SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
/X/ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended JUNE 30, 2002
or
/ / Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File No. 1-3548
ALLETE, INC.
A Minnesota Corporation
IRS Employer Identification No. 41-0418150
30 West Superior Street
Duluth, Minnesota 55802-2093
Telephone - (218) 279-5000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
----- -----
Common Stock, no par value,
85,226,304 shares outstanding
as of July 31, 2002
INDEX
Page
Definitions 2
Safe Harbor Statement 3
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheet -
June 30, 2002 and December 31, 2001 4
Consolidated Statement of Income -
Quarter and Six Months Ended June 30, 2002 and 2001 5
Consolidated Statement of Cash Flows -
Six Months Ended June 30, 2002 and 2001 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
Item 3. Quantitative and Qualitative Disclosures about Market
Risk 20
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders 21
Item 5. Other Information 22
Item 6. Exhibits and Reports on Form 8-K 23
Signatures 24
1 ALLETE Second Quarter 2002 Form 10-Q
DEFINITIONS
The following abbreviations or acronyms are used in the text. References in this
report to "we," "us" and "our" are to ALLETE, Inc. and its subsidiaries,
collectively.
ABBREVIATION OR ACRONYM TERM
- --------------------------------------------------------------------------------
2001 Form 10-K ALLETE's Annual Report on Form 10-K for
the Year Ended December 31, 2001
ADESA ADESA Corporation
AFC Automotive Finance Corporation
ALLETE ALLETE, Inc.
Company ALLETE, Inc. and its subsidiaries
EBITDAL Earnings Before Interest, Taxes,
Depreciation, Amortization and
Lease Expense
Electric Odyssey Electric Outlet, Inc.
Enventis Telecom Enventis Telecom, Inc.
ESOP Employee Stock Ownership Plan
FERC Federal Energy Regulatory Commission
FGUA Florida Governmental Utility Authority
Florida Water Florida Water Services Corporation
FPSC Florida Public Service Commission
Georgia Water Georgia Water Services Corporation
Heater Heater Utilities, Inc.
Minnesota Power An operating division of ALLETE, Inc.
Minnkota Minnkota Power Cooperative, Inc.
MPUC Minnesota Public Utilities Commission
MW Megawatt(s)
NCUC North Carolina Utilities Commission
NRG Energy NRG Energy, Inc.
PSCW Public Service Commission of Wisconsin
SEC Securities and Exchange Commission
SFAS Statement of Financial Accounting
Standards No.
Split Rock Energy Split Rock Energy LLC
Square Butte Square Butte Electric Cooperative
ALLETE Second Quarter 2002 Form 10-Q 2
SAFE HARBOR STATEMENT
UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
In connection with the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995, ALLETE is hereby filing cautionary statements
identifying important factors that could cause ALLETE's actual results to differ
materially from those projected in forward-looking statements (as such term is
defined in the Private Securities Litigation Reform Act of 1995) made by or on
behalf of ALLETE in this Quarterly Report on Form 10-Q, in presentations, in
response to questions or otherwise. Any statements that express, or involve
discussions as to, expectations, beliefs, plans, objectives, assumptions or
future events or performance (often, but not always, through the use of words or
phrases such as "anticipates," "believes," "estimates," "expects," "intends,"
"plans," "projects," "will likely result," "will continue" or similar
expressions) are not statements of historical facts and may be forward-looking.
Forward-looking statements involve estimates, assumptions, risks and
uncertainties and are qualified in their entirety by reference to, and are
accompanied by, the following important factors, which are difficult to predict,
contain uncertainties, are beyond the control of ALLETE and may cause actual
results or outcomes to differ materially from those contained in forward-looking
statements:
- war and acts of terrorism;
- prevailing governmental policies and regulatory actions, including
those of the United States Congress, state legislatures, the FERC,
the MPUC, the FPSC, the NCUC, the PSCW and various county
regulators, about allowed rates of return, financings, industry and
rate structure, acquisition and disposal of assets and facilities,
operation and construction of plant facilities, recovery of
purchased power and capital investments, and present or prospective
wholesale and retail competition (including but not limited to
transmission costs) as well as general vehicle-related laws,
including vehicle brokerage and auction laws;
- unanticipated impacts of restructuring initiatives in the electric
industry;
- economic and geographic factors, including political and economic
risks;
- changes in and compliance with environmental and safety laws and
policies;
- weather conditions;
- population growth rates and demographic patterns;
- the effects of competition, including the competition for retail and
wholesale customers, as well as suppliers and purchasers of
vehicles;
- pricing and transportation of commodities;
- market demand, including structural market changes;
- changes in tax rates or policies or in rates of inflation;
- unanticipated project delays or changes in project costs;
- unanticipated changes in operating expenses and capital
expenditures;
- capital market conditions;
- competition for economic expansion or development opportunities;
- our ability to manage expansion and integrate recent acquisitions;
and
- the outcome of legal and administrative proceedings (whether civil
or criminal) and settlements that affect the business and
profitability of ALLETE.
Any forward-looking statement speaks only as of the date on which that statement
is made, and ALLETE undertakes no obligation to update any forward-looking
statement to reflect events or circumstances after the date on which that
statement is made or to reflect the occurrence of unanticipated events. New
factors emerge from time to time and it is not possible for management to
predict all of those factors, nor can it assess the impact of each of those
factors on the businesses of ALLETE or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those
contained in any forward-looking statement.
3 ALLETE Second Quarter 2002 Form 10-Q
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ALLETE
CONSOLIDATED BALANCE SHEET
Millions
JUNE 30, DECEMBER 31,
2002 2001
- ---------------------------------------------------------------------------------------------------------------------
ASSETS
Current Assets
Cash and Cash Equivalents $ 232.8 $ 220.2
Trading Securities 157.2 155.6
Accounts Receivable (Less Allowance of $31.5 and $29.3) 476.8 431.2
Inventories 31.1 32.0
Prepayments and Other 25.6 28.7
Discontinued Operations 34.6 42.2
- ---------------------------------------------------------------------------------------------------------------------
Total Current Assets 958.1 909.9
Property, Plant and Equipment 1,368.6 1,323.3
Investments 129.2 141.0
Goodwill 501.0 494.4
Other Intangible Assets 40.0 34.8
Other Assets 74.7 68.8
Discontinued Operations 330.3 310.3
- ---------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $3,401.9 $3,282.5
- ---------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Current Liabilities
Accounts Payable $ 373.0 $ 239.8
Accrued Taxes, Interest and Dividends 32.7 38.1
Notes Payable 209.9 267.4
Long-Term Debt Due Within One Year 8.8 6.9
Other 93.5 106.4
Discontinued Operations 36.0 45.9
- ---------------------------------------------------------------------------------------------------------------------
Total Current Liabilities 753.9 704.5
Long-Term Debt 935.2 933.8
Accumulated Deferred Income Taxes 117.7 107.0
Other Liabilities 149.2 163.5
Discontinued Operations 160.7 154.9
- ---------------------------------------------------------------------------------------------------------------------
Total Liabilities 2,116.7 2,063.7
- ---------------------------------------------------------------------------------------------------------------------
Company Obligated Mandatorily Redeemable
Preferred Securities of Subsidiary ALLETE Capital I
Which Holds Solely Company Junior Subordinated Debentures 75.0 75.0
- ---------------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Common Stock Without Par Value, 130.0 Shares Authorized
85.2 and 83.9 Shares Outstanding 799.9 770.3
Unearned ESOP Shares (50.9) (52.7)
Accumulated Other Comprehensive Loss (10.5) (14.5)
Retained Earnings 471.7 440.7
- ---------------------------------------------------------------------------------------------------------------------
Total Shareholders' Equity 1,210.2 1,143.8
- ---------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $3,401.9 $3,282.5
- ---------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
ALLETE Second Quarter 2002 Form 10-Q 4
ALLETE
CONSOLIDATED STATEMENT OF INCOME
Millions Except Per Share Amounts - Unaudited
QUARTER ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
2002 2001 2002 2001
- -----------------------------------------------------------------------------------------------------------------
OPERATING REVENUE
Energy Services $ 154.1 $ 147.5 $ 297.0 $ 306.5
Automotive Services 217.6 214.7 431.1 419.6
Investments 5.0 42.9 21.6 55.9
- -----------------------------------------------------------------------------------------------------------------
Total Operating Revenue 376.7 405.1 749.7 782.0
- -----------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES
Fuel and Purchased Power 59.2 56.8 108.6 119.2
Operations 244.5 262.2 495.8 505.0
Interest 16.2 18.8 32.1 38.1
- -----------------------------------------------------------------------------------------------------------------
Total Operating Expenses 319.9 337.8 636.5 662.3
- -----------------------------------------------------------------------------------------------------------------
OPERATING INCOME FROM CONTINUING OPERATIONS 56.8 67.3 113.2 119.7
DISTRIBUTIONS ON REDEEMABLE
PREFERRED SECURITIES OF ALLETE CAPITAL I 1.5 1.5 3.0 3.0
INCOME TAX EXPENSE 22.1 26.3 43.6 46.5
- -----------------------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS 33.2 39.5 66.6 70.2
INCOME FROM DISCONTINUED OPERATIONS 5.6 3.0 7.4 5.2
- -----------------------------------------------------------------------------------------------------------------
NET INCOME $ 38.8 $ 42.5 $ 74.0 $ 75.4
- -----------------------------------------------------------------------------------------------------------------
AVERAGE SHARES OF COMMON STOCK
Basic 81.0 73.7 80.7 72.7
Diluted 81.7 74.3 81.3 73.3
- -----------------------------------------------------------------------------------------------------------------
EARNINGS PER SHARE OF COMMON STOCK
Basic
Continuing Operations $0.41 $0.54 $0.83 $0.97
Discontinued Operations 0.07 0.04 0.09 0.07
- -----------------------------------------------------------------------------------------------------------------
$0.48 $0.58 $0.92 $1.04
- -----------------------------------------------------------------------------------------------------------------
Diluted
Continuing Operations $0.40 $0.53 $0.82 $0.96
Discontinued Operations 0.07 0.04 0.09 0.07
- -----------------------------------------------------------------------------------------------------------------
$0.47 $0.57 $0.91 $1.03
- -----------------------------------------------------------------------------------------------------------------
DIVIDENDS PER SHARE OF COMMON STOCK $0.275 $0.2675 $0.55 $0.535
- -----------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
5 ALLETE Second Quarter 2002 Form 10-Q
ALLETE
CONSOLIDATED STATEMENT OF CASH FLOWS
Millions - Unaudited
SIX MONTHS ENDED
JUNE 30,
2002 2001
- --------------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
Net Income $ 74.0 $ 75.4
Depreciation and Amortization 39.9 50.9
Deferred Income Taxes 9.5 5.8
Changes In Operating Assets and Liabilities
Trading Securities (1.6) (68.8)
Accounts Receivable (42.2) (164.3)
Inventories 1.8 (3.3)
Accounts Payable 130.6 110.9
Other Current Assets and Liabilities (21.8) (6.9)
Other - Net 5.0 16.4
- --------------------------------------------------------------------------------------------------------------------
Cash from Operating Activities 195.2 16.1
- --------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Proceeds from Sale of Investments 1.9 2.6
Additions to Investments (2.9) (9.6)
Additions to Property, Plant and Equipment (97.5) (78.3)
Acquisitions - Net of Cash Acquired (17.2) (56.4)
Other - Net (9.7) 16.3
- --------------------------------------------------------------------------------------------------------------------
Cash for Investing Activities (125.4) (125.4)
- --------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Issuance of Common Stock 28.2 164.3
Issuance of Long-Term Debt 8.6 126.1
Changes in Notes Payable - Net (57.1) (73.1)
Reductions of Long-Term Debt (5.7) (13.1)
Dividends on Common Stock (43.0) (38.0)
- --------------------------------------------------------------------------------------------------------------------
Cash from (for) Financing Activities (69.0) 166.2
- --------------------------------------------------------------------------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 9.9 (1.6)
- --------------------------------------------------------------------------------------------------------------------
CHANGE IN CASH AND CASH EQUIVALENTS 10.7 55.3
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 234.2 219.3
- --------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 244.9 $ 274.6
- --------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL CASH FLOW INFORMATION
Cash Paid During the Period For
Interest - Net of Capitalized $36.8 $41.7
Income Taxes $33.7 $33.1
- --------------------------------------------------------------------------------------------------------------------
Included cash from discontinued operations.
The accompanying notes are an integral part of these statements.
ALLETE Second Quarter 2002 Form 10-Q 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited consolidated financial statements and notes should be
read in conjunction with our 2001 Form 10-K. In our opinion all adjustments
necessary for a fair statement of the results for the interim periods have been
included. The results of operations for an interim period may not give a true
indication of results for the year. The financial information for prior periods
has been reclassified to reflect as discontinued operations our Water Services
businesses, our auto transport business, and our retail business-Electric
Odyssey.
NOTE 1. BUSINESS SEGMENTS
Millions
INVESTMENTS
ENERGY AUTOMOTIVE AND CORPORATE
CONSOLIDATED SERVICES SERVICES CHARGES
- ------------------------------------------------------------------------------------------------------------------
FOR THE QUARTER ENDED JUNE 30, 2002
Operating Revenue $376.7 $154.1 $217.6 $ 5.0
Operation and Other Expense 276.6 119.4 149.6 7.6
Depreciation and Amortization Expense 20.1 12.2 7.8 0.1
Lease Expense 7.0 1.1 5.9 -
Interest Expense 16.2 4.7 5.7 5.8
- ------------------------------------------------------------------------------------------------------------------
Operating Income (Loss) from Continuing
Operations 56.8 16.7 48.6 (8.5)
Distributions on Redeemable
Preferred Securities of Subsidiary 1.5 0.6 - 0.9
Income Tax Expense (Benefit) 22.1 6.4 19.4 (3.7)
- ------------------------------------------------------------------------------------------------------------------
Income (Loss) from Continuing Operations 33.2 $ 9.7 $ 29.2 $ (5.7)
-----------------------------------------------
Income from Discontinued Operations 5.6
- -----------------------------------------------------------
Net Income $ 38.8
- -----------------------------------------------------------
EBITDAL from Continuing Operations $100.1 $34.7 $68.0 $(2.6)
- ------------------------------------------------------------------------------------------------------------------
FOR THE QUARTER ENDED JUNE 30, 2001
Operating Revenue $405.1 $147.5 $214.7 $ 42.9
Operation and Other Expense 290.3 113.3 154.5 22.5
Depreciation and Amortization Expense 21.7 11.4 10.1 0.2
Lease Expense 7.0 0.8 6.2 -
Interest Expense 18.8 5.3 10.0 3.5
- ------------------------------------------------------------------------------------------------------------------
Operating Income from Continuing Operations 67.3 16.7 33.9 16.7
Distributions on Redeemable
Preferred Securities of Subsidiary 1.5 0.6 - 0.9
Income Tax Expense 26.3 6.3 13.4 6.6
- ------------------------------------------------------------------------------------------------------------------
Income from Continuing Operations 39.5 $ 9.8 $ 20.5 $ 9.2
-----------------------------------------------
Income from Discontinued Operations 3.0
- -----------------------------------------------------------
Net Income $ 42.5
- -----------------------------------------------------------
EBITDAL from Continuing Operations $114.8 $34.2 $60.2 $20.4
- ------------------------------------------------------------------------------------------------------------------
Included $40.2 million of Canadian operating revenue in 2002 ($38.2 million in 2001).
7 ALLETE Second Quarter 2002 Form 10-Q
NOTE 1. BUSINESS SEGMENTS CONTINUED
Millions
INVESTMENTS
ENERGY AUTOMOTIVE AND CORPORATE
CONSOLIDATED SERVICES SERVICES CHARGES
- ------------------------------------------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED JUNE 30, 2002
Operating Revenue $749.7 $ 297.0 $431.1 $ 21.6
Operation and Other Expense 550.4 229.0 302.4 19.0
Depreciation and Amortization Expense 39.8 24.1 15.6 0.1
Lease Expense 14.2 2.2 12.0 -
Interest Expense 32.1 9.4 11.4 11.3
- ------------------------------------------------------------------------------------------------------------------
Operating Income (Loss) from Continuing
Operations 113.2 32.3 89.7 (8.8)
Distributions on Redeemable
Preferred Securities of Subsidiary 3.0 1.2 - 1.8
Income Tax Expense (Benefit) 43.6 12.3 35.8 (4.5)
- ------------------------------------------------------------------------------------------------------------------
Income (Loss) from Continuing Operations 66.6 $ 18.8 $ 53.9 $ (6.1)
-----------------------------------------------
Income from Discontinued Operations 7.4
- -----------------------------------------------------------
Net Income $ 74.0
- -----------------------------------------------------------
EBITDAL from Continuing Operations $199.3 $68.0 $128.7 $2.6
Total Assets $3,401.9 $971.2 $1,654.3 $411.5
Property, Plant and Equipment $1,368.6 $892.1 $472.4 $4.1
Accumulated Depreciation and Amortization $854.1 $715.3 $136.6 $2.2
Capital Expenditures $97.5 $44.9 $26.3 -
- ------------------------------------------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED JUNE 30, 2001
Operating Revenue $782.0 $ 306.5 $419.6 $ 55.9
Operation and Other Expense 567.3 234.1 301.9 31.3
Depreciation and Amortization Expense 43.4 23.0 20.1 0.3
Lease Expense 13.5 1.4 12.1 -
Interest Expense 38.1 10.2 20.6 7.3
- ------------------------------------------------------------------------------------------------------------------
Operating Income from Continuing Operations 119.7 37.8 64.9 17.0
Distributions on Redeemable
Preferred Securities of Subsidiary 3.0 1.2 - 1.8
Income Tax Expense 46.5 14.4 26.3 5.8
- ------------------------------------------------------------------------------------------------------------------
Income from Continuing Operations 70.2 $ 22.2 $ 38.6 $ 9.4
-----------------------------------------------
Income from Discontinued Operations 5.2
- -----------------------------------------------------------
Net Income $ 75.4
- -----------------------------------------------------------
EBITDAL from Continuing Operations $214.7 $72.4 $117.7 $24.6
Total Assets $3,293.8 $1,021.3 $1,619.3 $303.9
Property, Plant and Equipment $1,248.3 $791.5 $452.5 $4.3
Accumulated Depreciation and Amortization $795.8 $682.5 $111.0 $2.3
Capital Expenditures $78.3 $29.3 $33.9 -
- ------------------------------------------------------------------------------------------------------------------
Discontinued Operations represented $364.9 million of total assets in 2002 ($349.3 million in 2001); and
$26.3 million of capital expenditures in 2002 ($15.1 million in 2001).
Included $74.5 million of Canadian operating revenue in 2002 ($73.0 million in 2001).
Included $228.1 million of Canadian assets in 2002 ($212.2 million in 2001).
ALLETE Second Quarter 2002 Form 10-Q 8
NOTE 2. OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
AFC, through a wholly owned subsidiary, sells certain finance receivables
through a revolving private securitization structure. On May 31, 2002 AFC and
the subsidiary entered into a revised securitization agreement that allows for
the revolving sale by the subsidiary to third parties of up to $500 million in
undivided interests in eligible finance receivables. The revised agreement
expires in 2005. The securitization agreement in place prior to May 31, 2002
limited the sale of undivided interests to $325 million. In conjunction with the
revised securitization agreement and in accordance with SFAS 140 "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,"
AFC, for accounting purposes, began consolidating the subsidiary used in the
securitization structure on June 1, 2002 and reclassified prior periods to
conform to the current year presentation. Previously, AFC's interest in this
subsidiary was recorded as residual interest in other current assets ($103.0
million at December 31, 2001) net of the subsidiary's allowance for doubtful
accounts.
AFC managed total receivables of $535.7 million at June 30, 2002; $215.9 million
represent receivables which were included in accounts receivable on our
consolidated balance sheet and $319.8 million represent receivables sold in
undivided interests through the securitization agreement ($267 million at
December 31, 2001) which are off-balance sheet. AFC's proceeds from the sale of
the receivables to third parties were used to repay borrowings from ALLETE and
fund new loans to AFC's customers. AFC and the subsidiary must each maintain
certain financial covenants such as minimum tangible net worth to comply with
the terms of the securitization agreement.
NOTE 3. GOODWILL AND OTHER INTANGIBLE ASSETS
We adopted SFAS 142, "Goodwill and Other Intangible Assets," in January 2002 and
accordingly no longer amortize goodwill. We completed the required goodwill
impairment testing in the first quarter of 2002 with no resulting impairment. No
event or change has occurred that would indicate the carrying amount has been
impaired since our annual test. SFAS 142 requires disclosure of what reported
net income and earnings per share would have been in all periods presented
exclusive of amortization expense recognized in those periods related to
goodwill or other intangible assets that are no longer being amortized. All
goodwill amortization related to continuing operations.
QUARTER ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
2002 2001 2002 2001
- ------------------------------------------------------------------------------------------------------------------
Millions Except Per Share Amounts
NET INCOME
Reported $38.8 $42.5 $74.0 $75.4
Goodwill Amortization - 2.8 - 5.6
- ------------------------------------------------------------------------------------------------------------------
Adjusted $38.8 $45.3 $74.0 $81.0
- ------------------------------------------------------------------------------------------------------------------
EARNINGS PER SHARE
Basic
Reported $0.48 $0.58 $0.92 $1.04
Goodwill Amortization - 0.04 - 0.08
- ------------------------------------------------------------------------------------------------------------------
Adjusted $0.48 $0.62 $0.92 $1.12
- ------------------------------------------------------------------------------------------------------------------
Diluted
Reported $0.47 $0.57 $0.91 $1.03
Goodwill Amortization - 0.04 - 0.08
- ------------------------------------------------------------------------------------------------------------------
Adjusted $0.47 $0.61 $0.91 $1.11
- ------------------------------------------------------------------------------------------------------------------
9 ALLETE Second Quarter 2002 Form 10-Q
NOTE 4. DISCONTINUED OPERATIONS
In September 2001 we began a process of systematically evaluating our businesses
to determine the strategic value of our assets and explore ways to unlock that
value. As a result, our management and Board of Directors committed to a plan to
sell our Water Services businesses and our auto transport business. Water
Services includes water and wastewater services operated by several wholly owned
subsidiaries in Florida, North Carolina and Georgia. We anticipate selling our
Water Services businesses by the end of 2002 or early 2003. During the first
half of 2002 we exited our nonregulated water subsidiaries, our auto transport
business, and our retail business-Electric Odyssey. The financial results for
all of these businesses have been accounted for as discontinued operations.
Accordingly, we ceased depreciation of assets related to these businesses in the
fourth quarter of 2001.
QUARTER ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
INCOME STATEMENT 2002 2001 2002 2001
- ---------------------------------------------------------------------------------------------------------------------
Millions
Operating Revenue $34.4 $37.9 $68.6 $74.0
- ---------------------------------------------------------------------------------------------------------------------
Pre-Tax Income from Operations $10.7 $4.9 $17.4 $8.5
Income Tax Expense 4.3 1.9 6.9 3.3
- ---------------------------------------------------------------------------------------------------------------------
6.4 3.0 10.5 5.2
- ---------------------------------------------------------------------------------------------------------------------
Loss on Disposal (1.3) - (4.9) -
Income Tax Benefit 0.5 - 1.8 -
- ---------------------------------------------------------------------------------------------------------------------
(0.8) - (3.1) -
- ---------------------------------------------------------------------------------------------------------------------
Income from Discontinued Operations $ 5.6 $3.0 $ 7.4 $5.2
- ---------------------------------------------------------------------------------------------------------------------
JUNE 30, DECEMBER 31,
BALANCE SHEET INFORMATION 2002 2001
- ---------------------------------------------------------------------------------------------------------------------
Millions
Assets of Discontinued Operations
Cash and Cash Equivalents $ 12.1 $ 14.0
Other Current Assets 22.5 28.2
Property, Plant and Equipment 299.8 280.8
Other Assets 30.5 29.5
- ---------------------------------------------------------------------------------------------------------------------
$ 364.9 $ 352.5
- ---------------------------------------------------------------------------------------------------------------------
Liabilities of Discontinued Operations
Current Liabilities $ 36.0 $ 45.9
Long-Term Debt 128.0 128.7
Other Liabilities 32.7 26.2
- ---------------------------------------------------------------------------------------------------------------------
$ 196.7 $ 200.8
- ---------------------------------------------------------------------------------------------------------------------
ALLETE Second Quarter 2002 Form 10-Q 10
NOTE 5. INCOME TAX EXPENSE
QUARTER ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
2002 2001 2002 2001
- ---------------------------------------------------------------------------------------------------------------------
Millions
Current Tax
Federal $ 12.7 $ 17.2 $ 27.4 $ 35.9
Foreign 3.9 0.4 6.7 1.2
State 1.8 1.9 3.5 4.0
- ---------------------------------------------------------------------------------------------------------------------
18.4 19.5 37.6 41.1
- ---------------------------------------------------------------------------------------------------------------------
Deferred Tax
Federal 4.3 6.0 6.2 4.8
Foreign - (0.2) 0.2 (0.4)
State (0.3) 1.2 0.2 1.6
- ---------------------------------------------------------------------------------------------------------------------
4.0 7.0 6.6 6.0
- ---------------------------------------------------------------------------------------------------------------------
Deferred Tax Credits (0.3) (0.2) (0.6) (0.6)
- ---------------------------------------------------------------------------------------------------------------------
Income Taxes on Continuing Operations 22.1 26.3 43.6 46.5
Income Taxes on Discontinued Operations 3.8 1.9 5.1 3.3
- ---------------------------------------------------------------------------------------------------------------------
Total Income Tax Expense $ 25.9 $ 28.2 $ 48.7 $ 49.8
- ---------------------------------------------------------------------------------------------------------------------
NOTE 6. EARNINGS PER SHARE
The difference between basic and diluted earnings per share arises from
outstanding stock options and performance share awards granted under our
Executive and Director Long-Term Incentive Compensation Plans.
RECONCILIATION OF BASIC AND DILUTED
EARNINGS PER SHARE
- -------------------------------------------------------------------------------------------------------------------
Millions Except Per Share Amounts
QUARTER ENDED SIX MONTHS ENDED
JUNE 30, 2002 JUNE 30, 2002
------------------------------ ------------------------------
BASIC DILUTIVE DILUTED BASIC DILUTIVE DILUTED
EPS SECURITIES EPS EPS SECURITIES EPS
------------------------------ ------------------------------
Net Income $38.8 - $38.8 $74.0 - $74.0
Common Shares 81.0 0.7 81.7 80.7 0.6 81.3
Per Share $0.48 - $0.47 $0.92 - $0.91
- -------------------------------------------------------------------------------------------------------------------
QUARTER ENDED SIX MONTHS ENDED
JUNE 30, 2001 JUNE 30, 2001
------------------------------ ------------------------------
BASIC DILUTIVE DILUTED BASIC DILUTIVE DILUTED
EPS SECURITIES EPS EPS SECURITIES EPS
------------------------------ ------------------------------
Net Income $42.5 - $42.5 $75.4 - $75.4
Common Shares 73.7 0.6 74.3 72.7 0.6 73.3
Per Share $0.58 - $0.57 $1.04 - $1.03
- -------------------------------------------------------------------------------------------------------------------
11 ALLETE Second Quarter 2002 Form 10-Q
NOTE 7. TOTAL COMPREHENSIVE INCOME
For the quarter ended June 30, 2002 total comprehensive income was $44.8 million
($52.8 million for the quarter ended June 30, 2001). For the six months ended
June 30, 2002 total comprehensive income was $78.0 million ($79.2 million for
the six months ended June 30, 2001). Total comprehensive income includes net
income, unrealized gains and losses on securities classified as
available-for-sale, changes in the fair value of an interest rate swap and
foreign currency translation adjustments.
NOTE 8. NEW ACCOUNTING STANDARDS
SFAS 143, "Accounting for Asset Retirement Obligations," requires the
recognition of a liability for an asset retirement obligation in the period in
which it is incurred. When the liability is initially recorded, the carrying
amount of the related long-lived asset is correspondingly increased. Over time,
the liability is accreted to its present value and the related capitalized
charge is depreciated over the useful life of the asset. SFAS 143 is effective
for fiscal years beginning after June 15, 2002. Currently, decommissioning
amounts collected in Minnesota Power's rates are reported in accumulated
depreciation, which upon adoption of SFAS 143 will require a reclassification to
a liability. We are reviewing what additional assets, if any, may have
associated retirement costs as defined by SFAS 143 and anticipate no material
impact on the Company's financial position and results of operations.
NOTE 9. SQUARE BUTTE POWER PURCHASED CONTRACT
Minnesota Power has a power purchase agreement with Square Butte that extends
through 2026 (Agreement). It provides a long-term supply of low-cost energy to
customers in our electric service territory and enables Minnesota Power to meet
power pool reserve requirements. Square Butte, a North Dakota cooperative
corporation, owns a 455-MW coal-fired generating unit (Unit) near Center, North
Dakota. The Unit is adjacent to a generating unit owned by Minnkota, a North
Dakota cooperative corporation whose Class A members are also members of Square
Butte. Minnkota serves as the operator of the Unit and also purchases power from
Square Butte.
Minnesota Power is entitled to approximately 71 percent of the Unit's output
under the Agreement. After 2005 and upon compliance with a two-year advance
notice requirement, Minnkota has the option to reduce Minnesota Power's
entitlement by 5 percent annually, to a minimum of 50 percent. Minnesota Power
is obligated to pay its pro rata share of Square Butte's costs based on
Minnesota Power's entitlement to Unit output. Minnesota Power's payment
obligation is suspended if Square Butte fails to deliver any power, whether
produced or purchased, for a period of one year. Square Butte's fixed costs
consist primarily of debt service. At June 30, 2002 Square Butte had total debt
outstanding of $299.1 million. Total annual debt service for Square Butte is
expected to be approximately $36 million in each of the years 2002 and 2003, and
$23 million in each of the years 2004 through 2006. Variable operating costs
include the price of coal purchased from BNI Coal, Ltd., our subsidiary, under a
long-term contract. Minnesota Power's payments to Square Butte are approved as
purchased power expense for ratemaking purposes by both the MPUC and FERC.
ALLETE Second Quarter 2002 Form 10-Q 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
ALLETE's core operations are focused on two business segments. ENERGY SERVICES
includes electric and gas services, coal mining and telecommunications.
AUTOMOTIVE SERVICES includes a network of wholesale and total loss vehicle
auctions, a finance company, a vehicle remarketing company, a company that
provides vehicle inspection services to the automotive industry and its lenders,
and a company that provides Internet-based automotive parts location and
insurance claim audit services nationwide. INVESTMENTS AND CORPORATE CHARGES
include our real estate operations, investments in emerging technologies related
to the electric utility industry and corporate charges. Corporate charges
represent general corporate expenses, including interest, not specifically
related to any one business segment. Also included in Investments and Corporate
Charges is our trading securities portfolio which we began liquidating in July
2002 through a process we anticipate completing by the end of September 2002.
DISCONTINUED OPERATIONS includes our Water Services businesses, our auto
transport business, and our retail business-Electric Odyssey.
CONSOLIDATED OVERVIEW
Net income and earnings per share for the quarter ended June 30, 2002 decreased
9 percent and 18 percent, respectively, from the same period in 2001. For the
six months ended June 30, 2002, net income was down 2 percent and earnings per
share were down 12 percent from the same period in 2001. EXIT CHARGES. Net
income in 2002 included charges related to our exit from non-strategic
businesses ($1.6 million for the second quarter; $3.9 million for the six
months). Excluding these charges, earnings per share would have been $0.50 for
the quarter ended June 30, 2002 ($0.96 for the six months ended June 30, 2002).
GOODWILL. Earnings for the quarter ended June 30, 2001 included $2.8 million, or
$0.04 per share, of goodwill amortization expense ($5.6 million, or $0.08 per
share for the six months ended June 30, 2001). REAL ESTATE TRANSACTION. Earnings
for the quarter and six months ended June 30, 2001 included an $11.1 million, or
$0.15 per share, gain associated with the Company's largest ever single real
estate transaction. COMMON STOCK ISSUANCE. The issuance of 6.6 million shares of
our common stock in the second quarter of 2001 also impacted earnings per share
for 2002.
QUARTER ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
2002 2001 2002 2001
- -------------------------------------------------------------------------------------------------------------------
Millions Except Per Share Amounts
Operating Revenue
Energy Services $154.1 $147.5 $ 297.0 $306.5
Automotive Services 217.6 214.7 431.1 419.6
Investments 5.0 42.9 21.6 55.9
- -------------------------------------------------------------------------------------------------------------------
$376.7 $405.1 $749.7 $782.0
- -------------------------------------------------------------------------------------------------------------------
Operating Expenses
Energy Services $137.4 $130.8 $264.7 $268.7
Automotive Services 169.0 180.8 341.4 354.7
Investments and Corporate Charges 13.5 26.2 30.4 38.9
- -------------------------------------------------------------------------------------------------------------------
$319.9 $337.8 $636.5 $662.3
- -------------------------------------------------------------------------------------------------------------------
Net Income
Energy Services $ 9.7 $ 9.8 $ 18.8 $ 22.2
Automotive Services 29.2 20.5 53.9 38.6
Investments and Corporate Charges (5.7) 9.2 (6.1) 9.4
- -------------------------------------------------------------------------------------------------------------------
33.2 39.5 66.6 70.2
Discontinued Operations 5.6 3.0 7.4 5.2
- -------------------------------------------------------------------------------------------------------------------
$ 38.8 $ 42.5 $ 74.0 $ 75.4
- -------------------------------------------------------------------------------------------------------------------
Diluted Average Shares of Common Stock 81.7 74.3 81.3 73.3
- -------------------------------------------------------------------------------------------------------------------
Diluted Earnings Per Share of Common Stock
Continuing Operations $0.40 $0.53 $0.82 $0.96
Discontinued Operations 0.07 0.04 0.09 0.07
- -------------------------------------------------------------------------------------------------------------------
$0.47 $0.57 $0.91 $1.03
- -------------------------------------------------------------------------------------------------------------------
13 ALLETE Second Quarter 2002 Form 10-Q
NET INCOME
The following net income discussion summarizes a comparison of the six months
ended June 30, 2002 to the six months ended June 30, 2001.
ENERGY SERVICES' net income in 2002 decreased $3.4 million, or 15 percent,
primarily due to weaker wholesale market conditions. Last year's stronger
economy and colder winter weather resulted in higher wholesale prices. Total
retail megawatthour sales were similar to last year.
AUTOMOTIVE SERVICES reported a $15.3 million, or 40 percent, increase in net
income and a 9 percent increase in EBITDAL over 2001. The continued growth in
net income was primarily due to higher conversion rates (the percentage of
vehicles sold from those that were offered at auction), improved cost
efficiencies, a mandated accounting change which resulted in the discontinuance
of goodwill amortization and lower interest rates. The conversion rate related
to wholesale vehicles sold was 63 percent for the six months ended June 30, 2002
(61 percent for the same period in 2001). In 2002 the number of vehicles sold at
our wholesale auction facilities were similar to last year. Fleet downsizing by
rental car companies after September 11, 2001 resulted in increased sales of
factory vehicles at our auction facilities during the fourth quarter of 2001 to
the detriment of the first six months of 2002. Vehicle sales in other higher
margin categories and strong conversion rates in 2002 helped mitigate the
reduction in sales of factory vehicles. Vehicles sold at our total loss vehicle
auction facilities were up 36 percent from 2001. AFC contributed 30 percent of
the net income for Automotive Services in 2002 (33 percent in 2001) and reported
a 5 percent increase in the number of vehicles financed. Net income in 2002 also
included a $0.8 million charge associated with the exit from our 44 percent
ownership in a Canadian auto transport business.
INVESTMENTS AND CORPORATE CHARGES reported $15.5 million less net income in 2002
due to smaller real estate transactions in 2002 and lower returns on our
securities portfolio. In June 2001 our real estate operations reported an $11.1
million gain on its largest single sale ever. Our securities portfolio earned a
negative 0.33 percent after-tax annualized return in 2002 compared to a positive
10.02 percent in 2001. This decrease was partially offset by more income from
our emerging technology investments.
DISCONTINUED OPERATIONS was up $2.2 million primarily due to the suspension of
depreciation on our Water Services assets. Our Water Services businesses also
reported a 12 percent increase in water consumption as a result of drier weather
conditions and a 4 percent increase in customers. These increases were partially
offset by $3.1 million of exit charges associated with the auto transport
business and the retail business-Electric Odyssey.
COMPARISON OF THE QUARTERS ENDED JUNE 30, 2002 AND 2001
ENERGY SERVICES
OPERATING REVENUE was up $6.6 million, or 4 percent, in 2002 primarily due to
increased revenue from power marketing activities and Enventis Telecom. Revenue
from power marketing activities was $9.2 million higher in 2002 reflecting the
inclusion of $8.1 million of revenue from merchant generation operations
(non-rate base generation sold at market-based rates pursuant to FERC
authority), and $5.3 million for mark-to-market income related to energy
contracts ($1.5 million in 2001). The increase in revenue from power marketing
activities, however, was negatively impacted by weak wholesale market conditions
which reduced wholesale prices in 2002. Revenue from Enventis Telecom was $3.3
million higher in 2002 reflecting the July 2001 acquisition of Enventis, Inc.
These increases were partially offset by a $5.5 million decrease in revenue from
retail electric sales which was primarily attributed to lower fuel clause
recovery because of lower fuel costs in 2002. Total retail megawatthour sales
were similar to last year.
Revenue from electric sales to taconite customers accounted for 10 percent of
consolidated operating revenue in both 2002 and 2001. Electric sales to paper
and pulp mills accounted for 4 percent of consolidated operating revenue in both
2002 and 2001. Sales to other power suppliers accounted for 4 percent of
consolidated operating revenue in 2002 (5 percent in 2001).
OPERATING EXPENSES were up $6.6 million, or 5 percent, in 2002 reflecting the
inclusion of merchant generation and Enventis, Inc. operations. These increases
were partially offset by reduced maintenance expenses. In 2001 the Company had
higher plant maintenance expenses and additional costs incurred as a result of a
severe ice storm.
ALLETE Second Quarter 2002 Form 10-Q 14
AUTOMOTIVE SERVICES
OPERATING REVENUE was up $2.9 million, or 1 percent, in 2002 reflecting strong
conversion rates at wholesale auction facilities. At ADESA, 454,000 wholesale
vehicles were sold in 2002 (458,000 in 2001). The number of vehicles sold was
impacted by a reduction in factory vehicles brought to auction. Stronger sales
in other vehicle categories helped mitigate the reduction in factory vehicles.
In addition, at our total loss vehicle auctions, 47,000 vehicles were sold in
2002 (34,000 in 2001), an increase of 38 percent.
Operating revenue from AFC was higher in 2002 reflecting a 4 percent increase in
vehicles financed through its loan production offices. AFC financed
approximately 241,000 vehicles in 2002 (232,000 in 2001) and managed total
receivables of $536 million at June 30, 2002 ($480 million at June 30, 2001).
OPERATING EXPENSES were down $11.8 million, or 7 percent, in 2002 primarily due
to improved cost efficiencies, reduced interest expense ($4.3 million) as a
result of lower interest rates, and the discontinuance of goodwill amortization
($3.3 million). These decreases were partially offset by an increase in
operating expenses incurred to standardize operations at all our total loss
auction facilities and expenditures for information technology initiatives.
INVESTMENTS AND CORPORATE CHARGES
OPERATING REVENUE was down $37.9 million, or 88 percent, in 2002 primarily due
to a large real estate transaction recorded in 2001. In 2002 our real estate
operations reported no large real estate sales, while in 2001 two large real
estate sales contributed $30.4 million to revenue, one of which was our real
estate operations' largest single transaction ever. Income from our securities
portfolio and emerging technology investments was also lower in 2002.
OPERATING EXPENSES were down $12.7 million, or 48 percent, in 2002 primarily due
to expenses associated with larger real estate sales in 2001.
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001
ENERGY SERVICES
OPERATING REVENUE was down $9.5 million, or 3 percent, in 2002 primarily due to
a $16.9 million decrease in revenue from retail electric and gas sales. This
decrease was attributed to warmer winter weather and lower fuel clause recovery
due to lower fuel costs in 2002. Total retail megawatthour sales were similar to
last year. Revenue from power marketing activities was down $2.1 million in 2002
due to weak wholesale market conditions which reduced wholesale prices in 2002.
This decrease was partially offset by the inclusion of $8.1 million of revenue
from merchant generation operations, and $5.3 million for mark-to-market income
related to energy contracts in 2002 ($1.5 million in 2001). Revenue in 2002 also
included $8.0 million more revenue from Enventis Telecom reflecting the July
2001 acquisition of Enventis, Inc.
Revenue from electric sales to taconite customers accounted for 10 percent of
consolidated operating revenue in both 2002 and 2001. Electric sales to paper
and pulp mills accounted for 4 percent of consolidated operating revenue in both
2002 and 2001. Sales to other power suppliers accounted for 4 percent of
consolidated operating revenue in 2002 (6 percent in 2001).
OPERATING EXPENSES were down $4.0 million, or 1 percent, in 2002 due to
decreased purchased power and maintenance expenses. Purchased power expense was
down $15.0 million in 2002 because prices paid for purchased power were lower,
Company generation was up 6 percent and 2 percent fewer megawatthours were sold.
Purchased gas expense was lower in 2002 because in 2001 prices paid were at
record highs. In 2001 the Company had higher plant maintenance expenses and
additional costs incurred as a result of a severe ice storm. These decreases
were partially offset by the inclusion of merchant generation and Enventis, Inc.
operations.
15 ALLETE Second Quarter 2002 Form 10-Q
AUTOMOTIVE SERVICES
OPERATING REVENUE was up $11.5 million, or 3 percent, in 2002 reflecting strong
conversion rates at wholesale auction facilities. At ADESA, 915,000 wholesale
vehicles were sold in 2002 (924,000 in 2001). The number of vehicles sold was
impacted by a reduction in factory vehicles brought to auction. Stronger sales
in other vehicle categories helped mitigate the reduction in factory vehicles.
In addition, at our total loss vehicle auctions, 94,000 vehicles were sold in
2002 (69,000 in 2001), an increase of 36 percent.
Operating revenue from AFC was higher in 2002 reflecting a 5 percent increase in
vehicles financed through our loan production offices. AFC financed
approximately 478,000 vehicles in 2002 (453,000 in 2001) and managed total
receivables of $536 million at June 30, 2002 ($480 million at June 30, 2001).
OPERATING EXPENSES were down $13.3 million, or 4 percent, in 2002 primarily due
to improved cost efficiencies, reduced interest expense ($9.2 million) as a
result of lower interest rates, and the discontinuance of goodwill amortization
($6.6 million). These decreases were partially offset by an increase in
operating expenses incurred to standardize operations at all our total loss
auction facilities and expenditures for information technology initiatives.
Also, operating expenses in 2001 reflected additional expenses for utility and
labor costs incurred as a result of inclement weather conditions.
