
related documents has been satisfied; and
(vi) the Modification Condition shall have been satisfied.
SECTION VI.11 Book-Entry Certificates. (a) If provided in any Supplement,
the Investor Certificates of any Series, upon original issuance, will be issued
in the form of one or more Book-Entry Certificates, to be delivered to the
applicable Clearing Agency, by, or on behalf of, Transferor. The Investor
Certificates of the Series initially shall be registered on the Certificate
Register in the name of the nominee of the Clearing Agency, and no Certificate
Owner will receive a Definitive Certificate representing such Certificate
Owner's interest in the Investor Certificates, except as provided in Section
6.13. To the extent a Supplement provides that the Investor Certificates of a
Series will originally be issued in the form of one or more Book-Entry
Certificates, then unless and until Definitive Certificates have been issued to
Certificate Owners pursuant to Section 6.13:
(i) the provisions of this section shall be in full force and
effect;
(ii) Transferor, Servicer, the Paying Agent, the Transfer Agent and
Registrar and Trustee may deal with the Clearing Agency and the Clearing
Agency Participants for all purposes (including the making of
distributions on the Investor Certificates) as the authorized
representatives of the Certificate Owners;
(iii) to the extent that the provisions of this section conflict
with any other provisions of this Agreement, the provisions of this
section shall control; and
(iv) the rights of Certificate Owners shall be exercised only
through the Clearing Agency and the Clearing Agency Participants and shall
be limited to those established by law and agreements between the
Certificate Owners and the Clearing Agency and/or the Clearing Agency
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Participants. Unless and until Definitive Certificates are issued pursuant
to Section 6.13, the initial Clearing Agency will make book-entry
transfers among the Clearing Agency Participants and receive and transmit
distributions of principal and interest on the Investor Certificates to
the Clearing Agency Participants.
(b) Certificates sold to Qualified Institutional Buyers in reliance on
Rule 144A under the Securities Act shall be represented by one or more
Book-Entry Certificates (the "144A Book-Entry Certificates"), in registered
form, without coupons, which will be deposited upon the order of Transferor on
the Issuance Date with Trustee as custodian for and registered in the name of
Cede & Co., as nominee of the Clearing Agency.
(c) Certificates sold in offshore transactions in reliance on Regulation S
shall be represented initially by temporary Book-Entry Certificates (the
"Regulation S Temporary Book-Entry Certificates"). The Regulation S Temporary
Book-Entry Certificates shall be exchanged on the later of (i) 40 days after the
later of (A) the Issuance Date and (B) the completion of the distribution of the
Certificates, as certified by the Lead Placement Agent and (ii) the date on
which the requisite certifications are due to and provided to Trustee (the later
of clauses (i) and (ii) is referred to as the "Exchange Date") for permanent
Book-Entry Certificates (the "Unrestricted Book-Entry Certificates," and
together with the Regulation S Temporary Book-Entry Certificates, the
"Regulation S Book-Entry Certificates"). The Regulation S Temporary Book-Entry
Certificates shall be issued in registered form, without coupons, and deposited
upon the order of Transferor with Trustee as custodian for and registered in the
name of a nominee of the Clearing Agency for credit to the account of the
depositaries for Euroclear and Cedel, which depositaries shall, on behalf of
Euroclear and Cedel, hold the interests on behalf of account holders (each a
"Member Organization"), which have rights in respect of the Certificates
credited to their securities accounts with Euroclear or Cedel from time to time.
(d) A Certificate Owner holding an interest in a Regulation S Temporary
Book-Entry Certificate may receive payments in respect of the Certificates on
the Regulation S Temporary Book-Entry Certificate only after delivery to
Euroclear or Cedel, as the case may be, of a written certification substantially
in the form of a certification in the form set forth in Exhibit F, and upon
delivery by Euroclear or Cedel, as the case may be, to the Transfer Agent and
Registrar of a certification or certifications substantially in the form set
forth in Exhibit G. The delivery by a Certificate Owner of the certification
referred to above shall constitute its irrevocable instruction to Euroclear or
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Cedel, as the case may be, to arrange for the exchange of the Certificate
Owner's interest in the Regulation S Temporary Book-Entry Certificate for a
beneficial interest in the Unrestricted Book-Entry Certificate after the
Exchange Date in accordance with the paragraph below.
After (i) the Exchange Date and (ii) receipt by the Transfer Agent and
Registrar of written instructions from Euroclear or Cedel, as the case may be,
directing the Transfer Agent and Registrar to credit or cause to be credited to
either Euroclear's or Cedel's, as the case may be, depositary's account a
beneficial interest in the Unrestricted Book-Entry Certificate in a principal
amount not greater than that of the beneficial interest in the Regulation S
Temporary Book-Entry Certificate, the Transfer Agent and Registrar shall
instruct the Clearing Agency to reduce the principal amount of the Regulation S
Temporary Book-Entry Certificate and increase the principal amount of the
Unrestricted Book-Entry Certificate, by the principal amount of the beneficial
interest in the Regulation S Temporary Book-Entry Certificate to be so
transferred, and to credit or cause to be credited to the account of Euroclear,
Cedel or a Person who has an account with the Clearing Agency (a "Clearing
Agency Participant"), as the case may be, a beneficial interest in the
Unrestricted Book-Entry Certificate having a principal amount of the Regulation
S Temporary Book-Entry Certificate that was reduced upon the transfer.
Upon return of the entire principal amount of the Regulation S Temporary
Book-Entry Certificate to Trustee in exchange for beneficial interests in the
Unrestricted Book-Entry Certificate, Trustee shall cancel the Regulation S
Temporary Book-Entry Certificate by perforation and shall forthwith destroy
it.
(e) Transfers within a single Series between different Book-Entry
Certificates shall be made in accordance with this Section.
(i) For transfer of an interest in an Unrestricted Book-Entry
Certificate for an interest in the 144A Book-Entry Certificate, if the
Certificateholder of a beneficial interest in an Unrestricted Book-Entry
Certificate deposited with the Clearing Agency wishes at any time to
exchange its interest in the Unrestricted Book-Entry Certificate, or to
transfer its interest in the Unrestricted Book-Entry Certificate to a
Person who wishes to take delivery thereof in the form of an interest in
the 144A Book-Entry Certificate, the Certificateholder may, subject to the
rules and procedures of Euroclear or Cedel and the Clearing Agency, as the
case may be, give directions for the Transfer Agent and Registrar to
exchange or cause the exchange or transfer or cause the transfer of the
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interest for an equivalent beneficial interest in the 144A Book-Entry
Certificate. Upon receipt by the Transfer Agent and Registrar of
instructions from Euroclear or Cedel (based on instructions from a Member
Organization) or from a Clearing Agency Participant, as applicable, or the
Clearing Agency, as the case may be, directing the Transfer Agent and
Registrar to credit or cause to be credited a beneficial interest in the
144A Book-Entry Certificate equal to the beneficial interest in the
Unrestricted Book-Entry Certificate to be exchanged or transferred (such
instructions to contain information regarding the Clearing Agency
Participant account to be credited with the increase, and, with respect to
an exchange or transfer of an interest in the Unrestricted Book-Entry
Certificate, information regarding the Clearing Agency Participant account
to be debited with the decrease), the Transfer Agent and Registrar shall
instruct the Clearing Agency to reduce the Unrestricted Book-Entry
Certificate by the aggregate principal amount of the beneficial interest
in the Unrestricted Book-Entry Certificate to be exchanged or transferred,
and the Transfer Agent shall instruct the Clearing Agency, concurrently
with the reduction, to increase the principal amount of the 144A
Book-Entry Certificate by the aggregate principal amount of the beneficial
interest in the Unrestricted Book-Entry Certificate to be so exchanged or
transferred, and to credit or cause to be credited to the account of the
Person specified in the instructions a beneficial interest in the 144A
Book-Entry Certificate equal to the reduction in the principal amount of
the Unrestricted Book-Entry Certificate.
(ii) For transfers of an interest in the 144A Book-Entry
Certificate for an interest in a Regulation S Book-Entry Certificate, if a
Certificate Owner holding a beneficial interest in the 144A Book-Entry
Certificate wishes at any time to exchange its interest in the 144A
Book-Entry Certificate for an interest in a Regulation S Book-Entry
Certificate, or to transfer its interest in the 144A Book-Entry
Certificate to a Person who wishes to take delivery thereof in the form of
an interest in the Regulation S Book-Entry Certificate, the
Certificateholder may, subject to the rules and procedures of the Clearing
Agency, give directions for the Transfer Agent and Registrar to exchange
or cause the exchange or transfer or cause the transfer of the interest
for an equivalent beneficial interest in the Regulation S Book-Entry
Certificate. Upon receipt by the Transfer Agent and Registrar of (A)
instructions given in accordance with the Clearing Agency's procedures
from a Clearing Agency Participant directing the Transfer Agent and
Registrar to credit or cause to be credited a beneficial interest in the
Regulation S
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Book-Entry Certificate in an amount equal to the beneficial interest in
the 144A Book-Entry Certificate to be exchanged or transferred, (B) a
written order given in accordance with the Clearing Agency's procedures
containing information regarding the account of the depositaries for
Euroclear or Cedel or another Clearing Agency Participant, as the case may
be, to be credited with the increase and the name of the account and (C)
certificates in the forms of Exhibits H and I, respectively, given by the
Certificate Owner and the proposed transferee of the interest, the
Transfer Agent and Registrar shall instruct the Clearing Agency to reduce
the 144A Book-Entry Certificate by the aggregate principal amount of the
beneficial interest in the 144A Book-Entry Certificate to be so exchanged
or transferred and the Transfer Agent and Registrar shall instruct the
Clearing Agency, concurrently with the reduction, to increase the
principal amount of the Regulation S Book-Entry Certificate by the
aggregate principal amount of the beneficial interest in the 144A
Book-Entry Certificate to be so exchanged or transferred, and to credit or
cause to be credited to the account of the Person specified in the
instructions a beneficial interest in the Regulation S Book-Entry
Certificate equal to the reduction in the principal amount of the 144A
Book-Entry Certificate.
(iii) Notwithstanding any other provisions of this section, a
placement agent for the Investor Certificates may exchange beneficial
interests in the Regulation S Temporary Book-Entry Certificate held by it
for interests in the 144A Book-Entry Certificate only after delivery by
the placement agent of instructions for the exchange substantially in the
form of Exhibit J. Upon receipt of the instructions provided in the
preceding sentence, the Transfer Agent and Registrar shall instruct the
Clearing Agency to reduce the principal amount of the Regulation S
Temporary Book-Entry Certificate to be so transferred and shall instruct
the Clearing Agency to increase the principal amount of the 144A
Book-Entry Certificate and credit or cause to be credited to the account
of the placement agent a beneficial interest in the 144A Book-Entry
Certificate having a principal amount equal to the amount by which the
principal amount of the Regulation S Temporary Book-Entry Certificate was
reduced upon the transfer pursuant to the instructions provided in the
first sentence of this subclause.
(iv) If a Book-Entry Certificate is exchanged for a Definitive
Certificate, the Certificates may be exchanged or transferred for one
another only in accordance with such procedures as are substantially
consistent with the provisions of clauses (i) through (iii) above
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(including the certification requirements intended to ensure that the
exchanges or transfers comply with Rule 144 or Regulation S under the
Securities Act, as the case may be) and as may be from time to time
adopted by Trustee.
SECTION VI.12 Notices to Clearing Agency. Whenever notice or other
communication to the Investor Certificateholders of any Series represented by
Book-Entry Certificates is required under this Agreement, unless and until
Definitive Certificates shall have been issued to Certificate Owners pursuant to
Section 6.13, Trustee, Servicer and the Paying Agent shall give all such notices
and communications specified herein to be given to the Investor
Certificateholders of the Series to the Clearing Agency.
SECTION VI.13 Definitive Certificates. If (a)(i) Transferor advises
Trustee in writing that the Clearing Agency is no longer willing or able to
discharge its responsibilities under any Letter of Representations properly, and
(ii) Transferor is unable to locate a qualified successor, (b) Transferor, at
its option, advises Trustee in writing that, with respect to any Series, it
elects to terminate the book-entry system through the Clearing Agency or (c)
after the occurrence of a Servicer Default, Certificate Owners representing
beneficial interests aggregating not less than 50% of the Invested Amount of the
Series advise Trustee and the Clearing Agency through the Clearing Agency
Participants in writing that the continuation of a book-entry system through the
Clearing Agency is no longer in the best interests of the Certificate Owners of
the Series, Trustee shall notify the Clearing Agency of the occurrence of any
such event and of the availability of Definitive Certificates of the Series to
Certificate Owners of the Series requesting the same. Upon surrender to Trustee
of the Investor Certificates of the Series by the Clearing Agency accompanied by
registration instructions from the Clearing Agency for registration, Trustee
shall authenticate and deliver Definitive Certificates of the Series. Neither
Transferor, the Transfer Agent and Registrar nor Trustee shall be liable for any
delay in delivery of the instructions and may conclusively rely on, and shall be
protected in relying on, the instructions. Upon the issuance of Definitive
Certificates of any Series, all references herein to obligations with respect to
the Series imposed upon or to be performed by the Clearing Agency shall be
deemed to be imposed upon and performed by Trustee, to the extent applicable
with respect to the Definitive Certificates and Trustee shall recognize the
Holders of the Definitive Certificates as Certificateholders hereunder.
SECTION VI.14 Letter of Representations. Notwithstanding anything to the
contrary in this Agreement or any Supplement, the parties hereto shall comply
with the terms of each Letter of Representations.
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ARTICLE VII TRANSFEROR
SECTION VII.1 Representations and Warranties of Transferor Relating to
Transferor and the Transaction Documents. On the date hereof and on each
Issuance Date, Transferor hereby represents and warrants that:
(a) Organization and Good Standing. Transferor is a corporation duly
organized and validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all necessary corporate power and
authority to acquire, own and transfer the Receivables and the Related
Transferred Assets.
(b) Due Qualification. Transferor is duly qualified to do business
and is in good standing as a foreign corporation (or is exempt from such
requirements), and has obtained all necessary licenses and approvals, in
all jurisdictions in which the ownership or lease of property or the
conduct of its business requires qualification, licenses or approvals and
where the failure so to qualify, to obtain the licenses and approvals or
to preserve and maintain the qualification, licenses or approvals would
have a substantial likelihood of having a Material Adverse Effect.
(c) Power and Authority. Transferor has all necessary corporate
power and authority to execute, deliver and perform its obligations under
this Agreement and the other Transaction Documents to which it is a party.
(d) Binding Obligations. This Agreement constitutes, and each other
Transaction Document to which Transferor is a party when executed and
delivered will constitute, a legal, valid and binding obligation of
Transferor, enforceable against it in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization or
other similar laws affecting the enforcement of creditors' rights
generally and by general principles of equity, regardless of whether
enforceability is considered in a proceeding in equity or at law.
(e) Authorization; No Conflict or Violation. The execution, delivery
and performance of, and the consummation of the transactions contemplated
by, this Agreement and the other Transaction Documents to be signed by
Transferor and the fulfillment of the terms hereof and
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thereof have been duly authorized by all necessary action and will not (i)
conflict with, violate, result in any breach of any of the terms and
provisions of, or constitute (with or without notice or lapse of time or
both) a default under, (A) its Certificate of Incorporation or Bylaws or
(B) any indenture, loan agreement, mortgage, deed of trust or other
material agreement or instrument to which Transferor is a party or by
which it or any of its properties is bound, (ii) result in the creation or
imposition of any Adverse Claim upon any of its properties pursuant to the
terms of any such contract, indenture, loan agreement, mortgage, deed of
trust, or other agreement or instrument, other than this Agreement and the
other Transaction Documents, or (iii) conflict with or violate any
federal, state, local or foreign law or any decision, decree, order, rule
or regulation applicable to it or any of its properties of any court or of
any federal, state, local or foreign regulatory body, administrative
agency or other governmental instrumentality having jurisdiction over it
or any of its properties, which conflict, violation, breach, default or
Adverse Claim, individually or in the aggregate, would have a substantial
likelihood of having a Material Adverse Effect.
(f) Litigation and Other Proceedings. (i) There is no action, suit,
proceeding or investigation pending or, to the best knowledge of
Transferor, threatened against it before any court, regulatory body,
arbitrator, administrative agency or other tribunal or governmental
instrumentality and (ii) it is not subject to any order, judgment, decree,
injunction, stipulation or consent order of or with any court or other
government authority that, in the case of clauses (i) and (ii), (A)
asserts the invalidity of this Agreement or any other Transaction
Document, (B) seeks to prevent the transfer of any Receivables or Related
Transferred Assets to the Trust, the issuance of the Certificates or the
consummation of any of the transactions contemplated by this Agreement or
any other Transaction Document, (C) seeks any determination or ruling that
would materially and adversely affect the performance by Transferor of its
obligations under this Agreement or any other Transaction Document or the
validity or enforceability of this Agreement or any other Transaction
Document, (D) seeks to affect materially and adversely the income tax
attributes of the transfers hereunder or the Trust under the United States
Federal income tax system or any state income tax system or (E)
individually or in the aggregate for all such actions, suits, proceedings
and investigations would have a substantial likelihood of having a
Material Adverse Effect.
(g) Governmental Approvals. All authorizations, consents,
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orders and approvals of, or other action by, any Governmental Authority
that are required to be obtained by Transferor, and all notices to and
filings with any Governmental Authority, that are required to be made by
it, in the case of each of the foregoing in connection with the transfer
of Receivables and Related Transferred Assets to the Trust or the
execution, delivery and performance by it of this Agreement and any other
Transaction Documents to which it is a party and the consummation of the
transactions contemplated by this Agreement, have been obtained or made
and are in full force and effect, except where the failure to obtain or
make any such authorization, consent, order, approval, notice or filing,
individually or in the aggregate for all such failures, would not
reasonably be expected to have a Material Adverse Effect.
(h) Offices. Transferor's principal place of business and chief
executive office is, and since the date of its incorporation has been,
located at the address set forth under Transferor's signature hereto (or
at such other locations, notified to Servicer and Trustee in accordance
with Section 7.2(c), in jurisdictions where all action required by Section
7.2(c) has been taken and completed).
(i) Account Banks. The names and addresses of all the Account Banks
are specified in Schedule 1 or, after the First Issuance Date, have been
provided by Servicer to Trustee pursuant to Section 3.3(c), and the
account numbers of the Bank Accounts at such Account Banks have been
specified in a letter provided on or prior to the First Issuance Date to
Trustee or, after the First Issuance Date, have been provided by Servicer
to Trustee pursuant to Section 3.3(c). The Account Agreements to which
Transferor is a party constitute the legal, valid and binding obligations
of the parties thereto enforceable against such parties in accordance with
their respective terms subject to applicable bankruptcy, reorganization,
insolvency, moratorium and other laws affecting creditors' rights
generally and general equitable principles.
(j) Investment Company Act. Transferor is not, and is not controlled
by, an "investment company" registered or required to be registered under
the Investment Company Act of 1940, as amended.
The representations and warranties set forth in this section shall survive
the transfer and assignment of the Receivables and the other Transferred Assets
to the Trust. Upon discovery by Transferor, Servicer or Trustee of a breach of
any of the foregoing representations and warranties, the party discovering the
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breach shall give written notice to the other parties to this Agreement within
three Business Days following the discovery; provided, however, that if such
breach arises from a Seller's failure to perform its obligations under the
Purchase Agreement and such failure is of the type that may be cured by
settlement of a Seller Non-Complying Receivables Adjustment or Seller Dilution
Adjustment under Sections 3.1 and 3.5 of the Purchase Agreement, and such
settlement shall have (in fact) been made, then no breach shall be deemed to
have occurred under this Agreement. Trustee's obligations in respect of
discovering any breach are limited as provided in Section 11.2(g).
SECTION VII.2 Covenants of Transferor. So long as any Investor
Certificates or Purchased Interests remain outstanding (other than any Investor
Certificates or Purchased Interests payment for which has been duly provided for
in accordance with this Agreement), Transferor shall:
(a) Compliance with Laws, Etc. Comply in all material respects with
all applicable laws, rules, regulations, judgments, decrees and orders
(including those relating to the Receivables, the Related Transferred
Assets, the funds in the Transaction Accounts and the related Contracts
and any other agreements related thereto), in each case to the extent the
failure to comply, individually or in the aggregate for all such failures,
would have a substantial likelihood of having a Material Adverse Effect.
(b) Preservation of Corporate Existence. Preserve and maintain its
corporate existence, rights, franchises and privileges in the jurisdiction
of its incorporation, and qualify and remain qualified in good standing as
a foreign corporation in each jurisdiction where the failure to preserve
and maintain such existence, rights, franchises, privileges and
qualifications would have a substantial likelihood of having a Material
Adverse Effect.
(c) Location of Offices. Keep its principal place of business and
chief executive office at the address referred to in Section 7.1(h) or,
upon not less than 30 days' (or such shorter number of days as is
acceptable to the Servicer and Trustee) prior written notice given by
Transferor to Servicer and Trustee, at such other location in a
jurisdiction where all action required pursuant to Section 3.10 shall have
been taken and completed. Transferor will at all times maintain its chief
executive offices within the United States of America.
(d) Reporting Requirements of Transferor. Unless Trustee and
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the Required Series Holders for each outstanding Series shall otherwise
consent in writing, furnish to Trustee, the Investor Certificateholders
and the Rating Agencies:
(i) Early Amortization Events. As soon as possible, and in any
event within five Business Days after an Authorized Officer of
Transferor has obtained knowledge of the occurrence of any Early
Amortization Event or any Unmatured Early Amortization Event, a
written statement of an Authorized Officer of Transferor describing
the event and the action that Transferor proposes to take with
respect thereto, in each case in reasonable detail,
(ii) Material Adverse Effect. As soon as possible and in any
event within five Business Days after an Authorized Officer of
Transferor has knowledge thereof, written notice that describes in
reasonable detail any Adverse Claim, other than any Permitted
Adverse Claim, against the Transferred Assets or any other event or
occurrence that, individually or in the aggregate for all such
events or occurrences, has had, or would have a substantial
likelihood of having, in the reasonable, good faith judgment of
Transferor, a Material Adverse Effect,
(iii) Proceedings. As soon as possible and in any event within
five Business Days after an Authorized Officer of Transferor has
knowledge thereof, written notice of (A) any litigation,
investigation or proceeding of the type described in Section 7.1(f)
not previously disclosed to Trustee and (B) any material adverse
development that has occurred with respect to any such previously
disclosed litigation, investigation or proceeding,
(iv) Other. Promptly, from time to time, any other
information, documents, records or reports respecting the
Receivables or the Related Transferred Assets or any other
information respecting the condition or operations, financial or
otherwise, of Transferor, in each case as Trustee may from time to
time reasonably request in order to protect the interests of
Trustee, the Trust or the Investor Certificateholders under or as
contemplated by this Agreement.
(e) Adverse Claims. Except for any conveyances under the
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Transaction Documents, not permit to exist any Adverse Claim (other than
Permitted Adverse Claims or Special New Jersey EPA Claims) to or in favor
of any Person upon or with respect to, or cause to be filed any financing
statement or equivalent document relating to perfection that covers, any
Transferred Asset or any interest therein. Transferor shall defend the
right, title and interest of the Trust in, to and under the Transferred
Assets, whether now existing or hereafter created, against all claims of
third parties claiming through or under Transferor.
(f) Extension or Amendment of Receivables; Change in Credit and
Collection Policy or Contracts. Not (i) extend, amend or otherwise modify
the terms of any Receivable or Contract (except as permitted by the Credit
and Collection Policy) in a manner that would have a material adverse
effect on the Investor Certificateholders or the Purchasers, or (ii)
permit any Seller to make any change in its Credit and Collection Policy
that would have a material adverse effect on the Investor
Certificateholders or the Purchasers; provided that Transferor or
Servicer, as applicable, may change the terms and provisions of the Credit
and Collection Policy if (A) with respect to any material change of
collection policies, the change is made with the prior written approval of
each Agent, if any, and the Modification Condition is satisfied with
respect thereto, (B) with respect to any material change of collection
procedures, the change is made with prior written notice to each Agent and
no material adverse effect on any Series or Purchased Interest would
result, and (C) with respect to any material change in accounting policies
relating to Write-Offs, the change is made in accordance with GAAP.
(g) Mergers, Acquisitions, Sales, Etc. Not:
(i) except pursuant to the Transaction Documents (A) be a
party to any merger or consolidation, or directly or indirectly
purchase or otherwise acquire all or substantially all of the assets
or any stock of any class of, or any partnership or joint venture
interest in, any other Person, or (B) directly or indirectly, sell,
transfer, assign, convey or lease, whether in one transaction or in
a series of transactions, all or substantially all of its assets, or
sell or assign with or without recourse any Receivables or Related
Transferred Assets (other than pursuant hereto) unless:
(x)(1) the corporation formed by the consolidation or
into which Transferor is merged or the Person that acquires by
conveyance or transfer the properties and
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assets of Transferor substantially as an entirety shall be, if
Transferor is not the surviving entity, organized and existing
under the laws of the United States of America or any state
thereof or the District of Columbia, and shall expressly
assume, by an agreement supplemental hereto, executed and
delivered to Trustee, in form satisfactory to Trustee and each
Agent, the performance of every covenant and obligation of
Transferor hereunder, including its obligations under Section
7.3, under each Supplement and under each PI Agreement, and
(2) Transferor has delivered to Trustee an Officer's
Certificate stating that the consolidation, merger, conveyance
or transfer and the supplemental agreement comply with this
section and an Opinion of Counsel stating that the
supplemental agreement is a valid and binding obligation of
the surviving entity enforceable against it in accordance with
its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws affecting creditors' rights generally
from time to time in effect and except as such enforceability
may be limited by general principles of equity (whether
considered in a suit at law or in equity), and
(y) the Modification Condition shall have been satisfied
with respect to the consolidation, merger, conveyance or
transfer, and the Transferor's independent director shall have
approved such consolidation, merger, conveyance or transfer,
and
(z) Transferor shall have delivered to Trustee, each
Rating Agency, each Purchaser and each Enhancement Provider a
Tax Opinion for each outstanding Series of Investor
Certificates, Purchased Interest and Enhancement, dated the
date of the consolidation, merger, conveyance or transfer,
with respect thereto, or
(ii) except as contemplated in the Purchase Agreement in
connection with Transferor's purchases of Receivables and Related
Assets from the Sellers, (A) make, incur or suffer to exist an
investment in, equity contribution to, or payment
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obligation in respect of the deferred purchase price of property or
services from, any Person, or (B) declare or pay any dividends on
its capital stock or make any loan or advance to any Person other
than for reasonable and customary operating expenses provided that
notwithstanding (A) or (B), (I) Transferor may make payments in
respect of its obligations under the Buyer Notes in accordance with
their terms and (II) at any time when the Transferor Net Worth shall
be at least 18% of the aggregate Unpaid Balance of the Receivables,
Transferor shall be permitted to declare and pay dividends on its
capital stock and make loans and/or suffer to exist an investment in
Treasure Chest or Big Flower.
(h) Change in Name. Not change its corporate name or the name under
or by which it does business, or permit any Seller to change its corporate
name or the name under or by which it does business, unless prior to the
change in name, Transferor shall have filed (or shall have caused to be
filed) any financing statements or amendments as Servicer or Trustee
determines may be necessary to continue the perfection of the Trust's
interest in the Receivables, the Related Transferred Assets and the
proceeds thereof.
(i) Amendment of Certificate of Incorporation; Change in Business.
Not amend any of Articles III, IV, XII(g), XII(h) or XIV of its
Certificate of Incorporation, or engage in any business other than as
contemplated by the Transaction Documents, unless the Modification
Condition has been satisfied in connection with the amendment or change in
Transferor's business.
(j) Amendments to Purchase Agreement. Except as expressly provided
otherwise in this Agreement, make no amendment to the Purchase Agreement
that would adversely affect in any material respect the interests of the
Investor Certificateholders, the Purchasers or any Enhancement Provider.
(k) Enforcement of Purchase Agreement. Perform all its obligations
under and otherwise comply with the Purchase Agreement in all material
respects and, if requested by Trustee, enforce, for the benefit of the
Trust, the covenants and agreements of any Seller in the Purchase
Agreement.
(l) Other Indebtedness. Not (i) create, incur or permit to exist
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any Indebtedness, Guaranty or liability or (ii) cause or permit to be
issued for its account any letters of credit or bankers' acceptances,
except for (A) Indebtedness incurred pursuant to the Buyer Notes, (B)
other liabilities specifically permitted to be created, incurred or owed
by Transferor pursuant to or in connection with the Transaction Documents,
and (C) liabilities for reasonable and customary operating expenses in an
aggregate amount that do not exceed $15,000 in any of its fiscal quarters.
(m) Separate Corporate Existence. Hereby acknowledge that Trustee
and the Investor Certificateholders are, and will be, entering into the
transactions contemplated by the Transaction Documents in reliance upon
Transferor's identity as a legal entity separate from any Seller, Servicer
and any other Person. Therefore, from and after the First Issuance Date,
Transferor shall take all reasonable steps to maintain its existence as a
corporation separate and apart from Servicer, each Seller and any other
Big Flower Person. Without limiting the generality of the foregoing,
Transferor shall take such actions as shall be reasonably required in
order that:
(i) Transferor will not incur any material indirect or
overhead expenses for items shared between Transferor and any Big
Flower Person that are not reflected in the Servicing Fee, other
than shared items of expenses not reflected in the Servicing Fee,
such as legal, auditing and other professional services, that 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 any Big Flower Person will pay all expenses
owing by Transferor or any Big Flower Person relating to the
preparation, negotiation, execution and delivery of the Transaction
Documents, including, without limitation, legal, commitment, agency
and other fees.
(ii) Transferor will account for and manage its liabilities
separately from those of every other Big Flower Person, including
payment of all payroll and administrative expenses and taxes (other
than taxes that are determined or required to be determined on a
consolidated or combined basis) from its own assets.
(iii) Transferor will conduct its business at an office
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segregated from the offices of each Big Flower Person, which office
of Transferor may consist of office space shared with a Big Flower
Person, a portion of which is allocated solely to Transferor.
(iv) Transferor will maintain corporate records, books of
account and stationery separate from those of every Big Flower
Person.
(v) Any annual financial statements of any Big Flower Person
that are made publicly available and which are consolidated to
include Transferor will contain footnotes stating that Treasure
Chest and certain other Subsidiaries of Big Flower have sold
Receivables and indicating that the assets of Transferor will not be
available to Big Flower or such Subsidiaries unless Transferor's
liabilities have been paid in full.
(vi) Transferor's assets will be maintained in a manner that
facilitates their identification and segregation from those of any
Big Flower Person.
(vii) Transferor shall not, directly or indirectly, be named
and shall not enter into an agreement to be named as a direct or
contingent beneficiary or loss payee on any insurance policy with
respect to any loss relating to the property of a Big Flower Person.
(viii) Any transaction between Transferor and any Big Flower
Person will be the type of transaction which would be entered into
by a prudent Person in the position of Transferor with a Big Flower
Person, and will be on terms that are at least as favorable as may
be obtained from a Person that is not a Big Flower Person (it being
understood and agreed that the transactions contemplated in the
Transaction Documents meet the requirements of this clause).
(ix) Neither Transferor nor any Big Flower Person will be or
will hold itself out to be responsible for the debts of the other.
(x) Transferor will operate, conduct its business and
otherwise act in a manner which is consistent with the factual
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assumptions in each of the opinions of Skadden, Arps, Slate, Meagher
& Flom dated the date hereof regarding certain substantive
consolidation and true sale issues.
(n) Taxes. File or cause to be filed, and cause each Person with
whom it shares consolidated tax liability to file, all Federal, state and
local tax returns that are required to be filed by it, except where the
failure to file such returns would not have a substantial likelihood of
having a Material Adverse Effect, and pay or cause to be paid all taxes
shown to be due and payable on such returns or on any assessments received
by it, other than any taxes or assessments, the validity of which are
being contested in good faith by appropriate proceedings and with respect
to which Transferor shall have set aside adequate reserves on its books in
accordance with GAAP and which proceedings would not have a substantial
likelihood of having a Material Adverse Effect.
(o) Webcraft Account Agreements. By no later than 5:00 p.m., New
York City time, on Friday, March 22, 1996, cause (i) a Lockbox Agreement
to be executed with a Lockbox Bank for payments by Obligors in respect of
all Receivables originated by Webcraft Technologies, Inc. and (ii) a
Blocked Account Agreement to be executed with a Blocked Account Bank for
the remittance of payments by Webcraft Chemicals, Inc. and by Obligors in
respect of all Receivables originated by Webcraft Chemicals, Inc.
The covenants set forth in this section shall survive the transfer and
assignment of the Receivables and the other Transferred Assets to the Trust.
Upon discovery by Transferor, Servicer or Trustee of a breach of any of the
foregoing covenants, the party discovering the breach shall give written notice
to the other parties to this Agreement within three Business Days following such
discovery; provided, however that if such breach arises from a Seller's failure
to perform its obligations under the Purchase Agreement and such failure is of
the type that may be cured by settlement of a Seller Non-Complying Receivables
Adjustment or Seller Dilution Adjustment under Sections 3.1 and 3.5 of the
Purchase Agreement, and such settlement shall have (in fact) been made, then no
breach shall be deemed to have occurred under this Agreement. Trustee's
obligations in respect of discovering any breach are limited as provided in
Section 11.2(g).
SECTION VII.3 Indemnification by Transferor. (a) Transferor hereby agrees
to indemnify the Trust, Trustee and each of the successors, permitted
transferees and assigns of any such Person and all officers, directors,
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shareholders, controlling Persons, employees, affiliates and agents of any of
the foregoing (each of the foregoing Persons individually being called an
"Indemnified Party"), forthwith on demand, from and against any and all damages,
losses, claims (whether on account of settlement or otherwise, and whether or
not the relevant Indemnified Party is a party to any action or proceeding that
gives rise to any Indemnified Losses (as defined below)), judgments, liabilities
and related reasonable costs and expenses (including reasonable attorneys' fees
and disbursements) (all of the foregoing collectively being called "Indemnified
Losses") awarded against or incurred by any of them that arise out of or relate
to Transferor's performance of, or failure to perform, any of its obligations
under or in connection with any Transaction Document.
Notwithstanding the foregoing, in no event shall any Indemnified Party be
indemnified against any Indemnified Losses (a) resulting from gross negligence
or willful misconduct on the part of such Indemnified Party (or the gross
negligence or willful misconduct on the part of any of its officers, directors,
employees, affiliates or agents), (b) to the extent they include Indemnified
Losses in respect of Receivables and reimbursement therefor that would
constitute credit recourse to Transferor for the amount of any Receivable or
Related Transferred Asset not paid by the related Obligor, (c) to the extent
they are or result from lost profits, (d) to the extent they are or result from
taxes (including interest and penalties thereon) asserted with respect to (i)
distributions on the Investor Certificates, (ii) franchise or withholding taxes
imposed on any Indemnified Party other than the Trust or Trustee in its capacity
as Trustee or (iii) federal or other income taxes on or measured by the net
income of the Indemnified Party and costs and expenses in defending against the
same, or (e) to the extent that they constitute consequential, special or
punitive damages.
If for any reason the indemnification provided in this Section is
unavailable to an Indemnified Party or is insufficient to hold it harmless, then
Transferor shall contribute to the amount paid by the Indemnified Party as a
result of any loss, claim, damage or liability in such proportion as is
appropriate to reflect not only the relative benefits received by the
Indemnified Party on the one hand and Transferor on the other hand, but also the
relative fault of the Indemnified Party (if any) and Transferor and any other
relevant equitable consideration.
Notwithstanding any provisions contained in any Transaction Document to
the contrary, Transferor shall not, and shall not be obligated to, pay any
amount pursuant to this Section 7.3(a) unless funds are allocated for such
payment pursuant to the provisions of a Supplement or PI Agreement governing
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the allocation of funds in the Master Collection Account. Any amount which
Transferor does not pay pursuant to the operation of the preceding sentence
shall not constitute a claim (as defined in ss.101 of the Bankruptcy Code)
against or corporate obligation of Transferor for any such insufficiency.
(b) Transferor shall be directly liable to all creditors of the Trust (but
not to the Trust, Trustee, Investor Certificateholders or Purchasers in such
capacities) and to the extent of any indemnities arising under the Transaction
Documents, any other Person identified as a Person to be indemnified by
Transferor pursuant to the Transaction Documents, for all liabilities of the
Trust to the same extent as it would be if the Trust constituted a partnership
under Delaware law and Transferor were a general partner thereof (to the extent
Transferred Assets remaining after Investor Certificateholders and Purchasers
have been paid in full are insufficient to pay such losses, claims, damages or
liabilities). Notwithstanding anything to the contrary herein, any such creditor
shall be a third party beneficiary of this Section 7.3. Nothing in this
provision shall be construed as waiving any rights or claims (including rights
of recoupment or subrogation) which the Transferor may have against any third
party under this Agreement or applicable laws.
ARTICLE VIII SERVICER
SECTION VIII.1 Representations and Warranties of Servicer. On the date
hereof and on each Issuance Date, Servicer hereby makes, and any Successor
Servicer also shall be deemed to make by its acceptance of its appointment
hereunder, the following representations and warranties for the benefit of
Trustee and the Certificateholders and the Purchasers:
(a) Organization and Good Standing. Servicer is a corporation duly
organized and validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all necessary corporate power and
authority to own its properties and to conduct its business as the
properties presently are owned and as the business presently is conducted.
(b) Due Qualification. Servicer is duly qualified to do business and
is in good standing as a foreign corporation (or is exempt from such
requirements), and has obtained all necessary licenses and approvals, in
all jurisdictions in which the servicing of the Receivables and the
Related Transferred Assets as required by this Agreement requires
qualification, licenses or approvals and where the failure so to qualify,
to obtain the licenses and approvals or to preserve and maintain the
qualification,
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licenses or approvals would have a substantial likelihood of having a
material adverse effect on its ability to perform its obligations as
Servicer under this Agreement or a Material Adverse Effect.
(c) Power and Authority. Servicer has all necessary corporate power
and authority to execute, deliver and perform its obligations under this
Agreement and the other Transaction Documents to which it is a party.
(d) Binding Obligations. This Agreement constitutes, and each other
Transaction Document to which Servicer is a party when executed and
delivered will constitute, a legal, valid and binding obligation of
Servicer, enforceable against it in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization or
other similar laws affecting the enforcement of creditors' rights
generally and by general principles of equity, regardless of whether
enforceability is considered in a proceeding in equity or at law.
(e) Authorization; No Conflict or Violation. The execution and
delivery by Servicer of this Agreement and the other Transaction Documents
to which it is a party, the performance by it of its obligations hereunder
and thereunder and the fulfillment by it of the terms hereof and thereof
that are applicable to it have been duly authorized by all necessary
action and will not (i) conflict with, violate, result in any breach of
any of the terms and provisions of, or constitute (with or without notice
or lapse of time or both) a default under, (A) its Certificate of
Incorporation or Bylaws or (B) any indenture, loan agreement, mortgage,
deed of trust, or other material agreement or instrument to which it is a
party or by which it or any of its properties is bound (excluding any such
agreement that is terminated on or before the First Issuance Date or under
which Servicer has obtained all necessary consents) or (ii) conflict with
or violate any federal, state, local or foreign law or any decision,
decree, order, rule or regulation applicable to it or any of its
properties of any court or of any federal, state, local or foreign
regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over it or any of its properties,
which conflict, violation, breach or default described, individually or in
the aggregate, would have a substantial likelihood of having a Material
Adverse Effect.
(f) Governmental Approvals. All authorizations, consents, orders and
approvals of, or other action by, any Governmental Authority that
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are required to be obtained by Servicer, and all notices to and filings
with any Governmental Authority that are required to be made by it, in the
case of each of the foregoing in connection with the execution, delivery
and performance by it of this Agreement and any other Transaction
Documents to which it is a party and the consummation of the transactions
contemplated by this Agreement, have been obtained or made and are in full
force and effect (other than the filing of the UCC financing statements
referred to in Section 2.3(a)(i)(A), all of which, at the time required in
Section 2.3(a)(i)(A), will be duly made), except where the failure to
obtain or make such authorization, consent, order, approval, notice or
filing, individually or in the aggregate for all such failures, would not
reasonably be expected to have a Material Adverse Effect.
(g) Litigation and Other Proceedings. (i) There is no action, suit,
proceeding or investigation pending or, to the best knowledge of Servicer,
threatened against it before any court, regulatory body, arbitrator,
administrative agency or other tribunal or governmental instrumentality
and (ii) it is not subject to any order, judgment, decree, injunction,
stipulation or consent order of or with any court or other government
authority that, in the case of clauses (i) and (ii), (A) seeks to affect
adversely the income tax attributes of the transfers hereunder or the
Trust under the United States federal income tax system or any state
income tax system or (B) individually or in the aggregate for all such
actions, suits, proceedings and investigations would have a substantial
likelihood of having a Material Adverse Effect.
The representations and warranties set forth in this section shall survive
the transfer and assignment of the Receivables and the other Transferred Assets
to the Trust. Upon discovery by Transferor, Servicer or Trustee of a breach of
any of the foregoing representations and warranties, the party discovering the
breach shall give written notice to the other parties to this Agreement within
three Business Days following the discovery. Trustee's obligations in respect of
discovering any breach are limited as provided in Section 11.2(g).
SECTION VIII.2 Covenants of Servicer. So long as any Investor Certificates
or Purchased Interests remain outstanding (other than any Investor Certificates
or Purchased Interests payment for which has been duly provided for in
accordance with this Agreement), Servicer shall:
(a) Compliance with Laws, Etc. Maintain in effect all qualifications
required under applicable law in order to service properly
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the Receivables and shall comply in all material respects with all
applicable laws, rules, regulations, judgments, decrees and orders, in
each case to the extent the failure to comply, individually or in the
aggregate for all such failures, would have a substantial likelihood of
having a Material Adverse Effect.
(b) Preservation of Corporate Existence. Preserve and maintain its
corporate existence, rights, franchises and privileges in the jurisdiction
of its incorporation, and qualify and remain qualified in good standing as
a foreign corporation in each jurisdiction where the failure to preserve
and maintain such existence, rights, franchises, privileges and
qualification would have a substantial likelihood of having a Material
Adverse Effect.
(c) Notice. As soon as possible (and in any event within five
Business Days after an Authorized Officer has knowledge thereof), furnish
to Transferor, Trustee, the Investor Certificateholders and the Rating
Agencies notice of any of the events described in clauses (i), (ii) and
(iii) of Section 7.2(d).
(d) Location of Offices. Maintain at all times its chief executive
offices within the United States of America.
The covenants set forth in this section shall survive the transfer and
assignment of the Transferred Assets to the Trust. Upon discovery by Transferor,
Servicer or Trustee of a breach of any of the foregoing covenants, the party
discovering the breach shall give written notice to the other parties to this
Agreement within three Business Days following the discovery. Trustee's
obligations in respect of discovering any breach are limited as provided in
Section 11.2(g).
SECTION VIII.3 Merger or Consolidation of, or Assumption of the
Obligations of, Servicer. Servicer shall not consolidate with or merge into any
other Person or convey, transfer or sell all or substantially all of its
properties and assets to any Person, unless (a) Servicer is the surviving entity
or, if it is not the surviving entity, the Person formed by the consolidation or
into which Servicer is merged or the Person that acquires by conveyance,
transfer or sale all or substantially all of the properties and assets of
Servicer shall be a corporation organized and existing under the laws of the
United States of America or any State thereof or the District of Columbia and
such corporation shall expressly assume, by an agreement supplemental hereto,
executed and delivered to Trustee and in form and substance satisfactory to
Trustee, the performance of every covenant and obligation of Servicer hereunder
and under
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the other Transaction Documents to which Servicer is a party, and (b) Servicer
shall have delivered to Trustee an Officer's Certificate stating that the
consolidation, merger, conveyance, transfer or sale and the supplemental
agreement comply with this Section and an Opinion of Counsel stating that the
supplemental agreement is a valid and binding obligation of the surviving entity
enforceable against it in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally and by general principles of equity.
SECTION VIII.4 Indemnification by Servicer. Servicer hereby agrees to
indemnify each Indemnified Party forthwith on demand, from and against any and
all Indemnified Losses awarded against or incurred by any of them that arise out
of or relate to Servicer's performance of, or failure to perform, any of its
obligations under or in connection with any Transaction Document.
Notwithstanding the foregoing, in no event shall any Indemnified Party be
indemnified against any Indemnified Losses (a) resulting from gross negligence
or willful misconduct on the part of such Indemnified Party (or the gross
negligence or willful misconduct on the part of any of its officers, directors,
employees, affiliates or agents), (b) to the extent they include Indemnified
Losses in respect of Receivables and reimbursement therefor that would
constitute credit recourse to Servicer for the amount of any Receivable or
Related Transferred Asset not paid by the related Obligor, (c) to the extent
they are or result from lost profits, (d) to the extent they are or result from
taxes (including interest and penalties thereon) asserted with respect to (i)
distributions on the Investor Certificates, (ii) franchise or withholding taxes
imposed on any Indemnified Party other than the Trust or Trustee in its capacity
as Trustee or (iii) federal or other income taxes on or measured by the net
income of the Indemnified Party and costs and expenses in defending against the
same, or (e) to the extent that they constitute consequential, special or
punitive damages.
If for any reason the indemnification provided in this section is
unavailable to an Indemnified Party or is insufficient to hold it harmless, then
Servicer shall contribute to the amount paid by the Indemnified Party as a
result of any loss, claim, damage or liability in such proportion as is
appropriate to reflect not only the relative benefits received by the
Indemnified Party on the one hand and Servicer on the other hand, but also the
relative fault of the Indemnified Party (if any) and Servicer and any other
relevant equitable consideration.
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SECTION VIII.5 Servicer Liability. Servicer shall be liable in accordance
with this Agreement only to the extent of the obligations specifically
undertaken by Servicer in such capacity herein and as set forth herein.
SECTION VIII.6 Limitation on Liability of Servicer and Others. No recourse
under or upon any obligation or covenant of this Agreement, any Supplement, any
Certificate or any other Transaction Document, or for any claim based thereon or
otherwise in respect thereof, shall be had against any incorporator,
shareholder, officer or director, as such, past, present or future, of Servicer
or of any successor corporation, either directly or through Servicer, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise; it being expressly understood that this
Agreement, any Supplement, all other relevant Transaction Documents and the
obligations incurred hereunder or thereunder are solely corporate obligations,
and that no such personal liability whatsoever shall attach to, or is or shall
be incurred by the incorporators, shareholders, officers or directors, as such,
of Servicer or of any successor corporation, or any of them, by reason of the
obligations, covenants or agreements contained in this Agreement, any
Supplement, any of the Certificates or any other Transaction Documents, or
implied therefrom; and that any and all such personal liability of, either at
common law or in equity or by constitution or statute, and any and all such
rights and claims against, every such incorporator, shareholder, officer or
director, as such, because of the creation of the indebtedness hereby
authorized, or under or by reason of the obligations or covenants contained in
this Agreement, any Supplement, any of the Certificates or any other Transaction
Documents, or implied therefrom, are hereby expressly waived and released as a
condition of, and as a consideration for, the execution of this Agreement and
any Supplement. Servicer and any director, officer, employee or agent of
Servicer may rely in good faith on any document of any kind prima facie properly
executed and submitted by any Person respecting any matters arising hereunder.
Servicer shall not be under any obligation to appear in, prosecute or defend any
legal action that is not incidental to its duties to service the Receivables in
accordance with this Agreement or any Supplement that in its reasonable opinion
may involve it in any expense or liability. Servicer may, in its sole
discretion, undertake any legal action relating to the servicing, collection or
administration of Receivables and Related Transferred Assets that it may
reasonably deem necessary or appropriate for the benefit of the
Certificateholders and the Purchasers with respect to this Agreement and the
rights and duties of the parties hereto and the interests of the
Certificateholders hereunder.
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ARTICLE IX EARLY AMORTIZATION EVENTS; TERMINATION BY SELLERS
SECTION IX.1 Early Amortization Events. The Early Amortization Events with
respect to each Series and Purchased Interest shall be specified in the related
Supplement or PI Agreement.
SECTION IX.2 Remedies. Upon the occurrence of an Early Amortization Event,
Trustee shall have, in addition to all other rights and remedies available to
Trustee under this Agreement or otherwise, (a) the right to apply Collections to
the payment of the obligations of Transferor and Servicer under the Transaction
Documents, as provided herein, and (b) all rights and remedies provided under
all other applicable laws, which rights, in the case of each and all of the
foregoing, shall be cumulative. Trustee shall exercise the rights at the
direction of the Investor Certificateholders pursuant to (and subject to the
limitations specified in) Section 11.14.
SECTION IX.3 Additional Rights Upon the Occurrence of Certain Events. (a)
If a Bankruptcy Event shall occur with respect to Transferor or if the
Transferor Retained Percentage shall be equal to or less than 2% on any day (a
"Transferor Event"; and either a Bankruptcy Event or a Transferor Event being a
"Trigger Event"), this Agreement (other than this Section 9.3) and the Trust
shall be deemed to have terminated on the day of the Trigger Event. Within seven
Business Days of the date of written notice to Trustee of the Trigger Event,
Trustee shall:
(i) publish a notice in an Authorized Newspaper that a Bankruptcy
Event or Transferor Event, as the case may be, has occurred with respect
to Transferor, that the Trust has terminated, and that Trustee intends to
sell, dispose of or otherwise liquidate the Receivables and the Related
Transferred Assets pursuant to this Agreement in a commercially reasonable
manner and on commercially reasonable terms, which shall include the
solicitation of competitive bids (a "Disposition"), and
(ii) send written notice to the Investor Certificateholders and
Purchasers describing the provisions of this section and requesting each
Investor Certificateholder and Purchaser to advise Trustee in writing
whether (A) it wishes Trustee to instruct Servicer not to effectuate a
Disposition, (B) it refuses to advise Trustee as to the specific action
Trustee shall instruct Servicer to take or (C) it wishes Servicer to
effect a Disposition.
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If, after 60 days from the day notice pursuant to subsection (a)(i) is
first published (the "Publication Date"), Trustee shall not have received the
written instruction described in subsection (a)(ii)(A) from Holders representing
at least a majority in interest within the meaning of Internal Revenue Service
Revenue Procedure 94-46 (or subsequent authority promulgated by the Internal
Revenue Service), determined as if the Trust were classified as a partnership
for Federal income tax purposes (a "majority in interest"), of all outstanding
Series of Investor Certificates and Purchased Interests, Trustee shall instruct
Servicer to effectuate a Disposition, and Servicer shall proceed to consummate a
Disposition and approve the appointment of an entity to acquire an interest in
the Trust and to assume the obligations of Transferor provided in Section 7.3(b)
and to act as Transferor for purposes of this Section 9.3. If, however, Holders
representing at least a majority of interest of all Series of Investor
Certificates and Purchased Interests instruct Trustee not to effectuate a
Disposition, the Trust shall be reconstituted and continue pursuant to the terms
of this Agreement; provided the Trustee obtains a Tax Opinion in connection with
such reconstitution and continuation.
(b) Notwithstanding the termination of this Agreement and the Trust
pursuant to subsection (a), the proceeds from any Disposition of the Receivables
and the Related Transferred Assets pursuant to subsection (a) shall be treated
as Collections on the Receivables and shall be allocated and deposited in
accordance with the provisions of Article IV.
(c) Trustee may appoint an agent or agents to assist with its
responsibilities pursuant to this section with respect to competitive bids.
(d) Transferor or any of its Affiliates shall be permitted to bid for the
Receivables and the Related Transferred Assets. Trustee may obtain a prior
determination from any bankruptcy trustee, receiver or liquidator that the terms
and manner of any proposed Disposition are commercially reasonable.
(e) Notwithstanding the termination of this Agreement and the Trust
pursuant to subsection (a), Trustee shall continue to have the rights described
in Section 9.2 and Article XI, and be subject to direction on terms consistent
with those set out in Section 11.14, pending the completion of any Disposition
and/or the reconstitution of the Trust.
SECTION IX.4 Termination By Sellers. If the Sellers have notified the
Trustee in writing of their election to terminate their agreements to sell
Receivables under the Purchase Agreement (as provided in Section 8.1 of the
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Purchase Agreement), (i) the Trustee shall notify the Certificateholders of all
Series and all Purchasers within five Business Days of its receipt of such
notice and (ii) Transferor shall cause each Series of Certificates and Purchased
Interest to be repaid out of Collections as early as is practicable in
accordance with the applicable Series Supplement or Purchase Agreement.
ARTICLE X SERVICER DEFAULTS
SECTION X.1 Servicer Defaults. Any of the following events shall
constitute a "Servicer Default":
(a) any failure by Servicer in its capacity as Servicer to make any
payment, transfer or deposit required by any Transaction Document to be
made by it or to give instructions or to give notice to Trustee to make
such payment, transfer or deposit, which failure continues unremedied for
three Business Days,
(b) failure on the part of Servicer in its capacity as Servicer duly
to observe or perform in any material respect any other covenants or
agreements of Servicer set forth in this Agreement or any other
Transaction Document, which failure has a material adverse effect on the
Holders of any Series or Purchased Interest and continues unremedied for a
period of 30 days after the date on which written notice of the failure,
requiring the same to be remedied, shall have been given to Servicer by
Trustee, or to Servicer and Trustee by any Investor Certificateholder or
Purchaser or, subject to the prior written approval of the Required Series
Holders for each outstanding Series, Transferor,
(c) Servicer shall assign its duties under this Agreement, except as
permitted by Sections 3.1(b) and 8.3,
(d) any Daily Report or Monthly Report shall fail to have been
correct in any material respect when made or delivered, or shall not have
been delivered when required under the terms hereof, and in either case
such condition continues unremedied for a period of three Business Days;
or any other representation, warranty or certification made by Servicer in
any Transaction Document or in any certificate or other document or
instrument delivered pursuant to any Transaction Document shall fail to
have been correct in any material respect when made or delivered, which
failure has a materially adverse effect on the Certificateholders or any
Purchased Interest and which materially adverse effect continues
unremedied for a period of 15 Business Days
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after the date on which written notice of failure, requiring the same to
be remedied, shall have been given to Servicer by Trustee or to Servicer
and Trustee by any Investor Certificateholder or Purchaser or, subject to
the prior written approval of the Required Series Holders for each
outstanding Series, Transferor, or
(e) any Bankruptcy Event shall occur with respect to Servicer.
In the event of any Servicer Default, so long as such Servicer Default shall not
have been remedied, Transferor shall, at the direction of the Trustee or the
Required Series Holders for each outstanding Series, by notice then given in
writing to Servicer (a "Termination Notice"), terminate all (but not less than
all) the rights and obligations of Servicer as Servicer under this Agreement and
in and to the Receivables, the Related Transferred Assets and the proceeds
thereof.
As soon as possible, and in any event within five Business Days, after an
Authorized Officer of Servicer has obtained knowledge of the occurrence of any
Servicer Default, Servicer shall furnish Transferor, Trustee, each Agent and the
Rating Agencies, and Trustee shall promptly furnish each Investor
Certificateholder, notice of such Servicer Default.
Notwithstanding the foregoing, a delay in or failure in performance
referred to in subsection (a) for a period of ten Business Days after the
applicable grace period, or in subsection (b) or (d) for a period of 30 Business
Days after the applicable grace period, shall not constitute a Servicer Default
if the delay or failure could not have been prevented by the exercise of
reasonable diligence by Servicer and the delay or failure was caused by an act
of God or the public enemy, riots, acts of war, acts of terrorism, epidemics,
flood, embargoes, weather, landslides, fire, earthquakes or similar causes. The
preceding sentence shall not relieve Servicer from using its best efforts to
perform its obligations in a timely manner in accordance with the terms of the
Transaction Documents, and Servicer shall promptly give Transferor, Trustee,
each Agent and Transferor an Officer's Certificate notifying them of its failure
or delay.
SECTION X.2 Trustee to Act; Appointment of Successor. (a) On and after
Servicer's receipt of a Termination Notice pursuant to Section 10.1, Servicer
shall continue to perform all servicing functions under this Agreement until the
date specified in the Termination Notice or otherwise specified by Transferor
(acting upon the instruction of the Trustee or the Required Series Holders for
each outstanding Series) in writing or, if no such date is specified in the
Termination Notice, or otherwise specified by Transferor (acting upon the
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instruction of the Trustee or the Required Series Holders for each outstanding
Series), until a date mutually agreed upon by Servicer and Transferor (acting
upon the instruction of the Trustee or the Required Series Holders for each
outstanding Series). Transferor (acting upon the instruction of the Trustee or
the Required Series Holders for each outstanding Series) shall, as promptly as
possible after the giving of a Termination Notice, nominate an Eligible Servicer
as successor servicer (the "Successor Servicer"); provided that (a) in so
appointing any Successor Servicer, Trustee shall give due consideration to any
Successor Servicer proposed by any Agent and (b) the Successor Servicer shall
accept its appointment by a written assumption in a form acceptable to
Transferor (acting upon instruction from the Trustee) and each Agent. Any Person
who is nominated to be a Successor Servicer shall accept its appointment by a
written assumption in form and substance acceptable to Transferor (acting upon
instruction from the Trustee). In the event that a Successor Servicer has not
been appointed or has not accepted its appointment at the time when Servicer
ceases to act as Servicer, Trustee without further action shall automatically be
appointed the Successor Servicer. Trustee may delegate any of its servicing
obligations to an affiliate or agent in accordance with Section 3.1(b). If
Trustee is prohibited by applicable law from performing the duties of Servicer
hereunder, Trustee may appoint, or may petition a court of competent
jurisdiction to appoint, a Successor Servicer hereunder. Trustee shall give
prompt notice to the Rating Agencies and each Investor Certificateholder upon
the appointment of a Successor Servicer.
(b) After Servicer's receipt of a Termination Notice, and on the date that
a Successor Servicer shall have been appointed by Transferor (acting upon the
instruction of the Trustee or the Required Series Holders for each outstanding
Series) and shall have accepted the appointment pursuant to subsection (a), all
authority and power of Servicer under this Agreement shall pass to and be vested
in the Successor Servicer (a "Service Transfer"); and, without limitation,
Trustee is hereby authorized and empowered to execute and deliver, on behalf of
Servicer, as attorney-in-fact or otherwise, all documents and instruments, and
to do and accomplish all other acts or things that Trustee reasonably determines
are necessary or appropriate to effect the purposes of the Service Transfer.
Upon the appointment of the Successor Servicer and its acceptance thereof,
Servicer agrees that it will terminate its activities as Servicer hereunder in a
manner that Trustee indicates will facilitate the transition of the performance
of such activities to the Successor Servicer. Servicer agrees that it shall use
reasonable efforts to assist the Successor Servicer in assuming the obligations
to service and administer the Receivables and the Related Transferred Assets, on
the terms and subject to the conditions set forth herein, and to effect the
termination of the responsibilities and rights of Servicer to conduct servicing
hereunder, including the transfer to such Successor Servicer
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of all authority of Servicer to service the Receivables and Related Transferred
Assets provided for under this Agreement and all authority over all cash amounts
that shall thereafter be received with respect to the Receivables or the Related
Transferred Assets. Servicer shall, within five Business Days after the
designation of a Successor Servicer, transfer its electronic records (and any
related software and software licenses, appropriately assigned and prepaid)
relating to the Receivables, the related Contracts and the Related Transferred
Assets to the Successor Servicer in such electronic form as the Successor
Servicer may reasonably request and shall promptly transfer to the Successor
Servicer all other records, correspondence and documents necessary for the
continued servicing of the Receivables and the Related Transferred Assets in the
manner and at such times as the Successor Servicer shall request. To the extent
that compliance with this Section shall require Servicer to disclose to the
Successor Servicer information of any kind that Servicer reasonably deems to be
confidential, prior to the transfer contemplated by the preceding sentence the
Successor Servicer shall be required to enter into such licensing and
confidentiality agreements as Servicer shall reasonably deem necessary to
protect its interest. All reasonable costs and expenses (including attorneys'
fees and disbursements) incurred in connection with transferring the
Receivables, the Related Transferred Assets and all related Records (including
the related Contracts) to the Successor Servicer and amending this Agreement and
the other Transaction Documents to reflect the succession as Servicer pursuant
to this Section shall be paid by the predecessor Servicer (or, if Trustee serves
as Successor Servicer on an interim basis, the initial Servicer) within 15 days
after presentation of reasonable documentation of the costs and expenses.
(c) Upon its appointment and acceptance thereof, the Successor Servicer
shall be the successor in all respects to Servicer with respect to servicing
functions under this Agreement and shall be subject to all the responsibilities
and duties relating thereto placed on Servicer by the terms and provisions
hereof (and shall carry out such responsibilities and duties in accordance with
standards of reasonable commercial prudence), and all references in this
Agreement to Servicer shall be deemed to refer to the Successor Servicer.
(d) All authority and power granted to Servicer or the Successor Servicer
under this Agreement shall automatically cease and terminate upon termination of
the Trust pursuant to Section 12.1, and shall pass to and be vested in
Transferor and, without limitation, Transferor is hereby authorized and
empowered, on and after the effective date of such termination, to execute and
deliver, on behalf of the Servicer or the Successor Servicer, as
attorney-in-fact or otherwise, all documents and other instruments and to do and
accomplish all other acts or things that Transferor reasonably determines are
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necessary or appropriate to effect the purposes of such transfer of servicing
rights. The Servicer or Successor Servicer agrees to cooperate with Transferor
in effecting the termination of the responsibilities and rights of the Servicer
or Successor Servicer to conduct servicing of the Receivables and the Related
Transferred Assets. The Successor Servicer shall, within five Business Days
after such termination, transfer its electronic records relating to the
Receivables and the Related Transferred Assets to Transferor in such electronic
form as Transferor may reasonably request and shall transfer all other records,
correspondence and documents relating to the Receivables and the Related
Transferred Assets to Transferor in the manner and at such times as Transferor
shall reasonably request. To the extent that compliance with this Section shall
require the Successor Servicer to disclose to Transferor information of any kind
that the Successor Servicer deems to be confidential, Transferor shall be
required to enter into such customary licensing and confidentiality agreements
as the Successor Servicer shall reasonably deem necessary to protect its
interests. All reasonable costs and expenses (including attorneys' fees and
disbursements) incurred by Trustee, in its capacity as Successor Servicer, in
connection with the termination shall be paid by Transferor within 15 days after
presentation of reasonable documentation of the costs and expenses.
Notwithstanding any provisions contained in any Transaction Document to
the contrary, Transferor shall not, and shall not be obligated to, pay any
amount pursuant to this Section unless funds are allocated for such payment
pursuant to the provisions of a Supplement or PI Agreement governing the
allocation of funds in the Master Collection Account. Any amount which
Transferor does not pay pursuant to the operation of the preceding sentence
shall not constitute a claim (as defined in ss.101 of the Bankruptcy Code)
against or corporate obligation of Transferor for any such insufficiency.
SECTION X.3 Notification of Servicer Default; Notification of Appointment
of Successor Servicer. Within four Business Days after an Authorized Officer of
Servicer becomes aware of any Servicer Default, Servicer shall give written
notice thereof to Transferor, Trustee and the Rating Agencies, and Trustee
shall, promptly upon receipt of the written notice, give notice to the Investor
Certificateholders at their respective addresses appearing in the Certificate
Register and to the Purchasers. Upon any termination or appointment of a
Successor Servicer pursuant to this Article X, Trustee shall give prompt written
notice thereof to the Investor Certificateholders at their respective addresses
appearing in the Certificate Register and to the Purchasers and the Rating
Agencies.
SECTION X.4 Waiver of Servicer Defaults. The Required Series
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Holders for each outstanding Series or Transferor, acting at the direction of
the Required Series Holders for each outstanding Series, may, on behalf of
Transferor and all Holders of each Series, waive in writing any Servicer Default
hereunder and its consequences. Upon any such waiver of a Servicer Default, such
Servicer Default shall cease to exist, and shall be deemed to have been remedied
for every purpose of this Agreement. No such waiver shall extend to any
subsequent or other Servicer Default or impair any right consequent thereon
except to the extent expressly so waived.
ARTICLE XI TRUSTEE
SECTION XI.1 Duties of Trustee. (a) Trustee undertakes to perform the
duties and only the duties as are specifically set forth in this Agreement. The
provisions of this Article XI shall apply to Trustee solely in its capacity as
Trustee, and not to Trustee in its capacity as Servicer if it is acting as
Servicer. Following the occurrence of a Servicer Default of which a Responsible
Officer has actual knowledge, Trustee shall exercise such of the rights and
powers vested in it by this Agreement and use the same degree of care and skill
in their exercise as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs; provided that if Trustee
shall assume the duties of Servicer pursuant to Section 10.2, Trustee in
performing the duties shall use the degree of skill and attention customarily
exercised by a servicer with respect to trade receivables that it services for
itself or others. Trustee shall have no power to create, assume or incur
indebtedness or other liabilities in the name of the Trust other than as
contemplated in, or incidental to the performance of its duties under, the
Transaction Documents.
(b) Trustee, upon receipt of all resolutions, certificates, statements,
opinions, reports, documents, orders or other instruments furnished to Trustee
that are specifically required to be furnished pursuant to any provision of this
Agreement, shall examine them to determine whether they are substantially in the
form required by this Agreement. Trustee shall give written notice to the Person
who furnished any item of the type listed in the preceding sentence of any lack
of substantial conformity of any such item to the applicable requirements of
this Agreement. In addition, Trustee shall give prompt written notice to the
Investor Certificateholders and each Agent of any lack of substantial conformity
of any such instrument to the applicable requirements of this Agreement
discovered by Trustee that would entitle a specified percentage of the Investor
Certificateholders or the Holders of any Series of Certificates or Purchasers or
Agents to take any action pursuant to this Agreement. Within two Business Days
of its receipt of any Monthly Report, Trustee shall verify the mathematical
computations contained therein and shall notify Servicer and each
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of the Rating Agencies of the accuracy of such computations or of any
discrepancies therein (provided that the rounding of numbers will not constitute
a discrepancy), whereupon Servicer shall deliver to the Rating Agencies within 5
Business Days thereafter a certificate describing the nature and cause of such
discrepancies and the action that Servicer proposes to take with respect
thereto. During the first week of each year, Trustee shall provide the Rating
Agencies with a certificate, signed by a Responsible Officer, to the effect that
Trustee is not aware of any Early Amortization Event (or, if it is aware of any
Early Amortization Event, specifying the nature of that event).
(c) Subject to subsection (a), no provision of this Agreement shall be
construed to relieve Trustee from liability for its own negligent action, its
own negligent failure to act or its own willful misconduct; provided that:
(i) Trustee shall not be liable for an error of judgment made in
good faith by a Responsible Officer or Responsible Officers of Trustee,
unless it shall be proved that Trustee was negligent in ascertaining the
pertinent facts,
(ii) Trustee shall not be liable with respect to any action taken,
suffered or omitted to be taken by it in good faith in accordance with the
direction (as applicable) of the Majority Investors, the Required Series
Holders for each outstanding Series, all Investors, any Agent, or the
Required Series Holders relating to the time, method and place of
conducting any proceeding for any remedy available to Trustee, or
exercising any trust or power conferred upon Trustee, under this
Agreement,
(iii) Trustee shall not be charged with knowledge of (A) any failure
by Servicer to comply with the obligations of Servicer referred to in
subsections (a), (b) or (c) of Section 10.1, (B) any breach of the
representations and warranties of Transferor set forth in Section 2.3 or
7.1 or the representations and warranties of Servicer set forth in Section
8.1, (C) any breach of the covenants of Transferor set forth in Section
7.2 or the covenants of Servicer set forth in Section 8.2 or (D) the
ownership of any Certificate or Purchased Interest for purposes of Section
6.5, in each case unless a Responsible Officer of Trustee obtains actual
knowledge of the matter or Trustee receives written notice of the matter
from Servicer or from any Holder,
(iv) the duties and obligations of Trustee shall be determined
solely by the express provisions of this Agreement, Trustee shall not be
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liableexcept for the performance of the duties and obligations that
specifically shall be set forth in this Agreement, no implied covenants or
obligations shall be read into this Agreement against Trustee and, in the
absence of bad faith on the part of Trustee, Trustee may conclusively rely
on the truth of the statements and the correctness of the opinions
expressed in any certificates or opinions that are furnished to Trustee
and that conform to the requirements of this Agreement, and
(v) without limiting the generality of this section or Section 11.2,
Trustee shall have no duty (A) to see to any recording, filing, or
depositing of this Agreement or any agreement referred to herein or any
financing statement evidencing a security interest in the Receivables or
the Related Transferred Assets, or to see to the maintenance of any such
recording or filing or depositing or to any rerecording, refiling or
redepositing of any thereof (except that Trustee (x) shall note in its
records the date of filing of each UCC financing statement identified to
it in writing as having been filed in connection with the Transaction
Documents, or filed in connection with a predecessor receivables
securitization and amended and/or assigned in connection with the
Transaction Documents, and naming Trustee as secured party or assignee of
the secured party and (y) shall, unless it shall have received an Opinion
of Counsel to the effect that no such filing is necessary to continue the
perfection of Transferor's or Trustee's interests in the Receivables and
the Related Assets, cause continuation statements to be filed with respect
to each such financing statement not less than four years and six months
and not more than five years after (1) its filing date and (2) the date of
filing of any prior continuation statement), (B) to see to the payment or
discharge of any tax, assessment, or other governmental charge or any
Adverse Claim or encumbrance of any kind owing with respect to, assessed
or levied against, any part of the Trust, (C) to confirm or verify the
contents of any reports or certificates of Servicer delivered to Trustee
pursuant to this Agreement that are believed by Trustee to be genuine and
to have been signed or presented by the proper party or parties or (D) to
ascertain or inquire as to the performance or observance of any of
Transferor's or Servicer's representations, warranties or covenants or
Servicer's duties and obligations as Servicer.
(d) Trustee shall not be required to expend or risk its own funds or
otherwise incur financial liability in the performance of any of its duties
hereunder or in the exercise of any of its rights or powers, if Trustee
reasonably believes that the repayment of such funds or adequate indemnity
against such
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risk or liability is not reasonably assured to it, and none of the provisions
contained in this Agreement shall in any event require Trustee to perform, or be
responsible for the manner of performance of, any obligations of Servicer under
this Agreement except during the time, if any, that Trustee shall be the
successor to, and be vested with the rights, duties, powers and privileges of,
Servicer in accordance with the terms of this Agreement.
(e) Except for actions expressly authorized by this Agreement, Trustee
shall take no action reasonably likely to impair the interests of the Trust in
any Transferred Asset now existing or hereafter created or to impair the value
of any Transferred Asset now existing or hereafter created.
(f) Except to the extent expressly provided otherwise in this Agreement,
Trustee shall have no power to vary the Transferred Assets.
(g) In the event that the Paying Agent or the Transfer Agent and Registrar
shall fail to perform any obligation, duty or agreement in the manner or on the
day on which such obligation, duty or agreement is required to be performed by
the Paying Agent or the Transfer Agent and Registrar, as the case may be, under
this Agreement, Trustee shall be obligated, promptly upon its actual knowledge
thereof, to perform the obligation, duty or agreement in the manner so required.
SECTION XI.2 Certain Matters Affecting Trustee. Except as otherwise
provided in Section 11.1:
(a) Trustee may rely on and shall be protected in acting on, or in
refraining from acting in accordance with, any resolution, Officer's
Certificate, opinion of counsel, certificate of auditors or any other
certificate, statement, instrument, instruction, opinion, report, notice,
request, consent, order, appraisal, bond or other paper or document and
any information contained therein believed by it to be genuine and to have
been signed or presented to it pursuant to this Agreement by the proper
party or parties including, but not limited to, reports and records
required by Article III,
(b) Trustee may consult with counsel and any opinion of counsel
rendered by counsel reasonably satisfactory to Transferor shall be full
and complete authorization and protection in respect of any action taken
or permitted or omitted by it hereunder in good faith and in accordance
with such opinion of counsel,
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(c) Trustee (including in its role as Successor Servicer, if it
ever acts in that capacity) shall be under no obligation to exercise any
of the rights or powers vested in it by this Agreement, or to institute,
conduct or defend any litigation or other proceeding hereunder or in
relation hereto, at the request, order or direction of any of the
Certificateholders, the Purchasers or any Agent, pursuant to the
provisions of this Agreement, unless such Certificateholders, the
Purchasers or Agent shall have offered to Trustee reasonable security or
indemnity against the costs, expenses and liabilities that may be incurred
therein or thereby; provided that nothing contained herein shall relieve
Trustee of the obligations, upon the occurrence and continuance of a
Servicer Default that has not been cured, to exercise such of the rights
and powers vested in it by this Agreement and to use the same degree of
care and skill in their exercise as a prudent person would exercise or use
under the circumstances in the conduct of his or her own affairs,
(d) Trustee shall not be personally liable for any action taken,
permitted or omitted by it in good faith and believed by it to be
authorized or within the discretion or rights or powers conferred upon it
by this Agreement,
(e) Trustee shall not be bound to make any investigation into the
facts of matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval,
bond or other paper or document, unless requested in writing to do so by
the Required Series Holders for each outstanding Series; provided that if
the payment within a reasonable time to Trustee of the costs, expenses, or
liabilities likely to be incurred by it in connection with making such
investigation shall be, in the opinion of Trustee, not reasonably assured
to Trustee by the security afforded to it by the terms of this Agreement,
Trustee may require reasonable indemnity against such cost, expense, or
liability as a condition to proceeding with the investigation. The
reasonable expense of every examination shall be paid by Servicer or, if
paid by Trustee, shall be reimbursed by Servicer upon demand,
(f) Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents,
representatives, attorneys or a custodian, and Trustee shall not be
responsible for any misconduct or negligence on the part of any agent,
representative, attorney or custodian appointed with due care by it
hereunder,
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(g) except as may be required by Section 11.1(b) hereof, Trustee
shall not be required to make any initial or periodic examination of any
documents or records related to the Transferred Assets for the purpose of
establishing the presence or absence of defects or for any other purpose,
(h) whether or not therein expressly so provided, every provision
of this Agreement relating to the conduct or affecting the liability of or
affording protection to Trustee shall be subject to the provisions of this
section,
(i) Trustee shall have no liability with respect to the acts or
omissions of Servicer (except and to the extent Servicer is Trustee),
including, but not limited to, acts or omissions in connection with: (A)
the servicing, management or administration of the Receivables or the
Related Transferred Assets, (B) calculations made by Servicer whether or
not reported to Trustee, and (C) deposits into or withdrawals from any
Bank Accounts or Transaction Accounts established pursuant to the terms of
this Agreement, and
(j) in the event that Trustee is also acting as Paying Agent or
Transfer Agent and Registrar hereunder, the rights and protections
afforded to Trustee pursuant to this Article XI shall also be afforded to
Trustee acting as Paying Agent or as Transfer Agent and Registrar.
SECTION XI.3 Limitation on Liability of Trustee. Trustee shall at no time
have any responsibility or liability for or with respect to the correctness of
the recitals contained herein or in the Certificates (other than the certificate
of authentication on the Certificates) or the Purchased Interests. Except as set
forth in Section 11.15, Trustee makes no representations as to the validity or
sufficiency of this Agreement, any PI Agreement, any Supplement, the
Certificates (other than the certificate of authentication on the Certificates)
or the Purchased Interests, any other Transaction Document or any Transferred
Asset or related document. Trustee shall not be accountable for the use or
application (i) by Transferor of any of the Certificates or the Purchased
Interests or of the proceeds of such Certificates or the Purchased Interests, or
(ii) for the use or application of any funds paid to Transferor or to Servicer
(other than to Trustee in its capacity as Servicer) in respect of the
Transferred Assets or deposited by Servicer in or withdrawn by Servicer from the
Bank Accounts, the Transaction Accounts or any other accounts hereafter
established to effectuate the transactions contemplated herein or in the other
Transaction Documents and in accordance with the terms hereof or thereof.
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Trustee shall at no time have any responsibility or liability for or with
respect to the legality, validity, or enforceability of any ownership or
security interest in any Transferred Asset, or the perfection or priority of
such a security interest or the maintenance of any such perfection or priority,
or for the generation of the payments to be distributed to Certificateholders or
Purchasers under this Agreement, including: (a) the existence and substance of
any Transferred Asset or any related Record or any computer or other record
thereof, (b) the validity of the transfer of any Transferred Asset to the Trust
or of any preceding or intervening transfer, (c) the performance or enforcement
of any Transferred Asset, (d) the compliance by Transferor or Servicer with any
warranty or representation made under this Agreement or in any other Transaction
Document and the accuracy of any such warranty or representation prior to
Trustee's receipt of actual notice of any noncompliance therewith or any breach
thereof, (e) any investment of monies pursuant to Section 4.4 or any loss
resulting therefrom, (f) the acts or omissions of Transferor, Servicer or any
Obligor, (g) any action of Servicer taken in the name of Trustee, or (h) any
action by Trustee taken at the instruction of Servicer; provided that the
foregoing shall not relieve Trustee of its obligation to perform its duties
(including but not limited to its duties, if any, to act as Servicer in
accordance with Section 10.2) under the Agreement in accordance with the terms
hereof.
Except with respect to a claim based on the failure of Trustee to perform
its duties under this Agreement or based on Trustee's negligence or willful
misconduct, no recourse shall be had against Trustee in its individual capacity
for any claim based on any provision of this Agreement, any other Transaction
Document, the Certificates, the Purchased Interests, any Transferred Asset or
any assignment thereof. Trustee shall not have any personal obligation,
liability, or duty whatsoever to any Certificateholder, any Purchaser or any
other Person with respect to any such claim, and any such claim shall be
asserted solely against the Trust or any indemnitor who shall furnish indemnity
to the Trust or Trustee as provided in this Agreement.
SECTION XI.4 Trustee May Deal with Other Parties. Subject to any
restrictions that may otherwise be imposed by Section 406 of ERISA or Section
4975(e) of the Internal Revenue Code, Trustee in its individual or any other
capacity may deal with the other parties hereto (other than Transferor) and
their respective affiliates, with the same rights as it would have if it were
not Trustee.
SECTION XI.5 Servicer To Pay Trustee's Fees and Expenses. (a) To the
extent not paid by Servicer to Trustee from funds constituting the Servicing
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Fee, Servicer covenants and agrees to pay to Trustee from time to time, and
Trustee shall be entitled to receive, such reasonable compensation as is agreed
upon in writing between Trustee and Servicer (which shall not be limited by any
provision of law in regard to the compensation of a trustee of an express trust)
for all services rendered by it in connection with the Transaction Documents and
in the exercise and performance of any of the powers and duties hereunder of
Trustee, and Servicer will pay or reimburse Trustee upon its request for all
reasonable expenses, disbursements and advances incurred or made by Trustee in
accordance with any of the provisions of the Transaction Documents to which it
is a party (including the reasonable fees and expenses of its agents, any
co-Trustee and counsel) except any expense, disbursement or advance that may
arise from Trustee's negligence or willful misconduct.
(b) In addition, Servicer agrees to indemnify Trustee from, and hold it
harmless against, any and all losses, liabilities, damages, claims or expenses
incurred by Trustee in connection with the Transaction Documents or in the
exercise or performance of any of the powers or duties of Trustee hereunder,
other than those resulting from the negligence or willful misconduct of Trustee.
(c) If Trustee is appointed Successor Servicer pursuant to Section 10.2,
the provisions of this section shall not apply to expenses, disbursements and
advances made or incurred by Trustee in its capacity as Successor Servicer,
which shall be paid out of the Servicing Fee. Servicer's covenant to pay the
fees, expenses, disbursements and advances provided for in this section shall
survive the resignation or removal of Trustee and the termination of this
Agreement.
(d) Trustee shall look solely to Servicer for payment of amounts described
in this Section 11.5, and Trustee shall have no claim for payment of such
amounts against Transferor or the Transferred Assets.
SECTION XI.6 Eligibility Requirements for Trustee. Trustee hereunder shall
at all times: (a) be (i) a banking institution organized under the laws of the
United States, (ii) a member bank of the Federal Reserve System or (iii) any
other banking institution or trust company, incorporated and doing business
under the laws of any State or of the United States, a substantial portion of
the business of which consists of receiving deposits or exercising fiduciary
powers similar to those permitted to national banks under the authority of the
Comptroller of the Currency, and that is supervised and examined by a state or
federal authority having supervision over banks, (b) not be an Enhancement
Provider or an Affiliate of BT Securities Corporation, (c) have, in the case of
an entity that is subject to risk-based capital adequacy requirements,
risk-based
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capital of at least $250,000,000 or, in the case of an entity that is not
subject to risk-based capital adequacy requirements, a combined capital and
surplus of at least $250,000,000 and (d) have an unsecured long-term debt rating
of at least "A" or its equivalent from each Rating Agency. If such corporation
or association publishes reports of condition at least annually, pursuant to law
or to the requirements of the aforesaid supervising or examining authority,
then, for the purpose of this section, the combined capital and surplus of the
corporation or association shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. If at
any time Trustee shall cease to be eligible in accordance with the provisions of
this section, Trustee shall resign immediately in the manner and with the effect
specified in Section 11.7.
SECTION XI.7 Resignation or Removal of Trustee. (a) Trustee may at any
time resign and be discharged from its obligations hereunder by giving 30 days'
prior written notice thereof to Transferor, Servicer, the Rating Agencies, the
Investor Certificateholders and the Agents. Upon receiving the notice of
resignation, Transferor shall promptly appoint, subject to satisfaction of the
Modification Condition, a successor Trustee who meets the eligibility
requirements set forth in Section 11.6 by written instrument, in duplicate, one
copy of which shall be delivered to the resigning Trustee and one copy to the
successor Trustee. If no successor Trustee shall have been so appointed and
shall have accepted appointment within 30 days after the giving of the notice of
resignation, the resigning Trustee, upon notice to each Agent, may petition any
court of competent jurisdiction to appoint a successor Trustee.
(b) If at any time Trustee shall cease to be eligible to be Trustee
hereunder in accordance with the provisions of Section 11.6 hereof and shall
fail to resign promptly after its receipt of a written request therefor by
Transferor, or if at any time Trustee shall be legally unable to act, or shall
be adjudged bankrupt or insolvent, or if a receiver for Trustee or of its
property shall be appointed, or any public officer shall take charge or control
of Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation, then Transferor may remove Trustee and, subject to
the consent of each Agent (which consent shall not be unreasonably withheld or
delayed) and satisfaction of the Modification Condition, promptly appoint a
successor Trustee by written instrument, in duplicate, one copy of which shall
be delivered to Trustee so removed and one copy to the successor Trustee.
(c) Any resignation or removal of Trustee and appointment of a successor
Trustee pursuant to any of the provisions of this section shall not become
effective until (i) acceptance of appointment by the successor Trustee as
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provided in Section 11.8 hereof, and (ii) such successor Trustee shall have
agreed in writing to be bound by any Intercreditor Agreements then in effect.
SECTION XI.8 Successor Trustee. (a) Any successor Trustee appointed as
provided in Section 11.7 shall execute, acknowledge and deliver to Transferor,
Servicer, the Investor Certificateholders, the Purchasers and the predecessor
Trustee an instrument accepting such appointment hereunder, and thereupon the
resignation or removal of the predecessor Trustee shall, upon payment of its
fees and expenses and other amounts owed to it pursuant to Section 11.5, become
effective and the successor Trustee, without any further act, deed or
conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with like effect as if originally
named as Trustee herein. The predecessor Trustee shall deliver to the successor
Trustee, at the expense of Servicer, all documents or copies thereof and
statements held by it hereunder; and Transferor and the predecessor Trustee
shall execute and deliver such instruments and do such other things as may
reasonably be required for fully vesting and confirming in the successor Trustee
all such rights, powers, duties and obligations. Servicer shall promptly give
notice to the Rating Agencies upon the appointment of a successor Trustee.
(b) No successor Trustee shall accept appointment as provided in this
section unless at the time of the acceptance the successor Trustee shall be
eligible to become Trustee under the provisions of Section 11.6.