INVESTMENTS AND CORPORATE CHARGES
OPERATING REVENUE was down $34.3 million, or 61 percent, in 2002 primarily due
to a large real estate transaction recorded in 2001. Two large real estate sales
in 2002 contributed $4.9 million to revenue, while in 2001 four large real
estate sales contributed $33.1 million to revenue, one of which was our real
estate operations' largest single transaction ever. Operating revenue also
reflected less income from the securities portfolio due to lower returns in
2002. Operating revenue from our emerging technology investments was up $0.5
million in 2002.
OPERATING EXPENSES were down $8.5 million, or 22 percent, in 2002 primarily due
to expenses associated with larger real estate sales in 2001.
CRITICAL ACCOUNTING POLICIES
Certain accounting measurements under applicable generally accepted accounting
principles involve management's judgment about subjective factors and estimates,
the effects of which are inherently uncertain. The following summarizes those
accounting measurements we believe are most critical to our reported results of
operations and financial condition.
ACCOUNTING JUDGMENTS/UNCERTAINTIES SEE ADDITIONAL
POLICY AFFECTING APPLICATION DISCUSSION AT
- -----------------------------------------------------------------------------------------------------------------
Uncollectible Receivables - Economic conditions affecting Liquidity and Capital Resources -
and Allowance for Doubtful customers, suppliers and market prices Working Capital on page 18
Accounts - Outcome of negotiations,
litigation and bankruptcy proceedings
- Current sales, payment and
write-off histories
Goodwill Impairment - Economic conditions affecting Note 3. Goodwill and Other
market valuations Intangible Assets on page 9
- Changes in business strategy
- Forecast of future operating cash
flows and earnings
Fair Value of Energy - Economic conditions affecting Item 3. Quantitative and
Contracts energy supply, demand and market prices Qualitative Disclosures about
Market Risk - Power Marketing on
page 20
ALLETE Second Quarter 2002 Form 10-Q 16
OUTLOOK
Based on a mid-year review of our businesses, we have revised our 2002 earnings
per share estimate to be in the range of $2.00 to $2.10, excluding $0.05 per
share of charges related to the exit from the auto transport business and the
retail business-Electric Odyssey, and any potential gain recognized on the sale
of our Water Services businesses. This estimate reflects the goodwill accounting
change and incorporates our year to date performance and our revised
expectations for the second half of 2002 which include the liquidation of our
trading securities portfolio and lower wholesale power prices.
We have decided to liquidate our trading securities portfolio to reduce our
exposure to increased volatility in the securities market. At June 30, 2002 the
fair value of our trading securities portfolio was $157.2 million. Our revised
earnings estimate for 2002 reflects a $0.10 per share income reduction due to no
contribution from our trading securities portfolio. No gain or loss on
liquidation is expected. With the proceeds we plan to reduce debt. The cash
generated from this decision as well as from our continuing operations and the
expected sale of our Water Services' assets will fuel our future growth. Our
balance sheet remains strong. We continue to focus on our two core
competencies-Energy Services and Automotive Services, and work toward
positioning each of them to continue our earnings growth track record.
ENERGY SERVICES. Our new merchant generation facilities at the Taconite Harbor
Energy Center in northern Minnesota and in Kendall County near Chicago,
Illinois, became fully operational by the second quarter of 2002. The third
quarter is typically the highest net income quarter for our Energy Services'
business, and the third quarter of 2002 is expected to follow the historical
pattern. While our base retail electric business remains stable, we do not
expect that wholesale power margins will return to the high levels of a few
years ago, but we do expect improvement during the third quarter of 2002
compared to the first half of 2002. The extent of our profitability will be
impacted by wholesale power prices during the third quarter of 2002.
AUTOMOTIVE SERVICES. The second quarter 2002 performance of our Automotive
Services business demonstrated our ability to drive efficiencies at our auctions
acquired since January 2000 and generate profits. We expect to continue EBITDAL
and revenue improvement, and double digit earnings growth into 2003. We also
expect that the factory vehicle volume at our auctions will return to normal
levels later this year. We remain on target to achieve our previously stated
goal of 30 percent earnings growth (20 percent excluding the goodwill accounting
change) over 2001. In addition, we anticipate continued growth in the number of
vehicles sold and financed at auction. We expect a 5 percent increase in total
vehicles both sold and financed over 2001.
INVESTMENTS AND CORPORATE CHARGES. We anticipate net income from Investments and
Corporate Charges to decline in 2002 due to the liquidation of our trading
securities portfolio and, as expected, a lower contribution from our real estate
operations.
DISCONTINUED OPERATIONS. We remain engaged in discussions relating to the
planned sale of our Water Services businesses. The FGUA has delayed taking any
action on the proposed purchase of Florida Water assets until September 2002.
The FGUA has stated its intent to advise Florida Water which utility systems it
desires to purchase and the purchase price for these utility systems, and to
seek finalized definitive agreements. We continue to work with them at the same
time that we explore other sales opportunities. ALLETE has hired an investment
banker to facilitate the sale of Heater Utilities and Georgia Water Services. We
expect to close these transactions in late 2002 or early 2003. In June 2002 we
completed our exit from the auto transport business.
17 ALLETE Second Quarter 2002 Form 10-Q
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOW ACTIVITIES
During the first six months of 2002 cash flow from operating activities
reflected strong operating results and continued focus on working capital
management. Cash flow from operating activities was higher in 2002 due to the
timing of the collection of certain finance receivables outstanding at December
31, 2001 and changes in trading securities. In 2001 additional trading
securities were purchased with a portion of the proceeds from a common stock
issuance. Cash flow from operations was also affected by a number of factors
representative of normal operations.
WORKING CAPITAL. Additional working capital, if and when needed, generally is
provided by the sale of commercial paper. In July 2002 we began liquidating our
trading securities portfolio through a process we anticipate completing by the
end of September 2002. With the proceeds we plan to reduce debt. Approximately
5.0 million original issue shares of our common stock are available for issuance
through INVEST DIRECT, our direct stock purchase and dividend reinvestment plan.
A substantial amount of ADESA's working capital is generated internally from
payments for services provided. However, ADESA has arrangements to use proceeds
from the sale of commercial paper issued by ALLETE to meet short-term working
capital requirements arising from the timing of payment obligations to vehicle
sellers and the availability of funds from vehicle purchasers. During the sales
process, ADESA does not typically take title to vehicles.
AFC offers short-term on-site financing for dealers to purchase vehicles at
auctions in exchange for a security interest in each vehicle. The financing is
provided through the earlier of the date the dealer sells the vehicle or a
general borrowing term of 30 to 45 days. AFC has arrangements to use proceeds
from the sale of commercial paper issued by ALLETE to meet its working capital
requirements.
AFC, through a wholly owned subsidiary, sells certain finance receivables
through a revolving private securitization structure. On May 31, 2002 AFC and
the subsidiary entered into a revised securitization agreement that allows for
the revolving sale by the subsidiary to third parties of up to $500 million in
undivided interests in eligible finance receivables. The revised agreement
expires in 2005. The securitization agreement in place prior to May 31, 2002
limited the sale of undivided interests to $325 million. In conjunction with the
revised securitization agreement and in accordance with SFAS 140 "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,"
AFC, for accounting purposes, began consolidating the subsidiary used in the
securitization structure on June 1, 2002 and reclassified prior periods to
conform to the current year presentation. Previously, AFC's interest in this
subsidiary was recorded as residual interest in other current assets ($103.0
million at December 31, 2001) net of the subsidiary's allowance for doubtful
accounts.
AFC managed total receivables of $535.7 million at June 30, 2002; $215.9 million
represent receivables which were included in accounts receivable on our
consolidated balance sheet and $319.8 million represent receivables sold in
undivided interests through the securitization agreement ($267 million at
December 31, 2001) which are off-balance sheet. AFC's proceeds from the sale of
the receivables to third parties were used to repay borrowings from ALLETE and
fund new loans to AFC's customers. AFC and the subsidiary must each maintain
certain financial covenants such as minimum tangible net worth to comply with
the terms of the securitization agreement.
Significant changes in accounts receivable and accounts payable balances at June
30, 2002 compared to December 31, 2001 were due to increased sales and financing
activity at Automotive Services. Typically auction volumes are down during the
winter months and in December because of the holidays. As a result, Automotive
Services had higher receivables and higher payables at June 30, 2002.
We provide up to $50 million in credit support to facilitate the power marketing
activities of Split Rock Energy, and had $36.1 million in outstanding support at
June 30, 2002 ($36.0 million at December 31, 2001).
ALLETE Second Quarter 2002 Form 10-Q 18
SECURITIES. In March 2001 ALLETE, ALLETE Capital II and ALLETE Capital III,
jointly filed a registration statement with the SEC pursuant to Rule 415 under
the Securities Act of 1933. The registration statement, which has been declared
effective by the SEC, relates to the possible issuance of an aggregate amount of
$500 million of securities which may include ALLETE common stock, first mortgage
bonds and other debt securities, and ALLETE Capital II and ALLETE Capital III
preferred trust securities, of which approximately $387 million remains
available to be issued. ALLETE also previously filed a registration statement,
which has been declared effective by the SEC, relating to the possible issuance
of $25 million of first mortgage bonds and other debt securities. We may sell
all or a portion of the remaining registered securities if warranted by market
conditions and our capital requirements. Any offer and sale of the above
mentioned securities will be made only by means of a prospectus meeting the
requirements of the Securities Act of 1933 and the rules and regulations
thereunder.
INVESTMENTS. As investments in emerging technology companies are sold, we
recognize a gain or loss. Our investment in the companies that have gone public
had a cost basis of approximately $12 million at June 30, 2002 and December 31,
2001. The aggregate market value of our investment in these companies at June
30, 2002 was $7 million ($24 million at December 31, 2001). At this time the
Company does not believe there is a permanent impairment. These investments
provide us with access to developing technologies before their commercial debut,
as well as potential financial returns. We view these investments as a source of
capital for redeployment in existing businesses.
CAPITAL REQUIREMENTS
As a result of new construction and expansions at Automotive Services,
consolidated capital expenditures for 2002 are now expected to be $235 million.
Consolidated capital expenditures for the quarter ended June 30, 2002 totaled
$97.5 million ($78.3 million in 2001). Expenditures for 2002 included $44.9
million for Energy Services and $26.3 million for Automotive Services.
Expenditures for 2002 also included $26.3 million related to discontinued
operations ($22.4 million to maintain our Water Services businesses while they
are in the process of being sold; $3.9 million to buy previously leased auto
transportation trucks). Internally generated funds were the primary sources of
funding for these expenditures.
NEW ACCOUNTING STANDARDS
SFAS 143, "Accounting for Asset Retirement Obligations," requires the
recognition of a liability for an asset retirement obligation in the period in
which it is incurred. When the liability is initially recorded, the carrying
amount of the related long-lived asset is correspondingly increased. Over time,
the liability is accreted to its present value and the related capitalized
charge is depreciated over the useful life of the asset. SFAS 143 is effective
for fiscal years beginning after June 15, 2002. Currently, decommissioning
amounts collected in Minnesota Power's rates are reported in accumulated
depreciation, which upon adoption of SFAS 143 will require a reclassification to
a liability. We are reviewing what additional assets, if any, may have
associated retirement costs as defined by SFAS 143 and anticipate no material
impact on the Company's financial position and results of operations.
-----------------------
READERS ARE CAUTIONED THAT FORWARD-LOOKING STATEMENTS INCLUDING THOSE CONTAINED
ABOVE, SHOULD BE READ IN CONJUNCTION WITH OUR DISCLOSURES UNDER THE HEADING:
"SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995" LOCATED ON PAGE 3 OF THIS FORM 10-Q.
19 ALLETE Second Quarter 2002 Form 10-Q
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
SECURITIES PORTFOLIO
In July 2002 we began liquidating our trading securities portfolio through a
process we anticipate completing by the end of September 2002. With the proceeds
we plan to reduce our debt. At June 30, 2002 available-for-sale securities
consisted of the common stock of publicly traded companies and equity securities
in a grantor trust established to fund certain employee benefits.
Our trading securities portfolio had a fair value of $157.2 million at June 30,
2002 ($155.6 million at December 31, 2001). Our available-for-sale securities
portfolio had a fair value of $19.0 million at June 30, 2002 ($26.5 million at
December 31, 2001).
FOREIGN CURRENCY
Our foreign currency exposure is limited to the conversion of operating results
of our Canadian subsidiaries and, therefore, we have not entered into any
foreign exchange contracts to hedge the conversion of our Canadian operating
results into United States dollars.
POWER MARKETING
Minnesota Power purchases power for retail sales in our retail service territory
and occasionally sells excess generation in the wholesale market. At the end of
second quarter of 2002 we also had 500 MW of merchant generation (non-rate base
generation sold at market-based rates pursuant to FERC authority) available for
sale to the wholesale market. Our merchant generation includes 225 MW from our
Taconite Harbor Energy Center in northern Minnesota that was acquired in October
2001. It also includes 275 MW of generation secured through a 15-year tolling
agreement, which commenced in May 2002, with NRG Energy at the Kendall County
facility near Chicago, Illinois. Under the Kendall County tolling agreement, the
Company pays a fixed capacity charge for the right, but not the obligation, to
utilize one 275 MW generating unit. We are responsible for arranging the natural
gas fuel supply and are entitled to the electricity produced. Our strategy is to
sell the majority of merchant generation through long-term contracts of various
durations. The balance will be sold in the spot market, through short-term
agreements, or possibly utilized as a source of low-cost supply for our
regulated operations if the need exists. The services of Split Rock Energy may
be utilized to broker or market merchant generation. We currently have two
long-term forward capacity and energy contracts related to generation secured by
the NRG Energy tolling agreement. Each is for 50 MW, with one having a 10-year
term and the other a 15-year term.
The services of Split Rock Energy are used to fulfill purchase requirements for
retail load and to market excess generation. We own 50 percent of Split Rock
Energy which was formed in 2000 with Great River Energy to provide us with least
cost supply, maximize the value of our generation assets and maximize marketing
revenue within prescribed limits. Split Rock Energy operates in the wholesale
energy markets, and engages in marketing activities by entering into forward and
option contracts for the purchase and sale of electricity. These contracts are
primarily short-term in nature with maturities of less than one year. Although
Split Rock Energy generally attempts to balance its purchase and sale positions,
commodity price risk sometimes exists or is created. This risk is actively
managed through a risk management program that includes policies, procedures and
limits established by the Split Rock Energy Board of Governors.
Revenue for the quarter and six months ended June 30, 2002 included $5.3 million
for mark-to-market income attributable to the power marketing activities of
Split Rock Energy and our merchant generation operations ($1.5 million for the
quarter and six months ended June 30, 2001). Included in the $5.3 million of
mark-to-market income in 2002 is $5.6 million of mark-to-market income for
future fixed margins associated with the Kendall County contracts.
ALLETE Second Quarter 2002 Form 10-Q 20
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) We held our Annual Meeting of Shareholders on May 14, 2002.
(b) Included in (c) below.
(c) The election of directors, the appointment of independent accountants
and the reservation of an additional three million shares of ALLETE
common stock for issuance under the Executive Long-Term Incentive
Compensation Plan were voted on at the Annual Meeting of Shareholders.
The results were as follows:
VOTES
WITHHELD OR BROKER
VOTES FOR AGAINST ABSTENTIONS NONVOTES
- -----------------------------------------------------------------------------------------------------------------
DIRECTORS
Kathleen A. Brekken 72,931,311 924,410 - -
Wynn V. Bussmann 72,961,877 893,844 - -
Dennis E. Evans 72,945,815 909,906 - -
David G. Gartzke 73,053,319 802,402 - -
Glenda E. Hood 72,654,381 1,201,340 - -
Peter J. Johnson 72,666,159 1,189,562 - -
George L. Mayer 72,695,734 1,159,987 - -
Jack I. Rajala 73,021,920 833,801 - -
Nick Smith 72,956,767 898,954 - -
Bruce W. Stender 72,703,354 1,152,367 - -
Donald C. Wegmiller 72,948,613 907,108 - -
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP 70,418,228 2,785,483 652,010 -
ALLETE EXECUTIVE
LONG-TERM INCENTIVE
COMPENSATION PLAN
Reservation of additional
shares to be issued 59,119,239 12,804,480 1,932,002 -
- -----------------------------------------------------------------------------------------------------------------
(d) Not applicable.
21 ALLETE Second Quarter 2002 Form 10-Q
ITEM 5. OTHER INFORMATION
Reference is made to our 2001 Form 10-K for background information on the
following updates. Unless otherwise indicated, cited references are to our 2001
Form 10-K.
Ref. Page 18. - Insert after the Second Full Paragraph
In June 2002 Minnkota received a Notice of Violation from the Environmental
Protection Agency (EPA) regarding alleged New Source Review violations at the
M.R. Young Station which includes the Square Butte generating unit. The EPA
claims certain capital projects completed by Minnkota should have gone through
the New Source Review process potentially resulting in new air permit operating
conditions. The Company is unable to predict the outcome of this matter.
Minnesota Power is obligated to pay its pro rata share of Square Butte's costs
based on Minnesota Power's entitlement to the Square Butte generating unit
output.
Ref. Page 11. - Sixth Paragraph
Ref. Page 30. - Third Paragraph
Ref. Form 8-K dated and filed February 28, 2002 - Second Paragraph
Ref. Form 8-K dated and filed March 28, 2002
Ref. 10-Q for the quarter ended March 31, 2002, Page 18. - Fifth Paragraph
The Company remains engaged in discussions relating to the planned sale of our
Water Services businesses. The FGUA has delayed taking any action on the
proposed purchase of Florida Water assets until September 2002. The FGUA has
stated its intent to advise Florida Water which utility systems it desires to
purchase and the purchase price for these utility systems, and to seek finalized
definitive agreements. We continue to work with them at the same time that we
explore other sales opportunities. ALLETE has hired an investment banker to
facilitate the sale of Heater Utilities and Georgia Water Services. We expect to
close these transactions in late 2002 or early 2003. In June 2002 we completed
our exit from the auto transport business.
ALLETE Second Quarter 2002 Form 10-Q 22
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit
Number
-------
10(a) Receivables Purchase Agreement dated as of May 31, 2002, among
AFC Funding Corporation, as Seller, Automotive Finance
Corporation, as Servicer, Fairway Finance Corporation, as
initial Purchaser, BMO Nesbitt Burns Corp., as initial Agent
and as Purchaser Agent for Fairway Finance Corporation and XL
Capital Assurance Inc., as Insurer. [Portions of this exhibit
have been omitted pursuant to a request for confidential
treatment and filed separately with the Securities and
Exchange Commission.]
10(b) Amended and Restated Purchase and Sale Agreement dated as of
May 31, 2002, between AFC Funding Corporation and Automotive
Finance Corporation. [Portions of this exhibit have been
omitted pursuant to a request for confidential treatment and
filed separately with the Securities and Exchange Commission.]
99(a) Certification of Periodic Report dated August 5, 2002, signed
by David G. Gartzke.
99(b) Certification of Periodic Report dated August 5, 2002, signed
by James K. Vizanko.
(b) Reports on Form 8-K.
Report on Form 8-K filed July 19, 2002 with respect to Item 7. Financial
Statements and Exhibits.
23 ALLETE Second Quarter 2002 Form 10-Q
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ALLETE, INC.
August 5, 2002 James K. Vizanko
-----------------------------------------
James K. Vizanko
Vice President,
Chief Financial Officer and Treasurer
August 5, 2002 Mark A. Schober
-----------------------------------------
Mark A. Schober
Vice President and Controller
ALLETE Second Quarter 2002 Form 10-Q 24
EXHIBIT INDEX
EXHIBIT
NUMBER
- --------------------------------------------------------------------------------
10(a) Receivables Purchase Agreement dated as of May 31, 2002, among AFC
Funding Corporation, as Seller, Automotive Finance Corporation, as
Servicer, Fairway Finance Corporation, as initial Purchaser, BMO
Nesbitt Burns Corp., as initial Agent and as Purchaser Agent for
Fairway Finance Corporation and XL Capital Assurance Inc., as
Insurer. [Portions of this exhibit have been omitted pursuant to a
request for confidential treatment and filed separately with the
Securities and Exchange Commission.]
10(b) Amended and Restated Purchase and Sale Agreement dated as of May 31,
2002, between AFC Funding Corporation and Automotive Finance
Corporation. [Portions of this exhibit have been omitted pursuant to
a request for confidential treatment and filed separately with the
Securities and Exchange Commission.]
99(a) Certification of Periodic Report dated August 5, 2002, signed by
David G. Gartzke.
99(b) Certification of Periodic Report dated August 5, 2002, signed by
James K. Vizanko.
ALLETE Second Quarter 2002 Form 10-Q
Exhibit 10(a)
CONFIDENTIAL TREATMENT
AMENDED AND RESTATED
RECEIVABLES PURCHASE AGREEMENT
dated as of May 31, 2002
among
AFC FUNDING CORPORATION,
as Seller,
AUTOMOTIVE FINANCE CORPORATION,
as Servicer,
FAIRWAY FINANCE CORPORATION
and such other entities from time to time
as may become Purchasers hereunder,
BMO NESBITT BURNS CORP.,
as the initial Agent
and as Purchaser Agent for Fairway Finance Corporation
and
XL CAPITAL ASSURANCE INC.,
as Insurer
CONFIDENTIAL TREATMENT
TABLE OF CONTENTS
PAGE
ARTICLE I.
AMOUNTS AND TERMS OF THE PURCHASES
Section 1.1. Purchase Facility...........................................2
Section 1.2. Making Purchases............................................2
Section 1.3. Participation Computation...................................4
Section 1.4. Settlement Procedures.......................................4
Section 1.5. Fees.......................................................11
Section 1.6. Payments and Computations, Etc.............................12
Section 1.7. Dividing or Combining Portions of the Investment
of any Revolving Participation.............................12
Section 1.8. Increased Costs............................................12
Section 1.9. Additional Discount on Portions of Participation
Bearing a Eurodollar Rate..................................13
Section 1.10. Requirements of Law.......................................14
Section 1.11. Inability to Determine Eurodollar Rate....................15
Section 1.12. Additional and Replacement Purchasers,
Increase in Revolving Purchase Limit......................15
Section 1.13. [ * ]...................................................17
Section 1.14. [ * ]...................................................17
Section 1.15. [ * ]...................................................18
ARTICLE II.
REPRESENTATIONS AND WARRANTIES; COVENANTS;TERMINATION EVENTS
Section 2.1. Representations and Warranties; Covenants..................18
Section 2.2. Termination Events.........................................18
ARTICLE III.
INDEMNIFICATION
Section 3.1. Indemnities by the Seller..................................18
Section 3.2. Indemnities by AFC.........................................21
ARTICLE IV.
ADMINISTRATION AND COLLECTIONS
Section 4.1. Appointment of Servicer....................................22
i
* TEXT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
CONFIDENTIAL TREATMENT
Section 4.2. Duties of Servicer.........................................23
Section 4.3. Deposit Accounts; Establishment and Use
of Certain Accounts........................................24
Section 4.4. Enforcement Rights.........................................25
Section 4.5. Responsibilities of the Seller.............................26
Section 4.6. Servicing Fee..............................................26
ARTICLE V.
THE AGENTS
Section 5.1. Appointment and Authorization..............................27
Section 5.2. Delegation of Duties.......................................28
Section 5.3. Exculpatory Provisions.....................................28
Section 5.4. Reliance by Agents.........................................28
Section 5.5. Notice of Termination Date.................................29
Section 5.6. Non-Reliance on Agent, Purchaser Agents
and Other Purchasers.......................................29
Section 5.7. Agent, Purchaser Agents and Purchasers.....................30
Section 5.8. Indemnification............................................30
Section 5.9. Successor Agent............................................31
ARTICLE VI.
MISCELLANEOUS
Section 6.1. Amendments, Etc............................................31
Section 6.2. Notices, Etc...............................................32
Section 6.3. Assignability..............................................32
Section 6.4. Costs, Expenses and Taxes..................................33
Section 6.5. No Proceedings; Limitation on Payments.....................34
Section 6.6. Confidentiality............................................34
Section 6.7. GOVERNING LAW AND JURISDICTION.............................34
Section 6.8. Execution in Counterparts..................................35
Section 6.9. Survival of Termination....................................35
Section 6.10. WAIVER OF JURY TRIAL.......................................35
Section 6.11. Entire Agreement...........................................35
Section 6.12. Headings...................................................36
Section 6.13. Liabilities of the Purchasers..............................36
Section 6.14. [ * ]....................................................36
Section 6.15. Tax Treatment..............................................36
EXHIBIT I DEFINITIONS....................................................I-1
EXHIBIT II CONDITIONS OF PURCHASES.......................................II-1
EXHIBIT III REPRESENTATIONS AND WARRANTIES...............................III-1
EXHIBIT IV COVENANTS.....................................................IV-1
ii
* TEXT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
EXHIBIT V TERMINATION EVENTS.........................................V-1
EXHIBIT VI PORTFOLIO CERTIFICATE.....................................VI-1
EXHIBIT VII PERFECTION REPRESENTATIONS, WARRANTIES
AND COVENANTS..............................................................VII-1
SCHEDULE I CREDIT AND COLLECTION POLICY...............................I-1
SCHEDULE II DEPOSIT BANKS AND DEPOSIT ACCOUNTS........................II-1
SCHEDULE III TRADE NAMES..............................................III-1
SCHEDULE IV ELIGIBLE CONTRACTS........................................IV-1
SCHEDULE V TAX MATTERS................................................V-1
SCHEDULE VI COMPETITOR FINANCIAL INSTITUTIONS.........................VI-1
ANNEX A FORM OF PURCHASE NOTICE
ANNEX B FORM OF DEPOSIT ACCOUNT AGREEMENT
ANNEX C FORM OF SERVICER REPORT
ANNEX D FORMS OF JOINDER AGREEMENTS
iii
CONFIDENTIAL TREATMENT
AMENDED AND RESTATED
RECEIVABLES PURCHASE AGREEMENT
This AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT, originally
dated as of December 31, 1996 and amended and restated as of May 31, 2002 (as
further amended, supplemented or otherwise modified from time to time, the
"AGREEMENT") is entered into among AFC FUNDING CORPORATION, an Indiana
corporation, as seller (the "SELLER"), AUTOMOTIVE FINANCE CORPORATION, an
Indiana corporation ("AFC"), as initial servicer (in such capacity, together
with its successors and permitted assigns in such capacity, the "SERVICER"),
FAIRWAY FINANCE CORPORATION, a Delaware corporation ("FAIRWAY"), as initial
purchaser (together with its successors and permitted assigns and such other
entities as may become party hereto from time to time as purchasers, the
"PURCHASERS"), BMO NESBITT BURNS CORP., a Delaware corporation ("BMO Nesbitt
Burns") as agent for the Purchasers (in such capacity, together with its
successors and assigns in such capacity, the "AGENT") and as Purchaser Agent for
Fairway (in such capacity, together with its successors and assigns and such
other financial institutions as may become party hereto from time to time each
as a purchaser agent, a "PURCHASER AGENT") and XL CAPITAL ASSURANCE INC., a New
York stock insurance company (the "INSURER").
PRELIMINARY STATEMENTS. Certain terms that are capitalized and used
throughout this Agreement are defined in EXHIBIT I to this Agreement. References
in the Exhibits hereto to "the Agreement" refer to this Agreement, as amended,
modified or supplemented from time to time.
Fairway, the Agent, the Seller and the Servicer are party to that
certain Receivables Purchase Agreement, dated as of December 31, 1996, pursuant
to which the Seller has sold, transferred and assigned an undivided variable
percentage interest in a pool of receivables, and Fairway has acquired such
undivided variable percentage interest.
[ * ].
The parties hereto additionally wish to amend and restate the
Receivables Purchase Agreement in its entirety, in order to allow the Seller to
sell, transfer and assign undivided variable percentage interests in a pool of
receivables to one or several Purchasers, and to allow one or several Purchasers
to acquire such undivided variable percentage interests, each of which shall be
adjusted from time to time based upon, in part, reinvestment payments which are
made by the Purchasers and additional incremental payments which are made to the
Seller.
The parties hereto additionally wish to amend and restate the
Receivables Purchase Agreement in its entirety in order to make certain other
changes set forth herein.
* TEXT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
CONFIDENTIAL TREATMENT
In consideration of the mutual agreements, provisions and covenants
contained herein, the parties hereto agree as follows:
ARTICLE I.
AMOUNTS AND TERMS OF THE PURCHASES
Section 1.1. PURCHASE FACILITY. (a) On the terms and conditions
hereinafter set forth, (i) each Revolving Purchaser hereby agrees to purchase
and make reinvestments of undivided percentage ownership interests with regard
to its Participation from the Seller from time to time (but not on a Purchaser
Termination Day for such Revolving Purchaser) during the period from the date
hereof or the date set forth in the Joinder Agreement to which it is a party, as
applicable, to the Termination Date and (ii) each Term Purchaser hereby agrees
to make a purchase with regard to its Participation from Seller on the date set
forth in the Joinder Agreement to which it is a party. Under no circumstances
shall any (A) Revolving Purchaser make any such purchase or reinvestment if,
after giving effect to such purchase or reinvestment, either (1) the aggregate
outstanding Investment of all Revolving Purchasers would exceed the Revolving
Purchase Limit or (2) the aggregate Investment of such Revolving Purchaser would
exceed its Maximum Purchase Amount or (B) Purchaser make any such purchase or
reinvestment if, after giving effect to such purchase or reinvestment, the
aggregate outstanding Investment of all Purchasers would exceed the Maximum
Insured Amount.
(b) The Seller may, upon at least 30 days' notice to the Agent, the
Purchaser Agents and the Insurer, terminate the purchase facility provided in
SECTION 1.1(a)(i) in whole or, from time to time, irrevocably reduce in part the
unused portion of the Revolving Purchase Limit; PROVIDED that each partial
reduction shall be in the amount of [ * ], or an [ * ] in excess thereof and
shall not reduce the Revolving Purchase Limit [ * ]. Any reductions
in the Revolving Purchase Limit shall reduce the Maximum Purchase Amounts of the
Revolving Purchasers ratably according to their respective Revolving Pro Rata
Share.
Section 1.2. MAKING PURCHASES. (a) Each purchase (but not reinvestment)
of undivided ownership interests with regard to any Participation of any
Revolving Purchaser hereunder shall be made upon the Seller's irrevocable
written notice in the form of ANNEX A delivered to the Agent (who will forward
such notice to the applicable Purchaser Agent) and the Insurer in accordance
with SECTION 5.2 (which notice must be received by such Purchaser Agent prior to
11:00 a.m., Chicago time) on the second Business Day next preceding the date of
such proposed purchase. Each such notice of any such proposed purchase shall
specify the desired amount and date of such purchase and the desired duration of
the initial Yield Period for the related Portion of the Investment of such
Participation; PROVIDED each proposed purchase shall be in the amount of
[ * ] or [ * ] in excess thereof. Each Purchaser Agent shall select the
duration of such initial Yield Period with respect to the Portion of the
Investment funded by the Purchaser(s) for which it is acting as Purchaser Agent
and each
2
* TEXT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
subsequent Yield Period in connection with such Portion of Investment in its
discretion; PROVIDED that it shall use reasonable efforts, taking into account
market conditions, to accommodate Seller's preferences. Each purchase of
undivided ownership interests with regard to any Participation of any Term
Purchaser shall be made in accordance with the terms set forth in the related
Joinder Agreement.
(b) On the date of each purchase (but not reinvestment) of undivided
ownership interests with regard to the Participation of any Purchaser, such
Purchaser shall, upon satisfaction of the applicable conditions set forth in
EXHIBIT II hereto and (if applicable) set forth in the related Joinder
Agreement, make available to its Purchaser Agent (at its address set forth on
the signature pages hereto or of the applicable Joinder Agreement) the amount of
such purchase in same day funds, and after such Purchaser Agent's receipt of
such funds, such Purchaser Agent shall make such funds immediately available to
the Seller at such office.
(c) The Seller hereby sells and assigns to the Agent, for the benefit
of the Secured Parties, an undivided percentage ownership interest equal to the
Aggregate Participation in (i) each Pool Receivable then existing and thereafter
arising, (ii) all Related Security with respect to such Pool Receivables, and
(iii) Collections with respect to, and other proceeds of, such Pool Receivables
and Related Security.
(d) To secure all of the Seller's obligations (monetary or otherwise)
under this Agreement, the Insurance Agreement and the other Transaction
Documents to which it is a party, whether now or hereafter existing or arising,
due or to become due, direct or indirect, absolute or contingent, including to
secure the obligation of the Servicer that Collections be applied to the
Participations as provided in this Agreement, the Seller hereby grants to the
Agent, for the benefit of the Secured Parties, a security interest in all of the
Seller's right, title and interest (including, without limitation, any undivided
interest of the Seller) in, to and under all of the following, whether now or
hereafter owned, existing or arising: (A) all Pool Receivables, (B) all Related
Security with respect to each such Pool Receivable, (C) all Collections with
respect to each such Pool Receivable, (D) the Deposit Accounts, the Liquidation
Account and the Cash Reserve Account and all amounts on deposit therein and all
certificates and instruments, if any, from time to time evidencing the Deposit
Accounts, the Liquidation Account and the Cash Reserve Account, all amounts on
deposit therein, all investments (including any investment property) made with
such funds, all claims thereunder or in connection therewith, and all interest,
dividends, moneys, 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, (E) all rights of the Seller under the Purchase and
Sale Agreement, and (F) all proceeds of, and all amounts received or receivable
under any or all of, the foregoing. The Agent, for the benefit of the Secured
Parties, shall have, with respect to the property described in this SECTION
1.2(d), and in addition to all the other rights and remedies available under
this Agreement, all the rights and remedies of a secured party under any
applicable UCC.
3
CONFIDENTIAL TREATMENT
Section 1.3. PARTICIPATION COMPUTATION. Each Participation shall be
initially computed on the date of the initial purchase hereunder. Thereafter
until the Termination Date, each Participation shall be automatically recomputed
(or deemed to be recomputed) on each Business Day other than a Termination Day.
Each Participation, as computed (or deemed recomputed) as of the day immediately
preceding the Termination Date, shall thereafter remain constant. The
Participations shall all become zero when the aggregate Investment and Discount
thereon shall have been paid in full, all the amounts owed by the Seller
hereunder, under the Insurance Agreement and under any other Transaction
Documents to the Purchasers, the Purchaser Agents, the Insurer, the Agent, and
any other Indemnified Party or Affected Person are paid in full and the Servicer
shall have received the accrued Servicing Fee.
Section 1.4. SETTLEMENT PROCEDURES. (a) Collection of the Pool
Receivables shall be administered by the Servicer in accordance with the terms
of this Agreement. The Seller shall provide to the Servicer on a timely basis
all information needed for such administration, including notice of the
occurrence of any Termination Date or Revolving Paydown Day and current
computations of the Participations.
(b) The Servicer shall segregate and hold all Collections in trust for
the benefit of the Seller, the Purchasers and the Insurer and, within one
Business Day of the receipt (or deemed receipt) of Collections of Pool
Receivables by the Seller or Servicer, deposit such Collections into a Deposit
Account. With respect to such Collections on the day deposited into the Deposit
Accounts:
(i) out of the percentage of such Collections represented by
the Aggregate Participation, FIRST the Servicer shall transfer from the
Deposit Accounts to the Liquidation Account, and the Agent shall hold
therein for the benefit of the Insurer, an amount equal to the Premium
accrued through such day and not previously transferred to the
Liquidation Account and SECOND, out of each Purchaser's Distribution
Percentage of the remainder of such Collections, the Servicer shall
transfer from the Deposit Accounts to the Liquidation Account, and the
Agent shall hold therein for the benefit of each Purchaser, an amount
equal to the sum of the Discount accrued through such day on each
Portion of Investment of such Purchaser's Participation and not
previously transferred to the Liquidation Account and the Program Fees
accrued through such day with respect to such Purchaser and not
previously transferred to the Liquidation Account (provided that the
amount allocated pursuant to this priority SECOND shall not exceed
[ * ]) and third, out of the remainder of such Collections,
the Servicer shall transfer from the Deposit Accounts to
the Liquidation Account, and the Agent shall hold therein for the
benefit of the Servicer (if AFC or any Affiliate thereof is not the
Servicer), an amount equal to the Servicing Fee accrued through such
day and not previously transferred to the Liquidation Account;
(ii) if such day is not a Termination Day, (A) if the amount on
deposit in the Cash Reserve Account on such day is less than the Cash
Reserve, the Servicer shall transfer
4
* TEXT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
CONFIDENTIAL TREATMENT
from the Deposit Accounts out of the remainder of the percentage of
such Collections represented by the Aggregate Participation to the Cash
Reserve Account funds sufficient to increase the amount on deposit
therein to equal the Cash Reserve; (B) if such day is a Revolving
Paydown Day, Purchaser Termination Day or any date on which a reduction
is occurring pursuant to SECTION 1.4(f), out of the remainder (after
giving effect to clause (A)) of the percentage of such Collections
represented by the Aggregate Participation, the Servicer and the Agent
shall apply such Collections in accordance with SECTION 1.4(g), SECTION
1.4(f) and SECTION 1.4(h) (in the order of priority listed); (C) the
Servicer shall transfer from the Deposit Accounts to the Liquidation
Account out of the remainder (after giving effect to CLAUSES (A) and
(B) above) of the percentage of such Collections represented by the
Aggregate Participation an amount equal to the sum of the Discount
accrued through such day on each Portion of Investment of such
Purchaser's Participation and not previously transferred to the
Liquidation Account and the Program Fees accrued through such day with
respect to such Purchaser and not previously transferred to the
Liquidation Account, in each case, to the extent not transferred
pursuant to CLAUSE SECOND in SECTION 1.4(b)(i) above; (D) the Servicer
shall transfer (after giving effect to CLAUSES (A), (B) and (C) above)
from the Deposit Accounts to the Liquidation Account, and the Agent
shall promptly apply (ratably in proportion to the respective amounts
owed to each such Person) for the account of any Indemnified Party that
is owed any amounts hereunder, under the [ * ] Transaction Document
not consisting of Discount, Investment, Program Fees or Premium,
an amount equal to the sum of such amounts; and (E) the Servicer
shall remit to the Seller, on behalf of the Purchasers, the
remainder of the percentage of such Collections represented by
the Aggregate Participation (after giving effect to CLAUSES (A), (B),
(C) and (D) above); such Collections remitted to the Seller
shall first be used, if the Originator or any Affiliate of the
Seller is the Servicer, to pay any accrued but unpaid Servicing Fee to
the Servicer and the remainder shall be automatically reinvested in
Pool Receivables and in the Related Security;
(iii) if such day is a Termination Day, (A) the Servicer shall
transfer to the Liquidation Account, out of the Collections in the
Deposit Accounts (first out of the Seller's share of such Collections,
and then out of the portion of such Collections represented by the
Aggregate Participation) an amount equal to the costs and expenses
incurred by the Agent and the Insurer in enforcing their rights and the
rights of the other Indemnified Parties hereunder and reported to the
Servicer by the Agent, (B) the Servicer shall transfer to the
Liquidation Account, and the Agent shall hold therein for each
Purchaser, such Purchaser's Distribution Percentage of the entire
remainder of the percentage of the Collections represented by the
Aggregate Participation, and (C) the Servicer shall transfer to the
Liquidation Account, and the Agent shall hold therein for each
Purchaser, such Purchaser's Termination Share of the entire remainder
of the Collections in the Deposit Accounts represented by the Seller's
share of the Collections, if any; and
5
* TEXT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
CONFIDENTIAL TREATMENT
(iv) if such day is not a Termination Day, out of the Seller's
share of Collections, the Servicer shall FIRST, remit to the Servicer
in the event that AFC is not the Servicer, the Servicing Fee and
SECOND, remit to the Seller the remainder of such Collections.
(c) On each Settlement Date, funds being held on deposit in the
Liquidation Account shall be distributed by the Agent as follows:
(i) If such Settlement Date is not a Termination Day,
Collections held on deposit in the Liquidation Account for the benefit
of any Purchaser pursuant to SECTIONS 1.4(b)(i), 1.4(b)(ii)(C) and
1.4(b)(ii)(D) shall be paid on behalf of Seller [ * ] SECOND
to the applicable Purchaser Account in an amount equal to the
sum of any accrued and unpaid Program Fees payable on such
Settlement Date (if any) and accrued and unpaid Discount
payable on each Portion of the Investment of such Purchaser with a
Yield Period ending on such Settlement Date (if any) (provided that the
amount payable pursuant to this priority second shall not exceed the
[ * ]), THIRD, to the applicable Purchaser Account in
an amount equal to sum of any accrued and unpaid Program Fees payable
on such Settlement Date (if any) and accrued and unpaid Discount
payable on each Portion of Investment of such Purchaser with a Yield
Period ending on such Settlement Date (to extent not paid pursuant to
clause second above) and FOURTH, to the account of the applicable
Indemnified Party in an amount equal to the amount owed to such
Indemnified Party not consisting of Discount, Investment, Program Fees
or Premium;
(ii) If such Settlement Date is not a Termination Day and is a
Settlement Date associated with the last day of any Yield Period of any
Portion of the Investment of any Purchaser, the Collections held on
deposit in the Liquidation Account for the benefit of such Purchaser
pursuant to SECTIONS 1.4(f), 1.4(g) or 1.4(h) shall be paid on behalf
of Seller to the applicable Purchaser Account in an amount equal to the
lesser of (A) such Portion of the Investment and (B) the amount of such
Collections;
(iii) If such Settlement Date is a Termination Day, Collections
held on deposit in the Liquidation Account for the benefit of any
Purchaser pursuant to SECTIONS 1.4(b)(i), 1.4(b)(ii), 1.4(b)(iii),
1.4(f), 1.4(g) or 1.4(h) shall be applied FIRST, to the Agent and the
Insurer such Purchaser's Termination Share of the costs and expenses
incurred by the Agent and the Insurer in enforcing their rights and the
rights of the other Indemnified Parties hereunder (provided that the
amount payable pursuant to this priority FIRST shall not exceed
$100,000 per annum); SECOND, [ * ]; THIRD, to such Purchaser's
Account in an amount equal to the sum of accrued and unpaid Discount
payable on each Portion of the Investment of such
6
* TEXT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
CONFIDENTIAL TREATMENT
Purchaser and accrued and unpaid Program Fees payable on such
Settlement Date to such Purchaser (if any) (provided that the amount
payable pursuant to this priority THIRD [ * ]); FOURTH, to such
Purchaser's Account in an amount equal to such Purchaser's
outstanding Investment; FIFTH, [ * ] SIXTH, to such Purchaser's
Account in an amount equal to the sum of accrued and unpaid Discount
payable on each Portion of the Investment of such Purchaser and any
accrued and unpaid Program Fees (to the extent not paid pursuant to
clause THIRD above) and SEVENTH, to the Agent and the Insurer such
Purchaser's Termination Share of the costs and expenses of the Agent
and [ * ] in enforcing their rights and the rights of the Indemnified
Parties hereunder (to the extent not paid pursuant to clause FIRST
above);
(iv) [ * ];
(v) if such Settlement Date is a Servicer Payment Date and
neither AFC nor any of its Affiliates are the Servicer, Collections
held on deposit in the Liquidation Account for the benefit of the
Servicer pursuant to SECTION 1.4(b)(i) in respect of accrued and unpaid
Servicing Fees for the prior calendar month shall be paid as the
Servicer shall direct;
(vi) if the Investment and accrued Discount with respect to
each Portion of Investment of each Purchaser have been reduced to zero,
[ * ], and all accrued Servicing Fees payable to the Servicer (if
other than AFC or any of its Affiliates) have been paid in full, any
amount remaining in the Liquidation Account after the application of
CLAUSES (i)-(v) above shall be distributed to the Purchasers,
[ * ], the Agent, the Purchaser Agents and any other Indemnified
Party or Affected Person in payment in full of any other amounts owed
thereto hereunder [ * ] or any other Transaction Document (ratably in
proportion to the respective amounts owed to each such Person); and
(vii) if such Settlement Date is a Fee Payment Date,
Collections held on deposit in the Liquidation Account for the benefit
of the Purchasers in respect of accrued and unpaid Program Fees for the
prior calendar month shall be paid to the applicable Purchaser's
Account.