(c) Upon acceptance of appointment by a successor Trustee as provided in
this section, the successor Trustee shall mail notice of the succession
hereunder to all Investor Certificateholders at their addresses as shown in the
Certificate Register and to each Rating Agency.
SECTION XI.9 Merger or Consolidation of Trustee. Any Person into which
Trustee may be merged or converted or with which it may be consolidated, or any
Person resulting from any merger, conversion or consolidation to which Trustee
shall be a party, or any Person succeeding to all or substantially all of the
corporate trust business of Trustee, shall be the successor of Trustee
hereunder, if the Person meets the requirements of Section 11.6, without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, anything herein to the contrary notwithstanding. Servicer shall
promptly give notice to the Rating Agencies upon any merger or consolidation of
Trustee.
SECTION XI.10 Appointment of Co-Trustee or Separate Trustee. (a)
Notwithstanding any other provisions of this Agreement, at any time, for
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the purpose of meeting any legal requirements of any jurisdiction in which any
part of the Trust may at the time be located, Trustee shall have the power and
may execute and deliver all instruments to appoint one or more Persons (who may
be an employee or employees of Trustee) to act as a co-Trustee or co-Trustees,
or separate Trustee or separate Trustees, with respect to all or any part of the
Trust, and to vest in such Person or Persons, in such capacity and for the
benefit of the Certificateholders and the Purchasers, such title to the Trust,
or any part thereof, and, subject to the other provisions of this section, such
powers, duties, obligations, rights and trusts as Trustee may consider necessary
or appropriate; provided, that such appointment shall be subject to the prior
written consent of Transferor unless an Early Amortization Event or Servicer
Termination Event is continuing; and provided further, that in any event Trustee
will give Transferor and Servicer prior written notice of such appointment. No
co-Trustee or separate Trustee shall be required to meet the terms of
eligibility as a successor Trustee under Section 11.6 and no notice to
Certificateholders, Agents or Purchasers of the appointment of any co-Trustee or
separate Trustee shall be required under Section 11.8.
(b) Every separate Trustee and co-Trustee shall, to the extent permitted
by law, be appointed and act subject to the following provisions and conditions:
(i) all rights, powers, duties and obligations conferred or imposed
upon Trustee shall be conferred or imposed upon and exercised or performed
by Trustee and the separate Trustee or co-Trustee jointly (it being
understood that the separate Trustee or co-Trustee is not authorized to
act separately without Trustee joining in such act), except to the extent
that under any law of any jurisdiction in which any particular act or acts
are to be performed (whether as Trustee hereunder or as successor to
Servicer hereunder), Trustee shall be incompetent or unqualified to
perform such act or acts, in which event such rights, powers, duties and
obligations (including the holding of title to the Trust or any portion
thereof in any such jurisdiction) shall be exercised and performed singly
by such separate Trustee or co-Trustee, but solely at the direction of
Trustee,
(ii) no Trustee hereunder shall be personally liable by reason of
any act or omission of any other Trustee hereunder, and
(iii) Trustee may at any time accept the resignation of or remove
any separate Trustee or co-Trustee.
(c) Any notice, request or other writing given to Trustee shall be
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deemed to have been given to each of the then separate Trustees and co-Trustees,
as effectively as if given to each of them. Every instrument appointing any
separate Trustee or co-Trustee shall refer to this Agreement and the conditions
of this Article XI. Each separate Trustee and co-Trustee, upon its acceptance of
the trusts conferred, shall be vested with the estates or property specified in
its instrument of appointment, either jointly with Trustee or separately, as may
be provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the conduct
of, affecting the liability of, or affording protection or indemnity to,
Trustee. Every such instrument shall be filed with Trustee and a copy thereof
given to Servicer.
(d) Any separate Trustee or co-Trustee may at any time constitute Trustee,
its agent or attorney-in-fact with full power and authority, to the extent not
prohibited by law, to do any lawful act under or in respect to this Agreement or
any other Transaction Document on its behalf and in its name. If any separate
Trustee or co-Trustee shall die, become incapable of acting, resign or be
removed, all its estates, properties, rights, remedies and trusts shall vest in
and be exercised by Trustee, to the extent permitted by law, without the
appointment of a new or successor Trustee.
SECTION XI.11 Tax Returns. No Federal income tax return shall be filed on
behalf of the Trust unless required by applicable law or any Governmental
Authority. In the event the Trust shall be required to file tax returns,
Servicer shall prepare or shall cause to be prepared any tax returns required to
be filed by the Trust and shall remit the returns to Trustee for signature at
least five Business Days before the returns are due to be filed. Trustee shall
promptly sign and deliver the returns to Servicer and Servicer shall promptly
file the returns. Subject to the responsibilities of Trustee set forth in any
Supplement, Servicer, in accordance with that Supplement, shall also prepare or
shall cause to be prepared all tax information required by law to be made
available to Certificateholders and Purchasers and shall deliver the information
to Trustee at least five Business Days prior to the date it is required by law
to be made available to the Certificateholders and Purchasers. Trustee, upon
request, will furnish Servicer with all the information known to Trustee as may
be reasonably required in connection with the preparation of all tax returns of
the Trust and shall, upon request, execute such returns as Trustee determines
are appropriate.
SECTION XI.12 Trustee May Enforce Claims Without Possession of
Certificates. All rights of action and claims under this Agreement, the
Certificates, the Purchased Interests or the other Transaction Documents may be
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prosecuted and enforced by Trustee without the possession of any of the
Certificates or Purchased Interests or the production thereof in any proceeding
relating thereto, and any such proceeding instituted by Trustee shall be brought
in its own name as Trustee. Any recovery of judgment shall, after provision for
the payment of the reasonable compensation, expenses, disbursements and advances
of Trustee, its agents and counsel, be distributed to the Certificateholders or
Purchasers in respect of which such judgment has been obtained in accordance
with the related Supplement or PI Agreement.
SECTION XI.13 Suits for Enforcement. If an Early Amortization Event or a
Servicer Default shall occur and be continuing, Trustee, in its discretion may,
subject to the provisions of Sections 11.1 and 11.14, proceed to protect and
enforce its rights and the rights of the Certificateholders or Purchasers under
this Agreement by suit, action or proceeding in equity or at law or otherwise,
whether for the specific performance of any covenant or agreement contained in
this Agreement or any other Transaction Document or in aid of the execution of
any power granted in this Agreement or any other Transaction Document or for the
enforcement of any other legal, equitable or other remedy as Trustee, being
advised by counsel, shall deem most effectual to protect and enforce any of the
rights of Trustee or the Certificateholders or Purchasers. Nothing herein
contained shall be deemed to authorize Trustee to authorize or consent to or
accept or adopt on behalf of any Certificateholder or Purchaser any plan of
reorganization, arrangement, adjustment or composition affecting the Investor
Certificates or the rights of any Holder thereof, or the Purchasers, or to
authorize Trustee to vote in respect of the claim of any Investor
Certificateholder or Purchaser in any such proceeding.
SECTION XI.14 Rights of Transferor To Direct Trustee. Transferor, acting
with the prior written consent of the Required Series Holders for each
outstanding Series if no Early Amortization Event shall have occurred, and
acting only upon the direction of the Required Series Holders for each
outstanding Series if an Early Amortization Event shall have occurred, shall
have the right to direct the time, method, and place of conducting any
proceeding for any remedy available to Trustee, or exercising any trust or power
conferred on Trustee, or exercising any trust or power conferred on Trustee
(other than any rights of the Trustee under Section 3.8, the exercise of which
rights shall be subject to direction by the Required Series Holders for each
outstanding Series); provided that:
(i) subject to Section 11.1, Trustee may decline to follow any such
direction if Trustee, being advised by counsel, determines that the action
so directed may not be taken lawfully, or if a Responsible Officer
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or Responsible Officers of Trustee shall determine, in good faith, that
the proceedings so directed would be illegal or involve Trustee in
personal liability or be unduly prejudicial to the rights of the Investor
Certificateholders not giving such direction;
(ii) nothing in this Agreement shall impair the right of Trustee to
take any action deemed proper by Trustee and that is not inconsistent with
such direction of Transferor;
(iii) the Required Series Holders for each outstanding Series shall
have the right to request Transferor to direct the Trustee to take any
action related to or concerning the Transferred Assets (provided that such
action, or the power to take such action, is not specifically delegated to
or reserved by Transferor pursuant to any other Section of this Agreement
or any Supplement) and otherwise within the scope of this Section;
(iv) in the event that, pursuant to clause (iii) above (whether
before or after the occurrence of an Early Amortization Event), the
Required Series Holders for each outstanding Series shall request
Transferor to direct the Trustee to take any action and Transferor fails
to do so within 5 Business Days (in the case of any direction given prior
to the occurrence of an Early Amortization Event) or one Business Day (in
the case of any other direction) the Required Series Holders for each
outstanding Series shall have the right to direct the Trustee to take such
requested action; and
(v) the Trustee shall be entitled to rely exclusively on a
certification from the Required Series Holders for each outstanding Series
as to the existence of circumstances described in clause (iv) above, and
shall have no liability to any Person arising out of or relating to the
inaccuracy of such certification or actions taken by the Trustee at such
direction.
SECTION XI.15 Representations and Warranties of Trustee. Trustee
represents and warrants that:
(a) it is a banking corporation organized, existing and in good
standing under the laws of the State of New York,
(b) it has full power, authority and right to execute, deliver and
perform the Transaction Documents to which it is a party, and has taken
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all necessary action to authorize the execution, delivery and performance
by it of the Transaction Documents, and
(c) the Transaction Documents to which it is a party have been duly
executed and delivered by Trustee and, in the case of all such Transaction
Documents, are legal, valid and binding obligations of Trustee,
enforceable in accordance with their respective terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
other similar laws 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.
SECTION XI.16 Maintenance of Office or Agency. Trustee will maintain, at
its address designated pursuant to Section 13.6, an office, offices, agency or
agencies where notices and demands to or upon Trustee in respect of the
Certificates, the Purchased Interests and the Transaction Documents to which it
is a party may be served. Trustee will give prompt written notice to Servicer
and to the Certificateholders and Agents of any change in the location of the
Certificate Register or any such office or agency.
ARTICLE XII TERMINATION
SECTION XII.1 Termination of Trust. (a) If not earlier terminated pursuant
to Section 9.3, the Trust and the respective obligations and responsibilities of
Transferor, Servicer and Trustee created hereby (other than the obligation of
Trustee to make payments to Certificateholders or Purchasers as hereinafter set
forth and the obligations of Servicer contained in Sections 11.11) shall
terminate, except with respect to the duties and obligations described in
Sections 3.9(c), 7.3, 8.4, 11.5, 12.2(b), 13.9, 13.15 and 13.16 upon the
earliest to occur of (i) the day on which the Investor Certificateholders, the
Purchasers and Trustee shall have been paid all amounts required to be paid to
them pursuant to this Agreement and Trustee has disposed of all property held
hereunder (including pursuant to Section 12.3) and (ii) the day which is 21
years less one day after the death of the officers and the last survivor of all
the lineal descendants of every officer of the Trustee who are living on the
date hereof.
(b) Notwithstanding the foregoing, the last payment of the principal of
and interest on the Investor Certificates of any Series shall be due and payable
no later than the Final Scheduled Payment Date for that Series. If, on the
Distribution Date immediately prior to the Final Scheduled Payment Date for
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any Series, Servicer determines that the Invested Amount for the Series on the
applicable Final Scheduled Payment Date (after giving effect to all changes
therein on such date) will exceed zero, Servicer shall solicit bids for the sale
of interests in the Transferred Assets in an amount equal to 110% of the Base
Amount for the Series on the Final Scheduled Payment Date for the Series (after
giving effect to all distributions required to be made on the Final Scheduled
Payment Date for the Series), but in no event more than the Series Collection
Allocation Percentage for that Series of the Receivables held by the Trust on
that day. Transferor shall be entitled to participate in and to receive notice
of each bid submitted in connection with the bidding process. Upon the
expiration of the period, Servicer shall determine (x) the Highest Bid and (y)
the Available Final Distribution Amount for the Series. Servicer shall sell the
interests in the Transferred Assets on the Final Scheduled Payment Date for the
applicable Series to the bidder with the Highest Bid and shall deposit the
proceeds of such sale in the Master Collection Account for allocation (together
with the Available Final Distribution Amount for such Series) to the
Certificateholders of such Series.
SECTION XII.2 Final Distribution. (a) Servicer shall give Trustee at least
ten days' prior written notice of the date on which the Trust is expected to
terminate in accordance with Section 12.1(a). The notice shall be accompanied by
a certificate of an Authorized Officer of Servicer setting forth the information
specified in Section 3.6 covering the period during the then current calendar
year through the date of the notice. Upon receiving the notification from
Servicer, Trustee shall give the Certificateholders and/or the Agents (as
applicable) written notice as soon as practicable after Trustee's receipt of
notice from Servicer, which notice shall specify (i) the Distribution Date upon
which final payment with respect to the Certificates is expected to be made and
(ii) the amount of any such final payment. Trustee shall give the notice to the
Transfer Agent and Registrar and the Paying Agent at the time such notice is
given to Certificateholders. On the Distribution Date specified in the notice,
Trustee shall, based upon the Daily Report relating to such Distribution Date,
cause to be distributed to the Certificateholders the amounts distributable to
them on such Distribution Date pursuant to the applicable Supplement. Each
Certificateholder shall present its Certificate to Trustee and surrender its
Certificate for cancellation at the address of Trustee set forth in Section 13.6
not more than ten Business Days after the Distribution Date upon which final
payment with respect to the Certificates has been made.
(b) Notwithstanding the termination of the Trust pursuant to Section
12.1(a), all funds then on deposit in the Master Collection Account shall
continue to be held in trust for the benefit of the Certificateholders and the
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Purchasers and the Paying Agent or Trustee shall pay such funds to the
Certificateholders and the Purchasers at the time set forth in Section 12.1(a).
If any Certificateholder or Purchaser does not claim the portion of such funds
to which it is entitled at such time, interest shall cease to accrue on its
Certificate or Purchased Interest (as applicable) and Trustee shall hold such
funds in trust for such Person, subject to the further provisions of this
Section. In the event that any of the Certificateholders shall not have claimed
their final payment with respect to their Certificates within six months after
the date specified in the above-mentioned written notice from Trustee, Trustee
shall give a second written notice to the remaining Certificateholders
concerning payment of the final distribution with respect thereto and surrender
of their Certificates for cancellation. If within one year after the second
notice all the Certificates shall not have been surrendered for cancellation,
Trustee may take appropriate steps, or may appoint an agent to take appropriate
steps, to contact the remaining Certificateholders concerning surrender of their
Certificates, and the cost thereof shall be paid out of the funds in the Master
Collection Account held for the benefit of such Certificateholders. Trustee and
the Paying Agent shall pay to Transferor any monies held by them for the payment
of principal of or interest on the Certificates that remains unclaimed for two
years after the termination of the Trust pursuant to Section 12.1(a). After
payment of the monies to Transferor, Certificateholders entitled to the money
must look to Transferor for payment as unsecured general creditors unless an
applicable abandoned property law designates another Person.
SECTION XII.3 Rights Upon Termination of the Trust. Upon the termination
of the Trust pursuant to Section 12.1 and the surrender of the Transferor
Certificate by Transferor to Trustee, Trustee shall transfer, assign, set over
and otherwise convey to Transferor (without recourse, representation or
warranty), all right, title and interest of the Trust in the Receivables,
whether then existing or thereafter created, the Related Transferred Assets and
all of the other property and rights previously conveyed to Trustee hereunder,
except for amounts held by Trustee pursuant to Section 12.2(b) and except for
the rights of RPA Indemnified Parties (other than Transferor and its officers,
directors, shareholders, controlling Persons, employees and agents) to
indemnification and contribution under Section 9.1 of the Purchase Agreement.
Trustee shall execute and deliver the instruments of transfer and assignment
(including any document necessary to release the security interest in favor of
Trustee (for the benefit of the Certificateholders or the Purchasers) in such
Receivables and Related Transferred Assets, to release any filing evidencing or
perfecting such security interest and to terminate all powers of attorney
created by the Transaction Documents), in each case without recourse,
representation or warranty, that shall be reasonably requested by Transferor to
vest in Transferor all right, title
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and interest that Trustee had in the Transferred Assets.
SECTION XII.4 Optional Repurchase of Investor Interests. Any Supplement
may provide that on any Distribution Date occurring on or after the date that
the aggregate Unpaid Balance of the Receivables then included in the Receivables
Pool is 10% or less of the aggregate Unpaid Balance of the Receivables included
in the Receivables Pool as of the commencement of any Amortization Period,
Transferor shall have the option, upon the giving of ten days' prior written
notice by Transferor to Servicer, Trustee and the Rating Agencies, to repurchase
the undivided interest of the Series in the Trust by depositing into the
Principal Funding Account, on such Distribution Date (the "Repurchase
Distribution Date") an amount (the "Repurchase Amount") equal to the unpaid
Invested Amount of the Series plus accrued and unpaid interest on the unpaid
principal amount of the Series (and accrued and unpaid interest with respect to
interest amounts that were due but not paid on a prior Distribution Date)
through the day preceding the Distribution Date at the rates of interest then
applicable to such Series plus any "Additional Amounts" (as defined in the
Supplement for such Series) known to be payable through the day preceding the
Distribution Date for such Series. Upon tender of all outstanding Certificates
of the Series by the Certificateholders, Trustee shall then distribute such
amounts, together with all other amounts on deposit in the Principal Funding
Account with respect to that Series to the Certificateholders of the Series on
the next Distribution Date in repayment of the principal amount and all accrued
and unpaid interest owing to the Certificateholders. Following the Repurchase
Distribution Date, the Certificateholders of the Series shall have no further
rights with respect to the Receivables and Trustee shall execute and deliver the
instruments of transfer and assignment (including any document necessary to
release the security interest in favor of Trustee (for the benefit of the
Certificateholders) in the Receivables and Related Transferred Assets and to
release any filing evidencing or perfecting the security interest), in each case
without recourse, representation or warranty, as shall be reasonably requested
by Transferor to vest in Transferor all right, title and interest that Trustee
had in the Transferred Assets. In the event that Transferor fails for any reason
to deposit the Repurchase Amount for any Series, payments shall continue to be
made to the Certificateholders of the Series in accordance with the terms of
this Agreement.
ARTICLE XIII MISCELLANEOUS PROVISIONS
SECTION XIII.1 Amendment, Waiver, Etc. (a) This Agreement and any
Supplement may be amended from time to time by Servicer, Transferor and Trustee
by a written instrument signed by each of them, without the consent of
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any of the Certificateholders, the Purchasers or the Agents; provided that such
action shall not adversely affect in any material respect the interests of any
Certificateholder or Purchaser; and provided further, that any amendment of this
Agreement to effect any modification of the Bank Account arrangements pursuant
to Section 3.3(c)(ii)(y) shall not require the consent of any of the
Certificateholders or the Purchasers. This Agreement and any Supplement may not
be amended unless Transferor shall have delivered the proposed amendment to each
Agent and the Rating Agencies at least ten Business Days (or such shorter period
as shall be acceptable to each of them) prior to the execution and delivery
thereof and the Modification Condition has been satisfied with respect to such
amendment; provided, however, that the Modification Condition shall not apply to
proposed amendments the purpose of which is to correct any ambiguities or
inconsistencies in this Agreement or such Supplement. Notwithstanding anything
in this Section 13.1 to the contrary, the Supplement with respect to any Series
may be amended on the terms and in accordance with the procedures provided in
such Supplement.
(b) Any PI Agreement may be amended from time to time by the parties
thereto but without the consent of the Investor Certificateholders; provided
that any amendment will not adversely affect in any material respect the
interests of the Certificateholders, as evidenced by an Officer's Certificate of
Servicer; provided further, that any amendment of this Agreement to effect any
modification of the Bank Account arrangements pursuant to Section 3.3(c)(ii)(y)
shall not require the consent of any of the Certificateholders or the
Purchasers. No PI Agreement may be amended unless Transferor shall have
delivered the proposed amendment to each Agent and the Rating Agencies at least
ten Business Days (or such shorter period as shall be acceptable to each of
them) prior to the execution and delivery thereof and the Modification Condition
has been satisfied with respect to such amendment; provided, however, that the
Modification Condition shall not apply to proposed amendments the purpose of
which is to correct any ambiguities or inconsistencies in such PI Agreement.
(c) The provisions of this Agreement, any Supplement and any PI Agreement
may also be amended, modified or waived from time to time by Servicer,
Transferor and Trustee with the consent of: (i) in the case of this Agreement or
any Supplement, (A) the Required Series Holders of each affected Series and (B)
if any Purchased Interest shall or would be adversely affected, each Agent of a
Purchaser, for the purpose of adding any provisions to or changing in any manner
or eliminating any of the provisions of this Agreement or any Supplement or of
modifying in any manner the rights of the Certificateholders or the Purchasers;
provided that no amendment shall (w) reduce in any manner the amount of or delay
the timing of any distributions to
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be made to Investor Certificateholders or deposits of amounts to be so
distributed or the amount available under any Enhancement without the consent of
each affected Certificateholder, (x) change the definition of or the manner of
calculating the interest of any Investor Certificateholder without the consent
of each affected Investor Certificateholder, (y) reduce the aforesaid percentage
required to consent to any amendment without the consent of each Investor
Certificateholder or (z) adversely affect the rating of any Series or class by
any Rating Agency without the consent of the Holders of Investor Certificates of
the Series or class evidencing not less than 66 2/3% of the aggregate unpaid
principal amount of the Investor Certificates of the Series or class or (ii) in
the case of any PI Agreement, (A) each Agent of a Purchaser and the other
parties thereto and (B) if any Series of Investor Certificates shall or would be
adversely affected, the Required Series Holders of each such adversely affected
Series. It is understood that the consent of the Required Series Holders of any
Series or the Agent of a Purchaser shall not be required for any amendment,
modification or waiver if all amounts owed to the Holders of such Series or such
Purchaser (as the case may be) will be paid (and any commitments of such Holders
or Purchaser will terminate) prior to, or contemporaneously with, the
effectiveness of such amendment, modification or waiver; provided further, that
any amendment of this Agreement to effect any modification of the Bank Account
arrangements pursuant to Section 3.3(c)(ii)(y) shall not require the consent of
any of the Certificateholders or the Purchasers. No PI Agreement may be amended
unless Transferor shall have delivered the proposed amendment to the Agent and
the Rating Agencies at least ten Business Days (or such shorter period as shall
be acceptable to each of them) prior to the execution and delivery thereof and
the Modification Condition has been satisfied with respect to such amendment;
provided, however, that the Modification Condition shall not apply to proposed
amendments the purpose of which is to correct any ambiguities or inconsistencies
in such PI Agreement.
Transferor or Trustee shall establish a record date for determining which
Certificateholders may give such waivers and consents. No waiver of any Early
Amortization Event or other default hereunder given at any time shall apply to
any other prior or subsequent Early Amortization Event or default.
(d) Promptly after the execution of any amendment, consent or waiver
described in subsection (b) or (c), Trustee shall furnish written notification
of the substance of the amendment or consent to each Investor Certificateholder,
and Servicer shall furnish written notification of the substance of the
amendment or consent to the Rating Agency and each Enhancement Provider.
(e) It shall not be necessary for any waiver or consent given by the
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Certificateholders under this section to approve the particular form of any
proposed amendment, but it shall be sufficient if the consent shall approve the
substance thereof. The manner of obtaining such waivers and consents and of
evidencing the authorization of the execution thereof by the Certificateholders
shall be subject to such reasonable requirements as Trustee may prescribe.
(f) Notwithstanding anything in this section to the contrary, no amendment
may be made to this Agreement, any Supplement or any PI Agreement that would
adversely affect in any material respect the interests of any Enhancement
Provider without the consent of the Enhancement Provider.
(g) Any Supplement or PI Agreement executed in accordance with the
provisions of Section 6.10 shall not be considered an amendment to this
Agreement for the purposes of this section.
(h) Prior to the execution of any amendment to this Agreement, Trustee
shall be entitled to receive and rely upon an Opinion of Counsel stating that
the execution of the amendment is authorized or permitted by this Agreement and
that all conditions precedent to the execution and delivery have been satisfied.
Trustee may, but shall not be obligated to, enter into any amendment that
affects Trustee's own rights, duties or immunities under this Agreement.
(i) Notwithstanding anything in this Section to the contrary, no amendment
may be made to this Agreement unless Transferor shall have delivered to Trustee,
the Rating Agencies, each Purchaser and each Enhancement Provider a Tax Opinion
with respect to such amendment.
SECTION XIII.2 Actions by Certificateholders and Purchasers. (a) By its
acceptance of Certificates pursuant to this Agreement and the applicable
Supplement, each Certificateholder (other than Transferor and any Big Flower
Person) acknowledges and agrees that, wherever in this Agreement a provision
states that an action may be taken or a notice, demand or instruction given by
any Series of Investor Certificateholders, any class of Investor
Certificateholders or the Investor Certificateholders, the action, notice or
instruction may be taken or given by any Holder of an Investor Certificate of
the Series or class or by any Investor Certificateholder, respectively, unless
the provision requires a specific percentage of the Series or class of Investor
Certificateholders or of all Investor Certificateholders.
(b) By its acceptance of Certificates pursuant to this Agreement and the
applicable Supplement, each Certificateholder (other than Transferor and any Big
Flower Person) acknowledges and agrees that any request, demand,
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authorization, direction, notice, consent, waiver or other act by the Holder of
a Certificate shall bind the Holder and every subsequent Holder of the
Certificate and of any Certificate issued upon the registration of transfer
thereof or in exchange therefor or in lieu thereof in respect of anything done
or omitted to be done by Trustee or Servicer in reliance thereon, whether or not
notation of the action is made upon such Certificate.
(c) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Agreement, any Supplement or any PI Agreement
to be given or taken by Certificateholders or any Agent for a Purchaser may be
embodied in and evidenced by one or more instruments of substantially similar
tenor signed by the Certificateholders or any Agent for a Purchaser in person or
by agent duly appointed in writing; and except as herein otherwise expressly
provided, the action shall become effective when the instrument or instruments
are delivered to Trustee and, when required, to Servicer. Proof of execution of
any such instrument or of a writing appointing any such agent shall be
sufficient for any purpose of this Agreement, any Supplement or any PI Agreement
and conclusive in favor of Trustee and Servicer, if made in the manner provided
in this section.
(d) The fact and date of the execution by any Certificateholder or any
Agent for a Purchaser of any such instrument or writing may be proved in any
reasonable manner that Trustee deems sufficient.
SECTION XIII.3 Limitation on Rights of Certificateholders. (a) The death
or incapacity of any Certificateholder shall not operate to terminate this
Agreement or the Trust, nor shall the death or incapacity entitle such
Certificateholder's legal representatives or heirs to claim an accounting or to
take any action or commence any proceeding in any court for a partition or
winding up of the Trust, nor otherwise affect the rights, obligations and
liabilities of the parties hereto or any of them.
(b) No Certificateholder shall have any right to vote (except as expressly
provided otherwise in this Agreement) or in any manner otherwise to control the
operation and management of the Trust, or the obligations of the parties hereto,
nor shall anything herein set forth, or contained in the terms of the
Certificates, be construed so as to constitute the Certificateholders from time
to time as partners or members of an association, nor shall any
Certificateholder be under any liability to any third Person by reason of any
action taken by the parties to this Agreement pursuant to any provision hereof.
(c) No Certificateholder shall have any right by virtue of any provisions
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of this Agreement to institute any suit, action or proceeding in equity or at
law upon or under or with respect to the Transaction Documents (except to the
extent any Supplement or related certificate purchase agreement creates
independent and non-duplicative rights), unless the Certificateholder previously
shall have given to Trustee, and unless the Required Series Holders for each
outstanding Series shall have made, written request upon Trustee to institute
such action, suit or proceeding in its own name as Trustee hereunder and shall
have offered to Trustee such reasonable indemnity as it may require against the
costs, expenses and liabilities to be incurred therein or thereby, and Trustee,
for 30 days after its receipt of such notice, request and offer of indemnity,
shall have neglected or refused to institute any such action, suit or
proceeding; it being understood and intended, and being expressly covenanted by
each Certificateholder with every other Certificateholder, every Purchaser and
Trustee, that no one or more Certificateholders or Purchasers shall have any
right in any manner whatever by virtue of, or by availing itself or themselves
of, any provisions of a Transaction Document to affect, disturb or prejudice the
rights of any other Investor Certificateholder or Purchaser, or to obtain or
seek to obtain priority over or preference to any such other Investor
Certificateholder or Purchaser, except to the extent provided in the Transaction
Documents, or to enforce any right under the Transaction Documents, except in
the manner herein provided and for the equal, ratable and common benefit of, all
Investor Certificateholders and Purchasers (subject to the priorities set forth
in the Transaction Documents). For the protection and enforcement of the
provisions of this section, each and every Certificateholder, each and every
Purchaser and Trustee shall be entitled to such relief as can be given either at
law or in equity.
(d) By their acceptance of Certificates pursuant to this Agreement and the
applicable Supplement, the Certificateholders agree to the provisions of this
section.
SECTION XIII.4 Limitation on Rights of Purchasers. (a) The death or
incapacity of any Purchaser shall not operate to terminate this Agreement or the
Trust, nor shall the death or incapacity entitle such Purchaser's legal
representatives or heirs to claim an accounting or to take any action or
commence any proceeding in any court for a partition or winding up of the Trust,
nor otherwise affect the rights, obligations and liabilities of the parties
hereto or any of them.
(b) No Purchaser shall have any right to vote, (except provided otherwise
in this Agreement) or in any manner otherwise to control the operation and
management of the Trust, or the obligations of the parties hereto, nor shall
anything herein set forth, or contained in the terms of the Purchased
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Interests, be construed so as to constitute the Purchasers from time to time as
partners or members of an association, nor shall any Purchaser be under any
liability to any third Person by reason of any action taken by the parties to
this Agreement pursuant to any provision hereof.
(c) No Purchaser shall have any right by virtue of any provisions of this
Agreement to institute any suit, action or proceeding in equity or at law upon
or under or with respect to any Transaction Document (except to the extent a PI
Agreement creates independent and non-duplicative rights, unless such Purchaser
previously shall have given to Trustee, and unless such Purchaser shall have
made, written request upon Trustee to institute such action, suit or proceeding
in its own name as Trustee hereunder and shall have offered to Trustee such
reasonable indemnity as it may require against the costs, expenses and
liabilities to be incurred therein or thereby, and Trustee, for 30 days after
its receipt of such notice, request and offer of indemnity, shall have neglected
or refused to institute any such action, suit or proceeding; it being understood
and intended, and being expressly covenanted by each Purchaser with every other
Purchaser, every Certificateholder and Trustee, that no one or more Purchasers
or Certificateholders shall have any right in any manner whatever by virtue of,
or by availing itself or themselves of, any provisions of a Transaction Document
to affect, disturb or prejudice the rights of any other Investor
Certificateholder or a Purchaser, or to obtain or seek to obtain priority over
or preference to any such other Investor Certificateholder or Purchaser, except
to the extent provided in the Transaction Documents, or to enforce any right
under the Transaction Documents, except in the manner herein provided and for
the ratable and common benefit of all Investor Certificateholders or Purchasers
(subject to the priorities set forth in the Transaction Documents). For the
protection and enforcement of the provisions of this section, each and every
Certificateholder, each and every Purchaser and Trustee shall be entitled to
such relief as can be given either at law or in equity.
(d) By their acceptance of Purchased Interests pursuant to this Agreement
and the applicable Supplement, the Purchasers agree to the provisions of this
Section.
SECTION XIII.5 Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF
LAWS PRINCIPLES, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES
HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK.
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SECTION XIII.6 Notices. All demands, notices, instructions and
communications hereunder shall be in writing and shall be deemed to have been
duly given if personally delivered, four Business Days after mailing if mailed
by registered mail, return receipt requested, or sent by facsimile transmission
(a) in the case of Transferor, to its address set forth below its signature
hereto, (b) in the case of Big Flower, to its address set forth below its
signature hereto, and (c) in the case of Trustee, the Paying Agent or the
Transfer Agent and Registrar, to the address of Trustee set forth on the
signature pages hereof; or, as to each party, at such other address or facsimile
number as shall be designated by it in a written notice to each other party
given in accordance with this section. Except to the extent expressly provided
otherwise in an applicable Supplement, any notice required or permitted to be
mailed to a Certificateholder shall be sent by first-class mail, postage
prepaid, to the address of the Certificateholder as shown in the Certificate
Register. Except to the extent expressly provided otherwise in an applicable
Supplement, any notice so mailed within the time prescribed in this Agreement
shall be conclusively presumed to have been duly given on the fourth Business
Day after the notice is so mailed, whether or not the Certificateholder receives
the notice. Servicer shall deliver or make available to the Rating Agencies each
certificate and report required to be prepared, forwarded or delivered pursuant
to Section 3.5 (excluding the Daily Reports) or 3.6 and a copy of any amendment,
consent or waiver to this Agreement, at the address of the Rating Agency set
forth above or at the other address as shall be designated by the Rating Agency
in a written notice to Servicer.
SECTION XIII.7 Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement or any of the other
Transaction Documents shall for any reason whatsoever be held invalid, then the
unenforceable covenants, agreements, provisions or terms shall be deemed
severable from the remaining covenants, agreements, provisions or terms of this
Agreement or the other Transaction Documents (as applicable) and shall in no way
affect the validity or enforceability of the other provisions of this Agreement,
the Certificates, the Purchased Interests or any of the other Transaction
Documents or the rights of the Certificateholders or the Purchasers.
SECTION XIII.8 Certificates Nonassessable and Fully Paid. Except to the
extent otherwise expressly provided in Section 7.3 with respect to Transferor,
it is the intention of the parties to this Agreement that the Certificateholders
shall not be personally liable for obligations of the Trust, that the interests
in the Trust represented by the Certificates shall be nonassessable for any
losses or expenses of the Trust or for any reason whatsoever and that
Certificates upon authentication thereof by Trustee pursuant to Section 6.2 are
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and shall be deemed fully paid.
SECTION XIII.9 Nonpetition Covenant. Notwithstanding any prior termination
of this Agreement, each of Trustee, Servicer, Transferor, the Paying Agent, the
Authenticating Agent and the Transfer Agent and Registrar (and each Investor
Certificateholder or Purchaser by its acceptance of a Certificate or Purchased
Interest) agrees that it shall not, with respect to the Trust or Transferor,
institute or join any other Person in instituting any proceeding of the type
referred to in the definition of "Bankruptcy Event" so long as any Certificates
issued by the Trust shall be outstanding or there shall not have elapsed one
year plus one day since the last day on which any such Certificates shall have
been outstanding. The foregoing shall not limit the right of Servicer,
Transferor, the Paying Agent, the Authenticating Agent and the Transfer Agent
and Registrar to file any claim in or otherwise take any action with respect to
any such insolvency proceeding that was instituted against Transferor or the
Trust by any Person other than Servicer, Transferor, the Paying Agent, the
Authenticating Agent or the Transfer Agent and Registrar. In addition, each of
Servicer, the Paying Agent, the Authenticating Agent, the Transfer Agent and
Registrar and (as to the Trust) Transferor agree that all amounts owed to them
by the Trust or Transferor shall be payable solely from amounts that become
available for such payment pursuant to this Agreement and the Receivables
Purchase Agreement, and no such amounts shall constitute a claim against the
Trust or Transferor to the extent that they are in excess of the amounts
available for their payment.
SECTION XIII.10 No Waiver; Cumulative Remedies. No failure to exercise and
no delay in exercising, on the part of Transferor, Trustee, the Investor
Certificateholders, the Purchasers or the Holders of any Series of Investor
Certificates, any right, remedy, power or privilege hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, remedy,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, remedy, power or privilege. The rights,
remedies, powers and privileges herein provided are cumulative and are not
exhaustive of any rights, remedies, powers and privileges provided by law.
SECTION XIII.11 Counterparts. This Agreement may be executed in any number
of counterparts and by the different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original, and all of
which together shall constitute one and the same instrument.
SECTION XIII.12 Third-Party Beneficiaries. This Agreement will inure to
the benefit of and be binding upon the parties hereto and the
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Certificateholders, the Purchasers, the Enhancement Providers and their
respective successors and permitted assigns. Except as otherwise expressly
provided in this Agreement, nothing contained in this Agreement shall confer any
rights upon any Person that is not a party to, or a permitted assignee of a
party to, this Agreement.
SECTION XIII.13 Integration. This Agreement and the other Transaction
Documents contain a final and complete integration of all prior expressions by
the parties hereto with respect to the subject matter hereof and thereof and
shall together constitute the entire agreement among the parties hereto with
respect to the subject matter hereof and thereof, superseding all prior oral or
written understandings.
SECTION XIII.14 Binding Effect; Assignability; Survival of Provisions.
This Agreement shall be binding upon and inure to the benefit of Transferor,
Servicer and Trustee and their respective successors and permitted assigns;
provided, that Transferor shall not delegate any of its obligations hereunder.
This Agreement shall create and constitute the continuing obligations of the
parties hereto in accordance with its terms, and shall remain in full force and
effect until the termination of the Trust pursuant to Section 12.1. The rights
and remedies with respect to (a) any breach of any representation and warranty
made by Transferor in Section 2.3 or Section 7.1, (b) any breach of any
representation and warranty made by Servicer in Section 8.1 and (c) the
indemnification and payment provisions in Sections 3.9, 7.3, 8.4, 11.5 and
12.2(b) shall be continuing and shall survive any termination of this Agreement.
SECTION XIII.15 Recourse to Transferor. Except to the extent expressly
provided otherwise in the Transaction Documents, the obligations of Transferor
under the Transaction Documents to which it is a party are solely the
obligations of Transferor, and no recourse shall be had for payment of any fee
payable by or other obligation of or claim against Transferor that arises out of
any Transaction Document to which Transferor is a party against any director,
officer or employee of Transferor. Payments to be made by Transferor pursuant to
this Agreement shall be paid to the extent that funds are available to make the
payments after all amounts to be paid to the Certificateholders and the
Purchasers pursuant to the applicable Supplement and PI Agreement shall have
been paid, and there shall be no recourse to Transferor for all or any part of
any amounts payable pursuant to any Transaction Document if the funds are at any
time insufficient to make all or part of any such payments. The provisions of
this section shall survive the termination of this Agreement.
SECTION XIII.16 Recourse to Transferred Assets. The Certificates do
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not represent an obligation of, or an interest in, Transferor, any Seller,
Servicer, Trustee or any Affiliate of any of them. Except as expressly provided
otherwise in this Agreement, the Certificates and Purchased Interests are
limited in right of payment to the Transferred Assets.
SECTION XIII.17 Submission to Jurisdiction. Each party hereto hereby
irrevocably (a) submits to the non-exclusive jurisdiction of any New York State
or Federal court sitting in the Borough of Manhattan in the City of New York,
New York over any action or proceeding arising out of or relating to the
Transaction Documents, (b) irrevocably agrees that all claims in respect of the
action or proceeding may be heard and determined in the State or Federal court,
(c) irrevocably waives, to the fullest extent it may effectively do so, the
defense of an inconvenient forum to the maintenance of the action or proceeding,
and (d) in the case of Transferor and Big Flower, irrevocably appoints the
Process Agent as its agent to receive on behalf of it and its property service
of copies of the summons and complaint and any other process that may be served
in any action or proceeding. The service may be made by mailing or delivering a
copy of the process to Transferor or Big Flower in care of the Process Agent at
the Process Agent's address, and Transferor hereby irrevocably authorizes and
directs the Process Agent to accept the service on its behalf. As an alternative
method of service, each of Transferor and Servicer also irrevocably consents to
the service of any and all process in any action or proceeding by the mailing of
copies of the process to Transferor or Servicer (as applicable) at its address
specified herein. Nothing in this section shall affect the right of any party
hereto to serve legal process in any other manner permitted by law or affect the
right of any party hereto to bring any action or proceeding against any or all
of the other parties hereto or any of their respective properties in the courts
of any other jurisdiction.
SECTION XIII.18 Waiver of Jury Trial. Each party hereto waives any right
to a trial by jury in any action or proceeding to enforce or defend any rights
under or relating to the Transaction Documents, or any amendment, instrument,
document or agreement delivered or that may in the future be delivered in
connection therewith or arising from any course of conduct, course of dealing,
statements (whether verbal or written), actions of any of the parties hereto or
any other relationship existing in connection with the Transaction Documents,
and agrees that any such action or proceeding shall be tried before a court and
not before a jury.
SECTION XIII.19 Certain Partial Releases. If any Seller is
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discontinued as a Seller pursuant to Section 1.8(a) of the Purchase Agreement,
Trustee shall, upon the request (and at the expense) of Big Flower, execute and
deliver to Big Flower such statements of partial release and/or amendment
relating to the UCC-1 financing statements filed against such Seller pursuant to
the Purchase Agreement as shall be prepared by Big Flower and provided to
Trustee to evidence such termination; provided that Trustee shall have received
(i) an Officer's Certificate of Servicer to the effect that all conditions to
such termination specified in subclauses (i), (ii) and (iii) of such Section
1.8(a) have been satisfied (and shall not have received notice from any Investor
Certificateholder or Agent to the contrary) and (ii) an Opinion of Counsel to
the effect that the filing of such statements of partial release and/or
amendment will not impair the validity, perfection or priority of Transferor's
or Trustee's rights in and to (A) any Receivables or Related Assets conveyed
prior to the effective date of such termination or (B) any Receivables or
Related Assets generated by any remaining Seller on or after the effective date
of such termination. In addition, after a termination that complies with the
requirements set out in the preceding sentence, Trustee shall, upon the request
(and at the expense) of Big Flower, execute and deliver to Big Flower the
termination statements relating to the UCC-1 financing statements filed against
the Seller pursuant to the Purchase Agreement as shall be prepared by Big Flower
and provided to Trustee to evidence the termination; provided that Trustee shall
have received an Officer's Certificate of Servicer to the effect that Trustee no
longer holds any right, title or interest in the Receivables generated by the
terminated Seller.
[Remainder of page intentionally left blank.]
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IN WITNESS WHEREOF, Transferor, Servicer and Trustee have caused this
Agreement to be executed by their respective officers thereunto duly authorized
as of the day and year first above written.
BFP RECEIVABLES CORPORATION,
as Transferor
By: /s/ Rick Frier
Name: Rick Frier
Title: Vice President
Address: 250 W. Pratt Street
Baltimore, Maryland 21201
Attention: Rick Frier
Facsimile: 410-528-9287
BIG FLOWER PRESS HOLDINGS, INC.,
as initial Servicer
By: /s/ David Mait
Name: David Mait
Title: Vice President
Address: 3 East 54th Street, 19th Floor
New York, New York 10022
Attention: David Mait
Facsimile: 212-223-4074
MANUFACTURERS AND TRADERS TRUST COMPANY
as Trustee
By: /s/ Anita K. Spann
Title: Trust Officer
Address: 1 M&T Plaza, 7th Floor
Buffalo, New York 14203-2399
Attention: Russell Whitley
Telephone: (716) 842-5602
Facsimile: (716) 842-4474
<PAGE>
STATE OF NEW YORK )
) SS.
COUNTY OF NEW YORK )
On March 18, 1996 before me personally came Rick Frier, who, being by me
duly sworn, did depose and say that he resides at Ellicott City, Maryland; that
he is the Vice President of BFP RECEIVABLES CORPORATION, a Delaware corporation,
the corporation described in and that executed the foregoing instrument; and
that he signed his name thereto by order of the board of directors of the
corporation.
Given under my hand and notarial seal, this March 18, 1996.
/s/ Helen B. Kaplan
-----------------------
Notary Public
Type or
Print Name: Helen B. Kaplan
My commission expires:
April 18, 1997
<PAGE>
STATE OF NEW YORK )
) SS.
COUNTY OF NEW YORK )
On March 18, 1996 before me personally came David Mait, who, being by me
duly sworn, did depose and say that he resides at Wyckoff, New Jersey; that he
is the Vice President of BIG FLOWER PRESS HOLDINGS, INC., a Delaware
corporation, the corporation described in and that executed the foregoing
instrument; and that he signed his name thereto by order of the board of
directors of the corporation.
Given under my hand and notarial seal, this March 18, 1996.
/s/ Patrick J. Kennedy
---------------------------
Notary Public
Type or
Print Name: Patrick J. Kennedy
My commission expires:
August 1, 1996
<PAGE>
STATE OF NEW YORK )
) SS.
COUNTY OF ERIE )
On March 18, 1996 before me personally came Anita Spann, who, being by me
duly sworn, did depose and say that he resides at Buffalo, New York; that he is
the Trust Officer of MANUFACTURERS AND TRADERS TRUST COMPANY, a New York banking
corporation, the corporation described in and that executed the foregoing
instrument; and that he signed his name thereto by order of the board of
directors of the corporation.
Given under my hand and notarial seal, this March 18, 1996.
/s/ Steven J. Wattie
-------------------------
Notary Public
Type or
Print Name: Steven J. Wattie
My commission expires:
July 20, 1996
<PAGE>
EXHIBIT A-1
to Pooling Agreement
LOCKBOX ACCOUNT LETTER AGREEMENT
[Date]
[Bank]
Attention:
Ladies and Gentlemen:
By this letter agreement, (a) _________________________ ("SELLER")
irrevocably transfers exclusive ownership and control of its lockbox numbered
_________________ of the post office located at __________________ (the
"LOCKBOX") and the corresponding demand deposit account numbered _______________
(the "LOCKBOX ACCOUNT") maintained with you to BFP Receivables Corporation
("Transferor"), and (b) Transferor irrevocably transfers all of its rights and
title to and interest in the Lockbox and the Lockbox Account acquired hereby to
Manufacturers and Traders Trust Company, as trustee (the "TRUSTEE") for the
benefit of certain holders of certificates and purchased interests
(collectively, the "HOLDERS") issued by the Trustee under a Pooling and
Servicing Agreement, dated as of March 19, 1996 (the "POOLING AGREEMENT"), among
Transferor, Big Flower Press Holdings, Inc. ("PARENT") as initial Servicer, and
the Trustee. Seller acknowledges and agrees that Transferor is transferring to
the Trustee the rights, titles and interests transferred by Seller to Transferor
as provided above, and each of Seller and Transferor agrees to cooperate fully
with the Trustee and its agents and representatives (including, without
limitation, the Servicer referred to hereinafter) in the exercise of such
rights. The transfers described in this paragraph are effective on and as of
the date of this letter agreement.
By executing this letter agreement, you acknowledge the existence of the
Trustee's right to dominion and control over the Lockbox and the Lockbox Account
and its ownership of and security interest in the Lockbox, all moneys and
instruments delivered to the Lockbox, the Lockbox Account and the amounts from
time to time on deposit therein, and agree that, from and after the date hereof,
you shall maintain the Lockbox and the Lockbox Account and shall hold all such
moneys and instruments and such amounts for the benefit and subject to the
interests of the Trustee (for the benefit of itself and the Holders). You also
acknowledge that your execution of this letter agreement is a condition
precedent to continued maintenance of the Lockbox Account with you. The Lockbox
Account is to be maintained in the name of
<PAGE>
"Manufacturers and Traders Trust Company, as Trustee."
Seller and Transferor hereby irrevocably instruct you, and the Trustee, by
its acknowledgement hereof, hereby instructs you, at all times from and after
the date hereof until your receipt of contrary and/or terminating instructions
from the Trustee, to remit, pursuant to our funds transfer agreement and on a
daily basis, in immediately available funds, all available amounts deposited in
the Lockbox Account to the following account (the "MASTER COLLECTION ACCOUNT")
or such other account as the Trustee or the Servicer may specify:
Manufacturers and Traders Trust Company
Attn: R. Whitley, Trust Division
One M&T Plaza, Seventh Floor
Buffalo, NY 14203-2399
ABA # 022000046
CC # 880
For credit to the
Manufacturers and Traders Trust Company, as Trustee
Account No. 185611860
Ref: Big Flower Master Collection Account
By executing this letter agreement, you irrevocably waive and agree not to
assert any right to setoff against, or otherwise deduct from, any items
collected from the Lockbox, the Lockbox Account or any funds from time to time
therein or in transit thereto; PROVIDED, HOWEVER, that you may (i) debit the
Lockbox Account for any items deposited in the Lockbox Account that are returned
or otherwise not collected in accordance with your customary practices for the
chargeback of returned items, (ii) charge the Lockbox Account for any erroneous
crediting of funds by you to such Lockbox Account and (iii) apply funds in the
Lockbox Account for reimbursement of any fees and expenses owed to you under the
terms of this letter agreement, to the extent that such fees and expenses are
not paid or reimbursed by Seller.
All transfers referred to above shall be made by you irrespective of, and
without deduction for, any counterclaim, defense, recoupment or set-off (except
as expressly permitted otherwise by this letter agreement) and shall be final,
and you agree that you will not seek to recover any amount from the Trustee,
Transferor, or the Servicer for any reason once any payment or transfer has been
made.
Seller shall pay, or reimburse you for, customary and reasonable fees and
expenses incurred by you in the maintenance and operation of the Lockbox Account
in accordance with this letter agreement. The Trustee and Transferor will have
no liability to you or the Servicer for any costs, fees or charges under your
usual and customary procedures or this letter agreement. You hereby agree to
promptly notify the Trustee of your failure to receive timely payment of any fee
under this
<PAGE>
letter agreement.
The Trustee's instructions with respect to the Lockbox and the Lockbox
Account may be given through a Servicer that the Trustee may appoint from time
to time and will notify you thereof in writing, and you agree to follow the
instructions of such Servicer with the same effect as if such instructions were
given by the Trustee directly (subject to any limitations on such appointment
imposed by the Trustee that are communicated in writing to you) until such time
as the Trustee notifies you of the revocation of the Servicer's authority to act
for the Trustee. The initial servicer will be Parent. The Trustee and the
Servicer shall each provide to you a list of their respective employees
authorized to issue instructions and give notices with respect to the Lockbox
and the Lockbox Account, which lists may be revised from time to time, and you
shall be entitled to rely on (and to assume) the authority of any employee of
the Trustee or the Servicer identified on such lists, and are hereby authorized
to act on any notice given on behalf of the Trustee or the Servicer by any such
employee, subject to any limitations on the appointment of the Servicer and the
revocation of the Servicer's authority as provided above.
Seller and Transferor also hereby irrevocably notify you that, at all times
from and after the date hereof until your receipt of contrary and/or terminating
instructions from the Trustee, the Trustee shall be entitled (subject to your
rights set forth herein) to exercise in the place and stead of Seller and
Transferor (or either of them) any and all rights of Seller and Transferor in
respect of or in connection with the Lockbox, this letter agreement and the
Lockbox Account, including, without limitation (i) the right to specify that
payments are to be made out of or in connection with the Lockbox Account to
different accounts or at different times than those specified above (subject to
your customary and then-current procedures for lockbox processing) and (ii) the
right to require preparation of duplicate monthly bank statements on the Lockbox
Account for mailing directly to an address specified by the Trustee.
By executing this letter agreement you acknowledge that you have not
heretofore received a notice, writ, order or any form of legal process from any
other person asserting, claiming or exercising, any right of set-off, banker's
lien or other purported form of claim with respect to the items collected from
the Lockbox, the Lockbox Account or any funds from time to time therein or in
transit thereto, and agree to promptly inform the Trustee in writing of any such
action in the future.
Except as otherwise provided herein, the Lockbox and the Lockbox Account
shall be subject to the customary terms and conditions adopted by you from time
to time and generally applicable to lockboxes and lockbox accounts. Your duties
and functions under this letter agreement shall continue to be that
<PAGE>
of a debtor/creditor and you shall not by reason of this letter agreement be
deemed to have a fiduciary obligation or relationship of trust in respect of
Transferor or the Trustee. You shall not be deemed to have knowledge of or
liability under any agreements among the parties to this letter agreement to
which you are not a party.
You may terminate this letter agreement by cancelling the Lockbox Account
and Lockbox, which cancellation and termination shall become effective only upon
sixty days' prior written notice thereof from you to the Trustee. Upon the
termination of this letter agreement, you will close the Lockbox Account and,
subject to your rights to charge the Lockbox Account as set forth herein,
transfer any monies remaining therein to the Master Collection Account. You
agree that you shall forward all incoming mail addressed to the Lockbox or the
Lockbox Account and all wire transfers and deposits to the Lockbox Account that
you receive after such cancellation in the form received to another lockbox or
to another lockbox account or the Concentration Account or to such other address
or account as the Trustee (or the Servicer on behalf of the Trustee) shall
specify, promptly after you discover that you have received any such mail or
transfers. This letter agreement may also be terminated upon written notice to
you by the Trustee. Except as expressly set forth in this paragraph, this
letter agreement may not be terminated or amended without the prior written
consent of the Trustee.
You will use due care in performing your duties and responsibilities and
shall only be responsible for any liability, loss, cost or expense which Seller,
Transferor or the Trustee sustains to the extent that (i) such loss is a direct
result of your mishandling of a deposit or (ii) such loss is proximately caused
by your negligence or wilful misconduct. In no event shall you be liable to
Seller, Transferor or the Trustee for liabilities, losses, costs or expenses
resulting from actions beyond your control or for any consequential or special
damages. Except to the extent of the liability assumed by you, Seller hereby
agrees to indemnify and hold you harmless against any and all reasonable costs,
losses, liabilities or expenses including attorneys' fees and disbursements,
which may be imposed upon you in connection with your duties hereunder. This
paragraph shall survive termination of the Lockbox, the Lockbox Account, or this
letter agreement.
All notices and other communications provided for hereunder shall, unless
otherwise stated herein, be in writing (including facsimile communication) and
shall be personally delivered or sent by certified mail, postage prepaid, by
facsimile or by overnight courier, to the intended person at the address or
facsimile number of such person set forth under its name on the signature pages
hereof or at such other address or facsimile number as shall be designated by
such person in a written notice to the other parties hereto given in accordance
with the
<PAGE>
requirements of this paragraph. All notices and other communications hereunder
shall also be provided to the Trustee and shall be addressed as follows until
you receive written notice from the Trustee to the contrary:
Manufacturers and Traders Trust Company
Attention: R. Whitley, Trust Division
Telephone: 716-842-5602
Facsimile: 716-842-4474
All notices and communications provided for hereunder shall be effective,
(i) if personally delivered, when received, (ii) if sent by certified mail, four
business days after having been deposited in the mail, postage prepaid and
properly addressed, (iii) if transmitted by facsimile, when sent, receipt
confirmed by telephone or electronic means and (iv) if sent by overnight
courier, two business days after having been given to such courier unless sooner
received by the addressee.
This letter agreement shall be binding upon you and your successors and
assigns and shall inure to the benefit of Seller, Transferor, and the Trustee
and their respective successors, transferees and assigns; PROVIDED, HOWEVER,
that you may not assign your rights and duties under this letter agreement
without the prior written consent of the Trustee.
This letter agreement shall be governed by and construed in accordance with
the laws of the State of New York, not including the choice of law rules
thereof.
<PAGE>
Please acknowledge your agreement to the terms set forth in this letter
agreement by signing five (5) copies of this letter agreement in the space
provided below and returning such copies to us at the address indicated below
for Seller.
Very truly yours,
[SELLER].
By:
Title:
Address:
Attention:
Telephone:
Facsimile:
BFP RECEIVABLES CORPORATION
By:
Title:
Address:
Attention:
Telephone:
Facsimile:
<PAGE>
The undersigned hereby acknowledges and agrees to the foregoing letter
agreement as of the date of the letter agreement.
[BANK]
By:
Title:
Address:
Attention
Telephone:
Facsimile:
The undersigned hereby acknowledges and agrees to the foregoing letter
agreement as of the date of the letter agreement.
MANUFACTURERS AND TRADERS TRUST
COMPANY, INC.
as Trustee
By:
Title:
<PAGE>
EXHIBIT A-2
to Pooling Agreement
BLOCKED ACCOUNT AGREEMENT
[Name of Bank]
Ladies and Gentlemen:
By this letter agreement, (a) ______________. ("SELLER") irrevocably
transfers exclusive ownership and control of its demand deposit account numbered
_____________ (the "BLOCKED ACCOUNT") maintained with you to BFP Receivables
Corporation ("BFP"), and (b) BFP irrevocably transfers all of its rights and
title to and interest in the Blocked Account acquired hereby to Manufacturers
and Traders Trust Company, as trustee (the "TRUSTEE") for the benefit of certain
holders of certificates and purchased interests (collectively, the "HOLDERS")
issued by the Trustee under a Pooling and Servicing Agreement, dated as of
_____________ __, 1996 (the "POOLING AGREEMENT"), among BFP, Big Flower Press
Holdings, Inc., ("BIG FLOWER"), as initial Servicer, and the Trustee. Seller
acknowledges and agrees that BFP is transferring to the Trustee the rights,
titles and interests transferred by Seller to BFP as provided above, and each of
Seller and BFP agrees to cooperate fully with the Trustee and its agents and
representatives (including, without limitation, the Servicer referred to
hereinafter) in the exercise of such rights. The transfers described in this
paragraph are effective on and as of the date of this letter agreement.
By executing this letter agreement, you acknowledge the existence of the
Trustee's right to dominion and control over the Blocked Account and its
ownership of and security interest in the Blocked Account, all moneys and
instruments delivered to the Blocked Account and the amounts from time to time
on deposit therein, and agree that, from and after the date hereof, you shall
maintain the Blocked Account and shall hold all such moneys and instruments and
such amounts for the benefit and subject to the interests of the Trustee (for
the benefit of itself and the Holders). You also acknowledge that your
execution of this letter agreement is a condition precedent to continued
maintenance of the Blocked Account with you. The Blocked Account is to be
maintained in the name of "Manufacturers and Traders Trust Company, as Trustee."
Seller and BFP hereby irrevocably instruct you, and the Trustee, by its
acknowledgement hereof, hereby instructs you, at all times from and after the
date hereof until your receipt of contrary and/or terminating instructions from
the Trustee, to remit, on a daily basis, in immediately available funds, all
available amounts deposited in the Blocked Account to the
<PAGE>
following account (the "MASTER COLLECTION ACCOUNT") or such other account as the
Trustee or the Servicer may specify:
Manufacturers and Traders Trust Company
Attn: R. Whitley, Trust Division
One M&T Plaza, 7th Floor
Buffalo, New York 14203-2399
ABA # 022000046
CC # 880
For credit to the
Manufacturers and Traders Trust Company, as Trustee
Account No. 185611860
Ref: Big Flower Master Collection Account
By executing this letter agreement, you irrevocably waive and agree not to
assert any right to setoff against, or otherwise deduct from, any items
collected from the Blocked Account or any funds from time to time therein or in
transit thereto; PROVIDED, HOWEVER, that you may (i) debit the Blocked Account
for any items deposited in the Lockbox Account that are returned or otherwise
not collected in accordance with your customary practices for the chargeback of
returned items, (ii) charge the Blocked Account for any erroneous crediting of
funds by you to such Blocked Account and (iii) apply funds in the Blocked
Account for reimbursement of any fees and expenses owed to you under the terms
of this letter agreement, to the extent that such fees and expenses are not paid
or reimbursed by Seller.
All transfers referred to above shall be made by you irrespective of, and
without deduction for, any counterclaim, defense, recoupment or set-off (except
as expressly permitted otherwise by this letter agreement) and shall be final,
and you agree that you will not seek to recover any amount from the Trustee, BFP
or the Servicer for any reason once any payment or transfer has been made,
provided that you shall have the right to recover from Seller the amount of any
item so transferred which is returned, made in error, or otherwise not collected
in accordance with your customary practices in the event that you are unable to
recover such amount by debiting the Lockbox Account.
Seller shall pay, or reimburse you for, customary and reasonable fees and
expenses incurred by you in the maintenance and operation of the Blocked Account
in accordance with this letter agreement. The Trustee and Transferor will have
no liability to you or the Servicer for any costs, fees or charges under your
usual and customary procedures or this letter agreement. You hereby agree to
promptly notify the Trustee of your failure to receive timely payment of any fee
under this letter agreement.
<PAGE>
The Trustee's instructions with respect to the Blocked Account may be given
through a Servicer that the Trustee may appoint from time to time and will
notify you thereof in writing, and you agree to follow the instructions of such
Servicer with the same effect as if such instructions were given by the Trustee
directly (subject to any limitations on such appointment imposed by the Trustee
that are communicated in writing to you) until such time as the Trustee notifies
you of the revocation of the Servicer's authority to act for the Trustee. The
initial servicer will be Big Flower. The Trustee and the Servicer shall each
provide to you a list of their respective employees authorized to issue
instructions and give notices with respect to the Blocked Account, which lists
may be revised from time to time, and you shall be entitled to rely on (and to
assume) the authority of any employee of the Trustee or the Servicer identified
on such lists, and are hereby authorized to act on any notice given on behalf of
the Trustee or the Servicer by any such employee, subject to any limitations on
the appointment of the Servicer and the revocation of the Servicer's authority
as provided above.
Seller and BFP also hereby irrevocably notify you that, at all times from
and after the date hereof until your receipt of contrary and/or terminating
instructions from the Trustee, the Trustee shall be entitled (subject to your
rights set forth herein) to exercise in the place and stead of Seller and BFP
(or either of them) any and all of the rights of Seller and BFP in respect of or
in connection with this letter agreement and the Blocked Account, including,
without limitation (i) the right to specify that payments are to be made out of
or in connection with the Blocked Account to different accounts or at different
times than those specified above (subject to your customary and then-current
procedures for account processing) and (ii) the right to require preparation of
duplicate monthly bank statements on the Blocked Account for mailing directly to
an address specified by the Trustee.
By executing this letter agreement you acknowledge that you have not
heretofore received a notice, writ, order or any form of legal process from any
other person asserting, claiming or exercising any right of set-off, banker's
lien or other purported form of claim with respect to the items collected from
the Blocked Account or any funds from time to time therein or in transit
thereto, and agree to immediately inform the Trustee in writing of any such
action in the future.
Except as otherwise provided herein, the Blocked Account shall be subject
to the customary terms and conditions adopted by you from time to time and
generally applicable to demand deposit accounts. Your duties and functions
under this letter agreement shall continue to be that of a debtor/creditor and
you shall not by reason of this letter agreement be deemed to have a fiduciary
obligation or relationship of trust in respect of Transferor or
<PAGE>
the Trustee. You shall not be deemed to have knowledge of or liability under
any agreements among the parties to this letter agreement to which you are not a
party.
You may terminate this letter agreement by cancelling the Blocked Account,
which cancellation and termination shall become effective only upon thirty days'
prior written notice thereof from you to the Trustee. Upon the termination of
this letter agreement, you will close the Blocked Account and, subject to your
rights to change the Lockbox Account as set forth herein, transfer any monies
remaining therein to the Master Collection Account. You agree that you shall
forward all wire transfers and deposits to the Blocked Account that you receive
after such cancellation in the form received to the Master Collection Account or
to such other address or account as the Trustee (or the Servicer on behalf of
the Trustee) shall specify, promptly after you discover that you have received
any such transfers. This letter agreement may also be terminated upon written
notice to you by the Trustee. Except as expressly set forth in this paragraph,
this letter agreement may not be terminated or amended without the prior written
consent of the Trustee.
You will use due care in performing your duties and responsibilities and
shall only be responsible for any liability, loss, cost or expense which Seller,
Transferor or the Trustee sustains to the extent that (i) such loss is a direct
result of your mishandling of a deposit or (ii) such loss is proximately caused
by your gross negligence or wilful misconduct. In no event shall you be liable
to Seller, Transferor or the Trustee for liabilities, losses, costs or expenses
resulting from actions beyond your control or for any consequential or special
damages. Except to the extent of the liability assumed by you, Seller hereby
agrees to indemnify and hold you harmless against any and all reasonable costs,
losses, liabilities or expenses including attorneys' fees and disbursements,
which may be imposed upon you in connection with your duties hereunder. This
paragraph shall survive termination of the Blocked Account, or this letter
agreement.
All notices and other communications provided for hereunder (other than
duplicate monthly bank statements and returned items) shall, unless otherwise
stated herein, be in writing (including facsimile communication) and shall be
personally delivered or sent by certified mail, postage prepaid, by facsimile or
by overnight courier, to the intended person at the address or facsimile number
of such person set forth under its name on the signature pages hereof or at such
other address or facsimile number as shall be designated by such person in a
written notice to the other parties hereto given in accordance with the
requirements of this paragraph. All notices and other communications hereunder
shall also be provided to the Trustee and shall be addressed as follows until
you receive written notice from the Trustee to the contrary:
<PAGE>
Manufacturers and Traders Trust Company
One M&T Plaza
Buffalo, New York 14203-2399
Attention: R. Whitley, Trust Division
Telephone: 716/842-5602
Facsimile: 716/842-4474
All notices and communications provided for hereunder shall be effective,
(i) if personally delivered, when received, (ii) if sent by certified mail, four
business days after having been deposited in the mail, postage prepaid and
properly addressed, (iii) if transmitted by facsimile, when sent, receipt
confirmed by telephone or electronic means and (iv) if sent by overnight
courier, two business days after having been given to such courier unless sooner
received by the addressee.
This letter agreement shall be binding upon you and your successors and
assigns and shall inure to the benefit of Seller, BFP and the Trustee and their
respective successors, transferees and assigns; PROVIDED, HOWEVER, that you may
not assign your rights and duties under this letter agreement without the prior
written consent of the Trustee except for assignments to subsidiaries
wholly-owned by you or to successors by acquisition or merger so long as the
Blocked Account number does not change.
The parties hereto consent to the non-exclusive jurisdiction of the courts
of the State of New Jersey; PROVIDED, HOWEVER, that this letter agreement shall
be governed by and construed in accordance with the laws of the State of New
York, not including the choice of law rules thereof.
<PAGE>
Please acknowledge your agreement to the terms set forth in this letter
agreement by signing five (5) copies of this letter agreement in the space
provided below and returning such copies to us at the address indicated below
for Seller.
Very truly yours,
SELLER
By:________________________________
Title:__________________________
Address:
Attention:
Telephone:
Facsimile:
BFP RECEIVABLES CORPORATION
By:________________________________
Title:___________________________
Address:
Attention:
Telephone:
Facsimile:
<PAGE>
The undersigned hereby acknowledges and agrees to the foregoing letter
agreement as of this ______ day of March, 1996.
By:
Title:
Address:
Attention:
Telephone:
Facsimile:
<PAGE>
The undersigned hereby acknowledges and agrees to the foregoing letter
agreement dated as of the ______ day of March, 1996.
MANUFACTURERS AND TRADERS TRUST
COMPANY, as Trustee
By:
Title:
<PAGE>
The undersigned hereby acknowledges and agrees to the foregoing letter
agreement dated as of the ______ day of March, 1996.
BIG FLOWER PRESS HOLDINGS, INC., as
Seller
By:
Title:
<PAGE>
EXHIBIT B
to Pooling Agreement
FORM OF CONCENTRATION ACCOUNT AGREEMENT
__________________
[NAME OF CONCENTRATION BANK]
[ADDRESS OF CONCENTRATION BANK]
Ladies and Gentlemen:
By this letter agreement, (a) ____________ ("SELLER") irrevocably transfers
exclusive ownership and control of its demand deposit account numbered
__________ the "CONCENTRATION ACCOUNT" maintained with you to BFP Receivables
Corporation ("BRC"), and (b) BRC irrevocably transfers all of its rights and
title to and interest in the Concentration Account acquired hereby to
Manufacturers and Traders Trust Company, as trustee (the "TRUSTEE") for the
benefit of (i) certain holders of certificates and purchased interests
(collectively, the "HOLDERS") issued by the Trustee under a Pooling and
Servicing Agreement, dated as of March 19, 1996 (the "POOLING AGREEMENT"), among
BRC, Big Flower Press Holdings, Inc. ("Big Flower") as initial Servicer, and the
Trustee and (ii) BRC (to the extent of BRC's residual interest in the
Transferred Assets (as defined in the Pooling Agreement). Seller acknowledges
and agrees that BRC is transferring to the Trustee the rights, titles and
interests transferred by Seller to BRC as provided above, and each of Seller and
BRC agrees to cooperate fully with the Trustee and its agents and
representatives (including, without limitation, the Servicer referred to
hereinafter) in the exercise of such rights. The transfers described in this
paragraph are effective on and as of the date of this letter agreement.
By executing this letter agreement, you acknowledge the existence of the
Trustee's right to dominion and control over the Concentration Account and its
ownership of and security interest in the Concentration Account, all moneys and
instruments delivered to the Concentration Account and the amounts from time to
time on deposit therein, and agree that, from and after the date hereof, you
shall maintain the Concentration Account and shall hold all such moneys and
instruments and such amounts for the benefit and subject to the interests of the
Trustee. You also acknowledge that your execution of this letter agreement is a
condition precedent to continued maintenance of the Concentration Account with
you. The Concentration Account is to be maintained in the name of
"Manufacturers and Traders Trust Company, as Trustee."
Seller and BRC hereby irrevocably instruct you, and the
<PAGE>
Trustee, by its acknowledgement hereof, hereby instructs you, at all times from
and after the date hereof until your receipt of contrary and/or terminating
instructions from the Trustee, to remit, on a daily basis, in immediately
available funds, all available amounts deposited in the Concentration Account to
the following account (the "Master Collection Account") or such other account as
the Trustee or the Servicer may specify:
Manufacturers and Traders Trust Company
One M&T Plaza, 7th Floor
Buffalo, New York 14203-2399
ABA # 022000046
CC # 880
For credit to the
MANUFACTURERS AND TRADERS TRUST COMPANY,
AS TRUSTEE
Account No. ________________
No such transfer of funds shall either reflect the rounding off of any funds so
transferred or constitute a partial remittance except for (i) amounts applied to
fees and expenses under the terms of this letter agreement, and (ii) amounts
deducted for returned checks that were previously deposited in the Concentration
Account and with respect to which funds were previously transferred to the
Master Collection Account.
All transfers referred to above shall be made by you irrespective of, and
without deduction for, any counterclaim, defense, recoupment or set-off (except
as expressly permitted otherwise by this letter agreement) and shall be final,
and you agree that you will not seek to recover any amount from the Trustee, BRC
or the Servicer for any reason once any payment or transfer has been made.
The Trustee's instructions with respect to the Concentration Account may be
given through a Servicer that the Trustee may appoint from time to time and will
notify you thereof in writing, and you agree to follow the instructions of such
Servicer with the same effect as if such instructions were given by the Trustee
directly (subject to any limitations on such appointment imposed by the Trustee
that are communicated in writing to you) until such time as the Trustee notifies
you of the revocation of the Servicer's authority to act for the Trustee. The
initial servicer will be Big Flower. The Trustee and the Servicer shall each
provide to you a list of their respective employees authorized to issue
instructions and give notices with respect to the Concentration Account, which
lists may be revised from time to time, and you shall be entitled to rely on
(and to assume) the authority of any employee of the Trustee or the Servicer
identified on such lists, and are hereby authorized to act on any notice given
on behalf of the Trustee or the Servicer by any such employee, subject to any
limitations on the appointment of the Servicer and the revocation of the
Servicer's authority as
<PAGE>
provided above.
Seller and BRC also hereby irrevocably notify you that, at all times from
and after the date hereof until your receipt of contrary and/or terminating
instructions from the Trustee, the Trustee shall be entitled (subject to your
rights set forth herein) to exercise in the place and stead of Seller and BRC
(or either of them) any and all of the rights of Seller and BRC in respect of or
in connection with this letter agreement and the Concentration Account,
including, without limitation (i) the right to specify that payments are to be
made out of or in connection with the Concentration Account to different
accounts or at different times than those specified above (subject to your
customary and then-current procedures for account processing) and (ii) the right
to require preparation of duplicate monthly bank statements on the Concentration
Account for mailing directly to an address specified by the Trustee.
By executing this letter agreement you acknowledge that you have not
heretofore received a notice, writ, order or any form of legal process from any
other person asserting, claiming or exercising any right of set-off, banker's
lien or other purported form of claim with respect to the items collected from
the Concentration Account or any funds from time to time therein or in transit
thereto, and agree to immediately inform the Trustee in writing of any such
action in the future.
By executing this letter agreement, you irrevocably waive and agree not to
assert any right to setoff against, or otherwise deduct from, any items
collected from the Concentration Account or any funds from time to time therein
or in transit thereto; PROVIDED, HOWEVER, that you may (i) debit the
Concentration Account for any items deposited in the Concentration Account that
are returned or otherwise not collected in accordance with your customary
practices for the chargeback of returned items, and (ii) apply funds in the
Concentration Account for reimbursement of any fees and expenses incurred by you
in connection with this letter agreement, to the extent that such fees and
expenses are not paid or reimbursed by Seller.
Seller shall pay, or reimburse you for, customary and reasonable fees and
expenses incurred by you in the maintenance and operation of the Concentration
Account in accordance with this letter agreement. The Trustee will have no
liability to you or the Servicer for any costs, fees or charges under your usual
and customary procedures or this letter agreement. You will not be liable for
any actions taken in accordance with the instructions of the Trustee or the
Servicer.
You also agree that, notwithstanding anything to the contrary herein, you
shall promptly notify the Trustee of your failure to receive timely payment of
any fee under this letter agreement.
<PAGE>
You may terminate this letter agreement by cancelling the Concentration
Account, which cancellation and termination shall become effective only upon
sixty days' prior written notice thereof from you to the Trustee. Upon the
termination of this letter agreement, you will close the Concentration Account
and transfer any monies remaining therein to the Master Collection Account. You
agree that you shall forward all wire transfers and deposits to the
Concentration Account that you receive after such cancellation in the form
received to the Master Collection Account or to such other address or account as
the Trustee (or the Servicer on behalf of the Trustee) shall specify, promptly
after you discover that you have received any such transfers. This letter
agreement may also be terminated upon written notice to you by the Trustee.
Except as expressly set forth in this paragraph, this letter agreement may not
be terminated or amended without the prior written consent of the Trustee.
All notices and other communications provided for hereunder shall, unless
otherwise stated herein, be in writing (including facsimile communication) and
shall be personally delivered or sent by certified mail, postage prepaid, by
facsimile or by overnight courier, to the intended person at the address or
facsimile number of such person set forth under its name on the signature pages
hereof or at such other address or facsimile number as shall be designated by
such person in a written notice to the other parties hereto given in accordance
with the requirements of this paragraph. All notices and other communications
hereunder shall also be provided to the Trustee and shall be addressed as
follows until you receive written notice from the Trustee to the contrary:
Manufacturers and Traders Trust Company
One M&T Plaza
Buffalo, New York 14203
Attention: Corporate Trust and Agency Services
Telephone: (716) 842-5602
Facsimile: (716) 842-4474.
All notices and communications provided for hereunder shall be effective,
(i) if personally delivered, when received, (ii) if sent by certified mail, four
business days after having been deposited in the mail, postage prepaid and
properly addressed, (iii) if transmitted by facsimile, when sent, receipt
confirmed by telephone or electronic means and (iv) if sent by overnight
courier, two business days after having been given to such courier unless sooner
received by the addressee.
This letter agreement shall be binding upon you and your successors and
assigns and shall inure to the benefit of Seller, BRC and the Trustee and their
respective successors, transferees and assigns; PROVIDED, HOWEVER, that you may
not assign your
<PAGE>
rights and duties under this letter agreement without the prior written consent
of the Trustee.
This letter agreement shall be governed by and construed in accordance with
the laws of the State of New York, not including the choice of law rules
thereof.
Please acknowledge your agreement to the terms set forth in this letter
agreement by signing five (5) copies of this letter agreement in the space
provided below and returning such copies to us at the address indicated below
for Seller.
Very truly yours,
[NAME OF SELLER]
By:_____________________________________
Title:________________________________
Address:
Attention:
Telephone:
Facsimile:
BFP RECEIVABLES CORPORATION
By:_____________________________________
Title:________________________________
Address:
Attention:
Telephone:
Facsimile:
<PAGE>
The undersigned hereby acknowledges and agrees to the foregoing letter
agreement as of this ___ day of , 199 .
[NAME OF CONCENTRATION BANK]
By:________________________________
Title:
Address:
Telephone:
Facsimile:
The undersigned hereby acknowledges and agrees to the foregoing letter
agreement dated as of the ___ day of , 199 .
MANUFACTURERS AND TRADERS TRUST COMPANY,
as Trustee
By:_____________________________________
Title:__________________________________
<PAGE>
EXHIBIT C
to Pooling Agreement
FORM OF
MONTHLY SERVICER'S CERTIFICATE
TO: MANUFACTURERS AND TRADERS TRUST COMPANY
[Paying Agent]
BFP RECEIVABLES CORPORATION
[Name of Rating Agency]
BIG FLOWER PRESS HOLDINGS, INC. (the "SERVICER") hereby certifies that:
(A) This Certificate is being delivered pursuant to SECTION 3.6 of the
Pooling and Servicing Agreement, dated as of _______, 1996, (as the same may be
amended, supplemented or otherwise modified from time to time, the "POOLING
AGREEMENT"), among BFP RECEIVABLES CORPORATION, as Transferor, Servicer, and
MANUFACTURERS AND TRADERS TRUST COMPANY, as Trustee.
(B) As of the date of this Certificate, the Authorized Officer (as defined
in the Pooling Agreement) that is executing this Certificate is not aware of the
occurrence and continuance of any Early Amortization Event or Unmatured Early
Amortization Event (each as defined in the Pooling Agreement). [If an Early
Amortization Event or Unmatured Early Amortization Event has occurred and is
continuing, specify each such Early Amortization Event or Unmatured Early
Amortization Event (as applicable) of which the Authorized Officer executing
this Certificate is aware and the nature and status thereof and further certify
that such information is true and accurate in all material respects.]
<PAGE>
IN WITNESS WHEREOF, Servicer has caused this Certificate to be executed by
its duly authorized officer this __ day of _______________, 19__.
BIG FLOWER PRESS HOLDINGS, INC.
By:
Title:
<PAGE>
EXHIBIT D
to Pooling Agreement
ANNUAL AGREED UPON PROCEDURES
MONTHLY REPORTS
Select at random four Monthly Reports prepared during the fiscal year and:
1. Compare/reconcile the following Monthly Report items with the
Servicer's original source documents noted below for five selected
operating units (letters refer to the applicable section of the
Monthly Report):
A. Monthly Receivable Activity:
1. Monthly Sales Journal
2. Cash Application Journal
3. Aged Trial Balance
4. Journal entries and related support affecting
cash application or receivables
5. Receivable Write-off Approval List
6. Bank Account Statements and PC generated Bank
Account Reports
7. Credit Memo Report
D. Loss Reserve Ratio:
1. Schedule A of the Monthly Report
2. Applicable Daily Report for Cutoff Date
3. Previous Monthly Reports
E. Dilution Reserve Ratio:
1. Section A of the Monthly Report
2. Previous Monthly Reports
G. Carrying Cost Receivables Reserve:
1. Section C of the Monthly Report
2. Carrying Cost Worksheet
H. Loss to Liquidation Ratio:
1. Receivable Write-off Approval List
2. Aged Trial Balance
<PAGE>
3. Journal entries and related back-up on
write-offs and recoveries
4. Previous Monthly Reports
J. Discount Rate:
1. Carrying Cost Worksheet
Schedule A. Aged Receivables Ratio:
1. Section A of the Monthly Report
2. Previous Monthly Reports
3. Aged Trial Balance Summary - invoices only, and
2. Recalculate the mathematical accuracy of Sections
A,B,C,D,E,F,G,H,J and K and Schedule A.
For each quarter end date that a Monthly Report is obtained, obtain the accounts
receivable Write-Off Report for five selected operating units and randomly
select a total of five write-offs greater than $1000 individually. Then obtain
the write-off documentation and verify that the write-offs had been approved and
were deleted from the Aged Trial Balance Report.
DAILY REPORTS
Select at random ten Daily Reports prepared during the fiscal year (of which not
more than two shall relate to any single fiscal month) and:
1. Compare/reconcile the following Daily Report items with the
Servicer's original source documents noted below for five selected
operating units (letters refer to the applicable section of the
Daily Report):
A. Daily Receivable Activity:
1. Daily Sales Summary
2. Cash Application Journal
3. Aged Trial Balance
4. Journal entries and related support affecting
cash applications or receivables
5. Receivable Write-off Approval List
6. Bank Account Statement and PC generated Bank
Account Reports
2
<PAGE>
B. Net Eligible Receivables Calculation (if not closing period):
1. Ineligible Receivables Program Reports
C. Excess Concentration Balances:
1. Ineligible Receivables Program Reports
Schedule A (if settlement date):
1. Most recent Monthly Report
2. Daily Report last day prior to settlement date,
and
2. Recalculate the mathematical accuracy of sections A-C and
Schedule A.
CREDIT DOCUMENTATION
Select at random two fiscal month ends during the fiscal year and:
1. Direct the Servicer to prepare a Credit File Contents
Schedule (the "Credit Schedule") that summarizes the
contents of the credit files for each customer we select
for testing. The Credit Schedule will include the
following information as of the cut-off date selected:
customer name, customer account number, customer statement,
approved credit limit, date of credit limit approval, name
and title of highest authority that approved the credit
limit and other supporting documentation in support of
extension of the credit limit (e. g., Dunn & Bradstreet
report, customer financial statement and bank or trade
references), and
2. For each customer selected:
A. Compare the customer's account receivables balance
with the approved credit limit to verify that the
balance is less than or equal to the approved limit
B. Compare the customer's account balance per the Credit
Schedule with the balance per the Account Receivable
Aged Trial Balance
C. Compare the date of the customer's most recent
invoice indicated on the customer's statement to the
date of the credit approval to verify that the date
of the invoice is the
3
<PAGE>
date of or subsequent to, but within one year of the date of,
credit approval
D. Note that at least one of the following items is included with
the credit documentation: Dun & Bradstreet Credit Report or
other credit report, bank or trade reference, financial
statements or a memorandum or workpapers regarding credit
evaluation/justification.
For each of the ten Daily Reports selected:
1. Invoices: Obtain the detail Aged Trial Balance Report for
five selected operating units and randomly select a total of 15
different invoices and verify the invoice date, amount and customer
name with a system generated copy of the invoice;
2. Dilutions and Credits: Obtain the detail Aged Trial Balance Report for
five selected operating units and randomly select a total of 15 different credit
names and verify the credit memo date, amount and customer name with a system
generated copy of the credit memo;
3. Cash Application: Randomly select a total of 15 individual
cash receipts comprising the cash collection amount and verify the bank
receipt date with the receipt date and application amount on the Daily
Report, adjusted for available balances;
4. Ineligible Receivables: Obtain the Aged Trial Balance for five selected
operating units and randomly select a total of ten customers that have balances
over 90 days past due and calculate the customer balances over 90 days past due
as a percentage of the customer's total balance. If this calculated percentage
is more than 50%, determine if the customer is classified as part of the
Ineligible Receivables;
5. Aging Reports: Using the 15 invoices selected in paragraph 1
above, find that the invoice is in the appropriate aging category on
the Aged Trial Balance; and
6. Purchase Options: Using the 15 invoices selected in
paragraph 1 above, verify the purchase order reference number on the
invoice with the purchase order (if available).
4
<PAGE>
EXHIBIT E
to Pooling Agreement
FORM OF
TRANSFEROR CERTIFICATE
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), THE SECURITIES OR "BLUE SKY" LAWS OF ANY STATE
OR THE LAWS OF ANY FOREIGN COUNTRY. THIS CERTIFICATE MAY NOT BE RESOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS SUCH RESALE, TRANSFER OR DISPOSITION
IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS AND FOREIGN LAWS. IN ADDITION TO THE
RESTRICTIONS SET FORTH ABOVE, RESALE, TRANSFER OR DISPOSITION OF THIS
CERTIFICATE IS PROHIBITED TO THE EXTENT SET FORTH IN THE POOLING AGREEMENT (AS
DEFINED BELOW).