7
* TEXT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
(d) Upon receipt of funds deposited into any Purchaser's Account
pursuant to SECTION 1.4(c) with respect to such Purchaser's Participation, the
applicable Purchaser Agent shall cause such funds to be distributed as follows:
(i) if such distribution occurs on a day that is not a
Termination Day, FIRST to the payment in full (on a PARI PASSU basis)
of all Discount and Program Fees with respect to such Purchaser's
Participation previously due and remaining unpaid, SECOND, to the
payment in full (on a PARI PASSU basis) of all accrued and unpaid
Discount with respect to any Portion of Investment of such Purchaser
with a Yield Period ending on the applicable Settlement Date and all
accrued and unpaid Program Fees due on the applicable Settlement Date
and THIRD to the payment in full of any Portion of the Investment of
such Purchaser with a Yield Period ending on the applicable Settlement
Date; and
(ii) if such distribution occurs on a day that is a Termination
Day, FIRST to the payment in full (on a PARI PASSU basis) of all
Discount and Program Fees with respect to such Purchaser's
Participation previously due and remaining unpaid, SECOND, to the
payment in full (on a PARI PASSU basis) of all accrued and unpaid
Discount with respect to any Portion of Investment of such Purchaser
with a Yield Period ending on the applicable Settlement Date and all
accrued and unpaid Program Fees due on the applicable Settlement Date,
THIRD, to the payment in full of such Purchaser's Investment, FOURTH,
if the Investment and accrued Discount with respect to each Portion of
Investment of such Purchaser have been reduced to zero, to the payment
in full of any other amounts owed by the Seller hereunder to such
Purchaser.
If a Purchaser so directs, any of the foregoing payments owed to such Purchaser
may be paid to its Purchaser Agent on its behalf.
(e) For the purposes of this SECTION 1.4:
(i) if on any day the Outstanding Balance of any Pool Receivable
is reduced or adjusted as a result of any discount, rebate or other
adjustment made by the Originator, Seller or Servicer, or any setoff or
dispute between the Seller, Originator or the Servicer and an Obligor,
the Seller shall be deemed to have received on such day a Collection of
such Pool Receivable in the amount of such reduction or adjustment;
(ii) if on any day any of the representations or warranties in
PARAGRAPHS A.(g) or A.(o) of EXHIBIT III is not true with respect to
any Pool Receivable, the Seller shall be deemed to have received on
such day a Collection of such Pool Receivable in full;
(iii) except as provided in PARAGRAPH (i) or (ii) of this SECTION
1.4(e), or as otherwise required by applicable law or the relevant
Contract, all Collections received from an Obligor of any Receivable
shall be applied in accordance with the Contract with such Obligor and
the Credit and Collection Policy; and
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CONFIDENTIAL TREATMENT
(iv) if and to the extent any Purchaser Agent, the Agent,
[ * ] or any Purchaser shall be required for any reason to pay over
to an Obligor (or any trustee, receiver, custodian or similar official
in any Insolvency Proceeding) any amount received by it hereunder, such
amount shall be deemed not to have been so received but rather to have
been retained by the Seller and, accordingly, such Purchaser Agent, the
Agent, [ * ] or such Purchaser, as the case may be, shall have a
claim against the Seller for such amount, payable when and to the
extent that any distribution from or on behalf of such Obligor is made
in respect thereof.
(f) If at any time the Seller shall wish to cause the reduction of the
aggregate of the Investment of the Participations of the Revolving Purchasers
(but not to commence the liquidation, or reduction to zero, of the entire
Investment of the Participations), the Seller may do so as follows:
(i) the Seller shall give each Purchaser Agent, [ * ] and
the Agent at least two Business Days' prior written notice thereof
(including the amount of such proposed reduction and the proposed date
on which such reduction will commence),
(ii) on the proposed date of commencement of such reduction and
on each day thereafter, the Servicer shall cause each Revolving
Purchaser's Distribution Percentages of the remainder of the
Collections represented by the Aggregate Participation (after giving
effect to SECTION 1.4(b)(i), SECTION 1.4(b)(ii)(A) and SECTION 1.4(g))
to be transferred to the Liquidation Account and the Agent shall hold
therein such amounts until the aggregate amount thereof not so
reinvested shall equal the desired amount of reduction, and
(iii) the Agent shall hold such Collections in the Liquidation
Account for the benefit of the Revolving Purchasers, and for payment to
each Revolving Purchaser on a pari passu basis on the next Settlement
Date relating to any Portion of the Investment of such Revolving
Purchaser [ * ] pursuant to SECTION 1.4(c)(ii) or (iii);
provided that,
A. unless otherwise agreed by the Agent the amount of any such
reduction with respect to each Purchaser shall be not less than
$1,000,000 and shall be an integral multiple of $100,000, and the
entire Investment (if any) of the Participation after giving effect to
such reduction shall be not less than $2,000,000,
B. the Seller shall use reasonable efforts to choose a
reduction amount, and the date of commencement thereof, so that to the
extent practicable such reduction shall commence and conclude in the
same Yield Period, and
9
* TEXT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
CONFIDENTIAL TREATMENT
C. if two or more Portions of Investment shall be outstanding
with respect to any Purchaser at the time of any proposed reduction,
such proposed reduction shall be applied, unless the Seller shall
otherwise specify in the notice given pursuant to SECTION 1.4(f)(i), to
the Portion of Investment of such Purchaser with the shortest remaining
Yield Period.
(g) On each Purchaser Termination Day, the applicable Purchaser's
Distribution Percentage of the remainder of the Collections represented by the
Aggregate Participation (after giving effect to SECTION 1.4(b)(i)) and SECTION
1.4(b)(ii)(A) shall be transferred by the Servicer from the Deposit Accounts to
the Liquidation Account and held therein by the Agent for the benefit of such
Purchaser and then, on each Settlement Date related to such Purchaser, paid to
such Purchaser [ * ] in accordance with SECTIONS 1.4(c)(ii) or (iii);
IT BEING UNDERSTOOD that solely for the purposes of this SECTION 1.4(g), such
Purchaser's Distribution Percentage shall be deemed to remain constant on any
day that is not a Termination Day from (i) the occurrence of the first Purchaser
Termination Day with respect to such Purchaser or (ii), to the extent a
Termination Date has occurred after the date in CLAUSE (i) hereof, the first
Business Day after such Termination Date that is not a Termination Day, in each
case until the date such Purchaser's Investment shall be paid in full. To the
extent that amounts have been transferred to the Liquidation Account pursuant to
this SECTION 1.4(g) but not distributed to the applicable Purchaser [ * ] prior
to the occurrence of a Termination Date, the Agent shall hold each Purchaser's
Termination Share of such amounts for distribution to such Purchaser pursuant to
SECTION 1.4(c)(iii) until the first day that is not a Termination Day, at which
time the Agent shall hold any such amounts for the benefit of the Purchaser
whose Purchaser Termination Day preceded the occurrence of the most recent
Termination Date (or, if the Investment of such Purchaser has been reduced to
zero, the Agent shall transfer such amounts to the Seller for reinvestment
pursuant to SECTION 1.4(b)(ii)(E)).
(h) On each Revolving Paydown Day that is not also a Termination Day,
the remainder of the Collections represented by the Aggregate Participation
(after giving effect to SECTIONS 1.4(b)(i), 1.4(b)(ii)(A), 1.4(g) and 1.4(f))
shall be transferred by the Servicer from the Deposit Accounts to the
Liquidation Account and held therein by the Agent for the benefit of the
Revolving Purchasers (other than any Revolving Purchasers for whom such day is a
Purchaser Termination Day) until the earliest of (i) the first day that is not a
Revolving Paydown Day, at which point the Agent shall transfer such funds from
the Liquidation Account to the Seller, who shall reinvest such funds pursuant to
SECTION 1.4(b)(ii)(E) to the maximum extent permitted under this Agreement, (ii)
the Termination Date (at which time the Agent shall hold each Purchaser's
Termination Share of such amounts for distribution to such Purchaser [ * ]
pursuant to SECTION 1.4(c)(iii) until the first day that is not a Termination
Day, at which time the remainder of such amounts shall either be held for the
benefit of the Revolving Purchasers pursuant to this SECTION 1.4(h) or, if such
day is also not a Revolving Paydown Day, reinvested pursuant to CLAUSE (i) of
this SECTION 1.4(h)) and (iii) the first Settlement Date related to the end of
the Yield Period with respect to any Portion of Investment of a Revolving
Purchaser (other than any Purchasers for whom such day is a Purchaser
Termination Day) shall occur (at which
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* TEXT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
CONFIDENTIAL TREATMENT
point a portion of such funds equal to such Portion of the Investment (but only
to the extent such application would not result in such Revolving Purchaser
having received an amount pursuant to this CLAUSE (iii) of this SECTION 1.4(h)
in excess of such Purchaser's Distribution Percentage of the aggregate of all
amounts held in the Liquidation Account pursuant to this SECTION 1.4(h) and not
reinvested or held in the Liquidation Account pursuant to CLAUSES (i) and (ii)
above) shall be held in trust for the benefit of the applicable Revolving
Purchaser and paid to such Revolving Purchaser in accordance with SECTION
1.4(c)(ii) on such Settlement Date.
(i) If on any Draw Date (A) insufficient funds are on deposit in the
Liquidation Account to make in full the distributions required under ITEM SECOND
of CLAUSE (i) of SECTION 1.4(c) or ITEM THIRD of CLAUSE (iii) of SECTION 1.4(c)
and (B) since the prior Draw Date funds have been released to the Seller and not
used by the Seller to acquire Receivables, the Seller shall deposit into the
Liquidation Account on or before such Draw Date the lesser of the amounts
described in CLAUSES (A) and (B) above for the benefit of the applicable
Purchasers. If on any Draw Date insufficient funds are on deposit in the
Liquidation Account (after giving effect to any deposits made by the Seller as
described in the preceding sentence) to make in full the distributions required
under ITEM SECOND of CLAUSE (i) of SECTION 1.4(c) or ITEM THIRD of CLAUSE (iii)
of SECTION 1.4(c) for such Draw Date, the Agent shall distribute funds from the
Cash Reserve Account pursuant to ITEM SECOND of CLAUSE (i) of SECTION 1.4(c) and
ITEM THIRD of CLAUSE (iii) of SECTION 1.4(c) as if such funds were funds on
deposit in the Liquidation Account held for the benefit of the applicable
Purchaser. On any Termination Day, to the extent directed by the Control Party,
the Agent shall distribute funds from the Cash Reserve Account pursuant to ITEM
FOURTH of CLAUSE (iii) of SECTION 1.4(c) as if such funds were funds on deposit
in the Liquidation Account held for the benefit of the applicable Purchaser .
Section 1.5. FEES. (a) The Seller shall pay to the Agent certain fees
in the amounts and on the dates set forth in a letter dated May 31, 2002 between
the Seller and the Agent delivered pursuant to SECTION 1(n) of EXHIBIT II, as
such letter agreement may be amended, supplemented or otherwise modified from
time to time in accordance with the terms thereof with the prior written consent
of the Insurer.
(b) The Seller shall pay to any Purchaser Agent (other than the Agent)
such fees as may be set forth in a fee letter executed by the Seller and such
Purchaser Agent, and consented to by the Insurer, in contemplation of the
applicable Purchaser becoming an additional party hereto (each such letter, as
the same may be amended, amended and restated, supplemented or modified and
together with the letter referred to in PARAGRAPH (a) above, a "FEE LETTER"),
such fees to be payable in the amounts and on the dates set forth in such
letter, as such letter agreement may be amended, supplemented or otherwise
modified from time to time with the consent of the Insurer.
(c) [ * ].
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* TEXT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
CONFIDENTIAL TREATMENT
Section 1.6. PAYMENTS AND COMPUTATIONS, ETC. (a) All amounts to be paid
or deposited by the Seller or the Servicer to, or for the benefit of, any
Purchaser Agent, any Purchaser, the Agent or the Insurer hereunder shall be paid
or deposited no later than noon (Chicago time) on the day when due in same day
funds to the applicable Purchaser's Account or to the Insurer's Account (as
appropriate). All amounts received after noon (Chicago time) will be deemed to
have been received on the immediately succeeding Business Day.
(b) The Seller shall, to the extent permitted by law, pay interest on
any amount not paid or deposited by the Seller or Servicer to the applicable
Purchaser's Account or Insurer's Account when due hereunder, at an interest rate
equal to [ * ].
(c) All computations of interest under SUBSECTION (b) above and all
computations of Discount, fees, premiums and other amounts hereunder shall be
made on the basis of a year of 360 days for the actual number of days elapsed.
Whenever any payment or deposit to be made hereunder shall be due on a day other
than a Business Day, such payment or deposit shall be made no later than the
next succeeding Business Day and such extension of time shall be included in the
computation of such payment or deposit.
Section 1.7. DIVIDING OR COMBINING PORTIONS OF THE INVESTMENT OF ANY
REVOLVING PARTICIPATION. The Seller may, on the last day of any Yield Period,
either (i) divide the Investment of any Revolving Purchaser into two or more
portions (each, with respect to the applicable Participation, a "PORTION OF
INVESTMENT") equal, in aggregate, to the Investment of such Revolving Purchaser,
PROVIDED that after giving effect to such division the amount of each such
Portion of Investment shall be not less than $1,000,000, or (ii) combine any two
or more Portions of Investment outstanding on such last day and having Yield
Periods ending on such last day into a single Portion of Investment equal to the
aggregate of the Investment of such Portions of Investment.
Section 1.8. INCREASED COSTS. (a) If any Purchaser Agent, any
Purchaser, the Agent, the Insurer, any Liquidity Bank, any other Program Support
Provider or any of their respective Affiliates (each an "AFFECTED PERSON")
determines that the existence of or compliance with (i) any law or regulation or
any change therein or in the interpretation or application thereof, in each case
adopted, issued or occurring after the date hereof or (ii) any request,
guideline or directive from any central bank or other Governmental Authority
(whether or not having the force of law) issued or occurring after the date of
this Agreement affects or would affect the amount of capital required or
expected to be maintained by such Affected Person and such Affected Person
determines that the amount of such capital is increased by or based upon the
existence of any commitment to make purchases of or otherwise to maintain the
investment in Pool Receivables related to this Agreement or any related
liquidity facility or credit enhancement facility and other commitments of the
same type, then, upon written demand by such Affected Person (with a copy to the
Insurer, the Agent and the applicable Purchaser Agent (if any)), the Seller
shall immediately pay to the Agent, for the account of such Affected Person,
from time to time as
12
* TEXT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
specified by such Affected Person, additional amounts sufficient to compensate
such Affected Person in the light of such circumstances, to the extent that such
Affected Person reasonably determines such increase in capital to be allocable
to the existence of any of such commitments or maintenance of its investment in
the Pool Receivables; PROVIDED that within 30 days of an Affected Person's
knowledge of any such circumstance such Affected Person shall notify the Seller
in writing of the same and whether such Affected Person will request that the
Seller indemnify it for such circumstance. A certificate as to such amounts
submitted to the Insurer, the Seller, the Agent and the applicable Purchaser
Agent (if any) by such Affected Person shall be conclusive and binding for all
purposes, absent manifest error.
(b) If, due to either (i) the introduction of or any change (other than
any change by way of imposition or increase of reserve requirements referred to
in SECTION 1.9) in or in the interpretation of any law or regulation or (ii)
compliance with any guideline or request from any central bank or other
Governmental Authority (whether or not having the force of law), there shall be
any increase in the cost to any Affected Person of agreeing to purchase or
purchasing, or maintaining the ownership of the related Participation(s) in
respect of which Discount is computed by reference to the Eurodollar Rate, then,
upon written demand by such Affected Person, the Seller shall immediately pay to
such Affected Person, from time to time as specified, additional amounts
sufficient to compensate such Affected Person for such increased costs; PROVIDED
that within 30 days of an Affected Person's knowledge of any such circumstance
such Affected Person shall notify the Seller in writing of the same and whether
such Affected Person will request that the Seller indemnify it for such
circumstance. A certificate as to such amounts submitted to the Seller, the
Insurer, the Agent and the applicable Purchaser Agent (if any), by such Affected
Person shall be conclusive and binding for all purposes, absent manifest error.
Section 1.9. ADDITIONAL DISCOUNT ON PORTIONS OF PARTICIPATION BEARING A
EURODOLLAR RATE. The Seller shall pay to any Affected Person, so long as such
Affected Person shall be required under regulations of the Board of Governors of
the Federal Reserve System to maintain reserves with respect to liabilities or
assets consisting of or including "Eurocurrency Liabilities", additional
Discount on the unpaid Investment of the applicable Portion of Investment during
each Yield Period in respect of which Discount is computed by reference to the
Eurodollar Rate, for such Yield Period, at a rate per annum equal at all times
during such Yield Period to the remainder obtained by subtracting (i) the
Eurodollar Rate for such Yield Period from (ii) the rate obtained by dividing
such Eurodollar Rate referred to in clause (i) above by that percentage equal to
100% minus the Eurodollar Rate Reserve Percentage for such Yield Period, payable
on each date on which Discount is payable on the applicable Portion of
Investment; PROVIDED that within 30 days of an Affected Person's knowledge of
any such circumstance such Affected Person shall notify the Seller of the same
and whether such Affected Person will request that the Seller indemnify it for
such circumstance. Such additional Discount shall be determined by the Affected
Person and notified to the Seller through such Affected Person (or its Purchaser
Agent or the Agent) within 30 days after any Discount payment is made with
respect to which such additional Discount is requested. A certificate as to such
additional Discount submitted to the
13
Seller by the Affected Person shall be conclusive and binding for all purposes,
absent manifest error.
Section 1.10. REQUIREMENTS OF LAW. In the event that any Affected
Person determines that the existence of or compliance with (i) any law or
regulation or any change therein or in the interpretation or application
thereof, in each case adopted, issued or occurring after the date hereof or (ii)
any request, guideline or directive from any central bank or other Governmental
Authority (whether or not having the force of law) issued or occurring after the
date of this Agreement:
(i) does or shall subject such Affected Person to any tax of any
kind whatsoever with respect to this Agreement, any increase in the
applicable Participation(s) or in the amount of Investment relating
thereto, or does or shall change the basis of taxation of payments to
such Affected Person on account of Collections, Discount or any other
amounts payable hereunder (excluding taxes imposed on the overall net
income of such Affected Person, and franchise taxes imposed on such
Affected Person, by the jurisdiction under the laws of which such
Affected Person is organized or a political subdivision thereof);
(ii) does or shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets
held by, or deposits or other liabilities in or for the account of,
purchases, advances or loans by, or other credit extended by, or any
other acquisition of funds by, any office of such Affected Person which
are not otherwise included in the determination of the Eurodollar Rate
or the Base Rate hereunder; or
(iii) does or shall impose on such Affected Person any other
condition;
and the result of any of the foregoing is (x) to increase the cost to such
Affected Person of acting as a Purchaser Agent, Insurer or Agent or of agreeing
to purchase or purchasing or maintaining the ownership of undivided ownership
interests with regard to the applicable Participation or any Portion of
Investment (or interests therein) in respect of which Discount is computed by
reference to the Eurodollar Rate or the Base Rate or (y) to reduce any amount
receivable hereunder (whether directly or indirectly) funded or maintained by
reference to the Eurodollar Rate or the Base Rate, then, in any such case, upon
written demand by such Affected Person the Seller shall pay such Affected Person
any additional amounts necessary to compensate such Affected Person for such
additional cost or reduced amount receivable. All such amounts shall be payable
as incurred. A certificate from such Affected Person to the Seller certifying,
in reasonably specific detail, the basis for, calculation of, and amount of such
additional costs or reduced amount receivable shall be conclusive in the absence
of manifest error; PROVIDED, however, that no Affected Person shall be required
to disclose any confidential or tax planning information in any such
certificate.
14
Section 1.11. INABILITY TO DETERMINE EURODOLLAR RATE. In the event that
any Purchaser Agent shall have determined prior to the first day of any Yield
Period for the Participation of its Purchaser (which determination shall be
conclusive and binding upon the parties hereto) by reason of circumstances
affecting the interbank Eurodollar market, either (a) dollar deposits in the
relevant amounts and for the relevant Yield Period are not available, (b)
adequate and reasonable means do not exist for ascertaining the Eurodollar Rate
for such Yield Period or (c) the Eurodollar Rate determined pursuant hereto does
not accurately reflect the cost (as conclusively determined by such Purchaser
Agent) to any Purchaser for which such Purchaser Agent acts as agent of
maintaining each such Portion of Investment of such Purchaser during such Yield
Period, such Purchaser Agent shall promptly give telephonic notice of such
determination, confirmed in writing, to the Seller and the Insurer prior to the
first day of such Yield Period. Upon delivery of such notice (a) no Portion of
Investment of such Purchaser shall be funded thereafter at the Bank Rate
determined by reference to the Eurodollar Rate, unless and until the applicable
Purchaser Agent shall have given notice to the Seller that the circumstances
giving rise to such determination no longer exist, and (b) with respect to any
outstanding Portions of Investment then funded at the Bank Rate determined by
reference to the Eurodollar Rate, such Bank Rate shall automatically be
converted to the Bank Rate determined by reference to the Base Rate at the
respective last days of the then-current Yield Periods relating to such Portions
of Investment.
Section 1.12. ADDITIONAL AND REPLACEMENT PURCHASERS, INCREASE IN
REVOLVING PURCHASE LIMIT. (a) The Seller shall have the right, at any time and
from time to time, with the prior written consent of the Agent and the Insurer
(the consent of the Insurer not to be unreasonably withheld), to add any entity
as a Purchaser hereunder (which addition may increase the Revolving Purchase
Limit if a Revolving Purchaser is added) or increase the Maximum Purchase Amount
of any existing Revolving Purchaser. Each such addition of a new Purchaser
hereunder shall be effected by delivery to the Insurer, the Seller, the
Servicer, the Agent and each Purchaser Agent, of a (i) Joinder Agreement
executed by the Seller, the Servicer, the Agent, such new Purchaser, its
Purchaser Agent (if different from the Purchaser) and the Insurer in
substantially the form of ANNEX D hereto and (ii) in the case of any new
Purchaser that is a Term Purchaser an opinion of counsel to such new Term
Purchaser as to tax matters in a form reasonably satisfactory to the Insurer.
Upon receipt of a Joinder Agreement, if such Joinder Agreement has been fully
executed and completed and is substantially in the form of ANNEX D, the Servicer
shall, not less than five (5) Business Days prior to the effectiveness of such
Joinder Agreement give prompt written notice to all Purchaser Agents, the Agent,
the Insurer and Purchasers as to (i) the name, identity and address for
receiving notices of the new Purchaser(s) and Purchaser Agent(s) becoming party
hereto, (ii) the Maximum Purchase Amount (if such Purchaser is a Revolving
Purchaser) of such new Purchaser, (iii) the change in the Revolving Purchase
Limit (if any) and (iv) the effective date of such Joinder Agreement.
Immediately upon the effectiveness of such Joinder Agreement, such additional
Purchaser shall purchase, by wire transfer of immediately available funds its
Participation and, if such Purchasers shall agree, a portion of the other
Purchasers' outstanding Portion of Investment. Effective with the payment of
such
15
amounts, such new Purchaser and its Purchaser Agent designated in the applicable
Joinder Agreement shall each become parties hereto.
(b) By executing and delivering a Joinder Agreement, each new Purchaser
and Purchaser Agent confirms to and agrees with the Insurer, the Agent and each
other Purchaser and Purchaser Agent party hereto as follows: (A) such new
Purchaser has received a copy of this Agreement, the Purchase and Sale
Agreement, the Insurance Agreement, and the Policy, together with copies of such
financial statements and other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Joinder Agreement; (B) such new Purchaser has made and will continue to make,
independently and without reliance upon the Insurer, the Agent, any Purchaser
Agent or any other Purchaser and based on such documents and information as it
shall deem appropriate at the time, its own credit decisions in taking or not
taking action under this Agreement; (C) such new Purchaser appoints and
authorizes the Control Party, Insurer and the Agent to take such action as agent
on its behalf and to exercise such powers under this Agreement as are delegated
to the Control Party, Insurer and the Agent by the terms hereof, together with
such powers as are reasonably incidental thereto; and (D) such new Purchaser and
its Purchaser Agent agrees that it will perform in accordance with their terms
all of the obligations which by the terms of this Agreement are required to be
performed by it as a Purchaser or Purchaser Agent.
(c) In addition to the foregoing, in the event that any Purchaser or
Purchaser Agent (i) does not consent to an amendment of clause (ii) of the
definition of Termination Date to which the Seller, the Servicer and the Insurer
have otherwise consented; or (ii) does not consent to any amendment or
modification of this Agreement agreed to by the Seller, the Servicer, the Agent
and the Control Party and the Majority Purchasers but which requires the consent
of such Purchaser, then, in any such event, the Seller shall have the right,
with the prior written consent of the Control Party and the Agent, to require
such Purchaser to assign its interests in its Participation and the Pool
Receivables and all of its rights and obligations under this Agreement to a
replacement Purchaser acceptable to the Control Party, the Agent and the Seller.
Any such assignment shall be without recourse, representation or warranty of any
kind on the part of the assigning Purchaser, except that such assignment is free
and clear of any Adverse Claims created by such Purchaser, and shall be
consummated pursuant to documentation reasonably satisfactory to the assignor
and assignee on not less than ten days' prior written notice, at a purchase
price equal to the sum of (w) the aggregate outstanding Investment of the
Purchaser being so replaced; (x) all accrued and unpaid Discount on such
Investment; (y) all accrued and unpaid Program Fees owed to or on behalf of such
Purchaser; and (z) all other accrued and unpaid expenses, indemnities and other
amounts owing under this Agreement to such Purchaser, including any Termination
Fees caused by the above-described assignment. Concurrently with any such
assignment, the Seller, the Servicer, such replacement Purchaser, its Purchaser
Agent (if different from the Purchaser) and the Insurer shall execute a Joinder
Agreement to evidence the terms and conditions under which such replacement
Purchaser has agreed to become a Purchaser hereunder.
16
CONFIDENTIAL TREATMENT
Section 1.13. [ * ]
Section 1.14. [ * ]
(a) [ * ]
(b) [ * ]
(c) [ * ]
17
* TEXT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
CONFIDENTIAL TREATMENT
[ * ]
Section 1.15. [ * ]
ARTICLE II.
REPRESENTATIONS AND WARRANTIES; COVENANTS;
TERMINATION EVENTS
Section 2.1. REPRESENTATIONS AND WARRANTIES; COVENANTS. Each of the
Seller, AFC and the Servicer hereby makes the representations and warranties,
and hereby agrees to perform and observe the covenants of such Person, set forth
in EXHIBITS III, IV and VII, respectively hereto.
Section 2.2. TERMINATION EVENTS. If any of the Termination Events set
forth in EXHIBIT V hereto shall occur, the Control Party may, by notice to the
Seller, each Purchaser Agent, the Agent and the Insurer, declare the Termination
Date to have occurred (in which case the Termination Date shall be deemed to
have occurred); PROVIDED that, automatically upon the occurrence of any event
(without any requirement for the passage of time or the giving of notice)
described in SUBSECTION (g), (h), (k) or (m) of EXHIBIT V, the Termination Date
shall occur. Upon any such declaration, the occurrence or the deemed occurrence
of the Termination Date, the Purchasers, the Purchaser Agents, the Insurer and
the Agent shall have, in addition to the rights and remedies which they may have
under this Agreement, all other rights and remedies provided after default under
the UCC and under other applicable law, which rights and remedies shall be
cumulative.
ARTICLE III.
INDEMNIFICATION
Section 3.1. INDEMNITIES BY THE SELLER. Without limiting any other
rights that the Agent, the Insurer, the Purchaser Agents or the Purchasers or
any of their respective Affiliates,
18
* TEXT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
employees, agents, successors, transferees or assigns (each, an "INDEMNIFIED
PARTY") may have hereunder or under applicable law, the Seller hereby agrees to
indemnify each Indemnified Party from and against any and all claims, damages,
expenses, losses and liabilities (including Attorney Costs) (all of the
foregoing being collectively referred to as "INDEMNIFIED AMOUNTS") arising out
of or resulting from this Agreement or other Transaction Documents (whether
directly or indirectly) or the use of proceeds of purchases or reinvestments or
the ownership of any Participation, or any interest therein, or in respect of
any Receivable or any Contract regardless of whether any such Indemnified
Amounts result from an Indemnified Party's negligence or strict liability or
other acts or omissions of an Indemnified Party, excluding, however, (a)
Indemnified Amounts to the extent resulting from gross negligence or willful
misconduct on the part of such Indemnified Party, (b) recourse (except as
otherwise specifically provided in this Agreement) for uncollectible Receivables
to be written off consistent with the Credit and Collection Policy, (c) any
overall net income taxes or franchise taxes imposed on such Indemnified Party by
the jurisdiction under the laws of which such Indemnified Party is organized or
any political subdivision thereof or (d) if the Insurer is the Indemnified
Party, Indemnified Amounts to the extent resulting, directly or indirectly, from
an Insurer Default. Without limiting or being limited by the foregoing, and
subject to the exclusions set forth in the preceding sentence, the Seller shall
pay on demand to each Indemnified Party any and all amounts necessary to
indemnify such Indemnified Party from and against any and all Indemnified
Amounts relating to or resulting from any of the following:
(i) the failure of any Receivable included in the calculation
of the Net Receivables Pool Balance as an Eligible Receivable to be an
Eligible Receivable, the failure of any information contained in a
Servicer Report or a Portfolio Certificate to be true and correct, or
the failure of any other information provided to any Purchaser, any
Purchaser Agent, the Insurer or the Agent with respect to Receivables
or this Agreement to be true and correct;
(ii) the failure of any representation or warranty or statement
made or deemed made by the Seller (or any of its officers) under or in
connection with this Agreement to have been true and correct in all
respects when made;
(iii) the failure by the Seller to comply with any applicable law,
rule or regulation with respect to any Pool Receivable or the related
Contract; or the failure of any Pool Receivable or the related Contract
to conform to any such applicable law, rule or regulation;
(iv) the failure (A) to vest in the Agent (for the benefit of
the Secured Parties) a valid and enforceable perfected undivided
percentage ownership interest, to the extent of the Aggregate
Participation, in the Receivables in, or purporting to be in, the
Receivables Pool and the Related Security and Collections with respect
thereto and (B) the failure to vest in the Agent (for the benefit of
the Secured Parties) a first priority perfected security
19
interest in the items described in SECTION 1.2(d), in each case, free
and clear of any Adverse Claim;
(v) the failure to have filed, or any delay in filing, financing
statements or other similar instruments or documents under the UCC of
any applicable jurisdiction or other applicable laws with respect to
any Receivables in, or purporting to be in, the Receivables Pool and
the Related Security and Collections in respect thereof, whether at the
time of any purchase or reinvestment or at any subsequent time;
(vi) any dispute, claim, offset or defense (other than discharge
in bankruptcy of the Obligor) of the Obligor to the payment of any
Receivable in, or purporting to be in, the Receivables Pool (including,
without limitation, a defense based on such Receivable or the related
Contract not being a legal, valid and binding obligation of such
Obligor enforceable against it in accordance with its terms), or any
other claim resulting from or relating to the transaction giving rise
to such Receivable or relating to collection activities with respect to
such Receivable (if such collection activities were performed by the
Seller or any of its Affiliates acting as Servicer or by any agent or
independent contractor retained by the Seller or any of its
Affiliates);
(vii) any failure of the Seller to perform its duties or
obligations in accordance with the provisions hereof or to perform its
duties or obligations under the Contracts;
(viii) any products liability or other claim, investigation,
litigation or proceeding arising out of or in connection with goods,
insurance or services that are the subject of or secure any Contract;
(ix) the commingling of Collections of Pool Receivables at any
time with other funds;
(x) any investigation, litigation or proceeding related to this
Agreement or the use of proceeds of purchases or reinvestments or the
ownership of any Participation or in respect of any Receivable, Related
Security or Contract;
(xi) any reduction in Investment as a result of the distribution
of Collections pursuant to SECTION 1.4(d), in the event that all or a
portion of such distributions shall thereafter be rescinded or
otherwise must be returned for any reason;
(xii) any tax or governmental fee or charge (other than any tax
upon or measured by net income or gross receipts), 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, which may arise by
reason of the purchase or ownership of any Participation, or other
interests in the Receivables Pool or in any Related Security or
Contract;
20
(xiii) the failure by the Seller or the Servicer to pay when due
any taxes payable by it, including without limitation, the franchise
taxes and sales, excise or personal property taxes payable in
connection with the Receivables;
(xiv) the failure by the Seller or the Servicer to be duly
qualified to do business, to be in good standing or to have filed
appropriate fictitious or assumed name registration documents in any
jurisdiction; or
(xv) the failure of any Deposit Account Bank to remit any amounts
held in its Deposit Account pursuant to the instructions of the
Servicer whether by reason of the exercise of setoff rights or
otherwise.
If for any reason the indemnification provided above in this SECTION
3.1 is unavailable to an Indemnified Party or is insufficient to hold such
Indemnified Party harmless, then the Seller shall contribute to such Indemnified
Party the amount otherwise payable by such Indemnified Party as a result of such
loss, claim, damage or liability to the maximum extent permitted under
applicable law.
The obligations of the Seller under this SECTION 3.1 are limited
recourse obligations payable solely from the Collections, the Receivables and
Related Security in accordance with the priority of payments set forth in
SECTION 1.4.
Section 3.2. INDEMNITIES BY AFC. Without limiting any other rights
that the Insurer, the Agent, any Purchaser or Purchaser Agent or any other
Indemnified Party may have hereunder under applicable law, AFC hereby agrees to
indemnify each Indemnified Party, forthwith on demand, from and against any and
all Indemnified Amounts, regardless of whether any such Indemnified Amounts
result from an Indemnified Party's negligence or strict liability or other acts
or omissions of an Indemnified Party, awarded against or incurred by any of them
arising out of or relating to:
(i) the failure of any Receivable included in the calculation of
the Net Receivables Pool Balance as an Eligible Receivable to be an
Eligible Receivable, the failure of any information contained in a
Servicer Report or a Portfolio Certificate to be true and correct, or
the failure of any other information provided (directly or indirectly)
by AFC or the Seller to the Purchasers, the Insurer, the Agent, or any
Purchaser Agent with respect to Receivables or this Agreement to be
true and correct;
(ii) any representation or warranty made by AFC under or in
connection with any Transaction Document in its capacity as Servicer or
any information or report delivered by or on behalf of AFC in its
capacity as Servicer pursuant hereto, which shall have been false,
incorrect or misleading in any material respect when made or deemed
made;
21
(iii) the failure by AFC, in its capacity as Servicer, to comply
with any applicable law, rule or regulation (including truth in
lending, fair credit billing, usury, fair credit reporting, equal
credit opportunity, fair debt collection practices and privacy) with
respect to any Pool Receivable or other related contract;
(iv) any failure of AFC to perform its duties, covenants and
obligations in accordance with the applicable provisions of this
Agreement;
(v) any dispute, claim, offset or defense (other than discharge
in bankruptcy of the Obligor) of the Obligor to the payment of any
Receivable in, or purporting to be in, the Receivables Pool resulting
from or relating to collection activities with respect to such
Receivable (if such collection activities were performed by the Seller
or any of its Affiliates acting as Servicer or by any agent or
independent contractor retained by the Seller or any of its
Affiliates);
(vi) the commingling of Collections of Pool Receivables at any
time with other funds; or
(vii) any investigation, litigation or proceeding related to AFC's
activities as Servicer under this Agreement.
If for any reason the indemnification provided above in this SECTION
3.2 is unavailable to an Indemnified Party or is insufficient to hold such
Indemnified Party harmless, then AFC shall contribute to such Indemnified Party
the amount otherwise payable by such Indemnified Party as a result of such loss,
claim, damage or liability to the maximum extent permitted under applicable law.
ARTICLE IV.
ADMINISTRATION AND COLLECTIONS
Section IV.1. APPOINTMENT OF SERVICER. (a) The servicing, administering
and collection of the Pool Receivables shall be conducted by the Person so
designated from time to time as Servicer in accordance with this SECTION 4.1.
Until the Control Party gives notice to the Seller, the Insurer and the Servicer
(in accordance with this SECTION 4.1) of the designation of a new Servicer, AFC
is hereby designated as, and hereby agrees to perform the duties and obligations
of, the Servicer pursuant to the terms hereof. Upon the occurrence of a
Termination Event, the Control Party may designate as Servicer any Person
(including the Agent) to succeed the Servicer or any successor Servicer, on the
condition in each case that any such Person so designated shall agree to perform
the duties and obligations of the Servicer pursuant to the terms hereof.
22
(b) Upon the designation of a successor Servicer as set forth in
SECTION 4.1(a) hereof, the Servicer agrees that it will terminate its activities
as Servicer hereunder in a manner which the Control Party determines will
facilitate the transition of the performance of such activities to the new
Servicer, and the Servicer shall cooperate with and assist such new Servicer.
Such cooperation shall include (without limitation) access to and transfer of
records and use by the new Servicer of all licenses, hardware or software
necessary or desirable to collect the Pool Receivables and the Related Security.
(c) The Servicer acknowledges that, in making its decision to execute
and deliver this Agreement, the Purchaser Agents, the Agent, the Insurer and the
Purchasers have relied on the Servicer's agreement to act as Servicer hereunder.
Accordingly, the Servicer agrees that it will not voluntarily resign as
Servicer.
(d) The Servicer may delegate its duties and obligations hereunder to
any subservicer (each, a "SUB-SERVICER"); provided that, in each such
delegation, (i) such Sub-Servicer shall agree in writing to perform the duties
and obligations of the Servicer pursuant to the terms hereof, (ii) the Servicer
shall remain primarily liable to the Purchasers, the Insurer, the Agent and the
Purchaser Agents for the performance of the duties and obligations so delegated,
(iii) the Seller, the Purchaser Agents, the Agent, the Insurer and the
Purchasers shall have the right to look solely to the Servicer for such
performance and (iv) the terms of any agreement with any Sub-Servicer shall
provide that the Control Party may terminate such agreement upon the termination
of the Servicer hereunder in accordance with SECTION 4.1(a) above by giving
notice of its desire to terminate such agreement to the Servicer (and the
Servicer shall provide appropriate notice to such Sub-Servicer); provided
further, no such delegation shall be effective without the prior written consent
of the Control Party.
Section 4.2. DUTIES OF SERVICER. (a) The Servicer shall take or cause
to be taken all such action as may be necessary or advisable to collect each
Pool Receivable from time to time, all in accordance with this Agreement,
accepted industry standards and all applicable laws, rules and regulations, with
reasonable care and diligence, and in accordance with the Credit and Collection
Policy. The Servicer shall set aside for the accounts of the Seller, the Insurer
and the Purchasers the amount of the Collections to which each is entitled in
accordance with SECTION 1.4. The Seller shall deliver to the Servicer and the
Servicer shall hold for the benefit of the Seller, the Insurer and (for the
benefit of the Purchasers and individually) the Agent and the Purchaser Agents
in accordance with their respective interests, all records and documents
(including without limitation computer tapes or disks) with respect to each Pool
Receivable. Notwithstanding anything to the contrary contained herein, the
Control Party may direct the Servicer to commence or settle any legal action to
enforce collection of any Pool Receivable or to foreclose upon or repossess any
Related Security; PROVIDED, HOWEVER, that no such direction may be given unless
a Termination Event has occurred.
(b) The Servicer's obligations hereunder shall terminate on the Final
Payout Date.
23
After such termination, the Servicer shall promptly deliver to the
Seller all books, records and related materials that the Seller previously
provided to the Servicer in connection with this Agreement.
Section 4.3. DEPOSIT ACCOUNTS; ESTABLISHMENT AND USE OF CERTAIN
ACCOUNTS.
(a) DEPOSIT ACCOUNTS. On or prior to the date hereof, the Servicer
agrees to transfer ownership and control of each Deposit Account to the Seller.
Seller has granted a valid security interest in each Deposit Account to the
Agent (for the benefit of the Secured Parties) pursuant to SECTION 1.2(d) and
shall take all actions reasonably requested by the Agent and the Insurer to
cause the security interest to be perfected under the applicable UCC.
(b) CASH RESERVE ACCOUNT. The Agent agrees to establish the Cash
Reserve Account on or before May 31, 2002. The Cash Reserve Account shall be
used to hold the Cash Reserve and for such other purposes described in the
Transaction Documents.
(c) LIQUIDATION ACCOUNT. The Agent agrees to establish the Liquidation
Account on or before May 31, 2002. The Liquidation Account shall be used to
receive Collections from the Deposit Accounts pursuant to SECTION 1.4(b) and to
hold amounts set aside for the Purchasers, the Insurer and (if the Servicer is
not AFC or an Affiliate of AFC) the Servicer out of the Collections of Pool
Receivables prior to the applicable Settlement Dates and for such other purposes
described in the Transaction Documents. No funds other than those transferred in
accordance with SECTION 1.4 shall be intentionally transferred into the
Liquidation Account.
(d) PERMITTED INVESTMENTS. Any amounts in the Liquidation Account or
the Cash Reserve Account, as the case may be, may be invested by the Liquidation
Account Bank or the Cash Reserve Account Bank, respectively, at the Agent's
direction, in Permitted Investments, so long as the Agent's interest (for the
benefit of the Secured Parties) in such Permitted Investments is perfected in a
manner satisfactory to the Agent and the Insurer and such Permitted Investments
are subject to no Adverse Claims other than those of the Agent provided
hereunder.
(e) CONTROL OF ACCOUNTS. The Agent may (with notice to the Control
Party) and shall (at the direction of the Control Party) following any
Termination Event (or an Unmatured Termination Event of the type described in
PARAGRAPH (g) of EXHIBIT V) at any time give notice to any Deposit Account Bank
that the Agent is exercising its rights under the applicable Deposit Account
Agreement to do any or all of the following: (i) to have the exclusive ownership
and control of such Deposit Account transferred to the Agent and to exercise
exclusive dominion and control over the funds deposited therein and (ii) to take
any or all other actions permitted under the applicable Deposit Account
Agreement. The Seller hereby agrees that if the Agent at any time takes any
action set forth in the preceding sentence, the Agent shall have exclusive
control of the proceeds (including Collections) of all Pool Receivables and the
Seller hereby further agrees to take any other action that the Agent may
reasonably request to transfer such control. Any proceeds of Pool Receivables
received by the Seller, the Servicer or AFC (as Servicer or
24
CONFIDENTIAL TREATMENT
otherwise), thereafter shall be sent immediately to an account designated by the
Agent and approved by the Control Party and held by the Agent for the benefit of
the Secured Parties.
(f) LOCATION OF LIQUIDATION ACCOUNT AND CASH RESERVE ACCOUNT. [ * ],
the Agent shall promptly establish a new Liquidation Account and a new Cash
Reserve Account at a financial institution which is rated at least A-1+ by S&P
[ * ].
Section 4.4. ENFORCEMENT RIGHTS. (a) At any time following the
occurrence of a Termination Event:
(i) the Control Party may (and if the Control Party is the
Majority Purchasers, with the consent of the Agent) direct the Obligors
that payment of all amounts payable under any Pool Receivable be made
directly to the Agent or its designee (for the benefit of the Secured
Parties);
(ii) the Control Party may (and if the Control Party is the
Majority Purchasers, with the consent of the Agent) instruct the Seller
or the Servicer to give notice of the Agent's interest (for the benefit
of the Secured Parties) in Pool Receivables to each Obligor, which
notice shall direct that payments be made directly to the Agent or its
designee (for the benefit of the Secured Parties), and upon such
instruction from the Control Party, the Seller or the Servicer, as
applicable, shall give such notice at the expense of the Seller;
PROVIDED, that if the Seller or the Servicer fails to so notify each
Obligor, the Control Party or the Agent may so notify the Obligors; and
(iii) the Control Party may (and if the Control Party is the
Majority Purchasers, with the consent of the Agent) request the Seller
or the Servicer to, and upon such request the Seller or the Servicer,
as applicable, shall, (A) assemble all of the records necessary or
desirable to collect the Pool Receivables and the Related Security, and
transfer or license to any new Servicer the use of all software
necessary or desirable to collect the Pool Receivables and the Related
Security, and make the same available to the Agent or its designee at a
place selected by the Control Party (or if the Control Party is the
Majority Purchasers, the Agent) and (B) segregate all cash, checks and
other instruments received by it from time to time constituting
Collections with respect to the Pool Receivables in a manner acceptable
to the Control Party (or if the Control Party is the Majority
Purchasers, the Agent) and, promptly upon receipt, remit all such cash,
checks and instruments, duly endorsed or with duly executed instruments
of transfer, to the Agent or its designee (for the benefit of the
Secured Parties).
25
* TEXT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
CONFIDENTIAL TREATMENT
(b) The Seller hereby authorizes the Control Party (or if the Control
Party is the Majority Purchasers, the Agent) (for the benefit of the Secured
Parties), and irrevocably appoints the Control Party (or if the Control Party is
the Majority Purchasers, the Agent) (acting on behalf of the Secured Parties) as
its attorney-in-fact with full power of substitution and with full authority in
the place and stead of the Seller, which appointment is coupled with an
interest, to take any and all steps in the name of the Seller and on behalf of
the Seller necessary or desirable, in the determination of the Control Party (or
if the Control Party is the Majority Purchasers, the Agent), to collect any and
all amounts or portions thereof due under any and all Pool Receivables or
Related Security, including, without limitation, endorsing the name of the
Seller on checks and other instruments representing Collections and enforcing
such Pool Receivables, Related Security and the related Contracts. The Control
Party (or if the Control Party is the Majority Purchasers, the Agent) shall only
exercise the powers conferred by this SUBSECTION (b) after the occurrence of a
Termination Event. Notwithstanding anything to the contrary contained in this
SUBSECTION (b), none of the powers conferred upon such attorney-in-fact pursuant
to the immediately preceding sentence shall subject such attorney-in-fact to any
liability if any action taken by it shall prove to be inadequate or invalid, nor
shall they confer any obligations upon such attorney-in-fact in any manner
whatsoever.
Section 4.5. RESPONSIBILITIES OF THE SELLER. Anything herein to the
contrary notwithstanding, the Seller shall (i) perform all of its obligations,
if any, under the Contracts related to the Pool Receivables to the same extent
as if interests in such Pool Receivables had not been transferred hereunder, and
the exercise by the Agent, the Insurer, any Purchaser or any Purchaser Agent of
its rights hereunder shall not relieve the Seller from such obligations and (ii)
pay when due any taxes, including, without limitation, any sales taxes payable
in connection with the Pool Receivables and their creation and satisfaction. The
Agent, the Insurer, the Purchaser Agents and the Purchasers shall not have any
obligation or liability with respect to any Pool Receivable, any Related
Security or any related Contract, nor shall any of them be obligated to perform
any of the obligations of the Seller or AFC under any of the foregoing.
Section 4.6. SERVICING FEE. The Servicer shall be paid a fee, through
distributions contemplated by SECTION 1.4, equal to (a) at any time AFC or an
Affiliate of AFC is the Servicer, [ * ] and (b) at any time a Person other
than AFC or an Affiliate of AFC is the Servicer, the amount set forth in clause
(a) above or such other amount as the Control Party and such Servicer shall
agree. The Servicing Fee shall not be payable to the extent funds are not
available to pay the Servicing Fee pursuant to SECTION 1.4.
ARTICLE V.
THE AGENTS
26
* TEXT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Section V.1. APPOINTMENT AND AUTHORIZATION. The Insurer and each
Purchaser and Purchaser Agent (including each Purchaser and Purchaser Agent that
may from time to time become a party hereto) hereby irrevocably designates and
appoints BMO Nesbitt Burns Corp. the "Agent" hereunder and authorizes the Agent
to take such actions and to exercise such powers as are delegated to the Agent
hereby and to exercise such other powers as are reasonably incidental thereto.
The Agent shall hold, in its name, for the benefit of the Secured Parties,
amounts on deposit in the Liquidation Account and Cash Reserve Account. The
Agent shall not have any duties other than those expressly set forth herein or
any fiduciary relationship with any Indemnified Party, and no implied
obligations or liabilities shall be read into this Agreement or any other
Transaction Document or otherwise exist, against the Agent. The Agent does not
assume, nor shall it be deemed to have assumed, any obligation to, or
relationship of trust or agency with, the Seller or Servicer. Notwithstanding
any provision of this Agreement or any other Transaction Document to the
contrary, in no event shall the Agent ever be required to take any action which
exposes the Agent to personal liability or which is contrary to the provision of
any Transaction Document or applicable law.
(a) Each Purchaser hereby irrevocably designates and appoints the
respective institution identified as the Purchaser Agent for such Purchaser on
the signature pages hereto or in any agreement pursuant to which such Purchaser
becomes a party hereto, and each authorizes such Purchaser Agent to take such
action on its behalf under the provisions of this Agreement and to exercise such
powers and perform such duties as are expressly delegated to such Purchaser
Agent by the terms of this Agreement, if any, together with such other powers as
are reasonably incidental thereto. Notwithstanding any provision to the contrary
elsewhere in this Agreement, no Purchaser Agent shall have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with the Insurer, any Purchaser or other Purchaser Agent or the
Agent, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities on the part of such Purchaser Agent shall be read
into this Agreement or otherwise exist against such Purchaser Agent.
(b) Except as otherwise specifically provided in this Agreement, the
provisions of this ARTICLE V are solely for the benefit of the Purchaser Agents,
the Insurer, the Agent and the Purchasers, and none of the Seller or Servicer
shall have any rights as a third-party beneficiary or otherwise under any of the
provisions of this ARTICLE V, except that this ARTICLE V shall not affect any
obligations which any Purchaser Agent, the Insurer, the Agent or any Purchaser
may have to the Seller or the Servicer under the other provisions of this
Agreement. Furthermore, no Purchaser shall have any rights as a third-party
beneficiary or otherwise under any of the provisions hereof in respect of a
Purchaser Agent which is not the Purchaser Agent for such Purchaser.
(c) In performing its functions and duties hereunder, the Agent shall
act solely as the agent of the Secured Parties, and the Agent does not assume
nor shall be deemed to have assumed any obligation or relationship of trust or
agency with or for the Seller or Servicer or any of their successors and
assigns. In performing its functions and duties hereunder, each Purchaser
27
Agent shall act solely as the agent of its respective Purchasers and does not
assume nor shall be deemed to have assumed any obligation or relationship of
trust or agency with or for the Seller, the Servicer, the Insurer, any other
Purchaser, any other Purchaser Agent or the Agent, or any of their respective
successors and assigns.
Section 5.2. DELEGATION OF DUTIES. The Agent may, with the prior
written consent of the Control Party, execute any of its duties through agents
or attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible to the
Purchaser Agents, the Insurer or any Purchaser for the negligence or misconduct
of any agents or attorneys-in-fact selected by it with reasonable care.
Section 5.3. EXCULPATORY PROVISIONS. None of the Purchaser Agents, the
Agent or any of their directors, officers, agents or employees shall be liable
for any action taken or omitted (i) with the consent or at the direction of the
Control Party (or in the case of any Purchaser Agent, the Purchaser relating to
such Purchaser Agent) or (ii) in the absence of such Person's gross negligence
or willful misconduct. The Agent shall not be responsible to any Purchaser, the
Insurer or Purchaser Agent for (i) any recitals, representations, warranties or
other statements made by the Seller, Servicer, the Originator or any of their
Affiliates, (ii) the value, validity, effectiveness, genuineness, enforceability
or sufficiency of any Transaction Document, (iii) any failure of the Seller, the
Servicer, the Originator or any of their Affiliates to perform any obligation it
may have under any Transaction Document to which it is a party or (iv) the
satisfaction of any condition specified in EXHIBIT II. The Agent shall not have
any obligation to the Insurer, any Purchaser or any Purchaser Agent to ascertain
or inquire about the observance or performance of any agreement contained in any
Transaction Document or to inspect the properties, books or records of the
Seller, Servicer, the Originator or any of their Affiliates.
Section 5.4. RELIANCE BY AGENTS. Each Purchaser Agent and the Agent
shall in all cases be entitled to rely, and shall be fully protected in relying,
upon any document or other writing or conversation believed by it to be genuine
and correct and to have been signed, sent or made by the proper Person and upon
advice and statements of legal counsel (including counsel to the Seller, Insurer
or Servicer), independent accountants and other experts selected by the Agent or
any such Purchaser Agent. Each Purchaser Agent and the Agent shall in all cases
be fully justified in failing or refusing to take any action under any
Transaction Document unless it shall first receive such advice or concurrence of
the Control Party (or in the case of any Purchaser Agent, the Purchaser relating
to such Purchaser Agent) and it shall first be indemnified to its satisfaction
by the Control Party against any and all liability and expense which may be
incurred by reason of taking or continuing to take any such action.
(a) With regard to the Purchasers and the Purchaser Agents, the Agent
shall in all cases be fully protected in acting, or in refraining from acting,
under this Agreement in accordance with a request of the Control Party, the
Insurer, the Purchasers and the Purchaser Agents, and such request and any
action taken or failure to act pursuant thereto shall be binding upon all
Purchasers, the Insurer, the Agent and Purchaser Agents.
28
(b) Purchasers that have a common Purchaser Agent and that have a
majority of the Investment of all such related Purchasers shall be entitled to
request or direct the related Purchaser Agent to take action, or refrain from
taking action, under this Agreement on behalf of such Purchasers. With regard to
the Purchasers and the Purchaser Agents, such Purchaser Agent shall in all cases
be fully protected in acting, or in refraining from acting, under this Agreement
in accordance with a request of such Majority Purchasers, and such request and
any action taken or failure to act pursuant thereto shall be binding upon all of
such Purchaser Agent's related Purchasers.
(c) Unless otherwise advised in writing by a Purchaser Agent or by any
Purchaser on whose behalf such Purchaser Agent is purportedly acting, each party
to this Agreement may assume that (i) such Purchaser Agent is acting for the
benefit of each of the Purchasers for which such Purchaser Agent is identified
herein (or in any Joinder Agreement or assignment agreement) as being the
Purchaser Agent, as well as for the benefit of each assignee or other transferee
from any such Person, and (ii) each action taken by such Purchaser Agent has
been duly authorized and approved by all necessary action on the part of the
Purchasers on whose behalf it is purportedly acting. Each Purchaser Agent and
its Purchaser(s) shall agree amongst themselves as to the circumstances and
procedures for removal, resignation and replacement of such Purchaser Agent.
Section 5.5. NOTICE OF TERMINATION DATE. Neither any Purchaser Agent
nor the Agent shall be deemed to have knowledge or notice of the occurrence of
any Termination Event or Unmatured Termination Event unless such Person has
received notice from any Purchaser, Purchaser Agent, the Insurer, the Servicer
or the Seller stating that a Termination Event or Unmatured Termination Event
has occurred hereunder and describing such Termination Event or Unmatured
Termination Event. If the Agent receives such a notice, it shall promptly give
notice thereof to the Insurer and each Purchaser Agent whereupon each such
Purchaser Agent shall promptly give notice thereof to its Purchasers. If a
Purchaser Agent receives such a notice (other than from the Agent), it shall
promptly give notice thereof to the Agent. The Agent may take such action
concerning a Termination Event or Unmatured Termination Event as may be directed
by the Control Party (unless the Control Party is the Majority Purchasers and
such action otherwise requires the consent of all Purchasers), but until the
Agent receives such directions (if the Control Party is the Majority
Purchasers), the Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, as the Agent deems advisable and in the best
interests of the Secured Parties.
Section 5.6. NON-RELIANCE ON AGENT, PURCHASER AGENTS AND OTHER
PURCHASERS. Each Purchaser and the Insurer expressly acknowledges that none of
the Agent, the Purchaser Agents nor any of their respective officers, directors,
employees, agents, attorneys-in-fact or Affiliates has made any representations
or warranties to it and that no act by the Agent, or any Purchaser Agent
hereafter taken, including any review of the affairs of the Seller, Servicer or
the Originator, shall be deemed to constitute any representation or warranty by
the Agent or such Purchaser Agent, as applicable. Each Purchaser and the Insurer
represents and warrants to the Agent and
29
the Purchaser Agents that, independently and without reliance upon the Agent,
Purchaser Agents or any other Purchaser and based on such documents and
information as it has deemed appropriate, it has made and will continue to make
its own appraisal of and investigation into the business, operations, property,
prospects, financial and other conditions and creditworthiness of the Seller,
Servicer or the Originator, and the Receivables and its own decision to enter
into this Agreement and to take, or omit, action under any Transaction Document.
Except for items specifically required to be delivered hereunder, the Agent
shall not have any duty or responsibility to provide any Purchaser Agent with
any information concerning the Seller, Servicer or the Originator or any of
their Affiliates or the Receivables that comes into the possession of the Agent
or any of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates.
Section 5.7. AGENT, PURCHASER AGENTS AND PURCHASERS. Each of the
Purchasers, the Agent, the Purchaser Agents and their Affiliates may extend
credit to, accept deposits from and generally engage in any kind of banking,
trust, debt or other business with the Seller, ADESA, ALLETE, Servicer or the
Originator or any of their Affiliates. With respect to the acquisition of the
Eligible Receivables pursuant to this Agreement, any of the Purchaser Agents and
the Agent shall, to the extent they become Purchasers hereunder, have the same
rights and powers under this Agreement as any Purchaser and may exercise the
same as though it were not such an agent, and the terms "Purchaser" and
"Purchasers" shall, in such case, include such Purchaser Agent or the Agent in
their individual capacities.
Section 5.8. INDEMNIFICATION. Each Purchaser shall indemnify and hold
harmless the Agent (but solely in its capacity as Agent) and its officers,
directors, employees, representatives and agents (to the extent not reimbursed
by the Seller or Servicer and without limiting the obligation of the Seller or
Servicer to do so), ratably in accordance with their respective Investment from
and against any and all liabilities, obligations, losses, damages, penalties,
judgments, settlements, costs, expenses and disbursements of any kind whatsoever
(including in connection with any investigative or threatened proceeding,
whether or not the Agent or such Person shall be designated a party thereto)
that may at any time be imposed on, incurred by or asserted against the Agent or
such Person as a result of, or related to, any of the transactions contemplated
by the Transaction Documents or the execution, delivery or performance of the
Transaction Documents or any other document furnished in connection therewith
(but excluding any such liabilities, obligations, losses, damages, penalties,
judgments, settlements, costs, expenses or disbursements resulting solely from
the gross negligence or willful misconduct of the Agent or such Person as
finally determined by a court of competent jurisdiction); PROVIDED, that in the
case of each Purchaser that is a commercial paper conduit, such indemnity shall
be provided solely to the extent of amounts received by such Purchaser under
this Agreement which exceed the amounts required to repay such Purchaser's
outstanding commercial paper. The obligations of any Note Issuer under this
SECTION 5.8 shall be subject to the restrictions of SECTION 6.5.
30
Section 5.9. SUCCESSOR AGENT. The Agent may, upon at least thirty (30)
days notice to the Seller, the Insurer and each Purchaser and Purchaser Agent,
resign as Agent. Such resignation shall not become effective until a successor
Agent is appointed by the Control Party and has accepted such appointment. Upon
such acceptance of its appointment as Agent hereunder by a successor Agent, such
successor Agent shall succeed to and become vested with all the rights and
duties of the retiring Agent, and the retiring Agent shall be discharged from
its duties and obligations under the Transaction Documents. After any retiring
Agent's resignation hereunder, the provisions of SECTIONS 3.1 and 3.2 and this
ARTICLE V shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was the Agent.
ARTICLE VI.
MISCELLANEOUS
Section 6.1. AMENDMENTS, ETC. No amendment or waiver of any provision
of this Agreement or consent to any departure by the Seller or Servicer
therefrom shall be effective unless in a writing signed by the Agent, the
Control Party, the Majority Purchasers, and, in the case of any amendment, by
the Seller and the Servicer and then such amendment, waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given; PROVIDED, HOWEVER, that no such amendment or waiver shall materially
adversely affect the Insurer without the prior written consent of the Insurer;
PROVIDED, FURTHER, that (i) other than an amendment to extend the scheduled
Termination Date and/or the applicable scheduled Purchaser Termination Date, no
amendment shall be effective unless each Note Issuer that is a Purchaser (or the
Agent or applicable Purchaser Agent on its behalf) shall have received written
confirmation by the Rating Agencies that such amendment shall not cause the
rating on the then outstanding Notes of such Note Issuer to be downgraded or
withdrawn; (ii) no amendment shall be effective which would reduce the amount of
Investment or Discount, or fees payable to any Purchaser or amounts payable to
the Insurer hereunder, or delay any scheduled date for payment thereof
(including any scheduled occurrence of the Termination Date) absent the prior
written consent of the Insurer or such Purchaser (as applicable); (iii) no
increase in a Revolving Purchaser's Maximum Purchase Amount shall be effective
without the prior written consent of such Revolving Purchaser, and no increase
in the sum of the aggregate of the Investment of all Term Purchasers and the
Revolving Purchase Limit above the Maximum Insured Amount shall be effective
without the prior written consent of the Insurer; (iv) no amendment or waiver
which would release the Insurer from any of its obligations under the Policy, or
delay any scheduled payment date for payment thereunder, shall be effective
without prior written consent of each Purchaser; (v) no amendments or
modifications to any required recourse or reserves hereunder for uncollectible
Receivables may be modified without the prior written consent of the Insurer;
and (vi) no amendments to this Section 6.1 or to the definitions of Majority
Purchasers or Control Party shall be effective without the prior written consent
of all Purchasers and the Insurer. No failure on the part of the Insurer, the
Agent, any Purchaser, or any Purchaser Agent to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor
31
CONFIDENTIAL TREATMENT
shall any single or partial exercise of any right hereunder preclude any other
or further exercise thereof or the exercise of any other right.
Section 6.2. NOTICES, ETC. All notices and other communications
hereunder shall, unless otherwise stated herein, be in writing (which shall
include facsimile and electronic mail communication) and sent or delivered, to
each party hereto, at its address set forth under its name on the signature
pages hereof or at such other address as shall be designated by such party in a
written notice to the other parties hereto. Notices and communications by
facsimile or electronic mail shall be effective when sent (and shall, unless
such delivery is waived by the recipient by electronic mail or other means, be
followed by hard copy sent by first class mail), and notices and communications
sent by other means shall be effective when received.
Section 6.3. ASSIGNABILITY. (a) This Agreement and any Purchaser's
rights and obligations herein (including ownership of its Participation) shall
be assignable, in whole or in part, by such Purchaser and its successors and
assigns with the prior written consent of the Seller, the Agent [ * ] ;
PROVIDED, HOWEVER, that such consent shall not be unreasonably withheld; and
PROVIDED, FURTHER, that no such consent shall be required if the assignment is
made to (i) any Affiliate of such Purchaser, (ii) any Liquidity Bank (or any
Person who upon such assignment would be a Liquidity Bank) of such Purchaser or
(iii) other Program Support Provider (or any Person who upon such assignment
would be a Program Support Provider) of such Purchaser. Each assignor may, in
connection with the assignment, disclose to the applicable assignee any
information relating to the Seller or the Pool Receivables furnished to such
assignor by or on behalf of the Seller, [ * ], the Agent, the Purchasers or the
Purchaser Agents.
Upon the assignment by a Purchaser in accordance with this SECTION 6.3,
the assignee receiving such assignment shall have all of the rights of such
Purchaser with respect to the Transaction Documents and the Investment (or such
portion thereof as has been assigned).
(b) Each Purchaser may at any time grant to one or more banks or other
institutions (each a "LIQUIDITY BANK") party to a Liquidity Agreement or to any
other Program Support Provider participating interests or security interests in
its Participation. In the event of any such grant by a Purchaser of a
participating interest to a Liquidity Bank or other Program Support Provider,
the Purchaser shall remain responsible for the performance of its obligations
hereunder. The Seller agrees that each Liquidity Bank or other Program Support
Provider shall be entitled to the benefits of SECTIONS 1.8, 1.9 and 1.10.
(c) This Agreement and the rights and obligations of any Purchaser
Agent hereunder shall be assignable, in whole or in part, by such Purchaser
Agent and its successors and assigns; PROVIDED, HOWEVER, that if such assignment
is to any Person that is not an Affiliate of the assigning Purchaser Agent, such
Purchaser Agent must receive the prior written consent of the Agent, [ * ] and
the Seller (which consent shall not be unreasonably withheld).
32
* TEXT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
CONFIDENTIAL TREATMENT
(d) Except as provided in SECTION 4.1(d), neither the Seller nor the
Servicer may assign its rights or delegate its obligations hereunder or any
interest herein without the prior written consent of [ * ], the Agent and
the Majority Purchasers.
(e) Without limiting any other rights that may be available under
applicable law, the rights of any Purchaser may be enforced through it or by its
Purchaser Agent or its other agents.
(f) [ * ].
Section 6.4. COSTS, EXPENSES AND TAXES. (a) In addition to the rights
of indemnification granted under SECTION 3.1 hereof, the Seller agrees to pay on
demand all reasonable costs and expenses in connection with the preparation,
execution, delivery and administration (including periodic auditing of Pool
Receivables) of this Agreement, the Liquidity Agreement, the Insurance
Agreement, the Purchase and Sale Agreement and the other documents and
agreements to be delivered hereunder or in connection herewith, including all
reasonable costs and expenses relating to the amending, amending and restating,
modifying or supplementing of this Agreement, the Liquidity Agreement, the
Insurance Agreement, the Purchase and Sale Agreement and the other documents and
agreements to be delivered hereunder or in connection herewith and the waiving
of any provisions thereof, and including in all cases, without limitation,
Attorney Costs for the Agent, each Purchaser, each Program Support Provider,
each Purchaser Agent, the Insurer and their respective Affiliates and agents
with respect thereto and with respect to advising the Agent, the Purchaser, each
Program Support Provider, the Insurer and their respective Affiliates and agents
as to their rights and remedies under this Agreement and the other Transaction
Documents (PROVIDED that unless a Termination Event or Unmatured Termination
Event shall have occurred, the costs and expenses payable in connection with the
administration of the Transaction Documents (excluding any costs and expenses in
connection with any amendment, amendment and restatement, modification,
supplement or waiver and any costs and expenses in connection with enforcement)
in any year shall not exceed $25,000), and all reasonable costs and expenses, if
any (including Attorney Costs), of each Purchaser Agent, each Purchaser, each
Program Support Provider, the Insurer, the Agent and their respective Affiliates
and agents, in connection with the enforcement of this Agreement and the other
Transaction Documents.
(b) In addition, the Seller shall pay on demand any and all stamp and
other taxes and fees payable in connection with the execution, delivery, filing
and recording of this Agreement or the other documents or agreements to be
delivered hereunder, and agrees to save each Indemnified Party harmless from and
against any liabilities with respect to or resulting from any delay in paying or
omission to pay such taxes and fees.
33
* TEXT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Section 6.5. NO PROCEEDINGS; LIMITATION ON PAYMENTS. (a) Each of the
Seller, the Servicer, the Agent, the Insurer, the Purchaser Agents, the
Purchasers, each assignee of a Participation or any interest therein, and each
Person which enters into a commitment to purchase or does purchase a
Participation or interests therein, hereby covenants and agrees that it will not
institute against, or join any other Person in instituting against, any Note
Issuer, any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceeding, or other proceeding under any federal or state bankruptcy or similar
law, for one year and one day after the latest maturing Note issued by any such
Note Issuer is paid in full.
(b) Notwithstanding any provisions contained in this Agreement to the
contrary, no Note Issuer shall, nor shall be obligated to, pay any amount
pursuant to this Agreement unless (i) such Note Issuer has excess cash flow from
operations or has received funds with respect to such obligation which may be
used to make such payment and which funds or excess cash flow are not required
to repay the Notes when due and (ii) each "Participation" owned by such Note
Issuer pursuant to any receivables purchase agreement (including this Agreement)
is less than or equal to 100%. Any amounts which a Note Issuer does not pay
pursuant to the operation of the preceding sentence shall not constitute a claim
against such Note Issuer for any such insufficiency unless and until the
conditions described in clauses (i) and (ii) of the preceding sentence are
satisfied. Nothing in this subsection (b) shall be construed to forgive or
cancel any obligations of such Note Issuer hereunder.
Section 6.6. CONFIDENTIALITY. Unless otherwise required by applicable
law or already known by the general public or the third party to which it is
disclosed, the Seller agrees to maintain the confidentiality of this Agreement
and the other Transaction Documents (and all drafts thereof) in communications
with third parties and otherwise; PROVIDED that this Agreement may be disclosed
to (a) third parties to the extent such disclosure is made pursuant to a written
agreement of confidentiality in form and substance reasonably satisfactory to
the Agent, and (b) the Seller's legal counsel and auditors if they agree to hold
it confidential.
Section 6.7. GOVERNING LAW AND JURISDICTION. (a) THIS AGREEMENT SHALL
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
INDIANA (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF),
EXCEPT TO THE EXTENT THAT THE PERFECTION (OR THE EFFECT OF PERFECTION OR
NON-PERFECTION) OF THE INTERESTS OF THE PURCHASERS AND/OR THE INSURER IN THE
POOL RECEIVABLES AND THE OTHER ITEMS DESCRIBED IN SECTION 1.2(d) IS GOVERNED BY
THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF INDIANA.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY
BE BROUGHT IN THE COURTS OF THE STATE OF ILLINOIS COOK COUNTY AND CHICAGO OR NEW
YORK NEW YORK COUNTY, NEW YORK CITY OR OF THE UNITED STATES FOR THE NORTHERN
DISTRICT OF ILLINOIS OR THE SOUTHERN DISTRICT OF NEW YORK, AND BY EXECUTION AND
DELIVERY OF
34
THIS AGREEMENT, EACH OF THE PURCHASERS, THE INSURER, THE SELLER, THE SERVICER,
THE PURCHASER AGENTS AND THE AGENT CONSENTS, FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE
PURCHASERS, THE INSURER, THE SELLER, THE SERVICER, THE PURCHASER AGENTS AND THE
AGENT IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT PERMITTED BY LAW, ANY OBJECTION,
INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM
NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION
OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT
RELATED HERETO.
Section 6.8. EXECUTION IN COUNTERPARTS. This Agreement may be executed
in any number of counterparts, each of which when so executed shall be deemed to
be an original and all of which when taken together shall constitute one and the
same agreement.
Section 6.9. SURVIVAL OF TERMINATION. The provisions of SECTIONS 1.8,
1.9, 1.10, 3.1, 3.2, 6.4, 6.5, 6.6, 6.7, 6.10 and 6.13 shall survive any
termination of this Agreement.
Section 6.10. WAIVER OF JURY TRIAL. THE PURCHASERS, THE SELLER, THE
SERVICER, THE PURCHASER AGENTS, THE INSURER AND THE AGENT EACH WAIVE THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY
OF THE PARTIES AGAINST ANY OTHER PARTY OR PARTIES, WHETHER WITH RESPECT TO
CONTRACT CLAIMS, TORT CLAIMS OR OTHERWISE. THE PURCHASERS, THE SELLER, THE
SERVICER, THE PURCHASER AGENTS, THE INSURER AND THE AGENT EACH AGREE THAT ANY
SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY.
WITHOUT LIMITING THE FOREGOING, EACH OF THE PARTIES HERETO FURTHER AGREES THAT
ITS RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION
AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN
PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR ANY
PROVISION HEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT.
Section 6.11. ENTIRE AGREEMENT. This Agreement embodies the entire
agreement and understanding between the Purchasers, the Seller, the Insurer, the
Servicer, the Purchaser Agents and the Agent, and supersedes all prior or
contemporaneous agreements and understandings of such Persons, verbal or
written, relating to the subject matter hereof and thereof, except for any prior
arrangements made with respect to the payment by any Purchaser of (or any
35
CONFIDENTIAL TREATMENT
indemnification for) any fees, costs or expenses payable to or incurred (or to
be incurred) by or on behalf of the Seller, the Servicer and the Agent.
Section 6.12. HEADINGS. The captions and headings of this Agreement
and in any Exhibit hereto are for convenience of reference only and shall not
affect the interpretation hereof or thereof.
Section 6.13. LIABILITIES OF THE PURCHASERS. The obligations of each
Purchaser under this Agreement are solely the corporate obligations of such
Purchaser. No recourse shall be had for any obligation or claim arising out of
or based upon this Agreement against any stockholder, employee, officer,
director or incorporator of any Purchaser; and PROVIDED, HOWEVER, that this
SECTION 6.13 shall not relieve any such Person of any liability it might
otherwise have for its own gross negligence or willful misconduct. The
agreements provided in this SECTION 6.13 shall survive termination of this
Agreement.
Section 6.14. POLICY TERMINATION DATE. [ * ].
Section 6.15. TAX TREATMENT. The Participations shall be treated and
reported as indebtedness of the Seller for all income and franchise tax
purposes. The Seller, the Servicer, the Agent, the Insurer, and Fairway and each
Purchaser, by its agreement to make a purchase (and to make reinvestments, if
applicable) with regard to its Participation, agrees, and shall cause its
assignees to agree, to treat and report the Participations as indebtedness of
the Seller for all income and franchise tax purposes.
36
* TEXT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
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.
AFC FUNDING CORPORATION, as Seller
By: /s/ Curtis L. Phillips
----------------------------------------
Name: Curtis L. Phillps
Title: CFO & Treasurer
310 East 96th Street, Suite 310
Indianapolis, Indiana 46240
Attention: Curt Phillips
Telephone: 317-815-9645 ext. 2185
Facsimile: 317-815-8682
E-mail: cphillips@autofinance.com
[Notary]
AUTOMOTIVE FINANCE CORPORATION, as Servicer
By: /s/ Curtis L. Phillips
----------------------------------------
Name: Curtis L. Phillips
Title: CFO & Treasurer
310 East 96th Street, Suite 300
Indianapolis, Indiana 46240
Attention: Curt Phillips
Telephone: 317-815-9645 ext. 2185
Facsimile: 317-815-8682
E-mail: cphillips@autofinance.com
[Notary]
[Amended and Restated
S-1 Receivables Purchase Agreement]
CONFIDENTIAL TREATMENT
BMO NESBITT BURNS CORP., as Agent and as
Purchaser Agent for Fairway
By: /s/Jeffrey J. Phillips
----------------------------------------
Name: Jeffrey J. Phillips
Title: Executive Managing Director
By: /s/David J. Kucera
----------------------------------------
Name: David J. Kucera
Title: Managing Director
BMO NESBITT BURNS CORP.
115 S. LaSalle, 13th Floor West
Chicago, Illinois 60603
Attention: Conduit Administration
E-mail: fundingdesk@bmonb.com
Telephone: (312) 461-5640
Facsimile: (312) 293-4908
FAIRWAY FINANCE CORPORATION, as a Revolving
Purchaser
By: /s/Lori Gebron
----------------------------------------
Name: Lori Gebron
Title: Vice President
c/o Lord Securities Corp.
48 Wall Street, 27th Floor
New York, New York 10005
Attention: Dean Christiansen
Telephone: (212) 346-9008
Facsimile: (212) 346-9012
Maximum Purchase Amount: [ * ]
[ * ]
[Amended and Restated
S-2 Receivables Purchase Agreement]
* TEXT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
XL CAPITAL ASSURANCE INC., as Insurer
By: /s/Richard Pfaltzgraff
-----------------------------------------
Name: Richard Pfaltzgraff
Title: Managing Director
Richard Pfaltzgraff
Managing Director
XL Capital Assurance Inc.
250 Park Avenue - 19th Floor
New York, New York 10177
Telephone: (646) 435-5820
Email: rpfaltzgraff@xlserv.com
Reporting: surveillance@xlserv.com
[Amended and Restated
S-4 Receivables Purchase Agreement]
STATE OF INDIANA )
) SS
COUNTY OF MARION )
Before me the undersigned, a Notary Public in and for the said County
and State, personally appeared Curtis L. Phillips, an officer of AFC Funding
Corporation, personally known to me who acknowledged the execution of the
foregoing this 31st day of May, 2002.
/s/Francesca C. York My Commission Expires: 12/5/08
- ---------------------------- -----------------
Signature
Francesca C. York My County of Residence: Hamilton
- ---------------------------- ----------------
Printed Name
FRANCESCA C. YORK
NOTARY PUBLIC STATE OF INDIANA
HAMILTON COUNTY
MY COMMISSION EXP. DEC. 5, 2008
STATE OF INDIANA )
) SS
COUNTY OF MARION )
Before me the undersigned, a Notary Public in and for the said County
and State, personally appeared Curtis L. Phillips, an officer of Automotive
Finance Corporation, personally known to me who acknowledged the execution of
the foregoing this 31st day of May, 2002.
/s/Francesca C. York My Commission Expires: 12/5/08
- ---------------------------- -----------------
Signature
Francesca C. York My County of Residence: Hamilton
- ---------------------------- ----------------
Printed Name
FRANCESCA C. YORK
NOTARY PUBLIC STATE OF INDIANA
HAMILTON COUNTY
MY COMMISSION EXP. DEC. 5, 2008
[Amended and Restated
S-4 Receivables Purchase Agreement]
CONFIDENTIAL TREATMENT
EXHIBIT I
DEFINITIONS
As used in the Agreement (including its Exhibits), the following terms
shall have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined). Unless otherwise
indicated, all Section, Annex, Exhibit and Schedule references in this Exhibit
are to Sections of and Annexes, Exhibits and Schedules to the Agreement.
"ADESA" means ADESA Corporation, an Indiana corporation.
"ADVERSE CLAIM" means a lien, security interest or other
charge or encumbrance, or any other type of preferential arrangement, it being
understood that a lien, security interest or other charge or encumbrance, or any
other type of preferential arrangement, in favor of the Agent for the benefit of
the Secured Parties contemplated by the Agreement shall not constitute an
Adverse Claim.
"AFC" has the meaning set forth in the Preamble to this Agreement.
"AFFECTED PERSON" has the meaning set forth in SECTION 1.8.
"AFFILIATE" means, as to any Person, any other Person that,
directly or indirectly, is in control of, is controlled by or is under common
control with such Person or is a director or officer of such Person, except that
with respect to a Purchaser, Affiliate shall mean the holder(s) of its capital
stock.
"AGENT" has the meaning set forth in the preamble to the Agreement.
"AGGREGATE PARTICIPATION" means, at any time, the sum of the
Distribution Percentages of the Purchasers expressed as a percentage.
"AGREEMENT" shall have the meaning set forth in the preamble.
"ALLETE" means ALLETE, Inc., a Minnesota corporation.
"APPLICABLE MARGIN" means [ * ].
"ATTORNEY COSTS" means and includes all reasonable fees and
reasonable disbursements of any law firm or other external counsel, and all
reasonable disbursements of internal counsel.
[Amended and Restated
I-1 Receivables Purchase Agreement]
* TEXT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
"BANK RATE" for any Purchaser for any Yield Period for any Portion
of Investment means an interest rate PER ANNUM equal to the Applicable Margin
above the Eurodollar Rate for such Purchaser for such Yield Period; provided,
further, that in the case of
(a) any Yield Period on or after the first day of which the
applicable Purchaser Agent shall have been notified by a Liquidity
Bank or the related Purchaser that the introduction of or any
change in or in the interpretation of any law or regulation makes
it unlawful, or any central bank or other Governmental Authority
asserts that it is unlawful, for such Liquidity Bank or such
Purchaser to fund any Portion of Investment based on the Eurodollar
Rate set forth above (and such Liquidity Bank or such Purchaser, as
applicable, shall not have subsequently notified such Purchaser
Agent that such circumstances no longer exist),
(b) any Yield Period of one to (and including) 13 days, or
(c) any Yield Period as to which (i) the applicable Purchaser
Agent does not receive notice, by no later than 12:00 noon (Chicago
time) on (w) the second Business Day preceding the first day of
such Yield Period that the Seller desires that the related Portion
of Investment be funded at the CP Rate, or (x) the third Business
Day preceding the first day of such Yield Period that the Seller
desires that the related Portion of Investment be funded at the
Bank Rate, or (ii) the Seller has given the notice contemplated by
clause (w) of this CLAUSE (c) and the applicable Purchaser Agent
shall have notified the Seller that funding the related Portion of
Investment at the CP Rate is unacceptable to the applicable
Purchaser,
the "BANK RATE" for each such Yield Period shall be an interest rate per annum
equal to the Base Rate in effect on each day of such Yield Period.
Notwithstanding the foregoing, the "BANK RATE" for each day in a Yield Period
occurring during the continuance of a Termination Event shall be an interest
rate equal to 2% PER ANNUM above the Base Rate in effect on such day.
"BANKRUPTCY CODE" means the United States Bankruptcy Reform Act of
1978 (11U.S.C.ss. 101, ET SEQ.), as amended and in effect from time to time.
"BASE RATE" means for any Purchaser for any day, a fluctuating
interest rate per annum equal to the higher of: (a) the rate of interest most
recently announced by the applicable Reference Bank as its prime commercial rate
for loans made in Dollars in the United States or (b) 0.50% PER ANNUM above the
latest Federal Funds Rate. The rate referred to in CLAUSE (a) is not necessarily
intended to be the lowest rate of interest determined by the applicable
Reference Bank in connection with extensions of credit.
"BUSINESS DAY" means any day on which (i) (A) the Agent at its
branch office in Chicago, Illinois is open for business, (B) commercial banks in
New York City are not
[Amended and Restated
I-2 Receivables Purchase Agreement]
CONFIDENTIAL TREATMENT
authorized or required to be closed for business and (C) the Insurer in New York
City is open for business, and (ii) if this definition of "Business Day" is
utilized in connection with the Eurodollar Rate, dealings are carried out in the
London interbank market.
"BUYER'S FEES" means the fees paid by an Obligor to the auction
house in connection with a purchase of a vehicle by such dealer.
"CARRY COSTS" means with respect to any calendar month, the sum of
the amounts of the following items that accrued or were incurred during such
calendar month: (a) all Discount, (b) the Program Fee, (c) the Servicing Fee,
(d) the Premium and (e) all other expenses and fees of the Seller under the
Agreement.
"CASH RESERVE" means, at any time, an amount equal to [ * ].
"CASH RESERVE ACCOUNT" means that certain bank account numbered
[ * ] maintained at [ * ] and maintained for the benefit of the
Secured Parties.
"CASH RESERVE ACCOUNT BANK" means the bank holding the Cash Reserve
Account.
"CHANGE IN CONTROL" means
(a) ALLETE shall fail to own, directly or indirectly, at least
80% of the outstanding voting stock of ADESA; or
(b) AFC shall fail to own, free and clear of all Adverse
Claims, 100% of the outstanding shares of voting stock of the Seller,
except as otherwise provided by the Pledge Agreement; or
(c) Neither ADESA nor ALLETE shall own, directly or indirectly,
free and clear of all Adverse Claims, at least 80% of the outstanding
shares of voting stock of AFC, on a fully diluted basis.
"COLLATERAL BALANCE" means, at any time, the sum of the Net
Receivables Pool Balance on such day plus the amount on deposit in the
Liquidation Account (other than the amounts set aside pursuant SECTION
1.4(b)(i), SECTION 1.4(b)(ii) and SECTION 1.4(b)(iii) for the benefit of any
Purchaser, the Insurer and/or the Servicer).
"COLLECTIONS" means, with respect to any Pool Receivable, (a) all
funds which are received by the Seller, the Originator or the Servicer in
payment of any amounts owed in respect of such Receivable (including, without
limitation, principal payments, finance charges, interest
[Amended and Restated
I-3 Receivables Purchase Agreement]
* TEXT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
CONFIDENTIAL TREATMENT
and all other charges), or applied (or to be applied) to amounts owed in respect
of such Receivable (including, without limitation, insurance payments and net
proceeds of the sale or other disposition of vehicles or other collateral or
property of the related Obligor or any other Person directly or indirectly
liable for the payment of such Pool Receivable applied (or to be applied)
thereto), (b) all Collections deemed to have been received pursuant to SECTION
1.4(e) and (c) all other proceeds of such Receivable.
"COMPANY NOTE" has the meaning set forth in Section 3.2 of the
Purchase and Sale Agreement.
"CONTRACT" means, with respect to any Obligor, collectively, the
Dealer Note issued by such Obligor, or similar agreement between such Obligor
and AFC, any guaranty issued in connection therewith and each other agreement or
instrument executed by an Obligor pursuant to or in connection with any of the
foregoing.
"CONTROL PARTY" means, (a) [ * ] and the Agent; PROVIDED,
HOWEVER, that upon the occurrence of any Termination Event or Unmatured
Termination Event "Control Party" [ * ] and (b) upon the occurrence and
continuation of an Insurer Default or the Policy Termination Date the Majority
Purchasers.