BIG FLOWER RECEIVABLES MASTER TRUST
TRANSFEROR CERTIFICATE
THIS CERTIFIES THAT BFP RECEIVABLES CORPORATION is the registered owner of
an interest in the Big Flower Receivables Master Trust (the "Trust"), which was
created pursuant to the Pooling and Servicing Agreement, dated as of _______,
1996 (as the same may be amended, supplemented or otherwise modified from time
to time, the "Pooling Agreement"), by and among BFP Receivables Corporation, a
Delaware corporation, as Transferor ("Transferor"), Big Flower Press Holdings,
Inc., as initial Servicer (in such capacity, the "Servicer"), and MANUFACTURERS
AND TRADERS TRUST COMPANY, Trustee (in such capacity, together with its
successors and assigns in such capacity, the "Trustee"). This Certificate is the
duly authorized Transferor Certificate designated and issued under the Pooling
Agreement. To the extent not otherwise defined herein, capitalized terms have
the meanings assigned to them in Appendix A to the Pooling Agreement. This
Certificate is subject to the terms, provisions and conditions of, and is
entitled to the benefits afforded by, the Pooling Agreement, to which terms,
provisions and conditions the holder of this Certificate by virtue of the
acceptance hereof assents and by which the holder is bound.
<PAGE>
This Certificate shall not bear interest.
The Pooling Agreement may be amended and the rights and obligations of the
parties thereto and of the holder of this Certificate modified as set forth in
the Pooling Agreement.
Unless the certificate of authentication hereon shall have been executed
by or on behalf of Trustee by the manual signature of a duly authorized
signatory, this Certificate shall not entitle the holder hereof to any benefit
under the Pooling Agreement or under any other Transaction Document or be valid
for any purpose.
This Certificate is limited in right of payment to the Transferred Assets.
Transferor may not transfer, assign, exchange or otherwise convey or
pledge, hypothecate or otherwise grant a security interest in this Certificate
or any interest represented hereby except in compliance with the terms,
conditions and restrictions set forth in the Pooling Agreement. Any attempted
transfer of all or any part of this Certificate other than as permitted by the
Pooling Agreement shall be void and of no effect.
This Certificate shall be construed in accordance with the laws of the
State of New York, without reference to its conflict of laws principles, and all
obligations, rights and remedies under, or arising in connection with, this
Certificate shall be determined in accordance with the laws of the State of New
York.
2
<PAGE>
IN WITNESS WHEREOF, Transferor has caused this Certificate to be executed
by its officer thereunto duly authorized.
BFP RECEIVABLES CORPORATION
By: __________________________________
Title: _____________________________
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is the Transferor Certificate referred to in the Pooling Agreement.
MANUFACTURERS AND TRADERS
TRUST COMPANY,
as Trustee
By: __________________________________
Title: _____________________________
Dated: ___________, 199_
3
<PAGE>
EXHIBIT F
to Pooling Agreement
FORM OF CERTIFICATE TO BE GIVEN BY CERTIFICATE OWNER
[Euroclear [Cedel, societe anonyme
151 Boulevard Jacqmain 67 Boulevard Grand-Duchesse Charlotte
B-1210 Brussels, Belgium] L-1331 Luxembourg]
Re: [Description of Certificates] issued pursuant to the
Pooling and Servicing Agreement dated as of _______, 1996,
among BFP RECEIVABLES CORPORATION, BIG FLOWER PRESS
HOLDINGS, INC. and MANUFACTURERS AND TRADERS TRUST COMPANY,
as Trustee, (the "Certificates").
This is to certify that as of the date hereof, and except as set forth
below, the beneficial interest in the Certificates held by you for our account
is owned by persons that are not U.S. persons (as defined in Rule 901 under the
Securities Act of 1933, as amended).
The undersigned undertakes to advise you promptly by tested telex on or
prior to the date on which you intend to submit your certification relating to
the Certificates held by you in which the undersigned has acquired, or intends
to acquire, a beneficial interest in accordance with your operating procedures
if any applicable statement herein is not correct on such date. In the absence
of any such notification, it may be assumed that this certification applies as
of such date.
[This certification excepts beneficial interests in and does not relate to
U.S. $_________ principal amount of the Certificates appearing in your books as
being held for our account but that we have sold or as to which we are not yet
able to certify.]
We understand that this certification is required in connection with
certain securities laws in the United States of America. If administrative or
legal proceedings are commenced or threatened in connection with which this
certification is or would be relevant, we irrevocably authorize you to produce
this certification or a copy thereof to any interested party in such
proceedings.
Dated: ___________________,* By: ___________________,
Account Holder
<PAGE>
* Certification must be dated on or after the 15th day before the date of
the Euroclear or Cedel certificate to which this certification relates.
2
<PAGE>
EXHIBIT G
to Pooling Agreement
FORM OF CERTIFICATE TO BE GIVEN BY EUROCLEAR OR CEDEL
[Trustee and Transfer Agent and Registrar]
Re: [Description of Certificates] issued pursuant to the
Pooling and Servicing Agreement dated as of _______, 1996
among BFP RECEIVABLES CORPORATION, BIG FLOWER PRESS
HOLDINGS, INC. and MANUFACTURERS AND TRADERS TRUST COMPANY,
as Trustee, (the "Certificates").
This is to certify that, based solely on certifications we have received
in writing, by tested telex or by electronic transmission from member
organizations appearing in our records as persons being entitled to a portion of
the principal amount set forth below (our "Member Organizations") as of the date
hereof, $__________ principal amount of the Certificates is owned by persons (a)
that are not U.S. persons (as defined in Rule 901 under the Securities Act of
1933, as amended (the "Securities Act")) or (b) who purchased their Certificates
(or interests therein) in a transaction or transactions that did not require
registration under the Securities Act.
We further certify (a) that we are not making available herewith for
exchange any portion of the related Regulation S Temporary Book-Entry
Certificate excepted in such certifications and (b) that as of the date hereof
we have not received any notification from any of our Member Organizations to
the effect that the statements made by them with respect to any portion of the
part submitted herewith for exchange are no longer true and cannot be relied
upon as of the date hereof.
<PAGE>
We understand that this certification is required in connection with
certain securities laws of the United States of America. If administrative or
legal proceedings are commenced or threatened in connection with which this
certification is or would be relevant, we irrevocably authorize you to produce
this certification or a copy hereof to any interested party in such proceedings.
Date: _________________* Yours faithfully,
* To be dated no earlier By: ___________________________________
than the Effective Date. [Morgan Guaranty Trust
Company of New York, Brussels
Office, as Operator of the
Euroclear Clearance System]
[Cedel, societe anonyme]
<PAGE>
EXHIBIT H
to Pooling Agreement
FORM OF CERTIFICATE TO BE GIVEN BY TRANSFEREE
OF BENEFICIAL INTEREST IN A REGULATION S TEMPORARY
BOOK-ENTRY CERTIFICATE
[Euroclear [Cedel, soci t anonyme
151 Boulevard Jacqmain 67 Boulevard Grand-Duchesse
Charlotte
B-1210 Brussels, Belgium] L-1331 Luxembourg]
Re: [Description of Certificates] issued pursuant to the Pooling and
Servicing Agreement dated as of ______, 1996 among BFP RECEIVABLES
CORPORATION, BIG FLOWER PRESS HOLDINGS, INC. and MANUFACTURERS AND
TRADERS TRUST COMPANY, as Trustee, (the "CERTIFICATES").
This is to certify that as of the date hereof, and except as set forth
below, for purposes of acquiring a beneficial interest in the Certificates, the
undersigned certifies that it is not a U.S. person (as defined in Rule 901 under
the Securities Act of 1933, as amended).
The undersigned undertakes to advise you promptly by tested telex on or
prior to the date on which you intend to submit your certification relating to
the Certificates held by you in which the undersigned intends to acquire a
beneficial interest in accordance with your operating procedures if any
applicable statement herein is not correct on such date. In the absence of any
such notification, it may be assumed that this certification applies as of such
date.
We understand that this certification is required in connection with
certain securities laws in the United States of America. If administrative or
legal proceedings are commenced or threatened in connection with which this
certification is or would be relevant, we irrevocably authorize you to produce
this certification or a copy thereof to any interested party in such
proceedings.
Dated: ___________________, By:
<PAGE>
EXHIBIT I
to Pooling Agreement
FORM OF TRANSFER CERTIFICATE FOR EXCHANGE OR
TRANSFER FROM 144A BOOK-ENTRY CERTIFICATE TO
REGULATION S BOOK-ENTRY CERTIFICATE
[Trustee and Transfer Agent and Registrar]
Re: [Description of Certificates] issued pursuant to the Pooling and
Servicing Agreement dated as of _________, 1996 (the "AGREEMENT"),
among BFP RECEIVABLES CORPORATION, BIG FLOWER PRESS HOLDINGS, INC. and
MANUFACTURERS AND TRADERS TRUST COMPANY, as Trustee, (the
"CERTIFICATES").
Capitalized terms used but not defined herein shall have the meanings given
to them in the Agreement.
This letter relates to U.S. $___________ principal amount of Certificates
that are held as a beneficial interest in the 144A Book-Entry Certificate (CUSIP
No. _______) with DTC in the name of [insert name of transferor] (the
"TRANSFEROR"). The Transferor has requested an exchange or transfer of the
beneficial interest for an interest in the Regulation S Book-Entry Certificate
(CUSIP No. _______) to be held with [Euroclear] [Cedel] through DTC.
In connection with the request and in receipt of the Certificates, the
Transferor does hereby certify that the exchange or transfer has been effected
in accordance with the transfer restrictions set forth in the Agreement and the
Certificates and:
(a) pursuant to and in accordance with Regulation S under the
Securities Act of 1933, as amended (the "SECURITIES ACT"), and accordingly
the Transferor does hereby certify that:
(i) the offer of the Certificates was not made to a person in
the United States of America,
[(ii) at the time the buy order was originated, the transferee
was outside the United States of America or the Transferor and any
person acting on its behalf reasonably believed that the transferee
was outside the United States of America,
(ii) the transaction was executed in, on or through the
facilities of a designated offshore securities market and neither the
Transferor nor any person acting on its behalf knows that the
transaction was pre-arranged with a buyer in the United States of
America,]*
<PAGE>
(iii) no directed selling efforts have been made in
contravention of the requirements of Rule 903(b) or 904(b) of
Regulation S, as applicable,
(iv) the transaction is not part of a plan or scheme to evade
the registration requirements of the Securities Act, and
(b) with respect to transfers made in reliance on Rule 144 under the
Securities Act, the Transferor does hereby certify that the Certificates
are being transferred in a transaction permitted by Rule 144 under the
Securities Act.
This certification and the statements contained herein are made for your
benefit and the benefit of the issuer and the [placement agent].
[Insert name of Transferor]
Dated: By:
Title:
* Insert one of these two provisions, which come from the definition of
"offshore transactions" in Regulation S.
<PAGE>
EXHIBIT J
to Pooling Agreement
FORM OF PLACEMENT AGENT EXCHANGE INSTRUCTIONS
Depository Trust Company
55 Water Street
50th Floor
New York, New York 10041
Re: [Description of Certificates] issued pursuant to the Pooling and
Servicing Agreement dated as of _______, 1996 (the "AGREEMENT"), among
BFP RECEIVABLES CORPORATION, BIG FLOWER PRESS HOLDINGS, INC. and
MANUFACTURERS AND TRADERS TRUST COMPANY, as Trustee, (the
"CERTIFICATES").
Pursuant to SECTION 6.11 of the Agreement, _______________________ (the
"PLACEMENT AGENT") hereby requests that $____________ aggregate principal amount
of the Certificates held by you for our account and represented by the
Regulation S Temporary Book-Entry Certificate (CUSIP No. _______) (as defined in
the Agreement) be exchanged for an equal principal amount represented by the
144A Book-Entry Certificate (CUSIP No. _______) to be held by you for our
account.
Dated: [placement agent]
By:
Title:
<PAGE>
EXHIBIT K
to Pooling Agreement
FORM OF QUITCLAIM BILL OF SALE
Intentionally omitted, not material.
<PAGE>
SCHEDULE 1
to Pooling Agreement
Schedule intentionally omitted, not material.
<PAGE>
EXHIBIT L
to Pooling Agreement
FORM OF ANNUAL SERVICER CERTIFICATE
Intentionally omitted, not material.
<PAGE>
APPENDIX A
DEFINITIONS
A. DEFINED TERMS. As used in the Purchase Agreement, the Pooling Agreement
or any Supplement:
"ACCOUNT AGREEMENTS" means the Concentration Account Agreements, the
Blocked Account Agreements and the Lockbox Agreements.
"ACCOUNT BANKS" means the Concentration Account Banks, the Blocked Account
Banks and the Lockbox Banks.
"ADVERSE CLAIM" means any claim of ownership interest or any mortgage, deed
of trust, pledge, hypothecation, assignment, deposit arrangement, encumbrance,
lien (statutory or other) or other security interest.
"AFFECTED PARTY" shall mean, with respect to any Structured Lender, any
Support Bank of such Structured Lender.
"AFFILIATE" means, with respect to a Person, any other Person directly or
indirectly controlling, controlled by or under common control with such Person.
"AGING REPORT CONDITION" means Webcraft Technologies, Inc. shall have
demonstrated its ability to provide daily aging data as to the Receivables
originated by it and the Modification Condition shall have been satisfied as to
such demonstration.
"AGENT" means, with respect to a Series or Purchased Interest, any
Person(s) designated as the agent(s) for the Certificateholders or the
Purchasers in the related Supplement or PI Agreement.
"AGGREGATE UNPAID BALANCE" is defined in SECTION 2.1(B) of the Purchase
Agreement.
"AMORTIZATION PERIOD" is defined, for purposes of any Series or Purchased
Interest, in the related Supplement or PI Agreement.
"APPLICANT" is defined in SECTION 6.7 of the Pooling Agreement.
"AUTHORIZED NEWSPAPER" means a newspaper of general circulation in the
Borough of Manhattan, The City of New York printed in the English language and
customarily published on each Business Day, whether or not published on
Saturdays, Sundays and
<PAGE>
holidays.
"AUTHORIZED OFFICER" means, with respect to Transferor, Servicer or any
Seller, the Chief Executive Officer, the President, the Treasurer, the Chief
Financial Officer, any Vice President, the Secretary and any Assistant
Treasurer.
"AVAILABLE FINAL DISTRIBUTION AMOUNT" means, with respect to any Series,
the amount that would be available in the Master Collection Account on the Final
Scheduled Payment Date for the Series for distribution to the Certificateholders
of such Series.
"BANK ACCOUNTS" means the Lockbox Accounts, the Blocked Accounts and the
Concentration Accounts.
"BANKRUPTCY EVENT" means, for any Person, any of the following events:
(a) a case or other proceeding shall be commenced, without the
application or consent of such Person, in any court, seeking the
liquidation, reorganization, debt arrangement, dissolution, winding up or
composition or readjustment of debts of such Person, the appointment of a
trustee, receiver, custodian, liquidator, assignee, sequestrator or the
like for such Person or any substantial part of its assets, or any similar
action with respect to such Person under any law relating to bankruptcy,
insolvency, reorganization, winding up or composition or adjustment of
debts, and such case or proceeding shall continue undismissed, or unstayed
and in effect, for a period of (i) in the case of any Person other than
Transferor, 60 days and (ii) in the case of Transferor, 10 days; or an
order for relief in respect of such Person shall be entered in an
involuntary case under the federal bankruptcy laws or other similar laws
now or hereafter in effect, or
(b) such Person shall commence a voluntary case or other proceeding
under any applicable bankruptcy, insolvency, reorganization, debt
arrangement, dissolution or other similar law now or hereafter in effect,
or shall consent to the appointment of or taking possession by a receiver,
liquidator, assignee, trustee, custodian, sequestrator or the like, for
such Person or any substantial part of its property, or shall make any
general assignment for the benefit of creditors, or shall fail to, or admit
in writing its inability to, pay its debts generally as they become due.
"BASE AMOUNT" is defined, for purposes of any Series or Purchased Interest,
in the applicable Supplement or PI Agreement.
"BIG FLOWER" means Big Flower Press Holdings, Inc., a
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Delaware corporation.
"BIG FLOWER PERSON" means Big Flower and each of its Affiliates (other than
Transferor).
"BLOCKED ACCOUNT AGREEMENT" means any of the letter agreements delivered in
connection with the Pooling Agreement and any other letter agreement,
substantially in the form of EXHIBIT A-2 to the Pooling Agreement (or such other
form as to which the Modification Condition is satisfied), among a Blocked
Account Bank, one or more Sellers, Servicer and Trustee that relates to one or
more Blocked Accounts, as they may be amended, supplemented or otherwise
modified from time to time.
"BLOCKED ACCOUNT BANK" means any of the banks at which one or more Blocked
Accounts are maintained from time to time.
"BLOCKED ACCOUNTS" means the bank accounts maintained at those certain
locations described in SCHEDULE I to the Pooling Agreement, into which
Collections from Receivables are deposited, and any bank account that is
hereafter created in accordance with, and to perform the functions contemplated
for "Blocked Accounts" in, SECTION 3.3 of the Pooling Agreement.
"BOOK-ENTRY CERTIFICATES" means certificates evidencing a beneficial
interest in the Investor Certificates, ownership and transfers of which shall be
made through book entries by a Clearing Agency as described in SECTION 6.11 of
the Pooling Agreement; PROVIDED that after the occurrence of a condition
whereupon book-entry registration and transfer are no longer permitted and
Definitive Certificates are to be issued to the Certificate Owners, such
certificates shall no longer be "Book-Entry Certificates".
"BUSINESS DAY" means a day (other than a Saturday or Sunday) on which
commercial banks in New York, New York are not authorized or required to be
closed for business.
"BUYER" is defined in the preamble to the Purchase Agreement.
"BUYER NOTE" means the note defined in SECTION 3.2 of the Purchase
Agreement, substantially in the form of Exhibit A to the Purchase Agreement.
"CALCULATION PERIOD" means a fiscal month of Big Flower.
"CARRYING COST ACCOUNT" is defined in SECTION 4.2 of the Pooling Agreement.
"CARRYING COSTS" means, for any period, (a) interest or yield payable with
respect to any Series or Purchased Interest for that period, (b) the aggregate
Servicing Fee for the period
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in the applicable amount provided for in SECTION 3.4 of the Pooling Agreement,
(c) the operating expenses described in SECTION 7.2(M) of the Pooling Agreement
for the period and (d) other fees, costs and expenses incurred by Transferor and
Trustee for the period and paid to Persons other than Big Flower Persons in
connection with its duties under the Transaction Documents (in the case of
Trustee, to the extent not included in the Servicing Fee).
"CERTIFICATE" means any Investor Certificate or the Transferor Certificate.
"CERTIFICATEHOLDER" means the Person in whose name a Certificate is
registered in the Certificate Register.
"CERTIFICATE OWNER" means, with respect to a Book-Entry Certificate, the
Person who is the owner of such Book-Entry Certificate, as reflected on the
books of the Clearing Agency, or on the books of a Person maintaining an account
with such Clearing Agency (directly or as an indirect participant, in accordance
with the rules of such Clearing Agency).
"CERTIFICATE REGISTER" means the register maintained pursuant to SECTION
6.3 of the Pooling Agreement.
"CLEARING AGENCY" means, with respect to any Book-Entry Certificate, any
Person designated as such by Transferor, which Person must be registered as a
"clearing agency" pursuant to Section 17A of the Securities Exchange Act of
1934.
"CLEARING AGENCY PARTICIPANT" is defined in SECTION 6.11(D) of the Pooling
Agreement.
"COLLECTIONS" means all funds that are received by any Seller, Transferor,
Servicer or Trustee from or on behalf of any Obligor in payment of any amounts
owed (including invoice prices, finance charges, interest and all other charges,
if any) in respect of any Receivable or Related Asset, or otherwise applied to
repay or discharge any Receivable (including insurance payments that any Seller,
Transferor or Servicer applies in the ordinary course of its business to amounts
owed in respect of such Receivable and net proceeds of sale or other disposition
of repossessed goods that were the subject of such Receivable).
"CONCENTRATION ACCOUNT" means any bank account that is maintained in
accordance with, and to perform the functions contemplated for Concentration
Accounts in, SECTION 3.3 of the Pooling Agreement.
"CONCENTRATION ACCOUNT AGREEMENT" means a letter agreement, substantially
in the form of EXHIBIT B to the Pooling Agreement (or such other form as to
which the Modification Condition has been satisfied), among Transferor,
Servicer, a Concentration
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Account Bank and Trustee that relates to one or more Concentration Accounts, as
it may be amended, supplemented or otherwise modified from time to time.
"CONCENTRATION ACCOUNT BANKS" means any of the banks at which one or more
Concentration Accounts are maintained from time to time.
"CONTRACT" means an agreement between a Seller and any Person pursuant to
which such Person is obligated to make payments in respect of any Receivable or
Related Asset.
"CONTRIBUTED RECEIVABLES" means all right, title and interest of a Seller
in the Receivables (and Related Security in connection therewith) contributed by
such Seller to Buyer.
"CORPORATE TRUST OFFICE" means the principal office of Trustee in Buffalo,
New York, at which at any particular time its corporate trust business shall be
principally administered.
"CREDIT AND COLLECTION POLICY" means (a) so long as no Successor Servicer
has been appointed, with respect to any Seller, its credit and collection
policies and practices relating to the Contracts and Receivables of such Seller
that such Seller has provided to Transferor and Trustee prior to the First
Issuance Date, as such credit and collection policies may be modified without
violating SECTION 6.3(B) of the Purchase Agreement or SECTION 7.2(F) of the
Pooling Agreement or (b) with respect to any Successor Servicer, its collection
policies and practices with respect to receivables like the Receivables.
"CUT-OFF DATE" means the last day of any Calculation Period.
"DAILY REPORT" is defined in SECTION 3.5 of the Pooling Agreement.
"DCR" means Duff & Phelps Credit Rating Co.
"DEFINITIVE CERTIFICATES" means any Certificate other than a Book-Entry
Certificate.
"DILUTION" means any reduction in the balance of a Receivable or check
issued by any Seller to an Obligor on account of discounts, incorrect billings,
incentive payments, credits, volume rebates or other rebates, allowances,
chargebacks, returned or repossessed goods, allowances for early payments or any
other reduction in the balance of a Receivable for any other reason unrelated to
the inability of the Obligor to pay the Receivable.
"DIRECT PAY RECEIVABLE" means, at any time when a Big Flower Person is
acting as Servicer, (x) a Receivable generated by Webcraft Chemicals, Inc., the
Obligor of which has been
<PAGE>
instructed to make payments directly to Webcraft Chemicals, Inc. in accordance
with the credit and collection policies of Webcraft Chemicals, Inc. as in effect
on March 19, 1996, and (y) a Receivable generated by Webcraft Technologies,
Inc., the Obligor of which has been given supplemental instructions by Webcraft
Technologies, Inc. to make payments in respect of such Receivable originated by
it directly to Webcraft Technologies, Inc., provided that such supplemental
instructions are given to enhance the collection or origination of Receivables
in accordance with the past practices of Webcraft Technologies, Inc. (and not
for cash management purposes).
"DISCOUNT RATE" is defined in SECTION 2.2(D) of the Purchase Agreement.
"DISPOSITION" is defined in SECTION 9.3 of the Pooling Agreement.
"DISTRIBUTION DATE" means the 25th day of each calendar month (or, if not a
Business Day, the next Business Day).
"DISTRIBUTION PERIOD" means each period from one Distribution Date to the
next Distribution Date.
"DOLLARS" means dollars in lawful money of the United States of America.
"DOMESTIC PERSON" means any Person that has a place of business located in
the United States or Puerto Rico or otherwise is subject to the jurisdiction of
one or more civil courts of the United States (other than by reason of
contractual submission to such jurisdiction).
"DOMESTIC SUBSIDIARY" means any direct or indirect Subsidiary of Big Flower
having its chief executive office and principal place of business located in the
United States.
"EARLY AMORTIZATION EVENT" means, with respect to any Series or Purchased
Interest, any event identified as an Early Amortization Event in the related
Supplement or PI Agreement.
"EARLY AMORTIZATION PERIOD" is defined, for purposes of any Series or
Purchased Interest, in the related Supplement or PI Agreement.
"ELIGIBLE DEPOSIT ACCOUNT" means (a) a segregated trust account maintained
at a national bank with a long-term debt rating of at least A (or, in the case
of a Bank Account, BBB) from S&P, (b) a deposit account maintained with a bank
that has an unsecured long-term debt rating of A, or a short-term rating of at
least A-1, from S&P or (c) another deposit account as to which the Modification
Condition has been satisfied.
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"ELIGIBLE INVESTMENTS" means any of the following:
(a) deposit accounts that are established and maintained at a
financial institution, the short-term debt securities or certificates of
deposit of which have at the time of investment the highest short-term debt
or certificate of deposit rating (as the case may be) available from the
Rating Agencies, and that are held in the name of Trustee in trust for the
benefit of the Certificateholders, subject to the exclusive custody and
control of Trustee and for which Trustee has sole signature authority;
PROVIDED that this clause shall not apply to the Lockbox Accounts, the
Blocked Accounts or to the Transaction Accounts;
(b) marketable obligations of the United States of America, the full
and timely payment of principal and interest on which is backed by the full
faith and credit of the United States of America, that have a maturity date
not later than the next succeeding Distribution Date;
(c) marketable obligations directly and fully guaranteed by the
United States of America, the full and timely payment of principal and
interest on which is backed by the full faith and credit of the United
States of America, that have a maturity date not later than the next
succeeding Distribution Date;
(d) banker's acceptances, certificates of deposit and other
interest-bearing obligations denominated in Dollars (subject to the proviso
at the end of this definition), that have a maturity date not later than
the next succeeding Distribution Date;
(e) repurchase agreements (i) that are entered into with any
financial institution having the ratings referred to in CLAUSE (A) and (ii)
that are secured by a perfected first priority security interest in an
obligation of the type described in CLAUSE (B) or (C); PROVIDED that such
obligation may mature later than the next succeeding Distribution Date if
such bank is required to repurchase such obligation not later than the next
succeeding Distribution Date; and PROVIDED FURTHER, that (i) the market
value of the obligation with respect to which such bank has a repurchase
obligation, determined as of the date on which such obligation is
originally purchased, shall equal or exceed 102% of the repurchase price to
be paid by such bank and (ii) Trustee or a custodian acting on its behalf
shall have possession of the instruments or documents evidencing such
obligations;
(f) guaranteed investment contracts entered into with any financial
institution, the short-term debt securities of
<PAGE>
which have the highest short-term debt rating available from the Rating
Agencies that, in each case, have a maturity date not later than the next
succeeding Distribution Date;
(g) commercial paper (except for commercial paper issued by any Big
Flower Person) rated at the time of investment not less than "A-1+" or the
equivalent thereof by the Rating Agencies and having a maturity date not
later than the next succeeding Distribution Date; and
(h) freely redeemable shares in open-end money market mutual funds
(including such mutual funds that are offered by the Person who is acting
as Trustee or by any agent of such Person) that (i) maintain a constant
net-asset value and (ii) at the time of such investment have been rated not
less than "AAAm" or the equivalent thereof by S&P;
PROVIDED that (A) Trustee shall only acquire banker's acceptances and
certificates of deposit of, and enter into repurchase agreements with,
institutions whose short-term obligations have been rated not less than "A-1+"
or the equivalent thereof by the Rating Agencies and whose long-term obligations
have been rated not less than "AA-" by the Rating Agencies, (B) the securities,
banker's acceptances, certificates of deposit, other obligations and repurchase
agreements described above shall only constitute "Eligible Investments" if and
to the extent that (x) Servicer is satisfied that Trustee will have a perfected
security interest therein for the benefit of the Certificateholders and (y) S&P
shall not have added its "r" highlighter symbol to its rating thereof and (C)
notwithstanding anything to the contrary herein or in the other Transaction
Documents, the term "Rating Agency," whenever used in this definition of
"Eligible Investments", shall be deemed to not include DCR to the extent that an
investment is rated by S&P, but not by DCR.
"ELIGIBLE OBLIGOR" means, for purposes of any Series (unless otherwise
specified in the related Supplement) at any time, an Obligor that satisfies the
following criteria:
I. it is a Domestic Person and is not (except as otherwise specified
for any Series in the related Supplement) (i) the United States government
or any of its agencies or instrumentalities or (ii) a state or local
government agency or instrumentality;
(b) it is not a direct or indirect Subsidiary of Big Flower or any
other entity with respect to which Big Flower or any of its Subsidiaries
owns, directly or indirectly, more than 50% of the entity's equity
interests;
(c) with respect to which no Bankruptcy Event had occurred and was
continuing as of the end of the most recent Calculation Period and is
continuing; provided that this
<PAGE>
clause shall not apply if a bankruptcy court has approved the Obligor's
payment of its obligations on the Receivables;
(d) as of the end of the most recent Calculation Period, none of the
Receivables of the Obligor were evidenced by promissory notes; and
(e) it is not an Obligor with whom the applicable Seller has a "cash
in advance" or "cash on account" arrangement (but may be an Obligor that
the applicable Seller bills in advance in accordance with that Seller's
customary practices, and not on account of concerns about the
creditworthiness of the Obligor).
"ELIGIBLE RECEIVABLE" means, for purposes of any Series (unless otherwise
specified in the related Supplement) at any time, a Receivable:
(a) that arises from the sale of goods or services by a Seller in the
ordinary course of its business;
(b) that represents a BONA FIDE obligation resulting from a sale of
goods that have been shipped or services that have been performed and for
which an invoice has been sent to the applicable Obligor;
(c) that, as of that time, is not aged more than 90 days past its
original invoice date, or, at any time of determination prior to the
satisfaction of the Aging Report Condition, if such Receivable was
originated by Webcraft Technologies, Inc., is not aged more than 60 days
past its original invoice date;
(d) that constitutes an account or a general intangible for the
payment of money and not an instrument or chattel paper;
(e) the Obligor of which is an Eligible Obligor;
(f) with regard to which both the representation and warranty of
Transferor in SECTION 2.3(A)(I) of the Pooling Agreement and the
representation and warranty of the relevant Seller in SECTION 5.1(K) of the
Purchase Agreement are true and correct;
(g) the transfer of which (including the sale by the applicable
Seller to Transferor and the transfer by Transferor to the Trust) does not
contravene or conflict with any law, rule or regulation or any contractual
or other restriction, limitation or encumbrance that applies to the
applicable Seller, Transferor or the Trust, and the sale, assignment or
transfer of which, and the granting of a security interest in which, does
not require the consent of
<PAGE>
the Obligor thereof or any other Person, other than any such consent that
has been obtained;
(h) that is denominated and payable only in Dollars in the United
States of America and is non-interest bearing; PROVIDED that a Receivable
shall not be deemed to be interest-bearing solely as a result of the
applicable Seller's imposition of an interest or other charge on any such
Receivable that remains unpaid for some specified period (but such interest
charge or other charge shall not be included in the Unpaid Balance of a
Receivable for purposes of calculating the Base Amount);
(i) that arises under a Contract that has been duly authorized and
that, together with such Receivable, is in full force and effect and
constitutes the legal, valid and binding obligation of the Obligor of such
Receivable enforceable against such Obligor in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization or other similar laws 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;
(j) that is not subject to any asserted reduction, cancellation, or
refund or any dispute, offset, counterclaim, lien or defense whatsoever
(including any Permitted Adverse Claim, any Special New Jersey EPA Claim or
other potential reduction on account of any offsetting account payable of
Transferor or the applicable Seller to an Obligor or funds of an Obligor
held by Transferor or the Seller); PROVIDED that a Receivable that is
subject only in part to any of the foregoing shall be an Eligible
Receivable to the extent not subject to reduction, cancellation, refund,
dispute, offset, counterclaim, lien or other defense;
(k) that, together with the Contract related thereto, was created in
accordance with, and conforms in all material respects with, all applicable
laws, rules, regulations, orders, judgments, decrees and determinations of
all courts and other governmental authorities (whether Federal, state,
local or foreign and including usury laws);
(l) that satisfies all applicable requirements of the Credit and
Collection Policy of the applicable Seller; and
(m) that has not been compromised, adjusted, satisfied, subordinated,
rescinded or modified (including by extension of time or payment or the
granting of any discounts, allowances or credits), except as permitted by
SECTION 7.2(F) of the Pooling Agreement.
<PAGE>
"ELIGIBLE SERVICER" means (a) Big Flower, (b) Trustee or (c) an entity
that, at the time of its appointment as Servicer, (i) is servicing a portfolio
of trade receivables, (ii) is legally qualified and has the capacity to service
the Receivables, (iii) has demonstrated the ability to service professionally
and competently a portfolio of trade receivables similar to the Receivables in
accordance with high standards of skill and care, (iv) is qualified to use the
software that is then being used to service the Receivables or obtains the right
to use or has its own software that is adequate to perform its duties under the
Pooling Agreement and (v) as to which the Modification Condition has been
satisfied.
"ENHANCEMENT" means, with respect to any Series or Purchased Interest, any
surety bond, letter of credit, guaranteed rate agreement, maturity guaranty
facility, cash collateral account or guaranty, tax protection agreement,
interest rate swap or other contract or agreement for the benefit of
Certificateholders of the Series or Purchaser of the Purchased Interest.
"ENHANCEMENT PROVIDER" means the Person providing any Enhancement, other
than any Certificateholders, the Certificates of which are subordinated to any
Series or class of Certificates.
"EQUALIZATION ACCOUNT" is defined in SECTION 4.2 of the Pooling Agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974.
"ESTABLISHED SECURITIES MARKET" means a national securities exchange that
is either registered under Section 6 of the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT") or exempt from registration because of the limited
volume of transactions, a foreign securities exchange that, under the law of the
jurisdiction where it is organized, satisfies regulatory requirements that are
analogous to the regulatory requirements of the Exchange Act, a regional or
local exchange, or an interdealer quotation system that regularly disseminates
firm buy or sell quotations by identified brokers or dealers by electronic means
or otherwise.
"ESTIMATED BASE AMOUNT" is defined in SECTION 3.5 of the Pooling Agreement.
"EXCHANGE DATE" is defined in SECTION 6.11(C) of the Pooling Agreement.
"EXEMPT OBLIGOR" means an Obligor that is specified as an "EXEMPT OBLIGOR"
in a notice from Servicer to the Trustee, the Rating Agencies and the Agent;
PROVIDED that each of the following requirements must be satisfied with respect
to such
<PAGE>
Obligor: (w) the Modification Condition shall have been satisfied, (x) such
Obligor has been instructed to make all payments in respect to its receivables
to a location other than to any of the Bank Accounts, (y) such Obligor can
reasonably be expected to follow such instructions, as certified by the Servicer
in the notice specifying such Obligor as an Exempt Obligor, and (z) none of the
data included in the Daily Reports, Monthly Reports or other information
supplied to the Trustee or Holders includes any information about such Obligor
or amounts owed by it.
"FEDERAL RESERVE BOARD" means the Board of Governors of the Federal Reserve
System, or any successor thereto or to the functions thereof.
"FINAL SCHEDULED PAYMENT DATE" is defined, for purposes of any Series, in
the applicable Supplement.
"FIRST ISSUANCE DATE" means March 19, 1996.
"GAAP" means United States generally accepted accounting principles.
"GOVERNMENTAL AUTHORITY" means the United States of America, any state or
other political subdivision thereof and any entity in the United States of
America or any applicable foreign jurisdiction that exercises executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"GUARANTY" means any agreement or arrangement by which any Person directly
or indirectly guarantees, endorses, agrees to purchase or otherwise becomes
contingently liable upon any liability of any other Person (other than by
endorsements of instruments in the course of collection) or guarantees the
payment of distributions upon the shares of any other Person.
"HIGHEST BID" means the highest cash purchase offer for a Series received
by Servicer pursuant to SECTION 12.1 of the Pooling Agreement.
"HOLDBACK ACCOUNT" is defined in SECTION 4.2 of the Pooling Agreement.
"HOLDER" means the Person in whose name a Certificate is registered in the
Certificate Register or a Person who holds a Purchased Interest.
"IMPERMISSIBLE QUALIFICATION" means, relative to the opinion or
certification of any independent public accountant as to any financial statement
of Big Flower or Treasure Chest, any qualification or exception to such opinion
or certification that is of a "going concern" or similar nature.
<PAGE>
"INDEBTEDNESS" of any Person means all of that Person's obligations for
borrowed money, obligations evidenced by bonds, debentures, notes or other
similar instruments, obligations as lessee under leases that are required by
GAAP to be recorded as capitalized leases and obligations to pay the deferred
purchase price of property or services.
"INDEMNIFIED LOSSES" is defined in SECTION 7.3 of the Pooling Agreement.
"INDEMNIFIED PARTY" is defined in SECTION 7.3 of the Pooling Agreement.
"INITIAL CUT-OFF DATE" means the Business Day immediately preceding the
First Issuance Date.
"INTERCREDITOR AGREEMENT" means an intercreditor agreement, in form and
substance satisfactory to the Trustee, between the Trustee and a secured
creditor of a Seller.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986.
"INVESTED AMOUNT" is defined, with respect to any Series or Purchased
Interest, in the related Supplement or PI Agreement.
"INVESTOR CERTIFICATEHOLDER" means the Person in whose name an Investor
Certificate is registered in the Certificate Register.
"INVESTOR CERTIFICATES" means the Certificates issued pursuant to any
Supplement.
"INVESTOR EXCHANGE" is defined in SECTION 6.10(A) of the Pooling Agreement.
"ISSUANCE" is defined in SECTION 6.10(A) of the Pooling Agreement.
"ISSUANCE DATE" is defined in SECTION 6.10(B) of the Pooling Agreement.
"ISSUANCE NOTICE" is defined in SECTION 6.10(B) of the Pooling Agreement.
"LEAD PLACEMENT AGENT" means any Person designated as such by Transferor in
connection with the issuance of any Investor Certificates.
"LETTER OF REPRESENTATIONS" means the agreement among Transferor, Trustee
and the applicable Clearing Agency, with respect to any Book-Entry Certificates,
as the same may be
<PAGE>
amended, supplemented or otherwise modified from time to time.
"LOCKBOX ACCOUNTS" means the bank accounts, maintained at those certain
locations described in SCHEDULE 1 to the Pooling Agreement, into which
Collections from Receivables are deposited, and any bank account that is
hereafter created in accordance with, and to perform the functions contemplated
for "Lockbox Accounts" in, SECTION 3.3 of the Pooling Agreement.
"LOCKBOX AGREEMENT" means any of the letter agreements delivered in
connection with the Pooling Agreement and any other letter agreement,
substantially in the form of EXHIBIT A to the Pooling Agreement (or such other
form as to which the Modification Condition is satisfied), among a Lockbox Bank,
one or more Sellers, Servicer and Trustee that relates to one or more Lockbox
Accounts, as they may be amended, supplemented or otherwise modified from time
to time.
"LOCKBOX BANK" means any of the banks at which one or more Lockbox Accounts
are maintained from time to time.
"LOSS DISCOUNT" is defined in SECTION 2.2(B) of the Purchase Agreement.
"LOSS TO LIQUIDATION RATIO" means, as calculated in each Monthly Report, a
fraction (a) the numerator of which is the aggregate Unpaid Balance of
Receivables (net of recoveries) that were written off as uncollectible or
(without duplication) converted into promissory notes during the three preceding
Calculation Periods in accordance with the Credit and Collection Policy, and (b)
the denominator of which is the aggregate amount of Collections on the
Receivables received during such three Calculation Periods.
"MAJORITY INVESTORS" means Holders of Investor Certificates that
collectively evidence more than 50% of the outstanding principal amount of all
Investor Certificates.
"MASTER COLLECTION ACCOUNT" is defined in SECTION 4.2 of the Pooling
Agreement.
"MATERIAL ADVERSE EFFECT" means, with respect to any event or circumstance
at any time, a material adverse effect on any Series or Purchased Interest;
PROVIDED, that for the purpose of determining whether any Adverse Claim or other
event or circumstance results (or has a likelihood of resulting) in a Material
Adverse Effect, the effect of such event or circumstance shall be considered in
the aggregate with the effect of all other Adverse Claims (including Permitted
Adverse Claims and Special New Jersey EPA Claims) or other events and
circumstances occurring or existing at the time of such determination.
"MEMBER ORGANIZATION" is defined in SECTION 6.11(C) of the
<PAGE>
Pooling Agreement.
"MODIFICATION CONDITION" means, with respect to any action, that each
Rating Agency has confirmed in writing that such action will not result in a
reduction or withdrawal of the rating of any outstanding Series or Purchased
Interest that was rated by such Rating Agency, or if no outstanding Investor
Certificates or Purchased Interests have been rated, the Trustee shall have
consented in writing to such action.
"MONTHLY REPORT" is defined in SECTION 3.5(D) of the Pooling Agreement.
"NET INVESTED AMOUNT" is defined, for purposes of any Series or Purchased
Interest, in the applicable Supplement or PI Agreement.
"NEW ISSUANCE" is defined in SECTION 6.10(A) of the Pooling Agreement.
"NONCOMPLYING RECEIVABLES AND DILUTION ADJUSTMENT" is defined in SECTION
3.1(B) of the Purchase Agreement.
"OBLIGATIONS" means (a) all obligations of Buyer, the Sellers and the
Servicer to the Trustee, the Trust, any other Indemnified Party, the Investor
Certificateholders and their respective successors, permitted transferees and
assigns, arising under or in connection with the Transaction Documents, and (b)
all obligations of a Seller to Buyer, any other RPA Indemnified Party and their
respective successors, transferees and assigns, arising under or in connection
with the Transaction Documents, in each case howsoever created, arising or
evidenced, whether direct or indirect, absolute or contingent, now or hereafter
existing, or due or to become due.
"OBLIGOR" means a Person obligated to make payments on a Receivable.
"OFFICER'S CERTIFICATE" means, unless otherwise specified in the Pooling
Agreement or in any Supplement, a certificate signed by an Authorized Officer of
Transferor or the initial Servicer, as the case may be, or, in the case of a
Successor Servicer, a certificate signed by the President, any Vice President,
Assistant Treasurer or the financial controller (or an officer holding an office
with equivalent or more senior responsibilities) of such Successor Servicer,
that, in the case of any of the foregoing, is delivered to Trustee.
"OPINION OF COUNSEL" means a written opinion of counsel, who shall be
reasonably acceptable to Trustee and, if the Rating Agencies are addressees, the
Rating Agencies.
"PAYING AGENT" means any paying agent appointed pursuant to
<PAGE>
SECTION 6.6 of the Pooling Agreement and shall initially be Trustee.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PERMITTED ADVERSE CLAIMS" means (a) ownership or security interests
arising under the Transaction Documents and (b) liens for taxes, assessments or
charges of any governmental authority and liens of landlords, carriers,
warehousemen, mechanics and materialmen imposed by law in the ordinary course of
business, in each case (i) for amounts not yet due or (ii) which are being
contested in good faith by appropriate proceedings and with respect to which
adequate reserves or other appropriate provisions are being maintained in
accordance with GAAP, PROVIDED that the aggregate amount secured by all liens
referred to in this CLAUSE (II) does not exceed $1,000,000.
"PERMITTED TERMINATING SELLER" is defined in SECTION 1.8(A) of the Purchase
Agreement.
"PERMITTED TRANSFEREE" means, with respect to any Structured Lender, any of
its Support Banks; PROVIDED, HOWEVER, that the aggregate number of actual
assignments of Subject Instruments by all Structured Lenders to Permitted
Transferees at any time outstanding shall not exceed 20.
"PERSON" means an individual, partnership, limited liability company,
corporation (including a business trust), joint stock company, trust,
unincorporated association, joint venture, government or any agency or political
subdivision thereof or any other entity.
"PI AGREEMENT" means an agreement or agreements executed and delivered in
connection with the sale of a Purchased Interest, as amended, supplemented or
otherwise modified from time to time.
"POOLING AGREEMENT" means the Pooling and Servicing Agreement, dated as of
March 19, 1996 among Transferor, as transferor, Big Flower, as Servicer, and
Trustee, as it may be amended, supplemented or otherwise modified from time to
time.
"PREVIOUSLY TERMINATED SELLER AMOUNT" is defined in SECTION 1.8 of the
Purchase Agreement.
"PRINCIPAL FUNDING ACCOUNT" is defined in SECTION 4.2 of the Pooling
Agreement.
"PRIVATE HOLDER" shall mean each holder of a right to receive interest or
principal with respect to a Certificate or Purchased Interest, other than
certificates (or other such interests) with respect to which an opinion is
rendered that such certificates (or other such interests) will be treated as
debt for federal income tax purposes and any holder of a right to
<PAGE>
receive any amount in respect of the Transferor Certificate. A Person holding
more than one interest in the Trust each of which separately would cause such
Person to be a Private Holder shall be treated as a single Private Holder; a
Private Holder that would be a partnership, an S corporation or a grantor trust
under the Internal Revenue Code shall be treated as one or more Private Holders
in accordance with the provisions of Proposed Treasury Regulation Section
1.7704-1 or any successor provision of law.
"PRO FORMA FINANCIAL DATA" means the projections referred to in SECTION
7.05(E) of the Big Flower Credit Agreement.
"PROCESS AGENT" is defined in SECTION 10.7 of the Purchase Agreement.
"PROGRAM" means the transactions contemplated in the Transaction Documents.
"PUBLICATION DATE" is defined in SECTION 9.3(A) of the Pooling Agreement.
"PURCHASE" means each purchase of Receivables and Related Assets by
Transferor from a Seller under the Purchase Agreement.
"PURCHASE AGREEMENT" means the Receivables Purchase Agreement, dated as of
March 19, 1996, among the Sellers and Transferor, as it may be amended,
supplemented or otherwise modified from time to time.
"PURCHASE DISCOUNT RESERVE RATIO" is defined in SECTION 2.2(C) of the
Purchase Agreement.
"PURCHASE PRICE" is defined in SECTION 2.1(B) of the Purchase Agreement.
"PURCHASE PRICE CREDIT" is defined in SECTION 3.1(D) of the Purchase
Agreement.
"PURCHASE PRICE PERCENTAGE" is defined in SECTION 2.2(A) of the Purchase
Agreement.
"PURCHASE TERMINATION DATE" means the earlier to occur of (a) the date
specified by the Sellers pursuant to SECTION 8.1 of the Purchase Agreement and
(b) any event referred to in SECTION 8.2 of the Purchase Agreement.
"PURCHASED ASSETS" is defined in SECTION 1.1 of the Purchase Agreement.
"PURCHASED INTEREST" means a fluctuating undivided ownership interest in
the Transferred Assets, purchased pursuant to the PI Agreement related thereto,
that shall include the right to receive, to the extent necessary to make
required payments to
<PAGE>
Purchasers at the time and in the amounts specified in the related PI Agreement,
the portion of Collections allocable to such Purchased Interest pursuant to the
Pooling Agreement and the related PI Agreement, funds on deposit in the Master
Collection Account allocable to the Purchased Interest pursuant to the Pooling
Agreement and the related PI Agreement and funds available pursuant to any
related Enhancement.
"PURCHASED RECEIVABLES" is defined in SECTION 1.1 of the Purchase
Agreement.
"PURCHASER" means a purchaser, or any owner by permitted assignment, of a
Purchased Interest.
"RATING AGENCY" means each statistical rating agency that at the request of
Big Flower or Transferor, has rated any then-issued and outstanding Series of
Investor Certificates or Purchased Interest; PROVIDED that if at any time no
outstanding Series of Investor Certificates or Purchased Interest has been
rated, then for purposes of any provision of the Transaction Documents that
refers to a Person or instrument having a minimum rating, "Rating Agencies"
shall mean S&P.
"RECEIVABLE" means any right to payment, whether constituting an account,
chattel paper, instrument, general intangible or otherwise, (i) arising from the
sale of goods, services or future services by a Seller (and including the right
to payment of any interest or finance charges and other obligations with respect
thereto) and (ii) any other right to payment recorded as a receivable on a
Seller's accounts receivable ledger; provided that (in the case of either clause
(i) or (ii)) the term "Receivable" shall not include any such right to payment
from an Exempt Obligor.
"RECEIVABLES POOL" means at any time all Receivables then held by the
Trust.
"RECONVEYANCE NOTICE" is defined in SECTION 2.6 of the Pooling Agreement.
"RECONVEYANCE RECEIVABLES" is defined in SECTION 2.6 of the Pooling
Agreement.
"RECORD DATE" means the Business Day that is three Business Days prior to a
Distribution Date.
"RECORDS" means all Contracts, purchase orders, invoices and other
agreements, documents, books, records and other media for the storage of
information (including tapes, disks, punch cards, computer programs and
databases and related property) maintained by Transferor, the Sellers or
Servicer with respect to the Transferred Assets and/or the related Obligors.
<PAGE>
"RECOVERIES" means all Collections received by the Trust in respect of any
Write-Off held by the Trust.
"REGULATION S BOOK-ENTRY CERTIFICATE" is defined in SECTION 6.11(C) of the
Pooling Agreement.
"REGULATION S TEMPORARY BOOK-ENTRY CERTIFICATE" is defined in SECTION
6.11(C) of the Pooling Agreement.
"RELATED ASSETS" is defined in SECTION 1.1 of the Purchase Agreement.
"RELATED CONTRIBUTED ASSETS" is defined in SECTION 1.9 of the Purchase
Agreement.
"RELATED PURCHASED ASSETS" is defined in SECTION 1.1 of the Purchase
Agreement.
"RELATED SECURITY" means, with respect to any Receivable, (a) all of the
applicable Seller's right, title and interest in and to the goods, if any,
relating to the sale that gave rise to the Receivable, (b) all other security
interests or liens and property subject thereto from time to time purporting to
secure payment of the Receivable, whether pursuant to the Contract related to
the Receivable or otherwise, and (c) all letters of credit, guarantees and other
agreements or arrangements of whatever character from time to time supporting or
securing payment of the Receivable, whether pursuant to the Contract related to
the Receivable or otherwise.
"RELATED TRANSFERRED ASSETS" is defined in SECTION 2.1(A) of the Pooling
Agreement.
"REPORT DATE" means the earlier of (x) the 20th day of each calendar month
(or, if not a Business Day, the next Business Day) and (y) the Business Day that
is two Business Days prior to a Distribution Date.
"REPURCHASE AMOUNT" is defined in SECTION 12.4 of the Pooling Agreement.
"REPURCHASE DISTRIBUTION DATE" is defined in SECTION 12.4 of the Pooling
Agreement.
"REQUIRED RECEIVABLES" is defined, for purposes of any Series or Purchased
Interest, in the applicable Supplement or PI Agreement.
"REQUIRED SERIES HOLDERS" means with respect to any action to be taken by
Investor Certificateholders of any Series, unless otherwise specified in the
related Supplement, Investor Certificateholders that evidence at least 66-2/3%
of the principal amount of those Certificates.
<PAGE>
"RESPONSIBLE OFFICER" means, when used with respect to Trustee, (a) any
officer within the Corporate Trust Office (or any successor group of Trustee),
including any vice president, assistant vice president or any officer or
assistant trust officer of Trustee customarily performing functions similar to
those performed by the persons who hold the office of vice president, assistant
vice president, or assistant secretary and (b) any other officer within the
Corporate Trust Office with direct responsibility for the administration of the
Pooling Agreement or to whom any corporate trust matter is referred at Trustee's
Corporate Trust Office because of his knowledge of and familiarity with the
particular subject.
"REVOLVING PERIOD" means, with respect to each Series, the period before
the commencement of the earliest of any applicable amortization period,
accumulation period or early amortization period.
"RPA INDEMNIFIED LOSSES" is defined in SECTION 9.1 of the Purchase
Agreement.
"RPA INDEMNIFIED PARTY" is defined in SECTION 9.1 of the Purchase
Agreement.
"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SELLER" means each Person from time to time party to the Purchase
Agreement as a "Seller."
"SELLER ASSIGNMENT CERTIFICATE" means an assignment by a Seller,
substantially in the form of EXHIBIT B to the Purchase Agreement, evidencing
Transferor's acquisition of the Receivables (excluding the Contributed
Receivables) and Related Assets generated by the Seller, as it may be amended,
supplemented or otherwise modified from time to time.
"SELLER CHANGE EVENT" is defined in SECTION 3.5(E) of the Pooling
Agreement.
"SELLER DILUTION ADJUSTMENT" is defined in SECTION 3.5(B) of the Purchase
Agreement.
"SELLER GUARANTY" means the Guaranty, dated as of March 19, 1996, by Big
Flower of the Obligations of the Sellers, as it may be amended, supplemented or
otherwise modified from time to time.
"SELLER MATURITY DATE" is defined in SECTION 3.2 of the Purchase Agreement.
<PAGE>
"SELLER NONCOMPLYING RECEIVABLE" means a Receivable that does not meet the
criteria set forth in the definition of Eligible Receivables.
"SELLER NONCOMPLYING RECEIVABLES ADJUSTMENT" is defined in SECTION 3.5(A)
of the Purchase Agreement.
"SELLER RECEIVABLES REVIEW" is defined in SECTION 6.1(C) of the Purchase
Agreement.
"SELLER TRANSACTION DOCUMENTS" means the Purchase Agreement, the Seller
Assignment Certificates and the Account Agreements.
"SENIOR INTEREST" is defined in the Buyer Notes.
"SERIES" means any series of Investor Certificates issued pursuant to
SECTION 6.10 of the Pooling Agreement.
"SERIES COLLECTION ALLOCATION PERCENTAGE" means, for any Series or
Purchased Interest at any time, the percentage equivalent of a fraction the
numerator of which is the Required Receivables for that Series or Purchased
Interest and the denominator of which is the sum of the Required Receivables for
all then outstanding Series and Purchased Interests.
"SERIES INTEREST" is defined in SECTION 4.1 of the Pooling Agreement.
"SERIES LOSS ALLOCATION PERCENTAGE" means, for any Series or Purchased
Interest for purposes of any Monthly Report, the percentage equivalent of a
fraction the numerator of which is the Invested Amount of that Series or
Purchased Interest and the denominator of which is the sum of the Invested
Amounts of all then outstanding Series and Purchased Interests, in each case
determined as of the beginning of the related Calculation Period (or such other
date as may be specified in the related Supplement or PI Agreement).
"SERVICER" means at any time the Person then authorized pursuant to ARTICLE
III of the Pooling Agreement to service, administer and collect Receivables and
Related Transferred Assets.
"SERVICER DEFAULT" is defined in SECTION 10.1 of the Pooling Agreement.
"SERVICE TRANSFER" is defined in SECTION 10.2(B) of the Pooling Agreement.
"SERVICING FEE" is defined in SECTION 3.4 of the Pooling Agreement.
<PAGE>
"SHARED INVESTOR COLLECTIONS" means any funds identified as such in any
Supplement or PI Agreement.
"SHORTFALL" is defined, for any Series or Purchased Interest, in the
related Supplement or PI Agreement.
"SPECIAL NEW JERSEY EPA CLAIM" means, with respect to any Seller whose
chief executive office is in the State of New Jersey, an Adverse Claim on the
assets of such Seller (including Receivables originated by such Seller) arising
pursuant to subsection (f) of New Jersey Statutes 58:10-23.11f (or any successor
statute), so long as (a) such Lien exists for not more than five Business Days
or such Lien is being contested in good faith by appropriate proceedings and
with respect to which adequate reserves or other appropriate provisions are
being maintained in accordance with GAAP and (b) the applicable Seller and the
Servicer shall have provided the Buyer and the Trustee written notice as to the
existence of such Lien; PROVIDED that no Receivables of such Seller are treated
as Eligible Receivables unless and until such Seller and the Servicer provide
the Buyer and the Trustee written notice that such Lien has been released.
"SPECIFIED ASSETS" is defined in SECTION 1.1 of the Purchase Agreement.
"STRUCTURED LENDER" shall mean any Holder of a Certificate whose principal
business consists of issuing commercial paper, medium term notes or other
securities to fund its acquisition and maintenance of receivables, accounts,
instruments, chattel paper, general intangibles and other similar assets or
interests therein and which is required by any nationally recognized rating
agency which is rating such securities to obtain from its principal debtors an
agreement such as that set forth in SECTION 13.9 of the Pooling Agreement in
order to maintain such rating.
"SUB-SERVICER" is defined in SECTION 3.1 of the Pooling Agreement.
"SUBJECT INSTRUMENTS" means any Certificates or Purchased Interests with
respect to which Transferor shall not have received an Opinion of Counsel to the
effect that such Certificates or Purchased Interests will be treated as debt for
Federal income tax purposes.
"SUBSIDIARY" means, with respect to any Person, any corporation of which
more than 50% of the outstanding capital stock having ordinary voting power to
elect a majority of the board of directors of such corporation (irrespective of
whether at the time capital stock of any other class or classes of such
corporation shall or might have voting power upon the occurrence of any
contingency) is at the time directly or indirectly owned by such Person.
<PAGE>
"SUCCESSOR SERVICER" is defined in SECTION 10.2(A) of the Pooling
Agreement.
"SUPPLEMENT" means each supplement to the Pooling Agreement executed by
Transferor, Servicer and Trustee to specify the terms of a Series of
Certificates, as the same may be amended, supplemented or otherwise modified
from time to time.
"SUPPORT BANK" shall mean any bank or other financial institution extending
or having a commitment to extend funds to or for the account of any Structured
Lender (including by agreement to purchase an assignment of, or participation in
the Certificate held by such Person) under a liquidity or credit support
agreement which relates to the Certificate purchased by such Structured Lender.
"TAX OR ERISA LIEN" means a lien arising under Section 6321 of the Internal
Revenue Code or Section 302(f) or 4068 of ERISA.
"TAX OPINION" means, with respect to any action, an Opinion of Counsel to
the effect that, for Federal and state income and franchise tax purposes, (a)
such action will not adversely affect the characterization of the Investor
Certificates of any outstanding Series or Class or any Purchased Interest as
debt or partnership interests, (b) following such action the Trust will not be
treated as an association (or publicly traded partnership) taxable as a
corporation, (c) such action will not be treated as a taxable event to any
Investor Certificateholder, Certificate Owner or holder of a Purchased Interest
and (d) in the case of the original issuance of any Series or class of Investor
Certificates or any Purchased Interest, the Investor Certificates of the new
Series or any Purchased Interest will properly be characterized as debt or
partnership interests.
"TERMINATING SELLER" is defined in SECTION 1.8(A) of the Purchase
Agreement.
"TERMINATING SELLER NOTICE DATE" is defined in SECTION 1.8(A) of the
Purchase Agreement.
"TERMINATION NOTICE" is defined in SECTION 10.1 of the Pooling Agreement.
"TRANSACTION ACCOUNTS" is defined in SECTION 4.2 of the Pooling Agreement.
"TRANSACTION DOCUMENTS" means each Seller Transaction Document, the Pooling
Agreement, the Seller Guaranty, each Supplement, each PI Agreement, each
Investor Certificate, each agreement to purchase Investor Certificates, and each
other agreement designated as a Transaction Document in any Supplement or PI
Agreement.
<PAGE>
"TRANSFER AGENT AND REGISTRAR" means any transfer agent and registrar
appointed pursuant to SECTION 6.3 of the Pooling Agreement and shall initially
be Trustee.
"TRANSFEROR" means BFP Receivables Corporation, a Delaware corporation.
"TRANSFEROR CERTIFICATE" means a certificate substantially in the form of
EXHIBIT E to the Pooling Agreement, as described in SECTION 4.1 of the Pooling
Agreement.
"TRANSFEROR EVENT" is defined in SECTION 9.3(A) of the Pooling Agreement.
"TRANSFEROR INTEREST" is defined in SECTION 4.1 of the Pooling Agreement.
"TRANSFEROR RETAINED INTEREST" means, on any date of determination, the sum
of the Transferor Interest and the interest in the Trust represented by any
Investor Certificates (regardless of Series or class) or Purchased Interest
owned or otherwise retained by the Transferor.
"TRANSFEROR RETAINED PERCENTAGE" means, on any date of determination, the
percentage equivalent of a fraction the numerator of which is the Transferor
Retained Interest and the denominator of which is the aggregate Base Amounts for
all Series of Certificates or Purchased Interests at the end of the day
immediately prior to such date of determination plus all amounts on deposit in
the Carrying Cost Account, the Equalization Account and the Principal Funding
Account.
"TRANSFERRED ASSETS" is defined in SECTION 2.1 of the Pooling Agreement.
"TREASURE CHEST" means Treasure Chest Advertising Company, Inc., a Delaware
corporation.
"TRIGGER EVENT" is defined in SECTION 9.3(A) of the Pooling Agreement.
"TRUST" means the trust created by the Pooling Agreement, which shall be
known as the Big Flower Receivables Master Trust.
"TRUSTEE" means Manufacturers and Traders Trust Company, in its capacity as
agent for the Certificateholders, or its successor-in-interest, or any successor
trustee appointed as provided in the Pooling Agreement.
"TURNOVER DAYS" means, at any time, the quotient of:
(x) (i) the sum of the ending Unpaid Balances of Receivables as
of the Cut-Off Date for each of the two
<PAGE>
immediately preceding Calculation Periods DIVIDED BY 2, MULTIPLIED BY
(ii) 30; DIVIDED BY
(y) the aggregate amount payable pursuant to invoices giving
rise to Receivables that were generated during the immediately
preceding Calculation Period.
"UCC" means the Uniform Commercial Code as from time to time in effect in
the applicable jurisdiction or jurisdictions.
"UNMATURED EARLY AMORTIZATION EVENT" means any event that, with the giving
of notice or lapse of time, or both, would become an Early Amortization Event.
"UNPAID BALANCE" of any Receivable means at any time the unpaid amount
thereof as shown in the books of Servicer at such time.
"UNRESTRICTED BOOK-ENTRY CERTIFICATE" is defined in SECTION 6.11(C) of the
Pooling Agreement.
"WRITE-OFF" means any Receivable that, consistent with the applicable
Credit and Collection Policy, has been written off as uncollectible.
"144A BOOK-ENTRY CERTIFICATE" is defined in SECTION 6.11(B) of the Pooling
Agreement.
B. OTHER INTERPRETATIVE MATTERS. For purposes of any Transaction Document,
unless otherwise specified therein: (1) accounting terms used and not
specifically defined therein shall be construed in accordance with GAAP; (2)
terms used in Article 9 of the New York UCC, and not specifically defined in
that Transaction Document, are used therein as defined in such Article 9; (3)
the term "including" means "including without limitation," and other forms of
the verb "to include" have correlative meanings; (4) references to any Person
include such Person's permitted successors; (5) in the computation of a period
of time from a specified date to a later specified date, the word "from" means
"from and including" and the words "to" and "until" each means "to but
excluding"; (6) the words "hereof", "herein" and "hereunder" and words of
similar import refer to such Transaction Document as a whole and not to any
particular provision of such Transaction Document; (7) references to "SECTION",
"SCHEDULE" and "EXHIBIT" in such Transaction Document are references to
Sections, Schedules and Exhibits in or to such Transaction Document; (8) the
various captions (including any table of contents) are provided solely for
convenience of reference and shall not affect the meaning or interpretation of
such Transaction Document; and (9) references to any statute or regulation refer
to that statute or regulation as amended from time to time, and include any
successor statute or regulation of similar import.
<PAGE>
Exhibit 10.13
================================================================================
SERIES 1996-2 SUPPLEMENT
to POOLING AND SERVICING AGREEMENT
dated as of October 4, 1996
among
BFP RECEIVABLES CORPORATION,
as Transferor,
BIG FLOWER PRESS HOLDINGS, INC.,
as Servicer,
and
MANUFACTURERS AND TRADERS TRUST COMPANY,
as Trustee
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS; INCORPORATION OF TERMS................... 1
SECTION 1.1 Definitions ............................................. 1
SECTION 1.2 Incorporation of Terms and Designation of Transaction
Documents........................................... 33
ARTICLE II DESIGNATION........................................... 33
SECTION 2.1 Designation.............................................. 33
SECTION 2.2 Group.................................................... 33
SECTION 2.3 Investor Ownership Percentage............................ 34
ARTICLE III CONDITIONS TO ISSUANCE; USE OF PROCEEDS............... 34
SECTION 3.1 Conditions to Issuance................................... 34
SECTION 3.2 Use of Proceeds.......................................... 35
ARTICLE IV PAYMENTS AND ALLOCATIONS.............................. 35
SECTION 4.1 Interest; Additional Amounts............................. 35
SECTION 4.2 Daily Calculations and Group Allocations................. 35
SECTION 4.3 Allocations of Daily Group Collections (Other Than
in a Group Amortization Period)..................... 35
SECTION 4.4 Allocations of Daily Group Collections During a Group
Amortization Period................................. 38
SECTION 4.5 Withdrawals from the Equalization Account and
Principal Funding Account........................... 40
SECTION 4.6 Available Subordinated Amount............................ 40
SECTION 4.7 Write-Offs and Recoveries................................ 41
SECTION 4.8 Certain Dilution in a Group Amortization Period.......... 42
SECTION 4.9 Optional Early Pay Out................................... 43
SECTION 4.10 Reset of Benchmark Percentages and Special
Concentration Limits................................ 44
SECTION 4.11 Modification of Eligibility Criteria..................... 44
SECTION 4.12 Calculations to be Without Duplication................... 44
ARTICLE V DISTRIBUTIONS AND REPORTS............................. 46
SECTION 5.1 Distributions............................................ 46
SECTION 5.2 Special Distributions on the Refinancing Date............ 48
SECTION 5.3 Payments in Respect of Transferor Certificate............ 48
SECTION 5.4 Daily Reports and Monthly Reports........................ 49
SECTION 5.5 Annual Tax Information................................... 49
SECTION 5.6 Periodic Perfection Certificate.......................... 49
<PAGE>
Page
----
ARTICLE VI EARLY AMORTIZATION EVENTS............................. 50
SECTION 6.1 Early Amortization Events................................ 50
SECTION 6.2 Early Amortization Period................................ 52
ARTICLE VII OPTIONAL REDEMPTION; TERMINATION...................... 53
SECTION 7.1 Optional Redemption of Investor Interests................ 53
SECTION 7.2 Termination.............................................. 53
ARTICLE VIII MISCELLANEOUS......................................... 54
SECTION 8.1 Governing Law............................................ 54
SECTION 8.2 Counterparts............................................. 54
SECTION 8.3 Severability of Provisions............................... 54
SECTION 8.4 Amendment, Waiver, Etc................................... 54
SECTION 8.5 Trustee.................................................. 55
SECTION 8.6 Instructions in Writing.................................. 55
SECTION 8.7 Rule 144A................................................ 55
SECTION 8.8 Supplemental Ratings Requirement......................... 55
SECTION 8.9 Tax Characterization of the 1996-2 Certificates.......... 55
SECTION 8.10 Transfer Restrictions and Procedures..................... 56
EXHIBITS
EXHIBIT A Part 1. Form of Class A, Series 1996-2 Certificate
Part 2. Form of Class B, Series 1996-2 Certificate
Part 3. Form of Class C, Series 1996-2 Certificate
EXHIBIT B Form of Daily Report
Part 1. For Use Prior to Group Amortization Period
Part 2. For Use in Group Amortization Period
EXHIBIT C Form of Monthly Report
Part 1. For Use Prior to Group Amortization Period
Part 2. For Use in Group Amortization Period
EXHIBIT D Form of Termination Agreement
EXHIBIT E Form of Certificate to be Given by Certificate Owner
EXHIBIT F Form of Certificate to be Given by Euroclear or Cedely
ii
<PAGE>
This SERIES 1996-2 SUPPLEMENT, dated as of October 4, 1996 (this
"Supplement"), is made among BFP RECEIVABLES CORPORATION, a Delaware
corporation, as Transferor, BIG FLOWER PRESS HOLDINGS, INC., a Delaware
corporation ("Big Flower"), as Servicer, and MANUFACTURERS AND TRADERS TRUST
COMPANY, a New York banking corporation, as Trustee.
Pursuant to the Pooling and Servicing Agreement, dated as of March 19,
1996 (as it may be amended, supplemented or otherwise modified from time to
time, and as supplemented hereby, the "Pooling Agreement"), among Transferor,
Servicer and Trustee, Transferor may from time to time issue, and direct Trustee
to authenticate, on behalf of the Trust, one or more Series of Certificates
representing undivided interests in the Transferred Assets. Certain terms
applicable to a Series are to be set forth in a Supplement. This Supplement is a
"Supplement" as that term is defined in the Pooling Agreement.
Pursuant to this Supplement, Transferor and Trustee shall create a
Series of Certificates ("Series 1996-2") and specify certain of their terms.
ARTICLE I DEFINITIONS; INCORPORATION OF TERMS
SECTION I.1 Definitions. (a) Capitalized terms used and not otherwise
defined herein are used as defined in Appendix A to the Pooling Agreement. This
Supplement shall be interpreted in accordance with the conventions set forth in
Part B of that Appendix A.
(b) Each reference in this Supplement to funds on deposit in the
Carrying Cost Account, the Equalization Account or the Principal Funding Account
(or similar phrase) refers only to funds in the administrative sub-accounts of
those Accounts that are allocated to Series in Group I. Unless the context
otherwise requires, in this Supplement: (i) each reference to a "Daily Report"
or "Monthly Report" refers to a Daily Report or Monthly Report for Group I; (ii)
each reference to the "Servicing Fee" refers to the Servicing Fee allocable to
Group I; and (iii) each reference to the "Series Collection Allocation
Percentage" or the "Series Loss Allocation Percentage" refers to Group I's
Series Collection Allocation Percentage or Series Loss Allocation Percentage.
(c) Each capitalized term defined below relates only to the Series
1996-2 Certificates and to no other Series of Certificates (except to the extent
that certain of such terms are explicitly used as defined herein in any
Supplement relating to another Series in Group I). Whenever used in this
Supplement, the following words and phrases shall have the following meanings:
"Accumulation Notice" is defined in Section 4.9.
"Accumulation Period" means the period beginning on the first day of
the April, 2002
<PAGE>
Calculation Period and ending on the earlier of (a) the Expected Final Payment
Date and (b) the date, if any, on which an Early Amortization Period begins,
provided that there will be no Accumulation Period if an Early Amortization
Period commences on or prior to the date specified above for the beginning of
the Accumulation Period.
"Acquisition Amount" is defined in Section 2.3.
"Additional Amounts" means as to any Series in Group I (other than
Series 1996-2), any amounts identified as "Additional Amounts" in the related
Supplement. Series 1996-2 has no Additional Amounts.
"Adjusted Eligible Receivables" means, on any Business Day, the result
of (a) the aggregate Unpaid Balance of Eligible Receivables held by the Trust on
that day, minus (b) the Unapplied Cash held by the Trust on that day, plus (c)
the Unavailable Cash as reflected in the Daily Report for that day.
"Adjustment Condition" means with respect to any Subject State, that
the Trustee and each of S&P and DCR shall have received opinions, prepared by
independent accountants or independent attorneys, to the effect that the Trust
will not be liable to pay any State Income Tax imposed by such Subject State
(whether computed on its own income or the income of Big Flower and its
Subsidiaries) and the Modification Condition shall have been satisfied as to
such opinions; and provided further that upon the issuance of the Series 1996-2
Certificates, the Adjustment Condition shall be deemed to be satisfied with
respect to the States of Maryland, New York, Pennsylvania and Texas.
"Aged Receivables Ratio" means, as calculated in each Monthly Report as
of the Cut-Off Date for the related Calculation Period, a fraction (expressed as
a percentage) having (a) a numerator that is the sum of (i) the aggregate Unpaid
Balance of Receivables that remained outstanding 151 to 180 days after their
respective invoice dates, as determined as of the Cut-Off Date for such
Calculation Period, plus (ii) the aggregate Unpaid Balance of Receivables that
were written off as uncollectible during the most recently ended Calculation
Period and that, if not so written off, would have been outstanding not more
than 180 days after their respective invoice dates, as determined as of that
Cut-Off Date and (b) a denominator that is the aggregate amount payable pursuant
to invoices giving rise to Receivables (without giving effect to any payments
received on such invoices) that were generated by the Sellers during the
Calculation Period that occurred five Calculation Periods prior to the most
recently ended Calculation Period, as determined as of the Cut-Off Date for such
prior Calculation Period; provided however that the Aged Receivables Ratio for
each Calculation Period set forth below shall be the percentage set forth below
opposite such Calculation Period:
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Calculation Period Aged Receivables Ratio
------------------ ----------------------
June 1996 0.73%
May 1996 0.87%
April 1996 0.76%
March 1996 0.68%
February 1996 1.23%
January 1996 0.66%
December 1995 0.95%
November 1995 0.93%
October 1995 0.53%
September 1995 0.76%
August 1995 0.44%
July 1995 0.46%.
"Aggregate Apportionment Rate Factor" shall mean (i) if the Adjustment
Condition has been satisfied for all Subject States, zero, and (ii) in all other
circumstances, the sum of the Specified Apportionment Rate Factors for all
Subject States.
"Alternate Base Rate" means, on any day, a fluctuating rate of interest
per annum equal to the higher of:
(a) the rate of interest announced, from time to time, by the Trustee
as its prime, base or reference rate for United States dollar
loans made in the United States for any day, and
(b) the Federal Funds Rate.
"Applicable Ratings Factor" means the Class A Ratings Factor, the Class
B Ratings Factor or the Class C Ratings Factor, as specified in each calculation
where the Applicable Ratings Factor is used.
"Apportionment Percentage" shall mean, in the case of any Subject State
as to which the Adjustment Condition has been met, a percentage equal to 0%, and
shall mean, in the case of any other Subject State, as follows: 18.9411% for New
Jersey; and for any other states that become Subject States after the date
hereof or which were Subject States at any relevant time prior to the date
hereof, such percentages as the Transferor shall certify to the Trustee
supported by an opinion of independent tax counsel or a nationally respected
accounting firm. Such percentage shall take account of any changes in a state's
status as a Subject State.
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"ASA Measuring Period" means, for any Cut Off Date falling in a Group
Amortization Period, the Calculation Period ending on that Cut Off Date (or the
portion thereof falling after the Group Amortization Calculation Date, in the
case of the first Cut Off Date falling in the Group Amortization Period).
"Available Subordinated Amount" means, at any time during a Group
Amortization Period, the amount calculated pursuant to Section 4.6.
"Base Amount" means, on any Business Day, the result of the following
formula:
[NER x SCAP x (100%-CRR)] - CASD - CBSD - CCRR - ITR - SITR
where:
NER = the Net Eligible Receivables as reported in the Daily Report for that
Business Day.
SCAP = the Series Collection Allocation Percentage for that Business Day.
CRR = the Class C Reserve Ratio in effect for that Business Day.
CASD = the Class A Subordination Deficit for that Business Day.
CBSD = the Class B Subordination Deficit for that Business Day.
CCRR = the Carrying Cost Receivables Reserve for that Business Day.
ITR = the product of (i) the Identified Tax Reserve times (ii) the Series
Collection Allocation Percentage, as reported in the Daily Report for
that Business Day.
SITR = the product of (i) the State Income Tax Reserve times (ii) the Series
Collection Allocation Percentage, as reported in the Daily Report for
that Business Day.
"Benchmark Quarter" means, at any time, the corresponding fiscal
quarter of Big Flower in the preceding fiscal year.
"Big Flower" is defined in the preamble.
"Big Flower Credit Agreement" means the Credit Agreement dated as of
November 28, 1995, as amended and restated as of March 19, 1996 among Big
Flower, Treasure Chest Advertising Company, Inc., the financial institutions
named therein, Credit Suisse, as Documentation Agent and Bankers Trust Company,
as Administrative Agent.
"BH Obligor" means (x) if the related Seller is Webcraft Technologies,
Inc., an Obligor whose Unpaid Balance with respect to Receivables related to
Bill and Hold Arrangements exceeded $25,000 as of its Calculation Date, and (y)
in all other cases, an Obligor that benefits from a Bill and Hold Arrangement;
provided that if a Credit Officer of a
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Seller has actual knowledge that two or more Obligors are Affiliates of each
other, such Obligors will be treated as a single Obligor for purposes of this
definition and the definition of Bill and Hold Exposure.
"Bill and Hold Arrangement" means an arrangement in which any Seller,
pursuant to instructions from one of its customers, invoices the customer for
finished goods but retains possession of such goods for a period of time;
provided, that the following requirements are satisfied:
(a) title to, and the risk of loss of, the goods is
transferred to the customer;
(b) such Seller's records are adequate to enable such Seller
or a third-party to identify the goods subject to such arrangement as
separate from such Seller's own inventory at any time; and
(c) the related invoice is payable on the normal due date for
similar Receivables of such Seller that do not arise from a Bill and
Hold Arrangement, or if there are no such similar Receivables, in
accordance with the applicable Credit and Collection Policy.
"Bill and Hold Exposure" means, at any time, the result of the
following calculations:
(i) for each BH Obligor, determine its Material Cost Amount as
of its Calculation Date;
(ii) for each BH Obligor, determine the aggregate Unpaid
Balance of Eligible Receivables owed by such BH Obligor as of
its Calculation Date;
(iii) for each BH Obligor, determine the lower of the amounts
described in clause (i) and clause (ii), such lower amount
being the "BH Net Exposure" for such BH Obligor;
(iv) determine the sum of BH Net Exposures for all BH
Obligors;
(v) determine the sum of the Material Cost Amounts for all BH
Obligors as of their respective Calculation Dates;
(vi) determine a fraction (expressed as a percentage), the
numerator of which is the amount described in clause (iv) and
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the denominator of which is the amount described in clause
(v), which percentage is the "Bill and Hold Fraction",
provided that the Bill and Hold Fraction shall not exceed
100%;
(vii) determine the sum of the Material Cost Amounts for all
Obligors as of their respective Calculation Dates; and
(viii) multiply the amount described in clause (vii) by the
Bill and Hold Fraction, the result of such multiplication
being the "Bill and Hold Exposure".
"Calculation Date" means, as of any Business Day, (i) with respect to
an Obligor that owes Receivables originated by Treasure Chest, such Business
Day, and (ii) with respect to an Obligor that owes Receivables originated by any
other Seller, the most recent Cut-Off Date as to which a Monthly Report has been
prepared; provided that if an Obligor owes Receivables originated by Treasure
Chest and another Seller, (x) the Calculation Date specified in clause (i) shall
be applicable to calculations based on Receivables owed to Treasure Chest and
(y) the Calculation Date specified in clause (ii) shall be applicable to
calculations based on Receivables owed to other Sellers.
"Carrying Cost Receivables Reserve" means, on any Business Day, the
result of:
(a) the Current Carrying Costs; plus
(b) the product of (i) the Class A Invested Amount, multiplied
by (ii) 1.5 times the interest rate on the Class A Certificates,
multiplied by (iii) a fraction the numerator of which is the product of
two and the number of Turnover Days and the denominator of which is
360; plus
(c) the product of (i) the Class B Invested Amount, multiplied
by (ii) 1.5 times the interest rate on the Class B Certificates,
multiplied by (iii) a fraction the numerator of which is the product of
two and the number of Turnover Days and the denominator of which is
360; plus
(d) the product of (i) the Class C Invested Amount, multiplied
by (ii) 1.5 times the interest rate on the Class C Certificates,
multiplied by (iii) a fraction the numerator of which is the product of
two and the number of Turnover Days and the denominator of which is
360; plus
(e) the product of (i) the Series Collection Allocation
Percentage on the next
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preceding Distribution Date, multiplied by (ii) the aggregate Unpaid
Balance of Receivables held by the Trust on the next preceding
Distribution Date, multiplied by (iii) 2%, multiplied by (iv) a
fraction the numerator of which is the product of two and the number of
Turnover Days and the denominator of which is 360; plus
(f) the Carrying Cost Reserve Increments for each other Series
in Group I (as defined, and calculated as provided, in the related
Supplement); plus
(g) $60,000 multiplied by a fraction, the numerator of which
is the product of 1.5 and the number of Turnover Days and the
denominator of which is 365 or 366, as applicable; minus
(h) the balance on deposit in the Carrying Cost Account at the
beginning of that Business Day.
"Certificate Spread" means:
(a) for Class A Certificates, 0.25% per annum; and
(b) for Class B Certificates, 0.35% per annum; and
(c) for Class C Certificates, 0.75% per annum.
"Class A Bill and Hold Reserve" means, at any time, the Bill and Hold
Exposure.
"Class A Certificate" is defined in Section 2.1. Each Class A
Certificate shall be substantially in the form of Part 1 of Exhibit A.
"Class A Concentration Factor" means, as of any Cut-Off Date, the
greatest of:
(i) the "Class A Benchmark Percentage" for purposes of clause
(1) of the definition of "Class A Incremental Concentration Balance,"
(ii) two times the "Class A Benchmark Percentage" for purposes
of clause (2) of that definition,
(iii) three times the "Class A Benchmark Percentage" for
purposes of clause (3) of that definition,
(iv) four times the "Class A Benchmark Percentage" for
purposes of
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clause (4) of that definition, and
(v) six times the "Class A Benchmark Percentage" for purposes
of clause (5) of that definition.
"Class A Coverage" means, at any time, the sum of (i) the Class B
Required Reserves, plus (ii) the product of (A) the Series Collection Allocation
Percentage multiplied by (B) the Subordinate Class Special Reserves, plus (iii)
the outstanding principal amount of all Subordinated Classes.
"Class A Customer Supply Reserve" means, at any time, the excess, if
any, of (i) the Customer Supply Exposure over (ii) the Class A Postage Reserve.
"Class A Duplicate Amount" is defined in Section 4.12.
"Class A Duplicate Obligor" means, at any time, an Obligor whose
Receivables could be included in the calculation of two or more of the following
items: Class A Bill and Hold Reserve; Class A Incremental Concentration Balance;
Class A Customer Supply Reserve; Class A Executory Contract Reserve; and Class A
Postage Reserve.
"Class A Executory Contract Reserve" means, at any time, the Executory
Contract Exposure.
"Class A Incremental Concentration Balance" means, at any time, the
excess, if any, of (a) the sum of the amounts computed with respect to all
Obligors pursuant to the following sentence over (b) the sum of (i) the Class B
Incremental Concentration Balance plus (ii) the then aggregate amount of all
Class C Excess Concentration Balances with respect to all Obligors. The amount
to be calculated for purposes of clause (a) with respect to each Obligor on any
day equals the aggregate Unpaid Balance of Eligible Receivables it owes that,
expressed as a percentage of the Eligible Receivables, exceeds the following
percentages for the following Obligors:
(1) 18.00% for any Tier-1 Obligor;
(2) 9.00% for any Tier-2 Obligor;
(3) 6.00% for any Tier-3 Obligor;
(4) 4.50% for any Tier-4 Obligor; and
(5) 3.00% for any Tier-5 Obligor;
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<PAGE>
For purposes of placing Obligors in each of the tiers specified above, (i) if an
Obligor does not have either a commercial paper rating or a senior actual or
implied debt rating from the Specified Rating Agencies, but is the wholly-owned
direct or indirect Subsidiary of a Person that has either such rating, such
Obligor shall be placed in the same tier as such Person would be placed if it
was an Obligor, and (ii) if a Credit Officer of a Seller has actual knowledge
that two or more Obligors are Affiliates of each other, such Obligors will be
treated as a single Obligor for purposes of this definition. Each of the
percentages above is called a "Class A Benchmark Percentage."
"Class A Invested Amount" means, at any time, $75,000,000, reduced (but
not below zero) by (a) the aggregate amount of all distributions that have been
made to the Holders of the Class A Certificates on account of principal, and (b)
the amount of all Investor Write-Offs that have been applied to reduce the Class
A Invested Amount (net of Investor Allocable Recoveries and Investor Allocable
Dilution Adjustments that have been applied to reinstate the Class A Invested
Amount).
"Class A Minimum Required Reserve Ratio" means the sum, as of any
Cut-Off Date, of (a) the Class A Concentration Factor for that Cut-Off Date plus
(b) the product of (i) the average of the Dilution Ratios for the period of 12
preceding Calculation Periods ending on that Cut-Off Date, multiplied by (ii)
the Dilution Horizon Variable for that Cut-Off Date.
"Class A Postage Reserve" means, as calculated in each Monthly Report,
the average of the Postage Exposure for the three consecutive Calculation
Periods ending on the most recent Cut-Off Date.
"Class A Ratings Factor" means 2.5.
"Class A Required Reserve Ratio" means, as calculated in each Monthly
Report, the greater of (a) the Loss Reserve Ratio plus the Dilution Reserve
Ratio, each calculated using the Class A Ratings Factor, and (b) the Loss
Reserve Ratio (Z-value) plus the Dilution Reserve Ratio (Z-value), each
calculated using the Class A Ratings Factor and the Class A Z-value.
"Class A Required Reserves" means, at any time, the product of (a) the
excess of the Net Eligible Receivables over the Class A Incremental
Concentration Balance multiplied by (b) the Class A Reserve Ratio multiplied by
(c) the Series Collection Allocation Percentage.
"Class A Reserve Ratio" means, during any Distribution Period, the
greater of (a) the Class A Minimum Required Reserve Ratio and (b) the Class A
Required Reserve Ratio, each as calculated in the Monthly Report required to be
delivered on the Report Date immediately
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<PAGE>
prior to the start of that Distribution Period; provided that during the period
from the date hereof to the first Distribution Date hereafter the Class A
Reserve Ratio shall be 22.06%.
"Class A Special Reserves" means, at any time, the sum of (i) the Class
A Bill and Hold Reserve, plus (ii) the Class A Customer Supply Reserve, plus
(iii) the Class A Executory Contract Reserve, plus (iv) the Class A Postage
Reserve, minus (v) the Class A Duplicate Amount.
"Class A Subordination Deficit" means, on any Business Day, the
positive result (if any) of
(a) the Class A Required Reserves, plus
(b) the product of (i) the Class A Incremental Concentration
Balance multiplied by (ii) the Series Collection Allocation Percentage,
plus
(c) the product of (i) the Class A Special Reserves multiplied
by (ii) the Series Collection Allocation Percentage, minus
(d) the Class A Coverage;
provided that at any time when no Senior Class is outstanding the Class A
Subordination Deficit shall equal zero.
"Class A Z-value" means 2.58.
"Class B Certificate" is defined in Section 2.1. Each Class B
Certificate shall be substantially in the form of Part 2 of Exhibit A.
"Class B Concentration Factor" means, as of any Cut-Off Date, the
greatest of:
(i) the "Class B Benchmark Percentage" for purposes of clause
(1) or (2) of the definition of "Class B Incremental Concentration
Balance,"
(ii) three times the "Class B Benchmark Percentage" for
purposes of clause (3) of that definition,
(iii) four times the "Class B Benchmark Percentage" for
purposes of clause (4) of that definition, and
(iv) five times the "Class B Benchmark Percentage" for
purposes of clause
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(5) of that definition.
"Class B Incremental Concentration Balance" means, at any time, the
excess, if any, of (a) the sum of the amounts computed with respect to all
Obligors pursuant to the following sentence over (b) the then aggregate amount
of all Class C Excess Concentration Balances with respect to all Obligors. The
amount to be calculated for purposes of clause (a) with respect to each Obligor
on any day equals the aggregate Unpaid Balance of Eligible Receivables it owes
that, expressed as a percentage of the Eligible Receivables, exceeds the
following percentages for the following Obligors:
(1) 15.00% for any Tier-1 Obligor;
(2) 15.00% for any Tier-2 Obligor;
(3) 5.00% for any Tier-3 Obligor;
(4) 3.75% for any Tier-4 Obligor; and
(5) 3.00% for any Tier-5 Obligor.
For purposes of placing Obligors in each of the tiers specified above, (i) if an
Obligor does not have either a commercial paper rating or a senior actual or
implied debt rating from the Specified Rating Agencies, but is the wholly-owned
direct or indirect Subsidiary of a Person that has either such rating, such
Obligor shall be placed in the same tier as such Person would be placed if it
was an Obligor, and (ii) if a Credit Officer of a Seller has actual knowledge
that two or more Obligors are Affiliates of each other, such Obligors will be
treated as a single Obligor for purposes of this definition. Each of the
percentages above is called a "Class B Benchmark Percentage."
"Class B Invested Amount" means, at any time, $40,000,000, reduced (but
not below zero) by (a) the aggregate amount of all distributions that have been
made to the Holders of the Class B Certificates on account of principal, and (b)
the amount of all Investor Write-Offs that have been applied to reduce the Class
B Invested Amount (net of Investor Allocable Recoveries and Investor Allocable
Dilution Adjustments that have been applied to reinstate the Class B Invested
Amount).
"Class B Minimum Required Reserve Ratio" means the sum, as of any
Cut-Off Date, of (a) the Class B Concentration Factor for that Cut-Off Date plus
(b) the product of (i) the average of the Dilution Ratios for the period of 12
preceding Calculation Periods ending on that Cut-Off Date, multiplied by (ii)
the Dilution Horizon Variable for that Cut-Off Date.
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<PAGE>
"Class B Ratings Factor" means 2.25.
"Class B Required Reserve Ratio" means, as calculated in each Monthly
Report, the greater of (a) the Loss Reserve Ratio plus the Dilution Reserve
Ratio, each calculated using the Class B Ratings Factor, and (b) the Loss
Reserve Ratio (Z-value) plus the Dilution Reserve Ratio (Z-value), each
calculated using the Class B Ratings Factor and the Class B Z-value.
"Class B Required Reserves" means, at any time, the product of (a) the
excess of the Net Eligible Receivables over the Class B Incremental
Concentration Balance multiplied by (b) the Class B Reserve Ratio multiplied by
(c) the Series Collection Allocation Percentage.
"Class B Reserve Ratio" means, during any Distribution Period, the
greater of (a) the Class B Minimum Required Reserve Ratio and (b) the Class B
Required Reserve Ratio, each as calculated in the Monthly Report required to be
delivered on the Report Date immediately prior to the start of that Distribution
Period; provided that during the period from the date hereof to the first
Distribution Date hereafter the Class B Reserve Ratio shall be 20.36%.
"Class B Subordination Deficit" means, on any Business Day, the
positive result (if any) of
(a) the Class B Required Reserves, plus
(b) the product of (i) the Class B Incremental Concentration
Balance multiplied by (ii) the Series Collection Allocation Percentage,
minus
(c) the sum of (i) the Class C Required Reserves plus (ii) the
outstanding principal amount of all Junior Subordinated Classes;
provided that at any time when no Senior Subordinated Class is outstanding the
Class B Subordination Deficit shall equal zero.
"Class B Z-value" means 2.58.
"Class C Certificate" is defined in Section 2.1. Each Class C
Certificate shall be substantially in the form of Part 3 of Exhibit A.
"Class C Concentration Factor" means, as of any Cut-Off Date, the
greatest of (i) the "Class C Benchmark Percentage" for purposes of clause (c) of
the definition of "Class C Excess Concentration Balances," (ii) two times the
"Class C Benchmark Percentage" for purposes of clause (d) of that definition,
and (iii) the sum of (A) the Class C Special
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Concentration Limit, if any, then in effect, plus (B) the product of (x) the
"Class C Benchmark Percentage" for purposes of clause (e) of the definition of
"Class C Excess Concentration Balances" times (y) the excess of three over the
number of Special Obligors at such time, if any.
"Class C Excess Concentration Balances" means, on any day and with
respect to an Obligor (other than any Special Obligor), the aggregate Unpaid
Balances of Eligible Receivables it owes that, expressed as a percentage of the
Eligible Receivables, exceeds the following percentages for the following
Obligors (other than any Special Obligor):
(a) 100% for any Tier-1 Obligor;
(b) 100% for any Tier-2 Obligor;
(c) 9.00% for any Tier-3 Obligor;
(d) 4.50% for any Tier-4 Obligor; and
(e) 3.00% for any Tier-5 Obligor.
For purposes of placing Obligors in each of the tiers specified above, (i) if an
Obligor does not have either a commercial paper rating or a senior actual or
implied debt rating from the Specified Rating Agencies, but is the wholly-owned
direct or indirect Subsidiary of a Person that has either such rating, such
Obligor shall be placed in the same tier as such Person would be placed if it
was an Obligor, and (ii) if a Credit Officer of a Seller has actual knowledge
that two or more Obligors are Affiliates of each other, such Obligors will be
treated as a single Obligor for purposes of this definition. Each of the
percentages above is called a "Class C Benchmark Percentage." The Class C Excess
Concentration Balances on any day shall also include, with respect to any
Special Obligor, the aggregate Unpaid Balances of Eligible Receivables it owes
that, expressed as a percentage of the Eligible Receivables, exceeds the Class C
Special Concentration Limit.
"Class C Invested Amount" means, at any time, $15,000,000, reduced (but
not below zero) by (a) the aggregate amount of all distributions that have been
made to the Holders of the Class C Certificates on account of principal, and (b)
the amount of all Investor Write-Offs that have been applied to reduce the Class
C Invested Amount (net of Investor Allocable Recoveries and Investor Allocable
Dilution Adjustments that have been applied to reinstate the Class C Invested
Amount).
"Class C Minimum Required Reserve Ratio" means the sum, as of any
Cut-Off Date, of (a) the Class C Concentration Factor for that Cut-Off Date plus
(b) the product of (i) the
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average of the Dilution Ratios for the period of 12 preceding Calculation
Periods ending on that Cut-Off Date, multiplied by (ii) the Dilution Horizon
Variable for that Cut-Off Date; provided that in no event shall the Class C
Minimum Required Reserve Ratio be less than 10%.
"Class C Special Concentration Limit" means, with respect to the
Special Obligor identified in the most recent Monthly Report, if any, 4.5%.
"Class C Ratings Factor" means 1.5.
"Class C Required Reserve Ratio" means, as calculated in each Monthly
Report, the greater of (a) the Loss Reserve Ratio plus the Dilution Reserve
Ratio, each calculated using the Class C Ratings Factor, and (b) the Loss
Reserve Ratio (Z-value) plus the Dilution Reserve Ratio (Z-value), each
calculated using the Class C Ratings Factor and the Class C Z-value.
"Class C Required Reserves" means, at any time, the product of (a) the
Net Eligible Receivables multiplied by (b) the Class C Reserve Ratio multiplied
by (c) the Series Collection Allocation Percentage.
"Class C Reserve Ratio" means, during any Distribution Period, the
greater of (a) the Class C Minimum Required Reserve Ratio and (b) the Class C
Required Reserve Ratio, each as calculated in the Monthly Report required to be
delivered on the Report Date immediately prior to the start of that Distribution
Period, provided that during the period from the date hereof to the first
Distribution Date hereafter the Class C Reserve Ratio shall be 14.05%.
"Class C Z-value" means 1.96.
"Class Invested Amount" means (a) with respect to Class A, the Class A
Invested Amount, (b) with respect to Class B, the Class B Invested Amount, (c)
with respect to Class C, the Class C Invested Amount, and (d) with respect to
any other Senior Class or Subordinated Class, the amount identified as its
"Class Invested Amount" in the related Supplement.
"Class Percentage" means:
(i) with respect to the Holder of a Class A Certificate, the
percentage equivalent (carried out to twelve decimal places) of a
fraction, the numerator of which is the outstanding principal amount of
such Holder's Class A Certificate and the denominator of which is the
aggregate outstanding principal amount of all Class A Certificates;
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(ii) with respect to the Holder of a Class B Certificate, the
percentage equivalent (carried out to twelve decimal places) of a
fraction, the numerator of which is the outstanding principal amount of
such Holder's Class B Certificate and the denominator of which is the
aggregate outstanding principal amount of all Class B Certificates; and
(iii) with respect to the Holder of a Class C Certificate, the
percentage equivalent (carried out to twelve decimal places) of a
fraction, the numerator of which is the outstanding principal amount of
such Holder's Class C Certificate and the denominator of which is the
aggregate outstanding principal amount of all Class C Certificates.
"Credit Officer" means, with respect to any Seller, any officer that is
responsible for preparing or communicating information to the Servicer for
inclusion in a Daily Report or a Monthly Report.
"CSA Obligor" means (x) if the related Seller is Webcraft Technologies,
Inc., an Obligor whose Unpaid Balance with respect to Receivables related to
Customer Supply Arrangements exceeded $25,000 as of its Calculation Date, and
(y) in all other cases, an Obligor that benefits from a Customer Supply
Arrangement; provided that if a Credit Officer of a Seller has actual knowledge
that two or more Obligors are Affiliates of each other, such Obligors will be
treated as a single Obligor for purposes of this definition and the definition
of Customer Supply Exposure.
"Current Carrying Costs" means, during any Distribution Period, the sum
of (i) the amount of interest on the Series 1996-2 Certificates that will be
payable on or before the next Distribution Date, (ii) the amount of the
Servicing Fee that will be payable on or before the next Distribution Date,
(iii) the amount of accrued and unpaid expenses described in Section 7.2(l)(C)
of the Pooling Agreement, plus (iv) the Current Carrying Costs Increments for
each other Series in Group I (as defined, and calculated as provided, in the
Supplement for each such Series).
"Current Quarter" means the fiscal quarter of Big Flower immediately
following the most recently ended fiscal quarter of Big Flower.
"Customer Supply Arrangement" means an arrangement (other than a Bill
and Hold Arrangement) in which a Seller, pursuant to instructions from one of
its customers, (x) purchases paper, ink or other materials (in anticipation of
using such materials in the production of goods for such customer) and invoices
the customer for such materials but retains possession of such materials for a
period of time or (y) accepts delivery of paper, ink or other materials from
such customer (in anticipation of using such materials in the
15
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production of goods for such customer) and retains possession of such goods for
a period of time; provided in each case that the following requirements are
satisfied:
(a) title to, and the risk of loss of, such materials is
transferred to (or retained by) such customer; and
(b) such Seller's records are adequate to enable such Seller
or a third party to identify the materials subject to such
arrangement as separate from such Seller's own inventory at
any time (including, if such customer is a customer of
Treasure Chest by segregating such paper from paper owned by
such Seller and by identifying such paper as belonging to the
applicable customer by bar code).
"Customer Supply Exposure" means, at any time, the result of the
following calculations:
(i) for each CSA Obligor, determine the Material Cost Amount
as of its Calculation Date;
(ii) for each CSA Obligor, determine the aggregate Unpaid
Balance of Eligible Receivables owed by such CSA Obligor as of
its Calculation Date;
(iii) for each CSA Obligor, determine the lower of the amounts
described in clause (i) and clause (ii), such lower amount
being the "CS Net Exposure" for such CSA Obligor;
(iv) determine the sum of the CS Net Exposures for all CSA
Obligors;
(v) determine the sum of the Material Cost Amounts for all CSA
Obligors as of their respective Calculation Dates;
(vi) determine a fraction (expressed as a percentage), the
numerator of which is the amount described in clause (iv) and
the denominator of which is the amount described in clause
(v), which percentage is the "Customer Supply Fraction",
provided that the Customer Supply Fraction shall not exceed
100%;
(vii) determine the sum of the Material Cost Amounts for all
16
<PAGE>
Obligors as of their respective Calculation Dates; and
(viii) multiply the amount described in clause (vii) by the
Customer Supply Fraction, the result of such multiplication
being the "Customer Supply Exposure".
"Daily Group Collections" is defined in Section 4.2.
"DCR" means Duff & Phelps Credit Rating Co.
"Deferred Portion" means, on any day the portion of the Acquisition
Amount as to which payment is deferred, which portion shall equal the sum of (A)
(x) the Series Collection Allocation Percentage times (y) the sum of the
following amounts (as shown in the Daily Report for such day): (i) the sum of
the Class C Excess Concentration Balances with respect to all Obligors, plus
(ii) the Excess New Seller Reserve, plus (iii) the aggregate Unpaid Balance of
Receivables that are not Eligible Receivables (including any such Receivables
that are ineligible due to the attachment of Adverse Claims), plus (iv) the
Class C Reserve Ratio times the Net Eligible Receivables, plus (v) the
Subordinate Class Special Reserves, plus (vi) the Identified Tax Reserve, plus
(vii) the State Income Tax Reserve; plus (B) the Class A Subordination Deficit;
plus (C) the Class B Subordination Deficit; plus (D) the Carrying Cost
Receivables Reserve (it being understood that the Deferred Portion may vary from
day to day); provided that the Deferred Portion shall be fixed as of the Group
Amortization Calculation Date.
"Dilution Horizon Variable" means, at any time, a fraction having (a) a
numerator equal to the sum of the aggregate amounts payable (without giving
effect to any payments received with respect to such invoices) pursuant to
invoices giving rise to Receivables and generated by the Sellers during the two
Calculation Periods ending on the most recent Cut-Off Date and (b) a denominator
equal to the Net Eligible Receivables as of the most recent Cut-Off Date.
"Dilution Ratio" means, as calculated in each Monthly Report as of the
most recent Cut-Off Date, a fraction (expressed as a percentage) having (a) a
numerator equal to the aggregate amount of Dilution on the Receivables occurring
during the Calculation Period ending on the most recent Cut-Off Date, and (b) a
denominator equal to the aggregate amounts payable pursuant to invoices giving
rise to Receivables (without giving effect to any payments received with respect
to such invoices) that were generated by the Sellers during the second preceding
Calculation Period (so that, for example, if the Calculation Period specified in
clause (a) corresponded to the March fiscal month, the Calculation Period in
this clause (b) would be the one corresponding to the January fiscal month).
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"Dilution Reserve Ratio" means, as calculated in each Monthly Report,
the result (expressed as a percentage) calculated in accordance with the
following formula:
{(ARF x ADR) + [(HDR-ADR) x (HDR/ADR)]} x DHV
where:
ADR = the average of the Dilution Ratios during the period of 12 consecutive
Calculation Periods ending on the related Cut-Off Date.
ARF = the Applicable Ratings Factor.
DHV = the Dilution Horizon Variable.
HDR = the highest average of the Dilution Ratios for any two consecutive
Calculation Periods within the 12 consecutive Calculation Periods
ending on the related Cut-Off Date.
"Dilution Reserve Ratio (Z-value)" means, as calculated in each Monthly
Report, the result (expressed as a percentage) calculated in accordance with the
following formula:
[(ARF x ADR) + (Z-value x SD)] x DHV
where:
ADR = the average of the Dilution Ratios during the period of 12 consecutive
Calculation Periods ending on the related Cut-Off Date.
ARF = the Applicable Ratings Factor.
DHV = the Dilution Horizon Variable.
SD = the sample standard deviation, during the period of 12 consecutive
Calculation Periods ending on the related Cut-Off Date, of the Dilution
Ratio.
"Distribution Period" means a period from and including a Distribution
Date to but excluding the next Distribution Date.
"Early Amortization Period" means the period beginning on the date (if
any) specified in Section 6.2 and ending on the day on which the Series 1996-2
Invested Amount has been reduced to zero and any other period identified as an
"Early Amortization Period" in the Supplement for any other Series in Group I.
"Excess Bill and Hold Reserve" means, at any time, the result of the
following calculations:
18
<PAGE>
(i) determine an amount equal to the Bill and Hold Exposure;
(ii) determine an amount equal to 3% of the aggregate Unpaid
Balance of Eligible Receivables;
(iii) determine the excess, if any, of the amount described in
clause (i) over the amount described in clause (ii), which amount shall
be the "Excess Bill and Hold Reserve".
"Excess Executory Contract Reserve" means, at any time, the result of
the following calculations:
(i) determine an amount equal to the Executory Contract
Exposure;
(ii) determine an amount equal to 26% of the aggregate Unpaid
Balance of Eligible Receivables;
(iii) determine the excess, if any, of the amount described in
clause (i) over the amount described in clause (ii), which amount shall
be the "Excess Executory Contract Reserve".
"Excess New Seller Reserve" means, on any day, the sum of the following
amounts (if positive) calculated for each New Seller (other than any New Seller
as to which the Modification Condition has been satisfied):
(a) the aggregate Unpaid Balances of Eligible Receivables
generated by such New Seller (net of any Receivables included in the
Class B Incremental Concentration Balance or the Class C Excess
Concentration Balances); minus
(b) 5% of the Adjusted Eligible Receivables.
"Executory Contract" means, at any time, a contract between a Seller
and an Obligor (i) which has a term of greater than one year and (ii) under
which such Seller has obligations that are not yet performed.
"Executory Contract Exposure" means, at any time, the aggregate Unpaid
Balance of Eligible Receivables owed by Obligors that are party to Executory
Contracts, determined with respect to any Obligor as of its Calculation Date;
provided that if a Credit Officer of a Seller has actual knowledge that two or
more Obligors are Affiliates of each other, such Obligors will be treated as a
single Obligor for purposes of this definition.
19
<PAGE>
"Expected Final Payment Date" means (a) as to the Series 1996-2
Certificates, the June, 2002 Distribution Date, and (b) as to any other Series
in Group I, the date identified as the "Expected Final Payment Date" in the
related Supplement.
"Federal Funds Rate" means the weighted average of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published for the day (or, if the day is
not a Business Day, the immediately preceding Business Day) by the Federal
Reserve Bank of New York.
"Final Scheduled Payment Date" means (a) as to the Series 1996-2
Certificates, the April, 2003 Distribution Date, and (b) as to any other Series
in Group I, the date identified as the "Final Scheduled Payment Date" in the
related Supplement.
"Fully Funded Date" means the first date falling in a Group
Amortization Period or when all Series in Group I are in a Series Amortization
Period and on which there are funds on deposit in the Carrying Cost Account and
the Principal Funding Account that, in the aggregate, equal or exceed the
Investor Repayment Amount and any Servicing Fee payable to anyone other than a
Big Flower Person on the first Distribution Date falling after that date.
"Group Amortization Calculation Date" means the day before a Group
Amortization Period begins.
"Group Amortization Period" means the period (if any) commencing on the
first day on which all outstanding Series in Group I are in early amortization
periods.
"Group Initial Invested Amount" means, at any time, the sum of the
Series 1996-2 Initial Invested Amount plus the aggregate of the Series Initial
Invested Amounts of each other Series in Group I, all determined at that time.
"Group Invested Amount" means, at any time, the sum of the Series
1996-2 Invested Amount plus the aggregate of the Series Invested Amounts of each
other Series in Group I, all determined at that time.
"Group I" means a group of Series, including Series 1996-2 and each
other Series that is identified in its Supplement as belonging to Group I.
"Guarantor" means Big Flower, in its capacity as the guarantor under
the Seller Guaranty.
"Guaranty Confirmation" means the Confirmation of Guaranty dated as of
the Closing Date, executed by the Guarantor in favor of Transferor and Trustee.
20
<PAGE>
"Holdback Account Termination Date" is defined in Section 4.4.
"Holder" means a Holder (as defined in the Pooling Agreement) of a
Certificate in any Series in Group I.
"Identified Tax Reserve" means $250,810 which amount represents a
reserve for potential or disputed tax liabilities in the States of California,
Michigan and Pennsylvania; provided that upon certification by the Servicer in
writing to Trustee that all or part of the disputes relating to the States of
Michigan and Pennsylvania have been finally resolved such reserve may be reduced
by an amount corresponding to the liability related to such dispute (or portion
thereof).
"Intercreditor Provisions" means the following provisions of the Big
Flower Credit Agreement: Sections 9.01 (xvii), 9.02 (x), 9.04 (xiv), 9.05
(xvii), (xviii), (xix) and (xx), 9.10(a)(iii), 9.15, and 10.11, the last two
sentences of Section 9.11 and the definitions of Receivables Amendment
Conditions, Receivables Bridge Facility, Receivables Documents, Receivables
Facility, Receivables Facility Assets, Receivables Facility Financing Costs,
Receivables Maximum Funding Amount, Receivables Pooling Agreement, Receivables
Purchasers, Receivables Stated Amount, Receivables Subsidiary and Subsidiary
Guarantor.
"Interest Payment Date" means (a) as to the Series 1996-2 Certificates,
each Distribution Date, and (b) as to any other interest payable on any Series
in Group I, the date specified as the "Interest Payment Date" in the related
Supplement.
"Interest Period" means (i) the period from the date hereof to, but
excluding, the first subsequent Distribution Date, and (ii) each Distribution
Period thereafter.
"Invested Amount" means, at any time:
(a) for purposes of calculating the Series Loss Allocation
Percentage for Group I, the Group Invested Amount; and
(b) for purposes of the application of Sections 6.13 and 12.4
of the Pooling Agreement to the Series 1996-2 Certificates, the Series
1996-2 Invested Amount.
"Investor Allocable Dilution" means, for any ASA Measuring Period, the
product of the aggregate amount of Dilution for that ASA Measuring Period as to
which neither the applicable Seller nor the Guarantor has made any payment
required by Sections 3.1 and 3.5 of the Purchase Agreement, or the Seller
Guaranty on account of Seller Dilution Adjustments multiplied by the Series Loss
Allocation Percentage as of the beginning of that ASA Measuring
21
<PAGE>
Period, multiplied by the Investor Allocation Percentage as of the first
Business Day of that ASA Measuring Period.
"Investor Allocable Dilution Adjustments" is defined in Section 4.8.
"Investor Allocable Loss Amount" means, for any ASA Measuring Period,
the product of the Loss Amount for that ASA Measuring Period, multiplied by the
Series Loss Allocation Percentage as of the beginning of that ASA Measuring
Period, multiplied by the Investor Allocation Percentage as of the first
Business Day of that ASA Measuring Period.
"Investor Allocable Recoveries" means, for any ASA Measuring Period,
the product of the Net Recoveries for that ASA Measuring Period, multiplied by
the Series Loss Allocation Percentage as of the beginning of that ASA Measuring
Period, multiplied by the Investor Allocation Percentage as of the first
Business Day of that ASA Measuring Period.
"Investor Allocation Percentage" means:
(x) on any Business Day that does not fall in a Series
Amortization Period, a fraction (expressed as a percentage, which in
any event may not exceed 100%) (a) the numerator of which is the Net
Invested Amount as of that Business Day, and (b) the denominator of
which is the Base Amount as of that Business Day;
(y) on any Business Day falling in any Series Amortization
Period, a fraction (expressed as a percentage, which in any event may
not exceed 100%) (a) the numerator of which is the Net Invested Amount
as of that Business Day, and (b) the denominator of which is the Base
Amount as of that Business Day, provided that the percentage determined
pursuant to this clause (y) shall not be less than the Investor
Allocation Percentage as of the beginning of such Series Amortization
Period; and
(z) on any Business Day falling in the Group Amortization
Period, a fraction (expressed as a percentage, which in any event may
not exceed 100%) (a) the numerator of which is the Net Invested Amount
as of the Group Amortization Calculation Date, and (b) the denominator
of which is the Base Amount as of the Group Amortization Calculation
Date.
"Investor Ownership Percentage" means, on any Business Day, a fraction
(expressed as a percentage, which in any event may not exceed 100%) (x) the
numerator of which is the Acquisition Amount on such day and (y) the denominator
of which is the Series Collection Allocation Percentage times the excess of (i)
the sum of the Unpaid Balance of Receivables on such day plus Unavailable Cash
on such day over (ii) the Unapplied Cash on such day; provided that the Investor
Ownership Percentage shall be fixed as of the Group Amortization
22
<PAGE>
Calculation Date; and provided further that if the Investor Ownership Percentage
is being calculated on any day when a Series in Group I is in an accumulation,
amortization or early amortization period, the Investor Ownership Percentage
shall not be less than the Investor Ownership Percentage immediately prior to
the commencement of such period.
"Investor Repayment Amount" means, on any Business Day, the sum of (a)
the outstanding principal amount of the Series 1996-2 Certificates and all other
Series in Group I, plus (b) the interest and any Additional Amounts known to be
payable on the Series 1996-2 Certificates and all other Series in Group I on or
before the first Distribution Date falling after that date.
"Investor Write-Offs" means, as calculated in any Monthly Report
relating to a Calculation Period falling completely or partially in a Group
Amortization Period:
(a) if the Available Subordinated Amount is greater than zero
at the end of the related ASA Measuring Period, zero; and
(b) if the Available Subordinated Amount is zero at the end of
the related ASA Measuring Period (after taking into account any
reduction in the Available Subordinated Amount shown in such Monthly
Report), the excess (if any) of (x) the sum of the Investor Allocable
Loss Amount and the Investor Allocable Dilution minus the sum of
Investor Allocable Recoveries and Investor Allocable Dilution
Adjustment for the related ASA Measuring Period, over (y) the Available
Subordinated Amount as of the beginning of that ASA Measuring Period.
"Junior Subordinated Class" means each of Class C and each class of any
other Series in Group I that is identified in its Supplement as a Junior
Subordinated Class.
"LIBOR" means, with respect to any Interest Period, the rate per annum
equal to the average of the rates at which deposits in Dollars having a
one-month maturity that appear on Telerate Page 3750 as of 11:00 a.m., London
time, two London Business Days prior to the Distribution Date on which that
Interest Period begins. For purposes of the foregoing, "Telerate Page 3750"
means the display page so designated on the Dow Jones Telerate Service (or such
other pages as may replace that page on that service or such other service or
services as may be nominated by the British Banker's Association for the purpose
of displaying London interbank offered rates for Dollar deposits), and "London
Business Day" means a day upon which dealings in deposits in Dollars are
transacted in the London interbank market. Notwithstanding the foregoing, in the
event that no rate for one-month Dollar deposits appears on Telerate Page 3750
on the applicable date for determining LIBOR with respect to any Distribution
Date, then LIBOR shall be determined as the arithmetic mean (rounded upwards to
the nearest one-sixteenth of 1%) of the rates at which one-month Dollar deposits
are offered
23
<PAGE>
to prime banks in the London interbank market by four major banks in that market
selected by the Trustee as of the determination date and time specified above.
If fewer than two quotations are provided by such banks, then LIBOR shall be
determined as the arithmetic mean (rounded upwards as above) of the rates at
which one-month loans in Dollars are offered to leading European banks by three
major banks in New York City selected by the Trustee as of 11:00 a.m. New York
City time on the determination date specified above.
"Loss Amount" means, with respect to any ASA Measuring Period, an
amount equal to the positive difference (if any) of (a) the amount of
Receivables held by Trust that became Write-Offs during that ASA Measuring
Period, minus (b) the amount of Recoveries received during that ASA Measuring
Period.
"Loss Reserve Ratio" means, as calculated in each Monthly Report, the
result (expressed as a percentage) of (a) the Applicable Ratings Factor
multiplied by (b) the highest average of the Aged Receivables Ratio for any
three consecutive Calculation Periods that occurred during the preceding 12
consecutive Calculation Periods ending on the most recent Cut-Off Date
multiplied by (c) a fraction having (i) a numerator equal to the sum of the
aggregate amounts payable pursuant to invoices giving rise to Receivables
(without giving effect to any payments received with respect to such invoices)
that were generated by the Sellers during the three Calculation Periods
preceding or ending on the most recent Cut-Off Date, and (ii) a denominator
equal to the Net Eligible Receivables, as of the most recent Cut-Off Date.
"Loss Reserve Ratio (Z-value)" means, as calculated in each Monthly
Report, the result (expressed as a percentage) of (a) the Loss Reserve Ratio
plus (b) the product of the Z-value multiplied by the sample standard deviation
of the Aged Receivables Ratio during the preceding 12 consecutive Calculation
Periods ending on the most recent Cut-Off Date.
"Material Cost" means, at any time, (a) with respect to any finished
goods referred to in the definition of Bill and Hold Arrangement, the amount
shown in the invoice therefor sent by the applicable Seller to the Obligor for
which such goods are held; (b) with respect to any paper, ink or other materials
described in clause (x) of the definition of Customer Supply Arrangement, the
cost for such materials shown in the invoice therefor sent by the applicable
Seller to the Obligor for which such goods are held; and (c) with respect to any
paper, ink or other materials described in clause (y) of the definition of
Customer Supply Arrangement, the estimated cost of such materials, which
estimate shall be prepared by the applicable Seller in good faith on the basis
of the average cost (determined on a reasonably current basis) for materials of
such type or (if the Sellers do not currently hold materials of such type for
their own account) on the basis of reasonably current market prices for
materials of such type.
"Material Cost Amount" means, at any time, with respect to any Obligor
(x) when used
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in connection with the calculation of Bill and Hold Exposure, the aggregate
Material Cost attributable to finished goods held for its account pursuant to a
Bill and Hold Arrangement and (y) when used in connection with the calculation
of Customer Supply Exposure, the aggregate Material Cost attributable to paper,
ink or other materials held for its account pursuant to a Customer Supply
Arrangement.
"Net Eligible Receivables" means, at any time, (a) the Adjusted
Eligible Receivables, minus (b) the then aggregate amount of all Class C Excess
Concentration Balances with respect to all Obligors, minus (c) the Excess New
Seller Reserve, minus (d) the Subordinate Class Special Reserves; it being
understood that the amount of Eligible Receivables will be reduced by Adverse
Claims that attach to Receivables otherwise satisfying the definition of
Eligible Receivable.
"Net Invested Amount" means, on any Business Day, the Group Invested
Amount, reduced by the aggregate balance on deposit in the Equalization Account
and the Principal Funding Account with respect to Series in Group I.
"Net Recoveries" means, with respect to any ASA Measuring Period, an
amount equal to the positive difference (if any) of (a) the amount of Recoveries
received in that ASA Measuring Period minus (b) the amount of Receivables that
became Write-Offs in that ASA Measuring Period.
"New Seller" means, on any day, any Seller that became a Seller during
the preceding twelve months (other than any Seller that became a Seller on the
date hereof).
"Postage Balance" means, at any time and with respect to any Obligor,
the aggregate amount of Postage Prepayments made by such Obligor that have not
been applied to cover the corresponding postage or freight costs.
"Postage Exposure" means, as calculated in each Monthly Report, the
result of the following calculations:
(i) for each PR Obligor, determine its Postage Balance as of
the most recent Cut-Off Date;
(ii) for each PR Obligor, determine the aggregate Unpaid
Balance of Eligible Receivables owed by such PR Obligor as of
the most recent Cut-Off Date;
(iii) for each PR Obligor, determine the lower of the amounts
described in clause (i) and clause (ii), such lower amount
being
25
<PAGE>
the "PR Net Exposure" for such PR Obligor;
(iv) determine the sum of the PR Net Exposures for all PR
Obligors;
(v) determine the sum of the Postage Balances for all PR
Obligors as of the most recent Cut-Off Date;
(vi) determine a fraction (expressed as a percentage), the
numerator of which is the amount described in clause (iv) and
the denominator of which is the amount described in clause
(v), which percentage is the "Postage Fraction", provided that
the Postage Fraction shall not exceed 100%;
(vii) determine the sum of the Postage Balances for all
Obligors as of the most recent Cut-Off Date;
(viii) multiply the amount described in clause (vii) by the
Postage Fraction, the result of such multiplication being the
"Postage Exposure".
"Postage Prepayment" mean a payment made by an Obligor to a Seller to
cover anticipated postage or freight costs prior to such Seller's payment of
such costs.
"PR Amount" means, at any time, (x) with respect to a PR Obligor, its
PR Net Exposure, as specified in the definition of Postage Exposure, and (y)
with respect to any other Obligor, the product of (i) such Obligor's Postage
Balance as of the most recent Cut-Off Date, times (ii) the Postage Fraction, as
specified in the definition of Postage Exposure.
"PR Obligor" means, at any time, an Obligor whose Postage Balance
exceeded $100,000 as of the most recent Cut-Off Date; provided that if a Credit
Officer of a Seller has actual knowledge that two or more Obligors are
Affiliates of each other, such Obligors will be treated as a single Obligor for
purposes of this definition and the definition of Postage Exposure.
"Prepayment Accumulation Period" means a period beginning on the day
that Transferor gives an Accumulation Notice to Trustee of a full or partial
prepayment of the Series 1996-2 Certificates (or of the Class A Certificates,
the Class B Certificates or the Class C Certificates, as the case may be)
pursuant to Section 4.9 (and does not notify Trustee that it intends to cause
the Series Interest for Group I attributable to the Series 1996-2 Certificates
to be conveyed as described in subsection 4.9(b)) and ending on the earlier to
occur of (a) the day when amounts sufficient for that prepayment have been
accumulated pursuant to Section 4.3
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and (b) the end of the Revolving Period for the Series 1996-2 Certificates.
"Prepayment Notice" is defined in Section 4.9.
"Principal Deposit Amount" means, with respect to any Calculation
Period falling in a Series Amortization Period, the amount determined as such in
accordance with the Supplement for the applicable Series. The Principal Deposit
Amounts for the various Series Amortization Periods that may apply to Series
1996-2 are:
(a) for any Calculation Period falling in the Accumulation
Period or the Early Amortization Period, the Series 1996-2 Invested
Amount; and
(b) for any Calculation Period falling in a Prepayment
Accumulation Period, the amount of principal to be prepaid.
"Principal Payment Date" means (a) for the Series 1996-2 Certificates,
(i) any date on which any prepayment is to be made pursuant to Section 4.9, (ii)
each Distribution Date (beginning with the Distribution Date falling in the
Calculation Period after the Calculation Period in which the Early Amortization
Period begins) and (iii) any Distribution Date falling on or after the Expected
Final Payment Date, and (b) for any other Series in Group I, each date specified
as a "Principal Payment Date" in the related Supplement. The Refinancing Date is
not a Principal Payment Date.
"Rating Agencies" means S&P and DCR.
"Refinancing Date" is defined in subsection 4.9(b).
"Required Receivables" means, on any Business Day, collectively for all
Series in Group I:
(a) So long as a Group Amortization Period has not commenced,
the result of the following formula:
[GIIA + CCRR + ITR + SITR + CASR + NSR] X R
------------------------ ---
(1 - CARR) NER
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where:
CARR = the Class A Reserve Ratio in effect for that Business Day.
CASR = the product of (i) the Class A Special Reserves times (ii) the
Series Collection Allocation Percentage, as reported in the
Daily Report for the immediately preceding Business Day.
CCRR = the Carrying Cost Receivables Reserve as reported in the Daily
Report for that Business Day.
GIIA = the Group Initial Invested Amount.
ITR = the product of (i) the Identified Tax Reserve times (ii) the
Series Collection Allocation Percentage, as reported in the
Daily Report for the immediately preceding Business Day.
NER = the Net Eligible Receivables minus the sum of the Class A
Incremental Concentration Balance and the Class B Incremental
Concentration Balance, each as reported in the Daily Report for
that Business Day.
NSR = the product of (i) the Excess New Seller Reserve times (ii) the
Series Collection Allocation Percentage, as reported in the
Daily Report for the immediately preceding Business Day.
SITR = the product of (i) the State Income Tax Reserve times (ii) the
Series Collection Allocation Percentage, as reported in the
Daily Report for the immediately preceding Business Day.
R = the aggregate Unpaid Balance of Receivables held by the Trust as
reported in the Daily Report for that Business Day.
(b) If a Group Amortization Period has commenced, the result
of the following formula:
AGIIA + ASA + UCCRR
where:
AGIIA = the adjusted Group Initial Invested Amount on that Business Day
(which shall equal the Group Initial Invested Amount, reduced
(but not below zero) by the amount of all Investor Write-Offs
(net of Investor Allocable Recoveries and Investor Allocable
Dilution Adjustments that have been applied to reinstate the
Group Invested Amount));
UCCRR = the Unfunded Carrying Cost Receivables Reserve on that Business
Day; and
ASA = the Available Subordinated Amount on that Business Day.
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"Revolving Period" means, with respect to any Series in Group I, the
period beginning on the date hereof and ending on the day before the first day
of an accumulation period, an amortization period or an early amortization
period for such Series.
"Senior Class" means Class A and each class of any other Series in
Group I that is identified in its Supplement as a Senior Class.
"Senior Subordinated Class" means each of Class B and each class of any
other Series in Group I that is identified in its Supplement as a Senior
Subordinated Class.
"Series Allocable Dilution Adjustments" means, for any ASA Measuring
Period, the product of the aggregate amount of payments pursuant to Section 3.1
of the Purchase Agreement or pursuant to the Seller Guaranty on account of
Seller Dilution Adjustments received during that ASA Measuring Period relating
to Dilution that occurred prior to that ASA Measuring Period, multiplied by the
Series Loss Allocation Percentage as of the beginning of that ASA Measuring
Period.
"Series Amortization Period" means (a) as to Series 1996-2, the
Accumulation Period, any Prepayment Accumulation Period and any Early
Amortization Period and (b) as to any other Series in Group I any period
identified in the related Supplement as a "Series Amortization Period."
"Series Invested Amount" means, with respect to any Series in Group I,
the amount determined as such in accordance with the Supplement for that Series.
"Series Initial Invested Amount" means, with respect to any Series in
Group I, the amount determined as such in accordance with the Supplement for
that Series, provided that from and after the date on which the Series Invested
Amount for any Series is reduced to zero, the Series Initial Invested Amount for
that Series will also equal zero.
"Series 1996-2" is defined in the preamble.
"Series 1996-2 Certificates" means the Class A Certificates, the Class
B Certificates and the Class C Certificates.
"Series 1996-2 Holder" means a Holder of a Series 1996-2 Certificate.
"Series 1996-2 Initial Invested Amount" means (i) during the Revolving
Period for the Series 1996-2 Certificates, the Series 1996-2 Invested Amount,
and (ii) thereafter, the Series 1996-2 Invested Amount as of the last day of the
Revolving Period.
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"Series 1996-2 Invested Amount" means, at any time, the sum of the
Class A Invested Amount plus the Class B Invested Amount plus the Class C
Invested Amount.
"Special Obligor" means, at any time, the Tier-5 Obligor, if any, that
(i) has been designated in the most recent Monthly Report as the "Special
Obligor" and (ii) that owes the highest aggregate Unpaid Balances of Eligible
Receivables at the date of such Monthly Report; provided that this definition
may be modified as contemplated by Section 4.11.
"Specified Amount" at any time means an amount equal to the product of
(i) 1.5 multiplied by (ii) the Aggregate Apportionment Rate Factor multiplied by
(iii) 100% of the aggregate amounts payable pursuant to invoices giving rise to
Receivables that were generated by all Sellers during the applicable Benchmark
Quarter, multiplied by (iv) .20%.
"Specified Apportionment Rate Factor" shall mean, with respect to each
Subject State, a fraction equal to (i) the highest applicable tax rate (as
certified by Transferor's independent accountants) for such Subject State
multiplied by (ii) such Subject State's Apportionment Percentage.
"Specified Rating Agencies" means, as to any Obligor: (a) if both DCR
and S&P rate such Obligor, DCR and S&P; and (b) if S&P rates such Obligor, but
DCR does not, S&P. If DCR rates such Obligor, but S&P does not, then the Obligor
is deemed to be an unrated Obligor.
"State Income Tax" means any income or franchise or other tax on or
measured by net income and imposed by a Subject State, including any interest,
penalties, surtax or additions to tax in respect of any of the foregoing.
"State Income Tax Per Diem" means for any Subject State, (i) 1.5 times
the maximum potential liability of the Trust for State Income Tax required to be
accrued by applicable law (assuming the Trust would be a taxable entity) during
the Benchmark Quarter for such Subject State, divided by (ii) 90; provided that,
prior to March 19, 1997, the sum of the amounts determined for all Subject
States shall not be less than the Specified Amount divided by 90; and provided,
further, that, notwithstanding the preceding proviso, the State Income Tax Per
Diem shall be zero following the satisfaction of the Adjustment Condition for
each Subject State.
"State Income Tax Reserve" means, for any day during the Current
Quarter, the sum for all Subject States of (i) the product of 2 multiplied by
the number of Turnover Days multiplied by the State Income Tax Per Diem for such
Subject State, plus (ii) (A) the product of 2 multiplied by the State Income Tax
Per Diem for such Subject State multiplied by the total number of days in the
Current Quarter, minus (B) any such State Income Tax which has
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actually been paid for such quarter, plus (iii) the maximum potential liability
of the Trust for State Income Tax required to be accrued by applicable law
(assuming the Trust would be a taxable entity) prior to or during such most
recently ended fiscal quarter of Big Flower for such Subject State, to the
extent such State Income Tax has not been paid.
"Subject State" shall mean, as of any date of determination, each State
as to which any of the following is then applicable: (a) a state in which the
Trustee maintains the Corporate Trust Office, (b) a state in which the Trust
maintains its principal executive offices, and (c) a state in which the Servicer
or any Sub-Servicer regularly conducts servicing and collection operations other
than purely ministerial activities and which relate to a material portion of the
Receivables.
"Subordinate Class Customer Supply Reserve" means, at any time, the
result of the following calculations:
(i) determine an amount equal to the Customer Supply Exposure;
(ii) determine an amount equal to 10% of the aggregate Unpaid
Balance of Eligible Receivables;
(iii) determine the excess, if any, of the amount determined
pursuant to clause (i) over the amount determined pursuant to clause
(ii);
(iv) determine an amount equal to the excess of the amount
determined pursuant to clause (i) over the amount determined pursuant
to clause (iii), which amount shall be the "Remaining Customer Supply
Exposure";
(v) determine an amount equal to 75% of the Remaining Customer
Supply Exposure;
(vi) determine the sum of the amounts determined pursuant to
clauses (iii) and (v), which sum shall be the "Subordinate Class
Customer Supply Reserve".
"Subordinate Class Duplicate Amount" is defined in Section 4.12.
"Subordinate Class Duplicate Obligor" means, at any time, an Obligor
whose Receivables could be included in the calculation of two or more of the
following items: the Subordinate Class Customer Supply Reserve; the Excess Bill
and Hold Reserve; and the Excess Executory Contract Reserve.
"Subordinate Class Special Reserves" means, at any time, the sum of (i)
the Excess Bill
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and Hold Reserve, plus (ii) the Excess Executory Contract Reserve, plus (iii)
the Subordinate Class Customer Supply Reserve, minus (iv) the Subordinate Class
Duplicate Amount.
"Subordinated Class" means a Senior Subordinated Class or a Junior
Subordinated Class.
"Tier-1 Obligor" means any Obligor that has (a) a commercial paper
rating from the Specified Rating Agencies of at least "A-1+" (or its equivalent)
or (b) a senior actual or implied debt rating from the Specified Rating Agencies
of at least "AAA" (or its equivalent); provided that if such Obligor has both a
commercial paper rating from the Specified Rating Agencies and a senior actual
or implied debt rating from the Specified Rating Agencies, such Obligor must
have a commercial paper rating from the Specified Rating Agencies of at least
"A-1+" (or its equivalent) and a senior actual or implied debt rating from the
Specified Rating Agencies of at least "AAA" (or its equivalent) to be a Tier-1
Obligor.
"Tier-2 Obligor" means any Obligor (other than a Tier-1 Obligor) that
has (a) a commercial paper rating from the Specified Rating Agencies of at least
"A-1" (or its equivalent) or (b) a senior actual or implied debt rating from the
Specified Rating Agencies of at least "AA-" (or its equivalent), provided that
if such Obligor has both a commercial paper rating from the Specified Rating
Agencies and a senior actual or implied debt rating from the Specified Rating
Agencies, such Obligor must have a commercial paper rating from the Specified
Rating Agencies of at least "A-1" (or its equivalent) and a senior actual or
implied debt rating from the Specified Rating Agencies of at least "AA-" (or its
equivalent) to be a Tier-2 Obligor.
"Tier-3 Obligor" means any Obligor (other than a Tier-1 Obligor or a
Tier-2 Obligor) that has (a) a commercial paper rating from the Specified Rating
Agencies of at least "A-2" (or its equivalent) or (b) a senior actual or implied
debt rating from the Specified Rating Agencies of at least "A-" (or its
equivalent), provided that if such Obligor has both a commercial paper rating
from the Specified Rating Agencies and a senior actual or implied debt rating
from the Specified Rating Agencies, such Obligor must have a commercial paper
rating from the Specified Rating Agencies of at least "A-2" (or its equivalent)
and a senior actual or implied debt rating from the Specified Rating Agencies of
at least "A-" (or its equivalent) to be a Tier-3 Obligor.
"Tier-4 Obligor" means any Obligor (other than a Tier-1 Obligor, a
Tier-2 Obligor or a Tier-3 Obligor) that has (a) a commercial paper rating from
the Specified Rating Agencies of at least "A-3" (or its equivalent) or (b) a
senior actual or implied debt rating from the Specified Rating Agencies of at
least "BBB-" (or its equivalent), provided that if such Obligor has both a
commercial paper rating from the Specified Rating Agencies and a senior actual
or implied debt rating from the Specified Rating Agencies, such Obligor must
have a commercial
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paper rating from the Specified Rating Agencies of at least "A-3" (or its
equivalent) and a senior actual or implied debt rating from the Specified Rating
Agencies of at least "BBB-" (or its equivalent) to be a Tier-4 Obligor.
"Tier-5 Obligor" means any Obligor other than a Tier-1 Obligor, a
Tier-2 Obligor, a Tier-3 Obligor or a Tier-4 Obligor.
"Time Factor" means, at any time, a fraction, (x) the numerator of
which is 365 and (y) the denominator of which is the number of days that have
elapsed during the current calendar year.
"Transferor Net Worth" means, on any Business Day, (x) the aggregate
Unpaid Balance of all Receivables in the Receivables Pool as of such date, minus
(y) the sum of (i) an aggregate amount equal to the Net Invested Amount for each
Series (as defined in its related Supplement), plus the Net Invested Amount for
each Purchased Interest (as defined in its related PI Agreement), plus (ii) the
outstanding principal balance of the Buyer Notes as of such date.
"Transferor Payment Percentage" means, on any Business Day, the
difference of 100% minus the Investor Allocation Percentage on that Business
Day.
"Treasure Chest" means Treasure Chest Advertising Company, Inc., a
Seller under the Purchase Agreement.
"Unapplied Cash" means, on any Business Day, available funds received
in the Master Collection Account and reflected in the Daily Report for that
Business Day that have not been applied as Collections on a particular
Receivable on or prior to the time as of which that Daily Report is reported.
"Unavailable Cash" means, on any Business Day, the aggregate of the
balances retained in Lockbox Accounts, Blocked Accounts or Concentration
Accounts for items in the process of collection but for which funds have not
been made available by the related Lockbox Bank, Blocked Account Bank or
Concentration Account Bank, provided that (i) no notice of insufficient funds or
similar situation shall exist with respect thereto and (ii) the Unpaid Balance
of Receivables shall have been reduced by an amount equal to such balances.
"Unfunded Carrying Cost Receivables Reserve" means, on any Business Day
falling in a Group Amortization Period, the difference (but not less than zero)
of (a) the Carrying Cost Receivables Reserve as of the Group Amortization
Calculation Date, minus (b) the aggregate Collections deposited into the
Carrying Cost Account during the portion of the Group Amortization Period up to
and including that Business Day.
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"Unmatured Early Amortization Event" means an event or condition that,
with the giving of notice or lapse of time (or both) will constitute an Early
Amortization Event.
"Z-value" means the Class A Z-value, the Class B Z-value or the Class C
Z-value, as specified in each calculation where the Z-value is used.
(d) For purposes of this Series, after the Closing Date "Eligible
Obligors" may include (x) the United States government, any of its agencies or
instrumentalities, and a state or local government agency or instrumentality,
provided that such government, agency or instrumentality shall have consented in
writing to the assignment of its Receivables to the Trust, if such consent is
required under its Contract and (y) Obligors which are not Domestic Persons, in
each case for purposes of clauses (x) and (y) if and to the extent the
Modification Condition shall have been satisfied as to such inclusion.
SECTION I.2 Incorporation of Terms and Designation of Transaction
Documents. The terms of the Pooling Agreement (as modified hereby) are
incorporated in this Supplement as if set forth in full herein. As supplemented
by this Supplement, the Pooling Agreement is in all respects ratified and
confirmed and both together shall be read, taken and construed as one and the
same agreement. If the terms of this Supplement and the terms of the Pooling
Agreement conflict, the terms of this Supplement shall control with respect to
the Series 1996-2 Certificates. The Guarantor Confirmation is hereby designated
a "Transaction Document" for all purposes hereunder and under the other
Transaction Documents.
ARTICLE II DESIGNATION
SECTION II.1 Designation. There is hereby created a Series to be known
as the "Series 1996-2 Certificates," consisting of three classes: the
$75,000,000 Variable Rate Class A, Trade Receivables Backed Certificates, Series
1996-2 (the "Class A Certificates"), which shall be a Senior Class; the
$40,000,000 Variable Rate Class B, Trade Receivables Backed Certificates, Series
1996-2 (the "Class B Certificates"), which shall be a Senior Subordinated Class;
and the $15,000,000 Variable Rate Class C, Trade Receivables Backed
Certificates, Series 1996-2 (the "Class C Certificates"), which shall be a
Junior Subordinated Class. Subject to the conditions set forth in Article III,
Trustee shall authenticate and deliver the Class A Certificates, the Class B
Certificates and the Class C Certificates, to or upon the order of Transferor in
the aggregate principal amount indicated for each above. Notwithstanding the
terms of Section 6.1 of the Pooling Agreement, the Class A Certificates, the
Class B Certificates and the Class C Certificates will be issued in minimum
denominations of $1,000,000 and in integral multiples of $500,000.
SECTION II.2 Group. The Series 1996-2 Certificates are included in
Group I.
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Consequently, the Series 1996-2 Certificates will share a single Series
Collection Allocation Percentage (determined using the Required Receivables as
defined herein), a single Series Loss Allocation Percentage (determined using
the Group Invested Amount as defined herein), a single Deferred Portion of the
Acquisition Amount payable in respect of the Transferor Interest (determined as
provided herein), and if a Group Amortization Period occurs, a single Available
Subordinated Amount (determined as provided herein) with the other Series in
Group I. Collections, Investor Allocable Dilution, Investor Allocable Loss
Amounts and Investor Write-Offs will be allocated collectively to Group I in
accordance with such shared Series Collection Allocation Percentage and shared
Series Loss Allocation Percentage, as applicable, and will be further allocated
among Series included in Group I (and the various Senior Classes and
Subordinated Classes) in accordance with this Supplement. The Servicing Fee with
respect to all Series in Group I shall be paid in accordance with this
Supplement and shall be determined in accordance with Section 3.4 of the Pooling
Agreement using the collective Series Collection Allocation Percentage for Group
I. The Series in Group I share a collective Series Interest, the amount of which
equals the shared Series Collection Allocation Percentage for Group I.
Subsection 12.1(b) of the Pooling Agreement shall not apply to any
Series in Group I and shall be superseded for all such Series by Section 7.2 of
this Supplement. All terms of this Supplement applying generally to Group I
shall survive the repayment in full or other termination of the Series 1996-2
Certificates until such time as all Series in Group I have been repaid in full
and any revolving purchase commitments made by the Holders relating to
Certificates in any such Series have been terminated (or, if earlier, on the
Final Scheduled Payment Date for the last Series in Group I). Such terms of
general applicability include all of Article IV (excluding Sections 4.1 and
4.9), Article V, Section 7.2 and Article VIII (excluding Sections 8.7 and 8.8)
and all related definitions.
SECTION II.3 Investor Ownership Percentage. The Investor Certificates
in Group I represent an undivided interest in the portion of the Transferred
Assets allocable to Group I, which undivided interest (expressed as a
percentage) shall equal the Investor Ownership Percentage. On any day, the
aggregate of the amounts paid and payable by the Holders of such Investor
Certificates in respect of the acquisition of such undivided interest (the
"Acquisition Amount") shall equal the Group Invested Amount plus the Deferred
Portion (it being understood that the Acquisition Amount may vary from day to
day); provided that the Acquisition Amount shall be fixed as of the Group
Amortization Calculation Date.
The Deferred Portion of the Acquisition Amount shall be subject to a
holdback and shall be paid to the extent (and only to the extent) Daily Group
Collections are not required to pay amounts described in clauses first through
fourth of Section 4.3 or Section 4.4 (as applicable), it being understood that
the Holders of Series 1996-2 Certificates and of each other Series of
Certificates in Group I shall not be liable to pay any portion of the Deferred
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Portion not paid out of Daily Group Collections.
ARTICLE III CONDITIONS TO ISSUANCE; USE OF PROCEEDS
SECTION III.1 Conditions to Issuance. Trustee will not authenticate the
Series 1996-2 Certificates unless all conditions to the issuance of the Series
1996-2 Certificates under Section 6.10 of the Pooling Agreement shall have been
satisfied and the Trustee shall have received a termination agreement as to the
payment of the Series 1996-1 Certificates in substantially the form of Exhibit D
attached hereto, appropriately completed and duly executed by each party
thereto.
SECTION III.2 Use of Proceeds. The proceeds from the issuance of the
Series 1996-2 Certificates shall be used first to repay the Series 1996-1
Certificates in full and second for general corporate purposes of Transferor.
ARTICLE IV PAYMENTS AND ALLOCATIONS
SECTION IV.1 Interest; Additional Amounts.
(a) Interest on each Class A Certificate shall (i) accrue
during each Interest Period at a rate per annum equal to LIBOR plus the
applicable Certificate Spread, (ii) be calculated on the basis of
actual days over a year of 360 days, and (iii) be payable on each
Distribution Date.
(b) Interest on each Class B Certificate shall (i) accrue
during each Interest Period at a rate per annum equal to LIBOR plus the
applicable Certificate Spread, (ii) be calculated on the basis of
actual days over a year of 360 days, and (iii) be payable on each
Distribution Date.
(c) Interest on each Class C Certificate shall (i) accrue
during each Interest Period at a rate per annum equal to LIBOR plus the
applicable Certificate Spread, (ii) be calculated on the basis of
actual days over a year of 360 days, and (iii) be payable on each
Distribution Date.
(d) Interest with respect to the Series 1996-2 Certificates
due but not paid on any Distribution Date will be due on the next
Distribution Date with additional interest on any amount not paid when
due at 2% per annum above the Alternate Base Rate to the extent
permitted by law.
SECTION IV.2 Daily Calculations and Group Allocations. On each Business
Day, Servicer shall calculate the Series Collection Allocation Percentage (and
the Required
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Receivables), the Current Carrying Costs and, prior to the Group Amortization
Period, the Base Amount and the Net Invested Amount.
Pursuant to Section 4.3 of the Pooling Agreement, Servicer shall
allocate the Series Collection Allocation Percentage of available funds received
in the Master Collection Account since the preceding Business Day's allocation
to the shared Series Interest of Group I. The portion of funds so allocated,
together with any funds released from the Equalization Account or any Principal
Funding Account in accordance with Section 4.5 on that Business Day, are called
the "Daily Group Collections."
SECTION IV.3 Allocations of Daily Group Collections (Other Than in a
Group Amortization Period). On each Business Day (other than a Business Day
falling in a Group Amortization Period or after the Fully Funded Date), Servicer
shall allocate the Daily Group Collections (or, if less, the aggregate amount of
Daily Group Collections required to fund the items described in priorities first
through fourth below) to the following purposes, in the priority indicated (and
to the extent of Daily Group Collections available):
first, to the Carrying Cost Account until the amount allocated
to the Carrying Cost Account equals the Current Carrying Costs;
second, if the Net Invested Amount is greater than the Base
Amount, to the Equalization Account in an amount sufficient to reduce
the Net Invested Amount to an amount equal to the Base Amount; provided
that during any Series Amortization Period, funds that would otherwise
be required to be deposited in the Equalization Account pursuant to
this priority second shall instead be deposited in the sub-account of
the Principal Funding Account for the related Series (and, if there is
more than one such Series, shall be divided ratably between such
sub-accounts, on the basis of the respective Principal Deposit Amounts
of each such Series), but the amount deposited in any such sub-account
shall in no event cause the balance therein to exceed the applicable
Principal Deposit Amount (and any remaining amount not deposited in any
sub-account of the Principal Funding Account because of this limitation
shall be shared among the other sub-accounts for such Series in Group I
(ratably as described above), in each case to the extent that it will
not cause the balance therein to exceed the applicable Principal
Deposit Amount, and any remaining amount shall be deposited in the
Equalization Account); and provided further that no deposit shall be
made to a sub-account of the Principal Funding Account pursuant to the
immediately preceding proviso (and such proviso shall not apply
notwithstanding the existence of a Series Amortization Period) unless,
after giving effect thereto, the Net Invested Amount would not exceed
the Base Amount;
third, during any Series Amortization Period, to the
applicable sub-account of
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the Principal Funding Account until the amount on deposit in that
sub-account equals the applicable Principal Deposit Amount; provided
that
(i) the amount allocated to all Investor Certificates
in Group I in the aggregate pursuant to this priority third on
any Business Day shall not exceed the product of (x) the
Investor Ownership Percentage, multiplied by (y) the excess of
the Daily Group Collections over the amounts allocated on that
Business Day pursuant to priorities first and second and
(ii) if more than one Series in Group I is in a
Series Amortization Period, the amount so allocated shall be
divided among the sub-accounts for each such Series in Group I
as follows:
(1) first, such amount shall be divided
among the sub-accounts for each Series in Group I in
a Series Amortization Period that has an outstanding
Senior Class, on the basis of the respective
Principal Deposit Amounts allocable to each such
Senior Class, but the amount deposited in any such
sub-account shall in no event cause the balance
therein to exceed the applicable Principal Deposit
Amount allocable to the related Senior Class;
(2) second, such amount (after reduction
pursuant to the prior step) shall be divided among
the sub-accounts for each Series in Group I in a
Series Amortization Period that has an outstanding
Senior Subordinated Class, on the basis of the
respective Principal Deposit Amounts allocable to
each such Senior Subordinated Class, but the amount
deposited in any such sub-account shall in no event
cause the balance therein to exceed the applicable
Principal Deposit Amount allocable to the related
Senior Subordinated Class; and
(3) third, such amount (after reduction
pursuant to the prior two steps) shall be divided
among the sub-accounts for each Series in Group I in
a Series Amortization Period that has an outstanding
Junior Subordinated Class, on the basis of the
respective Principal Deposit Amounts allocable to
each such Junior Subordinated Class, but the amount
deposited in any such sub-account shall in no event
cause the balance therein to exceed the applicable
Principal Deposit Amount allocable to the related
Junior Subordinated Class; and
fourth, to hold in the Master Collection Account the amount
necessary to pay on the next Distribution Date any Additional Amounts
payable to the Holders.
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On such Business Day, Servicer shall allocate the remainder of the
Daily Group Collections to make current and/or deferred transfer payments to
Transferor in respect of the Transferor Certificate (including the Deferred
Portion of the Acquisition Amount).
If, on any day, the amount of Collections that is then allocated to the
Carrying Cost Account exceeds the amount of Collections that is then required to
be allocated to the Carrying Cost Account, Servicer shall reallocate such
Collections on such day to one or more of the obligations described in the first
paragraph of this Section in priorities second through fourth above, and in the
preceding paragraph, in the order of priority set forth therein.
In addition, if, on any day, funds on deposit in the Master Collection
Account and available (as described in the first paragraph of this Section) for
allocation under priority fourth are less than the amount of the obligations
described therein, then the available Collections shall be allocated by Servicer
to the holders of such obligations pro rata according to the respective amounts
of such obligations held by them.
On any Business Day falling after the Fully Funded Date, all Daily
Group Collections shall be paid to Transferor as current and/or deferred
transfer payments.
SECTION IV.4 Allocations of Daily Group Collections During a Group
Amortization Period. On each Business Day falling in a Group Amortization Period
and prior to or on the Fully Funded Date, Servicer shall allocate the Daily
Group Collections to the following purposes, in the priority indicated (and to
the extent of Daily Group Collections available):
first, to the Carrying Cost Account to the extent that the
balance therein is less than the amount of Current Carrying Costs
(other than any Servicing Fee payable to any Big Flower Person) payable
on the Distribution Date relating to the Calculation Period during
which such Business Day falls;
second, to the Principal Funding Account and to Transferor
(or, prior to the Holdback Account Termination Date, to the Holdback
Account) in the following amounts:
(a) the amount to be transferred to the Principal
Funding Account shall equal the product of (i) the Investor
Allocation Percentage, multiplied by (ii) the excess of the
Daily Group Collections over the amount allocated on that
Business Day pursuant to priority first, provided that the
amount allocated pursuant to this clause (a) on any Business
Day shall not exceed the product of (x) the Investor Ownership
Percentage, multiplied by (y) the excess of the Daily Group
Collections over the amounts allocated on that Business Day
pursuant to
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priority first; and provided further that the aggregate amount
so deposited in the Principal Funding Account shall not exceed
the Group Invested Amount; and
(b) the amount to be transferred to Transferor (or,
prior to the Holdback Account Termination Date, to the
Holdback Account) shall equal the product of (i) the
Transferor Payment Percentage, multiplied by (ii) the excess
of the Daily Group Collections over the amount allocated on
that Business Day pursuant to priority first;
the amount allocated to the Principal Funding Account pursuant to
clause (a) of this priority second shall be divided among the
sub-accounts for each Series of Group I as follows:
(1) first, such amount shall be divided among the
sub-accounts for each Series that has an outstanding Senior
Class, on the basis of the respective outstanding principal
amounts of each such Senior Class, but the amount deposited in
any such sub-account shall in no event cause the balance
therein to exceed the outstanding principal amount of the
related Senior Class;
(2) second, such amount (after reduction pursuant to
prior step) shall be divided among the sub-accounts for each
Series that has an outstanding Senior Subordinated Class, on
the basis of the respective outstanding principal amounts of
each such Senior Subordinated Class, but the amount deposited
in any such sub-account shall in no event cause the balance
therein to exceed the outstanding principal amount of the
related Senior Subordinated Class;
(3) third, such amount (after reduction pursuant to
the prior two steps) shall be divided among the sub-accounts
for each Series that has an outstanding Junior Subordinated
Class, on the basis of the respective outstanding principal
amounts of each such Junior Subordinated Class, but the amount
deposited in any such sub-account shall in no event cause the
balance therein to exceed the outstanding principal amount of
the related Junior Subordinated Class;
third, to hold in the Master Collection Account the amount
necessary to pay on the next Distribution Date all Additional Amounts
payable to the Holders;
fourth, to pay any Servicing Fee payable to any Big Flower
Person on the Distribution Date relating to the Calculation Period
during which such Business Day falls; and
fifth, the balance to Transferor, provided that prior to the
Holdback Account
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Termination Date, amounts payable to Transferor pursuant to this
priority fifth shall be deposited into the Holdback Account and held as
provided below.
The "Holdback Account Termination Date" shall be the earlier to occur
of (i) the date that falls twelve months after the beginning of the Group
Amortization Period and (ii) the Fully Funded Date. If at any time prior to the
Holdback Account Termination Date, the amount of funds on deposit in the
Holdback Account exceeds the difference of (1) the Investor Repayment Amount
minus (2) the amount of funds then held in the Carrying Cost Account and the
Principal Funding Account that are available to pay the Investor Repayment
Amount, then the amount of such excess funds shall be released from the Holdback
Account and paid to Transferor as current and/or deferred transfer payments. On
the Holdback Account Termination Date, Servicer shall calculate an amount equal
to (x) the aggregate amount of funds held in the Holdback Account, minus (y) the
aggregate Investor Allocable Dilution for the Group Amortization Period as to
which no Series Allocable Dilution Adjustments have been received. The amount of
such difference, if positive, will be paid to Transferor. The funds remaining in
the Holdback Account after the payment of such amount to Transferor shall be
transferred to the Master Collection Account and applied to the items listed in
the first paragraph of this Section as priorities first through fifth, in that
order (except that no such funds shall be allocated to Transferor or the
Holdback Account pursuant to priority second and the amount allocable to the
Principal Funding Account shall not be limited by application of the Investor
Allocation Percentage or the Investor Ownership Percentage).
If, on any day, funds on deposit in the Master Collection Account and
available (as described in the first paragraph of this Section) for allocation
under priority third are less than the amount of the obligations described
therein, then the available Collections shall be allocated by Servicer to the
holders of such obligations pro rata according to the respective amounts of such
obligations held by them.
On any Business Day falling after the Fully Funded Date, all Daily
Group Collections shall be paid to the Transferor in respect of the Transferor
Certificate (including the Deferred Portion of the Acquisition Amount).
SECTION IV.5 Withdrawals from the Equalization Account and Principal
Funding Account. On any Business Day prior to the Group Amortization Period on
which no Early Amortization Event or Unmatured Early Amortization Event with
respect to any Series in Group I exists, Servicer may instruct Trustee in
writing to withdraw funds from the Equalization Account and apply such funds as
Daily Group Collections, so long as the Net Invested Amount would not exceed the
Base Amount after giving effect to such transfer and application. On the first
day of any Series Amortization Period or Group Amortization Period, Servicer
shall instruct Trustee to withdraw the entire balance in the Equalization
Account and apply the same as Daily Group Collections on that day. On the first
day of the Group
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Amortization Period, Servicer shall instruct Trustee likewise to withdraw the
entire balance in the Principal Funding Account and apply the same as Daily
Group Collections on that day.
SECTION IV.6 Available Subordinated Amount. (a) If a Group Amortization
Period begins, Servicer shall promptly calculate the Deferred Portion as of the
Group Amortization Calculation Date and report such amount in the Daily Report
for the first day in the Group Amortization Period. The Available Subordinated
Amount as of the Group Amortization Calculation Date shall be equal to the
Deferred Portion as so calculated by Servicer. Servicer shall also calculate the
Available Subordinated Amount as of each Cut-Off Date falling in the Group
Amortization Period, such calculation to be reflected in the related Monthly
Report.
(b) The Available Subordinated Amount shall be determined as of the
Group Amortization Calculation Date. The Available Subordinated Amount, as of
any Cut-Off Date in the Group Amortization Period, shall equal the result of:
(i) the Available Subordinated Amount as of the preceding
Cut-Off Date (or as of the Group Amortization Calculation Date, in the
case of the first Cut-Off Date falling in the Group Amortization
Period); minus
(ii) the Investor Allocable Loss Amount with respect to the
ASA Measuring Period ending on that Cut-Off Date; minus
(iii) any Investor Allocable Dilution with respect to the ASA
Measuring Period ending on that Cut-Off Date; plus
(iv) subject to Sections 4.7 and 4.8, the Investor Allocable
Recoveries and Investor Allocable Dilution Adjustments with respect to
the ASA Measuring Period ending on that Cut-Off Date.
(c) Notwithstanding the foregoing, in no event shall the Available
Subordinated Amount at any time be less than zero or greater than the Available
Subordinated Amount as of the Group Amortization Calculation Date.
SECTION IV.7 Write-Offs and Recoveries. (a) In each Monthly Report
required to be delivered during the Group Amortization Period, Servicer shall
calculate the Investor Write-Offs and the Investor Allocable Recoveries for the
most recently ended ASA Measuring Period.
(b) If the Investor Write-Offs calculated in any Monthly Report exceed
zero, the Group Invested Amount shall be reduced by the amount of the Investor
Write-Offs with effect from the related Distribution Date. Any such reduction
shall be allocated to the Class Invested
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Amounts of all outstanding Junior Subordinated Classes (ratably in accordance
with such Class Invested Amounts) until all such Class Invested Amounts have
been reduced to zero. Any remaining reduction shall next be allocated to the
Class Invested Amounts of all outstanding Senior Subordinated Classes (ratably
in accordance with such Class Invested Amounts) until such Class Invested
Amounts have been reduced to zero. Finally, any remaining reduction shall be
allocated to the Class Invested Amounts of all outstanding Senior Classes
(ratably in accordance with such Class Invested Amounts).
(c) If the Group Invested Amount has been reduced on account of any
Investor Write-Offs, then any Investor Allocable Recoveries with respect to any
Calculation Period ending after the reduction takes place shall be applied to
reinstate the Group Invested Amount, to the extent of such prior reductions that
have not previously been reinstated, with effect from the related Distribution
Date. Any such reinstatement shall be allocated to the Class Invested Amounts of
all outstanding Senior Classes (ratably in accordance with such Class Invested
Amounts) until all prior reductions to such Class Invested Amounts on account of
Investor Write-Offs have been reinstated. Any remaining reinstatement shall next
be allocated to the Class Invested Amounts of all outstanding Senior
Subordinated Classes (ratably in accordance with such Class Invested Amounts)
until all prior reductions to such Class Invested Amounts on account of Investor
Write-Offs have been reinstated. Finally, any remaining reinstatement shall be
allocated to the Class Invested Amounts of all outstanding Junior Subordinated
Classes (ratably in accordance with such Class Invested Amounts).
(d) If Investor Allocable Recoveries are applied pursuant to subsection
(c) to reinstate the Group Invested Amount on any Distribution Date, then
Investor Allocable Recoveries shall be applied to increase the Available
Subordinated Amount on the same Distribution Date only to the extent of the
excess, if any, of the Investor Allocable Recoveries, minus the amount of
Investor Allocable Recoveries so applied.
(e) The outstanding principal amount of any Senior Class or
Subordinated Class shall be reduced by any reduction, and increased by any
reinstatement, of its Class Invested Amount pursuant to this Section 4.7 or
Section 4.8, in the amount of such reduction or reinstatement.
SECTION IV.8 Certain Dilution in a Group Amortization Period. (a) In
each Monthly Report required to be delivered during the Group Amortization
Period, Servicer shall calculate the Investor Allocable Dilution and the Series
Allocable Dilution Adjustments for the most recently ended ASA Measuring Period.
(b) If the Investor Allocable Dilution calculated in any Monthly Report
is greater than zero, and there are funds in the Holdback Account, then those
funds (up to an amount equal to the amount of the Investor Allocable Dilution),
shall be allocated (i) first, in
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accordance with priority first of the first paragraph of Section 4.4, (ii)
second, to the Principal Funding Account (in accordance with clauses (1), (2)
and (3) of priority second of the first paragraph of Section 4.4) until the Net
Invested Amount is reduced to zero and (iii) third, in accordance with
priorities third through fifth of the first paragraph of Section 4.4, in that
priority.
(c) If the Available Subordinated Amount or the Group Invested Amount
has been reduced on account of any Investor Allocable Dilution, then (i) any
Series Allocable Dilution Adjustments with respect to any Calculation Period
ending after the reduction takes place and (ii) any additional funds deposited
in the Holdback Account (the "Investor Allocable Dilution Adjustments") shall be
allocated (x) first, to reinstate the Group Invested Amount (with the same
allocation among Senior Classes, Senior Subordinated Classes and Junior
Subordinated Classes as is described in subsection 4.7(c)), and (y) second, to
reinstate the Available Subordinated Amount, in each case to the extent not
previously reinstated. Any amount so allocated on any day shall be allocated (i)
first, in accordance with priority first of the first paragraph of Section 4.4,
(ii) second, to the Principal Funding Account (in accordance with clauses (1),
(2) and (3) of priority second of the first paragraph of Section 4.4) until the
Net Invested Amount is reduced to zero and (iii) third, in accordance with
priorities third through fifth of the first paragraph of Section 4.4, in that
priority.
SECTION IV.9 Optional Early Pay Out. (a) On any Business Day falling in
the Revolving Period, Transferor may provide notice (an "Accumulation Notice")
to Trustee of its intention to accumulate funds to cause the Series 1996-2
Certificates to be prepaid in full, or, for the Class A Certificates, the Class
B Certificates or (subject to the last sentence of this subsection (a)) the
Class C Certificates to be prepaid in part, in a minimum amount of $10,000,000
or in higher integral multiples of $500,000. When amounts sufficient for such
prepayment have been accumulated, Transferor may provide notice to Trustee on
any Distribution Date falling in the Revolving Period (a "Prepayment Notice") of
the date, at least 30 days after the date of such Prepayment Notice, when the
prepayment shall occur. Trustee shall notify the affected Holders within five
Business Days of receiving such Prepayment Notice. No Class B Certificates may
be prepaid unless either (x) the Class A Certificates have been paid in full or
(y) after giving effect to such prepayment the Net Invested Amount would not
exceed the Base Amount. No Class C Certificates may be prepaid unless either (x)
the Class A Certificates and the Class B Certificates have been paid in full or
(y) after giving effect to such prepayment the Net Invested Amount would not
exceed the Base Amount. In the event of any partial prepayment of the Class A
Certificates, the Class B Certificates or the Class C Certificates, the Holders
of those Class A Certificates or Class B Certificates (as the case may be) will
be paid their pro rata share of such partial prepayment calculated in accordance
with the outstanding principal amount of each Class A Certificate, Class B
Certificate or Class C Certificate (as the case may be) as of the related Record
Date. The Class C Certificates may not be partially prepaid except as a result
of a prepayment of at least
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50% of the Class C Invested Amount as in effect on the date hereof.
(b) Commencing upon the date specified in the Accumulation Notice
(until an amount equal to the amount to be prepaid has been accumulated),
amounts shall be set aside for purposes of that prepayment in accordance with
Section 4.3, except that no such amounts shall be set aside if Transferor
notifies Trustee that Transferor intends to cause the Series 1996-2 Certificates
to be prepaid in full (but not in part) by causing the portion of the Series
Interest for Group I attributable to the Series 1996-2 Certificates to be
conveyed to one or more Persons (who may be the Holders of a new Series issued
substantially contemporaneously with such prepayment) for a cash purchase price
in an amount equal to the sum of (i) the Series 1996-2 Initial Invested Amount,
plus (ii) to the extent not available in the Carrying Cost Account, accrued and
unpaid interest on the Series 1996-2 Certificates to the day of such prepayment
(the "Refinancing Date"). No such conveyance shall, however, be permitted if as
a result thereof Transferor, Big Flower or any of their Affiliates would acquire
such portion of the Series Interest or the underlying Receivables. In the case
of any such conveyance, the purchase price shall be deposited in the Principal
Funding Account and shall be distributed to the Holders of the 1996-2
Certificates on the Refinancing Date in accordance with the terms of Section
5.2.
(c) Any prepayment pursuant to this Section 4.9 shall be made on the
later to occur of (i) the Distribution Date specified in the Prepayment Notice
and (ii) the Distribution Date on which sufficient funds have been accumulated
pursuant to Section 4.3 or 4.4 or obtained by a conveyance described in
subsection 4.9(b).
(d) No Class B Certificates (or Certificates in any other Senior
Subordinated Class) may be prepaid if any Senior Class is outstanding and, after
giving effect to that payment, the Net Invested Amount would exceed the Base
Amount.
(e) No Class C Certificates (or Certificates in any other Junior
Subordinated Class) may be prepaid if any Senior Subordinated Class is
outstanding and, after giving effect to that payment, the Net Invested Amount
would exceed the Base Amount.
SECTION IV.10 Reset of Benchmark Percentages and Special Concentration
Limits. Transferor may from time to time, by notice in any Monthly Report, (i)
increase or decrease any Class A Benchmark Percentage, Class B Benchmark
Percentage or Class C Benchmark Percentage used in the calculation of the Class
A Incremental Concentration Balance, Class B Incremental Concentration Balance,
or Class C Excess Concentration Balance, respectively, (ii) change the
percentage specified in the definition of Class C Special Concentration Limit,
and/or (iii) increase the number or type of Special Obligors, in each case if
the Modification Condition is satisfied. It is understood and agreed that the
actions described in the preceding sentence may change the calculation of other
amounts, including the Class A Concentration
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Factor, Class B Concentration Factor, Class C Concentration Factor, Class A
Minimum Required Reserve Ratio, Class B Minimum Required Reserve Ratio and the
Class C Minimum Required Reserve Ratio.
SECTION IV.11 Modification of Eligibility Criteria. Notwithstanding the
requirements in clause (b) of the definition of Eligible Receivable regarding
the shipment of goods and the requirements of clause (j) of such definition
regarding the absence of potential offsets, Receivables arising under Bill and
Hold Arrangements, Receivables owed by Obligors benefitting from Customer Supply
Arrangements and Receivables owed by Obligors that maintain a positive Postage
Balance may be Eligible Receivables, provided that such Receivables otherwise
satisfy the requirements of such definition.
SECTION IV.12 Calculations to be Without Duplication. (a) It is the
intent of the parties that the components of the Class A Subordination Deficit
be calculated without duplication. To facilitate such intent, the Servicer may
elect to identify each Class A Duplicate Obligor and shall take the following
additional steps with respect thereto (in the order indicated below):
First, determine an amount (the "Class A Step One Amount") equal to the
aggregate Unpaid Balance of Eligible Receivables owed by such Obligor that are
included in the Class A Executory Contract Reserve. If such Class A Step One
Amount exceeds zero, such Obligor shall be excluded from the calculation of the
Class A Bill and Hold Reserve, the Class A Incremental Concentration Balance,
the Class A Customer Supply Reserve and the Class A Postage Reserve.
Second, determine an amount (the "Class A Step Two Amount") equal to
the aggregate Unpaid Balance of Eligible Receivables owed by such Obligor that
are included in the Class A Incremental Concentration Balance, the Class B
Incremental Concentration Balance or the Class C Excess Concentration Balances
(after taking into account the First step above). For purposes of calculating
the Class A Bill and Hold Reserve, the Class A Customer Supply Reserve and the
Class A Postage Reserve, the aggregate Unpaid Balance of Eligible Receivables
owed by such Obligor shall be deemed to be reduced by the Class A Step Two
Amount.
Third, determine an amount (the "Class A Step Three Amount") equal to
the excess, if any, of (x) the sum of (i) such Obligor's BH Net Exposure (as
specified in the definition of Bill and Hold Exposure), plus (ii) such Obligor's
CS Net Exposure (as specified in the definition of Customer Supply Exposure),
plus (iii) such Obligor's PR Amount, over (y) the aggregate Unpaid Balance of
Eligible Receivables owed by such Obligor as of the most recent Cut-Off Date.
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Fourth, determine the sum (the "Class A Duplicate Amount") of the Class
A Step Three Amounts for all Class A Duplicate Obligors, which sum shall be
deducted in the calculation of the Class A Special Reserves.
(b) It is the intent of the parties that the Excess Bill and Hold
Reserve, the Excess Executory Contract Reserve, the Subordinate Class Customer
Supply Reserve, the Class B Incremental Concentration Balance and the Class C
Excess Concentration Balances be calculated without duplication. To facilitate
such intent, the Servicer may elect to identify each Subordinate Class Duplicate
Obligor and shall take the following additional steps with respect thereto (in
the order indicated below):
First, determine an amount (the "Subordinate Class Step One Amount")
equal to the aggregate Unpaid Balance of Eligible Receivables owed by such
Obligor that are included in the Class B Incremental Concentration Balance or
the Class C Excess Concentration Balances. For purposes of calculating the
Excess Bill and Hold Reserve, the Excess Executory Contract Reserve and the
Subordinate Class Customer Supply Reserve, the aggregate Unpaid Balance of
Receivables owed by such Obligor shall be deemed to be reduced by the
Subordinate Class Step One Amount.
Second, determine an amount (the "Subordinate Class Step Two Amount")
equal to the excess, if any, of (x) the sum of (i) such Obligor's BH Net
Exposure (as specified in the definition of Bill and Hold Exposure), plus (ii)
75% of such Obligor's CS Net Exposure (as specified in the definition of
Customer Supply Exposure), over (y) the aggregate Unpaid Balance of Eligible
Receivables owed by such Obligor as of its Calculation Date.
Third, determine an amount (the "Subordinate Class Duplicate Amount")
equal to the sum of the Subordinate Class Step Two Amounts for all Subordinate
Class Duplicate Obligors, which amount shall be added to the calculation of Net
Eligible Receivables and deducted in the calculations of Deferred Portion,
Required Receivables and Class A Coverage.