"CP RATE" for any Purchaser for any Yield Period for any Portion of
Investment means, to the extent such Purchaser funds such Portion of Investment
for such Yield Period by issuing Notes, (a) a rate PER ANNUM equal to the sum of
(i) the rate (or if more than one rate, the weighted average of the rates) at
which Notes of such Purchaser having a term equal to such Yield Period and to be
issued to fund such Portion of Investment may be sold by any placement agent or
commercial paper dealer selected by the applicable Purchaser Agent on behalf of
such Purchaser, as agreed between each such agent or dealer and the applicable
Purchaser Agent and notified by the applicable Purchaser Agent to the Servicer;
PROVIDED, that if the rate (or rates) as agreed between any such agent or dealer
and the applicable Purchaser Agent with regard to any Yield Period for such
Portion of Investment is a discount rate (or rates), then such rate shall be the
rate (or if more than one rate, the weighted average of the rates) resulting
from converting such discount rate (or rates) to an interest-bearing equivalent
rate per annum, PLUS (ii) the commissions and charges charged by such placement
agent or commercial paper dealer with respect to such Notes, expressed as a
percentage of such face amount and converted to an interest-bearing equivalent
rate PER ANNUM; or (b) such other rate set forth in the Joinder Agreement
pursuant to which such Purchaser becomes a party to the Agreement.
"CREDIT AND COLLECTION POLICY" means those receivables credit and
collection policies and practices of the Servicer in effect on the date of the
Agreement and described in Schedule I hereto, as modified in compliance with the
Agreement.
[Amended and Restated
I-4 Receivables Purchase Agreement]
* TEXT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
CONFIDENTIAL TREATMENT
"CURTAILMENT DATE" means, with respect to any Receivable, the date
defined as such in the Contract for such Receivable.
"DEALER NOTE" means a Demand Promissory Note and Security
Agreement, a Promissory Note and Floorplan Agreement and any other promissory
note issued by an Obligor in favor of AFC.
"DEBT" means (i) indebtedness for borrowed money (which shall not
include, in the case of the Seller or AFC, accounts payable to any Affiliate in
the ordinary course of business arising from the provision of goods and services
by such Affiliate), (ii) obligations evidenced by bonds, debentures, notes or
other similar instruments, (iii) obligations to pay the deferred purchase price
of property or services, (iv) obligations as lessee under leases which shall
have been or should be, in accordance with generally accepted accounting
principles, recorded as capital leases, (v) obligations under direct or indirect
guaranties in respect of, and obligations (contingent or otherwise) to purchase
or otherwise acquire, or otherwise to assure a creditor against loss in respect
of, indebtedness or obligations of others of kinds referred to in CLAUSES (i)
through (iv) above, and (vi) liabilities in respect of unfunded vested benefits
under plans covered by Title IV of ERISA.
"DEFAULT RATIO" means the ratio (expressed as a percentage and
rounded upward to the nearest 1/100th of 1%) computed as of the last day of each
calendar month by dividing (i) the aggregate Outstanding Balance of all Pool
Receivables that became Defaulted Receivables during such month PLUS the
aggregate amount of non-cash adjustments that reduced the Outstanding Balance of
any Pool Receivable during such month (other than a Pool Receivable that became
a Defaulted Receivable during such month) by (ii) the aggregate amount of Pool
Receivables that were generated by the Originator during the calendar month that
occurred five calendar months prior to the calendar month ending on such day.
"DEFAULTED RECEIVABLE" means a Receivable:
(i) as to which any payment, or part thereof, remains
unpaid for [ * ] after the due date for such payment
(such due date being determined without reference to any extension
that extends the due date of such Receivable to a date [ * ]
past the date such Receivable arose or, if such Receivable was
still an Eligible Receivable after such extension, without
reference to any extension that extends the due date [ * ]
past the date such Receivable arose);
(ii) [RESERVED]
(iii) which, consistent with the Credit and Collection
Policy, would be written off the Seller's books as uncollectible;
or
[Amended and Restated
I-5 Receivables Purchase Agreement]
* TEXT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
CONFIDENTIAL TREATMENT
(iv) which is converted to a long term payment plan in the
form of a note or other similar document.
"DEFICIENCY AMOUNT" means with respect to (i) [ * ] the
amount, if any, by which the Discount and Program Fees due [ * ] exceeds the
aggregate amount of funds available and actually paid in respect of such
Discount and Program Fees [ * ] including, without limitation, amounts
redeposited by the Seller and amounts withdrawn from the Cash Reserve Account
pursuant to Section 1.4(i) and (ii) the Legal Final Maturity Date, the amount,
if any, by which the outstanding Investment exceeds the aggregate amount of
funds available and actually paid in respect of such Investment on such Legal
Final Maturity Date, including, without limitation, amounts redeposited by the
Seller and amounts withdrawn from the Cash Reserve Account pursuant to Section
1.4(i).
"DELINQUENCY RATIO" means the ratio (expressed as a percentage and
rounded upward to the nearest 1/100 of 1%) computed as of the last day of each
calendar month by dividing (i) the aggregate Outstanding Balance of all Pool
Receivables (net of all miscellaneous credits) that were Delinquent Receivables
on such day by (ii) the aggregate Outstanding Balance of all Pool Receivables on
such day.
"DELINQUENT RECEIVABLE" means a Receivable which is not a Defaulted
Receivable (i) as to which any payment, or part thereof, remains unpaid for
[ * ] after the due date for such payment (such due date being determined
without reference to any extension that extends the due date to a date [ * ]
past the date such Receivable arose (provided that the determination of such due
date shall include any extension that extends the due date [ * ] such Receivable
arose if, after giving effect to such extension, such Receivable was still an
Eligible Receivable) or (ii) which, consistent with the Credit and Collection
Policy, would be classified as delinquent by the Seller.
"DEPOSIT ACCOUNT" means an account listed on SCHEDULE II hereto and
maintained at a bank or other financial institution for the purpose of receiving
Collections.
"DEPOSIT ACCOUNT AGREEMENT" means a letter agreement, in the form
of ANNEX B to the Agreement, among the Seller, the Agent and the applicable
Deposit Account Bank, as the same may be amended, supplemented, amended and
restated, or otherwise modified from time to time in accordance with the
Agreement and with the prior written consent of the Control Party.
"DEPOSIT BANK" means any of the banks or other financial
institutions at which one or more Deposit Accounts are maintained.
"DISCOUNT" means (a) with respect to each Revolving Purchaser:
[Amended and Restated
I-6 Receivables Purchase Agreement]
* TEXT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
CONFIDENTIAL TREATMENT
[ * ]
and (b) with respect to any Term Purchaser, has the meaning set forth in the
applicable Joinder Agreement; PROVIDED, that no provision of the Agreement shall
require the payment or permit the collection of Discount in excess of the
maximum permitted by applicable law; and PROVIDED, FURTHER, that Discount for
any Portion of Investment of any Participation shall not be considered paid by
any distribution to the extent that at any time all or a portion of such
distribution is rescinded or must otherwise be returned for any reason.
"DISTRIBUTION PERCENTAGE" means, with respect to any Purchaser on
any day (i) if the sum of the aggregate of the numerators of the Participations
on such day is less than or equal to the Collateral Balance on such day, such
Purchaser's Participation and (ii) if the sum of the aggregate of the numerators
of the Participations on such day exceeds the Collateral Balance on such day,
the Termination Share of such Purchaser (in each case, expressed as a
percentage).
[Amended and Restated
I-7 Receivables Purchase Agreement]
* TEXT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
CONFIDENTIAL TREATMENT
"DIVIDENDS" means any dividend or distribution (in cash or
obligations) on any shares of any class of Seller's capital stock or any
warrants, options or other rights with respect to shares of any class of
Seller's capital stock.
"DRAW DATE" means the 5th Business Day of each calendar month.
"ELIGIBLE CONTRACT" means a Contract in one of the forms set forth
in SCHEDULE IV with such variations as AFC shall approve in its reasonable
business judgment that shall not materially adversely affect the rights of the
Originator, the Seller, the Insurer or the Purchasers.
"ELIGIBLE RECEIVABLE" means, at any time, any Receivable:
[ * ]
[Amended and Restated
I-8 Receivables Purchase Agreement]
* TEXT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
CONFIDENTIAL TREATMENT
[ * ]
[Amended and Restated
I-9 Receivables Purchase Agreement]
* TEXT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
CONFIDENTIAL TREATMENT
[ * ]
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, and any successor statute of similar
import, together with the regulations thereunder, in each case as in
effect from time to time. References to sections of ERISA also refer to
any successor sections.
"ERISA AFFILIATE" shall mean with respect to any Person, at
any time, each trade or business (whether or not incorporated) that would, at
the time, be treated together with such Person as a single employer under
Section 4001 of ERISA or Sections 414(b), (c), (m) or (o) of the Internal
Revenue Code.
"EURODOLLAR RATE" means, for any Portion of the Investment for
any Yield Period, an interest rate per annum (rounded upward to the nearest
1/16th of 1%) determined pursuant to the following formula:
Eurodollar Rate = LIBOR
--------------------
1.00 - Eurodollar Reserve Percentage
Where,
"EURODOLLAR RESERVE PERCENTAGE" means, for any Yield Period, the
maximum reserve percentage (expressed as a decimal, rounded upward to
the nearest 1/100th of 1%) in effect on the date LIBOR for such Yield
Period is determined under regulations issued from time to time by the
Federal Reserve Board for determining the maximum reserve requirement
(including any emergency, supplemental or other marginal reserve
requirement) with respect to "Eurocurrency" funding (currently referred
to as"Eurocurrency liabilities") having a term comparable to such Yield
Period; and
[Amended and Restated
I-10 Receivables Purchase Agreement]
* TEXT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
CONFIDENTIAL TREATMENT
"EXCLUDED OBLIGOR" means an Obligor, so designated in writing
as such by the Control Party (or if the Control Party is the Majority
Purchasers, the Agent and the Majority Purchasers) to the Seller in good faith
and in the Control Party's (or if the Control Party is the Majority Purchasers,
the Agent's and the Majority Purchasers') reasonable judgment relating to credit
considerations from time to time, it being understood that from time to time the
Control Party and the Agent may revoke their designation of one or more Obligors
as Excluded Obligors by written notice to the Seller.
"EXCLUDED RECEIVABLES" means any Receivable identified on SCHEDULE
1.1(b) of the Purchase and Sale Agreement from time to time and any right to
payment under:
[ * ]
[Amended and Restated
I-11 Receivables Purchase Agreement]
* TEXT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
CONFIDENTIAL TREATMENT
[ * ]
"FAIRWAY" has the meaning set forth in the preamble.
"FEDERAL FUNDS RATE" means, for any period, a fluctuating
interest rate PER ANNUM equal (for each day during such period) to: (a) the
weighted average of the rates on overnight federal funds transactions with
members of the Federal Reserve System arranged by federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the preceding
Business Day) by the Federal Reserve Bank of New York, or (b) if such rate is
not so published for any Business Day, the average of the quotations for such
day on such transactions received by the Agent from three federal funds brokers
of recognized standing selected by it.
"FEDERAL RESERVE BOARD" means the Board of Governors of the
Federal Reserve System, or any entity succeeding to any of its principal
functions.
"FEE LETTER" as to any Purchaser means the fee letter entered into
by such Purchaser's Purchaser Agent party with the Seller as described more
particularly in SECTION 1.5.
"FEE PAYMENT DATE" means with respect to any Purchaser, any date so
designated in the applicable Fee Letter.
[Amended and Restated
I-12 Receivables Purchase Agreement]
* TEXT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
CONFIDENTIAL TREATMENT
"FINAL PAYOUT DATE" means the date following the Termination
Date on which no Investment or Discount in respect of any Participation under
the Agreement shall be outstanding and all other amounts payable by the
Originator, the Seller or the Servicer to the Purchasers, the Purchaser Agents,
the Agent, the Insurer or any other Affected Person under the Transaction
Documents shall have been paid in full.
"FINANCE CHARGE AND FLOOR PLAN FEE COLLECTIONS" means with respect
to any calendar month, any Collections applied by the Servicer in such calendar
month to the payment of interest and finance charges and all other amounts
(other than principal) owed under a Contract.
"GAAP" means, generally accepted accounting principles and
practices in the United States, consistently applied.
"GOVERNMENTAL AUTHORITY" means any nation or government, any state
or other political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any body or entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, including without limitation any court, and any Person owned or
controlled, through stock or capital ownership or otherwise, by any of the
foregoing.
"INDEMNIFIED AMOUNTS" has the meaning set forth in SECTION 3.1.
"INDEMNIFIED PARTY" has the meaning set forth in SECTION 3.1.
"INSOLVENT" or "INSOLVENCY" means with respect to any Multiemployer
Plan, the condition that such Plan is insolvent within the meaning of Section
4245 of ERISA.
"INSOLVENCY PROCEEDING" means (a) any case, action or
proceeding before any court or other Governmental Authority relating to
bankruptcy, reorganization, insolvency, liquidation, receivership, dissolution,
winding-up or relief of debtors, or (b) any general assignment for the benefit
of creditors, composition, marshalling of assets for creditors, or other,
similar arrangement in respect of its creditors generally or any substantial
portion of its creditors; in each case (a) and (b) undertaken under U.S.
Federal, state or foreign law, including the Bankruptcy Code.
"INSURANCE AGREEMENT" means that certain Insurance and Indemnity
Agreement dated as of the date hereof among the Servicer, the Seller, the
Originator and the Insurer, as amended, amended and restated, supplemented or
otherwise modified from time to time.
"INSURED AMOUNTS" [ * ]
[Amended and Restated
I-13 Receivables Purchase Agreement]
* TEXT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
CONFIDENTIAL TREATMENT
"INSURED DISCOUNT LIMIT" [ * ]
"INSURER" has the meaning set forth in the preamble to this
Agreement.
"INSURER ADVANCE" [ * ]
"INSURER DEFAULT" [ * ]
"INSURER'S ACCOUNT" means that certain bank account numbered
[ * ] or such other account as the Insurer may specify through written notice to
the Seller, the Servicer and the Agent.
"INVESTMENT" means with respect to any Purchaser the aggregate of
the amounts paid to the Seller in respect of the Participation of such Purchaser
pursuant to the Agreement, or such amount divided or combined in accordance with
SECTION 1.7, in each case reduced from time to time by Collections actually
distributed and applied on account of such Investment pursuant to SECTION
1.4(d); PROVIDED, THAT if such Investment shall have been reduced by any
distribution and thereafter all or a portion of such distribution is rescinded
or must otherwise be returned for any reason, such Investment shall be increased
by the amount of such rescinded or returned distribution, as though it had not
been made.
[Amended and Restated
I-14 Receivables Purchase Agreement]
* TEXT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
CONFIDENTIAL TREATMENT
"JOINDER AGREEMENT" means a Joinder Agreement substantially in the
form of ANNEX D and executed pursuant to SECTION 1.12.
"LEGAL FINAL MATURITY DATE" [ * ]
"LIBOR" means with respect to each Purchaser's Portion(s) of
Investment the rate of interest PER ANNUM (rounded to the nearest 1/100th of 1%,
with 0.005% being rounded upwards) equal to the rate of interest PER ANNUM: (i)
for deposits in Dollars (in the approximate amount of the Investment to be
funded) for a period equal to the applicable Yield Period that appears on
Telerate Page 3750 or (ii) if such rate does not appear on Telerate Page 3750,
determined by the Agent to be the arithmetic mean (rounded to the nearest
1/100th of 1%, with 0.005% being rounded upwards) of the rates of interest PER
ANNUM notified to the Agent as the rate of interest at which Dollar deposits in
the approximate amount of the Investment to be funded, and for a period equal to
the applicable Yield Period, would be offered to major banks in the London
interbank market at their request, in each case at or about 11:00 a.m. (London
time) on the second Business Day before such funding. [ * ]
"LIQUIDATION ACCOUNT" means that certain bank account numbered
[ * ] or such other account at such other bank approved by the Control Party (or
if the Control Party is the Majority Purchasers, the Agent), with the Purchasers
and their respective Purchaser Agents receiving notice that such account is
maintained at such bank in either case, which is in the name of [ * ]
"LIQUIDATION ACCOUNT BANK" means the bank holding the Liquidation
Account.
"LIQUIDITY AGENT" means any financial institution in its capacity
as a Liquidity Agent pursuant to a Liquidity Agreement.
"LIQUIDITY AGREEMENT" means any loan or asset purchase agreement or
similar agreement whereby a Note Issuer party hereto as a Purchaser which
obtains commitments from financial institutions to support its funding
obligations hereunder and/or to refinance any Notes issued to fund the Note
Issuer's Investment hereunder. [ * ] Bank of Montreal, acting through its
Chicago Branch, as Liquidity Agent, BMO Nesbitt
[Amended and Restated
I-15 Receivables Purchase Agreement]
* TEXT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
CONFIDENTIAL TREATMENT
Burns, as servicing agent, and Fairway, as amended, amended and restated,
supplemented or otherwise modified from time to time.
"LIQUIDITY BANK" has the meaning set forth in SECTION 6.3(b).
"LOSS PERCENTAGE" means, on any date, the greatest of [ * ]
"LOSS RESERVE" means, for any date and any Participation (a) of any
Revolving Purchaser, an amount equal to the product of (A) the quotient obtained
by dividing (x) the Loss Percentage by (y) 1 minus the Loss Percentage and (B)
such Purchaser's Investment at such time and (b) of any Term Purchaser, an
amount calculated pursuant to the "Loss Reserve Formula" set forth in the
Joinder Agreement to which such Term Purchaser is a party and approved by the
Insurer.
"LOSS RESERVE RATIO" means, as calculated as of the last day of
each calendar month, a percentage equal to (a) [ * ] that occurred during the
twelve consecutive calendar months ending on such last day [ * ] ending on such
day, and [ * ]
"LOT CHECK" with respect to any Obligor means a physical inspection
of such Obligor's vehicles that are financed by the Originator and which may
include a review of such Obligor's books and records related thereto.
"MAJORITY PURCHASERS" means Purchasers having a share of the
Aggregate Participation equal to or greater than 50%.
"MATERIAL ADVERSE EFFECT" means, with respect to any event or
circumstance, a material adverse effect on:
(a) the business, operations, property or financial condition
of the Seller or the Servicer;
(b) the ability of the Seller or the Servicer to perform its
obligations under this Agreement or any other Transaction Document to
which it is a party or the performance of any such obligations;
(c) the validity or enforceability of this Agreement or any
other Transaction Document;
[Amended and Restated
I-16 Receivables Purchase Agreement]
* TEXT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
CONFIDENTIAL TREATMENT
(d) the status, existence, perfection, priority or
enforceability of the Agent's interest (for the benefit of the Secured
Parties) in the Receivables or Related Security; or
(e) the collectibility of the Receivables.
"MAXIMUM INSURED AMOUNT" [ * ]
"MAXIMUM PURCHASE AMOUNT" means, as to any Revolving Purchaser, the
maximum dollar amount of Investment it is willing to fund, as set forth on the
signature pages to this Agreement, any Joinder Agreement or any assignment
entered into pursuant to SECTION 6.3 (as applicable), which amount may,
following the written request of the Seller, and if such increase would make the
sum of the Revolving Purchase Limit and the aggregate of the Investments of all
Term Purchasers exceed the Maximum Insured Amount, the prior written consent of
the Insurer in its sole discretion, be increased at any time by any Revolving
Purchaser (which increase shall cause a corresponding increase in the Revolving
Purchase Limit); PROVIDED THAT if any Affiliate of Fairway becomes a Term
Purchaser, the Maximum Purchase Amount of Fairway shall be reduced by the
initial Investment of such Term Purchaser.
"MOODY'S" means Moody's Investors Services, Inc.
"MULTIEMPLOYER PLAN" means a Plan that is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"NET RECEIVABLES POOL BALANCE" means at any time an amount equal to
[ * ]
"NET SPREAD" means [ * ]
[Amended and Restated
I-17 Receivables Purchase Agreement]
* TEXT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
CONFIDENTIAL TREATMENT
[ * ]
"NORMAL CONCENTRATION PERCENTAGE" [ * ]
"NOTE ISSUER" means Fairway and any other Purchaser in the business
of issuing short or medium term promissory notes.
"NOTES" (a) in the case of Fairway, means the short-term promissory
notes issued or to be issued by Fairway to fund its investments in accounts
receivable or other financial assets and (b) in the case of any other Purchaser,
has the meaning set forth in the applicable Joinder Agreement.
"OBLIGOR" means, with respect to any Receivable, a Person
obligated to make payments pursuant to the Contract relating to such Receivable;
PROVIDED THAT Receivables generated by Affiliates of any Obligor shall be
treated as if generated by such Obligor.
"ORIGINATOR" has the meaning set forth in the Purchase and Sale
Agreement.
"OUTSTANDING BALANCE" [ * ]
"PARTICIPATION" [ * ]
[Amended and Restated
I-18 Receivables Purchase Agreement]
* TEXT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
CONFIDENTIAL TREATMENT
[ * ]
Each Participation shall be determined from time to time pursuant to the
provisions of SECTION 1.3.
"PERFECTION REPRESENTATION" means the representations, warranties
and covenants set forth in EXHIBIT VII attached hereto.
"PERFORMANCE GUARANTY" means the Performance Guaranty, dated as of
May __, 2002, made by ADESA in favor of the Agent for the benefit of the Secured
Parties, as the same may be amended, supplemented or otherwise modified from
time to time with the prior written consent of the Control Party.
"PERMITTED INVESTMENTS" means (i) overnight obligations of the
United States of America, (ii) time deposits or AAAm or AAAm-G rated money
market accounts maintained at Harris Trust and Savings Bank or the Bank of
Montreal or if Harris Trust and Savings Bank or the Bank of Montreal is rated
below A-1 by S&P or P-1 by Moody's such other financial institutions rated at
the time of investment not less than A-1+ by S&P and P-1 by Moody's, (iii)
certificates of deposit that are not represented by instruments, have a maturity
of one week or less and are issued by financial institutions rated at the time
of investment not less than A-1 by S&P and P-1 by Moody's if such certificates
of deposit are issued by Harris Trust and Savings Bank or the Bank of Montreal
or A-1+ by S&P and P-1 by Moody's if such certificates of deposit are issued by
financial institutions other than Harris Trust and Savings Bank and the Bank of
Montreal and (iv) commercial paper rated at the time of investment not less than
A-1 by S&P and P-1 by Moody's if such commercial paper is issued by Fairway or
A-1+ by S&P and P-1 by Moody's if such commercial paper is issued by an entity
other than Fairway and, in the cases of clauses (ii), (iii) and (iv), having a
maturity date not later than (A) with respect to amounts on deposit in the Cash
Reserve Account the immediately succeeding Draw Date and (B) with respect to
amounts on deposit in the Liquidation Account the earlier of (x) the next
Settlement Date and (y) one week from the date of investment; PROVIDED, HOWEVER,
that the Control Party and the Agent (on behalf of Purchasers and the Insurer)
may, from time to time, upon three Business Days' prior written notice to
Servicer, remove from the scope of "Permitted
[Amended and Restated
I-19 Receivables Purchase Agreement]
* TEXT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
CONFIDENTIAL TREATEMENT
Investments" any such obligations, certificates of deposit or commercial paper
and specify to be within such scope, other investments.
"PERMITTED LIEN" [ * ]
"PERSON" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association, joint
venture, limited liability company or other entity, or a government or any
political subdivision or agency thereof.
"PLAN" means at a particular time, any employee benefit plan or
other plan established, maintained or contributed to by the Seller or any ERISA
Affiliate that is covered by Title IV of ERISA.
"PLEDGE AGREEMENT" means the Pledge Agreement dated May 31, 2002
between AFC and the Agent, as the same may be amended or modified with the prior
written consent of the Control Party.
"POLICY" [ * ]
"POLICY TERMINATION DATE" shall have the meaning set forth in the
Policy.
"POOL RECEIVABLE" means a Receivable in the Receivables Pool.
"PORTFOLIO CERTIFICATE" means a certificate substantially in
the form of EXHIBIT VI to the Agreement.
"PORTION OF INVESTMENT" has the meaning set forth in SECTION 1.7.
In addition, at any time when the Investment of a Participation is not divided
into two or more portions,"Portion of Investment" means 100% of the Investment
of such Participation.
"PREMIUM" means collectively, the premium owed to the Insurer under
the Insurance Agreement in respect of the Insurer's commitments under the
Policy.
[Amended and Restated
I-20 Receivables Purchase Agreement]
* TEXT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
CONFIDENTIAL TREATMENT
"PREMIUM PAYMENT DATE" means any date on which Premium is payable
pursuant to the letter agreement described in SECTION 1.5(c).
"PROGRAM FEE" as to any Purchaser means, collectively, the periodic
fees set forth in the applicable Fee Letter.
"PROGRAM SUPPORT AGREEMENT" as to any applicable Note Issuer party
hereto as a Purchaser means and includes the Liquidity Agreement and any other
agreement (if any) entered into by any Program Support Provider providing for
the issuance of one or more letters of credit for the account of the Purchaser,
the issuance of one or more surety bonds for which the Purchaser is obligated to
reimburse the applicable Program Support Provider for any drawings thereunder,
the sale by the Purchaser to any Program Support Provider of the Participation
(or portions thereof) and/or the making of loans and/or other extensions of
credit to the Purchaser in connection with the Purchaser's securitization
program, together with any letter of credit, surety bond or other instrument
issued thereunder.
"PROGRAM SUPPORT PROVIDER" as to any Note Issuer means and includes
any Liquidity Bank and any other or additional Person (other than any customer
of a Purchaser) now or hereafter extending credit or having a commitment to
extend credit to or for the account of, or to make purchases from, a Purchaser
or issuing a letter of credit, surety bond or other instrument to support any
obligations arising under or in connection with any Note Issuer's securitization
program.
"PURCHASE AND SALE AGREEMENT" means the Amended and Restated
Purchase and Sale Agreement, dated as of May 31, 2002, among the Originator and
the Seller, as the same may be modified, supplemented, amended and amended and
restated from time to time in accordance with the Transaction Documents and with
prior written consent of the Control Party.
"PURCHASER" means Fairway and each other Revolving Purchaser or
Term Purchaser which becomes a purchaser hereunder in accordance with the
provisions of SECTION 1.12 or SECTION 6.3(a).
"PURCHASER'S ACCOUNT" means (i), as to Fairway, the special account
(account number [ * ] of the Purchaser maintained at the office of [ * ] or
such other account as may be so designated in writing by the Agent to the Seller
and the Insurer and (ii) as to any other Purchaser, such account as may be so
designated in writing by the applicable Purchaser Agent to the Seller, the
Servicer and the Insurer.
"PURCHASER AGENT" means, as to any Purchaser, the financial
institution designated by such Purchaser as responsible for administering the
purchase facility contemplated by this Agreement on behalf of such Purchaser,
together with any successors or permitted assigns acting in such capacity; if
any Purchaser does not so designate another institution as its Purchaser Agent,
such Purchaser shall be deemed to have designated itself as its Purchaser Agent
and all
[Amended and Restated
I-21 Receivables Purchase Agreement]
* TEXT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
CONFIDENTIAL TREATMENT
references herein to such Purchaser's Purchaser Agent shall mean and be
references to such Purchaser.
"PURCHASER TERMINATION DAY" means, as to any Purchaser, any day on
or after the earliest of (a) the date that the commitments of all of the related
Program Support Providers terminate under any related Program Support Agreement,
or any related Program Support Agreement is terminated without being replaced,
(b) the date (if any) set forth as such Purchaser's "Scheduled Termination Date"
next to such Purchaser's signature hereto or to the applicable Joinder Agreement
(as such date may be periodically extended with the consent of the Seller and
such Purchaser) or (c) the Termination Date; PROVIDED THAT any day that would
otherwise be a Purchaser Termination Day shall not be so considered if such day
is a Termination Day.
"RATING AGENCIES" means Moody's and S&P.
"RECEIVABLE" means any right to payment from any Person,
whether constituting an account, chattel paper, instrument, payment intangible
or a general intangible, arising from the providing of financing and other
services by the Originator to new, used and wholesale automobile or other motor
vehicle dealers and that is denominated and payable only in United States
dollars, and includes the right to payment of any interest or finance charges
and other obligations of such Person with respect thereto.
"RECEIVABLES POOL" means at any time all of the then outstanding
Receivables conveyed to the Seller pursuant to the Purchase and Sale Agreement
and not reconveyed to the Originator in accordance with the terms of the
Purchase and Sale Agreement.
"RECREATIONAL VEHICLE" [ * ]
"RECREATIONAL VEHICLE RECEIVABLE" means those Receivables generated
as a result of the making of loans to finance the purchase of Recreational
Vehicles.
"REFERENCE BANK" means [ * ], provided that if so
agreed by the Seller, the Servicer and the Agent, each Purchaser which becomes a
party hereto by virtue of Section 1.12 may designate a different Reference Bank
for purposes of calculating the Base Rate applicable to such Purchaser's
Investment.
"RELATED SECURITY" means, with respect to any Receivable:
(a) all right, title and interest in and to all Contracts that
relate to such Receivable;
[Amended and Restated
I-22 Receivables Purchase Agreement]
* TEXT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
CONFIDENTIAL TREATMENT
(b) all security interests or liens and rights in property
subject thereto from time to time purporting to secure payment of such
Receivable, whether pursuant to the Contract related to such Receivable
or otherwise, including all rights in vehicles securing or purporting
to secure such payment;
(c) all UCC financing statements covering any collateral
securing payment of such Receivable;
(d) all guarantees and other agreements or arrangements of
whatever character from time to time supporting or securing payment of
such Receivable whether pursuant to the Contract related to such
Receivable or otherwise;
(e) all rights in any power of attorney delivered by the
related Obligor; and
(f) all rights and claims of the Seller with respect to such
Receivable, pursuant to the Purchase and Sale Agreement.
"REORGANIZATION" means with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of Section 4241
of ERISA.
"REPORTABLE EVENT" means any of the events set forth in Section
4043(c) of ERISA, other than those events as to which the thirty day notice
period is waived under subsections .22, .27 or .28 of PBGC Reg. ss.4043.
"RESTRICTED PAYMENTS" has the meaning set forth in PARAGRAPH (o)(i)
of EXHIBIT IV of the Agreement.
"REVOLVING PAYDOWN DAY" means any day that is not a Termination Day
on which the conditions set forth in SECTIONS 1.2(b) or SECTION 2 of EXHIBIT II
are not either satisfied or waived.
"REVOLVING PRO RATA SHARE" means, with respect of any Revolving
Purchaser, a fraction (expressed as a percentage), the numerator of which is
such Revolving Purchaser's Maximum Purchase Amount and the denominator of which
is the Revolving Purchase Limit.
"REVOLVING PURCHASE LIMIT" means the least of (a) $500,000,000, as
such amount may be reduced pursuant to SECTION 1.1(b), (b) the amount that [ * ]
and (c) [ * ] PROVIDED, HOWEVER, that if any Revolving Purchaser agrees to
increase its Maximum Purchase Amount pursuant to the definition thereof or if,
in compliance with SECTION 1.12, any new Revolving Purchaser becomes an
additional party hereto, clause (a) above [ * ], as
[Amended and Restated
I-23 Receivables Purchase Agreement]
* TEXT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
CONFIDENTIAL TREATMENT
applicable, and [ * ]
"REVOLVING PURCHASER" means any Purchaser identified as a revolving
purchaser on its signature page hereto or in the applicable Joinder Agreement.
"S&P" means Standard and Poor's Ratings Services.
"SECURED PARTIES" means, collectively, the Purchasers, the
Purchaser Agents, the Agent, the Program Support Providers and the Insurer.
"SELLER" has the meaning set forth in the preamble to the
Agreement.
"SERVICER" has the meaning set forth in the preamble to the
Agreement.
"SERVICER PAYMENT DATE" shall mean the first Business Day of each
calendar month.
"SERVICER REPORT" means a report, in substantially the form of
ANNEX D hereto, furnished by the Servicer to the Insurer, the Agent and the
Purchaser Agents pursuant to the Agreement.
"SERVICER REPORT DATE" means the 15th day of each month, or if such
day is not a Business Day, the next Business Day.
"SERVICING FEE" shall mean the fee referred to in SECTION 4.6.
"SETTLEMENT DATE" means each of (a) the last day of each Yield
Period, (b) any Servicer Payment Date, (c) any Premium Payment Date, (d) any Fee
Payment Date, (e) every Business Day following the date any draw is made under
the Policy until the amount of such draw is fully reimbursed to the Insurer and
(f) on and after the Termination Date, any day or days that the Agent may
declare by written notice with the prior written consent of the Control Party;
IT BEING UNDERSTOOD that the declaration of a Settlement Date under this CLAUSE
(f) by the Agent shall not accelerate the payment date for any amounts due to
any Purchaser or the Insurer without the applicable party's consent.
"SINGLE EMPLOYER PLAN" means any Plan which is covered by
Title IV of ERISA, but which is not a Multiemployer Plan.
"SPECIAL CONCENTRATION PERCENTAGE" means, for any [ * ]
at any time, [ * ]
[Amended and Restated
I-24 Receivables Purchase Agreement]
* TEXT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
CONFIDENTIAL TREATMENT
"SPECIAL OBLIGOR" means [ * ] and any other Obligor approved
in writing by the Control Party (or if the Control Party is the Majority
Purchasers, the Agent).
"TANGIBLE NET WORTH" means, with respect to any Person, the net
worth of such Person calculated in accordance with GAAP after subtracting
therefrom the aggregate amount of such Person's intangible assets, including,
without limitation, goodwill, franchises, licenses, patents, trademarks,
tradenames, copyrights, service marks and brand names and capitalized software.
"TERMINATION DATE" means the earliest of (i) the Business Day which
the Seller so designates by notice to the Insurer and the Agent at least 30 days
in advance pursuant to SECTION 1.1(b), (ii) May 27, 2005 (as such date may be
periodically extended with the written consent of the Seller, the Servicer, the
Insurer, the Agent and each Purchaser Agent), (iii) the date determined pursuant
to SECTION 2.2 and (iv) the date that a Purchaser Termination Day is in effect
with respect to all Purchasers.
"TERMINATION DAY" means each day which occurs on or after the
Termination Date.
"TERMINATION EVENT" has the meaning specified in EXHIBIT V.
"TERMINATION FEE" (i) with respect to any Portion of the
Investment of any Revolving Purchaser, means with respect to any Yield Period
during which any reduction of such Portion of the Investment occurs on a date
other than the last day of such Yield Period (without giving effect to any
shortened duration of such Yield Period pursuant to CLAUSE (iv) of the
definition thereof), the amount, if any, by which (i) the additional Discount
(calculated without taking into account any Termination Fee) which would have
accrued during the remainder of such Yield Period on the reductions of
Investment of the applicable Portion of the Participation relating had such
reductions remained as Investment, exceeds (ii) the income, if any, received by
the applicable Purchaser from the applicable Purchaser investing the proceeds of
such reductions of Investment, as determined by the Agent, which determination
shall be binding and conclusive for all purposes, absent manifest error and (ii)
with respect to any Portion of the Investment of any Term Purchaser, has the
meaning set forth in the applicable Joinder Agreement.
"TERMINATION SHARE" means, with respect to any Purchaser at any
time, the percentage equivalent of a fraction, the numerator of which is the
Investment of such Purchaser PLUS the Loss Reserve applicable to such Purchaser
and the denominator of which is the aggregate of the Investment of all
Purchasers PLUS the aggregate of the Loss Reserves of all Purchasers.
"TERM PURCHASER" means any Purchaser identified as a term purchaser
in the applicable Joinder Agreement.
[Amended and Restated
I-25 Receivables Purchase Agreement]
* TEXT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
CONFIDENTIAL TREATMENT
"TITLE ATTACHED RECEIVABLE" [ * ]
"TRACTOR RECEIVABLE" means, those Receivables generated as a result
of the making of loans to finance the purchase of Tractors.
"TRACTORS" means, any non-cargo carrying power unit manufactured
with a minimum of two axles and a maximum of three axles intended primarily for
use on the public streets, roads and highways and designed to operate in
combination with a semitrailer or trailer; PROVIDED, FURTHER, this definition
specifically excludes any semitrailer or trailer.
"TRANSACTION DOCUMENTS" means the Agreement, the Deposit Account
Agreements, the Purchase and Sale Agreement, the Performance Guaranty, the
Pledge Agreement, the Insurance Agreement, the Company Note, each Joinder
Agreement, the Policy, and all other certificates, instruments, UCC financing
statements, reports, notices, agreements and documents executed or delivered
under or in connection with any of the foregoing, in each case as the same may
be amended, supplemented or otherwise modified from time to time in accordance
with the Agreement.
"UCC" means the Uniform Commercial Code as from time to time in
effect in the applicable jurisdiction.
"UNMATURED TERMINATION EVENT" means an event which, with the giving
of notice or lapse of time, or both, would constitute a Termination Event.
"YIELD PERIOD" means, (a) with respect to each Portion of
Investment of any Revolving Purchaser:
(i) initially the period commencing on the date of a purchase
pursuant to SECTION 1.2 and ending such number of days as the Seller
shall select, subject to the approval of the applicable Purchaser Agent
pursuant to SECTION 1.2, [ * ]; PROVIDED THAT the weighted average
of all Yield Periods may not [ * ]; and
(ii) thereafter each period commencing on the last day of the
immediately preceding Yield Period for any Portion of Investment of the
Participation and ending such number of days [ * ] as the
Seller shall select, subject to the approval of the applicable
Purchaser Agent pursuant to SECTION 1.2, on notice by the Seller
received by the applicable Purchaser Agent (including notice by
telephone, confirmed in writing) not later than 11:00 a.m. (Chicago
time) on such last day or second the Business Day prior to such
[Amended and Restated
I-26 Receivables Purchase Agreement]
* TEXT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
CONFIDENTIAL TREATMENT
last day if Discount is computed by reference to the Eurodollar Rate,
EXCEPT that if the applicable Purchaser Agent shall not have received
such notice or approved such period on or before 11:00 a.m. (Chicago
time) on such last day, such period shall be one day; PROVIDED, that
(A) any Yield Period in respect of which Discount is
computed by reference to the Bank Rate shall be a period from
[ * ]
(B) any Yield Period (other than of one day) which would
otherwise end on a day which is not a Business Day shall be
extended to the next succeeding Business Day; PROVIDED, HOWEVER, if
Discount in respect of such Yield Period is computed by reference
to the Eurodollar Rate, and such Yield Period would otherwise end
on a day which is not a Business Day, and there is no subsequent
Business Day in the same calendar month as such day, such Yield
Period shall end on the next preceding Business Day;
(C) in the case of any Yield Period of one day, (A) if such
Yield Period is the initial Yield Period for a purchase pursuant to
SECTION 1.2, such Yield Period shall be the day of purchase of the
Participation; (B) any subsequently occurring Yield Period which is
one day shall, if the immediately preceding Yield Period is more
than one day, be the last day of such immediately preceding Yield
Period, and, if the immediately preceding Yield Period is one day,
be the day next following such immediately preceding Yield Period;
and (C) if such Yield Period occurs on a day immediately preceding
a day which is not a Business Day, such Yield Period shall be
extended to the next succeeding Business Day;
(D) in the case of any Yield Period for any Portion of
Investment which commences before the Termination Date and would
otherwise end on a date occurring after the Termination Date, such
Yield Period shall end on such Termination Date and the duration of
the initial Yield Period which commences after the Termination Date
shall commence on the Termination Date and end on the next Draw
Date and thereafter such Yield Period shall commence on the day
after such previous Draw Date and end on the next Draw Date; and
[ * ]
(b) with respect to each Portion of Investment of any Term
Purchaser, the period set forth as the "Yield Period" in the Joinder
Agreement to which such Term Purchaser is a party.
OTHER TERMS. All accounting terms not specifically defined herein shall
be construed in accordance with generally accepted accounting principles. All
terms used in Article 9 of the
[Amended and Restated
I-27 Receivables Purchase Agreement]
* TEXT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
UCC in the State of Indiana, and not specifically defined herein, are used
herein as defined in such Article 9. Unless the context otherwise requires, "or"
means "and/or," and "including" (and with correlative meaning "include" and
"includes") means including without limiting the generality of any description
preceding such term.
[Amended and Restated
I-28 Receivables Purchase Agreement]
EXHIBIT II
CONDITIONS OF PURCHASES
1. CONDITIONS PRECEDENT TO INITIAL PURCHASE AND THE EFFECTIVENESS
OF THIS AGREEMENT. The effectiveness of this Agreement and the initial purchase
under the Agreement are subject to the conditions precedent that the Agent and
the Insurer shall have received on or before the date hereof and the date of
such purchase the following, each in form and substance (including the date
thereof) satisfactory to the Agent and the Insurer:
(a) A counterpart of the Agreement and the other Transaction
Documents duly executed by the parties thereto.
(b) Certified copies of (i) the resolutions of the board of
directors of each of the Seller and AFC authorizing the execution, delivery, and
performance by the Seller and AFC of the Agreement and the other Transaction
Documents, (ii) all documents evidencing other necessary corporate action and
governmental approvals, if any, with respect to the Agreement and the other
Transaction Documents and (iii) the articles of incorporation and by-laws of the
Seller and AFC.
(c) A certificate of the secretary or assistant secretary of the
Seller and AFC certifying the names and true signatures of the officers of the
Seller and AFC authorized to sign the Agreement and the other Transaction
Documents. Until the Agent and the Insurer receive a subsequent incumbency
certificate from the Seller and AFC in form and substance satisfactory to the
Agent and the Insurer, the Agent and the Insurer shall be entitled to rely on
the last such certificate delivered to them by the Seller and AFC, as
applicable.
(d) Financing statements, in proper form for filing under the UCC of
all jurisdictions that either the Agent or the Insurer may deem necessary or
desirable in order to perfect the interests of the Agent (for the benefit of the
Secured Parties) contemplated by the Agreement and other Transaction Documents.
(e) Financing statements, in proper form for filing under the
applicable UCC, if any, necessary to release all security interests and other
rights of any Person in the Receivables, Contracts or Related Security
previously granted by the Seller or AFC.
(f) Completed UCC requests for information, dated on or before the
date of such initial purchase and on or before the date hereof, listing the
financing statements referred to in SUBSECTION (e) above and all other effective
financing statements filed in the jurisdictions referred to in SUBSECTION (e)
above that name the Seller or AFC as debtor, together with copies of such other
financing statements (none of which shall cover any Receivables, Contracts or
Related Security), and similar search reports with respect to federal tax liens,
judgments and liens of the
[Amended and Restated
II-1 Receivables Purchase Agreement]
Pension Benefit Guaranty Corporation in such jurisdictions as the Agent and the
Insurer may request, showing no such liens on any of the Receivables, Contracts
or Related Security.
(g) Executed copies of a Deposit Account Agreement with each Deposit
Account Bank.
(h) Favorable opinions of Joel G. Garcia, Esq., in-house counsel for
the Seller and AFC, as to corporate and such other matters as the Agent and the
Insurer may reasonably request.
(i) Favorable opinions of Ice Miller, special counsel for the
Seller, ADESA and AFC, as to enforceability and such other matters as the Agent
and the Insurer may reasonably request.