ARTICLE V DISTRIBUTIONS AND REPORTS
SECTION V.1 Distributions. On each Distribution Date and, with respect
to clause (b), on each Principal Payment Date, other than a Distribution Date
that is also a Refinancing Date, Trustee shall, in accordance with instructions
set out in the applicable Daily Report, distribute to the Holders, the following
amounts:
(a) accrued and unpaid interest on the Series 1996-2
Certificates and any other Investor Certificates in Group I (including
any additional interest payable to the Series 1996-2 Holders pursuant
to Section 4.1) to the extent funds are available for such payment in
the Carrying Cost Account (and in the event of any shortfall, such
interest
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shall be paid first to each Senior Class, ratably in accordance with
the total amount of interest owed to each Senior Class, second to each
Senior Subordinated Class, ratably in accordance with the total amount
of interest owed to each Senior Subordinated Class), and third to each
Junior Subordinated Class, ratably in accordance with the total amount
of interest owed to each Junior Subordinated Class;
(b) on each Principal Payment Date, all funds deposited in
each sub-account of the Principal Funding Account on or prior to the
most recent Cut-Off Date shall be distributed in reduction of the
related Series Invested Amounts; provided that (i) in the case of a
Principal Payment Date which is the date of a prepayment pursuant to
Section 4.9(a), all such amounts on deposit in the Series 1996-2
sub-account of the Principal Funding Account shall be paid to the
Holders of Class A Certificates, Class B Certificates and/or Class C
Certificates to be prepaid, as specified in the related Prepayment
Notice, in accordance with Section 4.9(a), (ii) in the case of any
other Principal Payment Date, all such amounts on deposit in the Series
1996-2 sub-account of the Principal Funding Account shall be paid to
the Holders of Class A Certificates until they have been paid or
provided for in full before any such amounts are paid to the Holders of
Class B Certificates or Class C Certificates, and any remaining amounts
on deposit in the Series 1996-2 sub-account of the Principal Funding
Account shall be paid to the Holders of Class B Certificates until they
have been paid or provided for in full before any such amounts are paid
to the Holders of Class C Certificates, (iii) no such amounts shall be
paid to the Holders of any Subordinated Class on any day if (A) any
Senior Class will remain outstanding after that date and (B) the Net
Invested Amount exceeds the Base Amount on that day (after giving
effect to all payments and allocations made pursuant to Section 4.3 on
that day), and (iv) no such amounts shall be paid to the Holders of any
Junior Subordinated Class on any day if (A) any Senior Subordinated
Class will remain outstanding after that date and (B) the Net Invested
Amount exceeds the Base Amount on that day (after giving effect to all
payments and allocations made pursuant to Section 4.3 on that day);
(c) if, on the Expected Final Payment Date for any Series in
Group I or any Distribution Date falling in a Group Amortization
Period, the funds on deposit in the Carrying Cost Account (less any
Servicing Fee payable on that day to anyone other than a Big Flower
Person) will be equal to or greater than the Net Invested Amount (after
giving effect to all distributions required by subsections (a) and
(b)), then an amount equal to such remaining Net Invested Amount shall
be withdrawn from the Carrying Cost Account and distributed in
reduction of the Net Invested Amount; and
(d) any Additional Amounts payable with respect to
Certificates in any Series in Group I to the extent that funds have
been allocated for those Additional Amounts pursuant to priority fourth
of Section 4.3 or priority third of Section 4.4 (and in the
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event of any shortfall, Additional Amounts shall be paid first to each
Senior Class, ratably in accordance with the total Additional Amounts
owed to each Senior Class, and second to each Senior Subordinated
Class, ratably in accordance with the total Additional Amounts owed to
each Senior Subordinated Class and third to each Junior Subordinated
Class, ratably in accordance with the total Additional Amounts owed to
each Junior Subordinated Class).
Unless otherwise specified in the applicable Supplement, such payments
in respect of Certificates in any Series in Group I shall be by wire transfer in
immediately available funds to an account specified in writing to the Trustee by
the Person whose name appears as the registered Holder of such Certificate on
the Certificate Register on the Record Date immediately prior to such payment,
or, if an account is not so specified by such Record Date, by check mailed to
such registered Holder at the address of such Person as it appears on such
Certificate Register.
On each Distribution Date, Trustee shall also, in accordance with
instructions set out in the applicable Daily Report, distribute the Servicing
Fee to Servicer to the extent that funds are available for that purpose in the
Carrying Cost Account.
On each Interest Payment Date (other than any Distribution Date, which
shall be governed by subsection (a) above), Trustee shall, in accordance with
instructions set out in the applicable Daily Report, distribute interest payable
on that date to the Holders of any Series in Group I, to the extent funds are
available for such payment in the Carrying Cost Account (and in the event of any
shortfall, any such interest shall be paid first to each Senior Class, ratably
in accordance with the total amount of interest owed to each Senior Class,
second to each Senior Subordinated Class, ratably in accordance with the total
amount of interest owed to each Senior Subordinated Class and third to each
Junior Subordinated Class, ratably in accordance with the total amount of
interest owed to each Junior Subordinated Class).
Servicer shall furnish instructions to the Trustee two (2) Business
Days prior to each Distribution Date setting forth the calculation of interest
for such Interest Period and the amounts to be distributed to the Holders.
SECTION V.2 Special Distributions on the Refinancing Date. On the
Refinancing Date, Trustee shall, in accordance with instructions set out in the
applicable Daily Report, distribute to the Holders of the affected Series in
Group I the following amounts:
(a) all interest accrued on the Certificates of the affected
Series in Group I to the Refinancing Date, to the extent funds are
available for such payment in the Carrying Cost Account or have been
deposited in the Principal Funding Account pursuant to Section 4.9;
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(b) all funds deposited in the Principal Funding Account
pursuant to Section 4.9, provided that (i) no such amounts shall be
paid to the Holders of the Class B Certificates or Class C Certificates
until the Holders of the Class A Certificates have been paid or
provided for in full, (ii) no such amounts shall be paid to the Holders
of any Subordinated Class on any day if (A) any Senior Class will
remain outstanding after that date and (B) the Net Invested Amount
exceeds the Base Amount on that day (after giving effect to all
payments and allocations made pursuant to Section 4.3 on that day),
(iii) no such amounts shall be paid to the Holders of the Class C
Certificates until the Holders of the Class B Certificates have been
paid or provided for in full, (iv) no such amounts shall be paid to the
Holders of any Junior Subordinated Class on any day if (A) any Senior
Subordinated Class will remain outstanding after that date and (B) the
Net Invested Amount exceeds the Base Amount on that day (after giving
effect to all payments and allocations made pursuant to Section 4.3 on
that day); and
(c) any Additional Amounts to the extent that funds for those
Additional Amounts have been allocated pursuant to priority fourth of
Section 4.3 or priority third of Section 4.4 or deposited in the
Principal Funding Account pursuant to Section 4.9.
SECTION V.3 Payments in Respect of Transferor Certificate. On each day
on which funds are allocated for distribution to Transferor in respect of the
Transferor Certificate pursuant to Sections 4.3 and 4.4 (and subject to the
terms of Section 4.4 relating to the Holdback Account), Trustee shall, in
accordance with instructions set out in the applicable Daily Report, distribute
to Transferor, all funds so allocated in accordance with those Sections. In
addition, after the Group Invested Amount has been repaid in full and all
interest and Additional Amounts owed to the Holders have been paid, any
additional funds on deposit in the Carrying Cost Account, the Equalization
Account or the Principal Funding Account shall similarly be paid to Transferor,
in respect of the Transferor Certificate.
SECTION V.4 Daily Reports and Monthly Reports. Each Daily Report and
Monthly Report shall be substantially in the applicable form set out in Exhibit
B or C or in such other form as may be required by any other Supplement relating
to a Series in Group I or otherwise satisfactory to Servicer and Trustee and
consistent with the terms of this Supplement, each such other Supplement and the
Pooling Agreement. Without limiting the foregoing, Servicer shall attach to each
Monthly Report a reconciliation of the Servicer's accounts receivable ledgers to
the information contained in such Monthly Report in such form as is satisfactory
to Servicer and Trustee and consistent with the terms of this Supplement. Copies
of each Monthly Report shall be provided free of charge by the Trustee to
purchasers of Series 1996-2 Certificates in connection with the initial
distribution thereof and may be obtained free of charge upon request from the
Trustee (and presentation of a confirmation evidencing the purchase of such
Certificates) by subsequent purchasers.
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SECTION V.5 Annual Tax Information. On or before January 31 of each
calendar year, beginning with calendar year 1997, Servicer, on behalf of
Trustee, shall furnish or cause to be furnished to each Person who at any time
during the preceding calendar year was a Holder the information for the
preceding calendar year, or the applicable portion thereof during which the
Person was a Holder, as is required to be provided by an issuer of indebtedness
under the Internal Revenue Code to the holders of the issuer's indebtedness and
such other customary information as is necessary to enable such Holders to
prepare their Federal income tax returns. Servicer's obligations under the
preceding sentence shall be deemed to have been satisfied to the extent that
substantially comparable information shall be provided by the Paying Agent to
the specified Persons pursuant to the Pooling Agreement or any requirements of
the Internal Revenue Code as from time to time in effect. Notwithstanding
anything to the contrary contained in this Agreement, Trustee shall, to the
extent required by applicable law, from time to time furnish to the appropriate
Persons a Form 1099-INT within the period required by applicable law.
SECTION V.6 Periodic Perfection Certificate. On or before December 1 of
each calendar year, beginning with calendar year 1996, Servicer, on behalf of
Trustee, shall furnish or cause to be furnished to Trustee and each Agent an
Officer's Certificate setting forth a list of all changes in (a) the name,
identity or corporate structure of Transferor or any Seller and (b) the chief
executive office of Transferor or any Seller (or in the place of business of
Transferor or any Seller that has only one place of business) that have taken
place since the date of the Officer's Certificate most recently delivered
pursuant to this Section 5.6 (or since the date hereof, in the case of the first
such Officer's Certificate to be delivered), or indicating that no such events
have taken place, and stating in each case what filings of UCC financing
statements, or amendments thereto, relating to the Transaction Documents have
been made in connection with each such event (identifying the date and filing
index numbers for each). Any financing statement identified in such an Officer's
Certificate delivered to Trustee shall be deemed to have been identified to
Trustee in writing for purposes of subsection 11.1(c)(v) of the Pooling
Agreement. If any such new UCC financing statements are filed, Servicer shall
cause Trustee to be named as secured party (in the case of any filing against
Transferor) or assignee of the secured party (in the case of any filing against
a Seller).
ARTICLE VI EARLY AMORTIZATION EVENTS
SECTION VI.1 Early Amortization Events. Each of the following shall
constitute an "Early Amortization Event":
(a) any of the following shall occur:
(i) failure on the part of Transferor or Servicer to
make any payment of
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the principal amount of any Series 1996-2 Certificate when
due, or to make any deposit required by the terms of any
Transaction Document within one Business Day after the date
the deposit is required to be made, or to make any payment of
any interest on the Series 1996-2 Certificates or any other
payment required by the terms of any Transaction Document on
or before three Business Days after the date such payment is
required to be made; or
(ii) failure on the part of Servicer to deliver a
Daily Report within the time period required under Section
3.5(c) of the Pooling Agreement and continuance of such
failure for five Business Days; provided that if the Servicer
shall have estimated the Base Amount in the Daily Report for
one or more days due to adverse circumstances beyond its
control (as described in, and subject to the limitations in,
such Section 3.5(c)), then the five day grace period specified
in this clause (ii) shall be reduced by the number of days on
which the Base Amount was estimated (or, if such number of
days exceeds five, shall be reduced to zero); or
(iii) failure on the part of the Servicer to deliver
a Monthly Report within the time required under Section 3.5(d)
of the Pooling Agreement and the applicable Supplement or PI
Agreement, and continuance of such failure for three Business
Days; or
(iv) failure on the part of Transferor, Guarantor,
Servicer or any Seller duly to observe or perform any covenant
or agreement set forth in any Transaction Document, which
failure continues unremedied for a period of 30 days after the
date on which written notice of the failure, requiring the
same to be remedied, shall have been given to Transferor by
Trustee or to Transferor and Trustee by any Holder; or
(v) Guarantor gives notice of termination of the
Seller Guaranty;
(b) any representation or warranty made by a Seller in
subsection 5.1(d), 5.1(k), 5.1(n), 5.1(o) or 5.1(r) of the Purchase
Agreement or by Transferor in subsection 2.3(a)(i), 2.3(a)(ii) or
7.1(i) of the Pooling Agreement shall prove to have been incorrect in
any material respect when made, and continues to be incorrect in any
material respect for a period of five Business Days after the date on
which written notice of the breach, requiring the same to be remedied,
shall have been given to Transferor by Trustee or to Transferor and
Trustee by any Series 1996-2 Holder, or any other representation or
warranty made by Transferor, Servicer, Guarantor or any Seller in any
Transaction Document shall prove to have been incorrect in any material
respect when made, and continues to be incorrect in any material
respect for a period
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of 30 days after the date on which written notice of the breach,
requiring the same to be remedied, shall have been given to Transferor
by Trustee, or Transferor and to Trustee by any Series 1996-2 Holder;
provided that a mistake in the representation of a Receivable as an
Eligible Receivable shall not constitute an Early Amortization Event
unless and until the applicable Seller has failed to make the cash
payments (if any) owed under Section 3.1 of the Purchase Agreement in
respect of the misrepresentation (it being understood that certain of
such mistakes may result in a non-cash adjustment under the Purchase
Agreement);
(c) a Bankruptcy Event shall occur with respect to Transferor,
Servicer, Guarantor or any Seller, or Transferor shall become unable,
for any reason, to transfer Receivables or other Transferred Assets to
the Trust in accordance with the provisions of the Purchase Agreement
and the Pooling Agreement; provided that if, at the time any event that
would, with the passage of time, become a Bankruptcy Event occurs as a
result of a bankruptcy proceeding being filed against Transferor or any
Seller, then, on and after the day on which the bankruptcy proceeding
is filed until the earlier to occur of the dismissal of the proceeding
and the commencement of the Early Amortization Period, Transferor shall
not purchase Receivables and Related Assets from the affected Seller
or, if Transferor is the subject of the proceeding, transfer
Receivables and Related Transferred Assets to the Trust;
(d) the Trust or Transferor shall be required to be registered
as an "investment company" under and within the meaning of the
Investment Company Act of 1940, as amended;
(e) the Net Invested Amount exceeds the Base Amount for a
period of five or more consecutive Business Days;
(f) a Servicer Default shall have occurred and shall not have
been remedied;
(g) Treasure Chest shall cease to own, directly or indirectly,
100% of the issued and outstanding capital stock of Transferor;
(h) the Internal Revenue Service or the PBGC files one or more
Tax or ERISA Liens against the assets of Transferor or any Seller
(including Receivables);
(i) the cessation of, or the failure to create, a valid
first-priority perfected ownership or security interest in favor of
Trustee in the Receivables (subject to Permitted Adverse Claims and
Special New Jersey EPA Claims) or the rights of Transferor under the
Purchase Agreement;
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(j) the Series 1996-2 Invested Amount is not paid in full on
the Expected Final Payment Date;
(k) any foreclosure or similar proceeding in respect of any
adverse claim on any Buyer Note or the Transferor's common stock shall
have been commenced; or title to any Buyer Note or Transferor's common
stock shall pass to the holders of such adverse claim, it being
understood that the grant of a security interest in the stock of
Transferor or a Buyer Note to a creditor of a Seller shall not be an
Early Amortization Event;
(l) the Transferor Net Worth shall be less than 18% of the
aggregate Unpaid Balance of the Receivables at any time and such
condition continues for five consecutive Business Days; or
(m) the Intercreditor Provisions shall be amended, waived,
modified or breached without the prior written consent of the Required
Series Holders of Series 1996-2.
SECTION VI.2 Early Amortization Period. Upon the occurrence and during
the continuance of any Early Amortization Event described in subsection 6.1(c),
(d), (i), (j), (k) or (l), an Early Amortization Period shall commence without
any notice or other action on the part of Trustee or the Series 1996-2 Holders,
immediately upon the occurrence of such Early Amortization Event. On the tenth
day after Transferor receives notice or otherwise becomes aware of the
occurrence of any Early Amortization Event described in subsection 6.1(a), (e)
or (h) an Early Amortization Period shall commence without any notice or other
action on the part of Trustee or the Series 1996-2 Holders, unless waived by the
Required Series Holders of Series 1996-2 or, in the case of subsection 6.1(a) or
(h), is otherwise cured prior to such tenth day. Upon the occurrence and
continuance of any event described in any subsection above (including subsection
6.1(a), (c), (d), (e), (h), (i), (j), (k) or (l)), after the applicable grace
period, if any, set forth in such subsection, if so directed by the Required
Series Holders of Series 1996-2, Trustee shall by notice then given in writing
to Transferor and Servicer, declare that an Early Amortization Period has
commenced as of the date of Transferor's receipt of the notice.
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ARTICLE VII OPTIONAL REDEMPTION; TERMINATION
SECTION VII.1 Optional Redemption of Investor Interests. On any
Distribution Date occurring during an Early Amortization Period with respect to
the Series 1996-2 Certificates on or after the date that the aggregate Unpaid
Balance of the Receivables then included in the Receivables Pool is reduced to
ten percent or less of the aggregate Unpaid Balance of the Receivables included
in the Receivables Pool as of the commencement of such Early Amortization
Period, Transferor shall have the option to redeem the Series 1996-2 Series
Interest. The purchase price will be an amount equal to the Series 1996-2
Invested Amount plus accrued and unpaid interest (and accrued and unpaid
interest with respect to interest that was due but not paid on any prior
Distribution Date) through the day preceding the Distribution Date at the
applicable interest rate (as specified in Section 4.1) plus the aggregate amount
by which the Series 1996-2 Invested Amount has been reduced on account of
Investor Write-Offs and Investor Allocable Dilution (and not subsequently
reinstated). Upon the tender of the outstanding Certificates of Series 1996-2 by
the Holders thereof, Trustee shall distribute the amounts, together with all
funds on deposit in the Principal Funding Account that are allocable to the
Series 1996-2 Certificates, to the Holders of Series 1996-2 Certificates on the
next Distribution Date in repayment of the principal amount and accrued and
unpaid interest owing to such Holders. Following any redemption, the Holders of
the Series 1996-2 Certificates shall have no further rights with respect to the
Receivables. In the event that Transferor fails for any reason to deposit in the
Principal Funding Account the aggregate purchase price for the Series 1996-2
Certificates, payments shall continue to be made to the Holders of the Series
1996-2 Certificates in accordance with the terms of the Pooling Agreement and
this Supplement. Notwithstanding the foregoing, no redemption pursuant to this
Article VII shall occur if the Series Invested Amount attributable to any Senior
Class or Senior Subordinated Class of any Series in Group I shall have been
reduced on account of Investor Write-Offs and/or Investor Allocable Dilution
(and not subsequently reinstated) unless all such reductions are reinstated
prior to such redemption.
SECTION VII.2 Termination. Notwithstanding Section 12.1 of the Pooling
Agreement, the last payment of the principal of and interest on the Certificates
of any Series in Group I shall be due and payable no later than the Final
Scheduled Payment Date for that Series. If, on the Distribution Date immediately
prior to the Final Scheduled Payment Date for any such Series, Servicer
determines that the Series Invested Amount for the Series on the applicable
Final Scheduled Payment Date (after giving effect to all changes therein on such
date) will exceed zero, Servicer shall solicit bids for the sale of interests in
the Receivables in an amount equal to the product of (i) the outstanding balance
of Receivables, times (ii) the Series Collection Allocation Percentage, times
(iii) the Investor Allocation Percentage, times (iv) a fraction the numerator of
which is the applicable Series Invested Amount and the denominator of which is
the Group Invested Amount. Transferor shall be entitled to participate
55
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in and to receive notice of each bid submitted in connection with the bidding
process. Upon the expiration of the period, Servicer shall determine (x) the
highest bid for such Receivables and (y) the Available Final Distribution Amount
for the Series. Servicer shall sell the interests in the Transferred Assets on
the Final Scheduled Payment Date for the applicable Series to the bidder with
the Highest Bid and shall deposit the proceeds of such sale in the Master
Collection Account for allocation to the Holders of the applicable Series. The
priorities specified in Section 5.1 shall apply to any such distribution.
ARTICLE VIII MISCELLANEOUS
SECTION VIII.1 Governing Law. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO CONFLICT OF LAWS PRINCIPLES.
SECTION VIII.2 Counterparts. This Supplement may be executed in any
number of counterparts and by the different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original,
and all of which together shall constitute one and the same instrument.
SECTION VIII.3 Severability of Provisions. If any one or more of the
provisions or terms of this Supplement shall for any reason whatsoever be held
invalid, then the unenforceable provision(s) or term(s) shall be deemed
severable from the remaining provisions or terms of this Supplement and shall in
no way affect the validity or enforceability of the other provisions or terms of
this Supplement.
SECTION VIII.4 Amendment, Waiver, Etc.
(a) In the event that federal legislation creates a new type
of entity for federal income tax purposes, the "financial asset
securitization investment trust" or other similar entity (a "FASIT"),
Transferor may amend this Supplement in order to effect a FASIT
election for all or a portion of the Trust or the Certificates;
provided, that Transferor delivers an Opinion of Counsel to the Trustee
to the effect that such election will not adversely affect the Federal
or Subject State income tax treatment of any outstanding Series of
Investor Certificates or the taxability of the Trust under Federal or
Subject State income tax laws.
(b) This Supplement may be amended, subject to Section 13.1 of
the Pooling Agreement, from time to time by Servicer, Transferor and
Trustee by a written instrument signed by each of them, without the
consent of any Holder; provided that such action shall not adversely
affect in any material respect the interests of any Holder; and
provided further that for purposes of this Supplement, any decrease in
an
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applicable rate of interest on any Series 1996-2 Certificate or any
postponement of the applicable Expected Final Payment Date for Series
1996-2 shall be deemed to materially adversely affect the interests of
a Holder of a Series 1996-2 Certificate. This Supplement also may be
amended, modified or waived from time to time by Servicer, Transferor
and Trustee with the consent of the Required Series Holders of each
Series in Group I to the extent permitted by Section 13.1 of the
Pooling Agreement, and the terms of that section shall apply to any
such amendment, modification or waiver.
SECTION VIII.5 Trustee. Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of this Supplement
or for or in respect of the recitals contained herein, all of which recitals are
made solely by Transferor and Servicer.
SECTION VIII.6 Instructions in Writing. All instructions given by
Servicer to Trustee pursuant to this Supplement shall be in writing, and may be
included in a Daily Report or Monthly Report.
SECTION VIII.7 Rule 144A. So long as any of the Series 1996-2
Certificates are "restricted securities" within the meaning of Rule 144(a)(3)
under the Securities Act, Transferor shall, unless it becomes subject to and
complies with the reporting requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, or rule 12g3-2(b) thereunder,
provide to any Holder of such restricted securities, or to any prospective
purchaser of such restricted securities designated by a Holder, upon the request
of such Holder or prospective purchaser, any information required to be provided
by Rule 144A(d)(4) under the Act.
SECTION VIII.8 Supplemental Ratings Requirement. So long as any of the
Series 1996-2 Certificates are outstanding, if any provision of the Purchase
Agreement, the Pooling Agreement or this Supplement requires a Person or
investment to have a certain rating from S&P, and such Person or investment is
also rated by DCR, such provision shall be read to also require a rating from
DCR that is equivalent to the required rating from S&P.
SECTION VIII.9 Tax Characterization of the 1996-2 Certificates. It is
the intention of the parties hereto that the Series 1996-2 Certificates be
treated for all tax purposes as indebtedness. In the event that any of the
Series 1996-2 Certificates are not so treated, it is the intention of the
parties that such Certificates be treated as an interest in a partnership that
owns the Transferred Assets. In the event that any of the Series 1996-2
Certificates are treated as an interest in a partnership, it is the intention of
the parties that interest payable on such Certificates be treated as guaranteed
payment and, if for any reason it is not so treated, that the holders of such
Certificates be specially allocated gross interest income equal to the interest
accrued during each Interest Period on such Certificates.
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SECTION VIII.10 Transfer Restrictions and Procedures.
(a) Each Series 1996-2 Certificate shall be issued as a
Definitive Certificate, provided that Class A Certificates and Class B
Certificates offered or sold pursuant to Regulation S will be
represented initially by two separate Regulation S Temporary Book-Entry
Certificates (each a "Series 1996-2 Regulation S Temporary Book-Entry
Certificate"). The Series 1996-2 Regulation S Temporary Book-Entry
Certificates shall be exchanged on the later of (i) 40 days after the
later of (A) the Closing Date and (B) the completion of the
distribution of the Series 1996-2 Certificates, as certified by the
initial purchasers of such Certificates and (ii) the date on which the
requisite certifications are due to and provided to the Trustee (the
later of clauses (i) and (ii) is referred to as the "Series 1996-2
Exchange Date") for permanent Book-Entry Certificates (the "Series
1996-2 Unrestricted Book-Entry Certificates," and together with the
Series 1996-2 Regulation S Temporary Book-Entry Certificates, the
"Series 1996-2 Regulation S Book-Entry Certificates"). The Series
1996-2 Regulation S Temporary Book-Entry Certificates shall be issued
in registered form, without coupons, and deposited upon the order of
Transferor with the Trustee as custodian for, and registered in the
name of Cede & Co., as nominee for The Depository Trust Company
("DTC"), for credit to the account of the depositaries for Euroclear
and Cedel, which depositaries shall, on behalf of Euroclear and Cedel,
hold the interests on behalf of Member Organizations, which have rights
in respect of the Series 1996-2 Certificates credited to their
securities accounts with Euroclear or Cedel from time to time. DTC
shall be the Clearing Agency for the Series 1996-2 Certificates.
(b) (i) A Certificate Owner holding an interest in a Series
1996-2 Regulation S Temporary Book-Entry Certificate may receive
payments in respect of the Class A Certificates or Class B
Certificates, as applicable, on the Series 1996-2 Regulation S
Temporary Book-Entry Certificate only after delivery to Euroclear or
Cedel, as the case may be, of a written certification substantially in
the form of a certification in the form set forth in Exhibit E, and
upon delivery by Euroclear or Cedel, as the case may be, to the
Transfer Agent and Registrar of a certification or certifications
substantially in the form set forth in Exhibit F. The delivery by a
Certificate Owner of the certification referred to above shall
constitute its irrevocable instruction to Euroclear or Cedel, as the
case may be, to arrange for the exchange of the Certificate Owner's
interest in the applicable Series 1996-2 Regulation S Temporary
Book-Entry Certificate for a beneficial interest in the applicable
Series 1996-2 Unrestricted Book-Entry Certificate after the Series
1996-2 Exchange Date in accordance with clause (ii) below.
(ii) After (i) the Series 1996-2 Exchange Date and (ii)
receipt by the Transfer Agent and Registrar of written instructions
from Euroclear or Cedel, as the case may be, directing the Transfer
Agent and Registrar to credit or cause to be credited to either
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Euroclear's or Cedel's, as the case may be, depositary's account a
beneficial interest in the applicable Series 1996-2 Unrestricted
Book-Entry Certificate in a principal amount not greater than that of
the beneficial interest in the applicable Series 1996-2 Regulation S
Temporary Book-Entry Certificate, the Transfer Agent and Registrar
shall instruct DTC to reduce the principal amount of the applicable
Series 1996-2 Regulation S Temporary Book-Entry Certificate and
increase the principal amount of the applicable Series 1996-2
Unrestricted Book-Entry Certificate, by the principal amount of the
beneficial interest in such Series 1996-2 Regulation S Temporary
Book-Entry Certificate to be so transferred, and to credit or cause to
be credited to the account of a Clearing Agency Participant with DTC a
beneficial interest in such Series 1996-2 Unrestricted Book-Entry
Certificate having a principal amount of the Series 1996-2 Regulation S
Temporary Book-Entry Certificate that was reduced upon the transfer.
(iii) Upon return of the entire principal amount of a Series
1996-2 Regulation S Temporary Book-Entry Certificate to Trustee in
exchange for beneficial interests in a Series 1996-2 Unrestricted
Book-Entry Certificate, Trustee shall cancel such Series 1996-2
Regulation S Temporary Book-Entry Certificate by perforation and shall
forthwith destroy it.
(c) Holders and Certificate Owners of any Class A Certificates
or Class B Certificates shall not (x) transfer, assign or otherwise
dispose of any such Certificate represented by a Definitive Certificate
or (y) transfer, assign or otherwise dispose of any such Certificate
represented by a Series 1996-2 Regulation S Book-Entry Certificate in
exchange for a Definitive Certificate unless, in either case (i) such
transfer is to be made to a Person which such Holder or Certificate
Owner reasonably believes is a "qualified institutional buyer" (as
defined in Rule 144A under the Securities Act) that is purchasing (1)
for its own account or (2) for the account of a "qualified
institutional buyer" (as so defined) that is, in either case, aware
that such disposition is being made in reliance on Rule 144A under the
Securities Act, (ii) such transfer is to be made to a Person which has
provided the Trustee, Transferor and the Holder or Certificate Owner of
such Certificate with a certificate to the effect that such Person is
an "accredited investor" within the meaning of Rule 501(a)(1), (2), (3)
or (7) of the Securities Act and such Holder or Certificate Owner has
caused its prospective transferee to deliver to Transferor, Trustee and
such Holder or Certificate Owner an opinion of counsel in a form
satisfactory to the Trustee and Transferor, or (iii) such transfer is
to be made in the United States in compliance with Rule 144 of the
Securities Act if available, upon delivery of an opinion of counsel in
a form satisfactory to the Trustee, Transferor and such Holder or
Certificate Owner (with respect to clauses (i), (ii) and (iii) above,
if the transferee is not an employee benefit plan, retirement
arrangement, individual retirement account or Keogh plan subject to
either Title I of ERISA or Section 4975 of the Internal Revenue Code
(each, a "Plan") or an
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entity using "plan assets" of a Plan to purchase a Certificate), (iv)
such transfer is to be made outside the United States to a Person which
has provided the Trustee, Transferor and the Holder or Certificate
Owner of such Certificate with a certificate to the effect that such
Person is not a "U.S. person" (as defined in Rule 901 of Regulation S
under the Securities Act), or (v) such transfer is to be made to the
Transferor.
(d) If a Series 1996-2 Certificate represented by a Series
1996-2 Regulation S Book-Entry Certificate is transferred or exchanged
for a Series 1996-2 Certificate represented by a Definitive
Certificate, such transfer or exchange shall be made only in accordance
with the following procedures.
(i) For transfer of a Series 1996-2 Certificate represented by
a Definitive Certificate in exchange for an interest in a Series 1996-2
Regulation S Book-Entry Certificate, the Holder of the Definitive
Certificate shall, subject to the rules and procedures of DTC,
surrender such Definitive Certificate to the Trustee at the Corporate
Trust Office, together with irrevocable directions for the Trustee to
exchange or cause the exchange of such Definitive Certificate for an
equivalent beneficial interest in a Series 1996-2 Regulation S
Book-Entry Certificate held by or on behalf of DTC, by credit to the
account of a Clearing Agency Participant specified in such directions.
Upon receipt by the Trustee of such Definitive Certificate, together
with such irrevocable directions and provided that all conditions
specified in Section 8.10(c)(iv) have been satisfied as to such
transfer, the Trustee shall instruct DTC to increase the principal
amount of the applicable Series 1996-2 Regulation S Book-Entry
Certificate by the aggregate principal amount of the Definitive
Certificate so surrendered, and to credit or cause to be credited to
the account of the Clearing Agency Participant specified in such
directions a beneficial interest in such Series 1996-2 Regulation S
Book-Entry Certificate equal to the principal amount of such Definitive
Certificate.
(ii) For transfer of an interest in the applicable Series
1996-2 Regulation S Book-Entry Certificate in exchange for a Definitive
Certificate, DTC shall, subject to and in accordance with the rules and
procedures of DTC, give irrevocable directions for the Trustee (x) to
exchange or cause the exchange of such interest for one or more
Definitive Certificates in an aggregate principal amount equal to the
principal amount of such interest, (y) to issue one or more Definitive
Certificates in an amount equal to the beneficial interest in the
Series 1996-2 Regulation S Book-Entry Certificate to be exchanged,
registered in the name or names specified in such directions and (z) to
deliver such Definitive Certificates upon issuance to such address or
addresses specified in such directions. Upon receipt by the Trustee of
such directions and provided that all conditions specified in Section
8.10(c)(i), (ii) or (iii) have been satisfied as to such transfer, the
Trustee shall instruct DTC to reduce a Series 1996-2
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Regulation S Book-Entry Certificate by the aggregate principal amount
of the interest in the applicable Series 1996-2 Regulation S Book-Entry
Certificate to be so exchanged, and Transferor shall execute and the
Trustee shall authenticate and deliver, to the address or as otherwise
specified in such directions, Definitive Certificates in an aggregate
principal amount equal to the beneficial interest in the applicable
Series 1996-2 Regulation S Book-Entry Certificate to be so exchanged.
Notwithstanding the foregoing, no transfer of an interest in any Series
1996-2 Regulation S Book-Entry Certificate in exchange for a Definitive
Certificate shall be permitted prior to the Series 1996-2 Exchange
Date.
(e) Notwithstanding Section 6.3 of the Pooling Agreement,
Transferor shall not execute, and the Transfer Agent and Registrar
shall not register the transfer of, any Class C Certificate (i) having
a Class C Invested Amount of less than 2.1% of the sum of the aggregate
Series Invested Amounts allocable to all outstanding Subject
Instruments and the invested amount of the Transferor Interest at such
time and, if Transferor so specifies, Enhancements, or (ii) if after
giving effect to the execution or transfer of such Class C Certificate,
there would be more than 20 Private Holders of Subject Instruments
(unless such Class C Certificate is transferred directly by a
Structured Lender to a Permitted Transferee). No transfer, assignment
or other conveyance of, or sale of a participation interest in, a Class
C Certificate (other than by a Structured Lender to a Permitted
Transferee) shall be permitted unless the Transfer Agent and Registrar
is permitted to register the same in accordance with the immediately
preceding sentence. Additionally, no Class C Certificate, or portion
thereof, shall be transferred (x) to any Person that is considered a
partnership, Subchapter S corporation or grantor trust for federal
income tax purposes or (y) on or through an "established securities
market" within the meaning of Section 7704(b)(1) of the Internal
Revenue Code and any proposed, temporary or final treasury regulation
thereunder, including an over-the-counter-market or an interdealer
quotation system that regularly disseminates firm buy or sell
quotations. Any attempted transfer, assignment, conveyance,
participation or subdivision in contravention of the preceding
restrictions, as reasonably determined by Transferor, shall be void ab
initio and the purported transferor, seller or subdivider of such Class
C Certificate shall be construed to be treated as the Certificateholder
of any such Class C Certificate for all purposes of the Pooling
Agreement and this Supplement.
(f) Notwithstanding Section 6.3 of the Pooling Agreement, no
Opinion of Counsel shall be required to be delivered with respect to
any transfer of a Class C Certificate to a Permitted Transferee.
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IN WITNESS WHEREOF, Transferor, Servicer and Trustee have caused this
Supplement to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
BFP RECEIVABLES CORPORATION, as
Transferor
By: /s/ Mark Angelson
---------------------------------
Name: Mark Angelson
---------------------------------
Title: Secretary
---------------------------------
BIG FLOWER PRESS HOLDINGS, INC., as
Servicer
By: /s/ Mark Angelson
---------------------------------
Name: Mark Angelson
---------------------------------
Title: Executive Vice President
---------------------------------
MANUFACTURERS AND TRADERS TRUST
COMPANY, as Trustee
By: /s/ Russell T. Whitley
---------------------------------
Name: Russell T. Whitley
---------------------------------
Title: Assistant Vice President
---------------------------------
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EXHIBIT A - Part 1
to the Series 1996-2 Supplement
FORM OF CLASS A, SERIES 1996-2 CERTIFICATE
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR UNDER THE SECURITIES OR BLUE SKY LAWS OF ANY
STATE IN THE UNITED STATES, AND MAY NOT BE OFFERED OR SOLD, EXCEPT PURSUANT TO
AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS. THIS
CERTIFICATE WILL NOT BE ACCEPTED FOR REGISTRATION OF TRANSFER EXCEPT UPON
PRESENTATION OF EVIDENCE SATISFACTORY TO THE REGISTRAR AND TRANSFER AGENT THAT
THE RESTRICTIONS ON TRANSFER SET FORTH IN THE POOLING AGREEMENT (AS DEFINED
BELOW) HAVE BEEN COMPLIED WITH.
[FOR REGULATION S BOOK-ENTRY CERTIFICATES ONLY.] [UNLESS THIS CERTIFICATE IS
PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE
TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS
IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND
ANY PAYMENT HEREON IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS BOOK-ENTRY CERTIFICATE SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO THE DEPOSITORY TRUST COMPANY, OR A NOMINEE THEREOF, NOMINEES
OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND
TRANSFERS OF PORTIONS OF THIS BOOK-ENTRY CERTIFICATE SHALL BE LIMITED TO
TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS REFERRED TO BELOW.]
A-1-1
<PAGE>
THE CERTIFICATEHOLDER HEREOF, BY ACCEPTING AND HOLDING THIS CERTIFICATE IS
DEEMED TO HAVE REPRESENTED AND WARRANTED THAT IT IS NOT (i) AN EMPLOYEE BENEFIT
PLAN (AS DEFINED IN SECTION 3(3) OF ERISA) THAT IS SUBJECT TO THE PROVISIONS OF
TITLE I OF ERISA, (ii) A PLAN (AS DESCRIBED IN SECTION 4975(e)(1) OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED), (iii) AN ENTITY WHOSE UNDERLYING
ASSETS INCLUDE "PLAN ASSETS" BY REASON OF A PLAN'S INVESTMENT IN THE ENTITY
(INCLUDING AN INSURANCE COMPANY GENERAL ACCOUNT THAT IS TREATED AS INCLUDING
"PLAN ASSETS") OR (iv) ACQUIRING THIS CERTIFICATE ON BEHALF OF, OR WITH, ANY
"PLAN ASSETS" OF ANY SUCH EMPLOYEE BENEFIT PLAN, PLAN OR ENTITY REFERRED TO
ABOVE.
BIG FLOWER TRADE RECEIVABLES BACKED CERTIFICATES
CLASS A, SERIES 1996-2 CERTIFICATE
CUSIP 144A:_________________________ Maximum Principal Amounts
ISIN Regulation S:__________________ $________________
CUSIP Regulation S:_________________
First Distribution Date:____________
No. R-[_______]
THIS CERTIFIES THAT _________________ is the registered owner of a
nonassessable, fully-paid, fractional undivided interest in the Big Flower
Receivables Master Trust (the "Trust") that was created pursuant to (a) the
Pooling and Servicing Agreement, dated as of March 19, 1996 (as the same may be
amended, supplemented or otherwise modified from time to time, the "Pooling
Agreement"), among BFP RECEIVABLES CORPORATION, a Delaware corporation,
("Transferor"), BIG FLOWER PRESS HOLDINGS, INC., a Delaware corporation,
("Servicer"), and MANUFACTURERS AND TRADERS TRUST COMPANY, a New York banking
corporation, as trustee (together with its successors and assigns in such
capacity, "Trustee") and (b) the Supplement dated as of October 4, 1996 relating
to the Series 1996-2 Certificates (the "Supplement"). This Certificate is one of
the duly authorized Class A, Series 1996-2 Certificates designated and issued
under the Pooling Agreement and the Supplement. Except as otherwise defined
herein, capitalized
A-1-2
<PAGE>
terms have the meanings that the Supplement and the Pooling Agreement assign to
them. This Certificate is subject to the terms, provisions and conditions of,
and is entitled to the benefits afforded by, the Pooling Agreement and the
Supplement, to which terms, provisions and conditions the Holder of this
Certificate by virtue of the acceptance hereof assents and by which the Holder
is bound.
The Class A, Series 1996-2 Certificates are a Senior Class and are
therefore entitled to share in the benefits of the subordination of the Class B,
Series 1996-2 Certificates, the Class C, Series 1996-2 Certificates and
Certificates in any other Subordinated Class that may be issued from time to
time to the extent set forth in the Supplement.
Unless the certificate of authentication hereon shall have been
executed by or on behalf of Trustee by the manual signature of a duly authorized
signatory, this Certificate shall not entitle the Holder hereof to any benefit
under the Transaction Documents or be valid for any purpose.
This Certificate does not represent a recourse obligation of, or an
interest in, Transferor, any Seller, Servicer, Trustee or any Affiliate of any
of them. This Certificate is limited in right of payment to the Transferred
Assets.
By its acceptance of this Certificate, each Holder hereof (a)
acknowledges that it is the intent of Transferor, and agrees that it is the
intent of the Holder that, for Federal, state and local income and franchise tax
purposes only, the Class A, Series 1996-2 Certificates (including this
Certificate) will be treated as evidence of indebtedness secured by the
Transferred Assets and the Trust not be characterized as an association taxable
as a corporation, (b) agrees to treat this Certificate for Federal, state and
local income and franchise tax purposes as indebtedness and (c) agrees that the
provisions of the Transaction Documents shall be construed to further these
intentions of the parties.
This Certificate shall be construed in accordance with the laws of the
State of New York, without regard to its conflict of laws principles, and all
obligations, rights and remedies under or arising in connection with this
Certificate shall be determined in accordance with the laws of the State of New
York.
A-1-3
<PAGE>
IN WITNESS WHEREOF, Transferor has caused this Certificate to be
executed by its officer thereunto duly authorized.
BFP RECEIVABLES CORPORATION
By: ________________________________
Title: ___________________________
A-1-4
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Class A, Series 1996-2 Certificates referred to in
the Pooling Agreement, as supplemented by the Supplement.
MANUFACTURERS AND TRADERS TRUST
COMPANY, as Trustee
By: ________________________________________
Title: ___________________________________
Dated: ____________, 1996
<PAGE>
EXHIBIT A - Part 2
to the Series 1996-2 Supplement
FORM OF CLASS B, SERIES 1996-2 CERTIFICATE
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR UNDER THE SECURITIES OR BLUE SKY LAWS OF ANY
STATE IN THE UNITED STATES, AND MAY NOT BE OFFERED OR SOLD, EXCEPT PURSUANT TO
AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS. THIS
CERTIFICATE WILL NOT BE ACCEPTED FOR REGISTRATION OF TRANSFER EXCEPT UPON
PRESENTATION OF EVIDENCE SATISFACTORY TO THE REGISTRAR AND TRANSFER AGENT THAT
THE RESTRICTIONS ON TRANSFER SET FORTH IN THE POOLING AGREEMENT (AS DEFINED
BELOW) HAVE BEEN COMPLIED WITH.
[FOR REGULATION S BOOK-ENTRY CERTIFICATES ONLY.] [UNLESS THIS CERTIFICATE IS
PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE
TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS
IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND
ANY PAYMENT HEREON IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS BOOK-ENTRY CERTIFICATE SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO THE DEPOSITORY TRUST COMPANY, OR A NOMINEE THEREOF, NOMINEES
OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND
TRANSFERS OF PORTIONS OF THIS BOOK-ENTRY CERTIFICATE SHALL BE LIMITED TO
TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS REFERRED TO BELOW.]
A-2-1
<PAGE>
THE CERTIFICATEHOLDER HEREOF, BY ACCEPTING AND HOLDING THIS CERTIFICATE IS
DEEMED TO HAVE REPRESENTED AND WARRANTED THAT IT IS NOT (i) AN EMPLOYEE BENEFIT
PLAN (AS DEFINED IN SECTION 3(3) OF ERISA) THAT IS SUBJECT TO THE PROVISIONS OF
TITLE I OF ERISA, (ii) A PLAN (AS DESCRIBED IN SECTION 4975(e)(1) OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED), (iii) AN ENTITY WHOSE UNDERLYING
ASSETS INCLUDE "PLAN ASSETS" BY REASON OF A PLAN'S INVESTMENT IN THE ENTITY
(INCLUDING AN INSURANCE COMPANY GENERAL ACCOUNT THAT IS TREATED AS INCLUDING
"PLAN ASSETS") OR (iv) ACQUIRING THIS CERTIFICATE ON BEHALF OF, OR WITH, ANY
"PLAN ASSETS" OF ANY SUCH EMPLOYEE BENEFIT PLAN, PLAN OR ENTITY REFERRED TO
ABOVE.
BIG FLOWER TRADE RECEIVABLES BACKED CERTIFICATES
CLASS B, SERIES 1996-2 CERTIFICATE
CUSIP 144A:_________________________ $________________
ISIN Regulation S:__________________
CUSIP Regulation S:_________________
First Distribution Date:____________
No. R-[_______]
THIS CERTIFIES THAT _________________ is the registered owner of a
nonassessable, fully-paid, fractional undivided interest in the Big Flower
Receivables Master Trust (the "Trust") that was created pursuant to (a) the
Pooling and Servicing Agreement, dated as of March 19, 1996 (as the same may be
amended, supplemented or otherwise modified from time to time, the "Pooling
Agreement"), among BFP RECEIVABLES CORPORATION, a Delaware corporation,
("Transferor"), BIG FLOWER PRESS HOLDINGS, INC., a Delaware corporation,
("Servicer"), and MANUFACTURERS AND TRADERS TRUST COMPANY, a New York banking
corporation, as trustee (together with its successors and assigns in such
capacity, "Trustee") and (b) the
A-2-2
<PAGE>
Supplement dated as of October 4, 1996 relating to the Series 1996-2
Certificates (the "Supplement"). This Certificate is one of the duly authorized
Class B, Series 1996-2 Certificates designated and issued under the Pooling
Agreement and the Supplement. Except as otherwise defined herein, capitalized
terms have the meanings that the Supplement and the Pooling Agreement assign to
them. This Certificate is subject to the terms, provisions and conditions of,
and is entitled to the benefits afforded by, the Pooling Agreement and the
Supplement, to which terms, provisions and conditions the Holder of this
Certificate by virtue of the acceptance hereof assents and by which the Holder
is bound.
The Class B, Series 1996-2 Certificates are a Senior Subordinated Class
and are therefore subordinated to the Class A, Series 1996-2 Certificates and
Certificates in any other Senior Class that may be issued from time to time to
the extent set forth in the Supplement.
As a Senior Subordinated Class, Class B, Series 1996-2 Certificates are
entitled to share in the benefits of the subordination of the Class C, Series
1996-2 Certificates and Certificates in any other Junior Subordinated Class that
may be issued from time to time to the extent set forth in the Supplement.
Unless the certificate of authentication hereon shall have been
executed by or on behalf of Trustee by the manual signature of a duly authorized
signatory, this Certificate shall not entitle the Holder hereof to any benefit
under the Transaction Documents or be valid for any purpose.
This Certificate does not represent a recourse obligation of, or an
interest in, Transferor, any Seller, Servicer, Trustee or any Affiliate of any
of them. This Certificate is limited in right of payment to the Transferred
Assets.
By its acceptance of this Certificate, each Holder hereof (a)
acknowledges that it is the intent of Transferor, and agrees that it is the
intent of the Holder that, for Federal, state and local income and franchise tax
purposes only, the Class B, Series 1996-2 Certificates (including this
Certificate) will be treated as evidence of indebtedness secured by the
Transferred Assets and the Trust not be characterized as an association taxable
as a corporation, (b) agrees to treat this Certificate for Federal, state and
local income and franchise tax purposes as indebtedness and (c) agrees that the
provisions of the Transaction Documents shall be construed to further these
intentions of the parties.
A-2-3
<PAGE>
This Certificate shall be construed in accordance with the laws of the
State of New York, without regard to its conflict of laws principles, and all
obligations, rights and remedies under or arising in connection with this
Certificate shall be determined in accordance with the laws of the State of New
York.
IN WITNESS WHEREOF, Transferor has caused this Certificate to be
executed by its officer thereunto duly authorized.
BFP RECEIVABLES CORPORATION
By: ________________________________
Title: ___________________________
A-2-4
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Class B, Series 1996-2 Certificates referred to in
the Pooling Agreement, as supplemented by the Supplement.
MANUFACTURERS AND TRADERS TRUST
COMPANY, as Trustee
By: ________________________________
Title: ___________________________
Dated: ____________, 1996
<PAGE>
EXHIBIT A - Part 3
to the Series 1996-2 Supplement
FORM OF CLASS C, SERIES 1996-2 CERTIFICATE
THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER THE SECURITIES OR BLUE
SKY LAWS OF ANY STATE IN THE UNITED STATES, AND MAY NOT BE OFFERED OR SOLD,
EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES
LAWS. THIS CERTIFICATE WILL NOT BE ACCEPTED FOR REGISTRATION OF TRANSFER EXCEPT
UPON PRESENTATION OF EVIDENCE SATISFACTORY TO THE REGISTRAR AND TRANSFER AGENT
THAT THE RESTRICTIONS ON TRANSFER SET FORTH IN THE POOLING AGREEMENT (AS DEFINED
BELOW) HAVE BEEN COMPLIED WITH.
THE CERTIFICATEHOLDER HEREOF, BY ACCEPTING AND HOLDING THIS CERTIFICATE IS
DEEMED TO HAVE REPRESENTED AND WARRANTED THAT IT IS NOT (i) AN EMPLOYEE BENEFIT
PLAN (AS DEFINED IN SECTION 3(3) OF ERISA) THAT IS SUBJECT TO THE PROVISIONS OF
TITLE I OF ERISA, (ii) A PLAN (AS DESCRIBED IN SECTION 4975(e)(1) OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED), (iii) AN ENTITY WHOSE UNDERLYING
ASSETS INCLUDE "PLAN ASSETS" BY REASON OF A PLAN'S INVESTMENT IN THE ENTITY
(INCLUDING AN INSURANCE COMPANY GENERAL ACCOUNT THAT IS TREATED AS INCLUDING
"PLAN ASSETS") OR (iv) ACQUIRING THIS CERTIFICATE ON BEHALF OF, OR WITH, ANY
"PLAN ASSETS" OF ANY SUCH EMPLOYEE BENEFIT PLAN, PLAN OR ENTITY REFERRED TO
ABOVE.
EACH PURCHASER REPRESENTS AND WARRANTS FOR THE BENEFIT OF BFP RECEIVABLES
CORPORATION THAT SUCH PURCHASER IS NOT AND WILL NOT BECOME A PARTNERSHIP,
SUBCHAPTER S CORPORATION OR GRANTOR TRUST FOR UNITED STATES FEDERAL INCOME TAX
PURPOSES. [If this representation cannot be made, Transferor, Servicer or the
Trustee may require the legend to contain additional
A-3-1
<PAGE>
representations.]
THIS CERTIFICATE MAY NOT BE ACQUIRED, SOLD, PARTICIPATED, TRADED OR TRANSFERRED,
NOR MAY ANY INTEREST IN THIS CERTIFICATE BE MARKETED, ON OR THROUGH AN
"ESTABLISHED SECURITIES MARKET" WITHIN THE MEANING OF SECTION 7704(b)(1) OF THE
CODE AND ANY PROPOSED, TEMPORARY OR FINAL TREASURY REGULATION THEREUNDER,
INCLUDING, WITHOUT LIMITATION, AN OVER-THE-COUNTER-MARKET OR AN INTERDEALER
QUOTATION SYSTEM THAT REGULARLY DISSEMINATES FIRM BUY OR SELL QUOTATIONS.
UNLESS OTHERWISE PERMITTED BY THE SERIES 1996-2 SUPPLEMENT, THIS CERTIFICATE, OR
ANY PORTION HEREOF, MAY NOT BE TRANSFERRED UNLESS (I) THIS CERTIFICATE, OR
PORTION HEREOF SO TRANSFERRED, HAS A CLASS C INVESTED AMOUNT OF EQUAL TO OR
GREATER THAN 2.1% OF THE SUM OF THE AGGREGATE SERIES INVESTED AMOUNTS ALLOCABLE
TO ALL OUTSTANDING SUBJECT INSTRUMENTS AND THE INVESTED AMOUNT OF THE TRANSFEROR
INTEREST AT SUCH TIME AND, IF TRANSFEROR SO SPECIFIES, ENHANCEMENTS, AND (II)
AFTER GIVING EFFECT TO THE EXECUTION OR TRANSFER OF SUCH CERTIFICATE, THERE
WOULD BE 20 OR FEWER HOLDERS OF SUBJECT INSTRUMENTS. THIS CERTIFICATE MAY NOT BE
ACQUIRED, SOLD, PARTICIPATED, TRADED OR TRANSFERRED, NOR MAY ANY INTEREST IN
THIS CERTIFICATE BE MARKETED, ON OR THROUGH AN "ESTABLISHED SECURITIES MARKET"
WITHIN THE MEANING OF SECTION 7704(b)(1) OF THE INTERNAL REVENUE CODE OF 1986,
AS AMENDED AND ANY PROPOSED, TEMPORARY OR FINAL TREASURY REGULATION THEREUNDER,
INCLUDING, WITHOUT LIMITATION, AN OVER-THE-COUNTER-MARKET OR AN INTERDEALER
QUOTATIONS SYSTEM THAT REGULARLY DISSEMINATES FIRM BUY OR SELL QUOTATIONS. EACH
PURCHASER REPRESENTS AND WARRANTS FOR THE BENEFIT OF THE TRANSFEROR THAT SUCH
PURCHASER IS NOT AND WILL NOT BECOME A PARTNERSHIP, SUBCHAPTER S CORPORATION OR
GRANTOR TRUST FOR FEDERAL INCOME TAX PURPOSES. ANY ATTEMPTED TRANSFER,
ASSIGNMENT, CONVEYANCE, PARTICIPATION OR SUBDIVISION IN CONTRAVENTION OF THE
PRECEDING RESTRICTIONS, AS REASONABLY DETERMINED BY
A-3-2
<PAGE>
TRANSFEROR, SHALL BE VOID AB INITIO AND THE PURPORTED TRANSFEROR, SELLER OR
SUBDIVIDER OF SUCH CERTIFICATE SHALL BE CONSTRUED TO BE TREATED AS THE
CERTIFICATEHOLDER OF ANY SUCH CERTIFICATE FOR ALL PURPOSES OF THE POOLING
AGREEMENT.
BIG FLOWER TRADE RECEIVABLES BACKED CERTIFICATES
CLASS C, SERIES 1996-2 CERTIFICATE
CUSIP 144A:_________________________ $________________
First Distribution Date:____________
No. R-[_______]
THIS CERTIFIES THAT _________________ is the registered owner of a
nonassessable, fully-paid, fractional undivided interest in the Big Flower
Receivables Master Trust (the "Trust") that was created pursuant to (a) the
Pooling and Servicing Agreement, dated as of March 19, 1996 (as the same may be
amended, supplemented or otherwise modified from time to time, the "Pooling
Agreement"), among BFP RECEIVABLES CORPORATION, a Delaware corporation,
("Transferor"), BIG FLOWER PRESS HOLDINGS, INC., a Delaware corporation,
("Servicer"), and MANUFACTURERS AND TRADERS TRUST COMPANY, a New York banking
corporation, as trustee (together with its successors and assigns in such
capacity, "Trustee") and (b) the Supplement dated as of October 4, 1996 relating
to the Series 1996-2 Certificates (the "Supplement"). This Certificate is one of
the duly authorized Class C, Series 1996-2 Certificates designated and issued
under the Pooling Agreement and the Supplement. Except as otherwise defined
herein, capitalized terms have the meanings that the Supplement and the Pooling
Agreement assign to them. This Certificate is subject to the terms, provisions
and conditions of, and is entitled to the benefits afforded by, the Pooling
Agreement and the Supplement, to which terms, provisions and conditions the
Holder of this Certificate by virtue of the acceptance hereof assents and by
which the Holder is bound.
The Class C, Series 1996-2 Certificates are a Junior Subordinated Class
A-3-3
<PAGE>
and are therefore subordinated to the Class A Series 1996-2 Certificates and the
Class B Series Certificates in any other Senior Class that may be issued from
time to time to the extent set forth in the Supplement.
Unless the certificate of authentication hereon shall have been
executed by or on behalf of Trustee by the manual signature of a duly authorized
signatory, this Certificate shall not entitle the Holder hereof to any benefit
under the Transaction Documents or be valid for any purpose.
This Certificate does not represent a recourse obligation of, or an
interest in, Transferor, any Seller, Servicer, Trustee or any Affiliate of any
of them. This Certificate is limited in right of payment to the Transferred
Assets.
By its acceptance of this Certificate, each Holder hereof (a)
acknowledges that it is the intent of Transferor, and agrees that it is the
intent of the Holder that, for Federal, state and local income and franchise tax
purposes only, the Class C, Series 1996-2 Certificates (including this
Certificate) will be treated as evidence of indebtedness secured by the
Transferred Assets and the Trust not be characterized as an association taxable
as a corporation, (b) agrees to treat this Certificate for Federal, state and
local income and franchise tax purposes as indebtedness and (c) agrees that the
provisions of the Transaction Documents shall be construed to further these
intentions of the parties.
This Certificate shall be construed in accordance with the laws of the
State of New York, without regard to its conflict of laws principles, and all
obligations, rights and remedies under or arising in connection with this
Certificate shall be determined in accordance with the laws of the State of New
York.
IN WITNESS WHEREOF, Transferor has caused this Certificate to be
executed by its officer thereunto duly authorized.
BFP RECEIVABLES CORPORATION
By: ________________________________
Title: ___________________________
A-3-4
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Class C, Series 1996-2 Certificates referred to in
the Pooling Agreement, as supplemented by the Supplement.
MANUFACTURERS AND TRADERS TRUST
COMPANY, as Trustee
By: ________________________________
Title: ___________________________
Dated: ____________, 1996
<PAGE>
EXHIBIT B
to Series 1996-2 Supplement
FORM OF DAILY REPORT
Intentionally omitted, not material.
<PAGE>
EXHIBIT C
to Series 1996-2 Supplement
FORM OF MONTHLY REPORT
Intentionally omitted, not material.
<PAGE>
EXHIBIT D
to Series 1996-2 Supplement
TERMINATION AGREEMENT
This Termination Agreement is entered into as of _______, 1996 among
BFP Receivables Corporation ("BFP"), Big Flower Press Holdings, Inc. ("Big
Flower"), Bankers Trust Company ("BTCo"), Credit Suisse, as Co-Agent ("CS"),
Greenwich Funding Corporation ("GFC") and Manufacturers and Traders Trust
Company, as trustee (the "Trustee").
Background
A. BFP, Big Flower and the Trustee are parties to a Pooling and
Servicing Agreement (the "Pooling Agreement") and a Series 1996-1 Supplement
(the "1996-1 Supplement"), each dated as of March 19, 1996, pursuant to which a
series of revolving trade receivables participation certificates (the
"Certificates") have been issued.
B. BFP, Big Flower, BTCo, CS and GFC are parties to a Certificate
Purchase Agreement (the "CPA"), dated as of March 19, 1996, pursuant to which
BTCo and GFC have purchased the Certificates and agreed to purchase certain
trust interests, which are evidenced by the Certificates, from time to time.
C. BFP intends to refinance the Certificates with proceeds from the
issuance of two new series of trust certificates, and in connection with that
refinancing BFP, Big Flower, BTCo, CS and GFC have agreed to terminate the
Certificates, the 1996-1 Supplement and, subject to the terms of this
Termination Agreement, the CPA.
Termination Agreement
1. Upon payment of the amounts specified in Paragraph 2 below, the
Certificates, the 1996-1 Supplement and the CPA are terminated, subject to the
survival of indemnities and other rights that are stated in the CPA to survive
termination of the CPA; provided that (i) any obligations of BFP under such
<PAGE>
Sections shall be paid by BFP only to the extent that it has funds available
after payment of all amounts due and owing in respect of any outstanding
Certificates or Purchased Interests, and (ii) there shall be no recourse to BFP
for any amount payable under such Sections if such funds are insufficient to pay
such amount. In addition, the provisions of Section 10.13 of the CPA shall
survive termination of the CPA.
2. Paragraph 1 of this Termination Agreement shall become effective
upon the payment by BFP to BTCo, as Agent, for the account of BTCo and GFC, of
the outstanding principal amount of the Certificates, together with all accrued
interest thereon, and any fees, breakage costs and expenses due and owing.
Assuming no further purchases are requested, the total amount payable is
$_______________.
3. Promptly after the amounts referred to in Paragraph 2 are paid, BTCo
and GFC shall return their respective Certificates to the Trustee for
cancellation.
4. BFP, Big Flower, BTCo, CS and GFC hereby instruct the Trustee to
enter into this Termination Agreement and to cancel the Certificates upon their
delivery to the Trustee pursuant to Paragraph 3.
5. This Termination Agreement shall be governed by New York law,
without reference to conflict of law provisions. This Termination Agreement may
be executed in multiple counterparts, and by the different parties on different
counterparts, and all such counterparts shall be originals but collectively
shall represent but one Termination Agreement.
IN WITNESS OF THE FOREGOING, the undersigned have caused this
Termination Agreement to be executed by their respective duly authorized
representatives as of the date first above mentioned.
BFP RECEIVABLES CORPORATION
By: ________________________________
Title: ___________________________
<PAGE>
BIG FLOWER PRESS HOLDINGS, INC.
By: ________________________________
Title: ___________________________
BANKERS TRUST COMPANY, as
Agent and as a Purchaser
By: ________________________________
Title: ___________________________
CREDIT SUISSE, as Co-Agent
By: ________________________________
Title: ___________________________
By: ________________________________
Title: ___________________________
<PAGE>
GREENWICH FUNDING
CORPORATION, as a Purchaser
By: Credit Suisse, New York Branch,
attorney-in-fact
By: ________________________________
Title: ___________________________
By: ________________________________
Title: ___________________________
MANUFACTURERS AND TRADERS
TRUST COMPANY, as Trustee
By: ________________________________
Title: ___________________________
<PAGE>
EXHIBIT E
to Series 1996-2 Supplement
FORM OF CERTIFICATE TO BE GIVEN BY CERTIFICATE OWNER
[Euroclear [Cedel, societe anonyme
151 Boulevard Jacqmain 67 Boulevard Grand-Duchesse Charlotte
B-1210 Brussels, Belgium] L-1331 Luxembourg]
Re: Variable Rate Class A and Variable Rate Class B Trade
Receivables Backed Certificates, Series 1996-2, issued
pursuant to the Pooling and Servicing Agreement dated as of
March 19, 1996, as amended or otherwise modified from time to
time, among BFP RECEIVABLES CORPORATION, BIG FLOWER PRESS
HOLDINGS, INC. and MANUFACTURERS AND TRADERS TRUST COMPANY, as
Trustee (the "Certificates"). Capitalized terms used herein
are defined in the Pooling and Servicing Agreement.
This is to certify that as of the date hereof, and except as set forth
below, the beneficial interest in the Certificates held by you for our account
is owned by persons that are not U.S. persons (as defined in Rule 901 under the
Securities Act of 1933, as amended).
The undersigned undertakes to advise you promptly by tested telex on or
prior to the date on which you intend to submit your certification relating to
the Certificates held by you in which the undersigned has acquired, or intends
to acquire, a beneficial interest in accordance with your operating procedures
if any applicable statement herein is not correct on such date. In the absence
of any such notification, it may be assumed that this certification applies as
of such date.
[This certification excepts beneficial interests in and does not relate
to U.S. $_________ principal amount of the Certificates appearing in your books
as being held for our account but that we have sold or as to which we are not
yet able to certify.]
<PAGE>
We understand that this certification is required in connection with
certain securities laws in the United States of America. If administrative or
legal proceedings are commenced or threatened in connection with which this
certification is or would be relevant, we irrevocably authorize you to produce
this certification or a copy thereof to any interested party in such
proceedings.
Dated: ___________________,* By: ____________________________,
Account Holder
- - ----------
* Certification must be dated on or after the 15th day before the date of the
Euroclear or Cedel certificate to which this certification relates.
<PAGE>
EXHIBIT F
to Series 1996-2 Supplement
FORM OF CERTIFICATE TO BE GIVEN BY
EUROCLEAR OR CEDEL
[Manufacturers and Traders Trust Company]
1 M&T Plaza 7th Floor
Buffalo, New York 14203-2399]
[Name of Successor Trustee and Transfer Agent and Registrar and Address]
Re: Variable Rate Class A and Variable Rate Class B Trade
Receivables Asset-Backed Certificates, Series 1996-2, issued
pursuant to the Pooling and Servicing Agreement dated as of
March 19, 1996, as amended or otherwise modified from time to
time, among BFP RECEIVABLES CORPORATION, BIG FLOWER PRESS
HOLDINGS, INC. and MANUFACTURERS AND TRADERS TRUST COMPANY, as
Trustee (the "Certificates"). Capitalized terms used herein
are defined in such Pooling and Servicing Agreement.
This is to certify that, based solely on certifications we have
received in writing, by tested telex or by electronic transmission from member
organizations appearing in our records as persons being entitled to a portion of
the principal amount set forth below (our "Member Organizations") as of the date
hereof, $__________ principal amount of the Certificates is owned by persons (a)
that are not U.S. persons (as defined in Rule 901 under the Securities Act of
1933, as amended (the "Securities Act")) or (b) who purchased their Certificates
(or interests therein) in a transaction or transactions that did not require
registration under the Securities Act.
We further certify (a) that we are not making available herewith for
exchange any portion of the related Regulation S Temporary Book-Entry
Certificate excepted in such certifications and (b) that as of the date hereof
we have not received any notification from any of our Member Organizations to
the effect that the statements made by them with respect to any portion of the
part submitted herewith for exchange are no longer true and cannot be relied
upon as of the date hereof.
<PAGE>
We understand that this certification is required in connection with
certain securities laws of the United States of America. If administrative or
legal proceedings are commenced or threatened in connection with which this
certification is or would be relevant, we irrevocably authorize you to produce
this certification or a copy hereof to any interested party in such proceedings.
Date: _________________* Yours faithfully,
* To be dated no earlier By: ________________________________
than the applicable [Morgan Guaranty Trust Company of New
Series 1996-2 York, Brussels Office, as Operator of the
Exchange Date. Euroclear Clearance System]
[Cedel, societe anonyme]
2
<PAGE>
Exhibit 10.14
================================================================================
SERIES 1996-3 SUPPLEMENT
to POOLING AND SERVICING AGREEMENT
dated as of October 4, 1996
among
BFP RECEIVABLES CORPORATION,
as Transferor,
BIG FLOWER PRESS HOLDINGS, INC.,
as Servicer,
and
MANUFACTURERS AND TRADERS TRUST COMPANY,
as Trustee
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS; INCORPORATION OF TERMS............................. 1
SECTION 1.1 Definitions............................................ 1
SECTION 1.2 Incorporation of Terms................................. 6
ARTICLE II DESIGNATION.................................................... 6
SECTION 2.1 Designation............................................ 6
SECTION 2.2 Group.................................................. 7
ARTICLE III CONDITIONS TO ISSUANCE; USE OF PROCEEDS ...................... 7
SECTION 3.1 Conditions to Issuance................................. 7
SECTION 3.2 Use of Proceeds........................................ 7
ARTICLE IV PAYMENTS AND ALLOCATIONS....................................... 7
SECTION 4.1 Interest; Additional Amounts........................... 7
SECTION 4.2 Additional Amounts..................................... 8
SECTION 4.3 Daily Calculations and Allocations..................... 8
SECTION 4.4 Available Subordinated Amount.......................... 8
SECTION 4.5 Optional Early Pay Out................................. 8
ARTICLE V DISTRIBUTIONS AND REPORTS....................................... 10
ARTICLE VI EARLY AMORTIZATION EVENTS...................................... 10
SECTION 6.1 Early Amortization Events.............................. 10
SECTION 6.2 Early Amortization Period.............................. 12
ARTICLE VII OPTIONAL REDEMPTION........................................... 13
ARTICLE VIII MISCELLANEOUS................................................ 13
SECTION 8.1 Governing Law.......................................... 13
SECTION 8.2 Counterparts........................................... 14
SECTION 8.3 Severability of Provisions............................. 14
SECTION 8.4 Amendment, Waiver, Etc................................. 14
SECTION 8.5 Trustee................................................ 14
SECTION 8.6 Instructions in Writing................................ 15
SECTION 8.7 Rule 144A.............................................. 15
SECTION 8.8 Supplemental Ratings Requirement....................... 15
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SECTION 8.9 Transfer Restrictions and Procedures................... 15
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EXHIBITS
EXHIBIT A Form of Series 1996-3 Certificate
EXHIBIT B Form of Certificate to be Given by Certificate Owner
EXHIBIT C Form of Certificate to be Given by Euroclear or Cedel
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This SERIES 1996-3 SUPPLEMENT, dated as of October 4, 1996 (this
"Supplement"), is made among BFP RECEIVABLES CORPORATION, a Delaware
corporation, as Transferor, BIG FLOWER PRESS HOLDINGS, INC., a Delaware
corporation ("Big Flower"), as Servicer, and MANUFACTURERS AND TRADERS TRUST
COMPANY, a New York banking corporation, as Trustee.
Pursuant to the Pooling and Servicing Agreement, dated as of March 19,
1996 (as it may be amended, supplemented or otherwise modified from time to
time, and as supplemented hereby, the "Pooling Agreement"), among Transferor,
Servicer and Trustee, Transferor may from time to time issue, and direct Trustee
to authenticate, on behalf of the Trust, one or more Series of Certificates
representing undivided interests in the Transferred Assets. Certain terms
applicable to a Series are to be set forth in a Supplement. This Supplement is a
"Supplement" as that term is defined in the Pooling Agreement.
Pursuant to this Supplement, Transferor and Trustee shall create a Series
of Certificates and specify certain of their terms.
ARTICLE I DEFINITIONS; INCORPORATION OF TERMS
SECTION I.1 Definitions. (a) Capitalized terms used and not otherwise
defined herein are used as defined in Appendix A to the Pooling Agreement or in
the Series 1996-2 Supplement. This Supplement shall be interpreted in accordance
with the conventions set forth in Part B of that Appendix A.
(b) Each capitalized term defined below relates only to the Series 1996-3
Certificates and to no other Series of Certificates (except to the extent that
certain of such terms are explicitly used as defined herein in any Supplement
relating to another Series in Group I). Whenever used in this Supplement, the
following words and phrases shall have the following meanings:
"ABR Tranche" means, at any time, the portion of the Series 1996-3
Invested Amount that is designated by Transferor in accordance with the
Certificate Purchase Agreement to accrue interest based on the Alternate Base
Rate.
"Additional Amounts" as to the Series 1996-3 Certificates, means amounts
payable pursuant to Sections 4.2, 4.3, 4.5, 4.6, 7.1 and 10.5 of the Certificate
Purchase Agreement.
"Agent" means Caisse Nationale De Credit Agricole, in its capacity as
Agent under (and as defined in) the Certificate Purchase Agreement, together
with its respective successors in that capacity. The Agent is an "Agent" for
purposes of the Pooling Agreement.
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"Alternate Base Rate" means, on any day, a fluctuating rate of interest
per annum equal to the higher of:
(a) the rate of interest announced, from time to time, by the Agent as
its prime commercial rate for United States dollar loans made in the
United States for any day, and
(b) the Federal Funds Rate.
Any change in the interest rate resulting from a change in the prime commercial
rate announced by the Agent shall become effective without prior notice to
Transferor or Servicer as of 12:01 a.m., New York City time, on the Business Day
on which each change in the prime commercial rate is announced by the Agent. The
prime commercial rate is a reference rate and does not necessarily represent the
lowest or best rate actually charged by the Agent to any customer. The Agent may
make commercial loans or other loans at rates of interest at, above or below the
prime commercial rate.
"Amortization Period" means the period (x) beginning on the earlier of (i)
the date on which a termination notice is given by the Sellers pursuant to
Section 8.1 of the Purchase Agreement and (ii) the first day of the April, 2002
Calculation Period and (y) ending on the earlier of (i) the Expected Final
Payment Date and (ii) the date, if any, on which an Early Amortization Period
begins, provided that there will be no Amortization Period if an Early
Amortization Period commences on or prior to the date specified above for the
beginning of the Amortization Period.
"Big Flower Credit Agreement" means the Credit Agreement dated as of
November 28, 1995, as amended and restated as of March 19, 1996 among Big
Flower, Treasure Chest Advertising Company, Inc., the financial institutions
named therein, Credit Suisse, as Documentation Agent and Bankers Trust
Company, as Administrative Agent.
"Carrying Cost Reserve Increment" means, on any Business Day, the sum of
(a) the product of (i) the Series 1996-3 Invested Amount, multiplied by (ii) 1.5
times the weighted average of the interest rates on Series 1996-3 Certificates,
multiplied by (iii) a fraction the numerator of which is the product of two and
the number of Turnover Days and the denominator of which is 360 plus (b) the
product of (i) the excess, if any, of the Stated Amount of all Series 1996-3
Certificates over the Series 1996-3 Invested Amount, multiplied by (ii) 1.5
times 0.20%, multiplied by (iii) a fraction the numerator of which is the
product of two and the number of Turnover Days and the denominator of which is
365 or 366, as applicable.
Certificate Purchase Agreement" means the Certificate Purchase Agreement
(Series
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1996-3) dated as of October 4, 1996 among Transferor, Servicer, the Purchasers
of the Series 1996-3 Certificates and the Agent.
"Certificate Rate" means, at any time, the weighted average of the
interest rates on all outstanding Series 1996-3 Certificates.
"Certificate Spread" means (i) with respect to any Eurodollar Tranche,
0.25% per annum, and (ii) with respect to any ABR Tranche, 0.00% per annum.
"Class Invested Amount" with respect to the Series 1996-3 Certificates,
means the Series 1996-3 Invested Amount.
"Current Carrying Costs Increment" means, during any Distribution Period,
the sum of (i) the amount of interest on the Series 1996-3 Certificates that
will be payable on or before the next Distribution Date and (ii) the amount of
the Non-Usage Fee (as such term is defined in the Certificate Purchase
Agreement) that will be payable on or before the next Distribution Date (in each
case determined using the Series 1996-3 Invested Amount and Stated Amount in
effect on the date of determination and an interest rate equal to the weighted
average of the interest rates on the Series 1996-3 Certificates).
"Early Amortization Period" means the period beginning on the date (if
any) specified in Section 6.2 and ending on the day on which the Series 1996-3
Invested Amount has been reduced to zero and any other period identified as an
"Early Amortization Period" in the Supplement for any other Series in Group I.
"Eurodollar Rate" means, for any Interest Period, a rate per annum equal
to the arithmetic average (rounded upward to the nearest 1/100 of one percent)
of the offered quotation, if any, to first class banks in the interbank
Eurodollar market by the Reference Bank for U.S. dollar deposits of amounts in
same day funds comparable to the principal amount of the Certificate of the
Reference Bank with maturities comparable to such Interest Period as of
approximately 10:00 a.m. (New York time) on the second Business Day prior to the
first day of that Interest Period.
"Eurodollar Tranche" means, during any Interest Period, any portion of the
Series 1996-3 Invested Amount that is designated by Transferor in accordance
with the Certificate Purchase Agreement to accrue interest based on the
Eurodollar Rate.
"Expected Final Payment Date" as to the Series 1996-3 Certificates,
means the June, 2002 Distribution Date.
"Federal Funds Rate" means (a) the weighted average of the rates on
overnight Federal
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funds transactions with members of the Federal Reserve System arranged by
Federal funds brokers, as published for the day (or, if the day is not a
Business Day, the immediately preceding Business Day) by the Federal Reserve
Bank of New York; provided that if the rate is not so published for any Business
Day, the rate for purposes of this clause will be the average of the quotations
for the day on such transactions received by the Agent from three Federal funds
brokers of recognized standing selected by it, plus (b) 100 basis points.
"Final Scheduled Payment Date" as to the Series 1996-3 Certificates,
means the April, 2003 Distribution Date.
"Intercreditor Provisions" means the following provisions of the Big
Flower Credit Agreement: Sections 9.01 (xvii), 9.02 (x), 9.04 (xiv), 9.05
(xvii), (xviii), (xix) and (xx), 9.10 (a)(iii), 9.15, and 10.11, the last two
sentences of Section 9.11 and the definitions of Receivables Amendment
Conditions, Receivables Bridge Facility, Receivables Documents, Receivables
Facility, Receivables Facility Assets, Receivables Facility Financing Costs,
Receivables Maximum Funding Amount, Receivables Pooling Agreement, Receivables
Purchasers, Receivables Stated Amount, Receivables Subsidiary and Subsidiary
Guarantor.
"Interest Payment Date" as to the Series 1996-3 Certificates, means any
date upon which interest is payable with respect to the ABR Tranche or any
Eurodollar Tranche, as specified in Section 4.1.
"Interest Period" means (i) as to the ABR Tranche (if any) from time to
time, (x) the period from the date hereof to, but excluding, the first
subsequent Distribution Date and (y) each Distribution Period thereafter and
(ii) as to each Eurodollar Tranche (if any) from time to time, each period from
the date upon which that Eurodollar Tranche was first designated as such
pursuant to the Certificate Purchase Agreement (or the end of the next preceding
Interest Period for such Eurodollar Tranche, if there has been one) to the date
that is one, two or three months, at the option of Transferor, thereafter; and
if any Interest Period for a Eurodollar Tranche would otherwise end on a day
that is not a Business Day, such Eurodollar Tranche shall instead end on the
next Business Day (or, if the next Business Day falls in the next calendar
month, then on the preceding Business Day).
"Invested Amount" means, at any time for purposes of the application of
Sections 6.13 and 12.4 of the Pooling Agreement to the Series 1996-3
Certificates, the Series 1996-3 Invested Amount.
"Prepayment Accumulation Period" means a period beginning on the day that
Transferor gives a Prepayment Notice to Trustee of a full or partial prepayment
of the Series 1996-3 Certificates pursuant to Section 4.5 (and does not notify
Trustee that it intends to cause the Series Interest for Group I attributable to
the Series 1996-3 Certificates to be conveyed as
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described in subsection 4.5(b)) and ending on the earlier to occur of (a) the
day when amounts sufficient for that prepayment have been accumulated pursuant
to Section 4.3 and (b) the end of the Revolving Period for the Series 1996-3
Certificates.
"Prepayment Notice" is defined in Section 4.5.
"Principal Payment Date" for the Series 1996-3 Certificates, means: (i)
any date on which the Series 1996-3 Invested Amount is to be reduced pursuant to
Section 3.1 of the Certificate Purchase Agreement, (ii) any date on which any
prepayment is to be made pursuant to Section 4.5, (iii) the end of each Interest
Period in respect of the next maturing Eurodollar Tranche and/or ABR Tranche,
(iv) each Distribution Date (beginning with the Distribution Date falling in the
Calculation Period after the Calculation Period in which the Early Amortization
Period begins) and (v) any Distribution Date falling on or after the Expected
Final Payment Date. The Refinancing Date is not a Principal Payment Date.
"Purchase" means any Purchase as defined in the Certificate Purchase
Agreement.
"Reference Bank" means the Agent.
"Refinancing Date" is defined in subsection 4.5(b).
"Required Series Holders" means Holders whose Series 1996-3 Certificates
evidence at least 66 2/3% of the aggregate Stated Amount of the Series 1996-3
Certificates, or if the aggregate Stated Amount shall have been reduced to zero,
Holders whose Series 1996-3 Certificates evidence at least 66 2/3% of the
outstanding principal amount of the Series 1996-3 Certificates.
"Series 1996-2 Supplement" means the Series 1996-2 Supplement to the
Pooling Agreement dated as of the date hereof.
"Series 1996-3 Certificate" is defined in Section 2.1. Each Series 1996-3
Certificate shall be substantially in the form of Exhibit A.
"Series 1996-3 Holder" means a Holder of a Series 1996-3 Certificate.
"Series 1996-3 Initial Invested Amount" means (i) during the Revolving
Period for the Series 1996-3 Certificates, the Series 1996-3 Invested Amount,
and (ii) thereafter, the Series 1996-3 Invested Amount as of the last day of the
Revolving Period. The Series 1996-3 Initial Invested Amount shall be the "Series
Initial Invested Amount" for Series 1996-3 for purposes of the Series 1996-2
Supplement.
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"Series 1996-3 Invested Amount" means, at any time, the sum of the
purchase prices paid for Purchases made pursuant to the Certificate Purchase
Agreement at or prior to that time, reduced (but not below zero) by (a) the
aggregate amount of all distributions that have been made to the Holders of the
Series 1996-3 Certificates on account of principal, and (b) the amount of all
Investor Write-Offs that have been applied to reduce the Series 1996-3 Invested
Amount (net of Investor Allocable Recoveries and Investor Allocable Dilution
Adjustments that have been applied to reinstate the Series 1996-3 Invested
Amount). The Series 1996-3 Invested Amount shall be the "Series Invested Amount"
for Series 1996-3 for purposes of the Series 1996-2 Supplement.
"Stated Amount" means as to any Series 1996-3 Certificate, the maximum
principal amount that may be required to be funded by the Holder of such Series
1996-3 Certificate.
"Tranche" means each of the ABR Tranche and each Eurodollar Tranche.
(c) For purposes of the Series 1996-2 Supplement, the Series Amortization
Periods for Series 1996-3 are the Amortization Period, any Prepayment
Accumulation Period and any Early Amortization Period, and the Principal Deposit
Amounts for the various Series Amortization Periods that may apply to Series
1996-3 are:
(i) for any Calculation Period falling in the Amortization
Period or the Early Amortization Period, the Series 1996-3
Invested Amount; and
(ii) for any Calculation Period falling in a Prepayment
Accumulation Period, the amount of principal to be prepaid.
(d) For purposes of this Series, after the Closing Date, "Eligible
Obligors" may include (x) the United States government, any of its agencies or
instrumentalities, and a state or local government agency or instrumentality,
provided that such government, agency or instrumentality shall have consented in
writing to the assignment of its Receivables to the Trust, if such consent is
required under its Contract and (y) Obligors which are not Domestic Persons, in
each case for purposes of clauses (x) and (y), if and to the extent the
Modification Condition shall have been satisfied as to such inclusion.
SECTION I.2 Incorporation of Terms. The terms of the Pooling Agreement (as
modified hereby) and the 1996-2 Supplement are incorporated in this Supplement
as if set forth in full herein. As supplemented by this Supplement, the Pooling
Agreement is in all respects ratified and confirmed and both together shall be
read, taken and construed as one and the same agreement. If the terms of this
Supplement and the terms of the Pooling Agreement or of the 1996-2 Supplement
conflict, the terms of this Supplement shall control with respect to the Series
1996-3 Certificates.
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ARTICLE II DESIGNATION
SECTION II.1 Designation. There is hereby created a Series to be known as
the "Series 1996-3 Certificates," consisting of the $20,000,000 Variable Rate
Class A-V, Trade Receivables Backed Certificates, Series 1996-3, which shall be
a Senior Class. Subject to the conditions set forth in Article III, Trustee
shall authenticate and deliver the Series 1996-3 Certificates, to or upon the
order of Transferor in an aggregate stated amount equal to $20,000,000.
Notwithstanding the terms of Section 6.1 of the Pooling Agreement, the Series
1996-3 Certificates will be issued in minimum denominations of $1,000,000 and in
integral multiples of $1,000,000.
SECTION II.2 Group. The Series 1996-3 Certificates are included in Group
I. Consequently, the Series 1996-3 Certificates will share a single Series
Collection Allocation Percentage (determined using the Required Receivables as
defined in the Series 1996-2 Supplement), a single Series Loss Allocation
Percentage (determined using the Group Invested Amount as defined in the Series
1996-2 Supplement), and a single Deferred Portion of the Acquisition Amount
(determined as provided in the Series 1996-2 Supplement) with the other Series
in Group I. Collections, Investor Allocable Dilution, Investor Allocable Loss
Amounts and Investor Write-Offs will be allocated collectively to Group I in
accordance with such shared Series Collection Allocation Percentage and shared
Series Loss Allocation Percentage, as applicable, and will be further allocated
among Series included in Group I (and the various Senior Classes and
Subordinated Classes (including Senior Subordinated Classes and Junior
Subordinated Classes)) in accordance with the Series 1996-2 Supplement and this
Supplement. The Servicing Fee with respect to all Series in Group I shall be
paid in accordance with the Series 1996-2 Supplement and shall be determined in
accordance with Section 3.4 of the Pooling Agreement using the collective Series
Collection Allocation Percentage for Group I. The Series in Group I share a
collective Series Interest, the amount of which equals the shared Series
Collection Allocation Percentage for Group I.
ARTICLE III CONDITIONS TO ISSUANCE; USE OF PROCEEDS
SECTION III.1 Conditions to Issuance. Trustee will not authenticate the
Series 1996-3 Certificates unless all conditions to the issuance of the Series
1996-3 Certificates under Section 6.10 of the Pooling Agreement shall have been
satisfied.
SECTION III.2 Use of Proceeds. The proceeds from the issuance of the
Series 1996-3 Certificates shall be used first to repay the Series 1996-1
Certificates in full and second for general corporate purposes of Transferor.
ARTICLE IV PAYMENTS AND ALLOCATIONS
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SECTION IV.1 Interest; Additional Amounts.
(a) Subject to Section 4.1 of the Certificate Purchase Agreement,
Transferor may from time to time allocate the outstanding principal amount
under the Series 1996-3 Certificates to an ABR Tranche and up to twelve
Eurodollar Tranches. Interest on the ABR Tranche and interest on a
Eurodollar Tranche shall be payable at the end of the applicable Interest
Period, except that interest on the amount of any principal repaid on any
other date shall be payable on the date of the repayment. If any such day
is not a Business Day, interest shall instead be due on the next Business
Day (or, if the next Business Day falls in the next calendar month, then
on the next preceding Business Day).
(b) Interest on a Eurodollar Tranche shall accrue during any
Interest Period at a rate per annum equal to the Eurodollar Rate plus the
applicable Certificate Spread and shall be calculated on the basis of
actual days over a year of 360 days.
(c) Interest on a ABR Tranche shall accrue at the Alternate Base
Rate in effect from time to time plus the applicable Certificate Spread
and shall be calculated on the basis of actual days over a year of 365 or
366 days, as the case may be.
(d) Interest with respect to the Series 1996-3 Certificates due but
not paid on any Distribution Date or the last day of an Interest Period,
as the case may be, will be due on the next Distribution Date or last day
of an Interest Period with additional interest on any amount not paid when
due at 2% per annum above the Alternate Base Rate to the extent permitted
by law.
SECTION IV.2 Additional Amounts. The Holders of the Series 1996-3
Certificates shall also be entitled to receive Additional Amounts to the extent
of funds available therefor pursuant to Sections 4.3 and 4.4 of the Series
1996-2 Supplement. The rating of the Series 1996-3 Certificates will not address
the likelihood of payment of Additional Amounts.
SECTION IV.3 Daily Calculations and Allocations. On each Business Day,
Servicer shall make the calculations and instruct Trustee to make the
allocations required by Sections 4.2, 4.3 and 4.4 of the Series 1996-2
Supplement and shall administer the Equalization Account and the Principal
Funding Account in accordance with Section 4.5 of the Series 1996-2 Supplement.
SECTION IV.4 Available Subordinated Amount. If a Group Amortization Period
occurs, Servicer shall calculate the Available Subordinated Amount pursuant to
Section 4.6 of the Series 1996-2 Supplement, and the provisions of Sections 4.7
and 4.8 of the Series 1996-2
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Supplement shall apply.
SECTION IV.5 Optional Early Pay Out. (a) In addition to Transferor's right
to reduce the Series 1996-3 Invested Amount from time to time in accordance with
Section 3.1 of the Certificate Purchase Agreement, Transferor may cause a
prepayment of the Series 1996-3 Certificates pursuant to, and subject to the
limitations set forth in, this Section 4.5. On any Business Day falling in the
Revolving Period, Transferor may provide notice to Trustee of its intention to
accumulate funds to cause the Series 1996-3 Certificates to be prepaid in full,
or in part in a minimum amount of $1,000,000 or in higher integral multiples of
$1,000,000 (or in an amount equal to the entire principal amount of the Series
1996-3 Certificates, if less). When amounts sufficient for such prepayment have
been accumulated, Transferor may provide notice to Trustee on any Distribution
Date falling in the Revolving Period (the "Prepayment Notice") of the date, at
least three Business Days after the date of such Prepayment Notice, when the
prepayment shall occur. Trustee shall notify the affected Holders promptly upon
receiving such Prepayment Notice. In the event of any partial prepayment of the
Series 1996-3 Certificates, the Holders of those Series 1996-3 Certificates will
be paid their pro rata share of such partial prepayment calculated in accordance
with the outstanding principal amount of each Series 1996-3 Certificate as of
the date of such prepayment.
(b) Commencing upon the date specified in the notice to the Trustee
referred to in subsection (a) (until an amount equal to the amount to be prepaid
plus any Additional Amounts arising as a result of such prepayment has been
accumulated), amounts shall be set aside for purposes of that prepayment in
accordance with Section 4.3 of the Series 1996-2 Supplement, except that no such
amounts shall be set aside if Transferor notifies Trustee that Transferor
intends to cause the Series 1996-3 Certificates to be prepaid in full (but not
in part) by causing the portion of the Series Interest for Group I attributable
to the Series 1996-3 Certificates to be conveyed to one or more Persons (who may
be the Holders of a new Series issued substantially contemporaneously with such
prepayment) for a cash purchase price in an amount equal to the sum of (i) the
Series 1996-3 Initial Invested Amount, plus (ii) to the extent not available in
the Carrying Cost Account, accrued and unpaid interest on the Series 1996-3
Certificates to the day of such prepayment (the "Refinancing Date"), plus (iii)
to the extent not available from funds set aside pursuant to priority fourth of
Section 4.3 of the Series 1996-2 Supplement, the Additional Amounts with respect
to the Series 1996-3 Certificates. No such conveyance shall, however, be
permitted if as a result thereof Transferor, Big Flower or any of their
Affiliates would acquire such portion of the Series Interest or the underlying
Receivables. In the case of any such conveyance, the purchase price shall be
deposited in the Principal Funding Account and shall be distributed to the
Agent, for further distribution to the Holders of the 1996-3 Certificates, on
the Refinancing Date in accordance with the terms of Section 5.2 of the Series
1996-2 Supplement.
(c) Any prepayment pursuant to this Section 4.5 shall be made on the later
to occur of
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(i) the Distribution Date specified in the notice of prepayment and (ii) the
Distribution Date on which sufficient funds (including funds to cover any
related Additional Amounts) have been accumulated pursuant to Section 4.3 or 4.4
of the Series 1996-2 Supplement or obtained by a conveyance described in
subsection 4.5(b).
(d) In the event of any partial prepayment of the Series 1996-3
Certificates, the Holders of those Certificates shall be paid their pro rata
share of the partial prepayment calculated in accordance with the outstanding
principal amount of each Series 1996-3 Certificate.
(e) The ratings of the Series 1996-3 Certificates will not address the
likelihood of payment of any Additional Amounts.
ARTICLE V DISTRIBUTIONS AND REPORTS
Trustee shall, in accordance with instructions set out in the applicable
Daily Report, make distributions to the Holders of the Series 1996-3
Certificates in accordance with Sections 5.1 and 5.2 of the Series 1996-2
Supplement. Such payments shall be made to the Agent for the account of the
Holders of the 1996-3 Certificates by wire transfer of immediately available
funds in Dollars on the date due. Servicer and Trustee shall also carry out
their respective obligations under the balance of Article V of the Series 1996-2
Supplement for the benefit of the Holders of the Series 1996-3 Certificates.
Without limiting the foregoing, copies of each Monthly Report shall be provided
free of charge by the Trustee to purchasers of Series 1996-3 Certificates in
connection with the initial distribution thereof and may be obtained free of
charge upon request from the Trustee (and presentation of a confirmation
evidencing the purchase of such Certificates) by subsequent purchasers.
ARTICLE VI EARLY AMORTIZATION EVENTS
SECTION VI.1 Early Amortization Events. Each of the following shall
constitute an "Early Amortization Event":
(a) any of the following shall occur:
(i) failure on the part of Transferor or Servicer to make any
payment of the principal amount of any Series 1996-3 Certificate
when due, or to make any deposit required by the terms of any
Transaction Document within one Business Day after the date the
deposit is required to be made, or to make any payment of any
interest on the Series 1996-3 Certificates or any other payment
required by the terms of any Transaction Document on or before three
Business Days after the date such payment is required to be made; or
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(ii) failure on the part of Servicer to deliver a Daily Report
within the time period required under Section 3.5(c) of the Pooling
Agreement and continuance of such failure for five Business Days;
provided that if the Servicer shall have estimated the Base Amount
in the Daily Report for one or more days due to adverse
circumstances beyond its control (as described in, and subject to
the limitations in, such Section 3.5(c)), then the five day grace
period specified in this clause (ii) shall be reduced by the number
of days on which the Base Amount was estimated (or, if such number
of days exceeds five, shall be reduced to zero); or
(iii) failure on the part of the Servicer to deliver a Monthly
Report within the time required under Section 3.5(d) of the Pooling
Agreement and the applicable Supplement or PI Agreement, and
continuance of such failure for three Business Days; or
(iv) failure on the part of Transferor, Guarantor, Servicer or
any Seller duly to observe or perform any covenant or agreement set
forth in any Transaction Document, which failure continues
unremedied for a period of 30 days after the date on which written
notice of the failure, requiring the same to be remedied, shall have
been given to Transferor by Trustee or to Transferor and Trustee by
any Holder; or
(v) Guarantor gives notice of termination of the Seller
Guaranty;
(b) any representation or warranty made by a Seller in subsection
5.1(d), 5.1(k), 5.1(n), 5.1(o) or 5.1(r) of the Purchase Agreement or by
Transferor in subsection 2.3(a)(i), 2.3(a)(ii) or 7.1(i) of the Pooling
Agreement shall prove to have been incorrect in any material respect when
made, and continues to be incorrect in any material respect for a period
of five Business Days after the date on which written notice of the
breach, requiring the same to be remedied, shall have been given to
Transferor by Trustee or to Transferor and Trustee by any Holder, or any
other representation or warranty made by Transferor, Servicer, Guarantor
or any Seller in any Transaction Document shall prove to have been
incorrect in any material respect when made, and continues to be incorrect
in any material respect for a period of 30 days after the date on which
written notice of the breach, requiring the same to be remedied, shall
have been given to Transferor by Trustee, or Transferor and to Trustee by
any Holder; provided that a mistake in the representation of a Receivable
as an Eligible Receivable shall not constitute an Early Amortization Event
unless and until the applicable Seller has failed to make the cash
payments (if any) owed under Section 3.1 of the Purchase Agreement in
respect of the misrepresentation (it being understood
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that certain of such mistakes may result in a non-cash adjustment under
the Purchase Agreement);
(c) a Bankruptcy Event shall occur with respect to Transferor,
Servicer, Guarantor or any Seller, or Transferor shall become unable, for
any reason, to transfer Receivables or other Transferred Assets to the
Trust in accordance with the provisions of the Purchase Agreement and the
Pooling Agreement; provided that if, at the time any event that would,
with the passage of time, become a Bankruptcy Event occurs as a result of
a bankruptcy proceeding being filed against Transferor or any Seller,
then, on and after the day on which the bankruptcy proceeding is filed
until the earlier to occur of the dismissal of the proceeding and the
commencement of the Early Amortization Period, Transferor shall not
purchase Receivables and Related Assets from the affected Seller or, if
Transferor is the subject of the proceeding, transfer Receivables and
Related Transferred Assets to the Trust;
(d) the Trust or Transferor shall be required to be registered as an
"investment company" under and within the meaning of the Investment
Company Act of 1940, as amended;
(e) the Net Invested Amount exceeds the Base Amount for a period
of five or more consecutive Business Days;
(f) a Servicer Default shall have occurred and shall not have
been remedied;
(g) Treasure Chest shall cease to own, directly or indirectly,
100% of the issued and outstanding capital stock of Transferor;
(h) the Internal Revenue Service or the PBGC files one or more Tax
or ERISA Liens against the assets of Transferor or any Seller (including
Receivables);
(i) the cessation of, or the failure to create, a valid
first-priority perfected ownership or security interest in favor of
Trustee in the Receivables (subject to Permitted Adverse Claims and
Special New Jersey EPA Claims) or the rights of Transferor under the
Purchase Agreement;
(j) the Series 1996-3 Invested Amount is not paid in full on the
Expected Final Payment Date;
(k) any foreclosure or similar proceeding in respect of any adverse
claim on any Buyer Note or the Transferor's common stock shall have been
commenced; or title to any Buyer Note or Transferor's common stock shall
pass to the holders of such
12
<PAGE>
adverse claim, it being understood that the grant of a security interest
in the stock of Transferor or a Buyer Note to a creditor of a Seller shall
not be an Early Amortization Event;
(l) the Transferor Net Worth shall be less than 18% of the aggregate
Unpaid Balance of the Receivables at any time and such condition continues
for five consecutive Business Days; or
(m) the Intercreditor Provisions shall be amended, waived, modified
or breached without the prior written consent of the Agent.
SECTION VI.2 Early Amortization Period. Upon the occurrence and during the
continuance of any Early Amortization Event described in subsection 6.1(c), (d),
(i), (j), (k) or (l), an Early Amortization Period shall commence without any
notice or other action on the part of Trustee or the Series 1996-3 Holders,
immediately upon the occurrence of such Early Amortization Event. On the tenth
day after Transferor receives notice or otherwise becomes aware of the
occurrence of any Early Amortization Event described in subsection 6.1(a), (e)
or (h) an Early Amortization Period shall commence without any notice or other
action on the part of Trustee or the Series 1996-3 Holders, unless waived by the
Required Series Holders or, in the case of subsection 6.1(a) or (h), is
otherwise cured prior to such tenth day. Upon the occurrence and continuance of
any event described in any subsection above (including subsection 6.1(a), (c),
(d), (e), (h), (i) or (j), (k) or (l)), after the applicable grace period, if
any, set forth in such subsection, if so directed by the Required Series
Holders, Trustee shall by notice then given in writing to Transferor and
Servicer, declare that an Early Amortization Period has commenced as of the date
of Transferor's receipt of the notice.
ARTICLE VII OPTIONAL REDEMPTION
On any Distribution Date occurring during an Early Amortization Period
with respect to the Series 1996-3 Certificates on or after the date that the
aggregate Unpaid Balance of the Receivables then included in the Receivables
Pool is reduced to ten percent or less of the aggregate Unpaid Balance of the
Receivables included in the Receivables Pool as the commencement of such Early
Amortization Period, Transferor shall have the option to redeem the Series
1996-3 Series Interest. The purchase price will be an amount equal to the Series
1996-3 Invested Amount plus accrued and unpaid interest (and accrued and unpaid
interest with respect to interest that was due but not paid on any prior
Distribution Date) through the day preceding the Distribution Date at the
applicable interest rate (as specified in Section 4.1) plus the aggregate amount
by which the Series 1996-3 Invested Amount has been reduced on account of
Investor Write-Offs and Investor Allocable Dilution (and not subsequently
reinstated) plus the applicable Additional Amounts (including any unpaid
Additional Amounts from earlier Distribution Dates). Upon the tender of the
outstanding Certificates of Series
13
<PAGE>
1996-3 by the Holders, Trustee shall distribute the amounts, together with all
funds on deposit in the Principal Funding Account that are allocable to the
Series 1996-3 Certificates, to the Holders of Series 1996-3 on the next
Distribution Date in repayment of the principal amount and accrued and unpaid
interest owing to such Holders. Following any redemption, the Holders of the
Series 1996-3 Certificates shall have no further rights with respect to the
Receivables. In the event that Transferor fails for any reason to deposit in the
Principal Funding Account the aggregate purchase price for the Series 1996-3
Certificates, payments shall continue to be made to the Holders of the Series
1996-3 Certificates in accordance with the terms of the Pooling Agreement, the
Series 1996-2 Supplement and this Supplement. Notwithstanding the foregoing, no
redemption pursuant to this Article VII shall occur if the Series Invested
Amount attributable to any Senior Class of any Series in Group I shall have been
reduced on account of Investor Write-Offs and/or Investor Allocable Dilution
(and not subsequently reinstated) unless all such reductions are reinstated
prior to such redemption.
ARTICLE VIII MISCELLANEOUS
SECTION VIII.1 Governing Law. THIS SUPPLEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO CONFLICT OF LAWS PRINCIPLES.
SECTION VIII.2 Counterparts. This Supplement may be executed in any number
of counterparts and by the different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original, and all of
which together shall constitute one and the same instrument.
SECTION VIII.3 Severability of Provisions. If any one or more of the
provisions or terms of this Supplement shall for any reason whatsoever be held
invalid, then the unenforceable provision(s) or term(s) shall be deemed
severable from the remaining provisions or terms of this Supplement and shall in
no way affect the validity or enforceability of the other provisions or terms of
this Supplement.
SECTION VIII.4 Amendment, Waiver, Etc.
(a) In the event that federal legislation creates a new type of
entity for federal income tax purposes, the "financial asset
securitization investment trust" (a "FASIT") Transferor may amend this
Supplement in order to effect a FASIT election for all or a portion of the
Trust or the Certificates; provided, that Transferor delivers an Opinion
of Counsel to the Trustee to the effect that such election will not
adversely affect the Federal or Subject State income tax treatment of any
outstanding Series of Investor Certificates or the taxability of the Trust
under Federal or Subject State income tax laws.
14
<PAGE>
(b) This Supplement may be amended, subject to Section 13.1 of the
Pooling Agreement and Section 10.1 of the Certificate Purchase Agreement,
from time to time by Servicer, Transferor and Trustee by a written
instrument signed by each of them, without the consent of any Holder;
provided that such action shall not adversely affect in any material
respect the interests of any Holder; and provided further that for
purposes of this Supplement, any decrease in an applicable rate of
interest on any Series 1996-3 Certificate or any postponement of the
applicable Expected Final Payment Date for Series 1996-3 shall be deemed
to materially adversely affect the interests of a Holder of a Series
1996-3 Certificate. This Supplement also may be amended, modified or
waived from time to time by Servicer, Transferor and Trustee with the
consent of the Required Series Holders of each Series in Group I to the
extent permitted by Section 13.1 of the Pooling Agreement and Section 10.1
of the Certificate Purchase Agreement, and the terms of that section shall
apply to any such amendment, modification or waiver.
SECTION VIII.5 Trustee. Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of this Supplement
or for or in respect of the recitals contained herein, all of which recitals are
made solely by Transferor and Servicer.
SECTION VIII.6 Instructions in Writing. All instructions given by Servicer
to Trustee pursuant to this Supplement shall be in writing, and may be included
in a Daily Report or Monthly Report.
SECTION VIII.7 Rule 144A. So long as any of the Series 1996-3 Certificates
are "restricted securities" within the meaning of Rule 144(a)(3) under the
Securities Act, Transferor shall, unless it becomes subject to and complies with
the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act
of 1934, as amended, or rule 12g3-2(b) thereunder, provide to any Holder of such
restricted securities, or to any prospective purchaser of such restricted
securities designated by a Holder, upon the request of such Holder or
prospective purchaser, any information required to be provided by Rule
144A(d)(4) under the Act.
SECTION VIII.8 Supplemental Ratings Requirement. So long as any of the
Series 1996-3 Certificates are outstanding, if any provision of the Purchase
Agreement, the Pooling Agreement, this Supplement or the Certificate Purchase
Agreement requires a Person or investment to have a certain rating from S&P, and
such Person or investment is also rated by DCR, such provision shall be read to
also require a rating from DCR that is equivalent to the required rating from
S&P.
SECTION VIII.9 Transfer Restrictions and Procedures.
15
<PAGE>
(a) Each Series 1996-3 Certificate shall be issued as a Definitive
Certificate, provided that Series 1996-3 Certificates offered or sold
pursuant to Regulation S will be represented initially by a Regulation S
Temporary Book-Entry Certificate (the "Series 1996-3 Regulation S
Temporary Book-Entry Certificate"). The Series 1996-3 Regulation S
Temporary Book-Entry Certificate shall be exchanged on the later of (i) 40
days after the later of (A) the Closing Date and (B) the completion of the
distribution of the Series 1996-3 Certificates, as certified by the
initial Purchasers of such Certificates, and (ii) the date on which the
requisite certifications are due to and provided to the Trustee (the later
of clauses (i) and (ii) is referred to as the "Series 1996-3 Exchange
Date") for a permanent Book-Entry Certificate (the "Series 1996-3
Unrestricted Book-Entry Certificate," and together with the Series 1996-3
Regulation S Temporary Book-Entry Certificate, the "Series 1996-3
Regulation S Book-Entry Certificates"). The Series 1996-3 Regulation S
Temporary Book-Entry Certificate shall be issued in registered form,
without coupons, and deposited upon the order of Transferor with the
Trustee as custodian for, and registered in the name of Cede & Co., as
nominee for The Depository Trust Company ("DTC"), for credit to the
account of the depositaries for Euroclear and Cedel, which depositaries
shall, on behalf of Euroclear and Cedel, hold the interests on behalf of
Member Organizations, which have rights in respect of the Series 1996-3
Certificates credited to their securities accounts with Euroclear or Cedel
from time to time. DTC shall be the Clearing Agency for the Series 1996-3
Certificates.
(b) (i) A Certificate Owner holding an interest in the Series 1996-3
Regulation S Temporary Book-Entry Certificate may receive payments in
respect of the Certificates on the Series 1996-3 Regulation S Temporary
Book-Entry Certificate only after delivery to Euroclear or Cedel, as the
case may be, of a written certification substantially in the form of a
certification in the form set forth in Exhibit B, and upon delivery by
Euroclear or Cedel, as the case may be, to the Transfer Agent and
Registrar of a certification or certifications substantially in the form
set forth in Exhibit C. The delivery by a Certificate Owner of the
certification referred to above shall constitute its irrevocable
instruction to Euroclear or Cedel, as the case may be, to arrange for the
exchange of the Certificate Owner's interest in the Series 1996-3
Regulation S Temporary Book-Entry Certificate for a beneficial interest in
the Series 1996-3 Unrestricted Book-Entry Certificate after the Series
1996-3 Exchange Date in accordance with clause (ii) below.
(ii) After (i) the Series 1996-3 Exchange Date and (ii) receipt by
the Transfer Agent and Registrar of written instructions from Euroclear or
Cedel, as the case may be, directing the Transfer Agent and Registrar to
credit or cause to be credited to either Euroclear's or Cedel's, as the
case may be, depositary's account a beneficial interest in
16
<PAGE>
the Series 1996-3 Unrestricted Book-Entry Certificate in a principal
amount not greater than that of the beneficial interest in the Series
1996-3 Regulation S Temporary Book-Entry Certificate, the Transfer Agent
and Registrar shall instruct DTC to reduce the principal amount of the
Series 1996-3 Regulation S Temporary Book-Entry Certificate and increase
the principal amount of the Series 1996-3 Unrestricted Book-Entry
Certificate, by the principal amount of the beneficial interest in the
Series 1996-3 Regulation S Temporary Book-Entry Certificate to be so
transferred, and to credit or cause to be credited to the account of a
Clearing Agency Participant with DTC a beneficial interest in the Series
1996-3 Unrestricted Book-Entry Certificate having a principal amount of
the Series 1996-3 Regulation S Temporary Book-Entry Certificate that was
reduced upon the transfer.
(iii) Upon return of the entire principal amount of the Series
1996-3 Regulation S Temporary Book-Entry Certificate to Trustee in
exchange for beneficial interests in the Series 1996-3 Unrestricted
Book-Entry Certificate, Trustee shall cancel the Series 1996-3 Regulation
S Temporary Book-Entry Certificate by perforation and shall
forthwith destroy it.
(c) If a Series 1996-3 Certificate represented by a Series 1996-3
Regulation S Book-Entry Certificate is transferred or exchanged for a
Series 1996-3 Certificate represented by a Definitive Certificate, such
transfer or exchange shall be made only in accordance with the following
procedures.
(i) For transfer of a Series 1996-3 Certificate represented by a
Definitive Certificate in exchange for an interest in a Series 1996-3
Regulation S Book-Entry Certificate, the Holder of the Definitive
Certificate shall, subject to the rules and procedures of DTC, surrender
such Definitive Certificate to the Trustee at the Corporate Trust Office,
together with irrevocable directions for the Trustee to exchange or cause
the exchange of such Definitive Certificate for an equivalent beneficial
interest in the Series 1996-3 Regulation S Book-Entry Certificate held by
or on behalf of DTC, by credit to the account of a Clearing Agency
Participant specified in such directions. Upon receipt by the Trustee of
such Definitive Certificate, together with such irrevocable directions and
provided that all conditions specified in Section 8.2(d) of the
Certificate Purchase Agreement have been satisfied as to such transfer,
the Trustee shall instruct DTC to increase the principal amount of the
Series 1996-3 Regulation S Book-Entry Certificate by the aggregate
principal amount of the Definitive Certificate so surrendered, and to
credit or cause to be credited to the account of the Clearing Agency
Participant specified in such directions a beneficial interest in the
Series 1996-3 Regulation S Book-Entry Certificate equal to the principal
amount of such Definitive Certificate.
17
<PAGE>
(ii) For transfer of an interest in the Series 1996-3 Regulation S
Book-Entry Certificate in exchange for a Definitive Certificate, DTC
shall, subject to and in accordance with the rules and procedures of DTC,
give irrevocable directions for the Trustee (x) to exchange or cause the
exchange of such interest for one or more Definitive Certificates in an
aggregate principal amount equal to the principal amount of such interest,
(y) to issue one or more Definitive Certificates in an amount equal to the
beneficial interest in the Series 1996-3 Regulation S Book-Entry
Certificate to be exchanged, registered in the name or names specified in
such directions and (z) to deliver such Definitive Certificates upon
issuance to such address or addresses specified in such directions. Upon
receipt by the Trustee of such directions and provided that all conditions
specified in Section 8.2(a), (b), (c) or (e) of the Certificate Purchase
Agreement have been satisfied as to such transfer, the Trustee shall
instruct DTC to reduce the Series 1996-3 Regulation S Book-Entry
Certificate by the aggregate principal amount of the interest in the
Series 1996-3 Regulation S Book-Entry Certificate to be so exchanged, and
Transferor shall execute and the Trustee shall authenticate and deliver,
to the address or as otherwise specified in such directions, Definitive
Certificates in an aggregate principal amount equal to the beneficial
interest in the Series 1996-3 Regulation S Book-Entry Certificate to be so
exchanged. Notwithstanding the foregoing, no transfer of an interest in
the Series 1996-3 Regulation S Book-Entry Certificate in exchange for a
Definitive Certificate shall be permitted prior to the Series 1996-3
Exchange Date.
18
<PAGE>
IN WITNESS WHEREOF, Transferor, Servicer and Trustee have caused this
Supplement to be duly executed by their respective officers thereunto duly
authorized as of the day and year first above written.
BFP RECEIVABLES CORPORATION, as Transferor
By: /s/ Mark Angelson
---------------------------------------
Name: Mark Angelson
Title: Secretary
BIG FLOWER PRESS HOLDINGS, INC., as
Servicer
By: /s/ Mark Angelson
---------------------------------------
Name: Mark Angelson
Title: Executive Vice President
MANUFACTURERS AND TRADERS TRUST COMPANY,
as Trustee
By: /s/ Russell T. Whitley
---------------------------------------
Name: Russell T. Whitley
Title: Assistant Vice President
19
<PAGE>
EXHIBIT A
to the Series 1996-3 Supplement
FORM OF SERIES 1996-3 CERTIFICATE
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR UNDER THE SECURITIES OR BLUE SKY LAWS OF ANY
STATE IN THE UNITED STATES, AND MAY NOT BE OFFERED OR SOLD, EXCEPT PURSUANT TO
AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS. THIS
CERTIFICATE WILL NOT BE ACCEPTED FOR REGISTRATION OF TRANSFER EXCEPT UPON
PRESENTATION OF EVIDENCE SATISFACTORY TO THE REGISTRAR AND TRANSFER AGENT THAT
THE RESTRICTIONS ON TRANSFER SET FORTH IN THE POOLING AGREEMENT (AS DEFINED
BELOW) HAVE BEEN COMPLIED WITH.
[FOR REGULATION S BOOK-ENTRY CERTIFICATES ONLY.] [UNLESS THIS CERTIFICATE IS
PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE
TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS
IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND
ANY PAYMENT HEREON IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS BOOK-ENTRY CERTIFICATE SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO THE DEPOSITORY TRUST COMPANY, OR A NOMINEE THEREOF, NOMINEES
OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND
TRANSFERS OF PORTIONS OF THIS BOOK-ENTRY CERTIFICATE SHALL BE LIMITED TO
TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS REFERRED TO BELOW.]
A-1
<PAGE>
THE CERTIFICATEHOLDER HEREOF, BY ACCEPTING AND HOLDING THIS CERTIFICATE IS
DEEMED TO HAVE REPRESENTED AND WARRANTED THAT IT IS NOT (i) AN EMPLOYEE BENEFIT
PLAN (AS DEFINED IN SECTION 3(3) OF ERISA) THAT IS SUBJECT TO THE PROVISIONS OF
TITLE I OF ERISA, (ii) A PLAN (AS DESCRIBED IN SECTION 4975(e)(1) OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED), (iii) AN ENTITY WHOSE UNDERLYING
ASSETS INCLUDE "PLAN ASSETS" BY REASON OF A PLAN'S INVESTMENT IN THE ENTITY
(INCLUDING AN INSURANCE COMPANY GENERAL ACCOUNT THAT IS TREATED AS INCLUDING
"PLAN ASSETS" OR (iv) ACQUIRING THIS CERTIFICATE ON BEHALF OF, OR WITH, ANY
"PLAN ASSETS" OF ANY SUCH EMPLOYEE BENEFIT PLAN, PLAN OR ENTITY REFERRED TO
ABOVE.
BIG FLOWER TRADE RECEIVABLES BACKED CERTIFICATES
CLASS A-V, SERIES 1996-3 CERTIFICATE
CUSIP 144A: ____
ISIN Regulation S: ____
CUSIP Regulation S: ____
No. R-[_____]
Date: Maximum Principal Amounts
$________________
THIS CERTIFIES THAT _________________ is the registered owner of a
nonassessable, fully-paid, fractional undivided interest in the Big Flower
Receivables Master Trust (the "Trust") that was created pursuant to (a) the
Pooling and Servicing Agreement, dated as of March 19, 1996 (as the same may be
amended, supplemented or otherwise modified from time to time, the "Pooling
Agreement"), among BFP Receivables Corporation, a Delaware corporation,
("Transferor"), Big Flower Press Holdings, Inc., a Delaware corporation,
("Servicer"), and Manufacturers and Traders Trust Company, a New York banking
corporation, as trustee (together with its successors and assigns in such
capacity, "Trustee") and (b) the Supplement dated as of October 4, 1996 relating
to the Series 1996-3 Certificates (the "Supplement"). This
A-2
<PAGE>
Certificate is one of the duly authorized Series 1996-3 Certificates designated
and issued under the Pooling Agreement and the Supplement. Except as otherwise
defined herein, capitalized terms have the meanings that the Supplement and the
Pooling Agreement assign to them. This Certificate is subject to the terms,
provisions and conditions of, and is entitled to the benefits afforded by, the
Pooling Agreement and the Supplement, to which terms, provisions and conditions
the Holder of this Certificate by virtue of the acceptance hereof assents and by
which the Holder is bound.
The Series 1996-3 Certificates are a Senior Class and are therefore
entitled to share in the benefits of the subordination of the Certificates in
any Subordinated Class that may be issued from time to time to the extent set
forth in the Supplement.
Unless the certificate of authentication hereon shall have been executed
by or on behalf of Trustee by the manual signature of a duly authorized
signatory, this Certificate shall not entitle the Holder hereof to any benefit
under the Transaction Documents or be valid for any purpose.
This Certificate does not represent a recourse obligation of, or an
interest in, Transferor, any Seller, Servicer, Trustee or any Affiliate of any
of them. This Certificate is limited in right of payment to the Transferred
Assets.
By its acceptance of this Certificate, each Holder hereof (a) acknowledges
that it is the intent of Transferor, and agrees that it is the intent of the
Holder that, for Federal, state and local income and franchise tax purposes
only, the Series 1996-3 Certificates (including this Certificate) will be
treated as evidence of indebtedness secured by the Transferred Assets and the
Trust not be characterized as an association taxable as a corporation, (b)
agrees to treat this Certificate for Federal, state and local income and
franchise tax purposes as indebtedness and (c) agrees that the provisions of the
Transaction Documents shall be construed to further these intentions of the
parties.
This Certificate shall be construed in accordance with the laws of the
State of New York, without regard to its conflict of laws principles, and all
obligations, rights and remedies under or arising in connection with this
Certificate shall be determined in accordance with the laws of the State of New
York.
A-3
<PAGE>
IN WITNESS WHEREOF, Transferor has caused this Certificate to be executed
by its officer thereunto duly authorized.
BFP RECEIVABLES CORPORATION
By:__________________________
Title:_______________________
A-4
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Series 1996-3 Certificates referred to in the Pooling
Agreement, as supplemented by the Supplement.
MANUFACTURERS AND TRADERS TRUST
COMPANY, as Trustee
By:_____________________________
Title:__________________________
Dated: ____________, 1996
<PAGE>
EXHIBIT B
to Series 1996-3 Supplement
FORM OF CERTIFICATE TO BE GIVEN BY CERTIFICATE OWNER
[Euroclear [Cedel, societe anonyme
151 Boulevard Jacqmain 67 Boulevard Grand-Duchesse Charlotte
B-1210 Brussels, Belgium] L-1331 Luxembourg]
Re: Variable Rate Class A-V, Trade Receivables Backed
Certificates, Series 1996-3, issued pursuant to the
Pooling and Servicing Agreement dated as of March 19,
1996, as amended or otherwise modified from time to
time, among BFP RECEIVABLES CORPORATION, BIG FLOWER
PRESS HOLDINGS, INC. and MANUFACTURERS AND TRADERS
TRUST COMPANY, as Trustee (the "Certificates").
Capitalized terms used herein are defined in the
Pooling and Servicing Agreement.
This is to certify that as of the date hereof, and except as set forth
below, the beneficial interest in the Certificates held by you for our account
is owned by persons that are not U.S. persons (as defined in Rule 901 under the
Securities Act of 1933, as amended).
The undersigned undertakes to advise you promptly by tested telex on or
prior to the date on which you intend to submit your certification relating to
the Certificates held by you in which the undersigned has acquired, or intends
to acquire, a beneficial interest in accordance with your operating procedures
if any applicable statement herein is not correct on such date. In the absence
of any such notification, it may be assumed that this certification applies as
of such date.
[This certification excepts beneficial interests in and does not relate to
U.S. $_________ principal amount of the Certificates appearing in your books as
being held for our account but that we have sold or as to which we are not yet
able to certify.]
<PAGE>
We understand that this certification is required in connection with
certain securities laws in the United States of America. If administrative or
legal proceedings are commenced or threatened in connection with which this
certification is or would be relevant, we irrevocably authorize you to produce
this certification or a copy thereof to any interested party in such
proceedings.
Dated: ___________________,* By: ,
Account Holder
- - ----------
* Certification must be dated on or after the 15th day before the date of the
Euroclear or Cedel certificate to which this certification relates.
2
<PAGE>
EXHIBIT C
to Series 1996-3 Supplement
FORM OF CERTIFICATE TO BE GIVEN BY EUROCLEAR OR CEDEL
[Manufacturers and Traders
Trust Company]
1 M&T Plaza
7th Floor
Buffalo, New York 14203-2399]
[Name of Successor Trustee and Transfer
Agent and Registrar and Address]
Re: Variable Rate Class A-V Trade Receivables
Asset-Backed Certificates, Series 1996-3, issued
pursuant to the Pooling and Servicing Agreement dated
as of March 19, 1996, as amended or otherwise
modified from time to time, among BFP RECEIVABLES
CORPORATION, BIG FLOWER PRESS HOLDINGS, INC. and
MANUFACTURERS AND TRADERS TRUST COMPANY, as Trustee
(the "Certificates"). Capitalized terms used herein
are defined in such Pooling and Servicing Agreement.
This is to certify that, based solely on certifications we have received
in writing, by tested telex or by electronic transmission from member
organizations appearing in our records as persons being entitled to a portion of
the principal amount set forth below (our "Member Organizations") as of the date
hereof, $__________ principal amount of the Certificates is owned by persons (a)
that are not U.S. persons (as defined in Rule 901 under the Securities Act of
1933, as amended (the "Securities Act")) or (b) who purchased their Certificates
(or interests therein) in a transaction or transactions that did not require
registration under the Securities Act.
We further certify (a) that we are not making available herewith for
exchange any portion of the related Regulation S Temporary Book-Entry
Certificate excepted in such certifications and (b) that as of the date hereof
we have not received any notification from any of our Member Organizations to
the effect that the statements made by them with respect to any portion of the
part submitted herewith for exchange are no longer true and cannot be relied
upon as of the date hereof.
<PAGE>
We understand that this certification is required in connection with
certain securities laws of the United States of America. If administrative or
legal proceedings are commenced or threatened in connection with which this
certification is or would be relevant, we irrevocably authorize you to produce
this certification or a copy hereof to any interested party in such proceedings.
Date: _________________* Yours faithfully,
* To be dated no earlier By:_________________________
than the applicable [Morgan Guaranty Trust
Series 1996-3 Exchange Date Company of New York,
Brussels
Office, as Operator of the
Euroclear Clearance System
[Cedel, societe anonyme]
2
<PAGE>
Exhibit 10.15
PURCHASE AGREEMENT
dated September 25, 1996
among
BIG FLOWER PRESS HOLDINGS, INC.,
BFP RECEIVABLES CORPORATION,
BT SECURITIES CORPORATION,
BANKERS TRUST INTERNATIONAL PLC,
and
CS FIRST BOSTON CORPORATION
<PAGE>
September 25, 1996
BT SECURITIES CORPORATION
Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
BANKERS TRUST INTERNATIONAL PLC
One Appold Street
Broadgate
London EC2A 2HE
England
CS FIRST BOSTON CORPORATION
Park Avenue Plaza
55 East 52nd Street
New York, New York 10055
Ladies and Gentlemen:
Big Flower Press Holdings, Inc., a Delaware corporation ("Big Flower"),
and BFP Receivables Corporation, a Delaware corporation and a wholly owned
subsidiary of Big Flower ("BFP"), hereby confirm their agreement with each of BT
Securities Corporation, Bankers Trust International PLC and CS First Boston
Corporation (each an "Initial Purchaser," and collectively the "Initial
Purchasers"), as set forth below.
SECTION 1 The Certificates. Subject to the terms and conditions herein
contained, BFP proposes to sell to the Initial Purchasers, $75,000,000 aggregate
principal amount of its Variable Rate Class A, Trade Receivables Backed
Certificates, Series 1996-2 (the "Class A Certificates"), and $40,000,000
aggregate principal amount of its Variable Rate Class B, Trade Receivables
Backed Certificates, Series 1996-2 (the "Class B Certificates"), $15,000,000
aggregate principal amount of its Variable Rate Class C, Trade Receivables
Backed Certificates, Series 1996-2 (the "Class C Certificates"), and
collectively with the Class A Certificates and the Class B Certificates, the
"Certificates"), as more fully described in Section 3. The terms of the
Certificates are more fully set forth in the Offering Memorandum (as hereinafter
defined). The Certificates are to be issued under (a) a Pooling and Servicing
Agreement, dated as of March 19, 1996 (as amended or otherwise modified from
time to time, the "Pooling Agreement"), among BFP, as transferor, Big Flower, as
initial Servicer
<PAGE>
("Servicer"), and Manufacturers and Traders Trust Company, as Trustee, and (b) a
Series 1996-2 Supplement to the Pooling Agreement, to be entered into on or
about October 4, 1996 (the "Series 1996-2 Supplement"), among BFP, Servicer, and
the Trustee. Capitalized terms used but not defined in this Purchase Agreement
(the "Agreement") have the meanings assigned to them in Appendix A to the
Pooling Agreement or in the Series 1996-2 Supplement.
The Certificates will be offered and sold to the Initial Purchasers
without being registered under the Securities Act, in reliance on exemptions
therefrom.
In connection with the sale of the Certificates, BFP has prepared a
preliminary offering memorandum dated August 30, 1996 (the "Preliminary Offering
Memorandum") and a final offering memorandum dated September 26, 1996 (the
"Offering Memorandum"), each of which will be in form and substance satisfactory
to each of the Initial Purchasers. All references to the Preliminary Offering
Memorandum or the Offering Memorandum shall be deemed to include all their
attachments.
Each of Big Flower and BFP hereby expressly authorizes the Initial
Purchasers to use the Preliminary Offering Memorandum and the Offering
Memorandum, as they may at any time have been amended or supplemented, in
connection with the offer and sale of the Certificates, and Big Flower and BFP
hereby ratify and affirm all distributions of the Preliminary Offering
Memorandum by the Initial Purchasers on or prior to the date of this Agreement
Persons whom the Initial Purchasers reasonably believe to be "Qualified
Institutional Buyers" or "Accredited Investors" (as each such term is defined
hereinbelow) and authorize the Initial Purchasers to distribute the Preliminary
Offering Memorandum and the Offering Memorandum in connection with the initial
resale of the Certificates. Big Flower also hereby expressly authorizes the
Initial Purchasers to distribute Big Flower's 1995 Annual Report on Form 10-K,
Quarterly Reports on Form 10-Q for the quarters ending March 31, 1996 and June
30, 1996, any materials incorporated by reference in such Annual or Quarterly
reports, the other written information distributed at the "road-show" investor
meetings attended by Big Flower (which materials may, for the avoidance of
doubt, be distributed to investors or potential investors whether or not they
attended those meetings) and the earnings release relating to Big Flower's
fiscal 1995 performance (collectively, the "Additional Disclosure Documents") in
connection with the sale of the Certificates.
Each of Big Flower and BFP understands that the Initial Purchasers propose
to make an offering of the Certificates on the terms and in the manner set forth
in the Offering Memorandum and Section 3 as soon as they deem advisable after
this Agreement has been executed and delivered to Persons whom the Initial
Purchasers reasonably believe to be qualified institutional buyers ("Qualified
Institutional Buyers") as defined in Rule 144A under the Securities Act, as such
rule may be amended from time to time ("Rule 144A"), in transactions under Rule
144A and to a limited number of other institutional "accredited
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<PAGE>
investors" ("Accredited Investors"), as defined in Rule 501(a)(1), (2), (3) and
(7) under Regulation D of the Securities Act in private sales exempt from
registration under the Securities Act, and, in the case of the Class A
Certificates and the Class B Certificates only, outside the United States of
America to certain non-U.S. Persons in reliance upon Regulation S under the
Securities Act ("Regulation S").
SECTION 2A. Representations and Warranties of Big Flower. Big Flower
represents and warrants to the Initial Purchasers that:
(a) Neither (i) any of the Preliminary Offering Memorandum, the Offering
Memorandum, any Additional Disclosure Documents or any amendment or supplement
to any of the foregoing, in each case as of the respective dates thereof, or
(ii) the Preliminary Offering Memorandum or the Offering Memorandum, as modified
by any amendment thereof or supplement thereto, at all times up to the Closing
Date (as defined in Section 3), contained or contains, as applicable, an untrue
statement of a material fact or omitted or omits to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, except that the representations and
warranties set forth in this subsection do not apply to statements or omissions
made in reliance upon and in conformity with the information described in
Section 12 and any other information that is furnished to BFP in writing by the
Initial Purchasers after the date hereof expressly for use in any amendment or
supplement to the Offering Memorandum.
(b) The Certificates, the Transaction Documents and the businesses of each
of Big Flower and its consolidated subsidiaries and BFP each conforms in all
material respects to the respective descriptions thereof contained in the
Offering Memorandum.
(c) The statistical and market-related data included in the Offering
Memorandum and any Additional Disclosure Documents are based on or derived from
sources that Big Flower believes to be reliable and accurate in all material
respects. The information concerning the Receivables that is included in the
Offering Memorandum and any Additional Disclosure Documents presents fairly in
all material respects the information purported to be stated therein. There has
been no material adverse change in the delinquency, dilution, loss and other
information with respect to the Receivables from that set forth in the Offering
Memorandum.
(d) Each Seller and each of Servicer and BFP is a corporation duly
organized, and validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has full power and authority to own its
properties and to conduct its business as the properties presently are owned and
the business presently is conducted. Each Seller and BFP had at all relevant
times, and now has, all necessary power, authority and legal right to acquire,
own and transfer, in the manner contemplated by the Transaction Documents, (i)
in the case of each
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Seller, the Receivables and the Related Assets and (ii) in the case of BFP, the
Receivables and the other Transferred Assets.
(e) (i) Servicer is duly qualified to do business and is in good standing
as a foreign corporation (or is exempt from such requirements), and has obtained
all necessary licenses and approvals, in all jurisdictions in which the
servicing of the Receivables and the Related Transferred Assets as required by
the Pooling Agreement requires qualification, licenses or approvals and where
the failure so to qualify, to obtain such licenses and approvals or to preserve
and maintain such qualification, licenses or approvals could have a material
adverse effect on its ability to perform its obligations as Servicer under the
Pooling Agreement or a Material Adverse Effect and (ii) each of BFP and each
Seller is duly qualified to do business and is in good standing as a foreign
corporation (or is exempt from such requirements), and has obtained all
necessary licenses and approvals, in all jurisdictions in which the ownership or
lease of property or the conduct of its business requires qualification,
licenses or approvals and where the failure so to qualify, to obtain such
licenses and approvals or to preserve and maintain such qualification, licenses
or approvals could have a Material Adverse Effect.
(f) BFP has all necessary power and authority to execute and deliver the
Certificates. Each Certificate has been duly and validly authorized by BFP and,
from and after the date on which such Certificate is executed by BFP and
authenticated by the Trustee in accordance with the terms of the Pooling
Agreement and the Series 1996-2 Supplement and delivered to and paid for by the
Initial Purchasers in accordance with the terms of this Agreement, will be
validly issued and outstanding and will constitute valid and legally binding
obligations of BFP entitled to the benefits of the Pooling Agreement and the
Series 1996-2 Supplement and enforceable against BFP in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of creditors'
rights generally and by general principles of equity, regardless of whether
enforceability is considered in a proceeding in equity or at law.
(g) Each Seller and each of Servicer and BFP has (i) all necessary
corporate power and authority to (A) execute and deliver such of the Transaction
Documents to which it is a party, and (B) perform its obligations under such of
the Transaction Documents to which it is a party, (ii) duly authorized by all
necessary action the execution, delivery and performance of such of the
Transaction Documents to which it is a party and the consummation of the
transactions provided for in such of the Transaction Documents to which it is a
party, and (iii) duly and validly executed and delivered such of the Transaction
Documents to which it is a party.
(h) Each of the Transaction Documents to which Servicer, any Seller or
BFP, as the case may be, is a party, when executed and delivered by it (and
assuming the due authorization, execution and delivery thereof by the other
parties thereto), will constitute its
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legal, valid and binding obligation, enforceable against it in accordance with
the terms thereof, except as enforceability may be limited by bankruptcy,
insolvency, reorganization or other similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity, regardless of
whether enforceability is considered in a proceeding in equity or at law.
(i) All authorizations, consents, orders and approvals of, or other action
by, any Governmental Authority that are required to be obtained by Servicer, any
Seller or BFP, and all notices to and filings with any Governmental Authority
that are required to be made by Servicer, any Seller or BFP, in the case of each
of the foregoing in connection with the due execution, delivery and performance
by Servicer, the Sellers and BFP of such of the Transaction Documents to which
they are a party and the consummation of the transactions contemplated by the
Transaction Documents to which they are a party, have been obtained or made and
are in full force and effect except (i) filings under any state "Blue Sky" laws
and (ii) where the failure to obtain or make any such authorization, consent,
order, approval, notice or filing, individually or in the aggregate for all such
failures, would not reasonably be expected to have a Material Adverse Effect.
(j) The execution, delivery and performance of, and the consummation of
the transactions contemplated by, this Agreement and each other Transaction
Document and the fulfillment of the terms hereof and thereof by Servicer, each
Seller and BFP will not (i) conflict with, violate, result in any breach of any
of the terms and provisions of, or constitute (with or without notice or lapse
of time or both) a default under, (A) the certificate of incorporation or the
by-laws of Servicer, any Seller or BFP or (B) any indenture, loan agreement,
mortgage, deed of trust or other agreement or instrument to which Servicer, any
Seller or BFP is a party or by which Servicer, any Seller or BFP or any of their
respective properties is bound unless a valid and enforceable consent has been
obtained prior to the date of this Agreement, (ii) result in the creation or
imposition of any Adverse Claim (other than any Permitted Adverse Claim or any
Adverse Claim created in favor of BFP pursuant to the Purchase Agreement or in
favor of the Trustee pursuant to the Pooling Agreement) upon any of the
properties of Servicer, any Seller or BFP, or (iii) conflict with or violate any
federal, state, local or foreign law or any decision, decree, order, rule or
regulation applicable to Servicer, any Seller or BFP or any of their respective
properties of any Governmental Authority, which conflict, violation, breach,
default or Adverse Claim described in any of clauses (i)(B), (ii) or (iii)
above, individually or in the aggregate, would have a substantial likelihood of
having a Material Adverse Effect.
(k) The audited financial statements and schedules of Big Flower, and its
consolidated Subsidiaries for the period ended December 31, 1995, as filed with
the Securities and Exchange Commission (the "Commission") on Form 10-K and the
unaudited financial statements and schedules of Big Flower and its consolidated
Subsidiaries, for the quarters
page 5
<PAGE>
ended March 31, 1996 and June 30, 1996, as filed with the Commission on Form
10-Q (collectively, the "Financial Statements"), present fairly in all material
respects the financial position, results of operations and cash flows of Big
Flower and its consolidated Subsidiaries at the dates and for the periods to
which they relate and have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis, except as otherwise stated
therein. Deloitte & Touche LLP (the "Independent Accountants") is an independent
public accounting firm within the meaning of the Securities Act and the rules
and regulations promulgated thereunder (the "Rules and Regulations").
(l) Since the date of the Financial Statements, (i) there has been no
material adverse change in the condition, financial or otherwise, or the
earnings, business affairs or business prospects of BFP, any Seller or Big
Flower, whether or not arising in the ordinary course of business, and (ii)
except as disclosed in the notes to the Financial Statements or in the
Preliminary Offering Memorandum, there have been no transactions entered into by
BFP, any Seller or Big Flower that are material with respect to BFP, any Seller
or Big Flower and that would be required to be disclosed under applicable law in
connection with the offering, sale or resale of the Certificates.
(m) (i) There is no action, suit, proceeding or investigation pending or,
to the best knowledge of Servicer, threatened against any of Servicer, any
Seller or BFP before any court, regulatory body, arbitrator, administrative
agency or other tribunal or governmental instrumentality and (ii) none of
Servicer, any Seller or BFP is subject to any order, judgment, decree,
injunction, stipulation or consent order of or with any court or other
Governmental Authority that, in the case of each of clauses (i) and (ii), (A)
asserts the invalidity of any Transaction Document, (B) seeks any determination
or ruling that would materially and adversely affect the performance by
Servicer, any Seller or BFP of its obligations under any Transaction Document or
the validity or enforceability of any Transaction Document, (C) seeks to affect
adversely the income tax attributes of the transfers occurring pursuant to the
Purchase Agreement or the Pooling Agreement under the United States Federal
income tax system or any state income tax system or (D) individually or in the
aggregate for all such actions, suits, proceedings and investigations would have
a substantial likelihood of having a Material Adverse Effect.
(n) Neither this Agreement nor any transaction contemplated herein or in
the Transaction Documents will result in a violation of, or give rise to an
obligation on the part of any purchaser to register, file or give notice under,
Regulations G, T, U or X of the Federal Reserve Board or any other regulation
issued by the Federal Reserve Board pursuant to the Securities Exchange Act of
1934, as amended (the "Exchange Act"), in each case as in effect on the Closing
Date.
(o) None of BFP, Big Flower, any Seller or the Trust is an "investment
company" or
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controlled by an "investment company" registered or required to be registered
under the Investment Company Act of 1940, as amended (the "Investment Company
Act").
(p) None of Big Flower, BFP or any of their respective affiliates (as
defined in Rule 501(b) of Regulation D under the Securities Act) has directly,
or through any agent, (i) sold, offered for sale, solicited offers to buy or
otherwise negotiated in respect of, any "security" (as defined in the Securities
Act) that is or will be integrated with the sale of the Certificates in a manner
that would require the registration under the Securities Act of the offering of
the Certificates or (ii) assuming the accuracy of the representations and
warranties of the Initial Purchasers in Section 8, engaged in any form of
general solicitation or general advertising in connection with the offering of
the Certificates (as those terms are used in Regulation D under the Securities
Act) or in any manner involving a public offering of the Certificates within the
meaning of Section 4(2) of the Securities Act.
(q) None of Big Flower, BFP, any of their respective Affiliates or any
Person acting on their behalf has engaged in any directed selling efforts (as
that term is defined in Regulation S) with respect to any Certificates or
otherwise made offers or sales of securities under circumstances that would
require registration of the Certificates under the Securities Act and Big
Flower, BFP and their respective affiliates and any Person acting on its or
their behalf have complied with the offering restrictions requirement of
Regulation S.
(r) Assuming the accuracy of the representations and warranties of the
Initial Purchasers in Section 8, it is not necessary in connection with the
offer, sale and delivery of the Certificates in the manner contemplated by this
Agreement to register any of the Certificates under the Securities Act or to
qualify the Pooling Agreement under the Trust Indenture Act of 1939, as amended.
(s) On the Closing Date, (i) each of the representations and warranties of
Servicer, each Seller and BFP that is set forth in this Agreement, the Purchase
Agreement, the Pooling Agreement and the other Transaction Documents will be
true and correct, and (ii) none of Servicer, any Seller or BFP will be in breach
of any covenant or agreement set forth in this Agreement, the Purchase
Agreement, the Pooling Agreement or any other Transaction Document.
(t) No event has occurred and is continuing that constitutes, or with the
passage of time or the giving of notice or both would constitute, an Early
Amortization Event or a Servicer Default.
(u) The Certificates meet the eligibility requirements of Rule 144A(d)(3)
under the Securities Act.
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<PAGE>
(v) Each of the Preliminary Offering Memorandum and the Offering
Memorandum, as of its date, contains all of the information specified in, and
meets the requirements of, Rule 144A(d)(4) under the Securities Act.
SECTION 2B. Representations and Warranties of BFP. BFP represents and
warrants to the Initial Purchasers that:
(a) Neither (i) any of the Preliminary Offering Memorandum, the Offering
Memorandum, any Additional Disclosure Documents or any amendment or supplement
to any of the foregoing, in each case as of the respective dates thereof, or
(ii) the Preliminary Offering Memorandum or the Offering Memorandum, as modified
by any amendment thereof or supplement thereto, at all times up to the Closing
Date (as defined in Section 3), contained or contains, as applicable, an untrue
statement of a material fact or omitted or omits to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, except that the representations and
warranties set forth in this subsection do not apply to statements or omissions
made in reliance upon and in conformity with the information described in
Section 12 and any other information that is furnished to BFP in writing by the
Initial Purchasers after the date hereof expressly for use in any amendment or
supplement to the Offering Memorandum.
(b) The Certificates, the Transaction Documents and the business of BFP
conforms in all material respects to the respective descriptions thereof
contained in the Offering Memorandum.
(c) The statistical and market-related data included in the Offering
Memorandum and any Additional Disclosure Documents are based on or derived from
sources that BFP believes to be reliable and accurate in all material respects.
The information concerning the Receivables that is included in the Offering
Memorandum and any Additional Disclosure Documents presents fairly in all
material respects the information purported to be stated therein. There has been
no material adverse change in the delinquency, dilution, loss and other
information with respect to the Receivables from that set forth in the Offering
Memorandum.
(d) BFP is a corporation duly organized, and validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has full
power and authority to own its properties and to conduct its business as the
properties presently are owned and the business presently is conducted. BFP had
at all relevant times, and now has, all necessary power, authority and legal
right to acquire, own and transfer, in the manner contemplated by the
Transaction Documents, the Receivables and the other Transferred Assets.
(e) BFP is duly qualified to do business and is in good standing as a
foreign
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<PAGE>
corporation (or is exempt from such requirements), and has obtained all
necessary licenses and approvals, in all jurisdictions in which the ownership or
lease of property or the conduct of its business requires qualification,
licenses or approvals and where the failure so to qualify, to obtain such
licenses and approvals or to preserve and maintain such qualification, licenses
or approvals could have a Material Adverse Effect.
(f) BFP has all necessary power and authority to execute and deliver the
Certificates. Each Certificate has been duly and validly authorized by BFP and,
from and after the date on which such Certificate is executed by BFP and
authenticated by the Trustee in accordance with the terms of the Pooling
Agreement and the Series 1996-2 Supplement and delivered to and paid for by the
Initial Purchasers in accordance with the terms of this Agreement, will be
validly issued and outstanding and will constitute valid and legally binding
obligations of BFP entitled to the benefits of the Pooling Agreement and the
Series 1996-2 Supplement and enforceable against BFP in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of creditors'
rights generally and by general principles of equity, regardless of whether
enforceability is considered in a proceeding in equity or at law.
(g) BFP has (i) all necessary corporate power and authority to (A) execute
and deliver such of the Transaction Documents to which it is a party, and (B)
perform its obligations under such of the Transaction Documents to which it is a
party, (ii) duly authorized by all necessary action the execution, delivery and
performance of such of the Transaction Documents to which it is a party and the
consummation of the transactions provided for in such of the Transaction
Documents to which it is a party, and (iii) duly and validly executed and
delivered such of the Transaction Documents to which it is a party.
(h) Each of the Transaction Documents to which BFP is a party, when
executed and delivered by it (and assuming the due authorization, execution and
delivery thereof by the other parties thereto), will constitute its legal, valid
and binding obligation, enforceable against it in accordance with the terms
thereof, except as enforceability may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of creditors'
rights generally and by general principles of equity, regardless of whether
enforceability is considered in a proceeding in equity or at law.
(i) All authorizations, consents, orders and approvals of, or other action
by, any Governmental Authority that are required to be obtained by BFP, and all
notices to and filings with any Governmental Authority that are required to be
made by BFP, in the case of each of the foregoing in connection with the due
execution, delivery and performance by BFP of such of the Transaction Documents
to which it is a party and the consummation of the transactions contemplated by
the Transaction Documents to which it is a party, have been obtained or made and
are in full force and effect except (i) filings under any state "Blue Sky" laws
and (ii) where
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the failure to obtain or make any such authorization, consent, order, approval,
notice or filing, individually or in the aggregate for all such failures, would
not reasonably be expected to have a Material Adverse Effect.
(j) The execution, delivery and performance of, and the consummation of
the transactions contemplated by, this Agreement and each other Transaction
Document and the fulfillment of the terms hereof and thereof by BFP will not (i)
conflict with, violate, result in any breach of any of the terms and provisions
of, or constitute (with or without notice or lapse of time or both) a default
under, (A) the certificate of incorporation or the by-laws of BFP or (B) any
indenture, loan agreement, mortgage, deed of trust or other agreement or
instrument to which BFP is a party or by which BFP or any of its properties is
bound unless a valid and enforceable consent has been obtained prior to the date
of this Agreement, (ii) result in the creation or imposition of any Adverse
Claim (other than any Permitted Adverse Claim or any Adverse Claim created in
favor of BFP pursuant to the Purchase Agreement or in favor of the Trustee
pursuant to the Pooling Agreement) upon any of the properties of BFP, or (iii)
conflict with or violate any federal, state, local or foreign law or any
decision, decree, order, rule or regulation applicable to BFP or any of its
properties of any Governmental Authority, which conflict, violation, breach,
default or Adverse Claim described in any of clauses (i)(B), (ii) or (iii)
above, individually or in the aggregate, would have a substantial likelihood of
having a Material Adverse Effect.
(k) Since the date of the Financial Statements, (i) there has been no
material adverse change in the condition, financial or otherwise, or the
earnings, business affairs or business prospects of BFP whether or not arising
in the ordinary course of business, and (ii) except as disclosed in the notes to
the Financial Statements or in the Preliminary Offering Memorandum, there have
been no transactions entered into by BFP that are material with respect to BFP
and that would be required to be disclosed under applicable law in connection
with the offering, sale or resale of the Certificates.
(l) (i) There is no action, suit, proceeding or investigation pending or,
to the best knowledge of BFP, threatened against them before any court,
regulatory body, arbitrator, administrative agency or other tribunal or
governmental instrumentality and (ii) BFP is not subject to any order, judgment,
decree, injunction, stipulation or consent order of or with any court or other
Governmental Authority that, in the case of each of clauses (i) and (ii), (A)
asserts the invalidity of any Transaction Document, (B) seeks any determination
or ruling that would materially and adversely affect the performance by BFP of
its obligations under any Transaction Document or the validity or enforceability
of any Transaction Document, (C) seeks to affect adversely the income tax
attributes of the transfers occurring pursuant to the Purchase Agreement or the
Pooling Agreement under the United States Federal income tax system or any state
income tax system or (D) individually or in the aggregate for all such
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actions, suits, proceedings and investigations would have a substantial
likelihood of having a Material Adverse Effect.
(m) Neither this Agreement nor any transaction contemplated herein or in
the Transaction Documents will result in a violation of, or give rise to an
obligation on the part of any purchaser to register, file or give notice under,
Regulations G, T, U or X of the Federal Reserve Board or any other regulation
issued by the Federal Reserve Board pursuant to the Securities Exchange Act of
1934, as amended (the "Exchange Act"), in each case as in effect on the Closing
Date.
(n) BFP is not an "investment company" or controlled by an "investment
company" registered or required to be registered under the Investment Company
Act.
(o) Neither BFP nor any of its affiliates (as defined in Rule 501(b) of
Regulation D under the Securities Act) has directly, or through any agent, (i)
sold, offered for sale, solicited offers to buy or otherwise negotiated in
respect of, any "security" (as defined in the Securities Act) that is or will be
integrated with the sale of the Certificates in a manner that would require the
registration under the Securities Act of the offering of the Certificates or
(ii) assuming the accuracy of the representations and warranties of the Initial
Purchasers in Section 8, engaged in any form of general solicitation or general
advertising in connection with the offering of the Certificates (as those terms
are used in Regulation D under the Securities Act) or in any manner involving a
public offering of the Certificates within the meaning of Section 4(2) of the
Securities Act.
(p) None of BFP, any of its Affiliates or any Person acting on its or
their behalf has engaged in any directed selling efforts (as that term is
defined in Regulation S) with respect to any Certificates or otherwise made
offers or sales of securities under circumstances that would require
registration of the Certificates under the Securities Act and BFP and its
affiliates and any Person acting on its or their behalf have complied with the
offering restrictions requirement of Regulation S.
(q) Assuming the accuracy of the representations and warranties of the
Initial Purchasers in Section 8, it is not necessary in connection with the
offer, sale and delivery of the Certificates in the manner contemplated by this
Agreement to register any of the Certificates under the Securities Act or to
qualify the Pooling Agreement under the Trust Indenture Act of 1939, as amended.
(r) On the Closing Date, (i) each of the representations and warranties of
BFP that is set forth in this Agreement, the Purchase Agreement, the Pooling
Agreement and the other Transaction Documents will be true and correct, and (ii)
BFP will not be in breach of any covenant or agreement set forth in this
Agreement, the Purchase Agreement, the Pooling
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Agreement or any other Transaction Document.
(s) No event has occurred and is continuing that constitutes, or with the
passage of time or the giving of notice or both would constitute, an Early
Amortization Event or a Servicer Default.
(t) The Certificates meet the eligibility requirements of Rule 144A(d)(3)
under the Securities Act.
(u) Each of the Preliminary Offering Memorandum and the Offering
Memorandum, as of its date, contains all of the information specified in, and
meets the requirements of, Rule 144A(d)(4) under the Securities Act.
SECTION 3. Purchase, Sale and Delivery of the Certificates. On the basis
of the representations, warranties, agreements and covenants herein contained
and subject to the terms and conditions herein set forth, BFP agrees to sell to
the Initial Purchasers, and each Initial Purchaser agrees to purchase, severally
and not jointly, Certificates in the principal amount set forth opposite the
name of each such Initial Purchaser on Schedule I at the purchase price
specified in Schedule I. The purchaser discount reflected in the purchase price
shall constitute compensation to each Initial Purchaser in addition to, and not
in substitution for, the other amounts referred to in Section 6 and any other
amount payable by Big Flower or BFP to any Initial Purchaser or its affiliate in
connection with the transactions contemplated by the Transaction Documents,
except that the purchaser discount will be credited against the success fee
referred to in the February 23, 1996 engagement letter among Treasure Chest
Advertising Company, Inc., BT Securities Corporation and CS First Boston
Corporation (the "Engagement Letter"). The Certificates that each Initial
Purchaser has agreed to purchase (in such denominations and registered in such
name or names as the Initial Purchasers shall designate two Business Days prior
to the Closing Date), shall be delivered to the holder against payment by or on
behalf of the Initial Purchasers of the purchase price therefor (after giving
effect to any amounts held back therefrom as described in the following
sentence) by wire transfer (same day funds) to the account or accounts that BFP
shall specify not less than one Business Day prior to the Closing Date. Each
Initial Purchaser shall be entitled to hold back from the purchase price so paid
for the Certificates by any amounts then payable by Big Flower or BFP to such
Initial Purchaser pursuant to any of Sections 5A, 5B and 6. The delivery of and
payment for the Certificates shall be made at the New York offices of Mayer,
Brown & Platt, at 10:00 a.m., New York City time, on October 4, 1996 or at such
other place, time or date as the Initial Purchasers, Big Flower and BFP may
agree upon, such time and date of delivery against payment being herein referred
to as the "Closing Date". BFP will make copies of the Certificates available for
checking by the Initial Purchasers at the New York offices of Mayer, Brown &
Platt at least 24 hours prior to the Closing Date.
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SECTION 4. Offering by the Initial Purchasers. The Initial Purchasers
propose to make an offering of the Certificates, upon the terms set forth in the
Offering Memorandum, as soon as practicable after this Agreement is entered into
and as in their judgment is advisable. During the period from the date of this
Agreement until the completion of the initial distribution, BFP and Big Flower
each agrees to assist the Initial Purchasers in any marketing of the
Certificates and (promptly upon request) to provide all information reasonably
deemed necessary by the Initial Purchasers in such marketing. In addition,
during such period BFP and Big Flower will use their best efforts to make
appropriate officers and representatives of BFP and Big Flower available to
participate in the information meetings for potential investors at such times
and places as the Initial Purchasers may reasonably request. Further, each of
BFP and Big Flower agrees, upon the request of an Initial Purchaser, to use
reasonable efforts to cause the Independent Accountants to deliver to any
potential purchaser of a Certificate an agreed upon procedures letter comparable
to the comfort letter described in Section 7(l).
SECTION 5A. Covenants of Big Flower. Big Flower covenants and agrees with
the Initial Purchasers that:
(a) Big Flower will not, and will not permit BFP to, amend or supplement
the Offering Memorandum or any amendment thereof or supplement thereto unless
each of the Initial Purchasers previously shall have been advised thereof and
been furnished a copy thereof for a reasonable period of time prior to the
proposed amendment or supplement and shall have given its prior written consent.
Big Flower will, and will cause BFP to, promptly upon the reasonable request by
any of the Initial Purchasers, prepare any amendments of or supplements to the
Offering Memorandum that, in the opinion of the Initial Purchasers, may be
necessary or advisable in connection with the resale of the Certificates by the
Initial Purchasers.
(b) Big Flower will, and will cause BFP to, take any action for the
qualification or exemption of the Certificates for offer, sale and resale under
the securities or "Blue Sky" laws of any jurisdictions that any of the Initial
Purchasers shall reasonably request and will pay all reasonable expenses
(including reasonable fees and disbursements of counsel) in connection with the
qualification or exemption and in connection with the determination of the
eligibility of the Certificates for investment under the laws of the
jurisdictions that the Initial Purchasers may designate; provided, however, that
neither Big Flower nor BFP shall be obligated to qualify to do business or
become subject to service of process generally, but only to the extent required
for such qualification, in any jurisdiction in which it is not currently so
qualified. Thereafter, while any of the Certificates remain outstanding, Big
Flower will, and will cause BFP to, arrange for the filing and making of, and
will pay all fees applicable to, any statements and reports and renewals of
registration necessary in order to continue to qualify or exempt the
Certificates for secondary market transactions in the various jurisdictions in
which the Certificates were originally registered or exempted for sale. If any
of the Initial Purchasers shall pay any of the fees or expenses referred to in
this subsection, Big Flower
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shall, and shall cause BFP to, promptly reimburse such Initial Purchaser; it
being understood and agreed that the reimbursement shall not be subject to any
limitations on reimbursement set forth in Section 6.
(c) Without limiting the conditions specified in Section 7, if, at any
time prior to the completion of the distribution of the Certificates, any event
occurs or condition exists as a result of which it is necessary or desirable, in
the opinion of the Initial Purchasers, BFP or Big Flower, to amend or supplement
the Offering Memorandum in order that the Offering Memorandum will not include
an untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made or existing at the time the Offering
Memorandum is delivered to a prospective purchaser of any legal or beneficial
interest in the Certificates, not misleading, or if for any other reason it is
necessary at any time to amend or supplement the Offering Memorandum to comply
with applicable law, Big Flower will, and will cause BFP to, promptly notify the
Initial Purchasers thereof and will prepare and deliver to the Initial
Purchasers, at the expense of Big Flower and BFP, an amendment of or supplement
to the Offering Memorandum that corrects the statement or omission or effects
such compliance.
(d) Big Flower will, and will cause BFP to, (i) promptly notify the
Initial Purchasers of any amendment, supplement or other modification of any
Additional Disclosure Document and (ii) without charge, provide to the Initial
Purchasers as many copies of the Offering Memorandum, the Additional Disclosure
Documents and any amendment or supplement to any of such documents as the
Initial Purchasers may reasonably request.
(e) Big Flower will, and will cause BFP to, apply the net proceeds from
the sale of the Certificates as set forth in the "Use of Proceeds" section of
the Offering Memorandum. Neither Big Flower nor any of its Subsidiaries will use
the proceeds of the sale of the Certificates or any part thereof, directly or
indirectly, to purchase or carry any "margin security" (as defined in
Regulations G, T, U or X issued by the Federal Reserve Board) or to reduce or
retire any indebtedness originally incurred to purchase any margin security.
(f) Big Flower will not, and will not permit BFP or any of Big Flower's or
BFP's respective Subsidiaries or Affiliates to, sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any "security" (as defined in
the Securities Act) that could be integrated with the sale of the Certificates
in a manner that would require the registration of the Certificates under the
Securities Act.
(g) Big Flower will not, and will not permit BFP, any of Big Flower's or
BFP's respective Subsidiaries or Affiliates or any Person acting on its or their
behalf to, engage in any directed selling efforts (as that term is defined in
Regulation S) with respect to any Certificates, and Big Flower will, and will
cause BFP, Big Flower's and BFP's respective
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Subsidiaries and Affiliates and each Person acting on its or their behalf to,
comply with the offering restrictions requirement of Regulation S.
(h) Big Flower will not, and will not permit BFP or any of Big Flower's or
BFP's respective Subsidiaries or Affiliates to, solicit any offer to buy or
offer to sell the Certificates by means of any form of general solicitation or
general advertising (as those terms are used in Regulation D under the
Securities Act) or in any manner involving a public offering within the meaning
of Section 4(2) of the Securities Act.
(i) Big Flower will not, and will not permit BFP or any of Big Flower's or
BFP's Subsidiaries or Affiliates to, contact or solicit potential investors to
purchase any Certificate, engage any Person to assist in the placement or sale
of the Certificates or sell any Certificates to any Person, in the case of each
of the foregoing, other than the Initial Purchasers.
(j) So long as any of the Certificates are "restricted securities" within
the meaning of Rule 144(a)(3) under the Securities Act, Big Flower shall cause
BFP to, unless BFP becomes subject to and complies with the reporting
requirements of Section 13 or 15(d) of the U.S. Securities Exchange Act of 1934,
as amended, provide to any holder of such restricted securities, or to any
prospective purchaser of such restricted securities designated by a holder, upon
the request of such holder or prospective purchaser, any information required to
be provided by Rule 144A(d)(4) under the Securities Act. This covenant is
intended to be for the benefit of the holders, and prospective purchasers
designated by such holders, from time to time of such restricted securities.
(k) Until all obligations under the Certificates shall have been finally
and fully paid and performed, Big Flower shall cause BFP to deliver to the
Initial Purchasers each Monthly Report (and, if requested by the Initial
Purchasers, each Daily Report) contemporaneously with the delivery thereof to
the Trustee pursuant to the Pooling Agreement.
(l) Big Flower shall not, nor shall it permit BFP or any of Big Flower's
or BFP's respective Affiliates to, resell any Certificates that have been
acquired by any of them.
(m) During the period commencing on the date hereof and ending on the 60th
day subsequent to the Closing Date with regard to borrowings or debt
instruments, and ending on the date on which the Initial Purchasers have resold
all of the Certificates with regard to securities or instruments similar to the
Certificates, Big Flower will, and will cause BFP to, ensure that no other
securities or instruments similar to the Certificates, borrowings or debt
instruments (whether issued or guaranteed by BFP or Big Flower) are either
placed or syndicated in the international or U.S. capital markets (or with
regard to securities or instruments similar to the Certificates, in the
international or U.S. bank markets), directly or on their behalf, in any manner
which would in the reasonable judgment of the Initial
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Purchasers have a detrimental effect on the successful placement of the
Certificates unless consented to in writing by the Initial Purchasers.
(n) Big Flower shall not, and shall not permit BFP, any of Big Flower's or
BFP's respective Affiliates, or any Person acting on behalf of any of them to,
make offers or sales of securities under circumstances that would require the
registration of the Certificates under the Securities Act or cause BFP or the
Trust to become an "investment company" registered or required to be registered
under the Investment Company Act.
(o) Big Flower shall, and shall cause BFP to, use its best efforts to
permit the Class A Certificates and Class B Certificates to be eligible for
clearance and settlement through Cedel S.A. and the Euroclear System.
SECTION 5B. Covenants of BFP. BFP covenants and agrees with the Initial
Purchasers that:
(a) BFP will not amend or supplement the Offering Memorandum or any
amendment thereof or supplement thereto unless each of the Initial Purchasers
previously shall have been advised thereof and been furnished a copy thereof for
a reasonable period of time prior to the proposed amendment or supplement and
shall have given its prior written consent. BFP will, promptly upon the
reasonable request by any of the Initial Purchasers, prepare any amendments of
or supplements to the Offering Memorandum that, in the opinion of the Initial
Purchasers, may be necessary or advisable in connection with the resale of the
Certificates by the Initial Purchasers.
(b) BFP will take any action for the qualification or exemption of the
Certificates for offer, sale and resale under the securities or "Blue Sky" laws
of any jurisdictions that any of the Initial Purchasers shall reasonably request
and will pay all reasonable expenses (including reasonable fees and
disbursements of counsel) in connection with the qualification or exemption and
in connection with the determination of the eligibility of the Certificates for
investment under the laws of the jurisdictions that the Initial Purchasers may
designate; provided, however, that BFP shall not be obligated to qualify to do
business or become subject to service of process generally, but only to the
extent required for such qualification, in any jurisdiction in which it is not
currently so qualified. Thereafter, while any of the Certificates remain
outstanding, BFP will arrange for the filing and making of, and will pay all
fees applicable to, any statements and reports and renewals of registration
necessary in order to continue to qualify or exempt the Certificates for
secondary market transactions in the various jurisdictions in which the
Certificates were originally registered or exempted for sale. If any of the
Initial Purchasers shall pay any of the fees or expenses referred to in this
subsection, BFP shall promptly reimburse such Initial Purchaser; it being
understood and agreed that the reimbursement shall not be subject to any
limitations on reimbursement set forth in Section 6.
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(c) Without limiting the conditions specified in Section 7, if, at any
time prior to the completion of the distribution of the Certificates, any event
occurs or condition exists as a result of which it is necessary or desirable, in
the opinion of the Initial Purchasers, BFP or Big Flower, to amend or supplement
the Offering Memorandum in order that the Offering Memorandum will not include
an untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made or existing at the time the Offering
Memorandum is delivered to a prospective purchaser of any legal or beneficial
interest in the Certificates, not misleading, or if for any other reason it is
necessary at any time to amend or supplement the Offering Memorandum to comply
with applicable law, BFP will promptly notify the Initial Purchasers thereof and
will prepare and deliver to the Initial Purchasers, at the expense of BFP, an
amendment of or supplement to the Offering Memorandum that corrects the
statement or omission or effects such compliance.
(d) BFP will (i) promptly notify the Initial Purchasers of any amendment,
supplement or other modification of any Additional Disclosure Document and (ii)
without charge, provide to the Initial Purchasers as many copies of the Offering
Memorandum, the Additional Disclosure Documents and any amendment or supplement
to any of such documents as the Initial Purchasers may reasonably request.
(e) BFP will apply the net proceeds from the sale of the Certificates as
set forth in the "Use of Proceeds" section of the Offering Memorandum. BFP will
not use the proceeds of the sale of the Certificates or any part thereof,
directly or indirectly, to purchase or carry any "margin security" (as defined
in Regulations G, T, U or X issued by the Federal Reserve Board) or to reduce or
retire any indebtedness originally incurred to purchase any margin security.
(f) BFP will not sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any "security" (as defined in the Securities
Act) that could be integrated with the sale of the Certificates in a manner that
would require the registration of the Certificates under the Securities Act.
(g) Neither BFP, nor any Person acting on its behalf will engage in any
directed selling efforts (as that term is defined in Regulation S) with respect
to any Certificates, and each of BFP and any Person acting on its behalf will
comply with the offering restrictions requirement of Regulation S.
(h) BFP will not solicit any offer to buy or offer to sell the
Certificates by means of any form of general solicitation or general advertising
(as those terms are used in Regulation D under the Securities Act) or in any
manner involving a public offering within the meaning of
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Section 4(2) of the Securities Act.
(i) BFP shall not contact or solicit potential investors to purchase any
Certificate, engage any Person to assist in the placement or sale of the
Certificates or sell any Certificates to any Person, in the case of each of the
foregoing, other than the Initial Purchasers.
(j) So long as any of the Certificates are "restricted securities" within
the meaning of Rule 144(a)(3) under the Securities Act, Big Flower shall cause
BFP to, unless it becomes subject to and complies with the reporting
requirements of Section 13 or 15(d) of the U.S. Securities Exchange Act of 1934,
as amended, provide to any holder of such restricted securities, or to any
prospective purchaser of such restricted securities designated by a holder, upon
the request of such holder or prospective purchaser, any information required to
be provided by Rule 144A(d)(4) under the Securities Act. This covenant is
intended to be for the benefit of the holders, and prospective purchasers
designated by such holders, from time to time of such restricted securities.
(k) Until all obligations under the Certificates shall have been finally
and fully paid and performed, BFP shall deliver to the Initial Purchasers each
Monthly Report (and, if requested by the Initial Purchasers, each Daily Report)
contemporaneously with the delivery thereof to the Trustee pursuant to the
Pooling Agreement.
(l) BFP shall not resell any Certificates that have been acquired by it.
(m) During the period commencing on the date hereof and ending on the 60th
day subsequent to the Closing Date with regard to borrowings or debt
instruments, and ending on the date on which the Initial Purchasers have resold
all of the Certificates with regard to securities or instruments similar to the
Certificates, BFP will ensure that no other securities or instruments similar to
the Certificates, borrowings or debt instruments (whether issued or guaranteed
by BFP or Big Flower) are either placed or syndicated in the international or
U.S. capital markets (or with regard to securities or instruments similar to the
Certificates, in the international or U.S. bank markets), directly or on their
behalf, in any manner which would in the reasonable judgment of the Initial
Purchasers have a detrimental effect on the successful placement of the
Certificates unless consented to in writing by the Initial Purchasers.
(n) Neither BFP nor any Person acting on its behalf shall make offers or
sales of securities under circumstances that would require the registration of
the Certificates under the Securities Act or cause BFP or the Trust to become an
"investment company" registered or required to be registered under the
Investment Company Act.
(o) BFP shall use its best efforts to permit the Class A Certificates and
Class B Certificates to be eligible for clearance and settlement through Cedel
S.A. and the Euroclear
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System.
SECTION 6. Expenses. (a) Each of Big Flower and BFP agrees, jointly and
severally, to pay all costs and expenses incident to the purchase and initial
resale of the Certificates by the Initial Purchasers and the transactions
contemplated by this Agreement and the other Transaction Documents, whether or
not the transactions contemplated herein or therein are consummated or this
Agreement is terminated pursuant to Section 11, including (without limitation)
all costs and expenses incident to (i) the preparation, printing, word
processing or other production of documents with respect to such transactions,
including any costs in respect of the Transaction Documents, the Preliminary
Offering Memorandum, the Offering Memorandum, the Additional Disclosure
Documents and any amendment or supplement to any of the foregoing, and any "Blue
Sky" memorandum, (ii) all arrangements relating to the delivery to the Initial
Purchasers of copies of the foregoing documents, (iii) subject to the
penultimate sentence of this Section 6(a), the reasonable fees and disbursements
of counsel retained by the Initial Purchasers, (iv) the fees and expenses of
outside tax, accounting and other consultants and advisors to the Initial
Purchasers, (v) travel, audit, publicity and other out-of-pocket fees and
expenses of the Initial Purchasers, (vi) the fees and disbursements of counsel,
accountants and other consultants, experts and advisors retained by Big Flower
or BFP, (vii) preparation, issuance and delivery of the Certificates, (viii)
trustee's fees and expenses, including expenses of counsel retained by the
Trustee, (ix) the qualification of the Certificates under state securities and
"Blue Sky" laws (including filing fees and fees and disbursements of counsel for
the Initial Purchasers relating thereto), (x) expenses in connection with any
meetings or roadshows with prospective investors in the Certificates, (xi)
document production, printing and distribution expenses for any rating agency
presentation, marketing and/or offering materials, (xii) all expenses and fees
incurred in connection with the application for use of any clearing or similar
system, quotation of the Certificates on any market and (xiii) fees charged by
Standard & Poor's Ratings Services ("S&P"), Duff & Phelps Credit Rating Co.
("DCR") or any other rating agencies and their counsel for the rating of the
Certificates. Except as provided in the following sentence, Big Flower and BFP
acknowledge that the Initial Purchasers are not responsible for the fees, costs
and expenses set forth in this subsection or for the fees, costs or expenses
incurred by any investor. Notwithstanding the limitations set forth in paragraph
3 of the Engagement Letter, Big Flower, BFP and the Initial Purchasers hereby
agree that the fees and disbursements of Mayer, Brown & Platt, as counsel for
the Initial Purchasers, in connection with the initial resale of the
Certificates shall be paid by such parties as follows: (I) Big Flower and BFP
hereby agree to pay $165,000 of such fees and disbursements plus 50% of such
fees and disbursements which are in excess of $165,000 but not more than
$265,000; (II) BT Securities Corporation hereby agrees to pay 28.5% of such fees
and disbursements which are in excess of $165,000 but not more than $265,000;
and (III) CS First Boston Corporation hereby agrees to pay 21.5% of such fees
and disbursements which are in excess of $165,000 but not more than $265,000.
Such fees and disbursements of Mayer, Brown & Platt are in addition to the fees
and disbursements in connection with the
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creation of the Trust and the issuance of the Series 1996-1 Certificates which
were previously paid by Big Flower.
(b) Big Flower and BFP further agree, jointly and severally, to pay or
reimburse, on a timely basis, the Initial Purchasers for all out-of-pocket fees,
costs and expenses incurred by them or a third party selected by them (which may
include an Affiliate of an Initial Purchaser) in connection with the conduct of
a due diligence examination of the Receivables and of the activities of Big
Flower, its Subsidiaries and Affiliates with respect to the Receivables whether
or not the transactions contemplated herein are consummated. Each of Big Flower
and BFP agrees that these fees may include (without limitation) fees and
expenses incurred in connection with time spent at the offices of Big Flower,
its Subsidiaries or Affiliates and in the preparation of a limited scope
examination report. Further, it is understood that the due diligence examination
will not preclude the need for the comfort letter and/or agreed upon procedures
letter to be issued by the Independent Accountants as is described in Section
7(l) in respect of information contained in the Offering Memorandum.
(c) The amounts payable under each clause of this section shall be
cumulative, and payment of amounts referred to in one clause shall not reduce
amounts payable under another clause.