(j) Favorable opinions of Ice Miller, special counsel for the Seller
and AFC, as to bankruptcy matters.
(k) Certificates of Existence with respect to the Seller and AFC
issued by the Indiana Secretary of State and articles of incorporation of the
Seller certified by the Indiana Secretary of State.
(l) Evidence (i) of the execution and delivery by each of the
parties thereto of the Purchase and Sale Agreement and all documents, agreements
and instruments contemplated thereby (which evidence shall include copies,
either original or facsimile, of each of such documents, instruments and
agreements), (ii) that each of the conditions precedent to the execution and
delivery of the Purchase and Sale Agreement has been satisfied to the Agent's
and the Insurer's satisfaction, and (iii) that the initial purchases under the
Purchase and Sale Agreement have been consummated.
(m) Evidence of payment by the Seller of all accrued and unpaid fees
(including those contemplated by the Fee Letter), costs and expenses to the
extent then due and payable on the date thereof, together with Attorney Costs of
the Agent and the Insurer to the extent invoiced prior to or on such date, plus
such additional amounts of Attorney Costs as shall constitute the Agent's and
the Insurer's (as applicable) reasonable estimate of Attorney Costs incurred or
to be incurred by it through the closing proceedings; including any such costs,
fees and expenses arising under or referenced in SECTION 6.4 as provided in the
Fee Letter and the letter setting forth the Premium.
(n) The Fee Letter between the Seller and the Agent contemplated by
and delivered pursuant to SECTION 1.5.
(o) A Servicer Report representing the performance of the portfolio
purchased through the Purchase and Sale Agreement and the Agreement for the
month prior to closing.
[Amended and Restated
II-2 Receivables Purchase Agreement]
(p) A Portfolio Certificate dated as of May 31, 2002, together with
a floorplan receivables summary dated as of May 31, 2002.
(q) Such confirmations from the rating agencies as shall be required
by any Purchaser or the Insurer in their respective sole discretion.
(r) a listing of all Obligors of all Receivables as of the date
hereof.
(s) Executed copy of the Policy and a favorable opinion of Susan
Comparato, Esq., Associate General Counsel to Insurer, as to corporate,
enforceability and such other matters as the Agent may reasonably request.
(t) Such other approvals, opinions or documents as the Agent and the
Insurer may reasonably request.
2. CONDITIONS PRECEDENT TO ALL PURCHASES AND REINVESTMENTS. Each
purchase (including the initial purchase) and each reinvestment shall be subject
to the further conditions precedent that:
(a) in the case of each purchase, the Servicer shall have delivered
to the Agent and the Insurer on or prior to such purchase, in form and substance
satisfactory to the Agent and the Insurer, a completed Servicer Report with
respect to the immediately preceding calendar month, dated within 30 days prior
to the date of such purchase and shall have delivered to the Agent and the
Insurer such additional information as may reasonably be requested by the Agent
and the Insurer.
(b) on the date of such purchase or reinvestment the following
statements shall be true (and acceptance of the proceeds of such purchase or
reinvestment shall be deemed a representation and warranty by the Seller that
such statements are then true):
(i) the representations and warranties contained in
EXHIBIT III are true and correct on and as of the date of such purchase or
reinvestment as though made on and as of such date; and
(ii) no event has occurred and is continuing, or
would result from such purchase or reinvestment, that constitutes a
Termination Event or an Unmatured Termination Event; and
(iii) the sum of the aggregate of the Participations does not
exceed 100%; and
[Amended and Restated
II-3 Receivables Purchase Agreement]
(iv) The amount on deposit in the Cash Reserve Account is equal
to or greater than the Cash Reserve; and
(c) the Agent and the Insurer shall have received such other approvals,
opinions or documents as each may reasonably request.
[Amended and Restated
II-4 Receivables Purchase Agreement]
EXHIBIT III
REPRESENTATIONS AND WARRANTIES
A. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller
represents and warrants as follows:
(a) The Seller is a corporation duly incorporated and in
existence under the laws of the State of Indiana, and is duly qualified to do
business, and is in good standing, as a foreign corporation in every
jurisdiction where the nature of its business requires it to be so qualified
except where the failure to so qualify has not had and could not reasonably be
expected to have a Material Adverse Effect.
(b) The execution, delivery and performance by the Seller of
the Agreement and the other Transaction Documents to which it is a party,
including the Seller's use of the proceeds of purchases and reinvestments, (i)
are within the Seller's corporate powers, (ii) have been duly authorized by all
necessary corporate action of the Seller, (iii) do not contravene or result in a
default under or conflict with (1) the Seller's charter or by-laws, (2) any law,
rule or regulation applicable to the Seller, (3) any contractual restriction
binding on or affecting the Seller or its property or (4) any order, writ,
judgment, award, injunction or decree binding on or affecting the Seller or its
property, and (iv) do not result in or require the creation of any Adverse Claim
upon or with respect to any of the Seller's properties, where, in the cases of
ITEMS (2), (3) and (4), such contravention, default or conflict has had or could
reasonably be expected to have a Material Adverse Effect. The Agreement and the
other Transaction Documents to which it is a party have been duly executed and
delivered by the Seller.
(c) No authorization or approval or other action by, and no
notice to or filing with, any Governmental Authority or other Person is required
for the due execution, delivery and performance by the Seller of the Agreement
or any other Transaction Document to which it is a party other than those
previously obtained or UCC filings.
(d) Each of the Agreement and the other Transaction Documents to
which it is a party constitutes the legal, valid and binding obligation of the
Seller enforceable against the Seller in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization or other
similar laws 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) Since December 31, 2001 there has been no material adverse
change in the business, operations, property or financial condition of the
Seller, AFC, the ability of the Seller or AFC to perform its obligations under
the Agreement or the other Transaction Documents to which it is a party or the
collectibility of the Receivables, or which affects the legality, validity or
enforceability of the Agreement or the other Transaction Documents.
[Amended and Restated
III-1 Receivables Purchase Agreement]
(f) (i) There is no action, suit, proceeding or investigation
pending or, to the knowledge of the Seller, threatened against the Seller before
any Government Authority or arbitrator and (ii) the Seller is not subject to any
order, judgment, decree, injunction, stipulation or consent order of or with any
Government Authority or arbitrator, that, in the case of each of foregoing
CLAUSES (i) and (ii), could reasonably be expected to have a Material Adverse
Effect.
(g) The Seller is the legal and beneficial owner of the Pool
Receivables and Related Security, free and clear of any Adverse Claim, excepting
only Permitted Liens; upon each purchase or reinvestment, the Agent (for the
benefit of the Secured Parties) shall acquire a valid and enforceable perfected
undivided percentage ownership interest, to the extent of the Participation, in
each Pool Receivable then existing or thereafter arising and in the Related
Security and Collections and other proceeds, with respect thereto, free and
clear of any Adverse Claim, excepting only Permitted Liens; the Agreement
creates a security interest in favor of the Agent (for the benefit of the
Secured Parties) in the items described in SECTION 1.2(d), and the Agent (for
the benefit of the Secured Parties) has a first priority perfected security
interest in such items, free and clear of any Adverse Claims, excepting only
Permitted Liens. No effective financing statement or other instrument similar in
effect covering any Contract or any Pool Receivable or the Related Security or
Collections with respect thereto or any Deposit Account is on file in any
recording office, except those filed in favor of the Agent (for the benefit of
the Secured Parties) relating to the Agreement.
(h) [Reserved].
(i) Each Servicer Report, Portfolio Certificate, information,
exhibit, financial statement, document, book, record or report furnished or to
be furnished at any time by or on behalf of the Seller to the Agent, the Insurer
or any Purchaser Agent in connection with the Agreement is or will be accurate
in all material respects as of its date or (except as otherwise disclosed to the
Agent, the Insurer and any such Purchaser Agent at such time) as of the date so
furnished, and no such item contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact necessary in order
to make the statements contained therein, in the light of the circumstances
under which they were made, not misleading.
(j) The principal place of business and chief executive office
(as such terms are used in the UCC) of the Seller and the office(s) where the
Seller keeps its records concerning the Receivables are located at the address
set forth under its signature to this Agreement.
(k) The names and addresses of all the Deposit Banks, together
with the account numbers of the Deposit Accounts of the Seller at such Deposit
Banks, are specified in SCHEDULE II to the Agreement (or at such other Deposit
Banks and/or with such other Deposit Accounts as have been notified to and
consented by the Insurer in accordance with the Agreement).
[Amended and Restated
III-2 Receivables Purchase Agreement]
(l) The Seller is not in violation of any order of any court,
arbitrator or Governmental Authority.
(m) Neither the Seller nor any Affiliate of the Seller has any
direct or indirect ownership or other financial interest in any Purchaser, the
Insurer, the Agent or any Purchaser Agent.
(n) No proceeds of any purchase or reinvestment will be used for
any purpose that violates any applicable law, rule or regulation, including,
without limitation, Regulations T, U and X of the Federal Reserve Board.
(o) Each Pool Receivable included as an Eligible Receivable in
the calculation of the Net Receivables Pool Balance is an Eligible Receivable as
of the date of such calculation.
(p) No event has occurred and is continuing, or would result
from a purchase in respect of, or reinvestment in respect of, any Participation
or from the application of the proceeds therefrom, which constitutes a
Termination Event.
(q) The Seller and the Servicer have complied in all material
respects with the Credit and Collection Policy with regard to each Receivable.
(r) The Seller has complied with all of the terms, covenants
and agreements contained in the Agreement and the other Transaction Documents
and applicable to it.
(s) The Seller's complete corporate name is set forth in the
preamble to the Agreement, and the Seller does not use and has not during the
last six years used any other corporate name, trade name, doing-business name or
fictitious name, except as set forth on SCHEDULE III and except for names first
used after the date of the Agreement and set forth in a notice delivered to the
Agent and the Insurer pursuant to PARAGRAPH (l)(vi) of EXHIBIT IV.
(t) The authorized capital stock of Seller consists of 1,000
shares of common stock, no par value, 100 shares of which are currently issued
and outstanding. All of such outstanding shares are validly issued, fully paid
and nonassessable and are owned (beneficially and of record) by AFC.
(u) Except as set forth on SCHEDULE V, the Seller has filed
all federal and other tax returns and reports required by law to have been filed
by it and has paid all taxes and governmental charges thereby shown to be owing.
(v) The Seller is not an "investment company" within the meaning
of the Investment Company Act of 1940, as amended.
[Amended and Restated
III-3 Receivables Purchase Agreement]
(w) No "accumulated funding deficiency" (within the meaning of
Section 412 of the Internal Revenue Code or Section 302 of ERISA) exists with
respect to any Single Employer Plan, and each Single Employer Plan has complied
in all material respects with the applicable provisions of ERISA and the
Internal Revenue Code. The present value of all accrued benefits under each
Single Employer Plan (based on those assumptions used to fund such Plans) did
not, as of the last annual valuation date prior to the date on which this
representation is made or deemed made, exceed the value of the assets of such
Plan allocable to such accrued benefits. Neither the Seller nor any ERISA
Affiliate has had a complete or partial withdrawal from any Multiemployer Plan,
and neither the Seller nor any ERISA Affiliate would become subject to any
liability under ERISA if the Seller or any such ERISA Affiliate were to withdraw
completely from all Multiemployer Plans as of the valuation date most closely
preceding the date on which this representation is made or deemed made. No such
Multiemployer Plan is in Reorganization or Insolvent.
B. REPRESENTATIONS AND WARRANTIES OF THE SERVICER. The Servicer
represents and warrants as follows:
(a) The Servicer is a corporation duly incorporated and in
existence under the laws of the State of Indiana, and is duly qualified to do
business, and is in good standing, as a foreign corporation in every
jurisdiction where the nature of its business requires it to be so qualified
except where the failure to so qualify has not had and could not reasonably be
expected to have a Material Adverse Effect.
(b) The execution, delivery and performance by the Servicer of
the Agreement and the other Transaction Documents to which it is a party, (i)
are within the Servicer's corporate powers, (ii) have been duly authorized by
all necessary corporate action on the part of the Servicer, (iii) do not
contravene or result in a default under or conflict with (1) the Servicer's
charter or by-laws, (2) any law, rule or regulation applicable to the Servicer,
(3) any contractual restriction binding on or affecting the Servicer or its
property or (4) any order, writ, judgment, award, injunction or decree binding
on or affecting the Servicer or its property, and (iv) do not result in or
require the creation of any Adverse Claim upon or with respect to any of its
properties, where, in the cases of items (2), (3) and (4), such contravention,
default or conflict has had or could reasonably be expected to have a Material
Adverse Effect. The Agreement and the other Transaction Documents to which it is
a party have been duly executed and delivered by the Servicer.
(c) No authorization or approval or other action by, and no
notice to or filing with, any Governmental Authority or other Person is required
for the due execution, delivery and performance by the Servicer of the Agreement
or any other Transaction Document to which it is a party.
(d) Each of the Agreement and the other Transaction Documents
to which it is a party constitutes the legal, valid and binding obligation of
the Servicer enforceable against the
[Amended and Restated
III-4 Receivables Purchase Agreement]
Servicer 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) There is no pending or threatened action or proceeding
affecting the Servicer before any Governmental Authority or arbitrator which
could have a Material Adverse Effect.
(f) The Servicer has complied in all material respects with
the Credit and Collection Policy with regard to each Receivable.
(g) the Servicer is not subject to any order, judgment,
decree, injunction, stipulation or consent order of or with any Governmental
Authority or arbitrator, that, could reasonably be expected to have a Material
Adverse Effect.
(h) Each Servicer Report, Portfolio Certificate, information,
exhibit, financial statement, document, book, record or report furnished or to
be furnished at any time by or on behalf of the Seller to the Agent, the Insurer
or any Purchaser Agent in connection with the Agreement is or will be accurate
in all material respects as of its date or (except as otherwise disclosed to the
Agent, the Insurer and any such Purchaser Agent at such time) as of the date so
furnished, and no such item contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact necessary in order
to make the statements contained therein, in the light of the circumstances
under which they were made, not misleading.
(i) The principal place of business and chief executive office
(as such terms are used in the UCC) of the Servicer and the office(s) where the
Servicer keeps its records concerning the Receivables are located at the address
set forth under its signature to this Agreement.
(j) The Servicer is not in violation of any order of any court,
arbitrator or Governmental Authority.
(k) Neither the Servicer nor any Affiliate of the Servicer has
any direct or indirect ownership or other financial interest in any Purchaser,
the Insurer, the Agent or any Purchaser Agent.
(l) The Servicer is not an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
[Amended and Restated
III-5 Receivables Purchase Agreement]
EXHIBIT IV
COVENANTS
COVENANTS OF THE SELLER AND THE SERVICER. Until the latest of the
Termination Date, the date on which no Investment of or Discount in respect of
any Participation shall be outstanding or the date all other amounts owed by the
Seller under the Agreement to the Purchasers, the Insurer, the Purchaser Agents,
the Agent and any other Indemnified Party or Affected Person shall be paid in
full:
(a) COMPLIANCE WITH LAWS, ETC. Each of the Seller and the
Servicer shall comply in all material respects with all applicable laws, rules,
regulations and orders, and preserve and maintain its corporate existence,
rights, franchises, qualifications, and privileges except to the extent that the
failure so to comply with such laws, rules and regulations or the failure so to
preserve and maintain such existence, rights, franchises, qualifications, and
privileges would not materially adversely affect the collectibility of the
Receivables or the enforceability of any related Contract or the ability of the
Seller or the Servicer to perform its obligations under any related Contract or
under the Agreement.
(b) OFFICES, RECORDS AND BOOKS OF ACCOUNT, ETC. The Seller
shall provide the Agent and the Insurer with at least 60 days' written notice
prior to making any change in the Seller's name or jurisdiction of organization
or making any other change in the Seller's identity or corporate structure
(including a merger) which could impair or otherwise render any UCC financing
statement filed in connection with this Agreement "seriously misleading" as such
term is used in the applicable UCC; each notice to the Agent or the Insurer
pursuant to this sentence shall set forth the applicable change and the proposed
effective date thereof. The Seller and Servicer will also maintain and implement
administrative and operating procedures (including, without limitation, an
ability to recreate records evidencing Receivables and related Contracts in the
event of the destruction of the originals thereof), and keep and maintain all
documents, books, records, computer tapes and disks and other information
reasonably necessary or advisable for the collection of all Receivables
(including, without limitation, records adequate to permit the daily
identification of each Receivable and all Collections of and adjustments to each
existing Receivable).
(c) PERFORMANCE AND COMPLIANCE WITH CONTRACTS AND CREDIT AND
COLLECTION POLICY. Each of the Seller and the Servicer shall, at its expense,
timely and fully perform and comply with all material provisions, covenants and
other promises required to be observed by it under the Contracts related to the
Receivables, and timely and fully comply in all material respects with the
Credit and Collection Policy with regard to each Receivable and the related
Contract.
(d) OWNERSHIP INTEREST, ETC. The Seller shall, at its expense,
take all action necessary or desirable to establish and maintain a valid and
enforceable undivided ownership
[Amended and Restated
IV-1 Receivables Purchase Agreement]
interest, to the extent of the Aggregate Participation, in the Pool Receivables
and the Related Security and Collections and other proceeds with respect
thereto, and a first priority perfected security interest in the items described
in SECTION 1.2(d), in each case free and clear of any Adverse Claim excepting
only Permitted Liens, in favor of the Agent (for the benefit of the Secured
Parties), including, without limitation, taking such action to perfect, protect
or more fully evidence the interest of the Agent (for the benefit of the Secured
Parties) under the Agreement as the Agent and the Insurer may request.
(e) SALES, LIENS, ETC. The Seller shall not sell, assign (by
operation of law or otherwise) or otherwise dispose of, or create or suffer to
exist any Adverse Claim (excepting only Permitted Liens) upon or with respect
to, any or all of its right, title or interest in, to or under, any item
described in SECTION 1.2(d) (including without limitation the Seller's undivided
interest in any Receivable, Related Security, or Collections, or upon or with
respect to any account to which any Collections of any Receivables are sent), or
assign any right to receive income in respect of any items contemplated by this
PARAGRAPH (e).
(f) EXTENSION OR AMENDMENT OF RECEIVABLES. After the
occurrence and during the continuance of a Termination Event or an Unmatured
Termination Event or after the Termination Date (or if a Termination Event or
Unmatured Termination Event would result therefrom), neither the Seller nor the
Servicer shall extend the maturity or adjust the Outstanding Balance or
otherwise modify the terms of any Pool Receivable in any material respect, or
amend, modify or waive any term or condition of any related Contract in any
material respect.
(g) CHANGE IN BUSINESS OR CREDIT AND COLLECTION POLICY.
Neither the Seller nor the Servicer shall make any material change in the
character of its business or in the Credit and Collection Policy, or any change
in the Credit and Collection Policy that would adversely affect the
collectibility of the Receivables Pool or the enforceability of any related
Contract or the ability of the Seller or Servicer to perform its obligations
under any related Contract or under the Agreement. Neither the Seller nor the
Servicer shall make any other material change in the Credit and Collection
Policy without the prior written consent of the Insurer and the Agent.
(h) AUDITS. Each of the Seller and the Servicer shall, from
time to time during regular business hours, upon reasonable prior notice as
requested by the Agent or the Insurer, permit the Agent or the Control Party, or
their agents or representatives, (i) to examine and make copies of and abstracts
from all books, records and documents (including, without limitation, computer
tapes and disks) in the possession or under the control of the Seller or the
Servicer relating to Receivables and the Related Security, including, without
limitation, the related Contracts, and (ii) to visit the offices and properties
of the Seller and the Servicer for the purpose of examining such materials
described in clause (i) above, and to discuss matters relating to Receivables
and the Related Security or the Seller's or Servicer's performance hereunder or
under the Contracts with any of the officers, employees, agents or contractors
of the Seller having knowledge of such matters; PROVIDED that so long as no
Termination Event or Unmatured Termination Event has occurred the Control Party
(or if the Control Party is the Majority
[Amended and Restated
IV-2 Receivables Purchase Agreement]
Purchasers, the Agent) shall not conduct more than two such examinations in any
year (including any examinations conducted pursuant to any other Transaction
Document). The Control Party agrees to notify the Agent of such examinations and
agrees that the Agent can be present at such examinations.
(i) CHANGE IN DEPOSIT BANKS, DEPOSIT ACCOUNTS AND PAYMENT
INSTRUCTIONS TO OBLIGORS. Neither the Seller nor the Servicer shall add or
terminate any bank as a Deposit Bank or any account as a Deposit Account from
those listed in SCHEDULE II to the Agreement without (i) the prior written
consent of the Control Party and (ii) in the case of a new Deposit Account
and/or Deposit Bank, the applicable Deposit Bank has executed, and the
applicable Deposit Account is subject to, a Deposit Account Agreement consented
to in writing by the Control Party and the Agent.
(j) DEPOSIT ACCOUNTS. Each Deposit Account shall at all times
be subject to a Deposit Account Agreement. Neither the Seller nor the Servicer
will deposit or otherwise credit, or cause or permit to be so deposited or
credited, to any Deposit Account, the Liquidation Account or the Cash Reserve
Account cash or cash proceeds other than Collections of Pool Receivables.
(k) MARKING OF RECORDS. At its expense, the Seller (or the
Servicer on its behalf) shall mark its master data processing records relating
to Pool Receivables and related Contracts, including with a legend evidencing
that the undivided percentage ownership interests with regard to the Aggregate
Participation related to such Receivables and related Contracts have been sold
in accordance with the Agreement.
(l) REPORTING REQUIREMENTS. The Seller will provide to the
Agent, each Purchaser Agent and the Insurer (in multiple copies, if requested by
the Agent) (except that with respect to PARAGRAPHS (i), (ii), (iii) and (iv) the
Seller will cause the Servicer to provide to the Agent, each Purchaser Agent and
the Insurer and the Servicer will deliver to the Agent, each Purchaser Agent and
the Insurer the following:
(i) as soon as available and in any event within 45 days after
the end of the first three quarters of each fiscal year of AFC in
a format acceptable to the Agent and the Insurer the
consolidating balance sheet of AFC, its consolidated subsidiaries
and Seller as of the end of such quarter and statements of income
of AFC and its consolidated subsidiaries and income statements of
the Seller for the period commencing at the end of the previous
fiscal year and ending with the end of such quarter, certified by
the chief financial officer of such Person;
(ii) as soon as available and in any event within 90 days
after the end of each fiscal year of AFC, (A) a copy of the
annual report for AFC and its consolidated subsidiaries,
containing financial statements for such year audited by
PricewaterhouseCoopers LLP or other independent certified public
accountants
[Amended and Restated
IV-3 Receivables Purchase Agreement]
acceptable to the Control Party (or if the Control Party is the
Majority Purchasers, the Agent) and (B) the consolidating balance
sheet of AFC and the income statement of the Seller for such year
certified by the chief financial officer of the Seller;
(iii) (a) as soon as available and in any event not later than
the Servicer Report Date, a Servicer Report as of the calendar
month ended immediately prior to such Servicer Report Date and
(b) unless the Control Party (or if the Control Party is the
Majority Purchasers, the Agent) has otherwise agreed in writing,
a Portfolio Certificate as of the last Business Day of every
calendar week, delivered on the third Business Day of the next
calendar week;
(iv) as soon as possible and in any event within three days
after the occurrence of each Termination Event and Unmatured
Termination Event, a statement of the chief financial officer of
the Seller setting forth details of such Termination Event or
event and the action that the Seller has taken and proposes to
take with respect thereto;
(v) promptly after the filing or receiving thereof, copies of
all reports and notices that the Seller or any ERISA Affiliate
files with respect to a Plan under ERISA or the Internal Revenue
Code with the Internal Revenue Service or the Pension Benefit
Guaranty Corporation or the U.S. Department of Labor or that the
Seller or any ERISA Affiliate receives from any of the foregoing
or from any Multiemployer Plan to which the Seller or any ERISA
Affiliate is or was, within the preceding five years, a
contributing employer, in each case in respect of the assessment
of withdrawal liability or an event or condition which could, in
the aggregate, result in the imposition of liability on the
Seller and/or any such ERISA Affiliate in excess of $250,000;
(vi) at least 60 days prior to any change in the Seller's name
or any other change requiring the amendment of UCC financing
statements, a notice setting forth such changes and the effective
date thereof;
(vii) such other information respecting the Receivables, the
Related Security (including inventory reports by branch, Obligor,
vehicle identification number, and other descriptions sufficient
to identify the Related Security) or the condition of operations,
financial or otherwise, of the Seller or AFC as the Agent, the
Insurer or any Purchaser Agent may from time to time reasonably
request;
(viii) promptly after the Seller obtains knowledge thereof,
notice of any (a) litigation, investigation or proceeding which
may exist at any time between the Seller, the Servicer or the
Originator, on the one hand, and any Governmental Authority
which, if not cured or if adversely determined, as the case may
be,
[Amended and Restated
IV-4 Receivables Purchase Agreement]
would have a Material Adverse Effect, or (b) litigation or
proceeding adversely affecting the Seller or any of its
subsidiaries, the Servicer or the Originator, as the case may be,
in which the amount involved, in the case of the Servicer or
Originator, is $100,000 or more and not covered by insurance or
in which injunctive or similar relief is sought or (c) litigation
or proceeding relating to any Transaction Document;
(ix) promptly after the occurrence thereof, notice of any event
or circumstance that could reasonably be expected to have a
Material Adverse Effect;
(x) notice of any material change to the Credit and Collection
Policy; and
(xi) as soon as possible and in any event within 30 days after
the Seller knows or has reason to know of: (i) the occurrence or
expected occurrence of any Reportable Event with respect to any
Plan that is a Single Employer Plan, a failure to make any
required contribution to a Plan, the creation of any lien in
favor of the Pension Benefit Guaranty Corporation or a Plan or
any withdrawal from, or the termination, Reorganization or
Insolvency of, any Multiemployer Plan or (ii) the institution of
proceedings or the taking of any other action by the Pension
Benefit Guaranty Corporation or the Seller or any ERISA Affiliate
or any Multiemployer Plan with respect to the withdrawal from, or
the terminating, Reorganization or Insolvency of any Plan.
(m) SEPARATE CORPORATE EXISTENCE. Each of the Seller and the Servicer
hereby acknowledges that the Purchasers, the Insurer, the Agent and the
Purchaser Agents are entering into the transactions contemplated by the
Agreement and the Transaction Documents in reliance upon the Seller's identity
as a legal entity separate from the Servicer and the Originator. Therefore, from
and after the date hereof, the Seller and the Servicer shall take all reasonable
steps to continue the Seller's identity as a separate legal entity and to make
it apparent to third Persons that the Seller is an entity with assets and
liabilities distinct from those of the Servicer, the Originator and any other
Person, and is not a division of the Servicer or the Originator or any other
Person. Without limiting the generality of the foregoing and in addition to and
consistent with the covenant set forth in PARAGRAPH (a) of this EXHIBIT IV, the
Seller and the Servicer shall take such actions as shall be required in order
that:
(i) The Seller will be a limited purpose corporation
whose primary activities are restricted in its articles of
incorporation to purchasing Receivables from the Originator, entering
into agreements for the servicing of such Receivables, selling
undivided interests in such Receivables and conducting such other
activities as it deems necessary or appropriate to carry out its
primary activities;
(ii) Not less than one member of Seller's Board of
Directors (the "INDEPENDENT DIRECTORS") shall be individuals who are
not direct, indirect or beneficial
[Amended and Restated
IV-5 Receivables Purchase Agreement]
stockholders, officers, directors, employees, affiliates, associates,
customers or suppliers of the Originator or any of its Affiliates. The
Seller's Board of Directors shall not approve, or take any other action
to cause the commencement of a voluntary case or other proceeding with
respect to the Seller under any applicable bankruptcy, insolvency,
reorganization, debt arrangement, dissolution or other similar law, or
the appointment of or taking possession by, a receiver, liquidator,
assignee, trustee, custodian, or other similar official for the Seller
unless in each case the Independent Directors shall approve the taking
of such action in writing prior to the taking of such action. The
Independent Directors' fiduciary duty shall be to the Seller (and
creditors) and not to the Seller's shareholders in respect of any
decision of the type described in the preceding sentence. In the event
an Independent Director resigns or otherwise ceases to be a director of
the Seller, there shall be selected a replacement Independent Director
who shall not be an individual within the proscriptions of the first
sentence of this CLAUSE (ii) or any individual who has any other type
of professional relationship with the Originator or any of its
Affiliates or any management personnel of any such Person or Affiliate
and who shall be (x) a tenured professor at a business or law school,
(y) a retired judge or (z) an established independent member of the
business community, having a sound reputation and experience relative
to the duties to be performed by such individual as an Independent
Director;
(iii) No Independent Director shall at any time serve as
a trustee in bankruptcy for Originator or any Affiliate thereof;
(iv) Any employee, consultant or agent of the Seller
will be compensated from the Seller's own bank accounts for services
provided to the Seller except as provided herein in respect of the
Servicing Fee. The Seller will engage no agents other than a Servicer
for the Receivables, which Servicer will be fully compensated for its
services to the Seller by payment of the Servicing Fee;
(v) The Seller will contract with the Servicer to
perform for the Seller all operations required on a daily basis to
service its Receivables. The Seller will pay the Servicer a monthly fee
based on the level of Receivables being managed by the Servicer. The
Seller will not incur any material indirect or overhead expenses for
items shared between the Seller and the Originator or any Affiliate
thereof which are not reflected in the Servicing Fee. To the extent, if
any, that the Seller and the Originator or any Affiliate thereof share
items of expenses not reflected in the Servicing Fee, such as legal,
auditing and other professional services, such expenses will be
allocated to the extent practical on the basis of actual use or the
value of services rendered, and otherwise on a basis reasonably related
to the actual use or the value of services rendered, it being
understood that Originator shall pay all expenses relating to the
preparation, negotiation, execution and delivery of the Transaction
Documents, including, without limitation, legal and other fees;
[Amended and Restated
IV-6 Receivables Purchase Agreement]
(vi) The Seller's operating expenses will not be paid by
Originator or any Affiliate thereof unless the Seller shall have agreed
in writing with such Person to reimburse such Person for any such
payments;
(vii) The Seller will have its own separate mailing
address and stationery;
(viii) The Seller's books and records will be maintained
separately from those of the Originator or any Affiliate thereof;
(ix) Any financial statements of the Originator or ADESA
which are consolidated to include the Seller will contain detailed
notes clearly stating that the Seller is a separate corporate entity
and has sold ownership interests in the Seller's accounts receivable;
(x) The Seller's assets will be maintained in a manner
that facilitates their identification and segregation from those of the
Originator and any Affiliate thereof;
(xi) The Seller will strictly observe corporate
formalities in its dealings with the Originator and any Affiliate
thereof, and funds or other assets of the Seller will not be commingled
with those of the Originator or any Affiliate thereof. The Seller shall
not maintain joint bank accounts or other depository accounts to which
the Originator or any Affiliate thereof (other than AFC in its capacity
as Servicer) has independent access and shall not pool any of the
Seller's funds at any time with any funds of the Originator or any
Affiliate thereof;
(xii) The Seller shall pay to the Originator the marginal
increase (or, in the absence of such increase, the market amount of its
portion) of the premium payable with respect to any insurance policy
that covers the Seller and any Affiliate thereof, but the Seller shall
not, directly or indirectly, be named or enter into an agreement to be
named, as a direct or contingent beneficiary or loss payee, under any
such insurance policy, with respect to any amounts payable due to
occurrences or events related to the Originator or any Affiliate
thereof (other than the Seller); and
(xiii) The Seller will maintain arm's length relationships
with the Originator and any Affiliate thereof. The Originator or any
Affiliate thereof that renders or otherwise furnishes services to the
Seller will be compensated by the Seller at market rates for such
services. Neither the Seller nor the Originator or any Affiliate
thereof will be or will hold itself out to be responsible for the debts
of the other or the decisions or actions respecting the daily business
and affairs of the other.
(n) MERGERS, ACQUISITIONS, SALES, ETC.
(i) The Seller shall not:
[Amended and Restated
IV-7 Receivables Purchase Agreement]
CONFIDENTIAL TREATMENT
(A) be a party to any merger or consolidation, or
directly or indirectly purchase or otherwise acquire, whether in
one or a series of transactions, 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 sell, transfer, assign,
convey or lease any of its property and assets (including,
without limitation, any Pool Receivable or any interest therein)
other than pursuant to this Agreement;
(B) make, incur or suffer to exist an investment in,
equity contribution to, loan, credit or advance to, or payment
obligation in respect of the deferred purchase price of property
from, any other Person, except for obligations incurred pursuant
to the Transaction Documents; or
(C) create any direct or indirect Subsidiary or otherwise
acquire direct or indirect ownership of any equity interests in
any other Person.
(o) RESTRICTED PAYMENTS.
(i) GENERAL RESTRICTION. Except in accordance with
SUBPARAGRAPH (ii), the Seller shall not (A) purchase or redeem any
shares of its capital stock, [ * ] (C) prepay, purchase or redeem
any subordinated indebtedness of the Seller, (D) lend or advance any
funds or (E) repay any loans or advances to, for or from the
Originator. Actions of the type described in this CLAUSE (i) are herein
collectively called "RESTRICTED PAYMENTS".
(ii) TYPES OF PERMITTED PAYMENTS. Subject to the
limitations set forth in CLAUSE (iii) below, the Seller may make
Restricted Payments so long as such Restricted Payments are made only
to the Originator and only in one or more of the following ways:
(A) Seller may make cash payments (including
prepayments) on the Company Note in accordance with its terms;
and
(B) if no amounts are then outstanding under the
Company Note, the Seller may declare and pay Dividends.
(iii) SPECIFIC RESTRICTIONS. [ * ]
[Amended and Restated
IV-8 Receivables Purchase Agreement]
* TEXT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
CONFIDENTIAL TREATMENT
(B) any Restricted Payment [ * ] if, after giving
effect thereto, any Termination Event or Unmatured Termination
Event shall have occurred and be continuing.
(p) USE OF SELLER'S SHARE OF COLLECTIONS. Subject to CLAUSE
(o) above, the Seller shall apply its share of Collections to make payments in
the following order of priority: FIRST, the payment of its expenses (including,
without limitation, the obligations payable to Purchasers, the Affected Persons,
the Agent, the Insurer, the Purchaser Agents and the Agent under the Transaction
Documents), SECOND, the payment of accrued and unpaid interest on the Company
Note, THIRD, the payment of the outstanding principal amount of the Company
Note, and FOURTH, other legal and valid corporate purposes permitted by the
Agreement.
(q) AMENDMENTS TO CERTAIN DOCUMENTS.
(i) The Seller shall not amend, supplement, amend and
restate, or otherwise modify the Purchase and Sale Agreement, the
Company Note, any other document executed under the Purchase and Sale
Agreement, the Deposit Account Agreements or the Seller's articles of
incorporation or by-laws, except (A) in accordance with the terms of
such document, instrument or agreement and (B) with the prior written
consent of the Control Party (or if the Control Party is the Majority
Purchasers, the Agent).
(ii) The Originator shall not enter into or otherwise
become bound by, any agreement, instrument, document or other
arrangement that restricts its right to amend, supplement, amend and
restate or otherwise modify, or to extend or renew, or to waive any
right under, this Agreement or any other Transaction Document.
(r) INCURRENCE OF INDEBTEDNESS. The Seller shall not (i)
create, incur or permit to exist, any Debt or liability or (ii) cause or permit
to be issued for its account any letters of credit or bankers' acceptances,
except for Debt incurred pursuant to the Company Note and liabilities incurred
pursuant to or in connection with the Transaction Documents or otherwise
permitted therein.
(s) LOT CHECKS. The Seller shall, or shall cause the
Originator to, conduct Lot Checks of the Obligors according to the Originator's
customary practices or such more frequent intervals as may reasonably be
requested by the Control Party (or if the Control Party is the Majority
Purchasers, the Agent).
[Amended and Restated
IV-9 Receivables Purchase Agreement]
* TEXT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
EXHIBIT V
TERMINATION EVENTS
Each of the following shall be a "Termination Event":
(a) Any Person which is the Servicer shall fail to (1) make
when due any payment or deposit to be made by it under the Agreement or any
other Transaction Document or (2) set aside or allocate all accrued and unpaid
Premium, Program Fee, Discount or Servicing Fee in accordance with SECTION
1.4(b) and in each case, such failure shall remain unremedied for two Business
Days after the earlier of (i) the Servicer's knowledge of such failure and (ii)
notice to the Servicer of such failure; or
(b) The Seller shall fail (i) to transfer to any successor
Servicer when required any rights, pursuant to the Agreement, which the Seller
then has with respect to the servicing of the Pool Receivables, or (ii) to make
any payment required under the Agreement or any other Transaction Document, and
in either case such failure shall remain unremedied for two Business Days after
notice or discovery thereof; or
(c) Any representation or warranty made or deemed made by the
Seller or the Servicer (or any of their respective officers) under or in
connection with the Agreement or any other Transaction Document or any
information or report delivered by the Seller or the Servicer pursuant to the
Agreement or any other Transaction Document shall prove to have been incorrect,
incomplete (with respect to such information or report delivered) or untrue in
any material respect when made or deemed made or delivered; PROVIDED, HOWEVER,
if the violation of this PARAGRAPH (c) by the Seller or the Servicer may be
cured without any potential or actual detriment to any Purchaser, the Agent, any
Purchaser Agent, the Insurer or any Program Support Provider, the Seller or the
Servicer, as applicable, shall have 30 days from the earlier of (i) such
Person's knowledge of such failure and (ii) notice to such Person of such
failure to so cure any such violation before a Termination Event shall occur so
long as such Person is diligently attempting to effect such cure; or
(d) The Seller or the Servicer shall fail to perform or
observe any other material term, covenant or agreement contained in the
Agreement or any other Transaction Document on its part to be performed or
observed and any such failure shall remain unremedied for 30 days after the
earlier of (i) such Person's knowledge of such failure and (ii) notice to such
Person of such failure (or, with respect to a failure to deliver the Servicer
Report or the Portfolio Certificate pursuant to the Agreement, such failure
shall remain unremedied for five days); or
(e) (i) A default shall occur in the payment when due (subject
to any applicable grace period), whether by acceleration or otherwise, of any
Debt of either the Seller, AFC or ADESA or (ii) a default shall occur in the
performance or observance of any obligation or condition with respect to such
Debt if the effect of such default is to accelerate the maturity of
[Amended and Restated
V-1 Receivables Purchase Agreement]
CONFIDENTIAL TREATMENT
any such Debt and in the case of either CLAUSE (i) or CLAUSE (ii), the Debt with
respect to which non-payment and/or non-performance shall have occurred exceeds,
at any point in time, with respect to the Seller or AFC, [ * ] for all such
occurrences or, with respect to ADESA, [ * ] for all such occurrences; or
(f) The Agreement or any purchase or any reinvestment pursuant
to the Agreement shall for any reason (other than pursuant to the terms hereof)
(i) cease to create, or the Aggregate Participation shall for any reason cease
to be, a valid and enforceable perfected undivided percentage ownership interest
to the extent of the Aggregate Participation in each Pool Receivable and the
Related Security and Collections and other proceeds with respect thereto, free
and clear of any Adverse Claim, excepting only Permitted Liens or (ii) cease to
create with respect to the items described in SECTION 1.2(d), or the interest of
the Agent (for the benefit of the Secured Parties) with respect to such items
shall cease to be, a valid and enforceable first priority perfected security
interest, free and clear of any Adverse Claim, excepting only Permitted Liens;
or
(g) The Originator, ADESA, ALLETE or Seller shall generally
not pay its debts as such debts become due, or shall admit in writing its
inability to pay its debts generally, or shall make a general assignment for the
benefit of creditors; or any proceeding shall be instituted by or against the
Originator, ADESA, ALLETE or Seller seeking to adjudicate it a bankrupt or
insolvent, or seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief, or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of debtors, or
seeking the entry of an order for relief or the appointment of a receiver,
trustee, custodian or other similar official for it or for any substantial part
of its property and, in the case of any such proceeding instituted against it
(but not instituted by it), either such proceeding shall remain undismissed or
unstayed for a period of 45 days, or any of the actions sought in such
proceeding (including, without limitation, the entry of an order for relief
against, or the appointment of a receiver, trustee, custodian or other similar
official for, it or for any substantial part of its property) shall occur; or
the Originator, ADESA, ALLETE or Seller shall take any corporate action to
authorize any of the actions set forth above in this PARAGRAPH (g); or
(h) As of the last day of any calendar month, the arithmetic
average of the Default Ratios for the most recent three calendar months shall
[ * ] as of the last day [ * ]; or
(i) As of the last day of any calendar month, the arithmetic
average of the Delinquency Ratios for the most recent three calendar months
shall [ * ] as of the last day [ * ]; or
(j) The Net Spread shall be [ * ] at any time; or
[Amended and Restated
V-2 Receivables Purchase Agreement]
* TEXT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
CONFIDENTIAL TREATMENT
(k) At any time the aggregate of all Participations [ * ]
and such condition shall continue [ * ] after any date any Servicer Report or
Portfolio Certificate is required to be delivered; or
(l) A Change in Control shall occur; or
(m) (i) Any "accumulated funding deficiency" (within the
meaning of Section 412 of the Internal Revenue Code or Section 302 of ERISA),
whether or not waived, shall exist with respect to any Plan, (ii) a Reportable
Event shall occur with respect to, or proceedings shall commence to have a
trustee appointed, or a trustee shall be appointed, to administer or to
terminate, any Single Employer Plan, which Reportable Event or commencement of
proceedings or appointment of a trustee is, in the reasonable opinion of the
Control Party, likely to result in the termination of such Plan for purposes of
Title IV of ERISA, (iii) the Seller or any ERISA Affiliate shall, or in the
reasonable opinion of the Control Party, is likely to, incur any liability in
connection with a withdrawal from, or the Insolvency or Reorganization of, a
Multiemployer Plan, (iv) the Internal Revenue Service shall file notice of a
lien pursuant to Section 6323 of the Internal Revenue Code with regard to any
assets of the Seller or any ERISA Affiliate and such lien shall not have been
released within ten Business Days, or the Pension Benefit Guaranty Corporation
shall, or shall indicate its intention to, file notice of a lien pursuant to
Section 4068 of ERISA or perfect a lien under Section 302(f) of ERISA with
regard to any of the assets of Seller or any ERISA Affiliate, or (v) any other
adverse event or condition shall occur or exist with respect to a Plan; and in
each case in CLAUSES (i), (ii), (iii), (iv) and (v) above, such event or
condition, together with all other such events or conditions, if any, could
reasonably be expected to involve an aggregate amount of liability to the Seller
or an ERISA Affiliate in excess of $250,000.
(n) The Tangible Net Worth of the Seller shall be [ * ]
or the Tangible Net Worth of the Originator shall be less than the result of:
(A) [ * ] for each fiscal quarter of the Originator that, at the time of
determination, has concluded for which net income of the Originator was [ * ]
commencing with the fiscal quarter ending September 30, 2002.