SECTION 7. Conditions of the Initial Purchasers' Obligations. The
obligations of the Initial Purchasers to purchase and pay for the Certificates
shall, in their sole discretion, be subject to the following conditions:
(a) The Trustee shall have good and marketable title to an undivided
percentage ownership interest in the Receivables and other Transferred Assets,
free and clear of all Adverse Claims (other than Permitted Adverse Claims).
(b) BFP shall have (i) caused all Uniform Commercial Code financing
statements required to perfect (A) the first priority ownership interest of BFP
in the Receivables and other Transferred Assets under the Purchase Agreement and
(B) the first priority interest granted by BFP to the Trustee pursuant to the
Pooling Agreement in the Receivables and other Transferred Assets, in each case,
to be duly filed in the manner required by the laws of each appropriate
jurisdiction, and (ii) paid, or caused to be paid, all transfer taxes,
documentary stamp taxes and filing fees incurred in connection therewith.
(c) All corporate and other proceedings in connection with the
transactions contemplated herein and in the Transaction Documents and all
documents and certificates incident thereto shall be satisfactory in form and
substance to the Initial Purchasers and their counsel, and the Initial
Purchasers shall have received any other documents and certificates incident to
the transactions that any of the Initial Purchasers or their counsel shall
reasonably
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request. Without limiting the foregoing, the Initial Purchasers or their counsel
shall have received on the Closing Date certified copies of all documents
evidencing corporate action taken by Servicer, each Seller, BFP and the Trustee
to approve the execution and delivery of the Transaction Documents to which they
are a party and the consummation of the transactions contemplated hereby and
thereby.
(d) The Transaction Documents and the Certificates shall conform in all
material respects to the descriptions thereof contained in the Offering
Memorandum. Immediately prior to the sale of the Certificates to the Initial
Purchasers, the Certificates shall have been executed by BFP and authenticated
by or on behalf of the Trustee, and each of the Pooling Agreement, the Purchase
Agreement, this Agreement, the Series 1996-2 Supplement and the other
Transaction Documents that are to be executed and delivered on or prior to the
Closing Date shall have been executed and delivered. The Initial Purchasers and
the Trustee shall have received on the Closing Date a fully executed counterpart
original and any required conformed copies of all Transaction Documents
delivered on or prior to the Closing Date, and the Trustee shall have received
the Certificates.
(e) The Initial Purchasers or their counsel shall have received on the
Closing Date signature and incumbency certificates executed by authorized
officers of Servicer, the Sellers, BFP and the Trustee certifying the identities
and signatures of those officers who executed each of the Transaction Documents
to which Servicer, the Sellers, BFP or the Trustee, as the case may be, is a
party.
(f) Upon consummation of the transactions contemplated in the Transaction
Documents that are to occur on or prior to the Closing Date, the Transferor Net
Worth will not be less than 18% of the aggregate Unpaid Balance of the
Receivables on such date.
(g) The purchase of the Certificates by the Initial Purchasers shall be
permitted by the laws and regulations to which the Initial Purchasers are
subject.
(h) BFP shall have delivered on the Closing Date to the Initial Purchasers
or their counsel evidence of acceptance by Lexis Document Services, Inc. of its
appointment by BFP, each Seller and Big Flower as agent for service of process
in New York.
(i) The Class A Certificates shall have been rated "AAA" by DCR and S&P
(collectively, the "Rating Agencies"), the Class B Certificates shall have been
rated not lower than "AA" by the Rating Agencies, the Class C Certificates shall
have been rated not lower than "BBB" by the Rating Agencies, the ratings shall
be in full force and effect and the Initial Purchasers shall have received on
the Closing Date a letter from the Rating Agencies dated on or before the
Closing Date to such effect.
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(j) Subsequent to the respective dates as of which information is given in
the Offering Memorandum, there shall not have occurred (i) any material adverse
change, or any development involving a prospective material adverse change, in
the condition (financial or otherwise) or in the earnings, business, operations
or business prospects of Servicer, any Seller or of BFP, whether or not arising
in the ordinary course of business, (ii) any other event or occurrence that
could have a Material Adverse Effect, (iii) a suspension or material limitation
in trading in any securities issued by Big Flower or any of its Affiliates, or
in securities generally, on any securities exchange or the establishment of
minimum prices on any such exchange, (iv) a general moratorium on commercial
banking activities declared by either Federal or New York State authorities, (v)
any downgrading in the rating accorded securities issued by Big Flower or any of
its Affiliates by any "nationally recognized statistical rating organization,"
as that term is defined for purposes of Rule 436(g) under the Securities Act, or
any public announcement that any such organization has under surveillance or
review its rating of any debt securities of Big Flower or any of its Affiliates
(other than an announcement with positive implications of a possible upgrading,
and no implication of a possible downgrading, of the rating), (vi) any outbreak
or escalation of major hostilities in which the United States of America is
involved, any declaration of war by Congress or any other substantial national
or international calamity or emergency that in the judgment of the Initial
Purchasers makes it inadvisable to proceed with the solicitation of offers to
purchase Certificates, or (vii) any material adverse change in financial,
political or economic conditions that in the judgment of the Initial Purchasers
makes it inadvisable to purchase the Certificates or to proceed with the
solicitation of offers to purchase Certificates.
(k) On the Closing Date, the Initial Purchasers shall have received
opinions, dated the Closing Date, addressed to the Initial Purchasers and the
Rating Agencies and satisfactory to their counsel, of (i) Skadden, Arps, Slate,
Meagher & Flom, special counsel to the Sellers, Servicer and BFP, (A) as to the
validity of the Trustee's interest in the Receivables and other Transferred
Assets and other UCC matters, (B) as to "true sale" and substantive
consolidation and (C) as to corporate, securities law and other matters, and (D)
as to certain Federal and New York tax matters, (ii) Ira Horowitz, Esq., as to
certain corporate and other matters, (iii) Hodgson, Russ, Andrews, Woods &
Goodyear, special counsel to the Trustee, as to certain matters relating to the
Trustee, (iv) Lowenstein, Sandler, Kohl, Fisher & Boylan, as to New Jersey
perfection and tax matters, (v) Hunton & Williams as to Maryland UCC and tax
matters and (vi) Jones, Day, Reavis & Pogue, as to Texas and Pennsylvania UCC
and tax matters, in each case in substantially the forms of the opinions as to
such matters delivered by such counsel on March 19, 1996, modified to the extent
appropriate to include this Agreement, the Series 1996-2 Supplement, the
Certificates and the transactions described herein and to cover the additional
matters described in Exhibit A hereto. The Initial Purchasers also shall have
received copies addressed to the Initial Purchasers of such opinion letters, if
any, as shall be delivered to the Rating Agencies with respect to matters not
addressed in clauses (i) through (vi) above.
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(l) The Initial Purchasers shall have received from the Independent
Accountants a comfort letter or letters with respect to the Offering Memorandum
dated the date hereof and the Closing Date, addressed to the Initial Purchasers
and in form and substance satisfactory to the Initial Purchasers and their
counsel.
(m) The Initial Purchasers shall have received an opinion from Mayer,
Brown & Platt, in form and substance satisfactory to the Initial Purchasers, as
to such matters that they require.
(n) The representations and warranties of Servicer, each Seller and BFP
contained in the Transaction Documents to which it is a party shall be true and
correct as of the date hereof and as of the Closing Date as if made on such
date; Servicer, the Sellers and BFP shall have performed all covenants and
agreements and satisfied all conditions on their respective parts to be
performed or satisfied under the Transaction Documents to which it is a party on
or prior to the Closing Date; and no event shall have occurred and no condition
shall exist that would constitute an Early Amortization Event or a Servicer
Default under the Pooling Agreement, either with or without notice or lapse of
time or both.
(o) Subsequent to the respective dates as of which information is given in
the Offering Memorandum, other than as contemplated by the Offering Memorandum,
none of Servicer, the Sellers or BFP shall have entered into any transactions
that are material to the business, condition (financial or otherwise) or results
of operations or business prospects of Servicer, any Seller or BFP.
(p) The Initial Purchasers shall have received a certificate of Big
Flower, dated the Closing Date, signed on behalf of Big Flower by its President,
Secretary or any Vice President and its Chief Financial Officer, to the effect
that:
(i) The representations and warranties of Servicer, each of the
Sellers and BFP contained in the Transaction Documents to which it is a
party are true and correct as of the Closing Date as if made on such date;
Servicer, the Sellers and BFP have performed all covenants and agreements
and satisfied all conditions on their respective parts to be performed or
satisfied under the Transaction Documents on or prior to the Closing Date;
subsequent to the date of the Financial Statements, there has been no
material adverse change in the business, condition (financial or
otherwise) or results of operations or business prospects of Servicer, any
Seller or BFP; and no event has occurred and no condition exists that
would constitute an Early Amortization Event or a Servicer Default, either
with or without notice or lapse of time or both.
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(ii) Subsequent to the respective dates as of which information is
given in the Offering Memorandum, there has not occurred (A) any material
adverse change, or any development involving a prospective material
adverse change, in the condition (financial or otherwise) or in the
earnings, business, operations or business prospects of Servicer, any
Seller, or BFP, whether or not arising in the ordinary course of business,
or (B) any other event or occurrence that would have a Material Adverse
Effect.
(iii) Subsequent to the respective dates as of which information is
given in the Offering Memorandum, other than as contemplated by the
Offering Memorandum, none of Servicer, the Sellers or BFP has entered into
any transactions that are material and adverse to the business, condition
(financial or otherwise) or results of operations or business prospects of
Servicer, any Seller or BFP.
(iv) As of the Closing Date, none of the Offering Memorandum, any
amendment thereof or supplement thereto, or any Additional Disclosure
Document or any amendment thereof or supplement thereto, contains an
untrue statement of a material fact or omits to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that the
certificate will not apply to statements or omissions made in reliance
upon and in conformity with the information described in Section 12 and
any other information that is furnished to BFP in writing by the Initial
Purchasers after the date hereof expressly for use in any amendment or
supplement to the Offering Memorandum.
(q) The Initial Purchasers shall have received a certificate of BFP, dated
the Closing Date, signed on behalf of BFP by its President or any Vice President
and its Chief Financial Officer, to the effect that:
(i) The representations and warranties of BFP contained in the
Transaction Documents to which it is a party are true and correct as of
the Closing Date as if made on such date; BFP has performed all covenants
and agreements and satisfied all conditions on its part to be performed or
satisfied under the Transaction Documents on or prior to the Closing Date;
subsequent to the date of the Financial Statements, there has been no
material adverse change in the business, condition (financial or
otherwise) or results of operations or business prospects of BFP; and no
event has occurred and no condition exists that would constitute an Early
Amortization Event or a Servicer Default, either with or without notice or
lapse of time or both.
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(ii) Subsequent to the respective dates as of which information is
given in the Offering Memorandum, there has not occurred (A) any material
adverse change, or any development involving a prospective material
adverse change, in the condition (financial or otherwise) or in the
earnings, business, operations or business prospects of BFP, whether or
not arising in the ordinary course of business, or (B) any other event or
occurrence that would have a Material Adverse Effect.
(iii) Subsequent to the respective dates as of which information is
given in the Offering Memorandum, other than as contemplated by the
Offering Memorandum, BFP has not entered into any transactions that are
material and adverse to the business, condition (financial or otherwise)
or results of operations or business prospects of BFP.
(iv) As of the Closing Date, none of the Offering Memorandum, any
amendment thereof or supplement thereto, or any Additional Disclosure
Document or any amendment thereof or supplement thereto, contains an
untrue statement of a material fact or omits to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that the
certificate will not apply to statements or omissions made in reliance
upon and in conformity with the information described in Section 12 and
any other information that is furnished to BFP in writing by the Initial
Purchasers after the date hereof expressly for use in any amendment or
supplement to the Offering Memorandum.
(r) The Offering Memorandum shall have been printed and copies distributed
to the Initial Purchasers not later than 10:00 a.m., Chicago time on October 1,
1996, or at such later date and time as the Initial Purchasers may approve in
writing.
(s) The Initial Purchasers shall have received confirmation that the Class
A Certificates and Class B Certificates have been accepted for clearance of
secondary trading by the Euroclear System and Cedel S.A.
Big Flower and BFP shall furnish to the Initial Purchasers (x) such other
agreements, instruments, documents, opinions, certificates, letters and
schedules as the Initial Purchasers or their counsel reasonably may request and
(y) originals and conformed copies of all opinions, certificates, letters,
schedules, agreements, documents and instruments delivered pursuant to this
Agreement in the quantities that any of the Initial Purchasers shall reasonably
request.
SECTION 8. Offering of Certificates; Restrictions on Transfer; Listing.
Each of the Initial Purchasers represents and warrants to Big Flower and BFP
that it is an Accredited Investor. Each of the Initial Purchasers represents and
warrants to Big Flower and BFP that it has not offered or sold, and will not
offer or sell, any Certificates, except (a) Class A
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Certificates, Class B Certificates and/or Class C Certificates within the United
States, in the case of BT Securities Corporation and CS First Boston
Corporation, (i) to Persons reasonably believed by such Initial Purchaser to be
Qualified Institutional Buyers in reliance on the exemption from registration
provided by Rule 144A and (ii) to a limited number of other Accredited Investors
or otherwise in compliance with Rule 144 if available, upon delivery of an
opinion of counsel in a form satisfactory to the Trustee and Transferor to the
effect that registration of the Certificate is not required in respect of such
offer or sale, and (b) Class A Certificates and/or Class B Certificates outside
the United States pursuant to Regulation S. Accordingly, each Initial Purchaser
agrees that neither it, its affiliates nor any Persons acting on its or their
behalf has engaged or will hereafter engage, in any directed selling efforts (as
such term is defined in Regulation S) with respect to any Certificate sold in
reliance on Regulation S, and each of such Persons has complied, and will
hereafter comply, with the offering restrictions requirements of Regulation S.
No such Person has solicited any offer to buy or will hereafter solicit any
offer to buy, or has offered to sell or will hereafter offer to sell, any
Certificate by means of any form of general solicitation or general advertising
(as such terms are used in Regulation D under the Securities Act, including,
without limitation, advertisements, articles, notices or other communications
published in any newspaper, magazine or similar medium or broadcast over
television or radio or any seminar or meeting whose attendees have been invited
by any general solicitation or general advertising) or in any manner involving a
public offering within the meaning of Section 4(2) of the Securities Act. Each
of the Initial Purchasers recognizes its responsibility for compliance with
applicable securities laws in connection with its own activities undertaken in
connection with the sale of the Certificates. Each Initial Purchaser further
represents and warrants that it has not entered into and will not enter into any
contractual arrangement with respect to the distribution of the Certificates,
except with its Affiliates or with the prior written consent of BFP.
Each Initial Purchaser agrees that, at or prior to confirmation of sale of
the Class A Certificates and/or Class B Certificates pursuant to Regulation S,
it will have sent to each distributor, dealer or Person receiving a selling
concession, fee or other remuneration that purchases the Class A Certificates
and/or Class B Certificates from it during the restricted period a confirmation
or notice to substantially the following effect;
"The Certificates covered hereby have not been registered under the
U.S. Securities Act of 1933 (the "Securities Act") and may not be offered
and sold within the United States or to, or for the account or benefit of,
U.S. persons (i) as part of their distribution at any time or (ii)
otherwise until 40 days after the later of the commencement of the
offering and the closing date, except in either case in accordance with
Regulation S under the Securities Act. Terms used above have the meanings
given to them by Regulation S."
Each Initial Purchaser represents and agrees that (a) it has not offered
or sold and,
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prior to the expiry of the period of six months from the Closing Date, will not
offer or sell any Certificates to Persons in the United Kingdom, except to
Persons whose ordinary activities involve them in acquiring, holding, managing
or disposing of investments (as principal or agent) for the purposes of their
businesses or otherwise in circumstances which have not resulted and will not
result in an offer to the public in the United Kingdom for purposes of the
Public Offers of Securities Regulation 1995; (b) it has complied and will comply
with all applicable provisions of the Public Offers of Securities Regulations
1995 and the Financial Services Act 1986 with respect to anything done by it in
relation to the Certificates in, from or otherwise involving the United Kingdom;
and (c) it has only issued or passed on and will only issue or pass on in the
United Kingdom any document received by it in connection with the proposed issue
or sale of the Certificates to a Person that is of a kind described in Article
11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1996, or a Person to whom such document may otherwise
lawfully be issued or passed on.
Each Initial Purchaser acknowledges that no action has been or will be
taken in any jurisdiction by BFP that would permit a public offering of the
Certificates, or possession or distribution of the Offering Memorandum or any
other offering material, in any country or jurisdiction where action for that
purpose is required. Each Initial Purchaser will comply with all applicable laws
and regulations in each jurisdiction in which it purchases, offers, sells or
delivers Certificates or has in its possession or distributes any offering
materials, in all cases at its own expense. Each Initial Purchaser will obtain
any consent, approval or permission required by it for the acquisition, offer,
sale or delivery by it of Certificates under the laws and regulations in force
in any jurisdiction in which it makes any such acquisition, offer, sale or
delivery.
Each Initial Purchaser agrees that, at or prior to confirmation of sale of
any Certificates, it will have received an appropriately completed and executed
letter in the form attached to the Offering Memorandum as Annex A.
SECTION 9. Indemnification and Contribution. (a) Big Flower and BFP,
jointly and severally, agree to indemnify and hold harmless each of the Initial
Purchasers, their respective Affiliates, directors, officers, employees, agents,
representatives and each Person who controls any of the Initial Purchasers
(within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act) against any losses, claims, damages or other liabilities, costs
and expenses to which any of the Initial Purchasers or any other indemnified
party may become subject, insofar as any losses, claims, damages or liabilities
(or actions in respect thereof) relate to, arise out of or are based upon:
(i) any untrue statement or alleged untrue statement of any material
fact contained in (A) any Preliminary Offering Memorandum, the Offering
Memorandum or any amendment of or supplement to any of the foregoing, (B)
any Additional
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Disclosure Document or any amendment of or supplement to any of the
foregoing or (C) any application or other document, or any amendment
thereof or supplement thereto, executed by Big Flower or BFP or based upon
written information furnished by or on behalf of Big Flower or BFP filed
in any jurisdiction in order to qualify the Certificates under the
securities or "Blue Sky" laws thereof or filed with any securities
association or securities exchange (each an "Application"), or
(ii) the omission or alleged omission to state, in any Preliminary
Offering Memorandum, the Offering Memorandum or any amendment of or
supplement to any of the foregoing, any Additional Disclosure Document or
any amendment of or supplement to any of the foregoing or any Application,
a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading,
and in each case will reimburse, as incurred, each indemnified party for any
legal or other expenses incurred in connection with investigating, defending
against or appearing as a third-party witness in connection with any loss,
claim, damage, liability or action; provided, however, that Big Flower and BFP
will not be liable in any case under clause (i) or (ii) to the extent that any
loss, claim, damage or liability arises out of or is based upon any untrue
statement or alleged untrue statement or omission or alleged omission made in
the Preliminary Offering Memorandum, the Offering Memorandum or any amendment or
supplement thereto, or any Application that, in the case of each of the
foregoing, is made in reliance upon and in conformity with the information
described in Section 12 or any other information that is furnished to BFP in
writing by the Initial Purchasers after the date hereof expressly for use in any
amendment or supplement to the Offering Memorandum; provided, further, that the
foregoing indemnity, insofar as it relates to any untrue statement or omission
in the Preliminary Offering Memorandum or any amendments or supplements thereto
issued prior to the Offering Memorandum, shall not inure to the benefit of the
Initial Purchasers or their respective employees, directors, agents, officers
and representatives or to any Person who controls an Initial Purchaser if the
Person asserting the loss, claim, damage or liability which gives rise to such
indemnity (the "Underlying Claimant") purchased Certificates from an Initial
Purchaser on its initial resale and if a copy of the Offering Memorandum and any
available amendments or supplements thereto were not sent or given by such
Initial Purchaser or on such Initial Purchaser's behalf to such Underlying
Claimant at or prior to the written confirmation of the sale of Certificates to
such Underlying Claimant (unless such failure to so send or give the Offering
Memorandum and/or such amendments or supplements results from the failure of Big
Flower and BFP to comply with Section 5(d)), and if the Offering Memorandum
together with any then available amendments or supplements thereto would have
cured the defect giving rise to such losses, claims, damages or liabilities.
Big Flower and BFP shall not be liable under this section for any
settlement of any
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<PAGE>
claim or action effected without their prior written consent, which shall not be
unreasonably withheld. Big Flower and BFP shall not, without the prior written
consent of the Initial Purchasers, settle or compromise or consent to the entry
of any judgment in any pending or threatened claim, action, suit or proceeding
in respect of which indemnification may be sought under this section (whether or
not the Initial Purchasers or any other indemnified party is an actual or
potential party to the claim, action, suit or proceeding) unless the settlement,
compromise or consent includes an unconditional release of the Initial
Purchasers and each other indemnified party described in this clause from all
liability arising out of the claim, action, suit or proceeding.
(b) Each Initial Purchaser will indemnify and hold harmless each of Big
Flower, BFP, their directors, officers, employees, agents and representatives
and each Person who controls Big Flower or BFP (within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act) against any losses,
claims, damages or liabilities to which Big Flower, BFP or any other indemnified
party may become subject, insofar as the losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement of any material fact contained in the
Preliminary Offering Memorandum, the Offering Memorandum or any amendment
thereof or supplement thereto, or any Application or (ii) the omission or the
alleged omission to state therein a material fact required to be stated in the
Preliminary Offering Memorandum, the Offering Memorandum or any amendment
thereof or supplement thereto, or any Application, necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, in each case to the extent, but only to the extent, that
the untrue statement or alleged untrue statement or omission or alleged omission
was made in reliance upon and in conformity with the information described in
Section 12 and any other written information concerning such Initial Purchaser
that is furnished to Big Flower or BFP after the date hereof by such Initial
Purchaser specifically for use in any amendment or supplement to the Offering
Memorandum; and, subject to the limitation set forth immediately preceding this
clause, each Initial Purchaser will reimburse, as incurred, any legal or other
expenses incurred by Big Flower or BFP or any other indemnified party in
connection with investigating or defending against or appearing as a third-party
witness in connection with any loss, claim, damage, liability or action in
respect thereof. An Initial Purchaser shall not be liable under this section for
any settlement of any claim or action effected without its prior written
consent, which shall not be unreasonably withheld. Notwithstanding any other
provision of this subsection, each Initial Purchaser's indemnification
obligations shall be limited in amount to the aggregate of total purchaser
discounts received by it under this Agreement.
(c) Promptly after receipt by an indemnified party under this section of
notice of the commencement of any action or proceeding for which an indemnified
party is entitled to indemnification under this section, the indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this section, notify the indemnifying party of the
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commencement thereof, but the omission to so notify the indemnifying party will
not relieve it from any liability under subsection (a) or (b) (as applicable)
unless and to the extent that the failure to notify results in the forfeiture by
the indemnifying party of substantial rights and defenses. If any action or
proceeding is brought that involves any indemnified party, the indemnifying
party will be entitled to participate therein and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel reasonably satisfactory to the indemnified
party; provided, however, that if (i) such counsel shall have advised the
indemnified party that the rules of professional responsibility would preclude,
under the circumstances on the date of such determination, one firm of attorneys
from representing both the indemnified and the indemnifying party, or (ii) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after receipt by the indemnifying party of notice of the institution of the
action or proceeding, then, in each case, (A) the indemnifying party shall not
have the right to direct the defense of the action on behalf of the indemnified
party or parties, (B) the indemnified party or parties shall have the right to
select separate counsel to defend the action on behalf of the indemnified party
or parties and (C) all costs and expenses of each indemnified party in
connection with the action or proceeding shall be paid by the indemnifying party
pursuant to subsection (a) or (b) (as applicable). Notwithstanding the
foregoing, in no event shall an indemnifying party, in connection with any one
such action or proceeding or separate but substantially similar or related
actions or proceedings arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one separate
firm of attorneys at any time for all indemnified parties, together with any
necessary local counsel.
After notice from the indemnifying party to the indemnified party of the
indemnifying party's election so to assume the defense of the action or
proceeding and approval by the indemnified party of counsel appointed to defend
the action, the indemnifying party will not be liable to the indemnified party
under this section for any legal or other expenses, other than reasonable legal
and other out-of-pocket costs of investigation, subsequently incurred by the
indemnified party in connection with the defense thereof, unless (i) the
indemnified party shall have employed separate counsel in accordance with the
proviso to the second sentence of the immediately preceding paragraph or (ii)
the indemnifying party has authorized in writing the employment of counsel for
the indemnified party at the expense of the indemnifying party. If the
indemnifying party assumes the defense of any action or proceeding, the
indemnified party shall have the right to employ separate counsel therein, and
to participate in the defense thereof, but the fees and expenses of its counsel
shall be borne exclusively by the indemnified party without any right or
entitlement to reimbursement by an indemnifying party or its Affiliates except
as otherwise provided in the preceding sentence and in the preceding paragraph.
(d) In circumstances in which the indemnity agreement provided for in the
preceding
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subsections is unavailable (other than by reason of the application of one of
the provisos to the first paragraph of Section 9(a)) or insufficient to hold
harmless an indemnified party in respect of any losses, claims, damages or
liabilities (or actions in respect thereof), each indemnifying party, in order
to provide for just and equitable contribution, shall contribute to the amount
paid or payable by the indemnified party as a result of losses, claims, damages
or liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect (i) the relative benefits received by the indemnifying
party or parties on the one hand and the indemnified party on the other from the
offering of the Certificates or (ii) if the allocation provided by clause (i) is
not permitted by applicable law, not only such relative benefits but also the
relative fault of the indemnifying party or parties on the one hand and the
indemnified party on the other in connection with the statements or omissions or
alleged statements or omissions that resulted in losses, claims, damages or
liabilities (or actions in respect thereof). It is the parties' intention that,
to the maximum extent permitted by applicable law, (A) the relative benefits
received by Big Flower and BFP on the one hand and the Initial Purchasers on the
other shall be deemed to be in the same proportion as the total proceeds from
the offering (before deducting expenses) received by or on behalf of BFP bear to
the total purchaser discounts and commissions received by the Initial Purchasers
with respect to the offering, and (B) the relative fault of the parties shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by Big Flower or BFP on the one
hand, or the Initial Purchasers on the other, the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission, and any other equitable considerations appropriate in the
circumstances.
Big Flower, BFP and the Initial Purchasers agree that it would not be
equitable if the amount of contribution pursuant to this section were determined
by pro rata or per capita allocation or by any other method of allocation that
does not take into account the equitable considerations referred to in the
preceding paragraph. Notwithstanding any other provision of this subsection, no
Initial Purchaser shall be obligated to make contributions hereunder that in the
aggregate exceed the total purchaser discounts and commissions received by it
under this Agreement, less the aggregate amount of any damages that it otherwise
has been required to pay by reason of the untrue or alleged untrue statements,
or the omissions or alleged omissions to state, a material fact. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation. For purposes of this
subsection, each affiliate, director, officer, employee, agent and
representative of each of the Initial Purchasers and each Person who controls
any Initial Purchaser (within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act) shall have the same rights to contribution as
the Initial Purchasers, and each affiliate, director, officer, employee, agent
and representative of Big Flower and BFP and each Person who controls Big Flower
or BFP (within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act), shall have the same
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rights to contribution as Big Flower and BFP. The indemnity and contribution
obligations of the Initial Purchasers under this section are several (and not
joint) in proportion to their respective purchase commitments hereunder.
SECTION 10. Survival; Scope of Liability. The respective representations,
warranties, agreements, covenants, indemnities and other statements of Big
Flower, BFP, their respective officers and the Initial Purchasers set forth in
this Agreement or made by or on behalf of any of them, respectively, pursuant to
this Agreement shall remain in full force and effect, regardless of (a) any
investigation made by or on behalf of Big Flower, BFP, the Initial Purchasers or
any of their respective officers or directors, or any controlling Person
referred to in Section 9 and (b) delivery of and payment for the Certificates.
The respective agreements, covenants, indemnities and other statements set forth
in Sections 6 and 9 shall remain in full force and effect regardless of any
termination or cancellation of this Agreement.
SECTION 11. Termination. (a) This Agreement may be terminated in the sole
discretion of the Initial Purchasers by notice to Big Flower and BFP given on or
prior to the Closing Date in the event that Servicer, any Seller or BFP shall
have failed, refused or been unable to perform all obligations and satisfy all
conditions on their respective parts to be performed or satisfied hereunder at
or prior thereto or if, on or prior to the Closing Date:
(i) there shall have been, in the sole judgment of the Initial
Purchasers, any material adverse change, or any development involving a
material adverse change, in the business, condition (financial or
otherwise) or results of operations or business prospects of Servicer, any
Seller or BFP, except in each case as described in or contemplated by the
Offering Memorandum (exclusive of any amendment or supplement thereto),
(ii) trading in any securities issued by Big Flower or its
Affiliates, or in securities generally, on the New York Stock Exchange,
American Stock Exchange or NASDAQ National Market shall have been
suspended or minimum or maximum prices shall have been established on any
such exchange,
(iii) a banking moratorium shall have been declared by New York
or United States authorities, or
(iv) there shall have been (A) an outbreak or escalation of
hostilities between the United States of America and any foreign power, or
(B) an outbreak or escalation of any other insurrection or armed conflict
involving the United States of America or any other national or
international calamity or emergency, or (C) any material change in the
financial markets that, in the sole judgment of the Initial Purchasers,
makes it impracticable or inadvisable to proceed with the offering or the
delivery of the
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Certificates as contemplated by the Offering Memorandum.
Termination of this Agreement pursuant to this section (a) shall be
without liability of any party to any other party except that the Initial
Purchasers shall be entitled to any fees and expenses payable, in each case in
accordance with Section 6.
(b) If, on the Closing Date, any of the Initial Purchasers shall fail or
refuse to purchase Certificates that it has agreed to purchase hereunder on such
date and arrangements satisfactory to the non-defaulting Initial Purchasers, BFP
and Big Flower for the purchase of the Certificates are not made within 36 hours
after such default, this Agreement shall terminate without liability on the part
of the non-defaulting Initial Purchasers, BFP or Big Flower. In any such case,
any of the non-defaulting Initial Purchasers, BFP or Big Flower shall have the
right to postpone the Closing Date, but in no event for longer than seven days,
in order that the required changes, if any, in the Offering Memorandum or in any
other documents or arrangements may be effected. Any action taken under this
paragraph shall not relieve any defaulting Initial Purchaser from liability in
respect of any default of such Purchaser under this Agreement.
SECTION 12. Information Supplied by the Initial Purchasers. The statements
set forth in Schedule II (to the extent such statements relate to the Initial
Purchasers) constitute the only information furnished by the Initial Purchasers
to Big Flower and BFP for purposes of inclusion in the Preliminary Offering
Memorandum, the supplements thereto and the Offering Memorandum.
SECTION 13. Notices. Unless otherwise provided herein, all notices
required under the terms and provisions hereof shall be in writing and either
delivered by hand, by mail or by facsimile, and any notice shall be effective
when received at the address or facsimile number (as applicable) specified
below:
If to BFP:
BFP Receivables Corporation
250 West Pratt Street
Baltimore, Maryland 21201
Attention: Rick Frier
Facsimile No.: (410) 528-9287
If to Big Flower:
Big Flower Press Holdings, Inc.
Three East 54th Avenue, 19th Floor
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<PAGE>
New York, New York 10022
Attention: David Mait
Facsimile No.: (212) 223-4074
If to the Initial Purchasers:
BT Securities Corporation
130 Liberty Street
New York, New York 10015
Attention: Global Structured Finance
Facsimile No.: (212) 250-7590
with a copy to:
Bankers Trust Company
130 Liberty Street
New York, New York 10015
Attention: General Counsel
Facsimile No.: (212) 250-5063
Bankers Trust International PLC
One Appold Street
Broadgate
London EC2A 2HE
England
Attention: Legal Department
Facsimile No.: 011-4471-982-2270
CS First Boston Corporation
Park Avenue Plaza
55 East 52nd Street
New York, New York 10055
Attention: Richard B. d'Albert
Facsimile No.: (212) 479-5502
or at such other address or facsimile number as any party may designate from
time to time by notice duly given to the other parties in accordance with the
terms of this section.
SECTION 14. Successors; Joint or Several Obligations. (a) This Agreement
shall inure to the benefit of and be binding upon the Initial Purchasers, Big
Flower, BFP and their respective successors and assigns. Nothing expressed or
mentioned in this Agreement is
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intended or shall be construed to give any Person, other than the parties
hereto, their respective successors and the controlling Persons, Affiliates,
directors, officers, employees, agents and representatives referred to in
Section 9 and their heirs and legal representatives, any legal or equitable
right, remedy or claim under or in respect of this Agreement or any provision
herein contained. This Agreement and all conditions and provisions hereof are
intended to be for the sole and exclusive benefit of the parties hereto, their
respective successors and said controlling Persons, Affiliates, directors,
officers, employees, agents and representatives and their heirs and legal
representatives, and for the benefit of no other Person. No purchaser of a
beneficial interest in the Certificates from any of the Initial Purchasers will
be deemed a successor because of such purchase.
(b) It is understood and agreed that (i) the obligations of Big Flower and
BFP under this Agreement are joint and several obligations, and (ii) the
obligations of the Initial Purchasers under this Agreement are several but not
joint obligations.
SECTION 15. Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
together shall constitute one and the same agreement.
SECTION 16. No Petition. Each of the Initial Purchasers covenants and
agrees that, prior to the date that is one year and one day after the date on
which all Certificates are paid in full, it will not institute against, or join
any other Person in instituting against, BFP any proceeding of the type referred
to in the definition of Bankruptcy Event in Appendix A to the Pooling Agreement.
The foregoing shall not limit the right of the Initial Purchasers to file any
claim in or otherwise take any action with respect to any such insolvency
proceeding that was instituted against BFP by any Person other than the Initial
Purchasers.
SECTION 17. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF LAWS
PRINCIPLES.
SECTION 18. Submission to Jurisdiction. EACH PARTY HERETO HEREBY
IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY NEW YORK STATE OR
FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK, NEW
YORK OVER ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT,
AND HEREBY (A) IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF THE ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN THE STATE OR FEDERAL COURT, (B)
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, THE DEFENSE
OF AN INCONVENIENT FORUM
page 35
<PAGE>
TO THE MAINTENANCE OF THE ACTION OR PROCEEDING, AND (C) IN THE CASE OF BIG
FLOWER AND BFP, IRREVOCABLY APPOINTS THE PROCESS AGENT AS ITS AGENT TO RECEIVE
ON BEHALF OF IT AND ITS PROPERTY SERVICE OF COPIES OF THE SUMMONS AND COMPLAINT
AND ANY OTHER PROCESS THAT MAY BE SERVED IN ANY ACTION OR PROCEEDING. THE
SERVICE MAY BE MADE BY MAILING OR DELIVERING A COPY OF THE PROCESS TO BIG FLOWER
OR BFP (AS APPLICABLE) IN CARE OF THE PROCESS AGENT AT THE PROCESS AGENT'S
ADDRESS, AND EACH OF BIG FLOWER AND BFP HEREBY IRREVOCABLY AUTHORIZES AND
DIRECTS THE PROCESS AGENT TO ACCEPT THE SERVICE ON ITS BEHALF. AS AN ALTERNATIVE
METHOD OF SERVICE, THE PARTIES ALSO IRREVOCABLY CONSENT TO THE SERVICE OF ANY
AND ALL PROCESS IN ANY ACTION OR PROCEEDING BY THE MAILING OF COPIES OF THE
PROCESS TO THE PARTIES (AS APPLICABLE) AT THEIR ADDRESSES SPECIFIED HEREIN.
NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE
LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF ANY
PARTY HERETO TO BRING ANY ACTION OR PROCEEDING AGAINST ANY OR ALL OF THE OTHER
PARTIES OR ANY OF THEIR RESPECTIVE PROPERTIES IN THE COURTS OF ANY OTHER
JURISDICTION.
SECTION 19. Amendments. This Agreement may be amended at any time upon the
written consent of each of the parties hereto.
SECTION 20. Severability of Provisions. If any one or more of the
agreements, provisions or terms of this Agreement shall for any reason
whatsoever be held invalid, then the unenforceable agreements, provisions or
terms shall be deemed severable from the remaining agreements, provisions or
terms of this Agreement and shall in no way affect the validity or
enforceability of the other agreements, provisions or terms of this Agreement.
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<PAGE>
If the foregoing correctly sets forth our understanding, please indicate
your acceptance thereof in the space provided below for that purpose, whereupon
this letter shall constitute a binding agreement among Big Flower, BFP and the
Initial Purchasers.
Very truly yours,
BIG FLOWER PRESS HOLDINGS, INC.
By: /s/ Mark Angelson
-----------------------------
Title: Executive Vice President
BFP RECEIVABLES CORPORATION
By: /s/ Mark Angelson
-----------------------------
Title: Secretary
Accepted and agreed to September 26, 1996:
BT SECURITIES CORPORATION
By: /s/ Reuben Cohen
------------------------------
Authorized Signatory
BANKERS TRUST INTERNATIONAL PLC
By: /s/ Jocelyn Court
------------------------------
Authorized Signatory
CS FIRST BOSTON CORPORATION
By: /s/ Richard D'Albert
------------------------------
Authorized Signatory
<PAGE>
SCHEDULE I
to Purchase Agreement
Series 1996-2, Class A Certificates
Principal Amount of
Name of Class A Certificates Purchase
Initial Purchaser to be Purchased Price
----------------- --------------- -----
BT Securities Corporation $13,000,000 $13,000,000
Bankers Trust International PLC $33,000,000 $33,000,000
CS First Boston Corporation $29,000,000 $29,000,000
Series 1996-2, Class B Certificates
Principal Amount of
Name of Class B Certificates Purchase
Initial Purchaser to be Purchased Price
----------------- --------------- -----
BT Securities Corporation $19,000,000 $19,000,000
Bankers Trust International PLC $10,000,000 $10,000,000
CS First Boston Corporation $11,000,000 $11,000,000
Series 1996-2, Class C Certificates
Principal Amount of
Name of Class C Certificates Purchase
Initial Purchaser to be Purchased Price
----------------- --------------- -----
BT Securities Corporation $15,000,000 $15,000,000
<PAGE>
SCHEDULE II
to Purchase Agreement
Section 12 of the Purchase Agreement shall refer to the following
information in the Offering Memorandum:
The penultimate sentence of the first paragraph and second sentence of the
ninth paragraph under the heading "PLAN OF DISTRIBUTION."
<PAGE>
Exhibit 10.16
================================================================================
CERTIFICATE PURCHASE AGREEMENT
(Series 1996-3)
dated as of October 4, 1996
among
BFP RECEIVABLES CORPORATION,
BIG FLOWER PRESS HOLDINGS, INC.,
THE PURCHASERS DESCRIBED HEREIN,
and
CAISSE NATIONALE DE CREDIT AGRICOLE,
as Agent
================================================================================
<PAGE>
TABLE OF CONTENTS
ARTICLE I DEFINITIONS
SECTION 1.1 Definitions...........................................Page 2
ARTICLE II PURCHASE AND SALE OF CERTIFICATES
SECTION 2.1 The Commitments.......................................Page 2
SECTION 2.2 Purchase Mechanics....................................Page 2
SECTION 2.3 Reduction of Stated Amounts...........................Page 4
SECTION 2.4 Certificates..........................................Page 4
ARTICLE III REDUCTIONS IN SERIES 1996-3 INVESTED AMOUNT
SECTION 3.1 Transferor's Right to Reduce Series 1996-3 Invested
Amount................................................Page 5
SECTION 3.2 Notice to Purchasers..................................Page 5
ARTICLE IV TRANCHES, INTEREST AND FEES
SECTION 4.1 Tranches .............................................Page 5
SECTION 4.2 Fees .................................................Page 6
SECTION 4.3 Yield Protection......................................Page 7
SECTION 4.4 Illegality; Unavailability............................Page 9
SECTION 4.5 Indemnity ............................................Page 10
SECTION 4.6 Taxes ................................................Page 10
ARTICLE V OTHER PAYMENT TERMS
SECTION 5.1 Time and Method of Payment............................Page 13
SECTION 5.2 Pro Rata Treatment....................................Page 13
ARTICLE VI REPRESENTATIONS AND WARRANTIES
SECTION 6.1 Transferor ............................................Page 14
SECTION 6.2 Big Flower ............................................Page 14
SECTION 6.3 Purchasers ............................................Page 15
ARTICLE VII CONDITIONS
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<PAGE>
SECTION 7.1 Conditions to Initial Purchase........................Page 16
SECTION 7.2 Conditions to Each Purchase...........................Page 19
ARTICLE VIII COVENANTS
SECTION 8.1 Covenants ............................................Page 19
SECTION 8.2 Transfers ............................................Page 21
ARTICLE IX AGENT; REQUIRED PURCHASERS
SECTION 9.1 Appointment...........................................Page 22
SECTION 9.2 Nature of Duties......................................Page 22
SECTION 9.3 Lack of Reliance on Agent.............................Page 23
SECTION 9.4 Certain Rights of Agent...............................Page 23
SECTION 9.5 Reliance .............................................Page 23
SECTION 9.6 Indemnification.......................................Page 24
SECTION 9.7 Agent in its Individual Capacity......................Page 24
SECTION 9.8 Resignation by Agent..................................Page 24
SECTION 9.9 Required Purchasers...................................Page 25
ARTICLE X MISCELLANEOUS PROVISIONS
SECTION 10.1 Amendments ...........................................Page 25
SECTION 10.2 No Waiver; Remedies..................................Page 26
SECTION 10.3 Successors and Assigns; Assignments..................Page 26
SECTION 10.4 Survival of Agreement................................Page 30
SECTION 10.5 Expenses; Indemnification............................Page 30
SECTION 10.6 Entire Agreement.....................................Page 32
SECTION 10.7 Notices .............................................Page 32
SECTION 10.8 No Third-Party Beneficiaries.........................Page 32
SECTION 10.9 Severability of Provisions...........................Page 32
SECTION 10.10 Counterparts........................................Page 33
SECTION 10.11 Governing Law.......................................Page 33
SECTION 10.12 Tax Characterization................................Page 33
SECTION 10.13 No Proceedings......................................Page 33
SECTION 10.14 Reference Banks.....................................Page 34
SECTION 10.15 Rule 144A...........................................Page 34
Page ii
<PAGE>
SCHEDULE
SCHEDULE I Amount of Each Initial Purchaser's Certificate
EXHIBITS
EXHIBIT A Form of Series 1996-2 Supplement
EXHIBIT B Form of Series 1996-3 Supplement
EXHIBIT C Form of Assignment Agreement
APPENDIX
APPENDIX X Index of Additional Defined Terms
Page iii
<PAGE>
This CERTIFICATE PURCHASE AGREEMENT, dated as of October 4, 1996 (this
"Agreement"), is made among BFP RECEIVABLES CORPORATION, a Delaware corporation
("Transferor"), BIG FLOWER PRESS HOLDINGS, INC., a Delaware corporation
("Servicer" or "Big Flower"), the purchasers named on the signatures pages of
this Agreement (together with their respective permitted assigns, the
"Purchasers") and CAISSE NATIONALE DE CREDIT AGRICOLE, as agent for the
Purchasers (in that capacity, together with any successors in that capacity,
"Agent").
BACKGROUND
1. Transferor (a) is party to a Pooling and Servicing Agreement dated
as of March 19, 1996 (as it may be amended, supplemented or otherwise modified
from time to time, the "Pooling Agreement") with Big Flower, as initial
Servicer, and Manufacturers and Traders Trust Company, a New York banking
corporation, as trustee (in that capacity, together with any successors in that
capacity, the "Trustee"), (b) is party to a Receivables Purchase Agreement dated
as of March 19, 1996 (as it may be amended, supplemented or otherwise modified
from time to time, the "Purchase Agreement") with Big Flower, as initial
Servicer, and the Sellers from time to time party thereto, (c) will enter into a
Series 1996-2 Supplement to the Pooling Agreement substantially in the form of
Exhibit A (the "1996-2 Supplement") and (d) will enter into a Series 1996-3
Supplement to the Pooling Agreement substantially in the form of Exhibit B (the
"Supplement"), which Supplement incorporates the terms and conditions of the
Series 1996-2 Supplement. Pursuant to the Pooling Agreement and the Supplement,
Transferor will obtain the Series 1996-3 Certificates (the "Certificates"),
which will represent fractional undivided beneficial interests in the assets of
the Big Flower Receivables Master Trust (the "Trust"), a trust organized
pursuant to the Pooling Agreement.
2. Transferor wishes to obtain the commitment of each Purchaser to
purchase fractional undivided beneficial interests in the assets of the Trust
(each a "Trust Interest") that will be evidenced by its Certificate. Subject to
the terms and conditions of this Agreement, each Purchaser is willing to agree
to so make purchases of Trust Interests, up to the Stated Amount (as defined
below) set forth opposite its name in Schedule I. Big Flower has joined in this
Agreement to confirm certain representations, warranties and covenants for the
benefit of the Purchasers and the Agent.
<PAGE>
ARTICLE I DEFINITIONS
SECTION I.1 Definitions. Capitalized terms used and not otherwise
defined herein have the meanings assigned to them in the Supplement (including
the definitions contained in the 1996-2 Supplement and incorporated in the
Supplement) or, if not defined in the Supplement, in Appendix A to the Pooling
Agreement. An index of terms defined directly in this Agreement is attached as
Appendix X.
ARTICLE II PURCHASE AND SALE OF CERTIFICATES
SECTION II.1 The Commitments. Subject to the terms and conditions of
this Agreement, the Pooling Agreement and the Supplement, each Purchaser agrees,
severally and for itself alone, upon Transferor's request (through Servicer), to
make purchases (each a "Purchase") of Trust Interests from time to time during
the Revolving Period for the Series 1996-3 Certificates; provided, that no
Purchaser will be required or permitted to make a Purchase on any date if the
funded principal amount of its Certificate, after giving effect to the Purchase,
would exceed the lesser of (a) the Stated Amount of its Certificate and (b) its
Percentage (as defined below) multiplied by the Series 1996-3 Invested Amount.
In addition, no Purchaser will be required or permitted to make a Purchase if,
after giving effect thereto (and any corresponding reduction to the Series
1996-3 Invested Amount pursuant to Section 3.1), the Net Invested Amount would
exceed the Base Amount. The Purchases by the Purchasers shall be made ratably in
accordance with their respective Percentages; provided, that the failure of any
Purchaser to make any Purchase shall not relieve any other Purchaser of its
obligation to make Purchases hereunder. No Purchaser shall, however, be
responsible for the failure of any other Purchaser to make any Purchase. Subject
to the terms of this Agreement, the aggregate principal amount of a Purchaser's
investment represented by its Certificate may be increased or decreased from
time to time.
For purposes of this Agreement, "Percentage" means, with respect to
each Purchaser, the percentage equivalent (carried out to twelve decimal places)
of a fraction the numerator of which is the Stated Amount of such Purchaser's
Certificate and the denominator of which is the sum of the Stated Amounts of all
of the Purchasers' Certificates. The initial Percentages of the initial
Purchasers, and the Stated Amounts of their Certificates, are set out opposite
their names in Schedule I.
SECTION II.2 Purchase Mechanics. (a) Whenever Transferor wishes
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<PAGE>
the Purchasers to make Purchases, it shall cause Servicer to notify the Agent if
the Trust Interests to be purchased initially will form a part of (i) the ABR
Tranche, not later than 3:00 p.m., New York City time, one Business Day prior to
the date of the proposed Purchase and (ii) a Eurodollar Tranche, not later than
3:00 p.m., New York City time, three Business Days prior to the date of the
proposed Purchase; provided that the notice to the Agent of the initial Purchase
hereunder may be provided up to (but no later than) 10:00 a.m. on the date
hereof and such Purchase shall form a part of the ABR Tranche. Each notice shall
be irrevocable and shall in each case refer to this Agreement and specify (x)
the aggregate purchase price for the requested Purchases (which shall be in a
minimum amount of $1,000,000 or a greater integral multiple of $1,000,000 (or in
the total unutilized amount of the various Purchasers' Stated Amounts)), (y)
whether the Trust Interests to be purchased will form a part of the ABR Tranche
or a Eurodollar Tranche and (z) the date of the Purchase (which shall be a
Business Day) and the amount thereof. If no election required by clause (y) is
made in any notice, then the Trust Interests obtained in the Purchase shall form
a part of the ABR Tranche. The Agent shall promptly advise the Purchasers of any
notice given pursuant to this section and of the amount of each Purchaser's
Purchase.
(b) After receiving notice from the Agent of any notice given pursuant
to subsection (a) and subject to the conditions in Article VII, each Purchaser
shall make a Purchase in the amount of its pro rata portion of aggregate
Purchases requested to be made, ratably according to its Percentage, on the
proposed date thereof by wire transfer in Dollars of immediately available funds
to the Agent at the office designated from time to time by the Agent, not later
than 10:00 a.m., New York City time, and the Agent shall (unless notified in
writing that any condition precedent has not been satisfied), by noon, New York
City time, on the same day, make available to Transferor by wire transfer of
Dollars in immediately available funds the aggregate amount of the funds
received. Unless the Agent shall have received written notice from a Purchaser
prior to the date of any Purchase that the Purchaser will not make available to
the Agent its purchase price, the Agent may (but shall not be required to)
assume that the Purchaser has made that portion available to the Agent on the
date of the Purchase in accordance with this subsection, and the Agent may, in
reliance upon that assumption, make available to Transferor on that date a
corresponding amount.
(c) If and to the extent that any Purchaser shall not have made its
purchase price available to the Agent and the Agent has made available a
corresponding amount to Transferor, such Purchaser agrees to repay to the
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<PAGE>
Agent forthwith on demand a corresponding amount, together with interest
thereon, for each day from the date the amount is made available to Transferor
until the date the amount is repaid to the Agent (i) for the first three days
following the date the amount is made available, at a rate per annum equal to
the Federal Funds Rate and (ii) thereafter, at a rate per annum equal to the
Federal Funds Rate plus 1%. If the Purchaser shall repay to the Agent a
corresponding amount, the amount shall constitute its Purchase for purposes of
this Agreement, and if Transferor shall have already made the repayment (as
provided below), the Agent shall make a corresponding amount immediately
available to Transferor, together with interest thereon for each day from the
date the amount is repaid by Transferor (as provided below) to the date the
Purchaser repaid the Agent, but only to the extent of interest actually paid by
the Purchaser to the Agent in respect of such period. At any time after the
Agent learns that a Purchaser has failed to make the purchase price for a
Purchase available as described above, the Agent promptly shall give notice to
Transferor and Servicer of that failure, and upon notice Transferor will be
required to refund to the Agent an amount equal to that purchase price, together
with interest on the amount at the rate of interest applicable to such Purchase
(determined in accordance with Section 4.1 of the Supplement).
SECTION II.3 Reduction of Stated Amounts. Upon at least three Business
Days' prior irrevocable notice to the Agent in writing, Transferor may reduce
the Stated Amounts of the Certificates; provided, that (a) each partial
reduction of the Stated Amounts shall be, in the aggregate for all Certificates,
in an integral multiple of $1,000,000 and in a minimum principal amount of
$5,000,000 and (b) no partial reduction shall be made that would reduce the
aggregate Stated Amounts to an amount less than the Series 1996-3 Invested
Amount at the time of the reduction. Each reduction in the Stated Amounts shall
be made ratably among the Purchasers in accordance with their respective Stated
Amounts. The Agent shall promptly advise the Purchasers of any notice given
pursuant to this section. Each reference in this Agreement to the "Stated
Amount" of a Certificate means the Stated Amount of the Certificate after giving
effect to any reductions made pursuant to this section.
SECTION II.4 Certificates. The outstanding amounts of the Purchases
made by each Purchaser shall be evidenced by its Certificate, to be issued on
the date hereof substantially in the form of Exhibit A to the Supplement. Each
Purchaser shall and is hereby authorized to record in its internal books and
records the date and amount of each Purchase made by it, the amount of each
repayment of the principal amount represented by its Certificate, the portions
of its Purchases that are from time to time allocated to the ABR Tranche and any
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<PAGE>
Eurodollar Tranche, and any reductions to the Stated Amount of its Certificate
made pursuant to Section 2.3 (which shall be conclusive absent manifest error);
provided, that failure to make any recordation on the grid or records or any
error in the grid or records shall not adversely affect the Purchaser's rights
with respect to its interest in the assets of the Trust and its right to receive
interest in respect of the outstanding principal amount of all Purchases made by
the Purchaser.
ARTICLE III REDUCTIONS IN SERIES 1996-3 INVESTED AMOUNT
SECTION III.1 Transferor's Right to Reduce Series 1996-3 Invested
Amount. Transferor may, on at least one Business Day's prior notice by
Transferor or Servicer to the Agent, reduce the Series 1996-3 Invested Amount by
causing an amount of funds equal to the desired amount of the reduction that are
available for this purpose in accordance with the terms of the Supplement to be
transferred to the Agent, for the account of the Purchasers (and application to
the respective and ratable reduction of the funded principal amount of the
Certificate of each Purchaser), provided that any reduction to the aggregate
funded principal amounts represented by the Certificates must be in a minimum
amount of $1,000,000 (or the entire funded principal amount, if less) or a
greater integral multiple of $1,000,000.
SECTION III.2 Notice to Purchasers. The Agent shall promptly advise the
Purchasers of any notice received by the Agent pursuant to Section 3.1.
ARTICLE IV TRANCHES, INTEREST AND FEES
SECTION IV.1 Tranches. (a) Each time Transferor requests the Purchasers
to make Purchases hereunder, Transferor will notify the Agent in writing as to
whether the Trust Interests included in the Purchase shall, in whole or in part,
be deemed part of the ABR Tranche or (subject to subsections (b)(iii) and
(b)(iv) below) a Eurodollar Tranche.
(b) Subject to the terms and conditions set forth in this section and
Section 4.4, Transferor shall have the option: (x) on any Business Day, to
convert all or part of the ABR Tranche to a Eurodollar Tranche and (y) on the
last day of any Interest Period of a Eurodollar Tranche, to convert all or any
part of that Eurodollar Tranche to form a part of the ABR Tranche and/or to
continue all or any part of that Eurodollar Tranche as a new Eurodollar Tranche,
the Interest Period for which shall commence on the last day of the prior
Interest Period; provided, that:
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(i) subject to Section 4.4, each conversion or continuation
shall be made ratably among the Purchasers in accordance with their
respective amounts of the Purchases comprising the converted or
continued Tranche,
(ii) if less than all of the outstanding amount of any Tranche
shall be converted or continued, the aggregate amount of the Tranche
converted or continued shall be in an integral multiple of $1,000,000
and in a minimum principal amount of $2,000,000,
(iii) no outstanding Eurodollar Tranche may be continued as a
Eurodollar Tranche, and no portion of the ABR Tranche may be converted
into a Eurodollar Tranche, at any time that an Early Amortization Event
has occurred and is continuing; and any Interest Period for a
Eurodollar Tranche that commences after the commencement of the
Amortization Period must begin on a Distribution Date and end on the
next Distribution Date, and
(iv) there shall not be more than twelve separate Eurodollar
Tranches outstanding at any one time.
(c) If Transferor wishes to convert and/or continue a Tranche under
this section, Transferor shall notify the Agent in writing (i) in the case of a
conversion to or continuation of a Eurodollar Tranche, not later than 3:00 p.m.,
New York City time, three Business Days prior to the date of the proposed
conversion or continuation date and (ii) otherwise, not later than noon, New
York City time, one Business Day prior to the date of the proposed conversion or
continuation. Each notice shall be irrevocable and shall refer to this Agreement
and specify (x) the identity and amount of the Tranche that Transferor wishes to
convert or continue, (y) whether all or part of the Tranche is to be converted
into or continued as a Eurodollar Tranche and (z) the date of the proposed
conversion or continuation (which shall be a Business Day). If Transferor shall
not have delivered a timely notice in accordance with this section with respect
to any Tranche, the Tranche shall, at the end of the Interest Period applicable
to it (unless repaid pursuant to the terms hereof), automatically be converted
into or continued as the ABR Tranche. The Agent shall promptly advise the
Purchasers of any notice given pursuant to this section and of each Purchaser's
portion of any converted or continued Tranche.
(d) In accordance with Section 4.1 of the Supplement, each Purchaser
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<PAGE>
and the Agent will be entitled to receive additional interest (at the rate
specified therein) on amounts that are not paid when due under this Agreement or
under its Certificate.
SECTION IV.2 Fees. (a) Each Purchaser shall be entitled to receive from
Collections a fee (a "Non-Usage Fee"), for the period from the date hereof up to
the end of the Revolving Period for Series 1996-3, equal to 0.20% per annum on
the daily average of (i) the Stated Amount of its Certificate minus (ii) the
amount represented by the Purchaser's Percentage of the Series 1996-3 Invested
Amount. The Non-Usage Fee shall be payable in arrears on each Distribution Date.
The Non-Usage Fee for any Distribution Date shall be calculated on the basis of
the actual number of days elapsed since the preceding Distribution Date (or, if
prior to the first subsequent Distribution Date after the date hereof, during
the period from the date hereof to such Distribution Date) over a year of 365 or
366 days, as applicable.
(b) The Agent shall be entitled to receive from Collections an agent's
fee at the times and in the amount set forth in that certain fee letter dated as
of the date hereof (as amended, or otherwise modified from time to time) between
the Transferor and the Agent.
SECTION IV.3 Yield Protection. (a) Notwithstanding any other provision
herein, if, after the date hereof, either:
(i) the adoption of any law, rule or regulation (including any
imposition or increase of reserve requirements) or any change after the
date hereof in the interpretation or administration of any law, rule or
regulation by any Governmental Authority, central bank or comparable
agency charged with the interpretation or administration thereof, or
(ii) the compliance by a Purchaser with any new or revised
guideline or request from any central bank or other Governmental
Authority or quasi-governmental authority exercising control over banks
or financial institutions generally (whether or not having the force of
law),
shall subject a Purchaser to the imposition or modification of any reserve
(including any imposed by the Federal Reserve Board), special deposit or similar
requirement (including a reserve, special deposit or similar requirement that
takes the form of a tax) against assets of, deposits with or for the account
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<PAGE>
of, or credit extended by, the Purchaser or the office from time to time that it
designates to the Agent as the office through which it makes and maintains its
Purchases comprising part of a Eurodollar Tranche (as to each Purchaser, its
"LIBOR Office") or impose any other condition on a Purchaser affecting its
Eurodollar Tranches or its obligations hereunder, and as a result of either of
the foregoing there shall be any increase in the cost to the Purchaser of
agreeing to make or making, funding or maintaining Purchases as Eurodollar
Tranches, or there shall be a reduction in the amount received or receivable by
the Purchaser or its LIBOR Office, then, upon written notice from the Purchaser
to Transferor and Servicer (with a copy to the Agent), signed by an officer of
the Purchaser with knowledge of and responsibility for such matters, and setting
forth in reasonable detail the calculation used to arrive at the amounts, the
Purchaser shall be entitled to receive such additional amounts sufficient to
indemnify that Purchaser against the increased cost or reduction in amounts
received or receivable. Any such additional amounts shall constitute "Additional
Amounts" for purposes of the Supplement, and the applicable Purchaser shall be
entitled to receive these additional amounts solely from amounts allocated
thereto and paid pursuant to the Supplement.
(b) If a Purchaser shall reasonably determine that the adoption after
the date hereof of any law, rule or regulation regarding capital adequacy or
capital maintenance, or any change after the date hereof in any of the foregoing
or in the interpretation or administration thereof by any Governmental
Authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by a Purchaser, any of its lending offices
or its holding company with any new or revised request or directive regarding
capital adequacy or capital maintenance (whether or not having the force of law)
of any such Governmental Authority, central bank or comparable agency, has or
would have the effect of reducing the rate of return on the Purchaser's capital
or the capital of its holding company as a consequence of this Agreement, the
commitment of such Purchaser to make Purchases or the Purchases made by such
Purchaser pursuant hereto to a level below what the Purchaser or its holding
company could have achieved but for the adoption, change or compliance (taking
into consideration the Purchaser's policies, and the policies of its holding
company, with respect to capital adequacy), then, upon written notice from the
Purchaser to Transferor and Servicer (with a copy to the Agent), signed by an
officer of the Purchaser with knowledge of and responsibility for such matters,
and setting forth in reasonable detail the calculation used to arrive at the
amounts, the Purchaser shall be entitled to receive such additional amounts as
will compensate the Purchaser or its holding company for the reduction. Any such
additional amounts shall constitute
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<PAGE>
"Additional Amounts" for purposes of the Supplement, and the applicable
Purchaser shall be entitled to receive these additional amounts solely from
amounts allocated thereto and paid pursuant to the Supplement.
(c) A Purchaser shall promptly notify Transferor, Servicer and the
Agent in writing of any event of which it has knowledge occurring after the date
hereof that will entitle it to compensation pursuant to this section. A
certificate of the Purchaser, signed by an officer of the Purchaser with
knowledge of and responsibility for such matters, and setting forth in
reasonable detail the calculation used to arrive at the amounts necessary to
compensate the Purchaser or its holding company as specified in subsection (a)
or (b), as the case may be, shall be delivered to Transferor and Servicer and
shall be conclusive absent demonstrable error.
(d) Failure on the part of a Purchaser to demand compensation for any
amounts as specified in subsection (a) or (b) with respect to any period shall
not constitute a waiver of its right to demand compensation with respect to that
period or any other period. The protection of this section shall be available to
the Purchasers regardless of any possible contention of the invalidity or
inapplicability of the law, rule, regulation, guideline or other change or
condition that shall have occurred or been imposed.
(e) Promptly after giving any notice to Transferor pursuant to this
section, a Purchaser will seek to designate one of its offices located at an
address other than that previously designated pursuant to this Agreement as the
office from which its Purchases will be made after the designation if it will
avoid the need for, or materially reduce the amount of, any payment to which the
Purchaser would otherwise be entitled pursuant to this section and will not, in
the sole discretion of the Purchaser, be otherwise disadvantageous to the
Purchaser.
SECTION IV.4 Illegality; Unavailability. (a) In the event that on any
date any Purchaser shall have determined (which determination shall be final and
conclusive and binding upon all parties) that the making or continuation of its
Purchases as Eurodollar Tranches has become unlawful by compliance by the
Purchaser in good faith with any law, governmental rule, regulation or order or
has become impossible as a result of a contingency occurring after the date
hereof that materially and adversely affects its interbank eurodollar market,
then, and in any such event, that Purchaser shall promptly give notice (by
telephone confirmed in writing) to Transferor, Servicer and the Agent (which
notice the Agent shall promptly transmit to each Purchaser) of that
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determination. The obligation of the affected Purchaser to make or maintain its
Purchases as Eurodollar Tranches during any such period shall be terminated at
the earlier of the termination of the Interest Period then in effect for each
Eurodollar Tranche or when required by law, and Transferor shall, no later than
the time specified for the termination, convert any Purchases of the affected
Purchaser that constitute part of any Eurodollar Tranche into a part of the ABR
Tranche.
(b) If, prior to the beginning of any Interest Period, the Agent shall
have determined (which determination shall be final and conclusive and binding
upon all parties) that: (i) Dollar deposits in the relevant amount and for the
Interest Period are not available in the relevant interbank eurodollar market or
(ii) by reason of circumstances arising after the date of this Agreement and
affecting the interbank eurodollar market, that adequate and fair means do not
exist for ascertaining the Eurodollar Rate applicable to a Eurodollar Tranche,
then the Agent shall promptly give notice of this determination to Transferor
and to each Purchaser. Thereafter, and continuing until the Agent shall notify
Transferor that the circumstances giving rise to this determination no longer
exist, (x) each Eurodollar Tranche will, on the last day of the applicable
Interest Period, convert into a part of the ABR Tranche, (y) the right of
Transferor to request Eurodollar Tranches shall be suspended and (z) any
Purchases requested to be made as Eurodollar Tranches prior to such time but not
yet made shall be made as ABR Tranches.
SECTION IV.5 Indemnity. If a Purchaser shall incur any losses, expenses
or liabilities (including any interest paid to lenders of funds borrowed by it
to fund any Purchase of a Certificate as a Eurodollar Tranche and any loss
sustained in connection with the re-deployment of such funds) as a result of (a)
the failure of a Purchase to be made on a date specified therefor in a notice
delivered by Transferor pursuant to Section 2.2 (other than any such failure
resulting from the Purchaser's default in the performance of its obligations
hereunder) or (b) any repayment, including under Section 3.1, of any part of the
Series 1996-3 Invested Amount allocated to a Eurodollar Tranche on a date that
is not the last day of the Interest Period applicable to that part of the Series
1996-3 Invested Amount or that is any date other than the date specified in a
notice of repayment given by Servicer, then, upon written notice (which notice
shall be signed by an officer of the Purchaser with knowledge of and
responsibility for such matters and shall set forth in reasonable detail the
basis for requesting the amounts) from the Purchaser to Transferor and Servicer,
additional amounts sufficient to indemnify the Purchaser against the losses,
liabilities and reasonable expenses, but not for any lost profits associated
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therewith, shall constitute "Additional Amounts" for purposes of the Supplement,
and the Purchaser shall be entitled to receive these additional amounts, solely
from amounts allocated thereto and paid pursuant to the Supplement.
SECTION IV.6 Taxes. (a) Any and all payments made to each Purchaser
under its Certificate shall be made free and clear of and without deduction for
any and all present or future taxes, levies, imposts, duties, charges, fees,
deductions or withholdings of any nature and whatever called, by whomsoever, on
whomsoever and wherever imposed, levied, collected, withheld or assessed,
excluding taxes imposed by the jurisdiction in which (i) that Purchaser is
incorporated or (ii) that Purchaser's principal office (and/or the office where
it books its investment in its Certificate) is located, on all or part of the
net income, profits or gains of that Purchaser (whether worldwide, or only
insofar as such income, profits or gains are considered to arise in or to relate
to a particular jurisdiction, or otherwise) (all the nonexcluded taxes, levies,
imposts, charges, deductions, withholdings and liabilities being hereinafter
referred to as "Taxes"). If Trustee or the Agent are required by law to deduct
or withhold any Taxes from or in respect of any sum payable hereunder or under
any Certificate to a Purchaser, then the sum payable shall be increased by the
amount necessary to yield to such Purchaser (after payment of all Taxes) an
amount equal to the sum it would have received had no such deductions or
withholdings been made, and the additional amount shall constitute "Additional
Amounts" for purposes of the Supplement, and the Purchaser shall be entitled to
receive these additional amounts, solely from amounts allocated thereto and paid
pursuant to the Supplement; provided, however, that no additional amounts shall
be paid under this Section 4.6 to the extent that the Taxes which gave rise to
the liability for such additional amounts would not have been imposed but for a
change in the Purchaser's circumstances including without limitation a change in
its jurisdiction of incorporation, the location or jurisdiction of residence of
its principal lending office and/or the office where it books its investment in
its Certificate; provided, further, that if a Purchaser that becomes entitled to
additional amounts with respect to Taxes can avoid or reduce its liability for
such Taxes by performing any ministerial act, such as the filing of a form or
the making of an election, such Purchaser shall use its reasonable efforts to
perform such act, unless such Purchaser determines in its reasonable judgement
that doing so would adversely affect it.
(b) Each Purchaser (or Participant or Assignee) that receives any
additional amounts pursuant to this Section 4.6 and that realizes a cash tax
benefit, whether by way of credit, deduction, refund or otherwise (a "Tax
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Benefit") in respect of any Taxes on account of which such additional amounts
have been paid, shall (A) promptly thereafter pay to the Trust the amount of
such Tax Benefit and (B) within 90 days after the close of the Purchaser's (or
Assignee's or Participant's) taxable year during which any such additional
amounts have been paid, deliver a certificate from an accounting firm of
international reputation setting forth its determination of the amount of any
such Tax Benefit realized in such taxable year and detailing the basis for its
determination; provided that, if the determination of the extent to which any
Tax Benefit realized in a taxable year is in respect of Taxes on account of
which such additional amounts have been paid or in respect of other items (the
"Other Items") available to such Purchaser (or Assignee or Participant), the Tax
Benefit shall be treated as realized in respect of such additional amounts on a
pro-rata basis with the Other Items, unless, and to the extent, the local law
which grants such Tax Benefit provides rules for determining the extent to which
the Tax Benefit was attributable to the Other Items, in which case the Tax
Benefit shall be deemed realized in accordance with the manner provided by such
local law. For purposes of the Supplement, any such amount paid by a Purchaser
to the Trust shall be treated as Collections on Receivables. Nothing in this
paragraph (b) shall be interpreted so as to require a Purchaser to file any
return, make any election, take any position or otherwise take any action
inconsistent with its usual and customary Tax reporting practices.
(c) Whenever any Taxes are paid by Trustee pursuant to subsection (a),
as promptly as possible thereafter Servicer shall send to the relevant Purchaser
the original or a certified copy of an original official receipt showing payment
thereof (if any) or any other evidence of the payment as may be available to
Servicer through the exercise of its reasonable efforts. If Trustee fails to pay
any Taxes when due to the appropriate taxing authority or fails to remit to the
Purchaser the required receipts or other required documentary evidence, the
Purchaser shall be entitled to receive, solely from amounts allocated with
respect thereto and paid pursuant to the Supplement, additional amounts
necessary to indemnify it for any incremental taxes, interest or penalties that
may become payable by the Purchaser as a result of any such failure, and the
amounts shall constitute "Additional Amounts" for purposes of the Supplement,
and the Purchaser shall be entitled to receive these additional amounts, solely
from amounts allocated thereto and paid pursuant to the Supplement.
(d) On or before the date it becomes a party to this Agreement (or, in
the case of any Support Bank, at the time it becomes a Support Bank) (and, so
long as it may properly do so, periodically thereafter, as requested by
Servicer, to keep forms up to date), each Purchaser, including any Assignee,
that is not a
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United States person (as defined in section 7701(a)(30) of the Internal Revenue
Code), shall deliver to Trustee any certificates, documents or other evidence
that shall be required by the Internal Revenue Code or Treasury Regulations
issued pursuant thereto to establish that, assuming the Certificates are
properly characterized as indebtedness for Federal income tax purposes, it is
exempt from existing United States Federal withholding (including backup
withholding) requirements, including (i) two original copies of Internal Revenue
Service Form 4224 or successor applicable form, properly completed and duly
executed by the Purchaser or Assignee certifying that it is entitled to receive
payments under this Agreement or any Certificate without deduction or
withholding of any United States Federal income taxes, or (ii) an original copy
of Internal Revenue Service Form W-8 or applicable successor form, properly
completed and duly executed; provided, that if any Purchaser does not comply
with this subsection 4.6(d) (it being understood that a Purchaser's inability to
properly provide the documents described herein after the date it becomes a
party hereto, in the case of a Purchaser other than a Support Bank, or after the
date it becomes a Support Bank, in the case of a Support Bank, shall not
constitute failure to comply with this Section 4.6(d)), amounts payable to such
Purchaser under this Section 4.6 shall be limited to amounts that would have
been payable under this section if such Purchaser had so complied.
ARTICLE V OTHER PAYMENT TERMS
SECTION V.1 Time and Method of Payment. (a) All amounts payable to any
Purchaser hereunder or with respect to its Certificate shall be made to the
Agent for the account of the Purchaser by wire transfer of immediately available
funds in Dollars not later than 2:00 p.m., New York City time, on the date due.
Any funds received after that time will be deemed to have been received on the
next Business Day. The Agent shall distribute all payments to the Purchasers, in
accordance with their respective interests, prior to the close of business on
the Business Day on which any payment is deemed received.
(b) On any date on which a payment to one or more Purchasers hereunder
or under the Certificates is due and payable, the Agent may (but in no event
shall be required to) assume that the payment has been made available to the
Agent on the date of the payment in accordance with this section, and the Agent
may (but in no event shall be required to), in reliance upon this assumption,
make payment of a corresponding amount to the Purchasers. If and to the extent
any amounts shall not have so been made available to the Agent, each Purchaser
irrevocably and unconditionally agrees to repay to the Agent forthwith on demand
the amount of payment it received together with interest
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thereon, for each day from the date payment is made by the Agent until the date
the amount is repaid to the Agent, (i) for the first three days following the
date the payment is made, at a rate per annum equal to the Federal Funds Rate
and (ii) thereafter, at a rate per annum equal to the Federal Funds Rate plus
1%.
SECTION V.2 Pro Rata Treatment. Each repayment of the principal of the
Certificates, (except as otherwise required by Section 2.2(c)), each payment of
interest thereon, each payment of the Non-Usage Fee, each reduction of the
Stated Amounts and each conversion or continuation of any Tranche (except as
otherwise required by Section 4.4(a) with respect to conversions) shall be
allocated pro rata among the Purchasers on the date of payment or reduction, in
accordance with their respective Percentages (unless the Agent has made the
election specified in Section 2.2(c), in which case such allocation shall be pro
rata in accordance with funded principal amounts). Each Purchaser agrees that in
computing its portion of any Purchases to be made hereunder, the Agent may, in
its discretion, round each Purchaser's pro rata share of the Purchases to the
next higher or lower whole dollar amount.
ARTICLE VI REPRESENTATIONS AND WARRANTIES
SECTION VI.1 Transferor. As of the date hereof, Transferor represents
and warrants to the Purchasers that each of its representations and warranties
in the Pooling Agreement and Purchase Agreement is true and correct, as if made
on the date hereof, and further represents and warrants that:
(a) no Early Amortization Event or Unmatured Early
Amortization Event exists;
(b) assuming the accuracy of each Purchaser's representations
set out in Section 6.3 and that no Purchaser (and no Person acting on
any Purchaser's behalf) has made a general solicitation or general
advertising within the meaning of the Securities Act, the offer and
sale of the Certificates in the manner contemplated by this Agreement
is a transaction exempt from the registration requirements of the
Securities Act, and the Pooling Agreement is not required to be
qualified under the Trust Indenture Act of 1939, as amended;
(c) no information supplied by or on behalf of Transferor or
Big Flower or any of its Subsidiaries to the Agent or the Purchasers in
connection with the Transaction Documents contains any untrue statement
of a material fact or omits to state a material fact necessary to
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make the statements contained herein or therein not misleading in light
of the circumstances under which they were made;
(d) the Certificates have been duly and validly authorized by
Transferor and, from and after the date on which the Certificates are
executed by Transferor and authenticated by the Trustee in accordance
with the terms of the Pooling Agreement and the Supplement and
delivered to and paid for by the Purchasers in accordance with the
terms of this Agreement, will be validly issued and outstanding and
will constitute valid and legally binding obligations of the Trust
entitled to the benefits of the Pooling Agreement and the Supplement
and enforceable against the Trust in accordance with their terms; and
(e) the Certificates are not subject to any Adverse Claim
created by, securing an obligation of or otherwise attributable to
Transferor and the Transferor is conveying to the Purchasers all of its
right, title and interest in such Certificates.
SECTION VI.2 Big Flower. As of the date hereof, Big Flower represents
and warrants to the Purchasers that:
(a) each of its representations and warranties in the Pooling
Agreement (in its capacity as Servicer) and the Purchase Agreement (in
its capacity as Servicer) is true and correct, as if made on the date
hereof with the same effect as if made on that date (unless
specifically stated to relate to an earlier date);
(b) the audited annual financial statements of Big Flower, for
the period ending December 31, 1995 present fairly in all material
respects the financial position, results of operations and cash flows
of Big Flower and its consolidated Subsidiaries at the dates and for
the periods to which they relate and have been prepared in accordance
with generally accepted accounting principles applied on a consistent
basis, except as otherwise stated therein;
(c) since December 31, 1995 through to the date hereof (and
except as contemplated in the Pro Forma Financial Data), (i) there has
been no material adverse change in the condition, financial or
otherwise, or the earnings, business affairs or business prospects of
Transferor or Big Flower, whether or not arising in the ordinary course
of business, and (ii) there have been no transactions (except the
execution and
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delivery of Transaction Documents and the consummation of the
transactions and refinancings contemplated by the Pro Forma Financial
Data) entered into by Transferor or Big Flower that are material with
respect to the condition, financial or otherwise, or the earnings,
business affairs or business prospects of Transferor or Big Flower; and
(d) no information supplied by or on behalf of Transferor or
Big Flower or any of its Subsidiaries to the Agent or the Purchasers in
connection with the Transaction Documents contains any untrue statement
of a material fact or omits to state a material fact necessary to make
the statements contained herein or therein not misleading in light of
the circumstances under which they were made.
SECTION VI.3 Purchasers. As of the date hereof (or such later date on
which it acquires its Certificate in accordance with Section 10.3), each
Purchaser represents and warrants (and each Assignee shall be deemed to
represent and warrant as of the date that its assignment becomes effective)
that:
(a) it is a "qualified institutional buyer" as that term is
defined under Rule 144A of the Securities Act (or, in the case of an
Assignee, it either (x) is a "qualified institutional buyer" as that
term is defined under Rule 144A of the Securities Act or an "accredited
investor" within the meaning of Rule 501(a) (1), (2), (3) or (7) of the
Securities Act, (y) is not a "U.S. person" (as defined in Rule 901
under the Securities Act) or (z) is a "U.S. person" (as defined in Rule
901 under the Securities Act) which has acquired its Certificate in a
transaction exempt from the Securities Act and it has provided the
Trustee and Transferor an opinion of counsel as to such exemption in a
form satisfactory to the Trustee and Transferor) and it is not
purchasing its Certificate with a view to making a distribution thereof
(within the meaning of the Securities Act); and
(b) it is not an employee benefit plan, retirement
arrangement, individual retirement account or Keogh plan subject to
either Title I of ERISA, or Section 4975 of the Internal Revenue Code
(each, a "Plan") or an entity using "plan assets" of a Plan to purchase
a Certificate.
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ARTICLE VII CONDITIONS
SECTION VII.1 Conditions to Initial Purchase. The obligation of each
Purchaser to Purchase its Certificate shall be subject to the satisfaction of
the conditions precedent that (w) the Certificates shall have been rated "AAA"
by Duff & Phelps Credit Rating Co. and Standard & Poor's Ratings Services, (x)
the Agent shall have received, for the account of such Purchaser, a duly
executed and authenticated Certificate registered in its name and in a Stated
Amount equal to the amount set out opposite its name on the signature pages of
this Agreement, (y) the Agent shall have received certain fees and reimbursement
of any expenses referred to in Section 10.5 for which invoices have been
presented and (z) the Agent shall have received, for the account of such
Purchaser, an original (except as indicated below) counterpart of the following
(each of which, if not in a form attached to this Agreement, shall be in form
and substance satisfactory to the Agent):
(a) copies of the Pooling Agreement (including the Series
1996-2 Supplement and the Series 1996-3 Supplement), the Purchase
Agreement and the Guaranty, each of which shall be in full force and
effect, and all actions required to be taken under those documents in
connection with the issuance of the Certificates shall have been taken;
(b) copies of each Account Agreement;
(c) a certificate of the Secretary, or an Assistant Secretary,
of each of Transferor, Servicer, Guarantor and each Seller with respect
to:
(i) attached copies of resolutions of its Board of
Directors then in full force and effect authorizing the
execution, delivery and performance of the Transaction
Documents,
(ii) the incumbency and signatures of those of its
officers authorized to act with respect to the Transaction
Documents,
(iii) attached copies of its certificate of
incorporation and by-laws;
(d) a certificate of an Authorized Officer of each of
Transferor, Servicer, Guarantor and each Seller as to the satisfaction
of the conditions precedent set forth in Section 7.2,
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(e) an opinion of counsel to Trustee as to the due
authorization, execution and delivery by Trustee of the Pooling
Agreement and this Supplement, as to the due authentication by Trustee
of the Certificates and as to related matters;
(f) the Daily Report for the date hereof;
(g) a pro forma balance sheet of Transferor as of the date
hereof, after giving effect to the transactions contemplated by the
Supplement, certified by an appropriate officer of Big Flower;
(h) evidence that the Series 1996-2 Certificates (as defined
in the Series 1996-2 Supplement) will be issued and authenticated
contemporaneously with the issuance and authentication of the
Certificates;
(i) results of recent searches of the UCC filing records and
tax and ERISA and judgment lien records in each jurisdiction in which a
filing has been made naming a Seller or Transferor as debtor in
connection with the Pooling Agreement or the Purchase Agreement for
filings against each Seller (including any predecessors in interest to
any Seller going back five years) and Transferor, showing no filings of
record that cover any of the Receivables or the Related Transferred
Assets other than (i) the financing statements naming Trustee as
secured party which have been filed in connection with the Pooling
Agreement and the Purchase Agreement and (ii) any other filings as to
which the Agent has received signed UCC-3 termination statements or pay
off letters in form and substance satisfactory to it;
(j) the following opinions addressed to the Agent, the
Purchasers and Trustee, and in each case as to the matters and in such
form and substance as shall be satisfactory to the Agent, the
Purchasers and Trustee:
(i) opinions of Skadden, Arps, Slate, Meagher & Flom
as to certain corporate and securities matters, Federal and
state tax and UCC matters, true sale and non-consolidation;
and
(ii) an opinion of Ira Horowitz, general counsel to
Webcraft Technologies, Inc. as to certain corporate, state tax
and
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UCC matters;
(iii) an opinion of Hunton & Williams, as to Maryland
law issues;
(iv) opinions of Jones, Day, Reavis & Pogue, as to
Texas and Pennsylvania law issues; and
(v) an opinion of Lowenstein, Sandler, Kohl, Fisher &
Boylan, as to New Jersey law issues.
(k) an agreed-upon procedures letter, in form and substance
satisfactory to the Agent, from Deloitte & Touche, with respect to
certain historical information provided by Big Flower and the Sellers
relating to the Receivables, and a form of agreed-upon procedures
letter, in form and substance satisfactory to the Agent, as to the
reports to be delivered under Section 3.7 of the Pooling Agreement; and
(l) a termination agreement from the Holders of the Series
1996-1 Certificates in substantially the form of Exhibit D to the
Series 1996-2 Supplement appropriately completed and duly executed by
each party thereto; and
(m) any other information, certificates, opinions and
documents as the Agent may have reasonably requested.
If the conditions specified above have not been fulfilled on the date
hereof, any condition specified in this Agreement shall not have been fulfilled
when and as required in this Agreement or waived by the Purchasers, in each case
a Purchaser's obligations to purchase the Certificates pursuant to this
Agreement may be terminated by notice to Transferor. In addition, if, under the
circumstances, it shall not be feasible for the Purchasers to invest on the date
the funds that are held available by the Purchasers for the Purchase, Transferor
shall pay the Purchasers interest on the funds at the Alternate Base Rate from
the date of the notice until the next succeeding Business Day on which it is
feasible for the Purchasers to invest the funds; provided that amounts payable
as interest under this paragraph shall constitute "Additional Amounts" for
purposes of the Supplement and shall be payable by Transferor only to the extent
that funds are available to make the payments pursuant to Article IV of the
Series 1996-2 Supplement, and there shall be no recourse to Transferor for all
or any part of any amounts payable pursuant to this paragraph if the funds are
at any
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time insufficient to make all or part of any such payments. Any amount which
Transferor does not pay pursuant to the operation of the preceding sentence
shall not constitute a claim (as defined in ss. 101 of the Bankruptcy Code)
against or corporate obligation of Transferor for any such insufficiency.
Nothing in this paragraph shall operate to relieve Transferor from any of its
obligations hereunder or otherwise waive any of the Purchasers' rights against
Transferor.
SECTION VII.2 Conditions to Each Purchase. The obligation of each
Purchaser to make any Purchase on any day (including those comprising the
initial Purchase) shall be subject to the Agent's receipt of the Daily Report
for that day and to the conditions precedent that on the date of the Purchase,
before and after giving effect thereto and to the application of any proceeds
therefrom, the following statements shall be true:
(a) the representations and warranties of Transferor and Big
Flower set out in this Agreement (other than in Section 6.2(b) or (c))
are true and accurate as of that date with the same effect as though
made on that date (unless specifically stated to relate to an earlier
date); and
(b) no Early Amortization Event or Unmatured Early
Amortization Event has occurred and is continuing.
The giving of any notice pursuant to Section 2.2 shall constitute a
representation and warranty by Transferor and Big Flower that the foregoing
statements (limited, in the case of subsection (a) to the representations and
warranties of the Person deemed to make the representation and warranty referred
to in this sentence) are true.
ARTICLE VIII COVENANTS
SECTION VIII.1 Covenants. Transferor and Big Flower each severally
covenant and agree that, until the Certificates have been paid in full, it will:
(a) with reasonable promptness deliver to each Purchaser such
information, documents, records or reports respecting the Program or
the Receivables as the Purchaser may from time to time reasonably
request;
(b) at the same time any report (including any Daily Report,
Monthly Report or annual auditors' report), notice or other document is
provided, or caused to be provided, by Transferor or Servicer to
Trustee
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under the Pooling Agreement, provide each Purchaser with a copy of the
report;
(c) until the Certificates have been paid in full, not allow
(i) to be outstanding over 100 Private Holders of Subject Instruments
and (ii) any Subject Instruments to be traded on an Established
Securities Market, registered under the Securities Act or offered or
sold pursuant to Regulation S (17 CFR 230.901 through 230.904 or any
successor thereto) if such offering or sale would have been required to
be registered under the Securities Act if the interests so offered or
sold had been offered and sold within the United States;
(d) furnish to the Agent (with sufficient copies for all the
Purchasers), and the Agent will promptly forward to each Purchaser:
(i) as soon as available and in any event within 50
days after the close of each of the first three quarterly
accounting periods in each fiscal year of Big Flower, the
consolidated balance sheet of Big Flower and its Subsidiaries
as at the end of such quarterly period and the related
statements of income and retained earnings and cash flows for
such quarterly period and for the elapsed portion of the
fiscal year of Big Flower ended with the last day of such
quarterly period (provided that for any quarterly accounting
period during which Big Flower is a company required to file
Form 10-K Reports and Form 10-Q Reports under the Securities
and Exchange Act of 1934, the furnishing of Big Flower's Form
10-Q Report filed with the Securities and Exchange Commission
for such quarterly accounting period shall satisfy the
requirements of this clause (i) for the respective fiscal
quarter), which items shall be certified by an appropriate
officer of Big Flower and subject to normal year-end audit
adjustments and the absence of footnotes;
(ii) as soon as available and in any event within 50
days after the close of each quarterly accounting period in
each fiscal year, the balance sheet of Transferor as of the
end of such quarterly period and the related statements of
income for such quarterly period; and
(iii) within 95 days after the close of each fiscal
year of Big Flower, the consolidated balance sheets of Big
Flower and its
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Subsidiaries as at the end of such fiscal year and the related
statements of income and retained earnings and cash flows for
such fiscal year, certified by Deloitte & Touche or such other
independent certified public accountants of recognized
national standing reasonably acceptable to the Agent; provided
that for any fiscal year for which Big Flower is a company
required to file Form 10-K Reports and Form 10-Q Reports under
the Securities and Exchange Act of 1934, the furnishing of Big
Flower's Form 10-K Report filed with the Securities and
Exchange Commission for such annual accounting period shall
satisfy the requirements of this clause (iii) for the
respective fiscal year;
(e) during regular business hours and (so long as no Early
Amortization Event has occurred and is continuing) upon two Business
Days prior written notice, permit the Agent, as an expense of Servicer
paid out of the Servicing Fee (provided that such expense shall be
reasonable), (i) to conduct reviews of, all Records in the possession
or under the control of Servicer, Transferor or any Seller, including
the related Contracts and purchase orders, invoices and other
agreements related thereto, and (ii) to visit the offices and
properties of Servicer, Transferor or any Seller and to discuss matters
relating to the Receivables or the Related Assets or the performance by
Servicer, Transferor or any Seller of their respective obligations
under any Transaction Document with any officer, employee or
representative of Servicer, Transferor or any Seller; provided that if
no Early Amortization Event is continuing, the Agent shall conduct, or
cause its agents or representatives to conduct, no more than two
reviews of the type described in this paragraph in each year.
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SECTION VIII.2 Transfers. Each Purchaser agrees that it will not make
any general solicitation or general advertising for the offer or sale of the
Certificates and will not transfer its Certificate (or any portion thereof) to
any Person except (a) within the United States to a Person which such Purchaser
reasonably believes is a "qualified institutional buyer" (as defined in Rule
144A under the Securities Act) that is purchasing (1) for its own account or (2)
for the account of a "qualified institutional buyer" (as so defined) that is, in
either case, aware that such resale, pledge or transfer is being made in
reliance on Rule 144A under the Securities Act, (b) in the United States to a
Person which has provided the Trustee and Transferor with a certificate to the
effect that such Person is an institutional "accredited investor" within the
meaning of Rule 501(a) (1), (2), (3) or (7) of Regulation D under the Securities
Act) that is not also a "qualified institutional buyer" (as defined in said Rule
144A) upon delivery of an opinion of counsel in form and substance satisfactory
to Transferor and the Trustee to the effect that registration of the
Certificates is not required in respect of such transfer, (c) in the United
States in compliance with Rule 144 of the Securities Act if available, upon
delivery of an opinion of counsel in a form satisfactory to the Trustee and
Transferor (with respect to clauses (a), (b) and (c) above, if such Person is
not a Plan or an entity using "plan assets" of a Plan to purchase a
Certificate), (d) outside the United States to a Person which has provided the
Trustee and Transferor with a certificate to the effect that such Person is not
a "U.S. person" (as defined in Rule 901 of Regulation S under the Securities
Act) and (e) to the Transferor. Each Purchaser further agrees to provide to any
Person purchasing any Certificates from it a notice advising such purchaser that
resales of the Certificates are restricted as stated above.
ARTICLE IX AGENT; REQUIRED PURCHASERS
SECTION IX.1 Appointment. The Purchasers hereby designate Caisse
Nationale De Credit Agricole as Agent. Each Purchaser hereby irrevocably
authorizes the Agent to take action on its behalf under the provisions of the
Transaction Documents and any other instruments and agreements referred to
therein and to exercise the powers and perform the duties hereunder and
thereunder that are specifically delegated to or required of the Agent by the
terms hereof and thereof, and any other powers as are reasonably incidental
thereto. The Agent may perform any of its duties by or through its officers,
directors, agents or employees.
SECTION IX.2 Nature of Duties. The Agent shall not have any duties or
responsibilities except those expressly set forth in this Agreement. Neither
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the Agent nor any of its officers, directors, agents or employees shall be
liable for any action taken or omitted by it or them under any Transaction
Document or in connection herewith or therewith, unless caused by their gross
negligence or willful misconduct. The duties of the Agent shall be mechanical
and administrative in nature, the Agent shall not have by reason of this
Agreement a fiduciary relationship in respect of any Purchaser, and nothing in
any Transaction Document, expressed or implied, is intended to or shall be
construed as to impose upon the Agent any obligations in respect of any
Transaction Document except as expressly set forth herein.
SECTION IX.3 Lack of Reliance on Agent. Independently and without
reliance upon the Agent, each Purchaser, to the extent it deems appropriate, has
made and shall continue to make (a) its own independent investigation of the
financial condition and affairs of Transferor, the Sellers, Servicer, Guarantor
and the Trust in connection with the making and the continuation of each
Purchase and the taking or not taking of any action in connection herewith and
(b) its own appraisal of the creditworthiness of Transferor, the Sellers,
Servicer and Guarantor and the merits and risks of an investment in the
Certificates, and, except as expressly provided in this Agreement, the Agent
shall not have any duty or responsibility, either initially or on a continuing
basis, to provide any Purchaser with any credit or other information with
respect thereto, whether coming into its possession before the making of a
Purchase or at any time or times thereafter. The Agent shall not be responsible
to any Purchaser for any recitals, statements, information, representations or
warranties herein or in any document, certificate or other writing delivered in
connection herewith or for the execution, effectiveness, genuineness, validity,
enforceability, perfection, collectibility, priority or sufficiency of the
Transaction Documents or the financial condition of Transferor, the Sellers,
Servicer, Guarantor or the Trust or be required to make any inquiry concerning
either the performance or observance of any of the terms, provisions or
conditions of any Transaction Document, or the financial condition of
Transferor, the Sellers, Servicer, Guarantor or the Trust or the existence or
possible existence of any Early Amortization Event or Unmatured Early
Amortization Event.
SECTION IX.4 Certain Rights of Agent. If the Agent shall request
instructions from the Required Purchasers with respect to any act or action
(including failure to act) in connection with any Transaction Document, the
Agent shall be entitled to refrain from acting or taking the action unless and
until the Agent shall have received instructions from the Required Purchasers,
and the Agent shall not incur liability to any Person by reason of so
refraining. Without limiting the foregoing, no Purchaser shall have any right of
action
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whatsoever against the Agent as a result of the Agent acting or refraining from
acting under any Transaction Document in accordance with the instructions of the
Required Purchasers or for refraining to act in the absence of instruction.
SECTION IX.5 Reliance. The Agent shall be entitled to rely, and shall
be fully protected in relying, upon any note, writing, resolution, notice,
statement, certificate, telex, teletype or telecopier message, cablegram,
radiogram, order or other document or telephone message signed, sent or made by
any Person that the Agent believed to be the proper Person. The Agent may
consult with legal counsel (including counsel for any Big Flower Person),
independent public accountants and other experts selected by the Agent and shall
not be liable for any action taken or omitted to be taken in accordance with the
advice of such counsel, accountants or experts.
SECTION IX.6 Indemnification. To the extent the Agent is not reimbursed
and indemnified by Transferor or Servicer, the Purchasers will reimburse and
indemnify the Agent ratably in accordance with their respective Percentages from
and against any and all liabilities, obligations, losses, damages, penalties,
claims, actions, judgments, suits, costs, expenses or disbursements of
whatsoever kind or nature that may be imposed on, asserted against or incurred
or suffered by the Agent (including fees and expenses of legal counsel,
accountants and experts) in performing its duties or as a result of any action
taken or omitted to be taken by the Agent under any Transaction Document or in
any way relating to or arising out of any Transaction Document; provided that no
Purchaser shall be liable for any portion of these liabilities, obligations,
losses, damages, penalties, claims, actions, judgments, suits, costs, expenses
or disbursements resulting from the Agent's gross negligence or willful
misconduct (as determined by a court of competent jurisdiction in a final and
non-appealable order).
SECTION IX.7 Agent in its Individual Capacity. With respect to its
obligation to purchase a Certificate under this Agreement, the Agent shall have
the rights and powers specified herein for a Purchaser and may exercise the same
rights and powers as though it were not performing the duties of the "Agent"
specified herein, and the term "Purchasers," "Required Purchasers" and "Holders"
or "payees" of any Certificates or any similar terms shall, unless the context
clearly otherwise indicates, include the Agent in its individual capacity. The
Agent and its Affiliates may accept deposits from, lend money to and generally
engage in any kind of banking, trust or other business with Transferor or
Servicer or any Big Flower Person as if the Agent were not performing the duties
specified herein, and may accept fees and other
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consideration from Transferor or Servicer for services in connection with this
Agreement and otherwise without having to account for the same to the
Purchasers.
SECTION IX.8 Resignation by Agent. (a) The Agent may resign at any time
by giving notice to Transferor and the Purchasers. Such resignation shall take
effect upon the appointment of a successor Agent pursuant to subsections (b) and
(c) below or as otherwise provided below.
(b) Upon any notice of resignation of the Agent, the Required
Purchasers shall appoint a successor Agent hereunder who shall be a commercial
bank or trust company reasonably acceptable to Transferor (it being understood
and agreed that any Purchaser is deemed to be acceptable to Transferor).
(c) If a successor Agent is not appointed pursuant to subsection (b)
within 30 days after the delivery of the notice referred to in subsection (a),
the resigning Agent, with the consent of Transferor, shall then appoint a
successor Agent who shall serve as Agent hereunder until the time, if any, that
the Required Purchasers appoint a successor Agent as provided above.
(d) If no successor Agent has been appointed pursuant to subsection (b)
or (c) above by the 60th day after the date notice of resignation was given by
the resigning Agent, such Agent's resignation shall become effective and the
Purchasers shall thereafter perform all the duties of the Agent under the
Transaction Documents until the time, if any, that the Purchasers appoint a
successor Agent as provided above.
SECTION IX.9 Required Purchasers. "Required Purchasers" means
Purchasers having Percentages that aggregate over 50%.
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ARTICLE X MISCELLANEOUS PROVISIONS
SECTION X.1 Amendments. Except as provided in Section 13.1(a) or (b) of
the Pooling Agreement, neither Transferor nor Big Flower shall amend, waive or
otherwise modify any provision of any Transaction Document to which it is a
party, consent to any departure therefrom, or grant any waiver or consent
thereunder, unless the same shall have been consented to in writing by the
Required Series Holders prior to the effectiveness of the same; provided,
however, that no amendment shall (a) decrease in any manner the amount of, or
delay the timing of, any allocation, payment or distribution in respect of any
Certificate without the prior written consent of each Purchaser affected
thereby, (b) amend, modify or waive any provision of this Agreement that
requires the approval or consent of a specified percentage of Purchasers without
the prior written consent of that percentage of Purchasers, (c) amend, modify or
waive the provisions of this section with respect to the rights of any Purchaser
without the consent of that Purchaser, (d) waive any Early Amortization Event
arising from a Bankruptcy Event with respect to Transferor, Big Flower or any
Seller without the consent of each Purchaser, (e) amend or modify the Percentage
of any Purchaser without its prior written consent, (f) waive any of the
requirements hereunder that the interests of Trustee in the Receivables and the
other Transferred Assets be perfected by appropriate UCC filings without the
prior written consent of each Purchaser or (g) amend, modify or otherwise affect
the rights or duties of the Agent hereunder without the prior written consent of
the Agent; provided further that neither the execution and delivery of a
Supplement relating to a refinancing of the Certificates as contemplated by
Section 4.5 of the Supplement relating to the Certificates, nor any other
amendment to the Transaction Documents in connection with such a refinancing,
shall require any consent from any Purchaser, so long as the prior or
contemporaneous repayment in full of the Certificates in accordance with Section
5.2 of the Series 1996-2 Supplement relating to the Certificates is a condition
to the issuance of the refinancing certificates, and of the effectiveness of
such related amendment. Each Purchaser shall be bound by any modification,
waiver or consent authorized by this section.
SECTION X.2 No Waiver; Remedies. Any waiver, consent or approval given
by any party hereto shall be effective only in the specific instance and for the
specific purpose for which given, and no waiver by a party of any breach or
default under this Agreement shall be deemed a waiver of any other breach or
default. No failure on the part of any party hereto to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor shall any
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single or partial exercise of any right hereunder, or any abandonment or
discontinuation of steps to enforce the right, power or privilege, preclude any
other or further exercise thereof or the exercise of any other right. No notice
to or demand on any party hereto in any case shall entitle such party to any
other or further notice or demand in the same, similar or other circumstances.
The remedies herein provided are cumulative and not exclusive of any remedies
provided by law.
SECTION X.3 Successors and Assigns; Assignments. (a) This Agreement
shall be binding upon, and inure to the benefit of, Transferor, Servicer, the
Agent, the Purchasers and their respective successors and assigns; provided that
neither Transferor nor Servicer may assign its rights or obligations hereunder
or in connection herewith or any interest herein (voluntarily, by operation of
law or otherwise) without the prior written consent of all the Purchasers,
except that Servicer may be terminated in accordance with Sections 10.1 and 10.2
of the Pooling Agreement; and provided further, that no Purchaser or Participant
may transfer, pledge, assign, sell participations in or otherwise encumber its
rights or obligations hereunder or any interest herein except as permitted under
this section.
(b) Each Purchaser may at any time sell to one or more banks or other
entities ("Participants") participating interests in all or any portion of its
Certificate and its obligations hereunder (its "Credit Exposure"); provided that
(x) (i) the selling Purchaser reasonably believes that such Participant is a
"qualified institutional buyer" (as defined in Rule 144A under the Securities
Act), (ii) such Participant shall have certified to the selling Purchaser either
(A) that such Participant is an "accredited investor" within the meaning of Rule
501(a) (1), (2), (3) or (7) of the Securities Act or (B) that such Participant
is not a "U.S. person" as defined in Rule 901 of Regulation S of the Securities
Act, or (iii) such Participant shall have provided such other evidence as such
selling Purchaser reasonably requests to evidence that such sale is in
compliance with the Securities Act and any applicable state securities or blue
sky laws and (y) unless such Participant satisfies clause (ii)(B) above, such
Participant shall have certified to the Trustee and Transferor that such
Participant is not a Plan or an entity using "plan assets" of a Plan to purchase
its participating interest in a Certificate. In the event of any sale by a
Purchaser of participating interests to a Participant, the Purchaser shall
notify Transferor of the identity of the Participant upon a request by
Transferor, the Purchaser's obligations under this Agreement shall remain
unchanged, the Purchaser shall remain solely responsible for the performance
thereof, and the Purchaser shall remain the holder of its rights under its
Certificate and this Agreement for all purposes
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under this Agreement, and the other parties to the Transaction Documents shall
continue to deal solely and directly with the Purchaser in connection with such
rights and obligations under this Agreement. Transferor agrees that each
Participant shall be entitled to the benefits of Sections 4.3, 4.5 and 4.6 with
respect to its participation in the Certificate. The Purchasers agree that any
agreement between them and any Participant in respect of a participating
interest shall (x) contain a covenant of the Participant not to make any general
solicitation or general advertising for the offer or sale of its interest in the
Certificates, (y) require the Participant to comply with the terms of Section
10.13 and (z) not restrict the Purchasers' right to agree to any amendment,
supplement or modification of the Transaction Documents except to (i) extend the
final maturity of any obligation, (ii) reduce the rate or extend the time of
payment of interest thereon or any fees owed to the Purchasers under the
Transaction Documents, (iii) reduce the principal amount of any obligation, (iv)
release or direct the release of all or substantially all of the Transferred
Assets or Trustee's claim to the Transferred Assets, (v) reduce substantially
the amount of the Excess New Seller Reserve, the Identified Tax Reserve, the
State Income Tax Reserve, the Class B Required Reserves, the Class B Incremental
Concentration Balances, the Class C Concentration Balances, the Excess Bill and
Hold Reserve, the Excess Executory Contract Reserve or the Subordinate Class
Customer Supply Reserve, (vi) increase the amount of the participation from the
amount thereof then in effect, or (vii) permit assignment or transfer by
Transferor or any Seller of its rights or obligations under the Transaction
Documents.
(c) Any Purchaser may at any time assign to one or more banks or other
financial institutions (each, an "Assignee") all or any part of its Credit
Exposure; provided that (i) unless assigned to an Affiliate of the Purchaser or
to an Exempt Transferee, it assigns all of its Credit Exposure or a portion of
its Credit Exposure in an amount not less than $10,000,000, (ii) such Assignee,
other than an existing Purchaser, an Affiliate of the Purchaser or an Exempt
Transferee, must be reasonably acceptable to the Agent and Transferor, which
acceptance shall not be delayed or withheld unreasonably, (iii) if such Assignee
is not a United States person (as defined in section 7701(a)(30) of the Internal
Revenue Code), such Assignee shall satisfy the requirements of Section 4.6(d),
provided, that if such Assignee thereafter fails to comply with the requirements
of Section 4.6, amounts payable to it under Section 4.6 shall be limited to
amounts that would be payable if such Assignee had complied with Section 4.6(d),
(iv) (A) the assigning Purchaser reasonably believes that such Assignee is a
"qualified institutional buyer" (as defined in Rule 144A under the Securities
Act), (B) such Assignee shall have certified to the assigning Purchaser either
(x)
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that such Assignee is not a "U.S. person" (as defined in Rule 901 of Regulation
S under the Securities Act) or (y) that such Assignee is an institutional
accredited investor within the meaning of Rule 501(a) (1), (2), (3) or (7) of
the Securities Act and, in the case of this clause (y), delivered an opinion of
counsel in form and substance satisfactory to Transferor and the Trustee to the
effect that registration of the Certificates is not required in respect of such
transfer or (C) such Assignee shall have provided such other evidence as the
assigning Purchaser reasonably requests to evidence that such sale is in
compliance with the Securities Act and any applicable state securities or blue
sky laws, and (v) unless such Assignee satisfies clause (iv)(B)(x) above, such
Assignee shall have certified to the Trustee and Transferor that such Assignee
is not a Plan or an entity using "plan assets" of a Plan to purchase a
Certificate. For purposes of this Section 10.3, an "Exempt Transferee" means,
with respect to any Structured Lender, its Support Banks. In the event of any
assignment, the Purchaser (x) shall comply with Article VI of the Pooling
Agreement; provided that no Opinion of Counsel shall be required to be delivered
pursuant to Section 6.3(e) of the Pooling Agreement with respect to any transfer
to an Exempt Transferee, and (y) shall give notice to Transferor and the Agent
and shall deliver to the Agent, for acceptance and recording in its records, an
assignment agreement substantially in the form of Exhibit C together with a
processing and recordation fee of, in the case of assignments to a Purchaser or
an Affiliate of a Purchaser, $1,500 and, in cases of any other assignment,
$3,500; provided, that no processing and recordation fee shall be payable in
connection with any assignment by a Structured Lender to an Exempt Transferee.
Within five Business Days of receipt thereof, the Agent shall, if the assignment
agreement has been fully executed by the Assignee and the assignor Purchaser, is
completed and is in substantially the form of Exhibit C, execute the assignment
agreement and record the information contained therein in its records. Upon the
earlier of the expiration of the five Business Day period or the date of the
recording, the assignment will become effective; provided, that any assignment
by a Structured Lender to an Exempt Transferee shall not require acceptance or
recording by the Agent or Transferor prior to effectiveness and shall become
effective immediately upon receipt by the Agent of an assignment agreement
appropriately completed in substantially the form of Exhibit C and executed by
such Structured Lender and the applicable Exempt Transferee. Transferor, the
Agent and the Purchasers agree to extend the rights and benefits under this
Agreement to the Assignee to the extent the Assignee would have had if it were a
Purchaser that was an original signatory to this Agreement; provided, that
Transferor shall be entitled to continue to deal solely and directly with the
assignor Purchaser in connection with the interests so assigned to the Assignee
until the assignment agreement and any required fee, as described above, shall
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have been delivered to the Agent by the Purchaser and the Assignee and the
assignment shall have become effective. Upon the effective assignment of its
Credit Exposure, the Purchaser shall be relieved of its obligations hereunder to
the extent of the assignment.
(d) The sale or assignment of any Credit Exposure to any Assignee or
Participant (each, a "Transferee") shall not be effective until it has agreed to
be bound by the provisions of Section 10.13. Transferor and Big Flower each
authorize the Purchasers to disclose to any Transferee and any prospective
Transferee any and all information in their possession concerning Transferor,
Big Flower, Treasure Chest or any other Seller that has been delivered to them
by Transferor, Big Flower, Treasure Chest, any other Seller or Trustee in
connection with their credit evaluation of the Program prior to entering into
this Agreement.
(e) Notwithstanding any other provision set forth in this Agreement,
the Purchasers may at any time create a security interest in all or any portion
of their rights under this Agreement and the Certificates in favor of any
Federal Reserve Bank in accordance with Regulation A of the Board of Governors
of the Federal Reserve System.
(f) Each Affected Party with respect to each Purchaser shall be
entitled to receive additional payments pursuant to Sections 4.3, 4.5, 4.6, and
10.5 as though it were a Purchaser and such Sections applied to its interest in
a Certificate or commitment to make or acquire interests in Purchases; provided
that such Affected Party shall not be entitled to additional payments pursuant
to Section 4.6 attributable to its failure to satisfy the requirements of
subsection 4.6(d), at the time it becomes a Support Bank, as if it were an
Assignee.
(g) Each Affected Party claiming increased amounts described in
Sections 4.3, 4.5, 4.6 or 10.5 shall furnish, through its related Purchaser, to
the Trustee, the Agent, Servicer and Transferor a certificate setting forth in
reasonable detail the basis and amount of each request by such Affected Party
for any such amounts referred to in such Section, which certificate will be
prepared in accordance with the requirements of such Section (if any).
Determinations by an Affected Party of any increased amounts referred to in such
Sections shall be conclusive, absent demonstrable error. Each Affected Party
shall promptly notify, through its related Purchaser, the Trustee, the Agent,
Servicer and Transferor of the occurrence of any event of which such Affected
Party is aware that would be likely to result in a demand for
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compensation pursuant to Section 4.3, 4.5, 4.6 or 10.5.
(h) In connection with any proposal that a bank or other financial
institution become a Support Bank for a Purchaser which is a Structured Lender,
such Purchaser at its sole discretion, shall be entitled to distribute to any
proposed Support Bank on a confidential basis any information furnished to such
Purchaser by the Agent pursuant to the Transaction Documents. Each Purchaser
which is a Structured Lender shall promptly notify the Agent (who shall promptly
notify Transferor) in writing of the identity and interest of each Support Bank
for such Purchaser promptly upon the obtaining of such Support Bank. Such
Purchaser shall provide to the Agent (who shall, upon request, provide copies of
the same to Transferor, Servicer and the Trustee), with respect to each Support
Bank, such forms as would be required to be furnished by such Support Bank
pursuant to subsection 4.6(d) if such Support Bank were an Assignee.
SECTION X.4 Survival of Agreement. All covenants, agreements,
representations and warranties made herein and in the Certificates delivered
pursuant hereto shall survive the making and the repayment of the Purchases and
the execution and delivery of this Agreement and the Certificates and shall
continue in full force and effect until all obligations have been paid in full
and all commitments of the Purchasers hereunder have been terminated. In
addition, the obligations of Transferor under Sections 4.2, 4.3, 4.4, 4.6 and
10.5 and the obligations of the Purchasers under Section 9.6 shall survive the
termination of this Agreement.
SECTION X.5 Expenses; Indemnification. Transferor and Big Flower
jointly and severally shall pay on demand (a) all reasonable out-of-pocket fees
and expenses (including reasonable attorneys' fees and expenses) of the Agent
incurred in connection with the preparation, execution, delivery,
administration, amendment, modification and waiver of the Transaction Documents
and the making and repayment of the Purchases, including any Servicer or
collection agent fees paid to any third party for services rendered to the
Purchasers and the Agent in collecting the Receivables and (b) all reasonable
out-of-pocket fees and expenses of the Purchasers and the Agent (including
reasonable attorneys' fees and expenses of their counsel) incurred in connection
with the enforcement of the Transaction Documents against Transferor, Servicer,
Guarantor and the Sellers and in connection with any workout or restructuring of
the Transaction Documents. In addition, Transferor will pay any and all stamp
and other taxes and fees payable or determined to be payable in connection with
the execution, delivery, filing, recording or enforcement of this Agreement or
any payment
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made under the Transaction Documents, and hereby indemnifies and saves the Agent
and the Purchasers harmless from and against any and all liabilities with
respect to or resulting from any delay in paying or omission to pay the taxes
and fees. Transferor and Big Flower jointly and severally agree to reimburse and
indemnify the Agent and each Purchaser and their respective officers, directors,
shareholders, controlling Persons, employees and agents (collectively, the
"Indemnitees") from and against any and all actions, judgments, costs, expenses
or disbursements of whatsoever kind or nature that may be imposed on, asserted
against or incurred or suffered by the Agent or the Purchasers (including fees
and expenses of legal counsel, accountants and experts) in any way relating to
or arising out of any Transaction Document.
Notwithstanding the foregoing (and with respect to clause (x) below,
without prejudice to the rights that an Indemnitee may have pursuant to the
other provisions of the Transaction Documents), in no event shall any Indemnitee
be indemnified against any amounts (w) resulting from gross negligence or
willful misconduct by it or on the part of any of its officers, directors,
employees or agents, (x) to the extent they include amounts in respect of
Receivables and reimbursement therefor that would constitute credit recourse to
Servicer for the amount of any Receivable or Related Transferred Asset not paid
by the related Obligor, (y) to the extent they are or result from lost profits
or (z) to the extent they would constitute consequential, special or punitive
damages.
If for any reason the indemnification provided in this section is
unavailable to an Indemnitee or is insufficient to hold it harmless, then
Transferor and Big Flower jointly and severally shall contribute to the amount
paid by the Indemnitee as a result of any loss, claim, damage or liability in a
proportion that is appropriate to reflect not only the relative benefits
received by the Indemnitee on the one hand and Transferor and Big Flower on the
other hand, but also the relative fault of the Indemnitee (if any), Transferor
and Big Flower and any other relevant equitable considerations; provided that
amounts payable under this section shall constitute "Additional Amounts" for
purposes of the Supplement and Transferor's obligations under this section shall
be paid by Transferor only to the extent that funds are available to make the
payments pursuant to Article IV of the Series 1996-2 Supplement, and there shall
be no recourse to Transferor for all or any part of any amounts payable pursuant
to this section if the funds are at any time insufficient to make all or part of
any such payments. Any amount which Transferor does not pay pursuant to the
operation of the preceding sentence shall not constitute a claim (as defined in
ss. 101 of the Bankruptcy Code) against or corporate obligation of Transferor
for
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any such insufficiency.
SECTION X.6 Entire Agreement. This Agreement, together with the
documents delivered pursuant to Section 7.1 and the other Transaction Documents,
including the exhibits and schedules thereto, contains a final and complete
integration of all prior expressions by the parties hereto with respect to the
subject matter hereof and shall constitute the entire agreement among the
parties hereto with respect to the subject matter hereof, superseding all
previous oral statements and other writings with respect thereto.
SECTION X.7 Notices. All communications hereunder shall be in writing
and shall be deemed to have been duly given if personally delivered, sent by
overnight courier or mailed by registered mail, postage prepaid and return
receipt requested, or transmitted by facsimile transmission and confirmed by a
similar mailed writing to any party at the address for that party set forth (a)
on the signature page to this Agreement or (b) to another address as that party
may designate in writing to the Agent and Transferor.
SECTION X.8 No Third-Party Beneficiaries. Nothing expressed herein is
intended or shall be construed to give any Person (other than the parties hereto
and the Participants and Assignees described in Section 10.3 and, solely to the
extent provided in Section 10.3, the other Affected Parties) any legal or
equitable right, remedy or claim under or in respect of this Agreement.
SECTION X.9 Severability of Provisions. Any covenant, provision,
agreement or term of this Agreement that is prohibited or is held to be void or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of the prohibition or unenforceability without invalidating the
remaining provisions of this Agreement.
SECTION X.10 Counterparts. This Agreement may be executed in any number
of counterparts (which may include facsimile) and by the different parties
hereto in separate counterparts, each of which when so executed shall be deemed
to be an original, and all of which together shall constitute one and the same
instrument.
SECTION X.11 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO CONFLICT OF LAWS PRINCIPLES.
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SECTION X.12 Tax Characterization. Each party to this Agreement (a)
acknowledges that it is the intent of the parties to this Agreement that, for
purposes of Federal, applicable state and local income and franchise and other
taxes measured by or imposed on income, the Certificates will be treated as
evidence of indebtedness secured by the Transferred Assets and the Trust will
not be characterized as an association (or publicly traded partnership) taxable
as a corporation, (b) agrees that the provisions of the Transaction Documents be
construed to further that intent, and (c) agrees to treat the Certificates, for
purposes of Federal, state and local income and franchise and other taxes
measured by or imposed on income, as indebtedness.
SECTION X.13 No Proceedings. (a) Notwithstanding any prior termination
of this Agreement, each of Servicer, the Agent (solely in its capacity as such)
and each Purchaser (solely in its capacity as such) hereby agrees that it will
not institute against Transferor, or join any other Person in instituting
against Transferor, any insolvency proceeding (namely, any proceeding of the
type referred to in the definition of "Bankruptcy Event") so long as any
Certificates shall be outstanding or there shall not have elapsed one year plus
one day since the last day on which any Certificates shall have been
outstanding. The foregoing shall not limit the right of Servicer, the Agent or
any Purchaser to file any claim in or otherwise take any action with respect to
any insolvency proceeding that was instituted against Transferor by any other
Person.
(b) Notwithstanding any prior termination of this Agreement, each of
Servicer, the Agent (solely in its capacity as such), and each Purchaser (solely
in its capacity as such) hereby agrees that it will not institute against any
Structured Lender, or join any other Person in instituting against any
Structured Lender, any insolvency proceeding (namely, any proceeding of the type
referred to in the definition of "Bankruptcy Event") for one year plus one day
after the latest maturing commercial paper note, medium term note or other debt
security issued by such Structured Lender is paid. The foregoing shall not limit
the right of Servicer, the Agent or any Purchaser to file any claim in or
otherwise take any action with respect to any insolvency proceeding that was
instituted against such Structured Lender by any other Person.
SECTION X.14 Reference Banks. By its execution of this Agreement, each
Purchaser identified as "Reference Bank" in the Supplement agrees to act as a
Reference Bank for purposes of the Supplement. The Agent shall notify Servicer
of the Eurodollar Rate applicable to each Interest Period and of each change in
the Alternate Base Rate.
Page 35
<PAGE>
SECTION X.15 Rule 144A. So long as any of the Series 1996-3
Certificates are "restricted securities" within the meaning of Rule 144(a)(3)
under the Securities Act, Transferor shall, unless it becomes subject to and
complies with the reporting requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, or rule 12g3-2(b) thereunder,
provide to any Holder of such restricted securities, or to any prospective
purchaser of such restricted securities designated by a Holder, upon the request
of such Holder or prospective purchaser, any information required to be provided
by Rule 144A(d)(4) under the Act.
Page 36
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their duly authorized officers and delivered as of the day and
year first above written.
BFP RECEIVABLES CORPORATION
By: /s/ Mark Angelson
-------------------------------
Name: Mark Angelson
Title: Secretary
Address: 250 West Pratt Street
Baltimore, Maryland 21201
Attention: Rick Frier
Telephone: 410-361-8352
Facsimile: 410-528-9287
BIG FLOWER PRESS HOLDINGS, INC.
By: /s/ Mark Angelson
-------------------------------
Name: Mark Angelson
Title: Executive Vice President
Address: 3 East 54th Street
17th Floor
New York, New York 10022-3108
Attention: General Counsel
Telephone: 212-521-1621
Facsimile: 212-521-1640
Page 37
<PAGE>
CAISSE NATIONALE DE CREDIT AGRICOLE,
as Agent and as a Purchaser
By: /s/ Katherine L. Abbott
----------------------------------
Title: First Vice President
Address: 55 East Monroe Street
Suite 4700
Chicago, Illinois 60603
Attention: Laura Schmuck
Telephone: (312) 917-7428
Facsimile: (312) 372-4421
BANK OF MONTREAL, as a Purchaser
By: /s/ Yvonne Bos
----------------------------------
Title: Senior Vice President
Address: 430 Park Avenue
New York, New York 10022
Attention: Janet Silverman
Telephone: (212) 605-1623
Facsimile: (212) 605-1621
CREDIT COMMUNAL DE BELGIQUE S.A., NEW
YORK BRANCH, as a Purchaser
By: /s/ Jan E. van Panhuys
----------------------------------
Title: General Manager
By: /s/ Caroline Van Bogaert
----------------------------------
Title: Assistant Vice President
Address: 405 Lexington Avenue - 54th Floor
New York, New York 10174-5499
Attention: Caroline Van Bogaert
Page 38
<PAGE>
Telephone: (212) 972-6060
Facsimile: (212) 972-6522
Page 39
<PAGE>
EXHIBIT A
Form of Series 1996-2 Supplement
See Exhibit 10.13 filed herewith
Page 40
<PAGE>
EXHIBIT B
Form of Series 1996-3 Supplement
See Exhibit 10.14 filed herewith
Page 41
<PAGE>
EXHIBIT C
Form of Assignment Agreement
Intentionally omitted, not material
Page 42
<PAGE>
APPENDIX X
Index of Additional Defined Terms
Intentionally omitted, not material.
Page 43
<PAGE>
SCHEDULE I
to Certificate Purchase
Agreement Series 1996-3
AMOUNT OF EACH INITIAL PURCHASER'S CERTIFICATE
CAISSE NATIONALE DE CREDIT AGRICOLE
Stated Amount of Certificate: $6,500,000
Percentage: 32.5%
BANK OF MONTREAL
Stated Amount of Certificate: $3,500,000
Percentage: 17.5%
CREDIT COMMUNAL DE BELGIQUE S.A., NEW YORK BRANCH
Stated Amount of Certificate: $10,000,000
Percentage: 50%
<PAGE>
Exhibit 10.22
NON-COMPETITION AGREEMENT
NON-COMPETITION AGREEMENT (this "Agreement") dated April 27, 1994 by and
between Treasure Chest Advertising Company, Inc., a Delaware corporation (the
"Company"), and Brian T. Clemente ("BTC").
W I T N E S S E T H :
WHEREAS, pursuant to that certain Purchase and Sale Agreement, dated March
16, 1993, among BTC, BFP Holdings Corp., the indirect parent of the Company
("Holdings"), KTB Associates, Inc. ("KTB"), Thomas A. Clemente, Jr., Joseph T.
Clemente, Tomsons Properties and TKB Properties (the "Purchase and Sale
Agreement"), the Company shall, among other things, purchase from BTC the shares
of common stock of KTB owned by BTC (the "Shares").
WHEREAS, as inducement to Holdings to enter into the Purchase and Sale
Agreement and Treasure Chest to purchase the Shares thereunder, BTC has agreed
to enter into this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual promises
and agreements contained herein, it is hereby agreed as follows:
1. This Agreement shall be effective at the time BTC receives the funds
set forth in Section 2 hereof, which time shall be referred to herein as the
"Effective Date."
2. (a) In consideration of the premises and $666,666.67 paid on the
Effective Date to BTC, BTC agrees that for the period commencing with the
Effective Date and expiring at the later of (i) the fifth anniversary of the
Effective Date and (ii) the second anniversary of the first date on which BTC is
no longer employed by the Company or any of its affiliates (the "Term") he will
not, without the prior written consent of the Board of Directors of the Company,
(1) directly or indirectly (through an affiliate or associate of BTC (each, a
"BTC Affiliate"), or otherwise) or by an action in concert with others, own
manage, operate, join, control, finance or participate in the ownership,
management, operation, control or financing of, or be connected as a principal,
agent, representative, consultant, investor, owner, partner, manager, joint
venturer or otherwise with, or permit his name to be used by or in connection
with, any business, enterprise or other entity engaged anywhere in the United
States, Canada or Mexico in, or in connection with, (A) during any time BTC is a
full time employee of the Company or any of its affiliates (the "Term of
Employment"), any business activity whatsoever, or (B) following the expiration
of the Term of Employment, (x) the printing or typesetting business, or (y) the
design, printing or production, preparation, selling or delivery of advertising
circulars, coupon books, newspaper supplements, comics, other products printed
for newspapers, comic books, television guides, free standing inserts,
government printing, directories, catalogs and other printing, or (z) any other
<PAGE>
significant business in which Holdings or any of its subsidiaries, including
without limitation, the Company, Retail Graphics Holding Company, and KTB
(collectively, the "Company Group") is engaged at the end of the Term of
Employment (the businesses and activities referred to in clauses (x), (y) and
(z), the "Business Activities"); provided, however, that nothing contained in
this clause (1) shall prohibit BTC from having passive investments of less than
5% of the outstanding equity securities in any entity listed for trading on a
national stock exchange or quoted on any automated quotation system; or (2)
directly or indirectly (through a BTC Affiliate or otherwise), (A) hire or seek
to otherwise employ in any capacity, as employee, consultant, agent or otherwise
any current or future employee of any member of the Company Group; provided
that, with respect to any such employee who is a member of the Stockholders;
Group (which means the Stockholders' Group as defined in the Purchase and Sale
Agreement, plus Robert Brown), BTC's only obligation under this clause (A) shall
be not to solicit such employee to leave the employ of any member of the Company
Group; or (B) seek or solicit the business of any person, firm, corporation or
other entity that, as of (or within the three-year period prior to) the end of
the Term of Employment, is (or was) a customer of any member of the Company
Group with respect to any of the Business Activities, as disclosed on their
books and records, wherever located. Clauses (x) and (y) of this Section 2(a)
include all significant businesses in which the Company is engaged at the
Effective Date.
(b) During the Term of Employment and thereafter, BTC shall not,
except as may be required to perform his duties as an employee of the Company or
any of its affiliates or as required by applicable law, disclose to others or
use, whether directly or indirectly, any Confidential Information regarding any
member of the Company Group. "Confidential Information" shall mean information
about any member of the Company Group, and their respective business,
operations, clients and customers, that is not available to the general public
and that was learned by BTC in the course of his employment by any member of the
Company Group or by KTB prior to the Effective Date, including (without
limitation) any data, formulae, information, proprietary knowledge, trade
secrets and client and customer lists and all papers, resumes, records and the
documents containing such Confidential Information. BTC acknowledges that such
Confidential Information is specialized, unique in nature and of great value to
the Company, and that such information gives the Company a competitive
advantage. Upon the termination of his employment with the Company or any of its
affiliates for any reason whatsoever, BTC shall promptly deliver to the Company
all documents (and all copies thereof) containing any Confidential Information.
3. BTC acknowledges that (i) the provision of this Agreement are
reasonable and necessary to protect the legitimate interests of the Company,
(ii) any violation of this Agreement will result in irreparable injury to the
Company, and damages at law will not be reasonable or adequate compensation to
the Company for a violation of this Agreement and (iii) the Company shall be
entitled to have the provisions of this Agreement specifically enforced by
preliminary and permanent injunctive relief without the necessity of proving
actual damages and without posting bond or other security. In the event that any
of the provisions of this Agreement should ever de deemed to exceed the time,
geographic, product or any other limitations prescribed by applicable law, then
such provisions shall be deemed reformed so that such provisions shall be
2
<PAGE>
valid, binding and enforceable to the maximum extent permitted by applicable
law. BTC and the Company each intend to and do hereby confer exclusive
jurisdiction to enforce the provisions of this Agreement upon the state and
federal courts located in the city, county and state of New York and BTC and the
Company each intend to and do hereby (a) consent to personal jurisdiction in
such jurisdiction, (b) consent to service of process by certified mail in such
jurisdiction, (c) waive any objection to venue in such jurisdiction and (d)
waive any claim that any objection to venue in such jurisdiction and (d) waive
any claim that any such court is an inconvenient forum.
4. BTC represents and warrants to the Company that he has the
authorization, power and right to deliver, execute, and fully perform his
obligations under this Agreement in accordance with its terms.
5. This Agreement supersedes all prior and existing negotiations and
agreements between the parties hereto concerning the subject matter hereof, and
this Agreement can only be changed or modified pursuant to a written instrument
duly executed by each of the parties hereto.
6. If any provision of this Agreement or any portion thereof is declared
invalid, illegal, or incapable of being enforced by any court of competent
jurisdiction, the remainder of such provisions and all of the remaining
provisions of this Agreement shall continue in full force and effect.
7. This Agreement shall be governed by and construed in accordance with
the internal laws of the State of Delaware.
8. This Agreement shall be binding upon and inure to the benefit of the
successors and assigns of the Company.
9. In the event of any dispute between the Company and BTC with respect to
any of the provisions of this Agreement, the Company and BTC agree that either
party may request that the dispute be resolved by submitting the issue to
arbitration or such other form of alternative dispute resolution as the parties
may agree upon (collectively, "Alternative Dispute Resolution"). The parties
expressly agree and acknowledge, however, that noting in this Agreement (whether
express or implied) shall under any circumstances require either party to
consent to Alternative Dispute Resolution.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first above written.
TREASURE CHEST ADVERTISING
COMPANY, INC.
By: /s/ Sanford G. Scheller
--------------------------
Its: President and CEO
-------------------------
/s/ Brian T. Clemente
------------------------------
Brian T. Clemente
4
<PAGE>
Exhibit 10.28
RICHARD L. RITCHIE
EXECUTIVE CHANGE IN CONTROL SEVERANCE AGREEMENT
THIS AGREEMENT dated January 6, 1997 is made by and between Big Flower
Press Holdings, Inc., a Delaware corporation (the "Company"), and Richard L.
Ritchie (the "Executive").
WHEREAS, the Company considers it essential to the best interests of its
stockholders to foster the continuous employment of key management personnel;
WHEREAS, the Board of Directors of the Company (the "Board") recognizes
that the possibility of a Change in Control (as defined in the last Section
hereof) exists and that such possibility, and the uncertainty and questions
which it may raise among management, may result in the departure or distraction
of management personnel to the detriment of the Company and its stockholders;
and
WHEREAS, the Board has determined that appropriate steps should be taken
to reinforce and encourage the continued attention and dedication of members of
the Company's management, including the Executive, to their assigned duties
without discussion in the face of potentially disturbing circumstances arising
from the possibility of a Change in Control.
NOW THEREFORE, in consideration of the promises and the mutual covenants
herein contained, the sufficiency of which is hereby acknowledged, the Company
and the Executive hereby agree as follows:
1. Defined Terms. The definition of capitalized terms used in this
Agreement is provided in the last Section hereof.
2. Term of Agreement. This Agreement shall commence on the date hereof and
remain in effect until the Executive's employment with the Company is terminated
by the Company, the Executive or any successor to the Company.
3. Company's Covenants. In order to induce the Executive to remain in the
employ of the Company and in consideration of the Executive's covenants set
forth in Section 4 hereof, the Company agrees, under the conditions described
herein, to pay the Executive the "Severance Payments" described in Section 6.1
hereof in the event the Executive's employment with the Company is terminated
following a Change in Control. No amount or benefit shall be payable under this
Agreement unless there shall have been (or, under the terms hereof, there shall
be deemed to have been) a termination of the Executive's employment with the
Company following a Change in Control under the conditions described herein.
This Agreement shall not be construed as creating an express or implied contract
of employment and, except as otherwise
1
<PAGE>
agreed in writing between the Executive and the Company, the Executive shall not
have any right to be retained in the employ of the Company.
4. The Executive's Covenants. The Executive agrees that, subject to the
terms and conditions of this Agreement, in the event of a Potential Change in
Control, the Executive will remain in the employ of the Company until the
earliest of (i) the date which is six (6) months from the date of such Potential
Change in Control, (ii) the date of a Change in Control, (iii) the date of
termination by the Executive of the Executive's employment for Good Reason
(determined by treating the Potential Change in Control as a Change in Control
in applying the definition of Good Reason), or by reason of death, Disability or
Retirement, or (iv) the termination by the Company of the Executive's employment
for any reason.
5. Compensation Other Than Severance Payments.
5.1 Following a Change in Control, during any period that the Executive
fails to perform the Executive's full-time duties with the Company as a result
of incapacity due to physical or mental illness, the Company shall pay the
Executive's full salary to the Executive at the rate in effect at the
commencement of any such period, together with all compensation and benefits
payable to the Executive under the terms of any compensation or benefit plan,
program or arrangement maintained by the Company during such period, until the
Executive's employment is terminated by the Company for Disability.
5.2 If the Executive's employment shall be terminated for any reason
following a Change in Control, the Company shall pay the Executive's full salary
to the Executive through the Date of Termination at the rate in effect at the
time the Notice of Termination is given, together with all compensation and
benefits payable to the Executive through the Date of Termination under the
terms of any compensation or benefit plan, program or arrangement maintained by
the Company during such period.
5.3 If the Executive's employment shall be terminated for any reason
following a Change in Control, the Company shall pay the Executive's normal
post-termination compensation and benefits, if any, to the Executive as such
payments become due. Such post-termination compensation and benefits, if any,
shall be determined under, and paid in accordance with, the Company's
retirement, insurance and other compensation or benefit plans, programs and
arrangements in effect from time to time.
6. Severance Payments.
6.1 Subject to Section 6.2 hereof, the Company shall pay the Executive the
payments and provide the Executive the benefits described in this Section 6.1
(the "Severance Payments") upon the termination of the Executive's employment
following a Change in Control, in addition to the payments and benefits
described in Section 5 hereof, unless such termination is (i) by the Company for
Cause, (ii) by reason of death, Disability or Retirement, or (iii) by the
Executive
2
<PAGE>
without Good Reason. The Executive's employment shall be deemed to have been
terminated following a Change in Control by the Company without Cause or by the
Executive with Good Reason if the Executive's employment is terminated prior to
a Change in Control without Cause at the direction of a Person who has entered
into an agreement with the Company the consummation of which will constitute a
Change in Control or if the Executive terminates his employment with Good Reason
prior to a Change in Control (determined by treating a Potential Change in
Control as a Change in Control in applying the definition of Good Reason) if the
circumstance or event which constitutes Good Reason occurs at the direction of
such Person.
(A) In lieu of any further salary payments to the Executive for
periods subsequent to the Date of Termination and in lieu of any severance
benefit otherwise payable to the Executive, the Company shall pay to the
Executive a lump sum severance payment, in cash, equal to two (2) times
the sum of (i) the greater of the Executive's annual base salary in effect
immediately prior to the occurrence of the event or circumstance upon
which the Notice of Termination is based and the Executive's annual base
salary in effect immediately prior to the Change in Control, and (ii) the
greater of the target bonus for the Executive pursuant to the Company's
Executive Incentive Plan (or any similar, successor or predecessor annual
incentive plan) (the "EIP") in the year immediately preceding that in
which the Date of Termination occurs or the average such bonus for the
three (3) years immediately preceding the Change in Control.
(B) Notwithstanding any provision of the EIP, the Company shall pay
to the Executive a lump sum amount, in cash, equal to the sum of (i) any
incentive compensation which has been allocated or awarded to the
Executive for a completed fiscal year or other measuring period preceding
the Date of Termination under the EIP, but has not yet been paid (pursuant
to Section 5.2 hereof or otherwise), and (ii) a pro rata portion to the
Date of Termination of the aggregate value of all contingent incentive
compensation awards to the Executive for all uncompleted periods under the
EIP calculated as to each such award by assuming all annual incentive
targets have been met.
(C) All stock options, restricted stock awards and any other
incentive awards (other than awards under the EIP described in
subparagraph (B) hereof) shall immediately vest and become exercisable
and/or payable to the Executive, as the case may be, with any such stock
options to remain exercisable until at least ninety (90) days following
the date of such Change in Control, any performance-based awards being
determined based on the assumption that all applicable incentive targets
have been met.
(D) For a twenty-four (24) month period after the Date of
Termination, the Company shall arrange to provide the Executive with life,
disability, accident
3
<PAGE>
and health insurance benefits substantially similar to those which the
Executive is receiving immediately prior to the Notice of Termination
(without giving effect to any reduction in such benefits subsequent to a
Change in Control which reduction constitutes Good Reason). Benefits
otherwise receivable by the Executive pursuant to this Section 6.1(D)
shall be reduced to the extent comparable benefits are actually received
by or made available to the Executive without cost during the twenty-four
(24) month period following the Executive's termination of employment (and
any such benefits actually received by the Executive shall be reported to
the Company by the Executive). If the benefits provided to the Executive
under this Section 6.1(D) shall result in a decrease, pursuant to Section
6.2, in the Severance Payments and these Section 6.1(D) benefits are
thereafter reduced pursuant to the immediately preceding sentence because
of the receipt of comparable benefits, the Company shall, at the time of
such reduction, pay to the Executive the lesser of (a) the amount of the
decrease made in the Severance Payments pursuant to Section 6.2, or (b)
the maximum amount which can be paid to the Executive without being, or
causing any other payment to be, nondeductible by reason of section 280G
of the Code.
6.2 Notwithstanding any other provisions of this Agreement, in the
event that any payment or benefit received or to be received by the Executive in
connection with a Change in Control or the termination of the Executive's
employment (whether pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with the Company, any Person whose actions result in a
Change in Control or any Person affiliated with the Company or such Person) (all
such payments and benefits, including the Severance Payments, being hereinafter
called "Total Payments") would not be deductible (in whole or part), by the
Company, an affiliate or Person making such payment or providing such benefit as
a result of section 280G of the Code, then, to the extent necessary to make such
portion of the Total Payments deductible (and after taking into account any
reduction in the Total Payments provided by reason of section 280G of the Code
in such other plan, arrangement or agreement), (A) the cash Severance Payments
shall first be reduced (if necessary, to, but not below, zero), and (B) all
other non-cash Severance Payments shall next be reduced (if necessary, to, but
not below, zero). For purposes of this limitation (i) no portion of the Total
Payments the receipt or enjoyment of which the Executive shall have effectively
waived in writing prior to the Date of Termination shall be taken into account,
(ii) no portion of the Total Payments shall be taken into account which in the
opinion of tax counsel selected by the Company's independent auditors does not
constitute a "parachute payment" within the meaning of section 280G(b)(2) of the
Code, including by reason of section 280G(b)(4)(A) of the Code, (iii) the
Severance Payments shall be reduced only to the extent necessary so that the
Total Payments (other than those referred to in clauses (i) or (ii) in their
entirety constitute reasonable compensation for services actually rendered
within the meaning of section 280G(b)(4)(B) of the Code or are otherwise not
subject to disallowance as deductions, in the opinion of the tax counsel
referred to in clause (ii); and (iv) the value of any non-cash benefit or any
deferred payment or benefit included in the Total Payments shall be determined
by the
4
<PAGE>
Company's independent auditors in accordance with the principles of sections
280G(d)(3) and (4) of the Code.
If it is established pursuant to a final determination of a court or an
Internal Revenue Service proceeding that, notwithstanding the good faith of the
Executive and the Company in applying the terms of this Section 6.2, the
aggregate "parachute payments" paid to or for the Executive's benefit are in an
amount that would result in any portion of such "parachute payments" not being
deductible by reason of section 280G of the Code, then the Executive shall have
an obligation to pay the Company upon demand an amount equal to the sum of (i)
the excess of the aggregate "parachute payments" paid to or for the Executive's
benefit over the aggregate "parachute payments" paid to or for the Executive's
benefit over the aggregate "parachute Payments" that could have been paid to or
for the Executive's benefit without any portion of such "parachute payments" not
being deductible by reason of section 280G of the Code; and (ii) interest on the
amount set forth in clause (i) of this sentence at the rate provided in section
1274(b)(2)(B) of the Code from the date of the Executive's receipt of such
excess until the date of such payment.
6.3 The payments provided for in Section 6.1(A), (B) and, to the extent
applicable, (C) hereof shall be made not later than the fifth day following the
Date of Termination, provided, however, that if the amounts of such payments,
and the limitation on such payments set forth in Section 6.2 hereof, cannot be
finally determined on or before such day, the Company shall pay to the Executive
on such day an estimate, as reasonably determined by the Company, of the minimum
amount of such payments to which the Executive is clearly entitled and shall pay
the remainder of such payments (together with interest at the rate provided in
section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be
determined but in no event later than the thirtieth (30th) day after the Date of
Termination. In the event that the amount of the estimated payments exceeds the
amount subsequently determined to have been due, such excess shall constitute a
loan by the Company to the Executive, payable on the fifth (5th) business day
after demand by the Company (together with interest at the rate provided in
section 1274(b)(2)(B) of the Code). At the time that payments are made under
this Section, the Company shall provide the Executive with a written statement
setting forth the manner in which such payments were calculated and the basis
for such calculations including, without limitation, any opinions or other
advice the Company has received from outside counsel, auditors or consultants
(and any such opinions or advice which are in writing shall be attached to the
statement).
7. Termination Procedures and Compensation During Dispute.
7.1 Notice of Termination. After a Change in Control, any purported
termination of the Executive's employment (other than by reason of death) shall
be communicated by written Notice of Termination from one party hereto to the
other party hereto in accordance with Section 10 hereof. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which shall indicate
the specific termination provision in this Agreement relied upon and shall set
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the
5
<PAGE>
Executive's employment under the provision so indicated. Further, a Notice of
Termination for Cause is required to include a copy of a resolution duly adopted
by the affirmative vote of not less than three-quarters (3/4) of the entire
membership of the Board at a meeting of the Board which was called and held for
the purpose of considering such termination (after reasonable notice to the
Executive and an opportunity for the Executive, together with the Executive's
counsel, to be heard before the Board) finding that, in the good faith opinion
of the Board, the Executive was guilty of conduct set forth in clause (i) or
(ii) of the definition of Cause herein, and specifying the particulars thereof
in detail.
7.2 Date of Termination. "Date of Termination," with respect to any
purported termination of the Executive's employment after a Change in Control
shall mean (i) if the Executive's employment is terminated for Disability,
thirty (30) days after Notice of Termination is given (provided that the
Executive shall not have returned to the full-time performance of the
Executive's duties during such thirty (30) day period), and (ii) if the
Executive's employment is terminated for any other reason, the date specified in
the Notice of Termination (which, in the case of a termination by the Company,
shall not be less than thirty (30) days (except in the case of a termination for
Cause) and, in the case of a termination by the Executive, shall not be less
than fifteen (15) days nor more than sixty (60) days, respectively, from the
date such Notice of Termination is given).
7.3 Compensation Concerning Termination. If within fifteen (15) days after
any Notice of Termination is given, or, if later, prior to the Date of
Termination (as determined without regard to this Section 7.3), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be the date on
which the dispute is finally resolved, either by mutual written agreement of the
parties or by a final judgment, order or decree of a court or arbitration
tribunal of competent jurisdiction which is not appealable or with respect to
which the time for appeal therefrom has expired and no appeal has been
perfected); provided further that the Date of Termination shall be extended by a
notice of dispute only if such notice is given in good faith and the party
giving such notice pursues the resolution of such dispute with reasonable
diligence.
7.4 Compensation During Dispute. If a purported termination occurs
following a Change in Control, and such termination is disputed in accordance
with Section 7.3 hereof, the Company shall continue to pay the Executive the
full compensation in effect when the notice giving rise to the dispute was given
(including, but not limited to, salary) and continue the Executive as a
participant in all compensation, benefit and insurance plans in which the
Executive was participating when the notice giving rise to the dispute was
given, until the dispute is finally resolved in accordance with Section 7.3
hereof. Amounts paid under this Section 7.4 are in addition to all other amounts
due under this Agreement (other than those due under Section 5.2 hereof) and
shall not be offset against or reduce any other amounts due under this
Agreement.
6
<PAGE>
8. No Mitigation. The Company agrees that, if the Executive's employment
by the Company is terminated following a Change in Control pursuant to Section
6.1, the Executive is not required to seek other employment or to attempt in any
way to reduce any amounts payable to the Executive by the Company pursuant to
Section 6 or Section 7.4. Further, the amount of any payment or benefit provided
for in Section 6 (other than Section 6.1(D)) or Section 7.4 shall not be reduced
by any compensation earned by the Executive as the result of employment by
another employer, by retirement benefits, by offset against any amount claimed
to be owed by the Executive to the Company, or otherwise.
9. Successors; Binding Agreement.
9.1 In addition to any obligations imposed by law upon any successor to
the Company, the Company will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
Failure of the Company to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall entitle the Executive to compensation from the Company in the same amount
and on the same terms as the Executive would be entitled to hereunder of the
Executive were to terminate the Executive's employment for Good Reason after a
Change in Control, except that, for purposes of implementing the foregoing, the
date on which any such succession becomes effective shall be deemed the Date of
Termination.
9.2 This Agreement shall inure to the benefit of and be enforceable by the
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive shall
die while any amount would still be payable to the Executive hereunder (other
than amounts which, by their terms, terminate upon the death of the Executive)
if the Executive had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
the executors, personal representatives or administrators of the Executive's
estate.
10. Notices. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth below, or to such other address as either party
may have furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon actual receipt:
7
<PAGE>
To the Company:
Big Flower Press Holdings, Inc.
3 East 54th Street
New York, New York 10022
Attention: General Counsel
To the Executive:
Richard L. Ritchie
at his office in person or at his
home address as maintained on the
books of record of the Company
from time to time
11. Miscellaneous. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing and signed by the Executive and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of New York. All references to sections of the Exchange
Act or the Code shall be deemed also to refer to any successor provisions to
such sections. Any payments provided for hereunder shall be paid net of any
applicable withholding required under federal, state or local law and any
additional withholding to which the Executive has agreed. The obligations of the
Company and the Executive under Sections 6 and 7 shall survive the expiration of
the term of this Agreement.
12. Validity. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
13. Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
8
<PAGE>
14. Settlement of Disputes; Arbitration; Attorneys' Fees.
14.1 All claims by the Executive for benefits under this Agreement shall
be directed to and determined by the Board and shall be in writing. Any denial
by the Board of a claim for benefits under this Agreement shall be delivered to
the Executive in writing and shall set forth the specific reasons for the denial
and the specific provisions of this Agreement relied upon. The Board shall
afford a reasonable opportunity to the Executive for a review of the decision
denying a claim and shall further allow the Executive to appeal to the Board a
decision of the Board within sixty (60) days after notification by the Board
that the Executive's claim has been denied. Any further dispute or controversy
arising under or in connection with this Agreement shall be settled exclusively
by arbitration in New York City, New York in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction; provided, however, that the
Executive shall be entitled to seek specific performance of the Executive's
right to be paid until the Date of Termination during the pendency of any
dispute or controversy arising under or in connection with this Agreement.
14.2 Each party shall have the right, in addition to any other relief
granted by such arbitrator (or by any court with respect to relief related to
specific performance as set forth in Section 14.1), to attorneys' fees based on
a determination by the arbitrator (or, with respect to relief related to
specific performance as set forth in Section 14.1, the court) of the extent to
which each party has prevailed as to the material issues raised in determination
of the dispute.
15. Definitions. For purposes of this Agreement, the following terms shall
have the meanings indicated below:
(A) "Ammon" shall mean R. Theodore Ammon, any member of his family, and
any entity (including, without limitation, any trust, corporation, LLC, LLP or
partnership) controlled, directly or indirectly, by R. Theodore Ammon and/or any
such family member.
(B) "Beneficial Owner" shall have the meaning defined in Rule 13d-3 under
the Exchange Act.
(C) "Board" has the meaning set forth in the introduction to this
Agreement.
(D) "Cause" for termination by the Company of the Executive's employment,
after any Change in Control, shall mean (i) the willful and continued failure by
the Executive to substantially perform the Executive's duties with the Company
(other than any such failure resulting from the Executive's incapacity due to
physical or mental illness or any such actual or anticipated failure after the
issuance of a Notice of Termination for Good Reason by the Executive pursuant to
Section 7.1) after a written demand for substantial performance is delivered to
the Executive by the Board, which demand specifically identifies the manner in
which the Board believes that the Executive has not substantially performed the
Executive's
9
<PAGE>
duties, or (ii) the willful engaging by the Executive in conduct which is
demonstrably and materially injurious to the Company or its subsidiaries,
monetarily or otherwise. For purposes of clauses (i) and (ii) of this
definition, no act, or failure to act, on the Executive's part shall be deemed
"willful" unless done, or omitted to be done, by the Executive not in good faith
or without reasonable belief that the Executive's act, or failure to act, was in
the best interest of the Company.
(E) A "Change in Control" shall be deemed to have occurred if the
conditions set forth in any one of the following paragraphs shall have been
satisfied:
(I) any Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Company (not including in the securities
beneficially owned by such Person any securities acquired directly from
the Company) representing 35% or more of the combined voting power of the
Company's then outstanding securities entitled to vote generally in the
election of directors of the Company; or
(II) during any period of two consecutive years (not including any
period prior to the date of this Agreement), individuals who at the
beginning of such period constitute the Board and any new director (other
than a director designated by a Person who has entered into an agreement
with the Company to effect a transaction described in clause (I), (III) or
(IV) of this paragraph) whose election by the Board or nomination for
election by the Company's stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination
for election was previously so approved, cease for any reason to
constitute a majority thereof; or
(III) the stockholders of the Company approve a merger or
consolidation of the Company with any other entity and, in connection with
such merger or consolidation, individuals who constitute the Board
immediately prior to the time any agreement to effect such merger or
consolidation is entered into fail for any reason to constitute at least a
majority of the board of directors of the surviving corporation following
the consummation of such merger or consolidation; or
(IV) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by
the Company of all or substantially all the Company's assets.
The acquisition of any portion of the combined voting power of the Company by
Ammon or by any person affiliated with Ammon shall in no event constitute a
Change in Control. The merger, consolidation or sale of assets of the Company
with or to any corporation or entity controlled by
10
<PAGE>
Ammon or any person affiliated with Ammon shall in no event constitute a Change
in Control.
(F) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
(G) "Company" has the meaning set forth in the introduction to this
Agreement.
(H) "Control" shall mean the possession, directly or indirectly, of the
power to direct the management or policies of a Person, whether through
ownership of securities, by contract, or otherwise.
(I) "Date of Termination" shall have the meaning stated in Section 7.2
hereof.
(J) "Disability" shall be deemed the reason for the termination by the
Company of the Executive's employment, if, as a result of the Executive's
incapacity due to physical or mental illness, the Executive shall have been
absent from the full-time performance of the Executive's duties with the Company
for a period of six (6) consecutive months, the Company shall have given the
Executive a Notice of Termination for Disability, and, within thirty (30) days
after such Notice of Termination is given, the Executive shall not have returned
to the full-time performance of the Executive's duties.
(K) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
(L) "Executive" has the meaning set forth in the first paragraph of this
Agreement.
(M) "Good Reason" for termination by the Executive of the Executive's
employment shall mean the occurrence (without the Executive's express written
consent) of any one of the following acts by the Company, or failures by the
Company to act, unless, in the case of any act or failure to act described in
paragraph (I), (IV), (V) or (VI) below, such act or failure to act is corrected
prior to the Date of Termination specified in the Notice of Termination given in
respect thereof:
(I) the assignment to the Executive following a Change in Control of
any duties inconsistent with the Executive's status as a senior executive
officer of the Company or a substantial adverse alteration in the nature
or status of the Executive's responsibilities from those in effect
immediately prior to the Change in Control other than any such alteration
primarily attributable to the fact that the Company may no longer be a
public company;
(II) a reduction by the Company following a Change in Control in the
Executive's annual base salary as in effect immediately prior to the
Change in Control;
11
<PAGE>
(III) the failure by the Company following a Change in Control,
without the Executive's consent, to pay to the Executive any portion of
the Executive's current compensation, or to pay to the Executive any
portion of an installment of deferred compensation under any deferred
compensation program of the Company within seven (7) days of the date such
compensation is due;
(IV) the failure by the Company following a Change in Control to
continue in effect any compensation plan in which the Executive
participates immediately prior to the Change in Control which is material
to the Executive's total compensation, unless an equitable arrangement
(embodied in an ongoing substitute or alternative plan) has been made with
respect to such plan (as determined by Ammon or the Board prior to the
Change in Control), or the failure by the Company following a Change in
Control to continue the Executive's participation therein (or in such
substitute or alternative plan) on a basis not materially less favorable,
both in terms of the amount of benefits provided and the level of the
Executive's participation relative to other participants, as existed at
the time of the Change in Control;
(V) the failure by the Company following a Change in Control to
continue to provide the Executive with benefits substantially similar to
those enjoyed by the Executive under any of the Company's pension, life
insurance, medical, health and accident, or disability plans in which the
Executive was participating at the time of the Change in Control, the
taking of any action by the Company following a Change in Control which
would directly or indirectly materially reduce any of such benefits or
deprive the Executive of any material fringe benefit enjoyed by the
Executive at the time of the Change in Control, or the failure by the
Company following a Change in Control to provide the Executive with the
number of paid vacation days to which the Executive is entitled on the
basis of years of service with the Company in accordance with the
Company's normal vacation policy in effect at the time of the Change in
Control;
(VI) any purported termination of the Executive's employment which
is not effected pursuant to a Notice of Termination satisfying the
requirements of Section 7.1; for purposes of this Agreement, no such
purported termination shall be effective; or
(VI) any relocation of the Company's principal executive offices
outside of the New York metropolitan area following a Change in Control.
The Executive's right to terminate the Executive's employment for Good
Reason shall not be affected by the Executive's incapacity due to physical or
mental illness. The Executive's
12
<PAGE>
continued employment shall not constitute consent to, or a waiver of rights with
respect to, any act or failure to act constituting Good Reason hereunder.
(N) "Notice of Termination" shall have the meaning stated in Section 7.1
hereof.
(O) "Person" shall have the meaning given in Section 3(a)(9) of the
Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof; however,
a Person shall not include (i) the Company or any of its subsidiaries, (ii) a
trustee or other fiduciary holding securities under an employee benefit plan of
the Company or any of its subsidiaries, (iii) an underwriter temporarily holding
securities pursuant to an offering of such securities, (iv) a corporation owned,
directly or indirectly, by the stockholders of the Company in substantially the
same proportions as their ownership of stock of the Company or (v) Ammon.
(P) "Potential Change in Control" shall be deemed to have occurred if the
conditions set forth in any one of the following paragraphs shall have been
satisfied:
(I) the Company enters into an agreement, the consummation of which
would result in the occurrence of a Change in Control; or
(II) the Board adopts a resolution to the effect that, for purposes
of this Agreement, a Potential Change in Control has occurred.
(Q) "Retirement" shall be deemed the reason for the termination by the
Company or the Executive of the Executive's employment if such employment is
terminated in accordance with the Company's retirement policy, not including
early retirement, generally applicable to its salaried employees, as in effect
immediately prior to the Change in Control, or in accordance with any retirement
arrangement established with the Executive's consent with respect to the
Executive.
(R) "Severance Payments" shall mean those payments described in Section
6.1 hereof.
(S) "Total Payments" shall mean those payments described in Section 6.2
hereof.
13
<PAGE>
IN WITNESS WHEROF, the undersigned parties have signed this Agreement as
of the date first written above.
BIG FLOWER PRESS HOLDINGS, INC.
By: /s/ Edward T. Reilly
--------------------------
Name: Edward T. Reilly
Title: President
/s/ Richard L. Ritchie
--------------------------
RICHARD L. RITCHIE
14
<PAGE>
Exhibit 10.29
[Big Flower Press Holding, Inc. Letterhead]
December 12, 1996
Mr. Richard L. Ritchie
105 Ponca Road
San Antonio, TX 78231
Dear Dick:
Ted, Mark and I have enjoyed our conversations with you in the process of
discussing the future plans for Big Flower, and the role you might serve in
helping us achieve these exciting and ambitious goals. We believe that your
skills and abilities are an excellent fit for us, and that Big Flower offers
great potential for your career growth.
Dick, it gives me great pleasure to confirm the following offer to you as
Executive Vice President and Chief Financial Officer reporting to me:
1. Your starting base salary will be $400,000 per annum.
2. Your performance will be reviewed at the end of January of each year and
any salary adjustments will be made at that time.
3. You will be eligible to receive a an Executive Incentive Plan (EIP) with a
target of 50% of your base salary. This bonus is contingent upon Big
Flower's attainment of EBITDA goals for fiscal year, and is typically
payable approximately two months after the close of each fiscal year. The
EIP provides an opportunity to earn a bonus of up to 100% of your base
salary under certain circumstances.
4. You will receive options to purchase 100,000 shares of Big Flower common
stock. These options will vest at a rate of 25% per year over a 4 year
period.
5. Your reasonable moving expenses will be reimbursed including reasonable
closing costs on selling your current home; acquiring for purchase or
rental your new home in New York, and reasonable temporary living
expenses, if any. If any such reasonable costs are not deductible from
gross income under the rules of the Internal Revenue Code, we shall pay
such costs on a "grossed up" basis. In addition, a lump sum of $25,000
will be paid for incidental moving expenses, and we will reimburse the
reasonable expenses associated with a reasonable number of
relocation-related visits to New York for you and your spouse.
<PAGE>
Page 2
6. We will provide you with protection upon the occurrence of certain events
following a "change in control" of Big Flower (essentially 24 months'
salary and target bonus and the immediate vesting of all options) as more
fully described in the "Change in Control Agreement" which you will
receive under separate cover. In the even that your employment is
terminated by us (other than for cause) prior to a "change in control", we
shall pay you one year's base salary.
7. You will receive an automobile allowance of $800 per month.
8. You will be eligible for our executive Deferred Compensation plan which
provides for tax free deferral of up to 100% of your income, and a
Supplemental Executive Retirement Plan.
As a member of our management team, you will be eligible to participate in
Savings Plus, our 401(k) plan. This plan provides the advantages of
tax-deferred savings, along with some matching contributions to be made by
the Company. Summary plan descriptions for these plans will be provided to
you under separate cover.
9. You will be eligible for coverage under our group health, life insurance,
and short term disability plans on the first day of the month following
your hire date as set out in the applicable plan documents. Our health
insurance plans provide coverage for most medical, dental and vision
expenses. The plan, like many others, excludes medical and dental coverage
for pre-existing conditions for twelve (12) months. Several coverage
options are available allowing you to select the program which best meets
your needs. These benefits are offered to you and your family at
competitive monthly costs. After a qualifying period, there is additional
coverage, which you may purchase at competitive rates, for optional
Universal Life Insurance and Long Term Disability Insurance. Information
on these programs will also be provided to you under separate cover.
10. Additionally, we require that post offer medical exams and controlled
substance/alcohol tests be conducted prior to the beginning of your
employment with Big Flower. Therefore this offer is contingent upon your
successfully completing such procedures. Details of this process can be
arranged through Karen Bernstein in our office.
11. You will be entitled to 4 weeks of compensated leave each year (leaves not
accumulated from year to year). Your leaves will need to be approved in
advance by me and coordinated with our company needs.
Due to the highly sensitive nature of our business, we require all management
personnel to sign a Key Employee Agreement. You will receive this under separate
cover as well. Additionally, it is now a federal requirement that at the time of
your employment you provide documentation establishing your identity and legal
right to work in the United States. Acceptable documents may include either a
U.S. Passport or Driver's License and Social Security card.
<PAGE>
Page 3
We understand that you are not a party to any employment contract or agreement
which restricts your ability to devote the full range of your skills and
knowledge to Big Flower, or your right to engage in competition with your
present employer after the termination of your employment. If this understanding
is incorrect, then this offer is contingent upon our receipt and review of any
such agreement, and our determination that the agreement does not, in fact,
prevent your engaging in vigorous competition for business with your former
employer.
There is no expressed or implied contract between yourself and Big Flower other
than as provided herein and in the other written agreements referred to herein.
You will have the right to terminate your employment at any time for any reason,
and the Company will have a similar right. The terms of this offer of employment
extended to you are outlined in this letter and any additions or other changes
must also be in writing. Any dispute arising out of your employment with Big
Flower will be settled through arbitration as outlined in the "Mutual Agreement
to Arbitrate Claims". This will be forthcoming shortly under separate cover.
Dick, I look forward with great anticipation to the opportunity to work with you
and to get to know you even better. We assume that you will commence your duties
in early January.
Please acknowledge your receipt of this offer and agreement with the terms
outlines above by signing the attached copy of this letter and returning it to
me.
Sincerely,
/s/ Edward T. Reilly
Edward T. Reilly
President
Signature /s/ Richard L. Ritchie
Richard L. Ritchie
Date: December 13, 1996
<PAGE>
Exhibit 10.34
AGREEMENT
This AGREEMENT ("Agreement"), dated as of February 1, 1996, is
entered into by and among Sanford G. Scheller ("Scheller"), Big Flower Press
Holdings, Inc. ("Big Flower") and Treasure Chest Advertising Company, Inc. (the
"Company"). Capitalized terms used and not otherwise defined herein shall have
the respective meanings set forth in the Management Subscription Agreement,
dated as of November 1, 1993 (as may be amended from time to time, the
"Management Subscription Agreement"), by and among Big Flower, Theodore Ammon
and Scheller.
WHEREAS, in March 1995 Big Flower and the Company agreed to provide
certain benefits to Scheller upon his voluntary termination from the Company;
WHEREAS, in connection therewith, Scheller agreed to serve as a
consultant to the Company, on the terms and conditions provided herein;
WHEREAS, Big Flower, the Company and Scheller desire to memorialize
the terms of their March 1995 agreement as set forth below; and
NOW, THEREFORE, in consideration of the premises and the mutual
promises and agreements contained herein, and intending to be legally bound
hereby, the parties hereto agree as follows:
1. Options to Purchase Class C Common Stock. As of March 8, 1995,
Scheller held Incentive Stock Options (as defined in the Internal Revenue Code
of 1986, as amended) to purchase 50,322.53 shares of Class C Common Stock of Big
Flower ("Shares"), with an exercise price of $4.66 per share. These options were
granted on November 1, 1993 and vest at the rate of 33-1/3% on the first three
anniversary dates following the date of grant. As of the date of Scheller's
voluntary termination from the Company, Big Flower agreed (i) to waive the
automatic cancellation of all Unvested Options and (ii) that, subject to the
approval of the Compensation Committee of the Board of Directors of Big Flower,
all such options will become fully exercisable and vested on March 1, 1996. As
of March 8, 1995, the Per Share Option Price was $1.77 and the number of
Unvested Options held by Scheller was 33,548.35.
2. Severance Benefit Agreement. On the date of Scheller's voluntary
<PAGE>
termination from the Company, Scheller received a lump sum severance payment of
$435,000 which was equal to Scheller's annual base salary in effect as of the
date of his termination of employment with the Company. Scheller hereby
acknowledges receipt of this payment.
3. Shares of Class C Stock Common Stock Owned. As of March 8, 1995,
Scheller held 86,762.98 Shares of Big Flower. Big Flower and Scheller hereby
acknowledge that none of these Shares is subject to (i) a "put" by Scheller
pursuant to Section 5.1 of the Management Subscription Agreement or (ii) a
"call" by Big Flower pursuant to Section 5.2 of the Management Subscription
Agreement in the event of a voluntary termination from the Company.
4. Agreement for Consulting Services and Retirement Benefit.
(a) Commencing on the Date of Termination, as defined in such
agreement, Scheller shall make himself available two days per month to consult
with the Company regarding the printing business and receive in consideration
therefor consulting fees equal to $6,417 per month for a period of 15 years;
provided, however, if Scheller becomes permanently disabled, as determined in
good faith by the Board of Directors of the Company, prior to the expiration of
such 15-year period, he shall continue to receive consulting fees for the
remainder of such fifteen year period.
(b) Commencing on the Date of Termination, Scheller shall receive a
Retirement Benefit, as defined in such agreement, of $6,084 per month for a
period of 15 years, net of the amounts payable under the Treasure Chest Profit
Sharing Plan.
(c) Commencing on the Date of Termination until Scheller attains age
65, Scheller shall remain eligible to participate in the Company's existing
medical and dental plan subject to his satisfaction of the conditions set forth
therein, including the payment of premiums through payroll deductions.
(d) On or after Scheller attains age 65, the Company shall reimburse
Scheller for the differential cost of a Medicare supplement, at a rate
equivalent to his out-of-pocket medical insurance costs prior to attaining age
65. This cost is projected to be approximately $3972 per year, adjusted for
inflation. This benefit shall be capped at $1000 per month and shall not include
the cost of dental
2
<PAGE>
coverage after Scheller attains age 65, which shall be Scheller's sole
responsibility.
(e) If Scheller dies prior to the expiration of the 15-year term
under (a) or (b) above, his surviving spouse, if any, shall receive a death
benefit equal to $12,500 per month for the balance of the 15-year term.
5. Supplemental Executive Retirement Plan. Pursuant to the Agreement for
Consulting Services and a Non-Qualified Retirement Benefit, dated May 3, 1993,
Scheller acknowledges that he has given up any and all claims under his
non-qualified professional retirement income supplement.
6. Profit Sharing (ESOP) and Retirement Income Plan. Commencing on the
Date of Termination, as defined in such plan, Scheller shall be entitled to
receive an amount equal to Scheller's account balance, which shall be payable
over five years, assuming a Profit Sharing, as defined in such plan, beginning
balance of $119,883.60 as of December 31, 1993 plus $7699.11 in the Retirement
Income Plan as of December 31, 1994 appreciating at a rate of 6.5% per year for
15 years.
7. Deferred Compensation Plan. Commencing on the Date of Termination,
Scheller shall receive a termination benefit equal to his account balance
payable in a lump sum within 60 days.
8. Leased Automobile. Commencing on the Date of Termination, Scheller
shall have use of a leased Mercedes 500 SEL, the lease of which expires October
20, 1996. Such lease cost is $1575.01 per month. At the expiration of such
lease, Scheller shall have the option to purchase this vehicle for the value
established in the lease document.
9. Office Lease and Support Staff. Commencing on the Date of Termination,
the Company shall pay for office space, furniture leasing, and secretarial
support in Florida through September 1, 1997. The cost for office and temporary
secretarial support shall not exceed $1000 per month.
10. Release of Claims. In consideration of the foregoing,
(a) Scheller hereby forever releases and discharges Big Flower, the
Company, its past and present directors, managers, officers, stockholders,
3
<PAGE>
employees, agents, attorneys, servants, subsidiaries, divisions, parent
corporations, affiliates, successors and assigns (collectively, "Releasees")
from any and all claims, charges, complaints, liens, demands, causes of action,
obligations, damages and liabilities, known or unknown that he had, now has, or
may hereafter claim to have against the Releasees arising out of or relating in
any way to Scheller's employment with or termination from the Company.
(b) Scheller expressly waives all rights afforded by section 1542 of
the Civil Code of the Sate of California ("Section 1542"). Section 1542 states
as follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT
KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR.
Thus, notwithstanding the provisions of Section 1542, and for the
purpose of implementing a full and complete release, Scheller understands and
agrees that this Agreement is intended to include all claims, if any, which
Scheller may have and does not know or suspect to exist in Scheller's favor and
that this Agreement extinguishes those claims.
11. Governing Law. This Agreement and the legal relations thus created
between the parties hereto shall be governed by and construed under and in
accordance with the laws of the State of California.
4
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date and year first above written.
BIG FLOWER PRESS HOLDINGS, INC.
By: /s/ Mark A. Angelson
------------------------------------
Name: Mark A. Angelson
Title: Executive Vice President
TREASURE CHEST ADVERTISING
COMPANY, INC.
By: /s/ Donald E. Roland
------------------------------------
Name: Donald E. Roland
Title: President and CEO
SANFORD G. SCHELLER
/s/ Sanford G. Scheller
------------------------------------
5
<PAGE>
EXHIBIT 21.1
BIG FLOWER PRESS HOLDINGS, INC. AND SUBSIDIARIES
SUBSIDIARIES OF THE REGISTRANT
The subsidiaries of Big Flower Press Holdings, Inc. and their respective
jurisdictions of organization are as follows:
Subsidiary Jurisdiction of
Organization
Treasure Chest Advertising Company, Inc............................. Delaware
PrintCo., Inc.................................................. Michigan
Treasure Chest Advertising Company of New York, Inc.
(formerly KTB Associates, Inc.)................................ New York
Treasure Chest Advertising Holding Company of Texas, Inc.
(formerly Retail Graphics Holding Company)..................... Delaware
BFP Receivables Corporation.................................... Delaware
Webcraft Technologies, Inc.......................................... Delaware
Scanforms, Inc................................................. Delaware
Laser Tech Color, Inc............................................... Delaware
Pacific Color Connection, Inc.................................. California
DCS, Incorporated.............................................. Delaware
Digital Dimensions, Inc........................................ Missouri
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS FOUND
ON PAGES F-3 AND F-4 OF THE COMPANY'S 10-K FOR THE YEAR ENDED DECEMBER 31, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 4,200
<SECURITIES> 0
<RECEIVABLES> 113,850
<ALLOWANCES> 8,580
<INVENTORY> 30,126
<CURRENT-ASSETS> 162,504
<PP&E> 384,419
<DEPRECIATION> 87,993
<TOTAL-ASSETS> 749,742
<CURRENT-LIABILITIES> 193,325
<BONDS> 0
0
0
<COMMON> 186
<OTHER-SE> 96,164
<TOTAL-LIABILITY-AND-EQUITY> 749,742
<SALES> 1,201,860
<TOTAL-REVENUES> 1,201,860
<CGS> 971,789
<TOTAL-COSTS> 971,789
<OTHER-EXPENSES> 187,106
<LOSS-PROVISION> 658
<INTEREST-EXPENSE> 37,967
<INCOME-PRETAX> 4,998
<INCOME-TAX> 8,283
<INCOME-CONTINUING> (3,285)
<DISCONTINUED> 0
<EXTRAORDINARY> 2,078
<CHANGES> 0
<NET-INCOME> (5,363)
<EPS-PRIMARY> (0.29)
<EPS-DILUTED> (0.29)
</TABLE>