(o) Any material adverse change shall occur in the reasonable
business judgment of the Control Party (or if the Control Party is the Majority
Purchasers, the Agent and the Majority Purchasers) in the collectibility of the
Receivables or the business, operations, property or financial condition of the
Originator or the Seller; or
(p) Any Purchase and Sale Termination Event (as defined in the
Purchase and Sale Agreement) shall occur (whether or not waived by the Seller);
or
(q) The Performance Guaranty shall cease to be in full force
and effect with respect to ADESA, ADESA shall fail to comply with or perform any
provision of the Performance Guaranty, or ADESA (or any Person by, through or on
behalf of ADESA) shall
[Amended and Restated
V-3 Receivables Purchase Agreement]
* TEXT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
CONFIDENTIAL TREATMENT
contest in any manner the validity, binding nature or enforceability of the
Performance Guaranty with respect to ADESA; or
(r) The sum of all of AFC's Debt (including intercompany loans
between AFC and ALLETE and between AFC and ADESA), plus the Investment of the
Aggregate Participation, plus the outstanding balance of any other non-recourse
transactions [ * ] on a quarterly basis; or
(s) An Insurer Default has occurred and is continuing; or
(t) Funds have been advanced by the Insurer under the Policy;
or
(u) The aggregate Outstanding Balances of Eligible Receivables
then in the Receivables Pool [ * ]
(v) The amount on deposit in the Cash Reserve Account shall at
any time fail to equal or exceed the Cash Reserve [ * ]; or
(w) (i) any of the Originator, the Seller or the Servicer
shall have asserted that any of the Transaction Documents to which it is a party
is not valid and binding on the parties thereto; or (ii) any court, governmental
authority or agency having jurisdiction over any of the parties to any of the
Transaction Documents or any property thereof shall find or rule that any
material provisions of any of the Transaction Documents is not valid and binding
on the parties thereto and all appeals therefrom have been decided or the time
to appeal has run.
[Amended and Restated
V-4 Receivables Purchase Agreement]
* TEXT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
CONFIDENTIAL TREATMENT
EXHIBIT VI
PORTFOLIO CERTIFICATE
AFC FUNDING CORPORATION
PORTFOLIO CERTIFICATE
AS OF:
-----------
To: BMO Nesbitt Burns Corp., as Agent
Reference is made to the Amended and Restated Receivables Purchase
Agreement, dated as of May , 2002 (herein as amended or otherwise modified from
time to time, called the "RECEIVABLES PURCHASE AGREEMENT"), among AFC Funding
Corporation (the "SELLER"), Automotive Finance Corporation (the "SERVICER"),
Fairway Finance Corporation, as a Purchaser and such other entities from time to
time as may become purchasers thereunder, BMO Nesbitt Burns Corp., as Agent and
purchaser Agent for Fairway Finance Corporation and XL Capital Assurance Inc.,
as Insurer. Capitalized terms used but not otherwise defined herein are used as
defined in the Receivables Purchase Agreement.
The Seller hereby certifies and warrants to you that the following is a
true and correct computation as of , 200 .
---- --
1. NET RECEIVABLES POOL BALANCE
----------------------------
A. [ * ] $
---------------
B. [ * ] $
---------------
C. [ * ] $
---------------
VI-1
* TEXT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
CONFIDENTIAL TREATMENT
D. [ * ] $
---------------
E. [ * ] $
---------------
2. COLLECTIONS
-----------
[ * ] $
--------------
3. PARTICIPATION OUTSTANDING
-------------------------
[ * ] $
--------------
[ * ] YES/NO
VI-2
* TEXT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
IN WITNESS WHEREOF, the Seller has caused this Certificate to be
executed and delivered by its duly authorized officer this day of , 200 .
-- -- --
AFC FUNDING CORPORATION,
as Servicer
By
-------------------------------
Name:
-----------------------------
Title:
---------------------------
VI-3
EXHIBIT VII
PERFECTION REPRESENTATIONS, WARRANTIES AND COVENANTS
In addition to the representations, warranties and covenants contained
in the Agreement, to induce Purchasers and Agent to enter into the Agreement
and, in the case of Purchasers, to purchase the Participation hereunder, the
Seller hereby represents, warrants and covenants to Agent and the Purchasers as
to itself as follows on the Closing Date and on the date of each purchase and
reinvestment in the Participation thereafter:
GENERAL
1. The Agreement creates a valid and continuing security interest
(as defined in the Indiana UCC) in the Receivables in favor of the Agent, for
the benefit of the Secured Parties, which security interest is prior to all
other Adverse Claims, and is enforceable as such as against creditors of and
purchasers from the Seller.
2. The Receivables constitute "accounts," "payment intangibles,"
"general intangibles," "instruments" or "tangible chattel paper," within the
meaning of the Indiana UCC.
3. The Cash Reserve Account, the Deposit Account and the
Liquidation Account and all subaccounts of such accounts, constitute either a
"deposit account" or a "securities account" within the meaning of the Indiana
UCC.
4. Originator has taken all steps necessary to perfect its security
interest against the Obligors in the property securing the Receivables that
constitute chattel paper.
CREATION
5. The Seller owns and has good and marketable title to the
Receivables free and clear of any Adverse Claim, claim or encumbrance of any
Person, excepting only Permitted Liens.
6. Originator has received all consents and approvals to the sale
of the Receivables hereunder to the Seller required by the terms of the
Receivables that constitute instruments or payment intangibles.
[Amended and Restated
VII-1 Receivables Purchase Agreement]
CONFIDENTIAL TREATMENT
PERFECTION
7. Each of the Originator and the Seller has caused or will have
caused, [ * ] the filing of all appropriate financing statements in the proper
filing office in the appropriate jurisdictions under applicable law in order to
perfect the sale of the Receivables from Originator to the Seller pursuant to
the Purchase and Sale Agreement and the security interest therein granted by the
Seller to the Agent, for the benefit of the Secured Parties, hereunder; and
Originator has in its possession the original copies of such instruments or
tangible chattel paper that constitute or evidence the Receivables, and all
financing statements referred to in this paragraph contain a statement to the
effect that: A purchase of or security interest in any collateral described in
this financing statement will violate the rights of the Agent, for the benefit
of the Secured Parties.
8. With respect to Receivables that constitute an instrument or
tangible chattel paper:
Such instruments or tangible chattel paper is in the possession
of the Servicer and the Agent has received a written
acknowledgment from the Servicer that the Servicer is holding
such instruments or tangible chattel paper solely on behalf and
for the benefit of the Agent, on behalf of the Secured Parties,
and each of the Originator and the Seller has caused or will
have caused, [ * ] the filing of all appropriate financing
statements in the proper filing office in the appropriate
jurisdictions under applicable law, and all financing
statements referred to in this paragraph contain a statement
to the effect that: A purchase of or security interest in any
collateral described in this financing statement will violate
the rights of the Agent, for the benefit of the Secured
Parties.
9. With respect to the Cash Reserve Account, the Deposit Account
and the Liquidation Account and all subaccounts of such accounts that constitute
deposit accounts, either:
(i) The Seller has delivered to the Agent, for the benefit of
the Secured Parties, a fully executed agreement pursuant to
which the bank maintaining the deposit accounts has agreed to
comply with all instructions originated by the Agent, for the
benefit of the Secured Parties, directing disposition of the
funds in such accounts without further consent by the Seller;
or
(ii) The Seller has taken all steps necessary to cause the
Agent, on behalf of the Secured Parties, to become the account
holder of such accounts.
[Amended and Restated
VII-2 Receivables Purchase Agreement]
* TEXT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
10. With respect to the Cash Reserve Account, the Deposit Account
and the Liquidation Account or subaccounts of such accounts that constitute
"securities accounts" or "securities entitlements" within the meaning of the
Indiana UCC:
(i) The Seller has delivered to the Agent, for the benefit of
the Secured Parties, a fully executed agreement pursuant to
which the securities intermediary has agreed to comply with all
instructions originated by the Agent, for the benefit of the
Secured Parties, relating to such account without further
consent by the Seller; or
(ii) The Seller has taken all steps necessary to cause the
securities intermediary to identify in its records the Agent,
for the benefit of the Secured Parties, as the person having a
security entitlement against the securities intermediary in
each of such accounts.
PRIORITY
11. Other than the transfer of the Receivables to the Seller under
the Purchase and Sale Agreement and the security interest granted to the Agent,
for the benefit of the Secured Parties, pursuant to this Agreement, neither the
Seller nor the Originator has pledged, assigned, sold, granted a security
interest in, or otherwise conveyed any of the Receivables or the Cash Reserve
Account, the Deposit Account, the Liquidation Account or any subaccount of such
accounts. Neither the Seller nor the Originator has authorized the filing of, or
is aware of any financing statements against the Seller or the Originator that
include a description of collateral covering the Receivables or the Cash Reserve
Account, the Deposit Account, the Liquidation Account or any subaccount of such
accounts other than any financing statement relating to the security interest
granted to the Agent, for the benefit of the Secured Parties, hereunder or that
has been terminated.
12. Neither the Seller nor the Originator is aware of any judgment,
ERISA or tax lien filings against either the Seller or the Originator.
13. None of the instruments or tangible chattel paper that
constitute or evidence the Receivables has any marks or notations indicating
that they have been pledged, assigned or otherwise conveyed to any Person other
than the Seller or the Agent, for the benefit of the Secured Parties.
14. Neither the Cash Reserve Account, the Deposit Account, the
Liquidation Account nor any subaccount of such accounts are in the name of any
person other than the Seller or the Agent, on behalf of the Secured Parties. The
Seller has not consented to the securities intermediary of any such account to
comply with entitlement orders of any person other than the Agent, on behalf of
the Secured Parties.
[Amended and Restated
VII-3 Receivables Purchase Agreement]
15. SURVIVAL OF PERFECTION REPRESENTATIONS. Notwithstanding any
other provision of the Agreement or any other Transaction Document, the
Perfection Representations contained in this Exhibit VII shall be continuing,
and remain in full force and effect (notwithstanding any termination of the
commitments or any replacement of the Servicer or termination of Servicer's
rights to act as such) until such time as Investments and all other obligations
under the Agreement have been finally and fully paid and performed.
16. NO WAIVER. The parties to the Agreement: (i) shall not, without
obtaining a confirmation of the then-current rating of the Notes, waive any of
the Perfection Representations; (ii) shall provide the Ratings Agencies with
prompt written notice of any breach of the Perfection Representations, and shall
not, without obtaining a confirmation of the then-current rating of the Notes
(as determined after any adjustment or withdrawal of the ratings following
notice of such breach) waive a breach of any of the Perfection Representations.
17. SERVICER TO MAINTAIN PERFECTION AND PRIORITY. The Servicer
covenants that, in order to evidence the interests of the Agent, on behalf of
the Secured Parties, under this Agreement, Servicer shall take such action, or
execute and deliver such instruments (other than effecting a Filing (as defined
below), unless such Filing is effected in accordance with this paragraph) as may
be necessary or advisable including, without limitation, such actions as are
requested by the Agent, on behalf of the Secured Parties, to maintain and
perfect, as a first priority interest (subject only to Permitted Liens), the
Agent's, on behalf of the Secured Parties', security interest in the
Receivables, Related Security and Collections. Servicer shall, from time to time
and within the time limits established by law, prepare and present to the Agent,
on behalf of the Secured Parties, for the Agent, on behalf of the Secured
Parties, to authorize (based in reliance on the opinion of counsel hereinafter
provided for) the Servicer to file, all financing statements, amendments,
continuations, initial financing statements in lieu of a continuation statement,
terminations, partial terminations, releases or partial releases, or any other
filings necessary or advisable to continue, maintain and perfect the Agent's, on
behalf of the Secured Parties' security interest in the Receivables, Related
Security and Collections as a first-priority interest (subject only to Permitted
Liens) (each a "Filing"). Servicer shall present each such Filing to the Agent,
on behalf of the Secured Parties, together with (x) an opinion of counsel as to
perfection and such other matters as the Control Party (or if the Control Party
is the Majority Purchasers, the Agent) may reasonably request with respect to
such Filing, and (y) a form of authorization for the Agent's, on behalf of the
Secured Parties' signature. Upon receipt of such opinion of counsel and form of
authorization, the Agent, on behalf of the Secured Parties, shall promptly
authorize in writing Servicer to, and Servicer shall, effect such Filing under
the Uniform Commercial Code without the signature of Originator, the Seller, or
the Agent, on behalf of the Secured Parties where allowed by applicable law.
Notwithstanding anything else in the Agreement to the contrary, the Servicer
shall not have any authority to effect a Filing without obtaining written
authorization from the Agent, on behalf of the Secured Parties, in accordance
with this paragraph (17).
[Amended and Restated
VII-4 Receivables Purchase Agreement]
Exhibit 10(b)
CONFIDENTIAL TREATMENT
AMENDED AND RESTATED
PURCHASE AND SALE AGREEMENT
Dated as of May 31, 2002
between
AFC FUNDING CORPORATION
and
AUTOMOTIVE FINANCE CORPORATION
TABLE OF CONTENTS
PAGE
ARTICLE I
AGREEMENT TO PURCHASE AND CONTRIBUTE
1.1. Agreement to Purchase and Sell.........................................-2-
1.2. Timing of Purchases....................................................-3-
1.3. Consideration for Purchases............................................-3-
1.4. Purchase and Sale Termination Date.....................................-3-
1.5. Intention of the Parties...............................................-3-
1.6. Certain Definitions....................................................-4-
ARTICLE II
CALCULATION OF PURCHASE PRICE
2.1. Calculation of Purchase Price..........................................-5-
ARTICLE III
CONTRIBUTION OF RECEIVABLES;
PAYMENT OF PURCHASE PRICE
3.1. Contribution of Receivables............................................-6-
3.2. Initial Purchase Price Payment.........................................-6-
3.3. Subsequent Purchase Price Payments.....................................-6-
3.4. Settlement as to Specific Receivables..................................-7-
3.5. Reconveyance of Receivables............................................-8-
ARTICLE IV
CONDITIONS OF PURCHASES
4.1. Conditions Precedent to Initial Purchase...............................-8-
4.2. Certification as to Representations and Warranties.....................-9-
4.3. Conditions Precedent to Effectiveness of this Agreement................-9-
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE ORIGINATOR
5.1. Organization and Good Standing........................................-11-
-i-
TABLE OF CONTENTS
(continued)
PAGE
5.2. Due Qualification.....................................................-11-
5.3. Power and Authority; Due Authorization................................-11-
5.4. Valid Sale or Contribution; Binding Obligations.......................-12-
5.5. No Violation..........................................................-12-
5.6. Proceedings...........................................................-12-
5.7. Bulk Sales Act........................................................-12-
5.8. Government Approvals..................................................-13-
5.9. Financial Condition...................................................-13-
5.10. Margin Regulations...................................................-13-
5.11. Quality of Title.....................................................-13-
5.12. Accuracy of Information..............................................-13-
5.13. Offices..............................................................-14-
5.14. Trade Names..........................................................-14-
5.15. Taxes................................................................-14-
5.16. Licenses and Labor Controversies.....................................-14-
5.17. Compliance with Applicable Laws......................................-14-
5.18. Reliance on Separate Legal Identity..................................-15-
5.19. Purchase Price.......................................................-15-
5.20. Eligibility of Receivables...........................................-15-
5.21. Perfection Representations...........................................-15-
5.22. Credit and Collection Policy.........................................-15-
5.23. Transaction Documents................................................-15-
ARTICLE VI
COVENANTS OF THE ORIGINATOR
6.1. Affirmative Covenants.................................................-15-
6.2. Reporting Requirements................................................-18-
6.3. Negative Covenants....................................................-19-
ARTICLE VII
ADDITIONAL RIGHTS AND OBLIGATIONS INRESPECT OF THE RECEIVABLES
7.1. Rights of the Company.................................................-20-
7.2. Responsibilities of the Originator....................................-20-
7.3. Further Action Evidencing Purchases...................................-21-
7.4. Application of Collections............................................-21-
-ii-
TABLE OF CONTENTS
(continued)
PAGE
ARTICLE VIII
PURCHASE AND SALE TERMINATION EVENTS
8.1. Purchase and Sale Termination Events..................................-22-
8.2. Remedies..............................................................-23-
ARTICLE IX
INDEMNIFICATION
9.1. Indemnities by the Originator.........................................-24-
ARTICLE X
MISCELLANEOUS
10.1. Amendments, etc......................................................-27-
10.2. Notices, etc.........................................................-27-
10.3. No Waiver; Cumulative Remedies.......................................-27-
10.4. Binding Effect; Assignability........................................-27-
10.5. Governing Law........................................................-28-
10.6. Costs, Expenses and Taxes............................................-28-
10.7. Submission to Jurisdiction...........................................-28-
10.8. Waiver of Jury Trial.................................................-29-
10.9. Captions and Cross References; Incorporation by Reference............-29-
10.10. Execution in Counterparts...........................................-29-
10.11. Acknowledgment and Agreement........................................-29-
SCHEDULES
SCHEDULE 1.1(b) Excluded Receivables
SCHEDULE 5.13 Office Locations
SCHEDULE 5.14 Trade Names
SCHEDULE 5.15 Tax Matters
-iii-
EXHIBITS
EXHIBIT A Form of Purchase Report
EXHIBIT B Form of Company Note
-iv-
AMENDED AND RESTATED PURCHASE AND SALE AGREEMENT
THIS AMENDED AND RESTATED PURCHASE AND SALE AGREEMENT (as amended,
supplemented or modified from time to time, this "AGREEMENT"), dated as of May
31, 2002, is between AUTOMOTIVE FINANCE CORPORATION, an Indiana corporation (the
"ORIGINATOR"), as seller, and AFC FUNDING CORPORATION, an Indiana corporation
(the "COMPANY"), as purchaser.
Upon the effectiveness of this Agreement, the terms and provisions of
the Purchase and Sale Agreement dated as of December 31, 1996 (as amended or
otherwise modified prior to the date hereof, the "ORIGINAL PURCHASE AND SALE
AGREEMENT") shall, subject to this paragraph, be superseded hereby in their
entirety. Notwithstanding the amendment and restatement of the Original Purchase
and Sale Agreement by this Agreement, the Originator shall continue to be liable
for all unpaid amounts accrued to the date hereof and owing by it under the
Original Purchase and Sale Agreement and all agreements thereunder to indemnify
such parties in connection with events or conditions arising or existing prior
to the date that the conditions are satisfied in SECTION 4.3 hereof (the
"AMENDED AND RESTATED CLOSING DATE"). Upon the effectiveness of this Agreement,
each reference to the Original Purchase and Sale Agreement in any other
document, instrument or agreement shall mean and be a reference to this
Agreement.
DEFINITIONS
Unless otherwise indicated in this Agreement, certain terms that are
capitalized and used throughout this Agreement are defined in EXHIBIT I to the
Amended and Restated Receivables Purchase Agreement of even date herewith (as
amended, supplemented or otherwise modified from time to time, the "RECEIVABLES
PURCHASE AGREEMENT"), among the Company, the Originator, as initial Servicer,
Fairway Finance Corporation and such other entities from time to time as may
become purchasers thereunder as purchasers (together with their successors and
assigns, the "PURCHASERS"), and BMO NESBITT BURNS CORP., as the initial agent
and as purchaser agent for Fairway Finance Corporation (together with its
successors and assigns, the "AGENT") and XL Capital Assurance Inc., as Insurer
(the "INSURER").
BACKGROUND
1. The Company is a special purpose corporation, all of the capital
stock of which is wholly-owned by the Originator.
2. On the Original Closing Date (as defined below), the Originator
transferred certain Receivables and Related Rights to the Company as a capital
contribution to the Company.
3. In order to finance its business, the Originator wishes to sell
certain Receivables and Related Rights from time to time to the Company, and the
Company is willing, on the terms and subject to the conditions set forth herein,
to purchase such Receivables and Related Rights from the Originator.
4. The Company intends to sell to Purchasers an undivided variable
percentage interest in its Receivables and Related Rights pursuant to the
Receivables Purchase Agreement in order to finance its purchases of certain
Receivables and Related Rights hereunder.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the parties hereto agree as follows:
ARTICLE I
AGREEMENT TO PURCHASE AND CONTRIBUTE
1.1. AGREEMENT TO PURCHASE AND SELL. On the terms and subject to the
conditions set forth in this Agreement (including ARTICLE IV), and in
consideration of the Purchase Price, the Originator agrees to sell to the
Company, and does hereby sell to the Company, and the Company agrees to purchase
from the Originator, and does hereby purchase from the Originator, without
recourse and without regard to collectibility, all of the Originator's right,
title and interest in and to:
(a) each Receivable of the Originator that existed and was owing to the
Originator as of the opening of the Originator's business on December 31, 1996
(the "ORIGINAL CLOSING DATE") (other than the Receivables and Related Rights
contributed by the Originator to the Company pursuant to SECTION 3.1 (the
"CONTRIBUTED RECEIVABLES"));
(b) each Receivable created or originated by the Originator from the
opening of the Originator's business on the Original Closing Date to and
including the Purchase and Sale Termination Date (other than any Excluded
Receivables identified from time on SCHEDULE 1.1(b) and consented to by the
Agent and the Insurer, as such Schedule may be amended, supplemented or modified
from time to time with the consent of the Agent and the Insurer);
(c) all rights to, but not the obligations under, all Related Security
(other than with respect to the Contributed Receivables);
(d) all monies due or to become due with respect to any of the
foregoing;
(e) all books and records related to any of the foregoing; and
(f) all proceeds thereof (as defined in the UCC) received or applied on
or after the Original Closing Date including, without limitation, all funds
which either are received by the Originator, the Company or the Servicer from or
on behalf of the Obligors in payment of any
-2-
amounts owed (including, without limitation, finance charges, interest and all
other charges) in respect of any Receivable (other than Contributed
Receivables), or that are (or are to be) applied to amounts owed in respect of
any such Receivable (including, without limitation, insurance payments and net
proceeds of the sale or other disposition of vehicles or other collateral or
property of the related Obligor or any other Person directly or indirectly
liable for the payment of any such Receivable that are (or are to be) applied
thereto).
All purchases and contributions hereunder shall be made without recourse, but
shall be made pursuant to and in reliance upon the representations, warranties
and covenants of the Originator, in its capacity as seller and contributor, set
forth in each Transaction Document. The Company's foregoing commitment to
purchase such Receivables and the proceeds and rights described in SUBSECTIONS
(c) through (f) of this SECTION 1.1 (collectively, including such item relating
to Contributed Receivables, the "RELATED RIGHTS") is herein called the "PURCHASE
FACILITY."
1.2. TIMING OF PURCHASES.
(a) ORIGINAL CLOSING DATE PURCHASES. The Originator's entire right,
title and interest in (i) each Receivable that existed and was owing to the
Originator as of the opening of the Originator's business on the Original
Closing Date (other than Contributed Receivables), and (ii) all Related Rights
with respect thereto was sold to the Company on the Original Closing Date.
(b) REGULAR PURCHASES. After the Original Closing Date, each Receivable
created or originated by the Originator and all Related Rights shall be
purchased and owned by the Company (without any further action) upon the
creation or origination of such Receivable (other than any Excluded Receivables
created or originated by the Originator from the opening of the Originator's
business on the Amended and Restated Closing Date to and including the Purchase
and Sale Termination Date).
1.3. CONSIDERATION FOR PURCHASES. On the terms and subject to the
conditions set forth in this Agreement, the Company agrees to make all Purchase
Price payments to the Originator.
1.4. PURCHASE AND SALE TERMINATION DATE. The "PURCHASE AND SALE
TERMINATION DATE" shall be the earlier to occur of (a) the date of the
termination of this Agreement pursuant to SECTION 8.2 and (b) the Payment Date
immediately following the day on which the Originator shall have given notice to
the Company that the Originator desires to terminate this Agreement.
As used herein, "PAYMENT DATE" means (i) the Original Closing Date and
(ii) each Business Day thereafter that the Originator is open for business.
1.5. INTENTION OF THE PARTIES. It is the express intent of the parties
hereto that the transfers of the Receivables (other than Contributed
Receivables) and Related Rights (other than those relating to the Contributed
Receivables) by the Originator to the Company, as contemplated by this Agreement
be, and be treated as, sales and not as secured loans secured by the Receivables
and
-3-
Related Rights. If, however, notwithstanding the intent of the parties, such
transactions are deemed to be loans, the Originator hereby grants to the Company
a security interest in all of the Originator's right, title and interest in and
to the Receivables and the Related Rights now existing and hereafter created,
all monies due or to become due and all amounts received with respect thereto,
and all proceeds thereof, to secure all of the Originator's obligations
hereunder.
1.6. CERTAIN DEFINITIONS. As used in this Agreement, the terms
"Material Adverse Effect" and "Solvent" are defined as follows:
"MATERIAL ADVERSE EFFECT" means, with respect to any event or
circumstance, a material adverse effect on:
(i) the business, operations, property or financial condition
of the Originator;
(ii) the ability of the Originator or the Servicer (if it is the
Originator) to perform its obligations under the Receivables Purchase
Agreement or any other Transaction Document to which it is a party or
the performance of any such obligations;
(iii) the validity or enforceability of the Receivables Purchase
Agreement or any other Transaction Document;
(iv) the status, existence, perfection, priority or
enforceability of the Company's interest in the Receivables or Related
Rights; or
(v) the collectibility of the Receivables.
"SOLVENT" means, with respect to any Person at any time, a
condition under which:
(i) the fair value and present fair saleable value of such
Person's total assets is, on the date of determination, greater than
such Person's total liabilities (including contingent and unliquidated
liabilities) at such time;
(ii) such Person is and shall continue to be able to pay all of
its liabilities as such liabilities mature; and
(iii) such Person does not have unreasonably small capital with
which to engage in its current and in its anticipated business.
For purposes of this definition:
(A) the amount of a Person's contingent or unliquidated
liabilities at any time shall be that amount which, in light of all the
facts and circumstances then existing,
-4-
represents the amount which can reasonably be expected to become an
actual or matured liability;
(B) the "fair value" of an asset shall be the amount which may
be realized within a reasonable time either through collection or sale
of such asset at its regular market value;
(C) the "regular market value" of an asset shall be the amount
which a capable and diligent business person could obtain for such
asset from an interested buyer who is willing to purchase such asset
under ordinary selling conditions; and
(D) the "present fair saleable value" of an asset means the
amount which can be obtained if such asset is sold with reasonable
promptness in an arm's length transaction in an existing and not
theoretical market.
ARTICLE II
CALCULATION OF PURCHASE PRICE
2.1. CALCULATION OF PURCHASE PRICE. On each Servicer Report Date, the
Servicer shall deliver to the Company, the Agent, the Insurer and the Originator
(if the Servicer is other than the Originator) a report in substantially the
form of EXHIBIT A (each such report being herein called a "PURCHASE REPORT")
with respect to the matters set forth therein and the Company's purchases of
Receivables from the Originator
(a) that were made on the Original Closing Date (in the case of the
Purchase Report delivered on the Original Closing Date), or
(b) that were made during the period commencing on the Servicer Report
Date immediately preceding such Servicer Report Date to (but not including) such
Servicer Report Date (in the case of each subsequent Purchase Report).
The "PURCHASE PRICE" (to be paid to the Originator in accordance with the terms
of ARTICLE III) for the Receivables and the Related Rights that are purchased
hereunder shall be the fair market value of the Receivables as agreed to from
time to time by the Company and the Originator.
-5-
CONFIDENTIAL TREATMENT
ARTICLE III
CONTRIBUTION OF RECEIVABLES;
PAYMENT OF PURCHASE PRICE
3.1. CONTRIBUTION OF RECEIVABLES. On the Original Closing Date, the
Originator contributed to the capital of the Company, Receivables and Related
Rights with respect thereto consisting of each Receivable of the Originator that
existed and was owing to the Originator on the Original Closing Date that as of
such date was not an Eligible Receivable and Receivables that existed and were
owing to the Originator on the Original Closing Date that as of such date were
Eligible Receivables, beginning with the oldest of such Eligible Receivables and
continuing chronologically thereafter, and all or an undivided interest in the
most recent of such contributed Eligible Receivables such that the aggregate
Outstanding Balance of all such contributed Receivables [ * ].
3.2. INITIAL PURCHASE PRICE PAYMENT. On the terms and subject to the
conditions set forth in this Agreement, the Company agreed to pay to the
Originator the Purchase Price for the purchase of Receivables made on the
Original Closing Date, [ * ].
3.3. SUBSEQUENT PURCHASE PRICE PAYMENTS. On each Business Day falling
after the Original Closing Date and on or prior to the Purchase and Sale
Termination Date, on the terms and subject to the conditions set forth in this
Agreement, the Company shall pay to the Originator the Purchase Price for the
Receivables sold by the Originator to the Company on such Business Day, in cash,
to the extent funds are available to make such payment and such payment is
permitted by paragraph (o) of Exhibit IV to the Receivables Purchase Agreement,
[ * ].
Servicer shall make all appropriate record keeping entries with respect
to the Company Note or otherwise to reflect the foregoing payments and
adjustments pursuant to SECTION 3.4, and Servicer's books and records shall
constitute rebuttable presumptive evidence of the principal amount of and
accrued interest on the Company Note at any time. Furthermore, Servicer shall
hold the Company Note for the benefit of the Originator, and all payments under
the Company Note shall be made to the Servicer for the account of the applicable
payee thereof. The Originator hereby irrevocably authorizes Servicer to mark the
Company Note "CANCELLED" and to return the Company Note to the Company upon the
final payment thereof after the occurrence of the Purchase and Sale Termination
Date.
-6-
* TEXT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
3.4. SETTLEMENT AS TO SPECIFIC RECEIVABLES AND DILUTION.
(a) If on the day of purchase or contribution of any Receivable from
the Originator hereunder, any of the representations or warranties set forth in
SECTION 5.4, 5.11 or 5.20 is not true with respect to such Receivable or as a
result of any action or inaction of the Originator, on any day any of the
representations or warranties set forth in SECTION 5.4, 5.11 or 5.20 is no
longer true with respect to such a Receivable, then the Purchase Price with
respect to the Receivables purchased hereunder shall be reduced by an amount
equal to the Outstanding Balance of such Receivable and shall be accounted to
the Originator as provided in SUBSECTION (c) below; PROVIDED, that if the
Company thereafter receives payment on account of Collections due with respect
to such Receivable, the Company promptly shall deliver such funds to the
Originator.
(b) If, on any day, the Outstanding Balance of any Receivable
purchased or contributed hereunder is reduced or adjusted as a result of any
discount, rebate or other adjustment made by the Originator, Company or Servicer
or any setoff or dispute between the Company, the Originator or the Servicer and
an Obligor, then the Purchase Price with respect to the Receivables purchased
hereunder shall be reduced by the amount of such reduction and shall be
accounted to the Originator as provided in SUBSECTION (c) below.
(c) Any reduction in the Purchase Price of the Receivables pursuant
to SUBSECTION (a) or (b) above shall be applied as a credit for the account of
the Company against the Purchase Price of Receivables subsequently purchased by
the Company from the Originator hereunder; PROVIDED, HOWEVER if there have been
no purchases of Receivables (or insufficiently large purchases of Receivables)
to create a Purchase Price sufficient to so apply such credit against, the
amount of such credit
(i) shall be paid in cash to the Company by the Originator in
the manner and for application as described in the following proviso,
or
(ii) shall be deemed to be a payment under, and shall be
deducted from the principal amount outstanding under, the Company Note,
to the extent that such payment is permitted under paragraph (o) of
Exhibit IV of the Receivables Purchase Agreement;
PROVIDED, FURTHER, that at any time (y) when a Termination Event or Unmatured
Termination Event exists or (z) on or after the Termination Date, the amount of
any such credit shall be paid by the Originator to the Company by deposit in
immediately available funds into the Collection Account for application by
Servicer to the same extent as if Collections of the applicable Receivable in
such amount had actually been received on such date.
(d) Each Purchase Report (other than the Purchase Report delivered on
the Original Closing Date) shall include, in respect of the Receivables
previously generated by the Originator (including the Contributed Receivables),
a calculation of the aggregate reductions described in SUBSECTION (a) or (b)
relating to such Receivables since the last Purchase Report delivered hereunder.
-7-
3.5. RECONVEYANCE OF RECEIVABLES. In the event that the Originator
has paid to the Company the full Outstanding Balance of any Receivable pursuant
to SECTION 3.4, the Company shall reconvey such Receivable to the Originator,
without representation or warranty, but free and clear of all liens created by
the Company.
ARTICLE IV
CONDITIONS OF PURCHASES
4.1. CONDITIONS PRECEDENT TO INITIAL PURCHASE. The initial purchase
under the Original Purchase and Sale Agreement was subject to the condition
precedent that the Company shall have received, on or before the Original
Closing Date, the following, each (unless otherwise indicated) dated the
Original Closing Date, and each in form, substance and date satisfactory to the
Company:
(a) A copy of the resolutions of the Board of Directors of the
Originator approving the Transaction Documents to be delivered by it and the
transactions contemplated hereby and thereby, certified by the Secretary or
Assistant Secretary of the Originator;
(b) A Certificate of Existence for the Originator issued as of a
recent date by the Indiana Secretary of State;
(c) A certificate of the Secretary or Assistant Secretary of the
Originator certifying the names and true signatures of the officers authorized
on the Originator's behalf to sign the Transaction Documents to be delivered by
it (on which certificate the Company and the Servicer (if other than the
Originator) may conclusively rely until such time as the Company and the
Servicer shall receive from the Originator a revised certificate meeting the
requirements of this SUBSECTION (c));
(d) The articles of incorporation of the Originator together with
a copy of the by-laws of the Originator, each duly certified by the Secretary or
an Assistant Secretary of the Originator;
(e) Copies of the proper financing statements (Form UCC-1) that have
been duly executed and name the Originator as the assignor and the Company as
the assignee (and Purchaser as assignee of the Company) of the Receivables
generated by the Originator and Related Rights or other, similar instruments or
documents, as may be necessary or, in Servicer's or the Agent's opinion,
desirable under the UCC of all appropriate jurisdictions or any comparable law
of all appropriate jurisdictions to perfect the Company's ownership interest in
all Receivables and Related Rights in which an ownership interest may be
transferred to it hereunder;
(f) A written search report from a Person satisfactory to Servicer
and the Agent listing all effective financing statements that name the
Originator as debtor or assignor and that are filed in the jurisdictions in
which filings were made pursuant to the foregoing SUBSECTION (e), together with
-8-
copies of such financing statements (none of which, except for those described
in the foregoing SUBSECTION (e), shall cover any Receivable or any Related
Right), and tax and judgment lien search reports from a Person satisfactory to
Servicer and the Agent showing no evidence of such liens filed against the
Originator;
(g) Favorable opinions of Warren W. Byrd, Esq., general counsel
to the Originator and Ice Miller Donadio and Ryan, special counsel to the
Originator, concerning enforceability of this Agreement and certain other
matters, and Ice Miller Donadio and Ryan, concerning certain bankruptcy matters,
and such other opinions as the Company may reasonably request;
(h) Evidence (i) of the execution and delivery by each of the parties
thereto of each of the other Transaction Documents to be executed and delivered
in connection herewith and (ii) that each of the conditions precedent to the
execution, delivery and effectiveness of such other Transaction Documents has
been satisfied to the Company's satisfaction; and
(i) A certificate from an officer of the Originator to the effect
that Servicer and the Originator have placed on the most recent, and have taken
all steps reasonably necessary to ensure that there shall be placed on
subsequent, summary master control data processing reports the following legend
(or the substantive equivalent thereof): "THE RECEIVABLES DESCRIBED HEREIN HAVE
BEEN SOLD TO AFC FUNDING CORPORATION PURSUANT TO A PURCHASE AND SALE AGREEMENT,
DATED AS OF DECEMBER 31, 1996, BETWEEN AUTOMOTIVE FINANCE CORPORATION AND AFC
FUNDING CORPORATION; AND AN INTEREST IN THE RECEIVABLES DESCRIBED HEREIN HAS
BEEN GRANTED TO POOLED ACCOUNTS RECEIVABLE CAPITAL CORPORATION, PURSUANT TO A
RECEIVABLES PURCHASE AGREEMENT, DATED AS OF DECEMBER 31, 1996, AMONG AFC FUNDING
CORPORATION, AS SELLER, AUTOMOTIVE FINANCE CORPORATION, AS SERVICER, POOLED
ACCOUNTS RECEIVABLE CAPITAL CORPORATION, AS PURCHASER AND NESBITT BURNS
SECURITIES INC., AS AGENT."
4.2. CERTIFICATION AS TO REPRESENTATIONS AND WARRANTIES. The
Originator, by accepting the Purchase Price (including by the increase in the
outstanding balance of the Company Note) related to each purchase of Receivables
and Related Rights shall be deemed to have certified that the representations
and warranties contained in ARTICLE V are true and correct on and as of such
day, with the same effect as though made on and as of such day.
4.3. CONDITIONS PRECEDENT TO EFFECTIVENESS OF THIS AGREEMENT. This
Agreement shall become effective when each of the conditions precedent in this
SECTION 4.3 has been satisfied on or before the Amended and Restated Closing
Date. The effectiveness of this Agreement shall be subject to the condition
precedent that the Company, the Agent and the Insurer shall have received, on or
before the Amended and Restated Closing Date, the following, each (unless
otherwise indicated) dated as of the date hereof, and each in form and substance
satisfactory to the Company, the Agent and the Insurer:
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(a) A copy of the resolutions of the Board of Directors of the
Originator approving the Transaction Documents to be delivered by it and the
transactions contemplated hereby and thereby, certified by the Secretary or
Assistant Secretary of the Originator;
(b) A Certificate of Existence for the Originator issued as of a
recent date by the Indiana Secretary of State;
(c) A certificate of the Secretary or Assistant Secretary of the
Originator certifying the names and true signatures of the officers authorized
on the Originator's behalf to sign the Transaction Documents to be delivered by
it (on which certificate the Company, the Agent, the Insurer and the Servicer
(if other than the Originator) may conclusively rely until such time as the
Company, the Agent, the Insurer and the Servicer shall receive from the
Originator a revised certificate meeting the requirements of this SUBSECTION
(c));
(d) The articles of incorporation of the Originator together with a
copy of the by-laws of the Originator, each duly certified as of the Amended and
Restated Closing Date by the Secretary or an Assistant Secretary of the
Originator;
(e) Copies of the proper financing statements (Form UCC-1) that are
suitable for filing and name the Originator as the assignor and the Company as
the assignee (and the Agent (for the benefit of the Secured Parties) as assignee
of the Company) of the Receivables generated by the Originator and Related
Rights or other, similar instruments or documents, as may be necessary or, in
Servicer's, the Insurer's or the Agent's opinion, desirable under the UCC of all
appropriate jurisdictions or any comparable law of all appropriate jurisdictions
to perfect the Company's ownership interest in all Receivables and Related
Rights in which an ownership interest may be transferred to it hereunder;
(f) A written search report as of a recent date from a Person
satisfactory to Servicer, the Insurer and the Agent listing all effective
financing statements that name the Originator as debtor or assignor and that are
filed in the jurisdictions in which filings were made pursuant to the foregoing
SUBSECTION (e), together with copies of such financing statements (none of
which, except for those described in the foregoing SUBSECTION (e), shall cover
any Receivable or any Related Right), and tax and judgment lien search reports
from a Person satisfactory to Servicer, the Insurer and the Agent showing no
evidence of such liens filed against the Originator;
(g) Favorable opinions of Joel G. Garcia, Esq., general counsel to
the Originator and Ice Miller, special counsel to the Originator, concerning
enforceability of this Agreement and certain other matters, and Ice Miller,
concerning certain bankruptcy matters, and such other opinions as the Company,
the Agent or the Insurer may reasonably request;
(h) Evidence (i) of the execution and delivery by each of the parties
thereto of each of the other Transaction Documents to be executed and delivered
in connection herewith and (ii) that each of the conditions precedent to the
execution, delivery and effectiveness of such other
-10-
Transaction Documents has been satisfied to the Company's, the Agent's and the
Insurer's satisfaction; and
(i) A certificate from an officer of the Originator to the effect that
Servicer and the Originator have placed on the most recent, and have taken all
steps reasonably necessary to ensure that there shall be placed on subsequent,
summary master control data processing reports the following legend (or the
substantive equivalent thereof): "THE RECEIVABLES DESCRIBED HEREIN HAVE BEEN
SOLD TO AFC FUNDING CORPORATION PURSUANT TO AN AMENDED AND RESTATED PURCHASE AND
SALE AGREEMENT, DATED AS OF MAY 31, 2002 BETWEEN AUTOMOTIVE FINANCE CORPORATION
AND AFC FUNDING CORPORATION; AND AN INTEREST IN THE RECEIVABLES DESCRIBED HEREIN
HAS BEEN GRANTED TO THE AGENT FOR THE BENEFIT OF THE SECURED PARTIES, PURSUANT
TO AN AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT, DATED AS OF MAY 31,
2002, AMONG AFC FUNDING CORPORATION, AS SELLER, AUTOMOTIVE FINANCE CORPORATION,
AS SERVICER, FAIRWAY FINANCE CORPORATION, AND SUCH OTHER ENTITIES FROM TIME TO
TIME AS MAY BECOME PURCHASERS THEREUNDER, BMO NESBITT BURNS CORP. AS AGENT AND
PURCHASER AGENT FOR FAIRWAY FINANCE CORPORATION AND XL CAPITAL ASSURANCE INC.,
AS INSURER."
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE ORIGINATOR
In order to induce the Company to enter into this Agreement and to make
purchases and accept contributions hereunder, the Originator, in its capacity as
seller under this Agreement, hereby makes the representations and warranties set
forth in this ARTICLE V.
5.1. ORGANIZATION AND GOOD STANDING. The Originator has been duly
incorporated and in existence as a corporation under the laws of the State of
Indiana, with power and authority to own its properties and to conduct its
business as such properties are presently owned and such business is presently
conducted.
5.2. DUE QUALIFICATION. The Originator is duly licensed or qualified
to do business as a foreign corporation in good standing in the jurisdiction
where its chief executive office and principal place of business are located and
in all other jurisdictions in which the ownership or lease of its property or
the conduct of its business requires such licensing or qualification except
where the failure to be so licensed or qualified has not had and could not
reasonably be expected to have a Material Adverse Effect.
5.3. POWER AND AUTHORITY; DUE AUTHORIZATION. The Originator has (a)
all necessary corporate power, authority and legal right (i) to execute and
deliver, and perform its obligations under, each
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Transaction Document to which it is a party, as seller, and (ii) to generate,
own, sell, contribute and assign Receivables and Related Rights on the terms and
subject to the conditions herein and therein provided; and (b) duly authorized
such execution and delivery and such sale, contribution and assignment and the
performance of such obligations by all necessary corporate action.
5.4. VALID SALE OR CONTRIBUTION; BINDING OBLIGATIONS. Each sale or
contribution, as the case may be, of Receivables and Related Rights made by the
Originator pursuant to this Agreement shall constitute a valid sale or
contribution, as the case may be, transfer, and assignment thereof to the
Company, enforceable against creditors of, and purchasers from, the Originator;
and this Agreement constitutes, and each other Transaction Document to be signed
by the Originator, as seller, when duly executed and delivered, will constitute,
a legal, valid, and binding obligation of the Originator, enforceable 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 such enforceability is considered in a proceeding in
equity or at law.
5.5. NO VIOLATION. The consummation of the transactions contemplated
by this Agreement and the other Transaction Documents to which the Originator is
a party as seller, and the fulfillment of the terms hereof or thereof will not
(a) conflict with, result in any breach of any of the terms and provisions of,
or constitute (with or without notice or lapse of time or both) a default under
(i) the Originator's articles of incorporation or by-laws, or (ii) any
indenture, loan agreement, mortgage, deed of trust, or other agreement or
instrument to which it is a party or by which it is bound, (b) result in the
creation or imposition of any Adverse Claim upon any of its properties pursuant
to the terms of any such indenture, loan agreement, mortgage, deed of trust, or
other agreement or instrument, other than the Transaction Documents, or (c)
violate any law or any order, writ, judgment, award, injunction, decree, rule,
or regulation applicable to it or its properties, where, in the cases of ITEMS
(a)(ii), (b) or (c), such conflict, breach, default, Adverse Claim or violation
has had or could reasonably be expected to have a Material Adverse Effect.
5.6. PROCEEDINGS. (i) There is no litigation, proceeding or
investigation pending or, to the Originator's knowledge threatened, before any
Government Authority or arbitrator (a) asserting the invalidity of any
Transaction Document to which the Originator is a party as seller, (b) seeking
to prevent the sale or contribution of Receivables and Related Rights to the
Company or the consummation of any of the other transactions contemplated by any
Transaction Document to which the Originator is a party as seller, or (c)
seeking any determination or ruling that could reasonably be expected to have a
Material Adverse Effect. (ii) The Originator is not subject to any order,
judgment, decree, injunction, stipulation or consent order that could reasonably
be expected to have a Material Adverse Effect.
5.7. BULK SALES ACT. No transaction contemplated hereby requires
compliance with any bulk sales act or similar law.
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CONFIDENTIAL TREATMENT
5.8. GOVERNMENT APPROVALS. Except for the filing of the UCC financing
statements referred to in ARTICLE IV, all of which, at the time required in
ARTICLE IV, shall have been duly made and shall be in full force and effect, no
authorization or approval or other action by, and no notice to or filing with,
any governmental authority or regulatory body is required for the Originator's
due execution, delivery and performance of any Transaction Document to which it
is a party, as seller.
5.9. FINANCIAL CONDITION.
(a) On the date hereof, and on the date of each sale of Receivables
by the Originator to the Company (both before and after giving effect to such
sale), the Originator shall be Solvent.
(b) The consolidated balance sheets of the Originator and its
consolidated subsidiaries as of December 31, 2001, and the related statements of
income and shareholders' equity of the Originator and its consolidated
subsidiaries for the fiscal year then ended certified by the Originator's
independent accountants, copies of which have been furnished to the Company,
present fairly the consolidated financial position of the Originator and its
consolidated subsidiaries for the period ended on such date, all in accordance
with generally accepted accounting principles consistently applied; and since
such date no event has occurred that has had, or is reasonably likely to have, a
Material Adverse Effect.
5.10. MARGIN REGULATIONS. No use of any funds acquired by the
Originator under this Agreement will conflict with or contravene any of
Regulations G, T, U and X promulgated by the Board of Governors of the Federal
Reserve System from time to time.
5.11. QUALITY OF TITLE.
(a) Each Receivable (together with the Related Rights) which is to be
sold or contributed to the Company hereunder is or shall be owned by the
Originator, free and clear of any Adverse Claim excepting only Permitted Liens.
Whenever the Company makes a purchase, or accepts a contribution, hereunder, it
shall have acquired a valid and perfected ownership interest (free and clear of
any Adverse Claim, excepting only Permitted Liens) in all Receivables generated
by the Originator and all Collections related thereto, and in the Originator's
entire right, title and interest in and to the other Related Rights with respect
thereto.
[ * ].
5.12. ACCURACY OF INFORMATION. No factual written information furnished
or to be furnished in writing by the Originator, as seller, to the Company, the
Purchasers, the Insurer or the Agent for purposes of or in connection with any
Transaction Document or any transaction contemplated hereby or thereby
(including the information contained in any Purchase Report) is, and no other
such factual
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* TEXT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
written information hereafter furnished (and prepared) by the Originator, as
seller, to the Company, the Purchasers, the Insurer or the Agent pursuant to or
in connection with any Transaction Document, taken as a whole, will be
inaccurate in any material respect as of the date it was furnished or (except as
otherwise disclosed to the Company at or prior to such time) as of the date as
of which such information is dated or certified, or shall contain any material
misstatement of fact or omitted or will omit to state any material fact
necessary to make such information, in the light of the circumstances under
which any statement therein was made, not materially misleading on the date as
of which such information is dated or certified.
5.13. OFFICES. The Originator's principal place of business and
chief executive office is located at the address set forth under the
Originator's signature hereto, and the offices where the Originator keeps all
its books, records and documents evidencing the Receivables, the related
Contracts and all other agreements related to such Receivables are located at
the addresses specified on SCHEDULE 5.13 (or at such other locations, notified
to Servicer (if other than the Originator), the Insurer and the Agent in
accordance with SECTION 6.1(f), in jurisdictions where all action required by
SECTION 7.3 has been taken and completed).
5.14. TRADE NAMES. Except as disclosed on SCHEDULE 5.14, the Originator
does not use any trade name other than its actual corporate name. From and after
the date that fell six years before the date hereof, the Originator has not been
known by any legal name or trade name other than its corporate name as of the
date hereof, nor has the Originator been the subject of any merger or other
corporate reorganization except, in each case, as disclosed on SCHEDULE 5.14.
5.15. TAXES. Except as set forth on SCHEDULE 5.15 the Originator has
filed all tax returns and reports required by law to have been filed by it and
has paid all taxes and governmental charges thereby shown to be owing, except
any such taxes which are not yet delinquent or are being diligently contested in
good faith by appropriate proceedings and for which adequate reserves in
accordance with generally accepted accounting principles shall have been set
aside on its books.
5.16. LICENSES AND LABOR CONTROVERSIES.
(a) The Originator has not failed to obtain any licenses, permits,
franchises or other governmental authorizations necessary to the ownership of
its properties or to the conduct of its business, which violation or failure to
obtain would be reasonably likely to have a Material Adverse Effect; and
(b) There are no labor controversies pending against the Originator
that have had (or are reasonably likely to have) a Material Adverse Effect.
5.17. COMPLIANCE WITH APPLICABLE LAWS. The Originator is in compliance,
in all material respects, with the requirements of (i) all applicable laws,
rules, regulations, and orders of all governmental authorities (including,
without limitation, Regulation Z, laws, rules and regulations relating to usury,
truth in lending, fair credit billing, fair credit reporting, equal credit
opportunity,
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CONFIDENTIAL TREATMENT
fair debt collection practices and privacy and all other consumer laws
applicable to the Receivables and related Contracts) (excluding with respect to
environmental matters which are covered by CLAUSE (ii)), and (ii) to the best of
its knowledge, all applicable environmental laws, rules, regulations and orders
of all governmental authorities.
5.18. RELIANCE ON SEPARATE LEGAL IDENTITY. The Originator is aware that
Purchasers, the Insurer and the Agent are entering into the Transaction
Documents to which they are parties in reliance upon the Company's identity as a
legal entity separate from the Originator.
5.19. PURCHASE PRICE. The purchase price payable by the Company to the
Originator hereunder is intended by the Originator and Company to be consistent
with the terms that would be obtained in an arm's length sale. The Servicing Fee
payable to the Originator is intended to be consistent with terms that would be
obtained in an arm's length servicing arrangement.
5.20. ELIGIBILITY OF RECEIVABLES. Unless otherwise identified to the
Company on the date of the purchase hereunder, each Receivable purchased
hereunder is on the date of purchase an Eligible Receivable and, so long as the
Originator is the Servicer, each Pool Receivable included as an Eligible
Receivable in the calculation of Net Receivables Pool Balance is an Eligible
Receivable as of the date of such calculation.
5.21. PERFECTION REPRESENTATIONS. [ * ].
5.22. CREDIT AND COLLECTION POLICY. The Originator has complied in
all material respects with the Credit and Collection Policy with regard to each
Receivable prior to its transfer hereunder.
5.23. TRANSACTION DOCUMENTS. The Originator has complied in all
material respects with all terms, covenants and agreements contained in this
Agreement and the other Transaction Documents applicable to it prior to the
Amended and Restated Closing Date and will comply in all material respects from
and after the Amended and Restated Closing Date with all terms, covenants and
agreements contained in this Agreement and the other Transaction Documents
applicable to it.
ARTICLE VI
COVENANTS OF THE ORIGINATOR
6.1. AFFIRMATIVE COVENANTS. From the date hereof until the first day
following the Final Payout Date, the Originator will, unless the Company and the
Control Party (or if the Control Party is the Majority Purchasers, the Agent)
shall otherwise consent in writing:
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* TEXT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
(a) COMPLIANCE WITH LAWS, ETC. Comply in all material respects with
all applicable laws, rules, regulations and orders, including those with respect
to the Receivables generated by it and the related Contracts and other
agreements related thereto.
(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 could
reasonably be expected to have a Material Adverse Effect.
(c) RECEIVABLES REVIEW. (i) From time to time during regular
business hours, upon reasonable prior notice as requested by the Company, the
Insurer or the Agent, permit the Company, the Agent or the Control Party, or
their respective agents or representatives, (A) to examine and make copies of
and abstracts from all books, records and documents (including, without
limitation, computer tapes and disks) in the possession or under the control of
the Originator relating to the Receivables and Related Rights, including,
without limitation, the related Contracts, and (B) to visit the Originator's
offices and properties for the purpose of examining such materials described in
the foregoing CLAUSE (A) and to discuss matters relating to the Receivables and
Related Rights or the Originator's performance hereunder or under the Contracts
with any of the officers or employees of the Originator having knowledge of such
matters; and (ii) without limiting the provisions of CLAUSE (i) next above, from
time to time on request of the Insurer or the Agent permit certified public
accountants or other auditors acceptable to the Insurer or the Agent, as
applicable to conduct a review of its books and records with respect to the
Receivables and Related Rights; PROVIDED that so long as no Purchase and Sale
Termination Event or Unmatured Termination Event has occurred the Company, the
Agent, the Control Party, certified public accountants or other auditors
acceptable to the Control Party (or if the Control Party is the Majority
Purchasers, the Agent), as applicable, shall not conduct more than two such
examinations or reviews, as applicable, in any year (including any examinations
conducted pursuant to any other Transaction Document). The Control Party agrees
to notify the Agent of such examinations and agrees that the Agent can be
present at such examinations.
(d) KEEPING OF RECORDS AND BOOKS OF ACCOUNT. Maintain an ability to
recreate records evidencing the Receivables in the event of the destruction of
the originals thereof.
(e) PERFORMANCE AND COMPLIANCE WITH RECEIVABLES AND CONTRACTS. At
its expense timely and fully perform and comply with all provisions, covenants
and other promises required to be observed by it under the related Contracts and
all other agreements related to the Receivables and Related Rights.
(f) LOCATION OF RECORDS, ETC.. (i) Keep its principal place of
business and chief executive office, and the offices where it keeps its records
concerning or related to Receivables and Related Rights, at the address(es)
referred to in SCHEDULE 5.13 or, upon 30 days' prior written notice to the
Company, the Insurer and the Agent, at such other locations in jurisdictions
where all action required
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by SECTION 7.3 shall have been taken and completed, and (ii) provide the
Company, the Insurer and the Agent with at least 60 days' written notice prior
to making any change in its name, jurisdiction of organization or location or
making any other change in its identity or corporate structure (including a
merger) which could render any UCC financing statement filed in connection with
this Agreement "seriously misleading" as such term is used in the UCC (which
written notice sets forth the applicable change and the effective date thereof).
(g) CREDIT AND COLLECTION POLICIES. Comply in all material respects
with its Credit and Collection Policy in connection with the Receivables and the
related Contracts prior to their transfer hereunder.
(h) SEPARATE CORPORATE EXISTENCE OF THE COMPANY. Take such actions
as shall be required in order that:
(i) the Company's operating expenses (other than certain
organization expenses and expenses incurred in connection with the
preparation, negotiation and delivery of the Transaction Documents)
will not be paid by the Originator unless the Company shall have agreed
in writing with the Originator to reimburse the Originator for any such
payments;
(ii) the Originator will have its own separate mailing address
and stationery;
(iii) the Company's books and records will be maintained
separately from those of the Originator;
(iv) any financial statements of the Originator which are
consolidated to include the Company will contain detailed notes clearly
stating that (A) all of the Company's assets are owned by the Company,
and (B) the Company is a separate corporate entity and has sold
ownership interests in the Company's accounts receivable;
(v) the Company's assets will be maintained in a manner that
facilitates their identification and segregation from those of the
Originator;
(vi) the Originator will strictly observe corporate
formalities in its dealing with the Company, and funds or other assets
of the Originator will not be commingled with those of the Company. The
Originator shall not maintain joint bank accounts or other depository
accounts to which the Company has independent access and shall not pool
any of Originator's funds at any time with any funds of the Company;
(vii) the Originator will maintain arm's length relationships
with the Company, and the Originator will be compensated at market
rates for any services it renders or otherwise furnishes to the
Company; and
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CONFIDENTIAL TREATMENT
(viii) the Originator will not be, and will not hold itself
out to be, responsible for the debts of the Company or the decisions or
actions in respect of the daily business and affairs of the Company
(other than with respect to such decisions or actions of the Originator
in its capacity as Servicer).
(i) PERFECTION COVENANT. [ * ].
6.2. REPORTING REQUIREMENTS. From the date hereof until the first
day following the Purchase and Sale Termination Date, the Originator shall,
unless the Agent, the Insurer and the Company shall otherwise consent in
writing, furnish to the Company, the Insurer and the Agent:
(a) PROCEEDINGS. As soon as possible and in any event within three
Business Days after the Originator has knowledge thereof, written notice to the
Company, the Insurer and the Agent of (i) all pending proceedings and
investigations of the type described in SECTION 5.6 not previously disclosed to
the Company, the Insurer and the Agent and (ii) all material adverse
developments that have occurred with respect to any previously disclosed
proceedings and investigations;
(b) as soon as possible and in any event within three Business Days
after the occurrence of each Purchase and Sale Termination Event or event which,
with the giving of notice or lapse of time, or both, would constitute a Purchase
and Sale Termination Event, a statement of the chief financial officer of the
Originator setting forth details of such Purchase and Sale Termination Event or
event and the action that the Originator has taken and proposes to take with
respect thereto;
(c) promptly after the filing or receiving thereof, copies of all
reports and notices that the Originator or any ERISA Affiliate files with
respect to a Plan under ERISA or the Internal Revenue Code with the Internal
Revenue Service or the Pension Benefit Guaranty Corporation or the U.S.
Department of Labor or that the Originator or any ERISA Affiliate receives from
any of the foregoing or from any Multiemployer Plan to which the Originator or
any ERISA Affiliate is or was, within the preceding five years, a contributing
employer, in each case in respect of the assessment of withdrawal liability or
an event or condition which could, in the aggregate, result in the imposition of
liability on the Originator and/or any such ERISA Affiliate in excess of
$250,000; and
(d) promptly after the occurrence of any event or condition that
could reasonably be expected to have a Material Adverse Effect, notice of such
event or condition.
(e) OTHER. Promptly, from time to time, such other information,
documents, records or reports respecting the Receivables, the Related Rights or
the Originator's performance hereunder that the Company, the Insurer or the
Agent may from time to time reasonably request in order to protect the interests
of the Company, the Purchasers, the Agent, the Insurer or any other Affected
Party under or as contemplated by the Transaction Documents.
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* TEXT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
6.3. NEGATIVE COVENANTS. From the date hereof until the date
following the Final Payout Date, the Originator agrees that, unless the Control
Party (or if the Control Party is the Majority Purchasers, the Agent) and the
Company shall otherwise consent in writing, it shall not:
(a) SALES, LIENS, ETC. Except as otherwise provided herein or in
any other Transaction Document, sell, assign (by operation of law or otherwise)
or otherwise dispose of, or create or suffer to exist any Adverse Claim except
for Permitted Liens upon or with respect to, any Receivable or related Contract,
Collections or Related Security, or any interest therein, or assign any right to
receive income in respect thereof.
(b) EXTENSION OR AMENDMENT OF RECEIVABLES. Except in its capacity
as Servicer to the extent permitted by paragraph (f) of Exhibit IV to the
Receivables Purchase Agreement, extend, amend or otherwise modify the terms of
any Receivable in any respect, or amend, modify or waive, any term or condition
of any Contract related thereto.
(c) CHANGE IN BUSINESS OR CREDIT AND COLLECTION POLICY. Make (i)
any material change in the character of its business, or any change in the
Credit and Collection Policy that would adversely affect the collectibility of
the Receivables Pool or the enforceability of any related Contract or the
ability of the Originator or the Company to perform its obligations under any
related Contract or under any Transaction Document; or (ii) any other material
change in the Credit and Collection Policy without prior written consent of the
Company and the Control Party (or if the Control Party is the Majority
Purchasers, the Agent).
(d) RECEIVABLES NOT TO BE EVIDENCED BY INSTRUMENTS. Take any action
to cause or permit any Receivable generated by it to become evidenced by any
"instrument" (as defined in the applicable UCC) unless such "instrument" shall
be delivered to the Company (which in turn shall deliver the same to the Agent
on behalf of the Secured Parties).
(e) MERGERS, ACQUISITIONS, SALES, ETC. Merge or consolidate with
another Person (except pursuant to a merger or consolidation involving the
Originator where the Originator is the surviving corporation), or convey,
transfer, lease or otherwise dispose of (whether in one or in a series of
transactions), all or substantially all of its assets (whether now owned or
hereafter acquired), other than pursuant to this Agreement.
(f) DEPOSIT BANKS. Add or terminate any Deposit Bank unless the
requirements of PARAGRAPH (i) of EXHIBIT IV of the Receivables Purchase
Agreement have been met.
(g) ACCOUNTING FOR PURCHASES. Account for or treat (whether in
financial statements or otherwise) the transactions contemplated hereby in any
manner other than as sales of the Receivables and Related Security by the
Originator to the Company.
(h) TRANSACTION DOCUMENTS. Enter into, execute, deliver or
otherwise become bound by any agreement, instrument, document or other
arrangement that restricts the right of the Originator
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to amend, supplement, amend and restate or otherwise modify, or to extend or
renew, or to waive any right under, this Agreement or any other Transaction
Documents.
ARTICLE VII
ADDITIONAL RIGHTS AND OBLIGATIONS IN
RESPECT OF THE RECEIVABLES
7.1. RIGHTS OF THE COMPANY. The Originator hereby authorizes the
Company or its respective designees to take any and all steps in the
Originator's name necessary or desirable, in their respective determination, to
collect all amounts due under any and all Receivables and Related Rights,
including, without limitation, endorsing the Originator's name on checks and
other instruments representing Collections and enforcing such Receivables and
the provisions of the related Contracts that concern payment and/or enforcement
of rights to payment.
7.2. RESPONSIBILITIES OF THE ORIGINATOR. Anything herein to the
contrary notwithstanding:
(a) The Originator agrees to transfer any Collections that it
receives directly to a Deposit Account within one Business Day of receipt
thereof, and agrees that all such Collections shall be segregated and held in
trust for the Company and the Agent for the benefit of the Secured Parties;
PROVIDED that if the Company or the Servicer is required by SECTION 4.4 of the
Receivables Purchase Agreement to remit Collections directly to the Agent for
the benefit of the Secured Parties (or its designee) the Originator shall remit
such Collections directly to the Agent for the benefit of the Secured Parties
(or its designee) in the same manner as the Company and Servicer may be required
to do so by Section 4.4 of the Receivables Purchase Agreement. The Originator
further agrees not to deposit any funds other than Collections in a Deposit
Account.
(b) The Originator shall perform its obligations hereunder, and the
exercise by the Company or its designee of its rights hereunder shall not
relieve the Originator from such obligations.
(c) None of the Company, Servicer (if other than the Originator),
Purchasers, the Insurer or the Agent shall have any obligation or liability to
any Obligor or any other third Person with respect to any Receivables, Contracts
related thereto or any other related agreements, nor shall the Company, Servicer
(if other than the Originator), Purchasers, the Insurer or the Agent be
obligated to perform any of the obligations of the Originator thereunder.
(d) The Originator hereby grants to Servicer (if other than the
Originator) an irrevocable power of attorney, with full power of substitution,
coupled with an interest, to take in the name of the Originator all steps
necessary or advisable to indorse, negotiate or otherwise realize on any writing
or other right of any kind held or transmitted by the Originator or transmitted
or received by
-20-
the Company (whether or not from the Originator) in connection with any
Receivable or Related Right.
7.3. FURTHER ACTION EVIDENCING PURCHASES. The Originator agrees that
from time to time, at its expense, it will promptly execute and deliver all
further instruments and documents, and take all further action that the Company
or Servicer, the Agent or the Insurer may reasonably request or that may be
otherwise necessary or desirable in order to establish or maintain a valid and
enforceable ownership interest in the Receivables and Related Rights and
Collections and other proceeds with respect thereto, and a perfected security
interest in the items described in SECTION 1.5, in each case free and clear of
any Adverse Claim, excepting only Permitted Liens, in favor of the Company
including, without limitation, taking such action to perfect, protect or more
fully evidence the interest of the Company under this Agreement or to enable the
Company to exercise or enforce any of its rights hereunder or under any other
Transaction Document. Without limiting the generality of the foregoing, the
Originator will at Originator's expense:
(a) upon the request of the Company or the Insurer and the Agent
authorize and file such financing or continuation statements, or amendments
thereto or assignments thereof, and such other instruments or notices, as may be
necessary or appropriate; and
(b) mark the summary master control data processing records relating
to the Receivables and related Contracts with the legend set forth in SECTION
4.1(i).
The Originator hereby authorizes the Company 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 the Related Rights) now
existing or hereafter generated by the Originator. If the Originator fails to
perform any of its agreements or obligations under this Agreement, the Company
or its designee may (but shall not be required to) itself perform, or cause
performance of, such agreement or obligation, and the expenses of the Company or
its designee incurred in connection therewith shall be payable by the Originator
as provided in SECTION 10.6.
7.4. APPLICATION OF COLLECTIONS. Any payment by an Obligor in respect
of any indebtedness owed by it to the Originator or the Company, shall be
applied first, as a Collection of any Receivables owed by such Obligor to the
Company, and second to any other indebtedness of such Obligor. The foregoing
notwithstanding, a different application of such payment is permissible if (a)
required by contract or law, (b) otherwise instructed by the Obligor or (c)
instructed by the Company or the Agent and, in the case of (c) above, only with
the prior written consent of the Insurer.
-21-
ARTICLE VIII
PURCHASE AND SALE TERMINATION EVENTS
8.1. PURCHASE AND SALE TERMINATION EVENTS. Each of the following
events or occurrences described in this SECTION 8.1 shall constitute a "PURCHASE
AND SALE TERMINATION EVENT":
(a) The Termination Date (as defined in the Receivables Purchase
Agreement) shall have occurred; or
(b) The Originator shall fail to make any payment or deposit to be
made by it hereunder or under the Transaction Documents when due and such
failure shall remain unremedied for two Business Days after notice or discovery
thereof; or
(c) Any representation or warranty made or deemed to be made by the
Originator (or any of its officers) under or in connection with this Agreement,
any other Transaction Document or any other information or report delivered
pursuant hereto or thereto shall prove to have been false, incorrect or
incomplete (with respect to such information or report delivered) in any
material respect when made or deemed made provided, however, if the violation of
this paragraph (c) by the Originator may be cured without any potential or
actual detriment to the Company, the Purchasers, the Agent, the Insurer or any
Program Support Provider, the Originator shall have 30 days from the earlier of
(i) the Originator's knowledge of such failure and (ii) notice to the Originator
of such failure to so cure any such violation before a Purchase and Sale
Termination Event shall occur so long as the Originator is diligently attempting
to effect such cure; or
(d) The Originator shall fail to perform or observe in any material
respect any agreement contained in any of SECTIONS 6.1(h) or 6.3; or
(e) The Originator shall fail to perform or observe any other
material term, covenant or agreement contained in this Agreement or any other
Transaction Document on its part to be performed or observed and such failure
shall remain unremedied for 30 days after the earlier of (i) the Originator's
knowledge of such failure and (ii) written notice thereof shall have been given
by Servicer, the Agent, the Insurer or the Company to the Originator; or
(f)(i) The Originator or any of its subsidiaries shall generally not
pay its debts as such debts become due, or shall admit in writing its inability
to pay its debts generally, or shall make a general assignment for the benefit
of creditors; or any proceeding shall be instituted by or against the Originator
or any of its subsidiaries seeking to adjudicate it a bankrupt or insolvent, or
seeking liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or seeking the
entry of an order for relief or the appointment of a receiver, trustee, or other
similar official for it or for all or any substantial part of its property and,
in the case of any such
-22-
proceeding instituted against it (but not instituted by it), such proceeding
shall remain undismissed or unstayed for a period of 45 days; or (ii) the
Originator or any of its subsidiaries shall take any corporate action to
authorize any of the actions set forth in CLAUSE (i) above in this SECTION
8.1(f);
(g)(i) Any "accumulated funding deficiency" (within the meaning of
Section 412 of the Internal Revenue Code or Section 302 of ERISA), whether or
not waived, shall exist with respect to any Plan, (ii) a Reportable Event shall
occur with respect to, or proceedings shall commence to have a trustee
appointed, or a trustee shall be appointed, to administer or to terminate, any
Single Employer Plan, which Reportable Event or commencement of proceedings or
appointment of a trustee is, in the reasonable opinion of the Control Party,
likely to result in the termination of such Plan for purposes of Title IV of
ERISA, (iii) the Originator or any ERISA Affiliate shall, or in the reasonable
opinion of the Control Party, is likely to, incur any liability in connection
with a withdrawal from, or the Insolvency or Reorganization of, a Multiemployer
Plan, (iv) the Internal Revenue Service shall file notice of a lien pursuant to
Section 6323 of the Internal Revenue Code with regard to any assets of the
Originator or any ERISA Affiliate and such lien shall not have been released
within ten Business Days, or the Pension Benefit Guaranty Corporation shall, or
shall indicate its intention to, file notice of a lien pursuant to Section 4068
of ERISA or perfect a lien under Section 302(f) of ERISA with regard to any of
the assets of Seller or any ERISA Affiliate, or (v) any other adverse event or
condition shall occur or exist with respect to a Plan; and in each case in
CLAUSES (i), (ii), (iii), (iv) and (v) above, such event or condition, together
with all other such events or conditions, if any, could reasonably be expected
to involve an aggregate amount of liability to the Seller or an ERISA Affiliate
in excess of $250,000.
(h) The Internal Revenue Service shall file notice of a lien pursuant
to Section 6323 of the Internal Revenue Code with regard to any of assets of the
Originator and such lien shall not have been released within ten Business Days,
or the Pension Benefit Guaranty Corporation shall, or shall indicate its
intention to, file notice of a lien pursuant to Section 4068 of ERISA with
regard to any of the assets of the Originator; or
(i) This Agreement or any purchase pursuant to this Agreement shall
for any reason (other than pursuant to the terms hereof) (i) cease to create, a
valid and enforceable perfected ownership interest in each Receivable and the
Related Rights and Collections and other proceeds with respect thereto, free and
clear of any Adverse Claim, excepting only Permitted Liens or (ii) cease to
create with respect to the items described in SECTION 1.5, or the interest of
the Company with respect to such items shall cease to be, a valid and
enforceable perfected security interest, free and clear of any Adverse Claim,
excepting only Permitted Liens.
8.2. REMEDIES.
(i) OPTIONAL TERMINATION. Upon the occurrence of a Purchase
and Sale Termination Event, the Company (and not Servicer) shall have
the option by notice to the Originator (with a copy to the Agent and
the Insurer) to declare the Purchase and Sale Termination Date to have
occurred.
-23-
CONFIDENTIAL TREATMENT
(ii) REMEDIES CUMULATIVE. Upon any termination of the Purchase
Facility pursuant to this SECTION 8.2, the Company shall have, in
addition to all other rights and remedies under this Agreement or
otherwise, all other rights and remedies provided under the UCC of each
applicable jurisdiction and other applicable laws, which rights shall
be cumulative. Without limiting the foregoing, the occurrence of the
Purchase and Sale Termination Date shall not deny the Company any
remedy in addition to termination of the Purchase Facility to which the
Company may be otherwise appropriately entitled, whether at law or
equity.
ARTICLE IX
INDEMNIFICATION
9.1. INDEMNITIES BY THE ORIGINATOR. Without limiting any other rights
which the Company may have hereunder or under applicable law, the Originator
hereby agrees to indemnify the Company, the Purchasers, the Agent, the Insurer
and each of their respective assigns, officers, directors, employees and agents
(each of the foregoing Persons being individually called a "PURCHASE AND SALE
INDEMNIFIED PARTY"), forthwith on demand, from and against any and all damages,
losses, claims, judgments, liabilities and related costs and expenses, including
reasonable attorneys' fees and disbursements (all of the foregoing being
collectively called "PURCHASE AND SALE INDEMNIFIED AMOUNTS"), regardless of
whether any such Purchase and Sale Indemnified Amount is the result of a
Purchase and Sale Indemnified Party's negligence, strict liability or other acts
or omissions of a Purchase and Sale Indemnified Party, awarded against or
incurred by any of them arising out of or as a result of the following:
(a) the transfer by the Originator of an interest in any Receivable
or Related Right to any Person other than the Company;
(b) the breach of any representation or warranty made by the
Originator under or in connection with this Agreement or any other Transaction
Document, or any information or report delivered by the Originator pursuant
hereto or thereto (including any information contained in a Purchase Report)
which shall have been false, incorrect or misleading in any material respect
when made, deemed made or delivered;
(c) the failure by the Originator to comply with any applicable law,
rule or regulation with respect to any Receivable or the related Contract, or
the nonconformity of any Receivable or the related Contract with any such
applicable law, rule or regulation;
(d) [ * ]
-24-
* TEXT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
(e) the failure of the Originator to file with respect to itself, or
any delay by the Originator in filing, financing statements or other similar
instruments or documents under the UCC of any applicable jurisdiction or other
applicable laws with respect to any Receivables or purported Receivables
generated by the Originator or Related Rights, whether at the time of any
purchase or contribution or at any subsequent time;
(f) any dispute, claim, offset or defense (other than discharge in
bankruptcy) of the Obligor to the payment of any Receivable or purported
Receivable generated by the Originator (including, without limitation, a defense
based on such Receivables or the related Contracts not being a legal, valid and
binding obligation of such Obligor enforceable against it in accordance with its
terms), or any other claim resulting from or relating to the transaction giving
rise to any Receivable or relating to collection activities with respect to any
Receivable (if such collection activities were performed by the Originator or
any of its Affiliates acting as Servicer or by any agent or independent
contractor retained by the Originator or any of its Affiliates);
(g) any products liability or other claim, investigation, litigation
or proceeding arising out of or in connection with goods, insurance or services
that secure or relate to any Receivable;
(h) any litigation, proceeding or investigation against the
Originator or in respect of any Receivable or Related Right;
(i) any tax or governmental fee or charge (other than any tax
excluded pursuant to the proviso below), all interest and penalties thereon or
with respect thereto, and all out-of-pocket costs and expenses, including the
reasonable fees and expenses of counsel in defending against the same, which may
arise by reason of the purchase, contribution or ownership of the Receivables or
any Related Right connected with any such Receivables;
(j) any failure of the Originator to perform its duties or
obligations in accordance with the provisions of this Agreement or any other
Transaction Document;
(k) the commingling of any Collections at any time with other funds;
(l) the failure by the Originator to pay when due any taxes payable
by it, including without limitation, franchise taxes and sales, excise or
personal property taxes payable in connection with the Receivables or any
Related Right connected with any such Receivables; and
(m) the failure by the Originator to be duly qualified to do
business, to be in good standing or to have filed appropriate fictitious or
assumed name registration documents in any jurisdiction;
EXCLUDING, HOWEVER, (i) Purchase and Sale Indemnified Amounts to the extent
resulting from gross negligence or willful misconduct on the part of a Purchase
and Sale Indemnified Party, (ii) any indemnification which has the effect of
recourse for non-payment of the Receivables due to credit
-25-
reasons to the Originator (except as otherwise specifically provided under this
SECTION 9.1) and (iii) any tax based upon or measured by net income or gross
receipts.
If for any reason the indemnification provided above in this SECTION
9.1 is unavailable to a Purchase and Sale Indemnified Party or is insufficient
to hold such Purchase and Sale Indemnified Party harmless, then the Originator
shall contribute to the amount paid or payable by such Purchase and Sale
Indemnified Party as a result of such loss, claim, damage or liability to the
maximum extent permitted under applicable law. Promptly after receipt by a
Purchase and Sale Indemnified Party under this ARTICLE IX of notice of any claim
or the commencement of any action arising out of or as a result of any of
paragraphs (a) through (m) above, the Purchase and Sale Indemnified Party shall,
if a claim in respect thereof is to be made against the Originator under this
ARTICLE IX, notify the Originator in writing of the claim or the commencement of
that action; PROVIDED, HOWEVER, that the failure to notify the Originator shall
not relieve it from any liability which it may have under this ARTICLE IX except
to the extent it has been materially prejudiced by such failure and, PROVIDED,
FURTHER, that the failure to notify the Originator shall not relieve it from any
liability which it may have to a Purchase and Sale Indemnified Party otherwise
than under this ARTICLE IX. If any such claim or action shall be brought against
a Purchase and Sale Indemnified Party, the Originator shall be entitled to
participate therein and, to the extent that it wishes, to assume the defense
thereof with counsel satisfactory to the Purchase and Sale Indemnified Party.
After notice from the Originator to the Purchase and Sale Indemnified Party of
its election to assume the defense of such claim or action, the Originator shall
not be liable to the Purchase and Sale Indemnified Party under this ARTICLE IX
for any legal or other expenses subsequently incurred by Purchase and Sale
Indemnified Party in connection with the defense thereof other than reasonable
costs of investigation. The Originator shall not (i) without the prior written
consent of the relevant Purchase and Sale Indemnified Party or Parties (which
consent shall not be unreasonably withheld), settle or compromise or consent to
the entry of any judgment with respect to any pending or threatened claim,
action, suit or proceeding in respect of which indemnification or contribution
may be sought hereunder (whether or not the Purchase and Sale Indemnified Party
or Parties are actual or potential parties to such claim or action) unless such
settlement, compromise or consent includes an unconditional release of each
Purchase and Sale Indemnified Party from all liability arising out of such
claim, action, suit or proceeding or (ii) be liable for any settlement of any
such action affected without its written consent (which consent shall not be
unreasonably withheld), but if settled with its written consent or if there be a
final judgment of the plaintiff in any such action, the Originator agrees to
indemnify and hold harmless any indemnified party from and against any Purchase
and Sale Indemnified Amounts relating thereto.
-26-
ARTICLE X
MISCELLANEOUS
10.1. AMENDMENTS, 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 consented to by the Originator, the Company, the Servicer (if other
than the Originator) and the Control Party (or if the Control Party is the
Majority Purchasers, the Agent); PROVIDED, HOWEVER, that no such amendment,
modification or waiver shall materially adversely affect the Insurer without the
prior written consent of the Insurer.
(b) No failure or delay on the part of the Company, the Originator
or any third party beneficiary 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 the Company,
Servicer, or the Originator in any case shall entitle it to any notice or demand
in similar or other circumstances. No waiver or approval by the Company or
Servicer under this Agreement shall, except as may otherwise be stated in such
waiver or approval, be applicable to subsequent transactions. No waiver or
approval under this Agreement shall require any similar or dissimilar waiver or
approval thereafter to be granted hereunder.
10.2. NOTICES, ETC. All notices and other communications hereunder
shall, unless otherwise stated herein, be in writing (which shall include
facsimile and electronic mail communication) and sent or delivered, to each
party hereto, at its address set forth under its name on the signature pages
hereof or at such other address as shall be designated by such party in a
written notice to the other parties hereto. Notices and communications by
facsimile or electronic mail shall be effective when sent (and shall, unless
such delivery is waived by the recipient by electronic mail or other means, be
followed by hard copy sent by first class mail), and notices and communications
sent by other means shall be effective when received.
10.3. NO WAIVER; CUMULATIVE REMEDIES. The remedies herein provided
are cumulative and not exclusive of any remedies provided by law.
10.4. BINDING EFFECT; ASSIGNABILITY. This Agreement shall be binding
upon and inure to the benefit of the Company, the Originator and its respective
successors and permitted assigns. The Originator may not assign its rights
hereunder or any interest herein without the prior consent of the Company, the
Insurer and the Agent. 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 date after the Purchase and Sale Termination
Date on which the Originator has received payment in full for all Receivables
and Related Rights purchased pursuant to SECTION 1.1 hereof. The
-27-
rights and remedies with respect to any breach of any representation and
warranty made by the Originator 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.
10.5. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF INDIANA (WITHOUT GIVING
EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF), EXCEPT TO THE EXTENT THAT
THE VALIDITY OR PERFECTION OF THE INTERESTS OF PURCHASERS IN THE RECEIVABLES OR
RELATED RIGHTS, OR REMEDIES HEREUNDER IN RESPECT THEREOF, ARE GOVERNED BY THE
LAWS OF A JURISDICTION OTHER THAN THE STATE OF INDIANA.
10.6. COSTS, EXPENSES AND TAXES. In addition to the obligations of
the Originator under ARTICLE IX, the Originator agrees to pay on demand:
(a) all reasonable costs and expenses in connection with the
preparation, execution, delivery and administration (including periodic auditing
of the Receivables) of this Agreement, the Liquidity Agreement, the Receivables
Purchase Agreement and the other documents and agreements to be delivered
hereunder or in connection herewith, including all reasonable costs and expenses
relating to the amending, amending and restating, modifying or supplementing of
this Agreement, the Liquidity Agreement, the Receivables Purchase Agreement and
the other documents and agreements to be delivered hereunder or in connection
herewith and the waiving of any provisions thereof, and including in all cases,
without limitation, Attorney Costs for the Company, the Agent, the Insurer, the
Purchasers and their respective Affiliates and agents with respect thereto and
with respect to advising the Company, the Agent, the Insurer, the Purchasers and
their respective Affiliates and agents as to their rights and remedies under
this Agreement and the other Transaction Documents, and all reasonable costs and
expenses, if any (including Attorney Costs), of the Company, the Agent, the
Insurer, the Purchasers and their respective Affiliates and agents, in
connection with the enforcement of this Agreement and the other Transaction
Documents; and
(b) any and all stamp and other taxes and fees payable in
connection with the execution, delivery, filing and recording of this Agreement
or the other documents or agreements to be delivered hereunder, and agrees to
save each Purchase and Sale Indemnified Party harmless from and against any
liabilities with respect to or resulting from any delay in paying or omission to
pay such taxes and fees.
10.7. SUBMISSION TO JURISDICTION. EACH PARTY HERETO HEREBY
IRREVOCABLY (a) SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY ILLINOIS, COOK
COUNTY, CITY OF CHICAGO OR NEW YORK STATE COURT, NEW YORK COUNTY, CITY OF NEW
YORK AND THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS
AND THE SOUTHERN DISTRICT OF NEW YORK, OVER ANY ACTION OR PROCEEDING ARISING OUT
OF OR RELATING TO ANY TRANSACTION DOCUMENT; (b) AGREES THAT ALL CLAIMS IN
RESPECT OF SUCH ACTION OR
-28-
PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH STATE OR UNITED STATES DISTRICT
COURT; (c) WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER
APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH
ACTION OR PROCEEDING; (d) CONSENTS TO THE SERVICE OF ANY AND ALL PROCESS IN ANY
SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES OF SUCH PROCESS TO SUCH
PERSON AT ITS ADDRESS SPECIFIED IN SECTION 10.2; AND (e) TO THE EXTENT ALLOWED
BY LAW, AGREES THAT A NONAPPEALABLE FINAL JUDGMENT IN ANY SUCH ACTION OR
PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY
SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS
SECTION 10.7 SHALL AFFECT THE COMPANY'S RIGHT TO SERVE LEGAL PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR TO BRING ANY ACTION OR PROCEEDING AGAINST THE
ORIGINATOR OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTIONS.
10.8. WAIVER OF JURY TRIAL. EACH PARTY HERETO EXPRESSLY WAIVES ANY
RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY
RIGHTS UNDER THIS AGREEMENT, ANY OTHER TRANSACTION DOCUMENT, OR UNDER ANY
AMENDMENT, INSTRUMENT OR DOCUMENT DELIVERED OR WHICH MAY IN THE FUTURE BE
DELIVERED IN CONNECTION HEREWITH OR ARISING FROM ANY RELATIONSHIP EXISTING IN
CONNECTION WITH THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT, AND AGREES
THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE
A JURY.
10.9. CAPTIONS AND CROSS REFERENCES; INCORPORATION BY REFERENCE. The
various captions (including, without limitation, the table of contents) in this
Agreement are included for convenience only and shall not affect the meaning or
interpretation of any provision of this Agreement. References in this Agreement
to any underscored Section or Exhibit are to such Section or Exhibit of this
Agreement, as the case may be. The Exhibits hereto are hereby incorporated by
reference into and made a part of this Agreement.
10.10. EXECUTION IN 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 when taken together shall constitute one and the same
Agreement.
10.11. ACKNOWLEDGMENT AND AGREEMENT. By execution below, the
Originator expressly acknowledges and agrees that all of the Company's rights,
title, and interests in, to, and under this Agreement shall be assigned by the
Company to the Agent (for the benefit or the Secured Parties) pursuant to the
Receivables Purchase Agreement, and the Originator consents to such assignment.
Each of the parties hereto acknowledges and agrees that the Agent, the Insurer
and the Purchasers are third party beneficiaries of the rights of the Company
arising hereunder and under the other
-29-
Transaction Documents to which the Originator is a party and that the Control
Party may enforce the rights of the Company under this Agreement.
-30-
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.
AUTOMOTIVE FINANCE CORPORATION
By: /s/ Curtis L. Phillips
---------------------------------
Name: Curtis L. Phillips
Title: CFO & Treasurer
310 East 96th Street, Suite 300
Indianapolis, Indiana 46240
Attention: Curt Phillips
Telephone: (317) 815-9645 ext. 2185
Facsimile: (317) 815-8682
E-mail: cphillips@autofinance.com
[Notary]
AFC FUNDING CORPORATION
By: /s/ Curtis L. Phillips
--------------------------------
Name: Curtis L. Phillips
Title: CFO & Treasurer
310 East 96th Street, Suite 310
Indianapolis, Indiana 46240
Attention: Curt Phillips
Telephone: (317) 815-9645 ext. 2185
Facsimile: (317) 815-8682
E-mail: cphillips@autofinance.com
[Notary]
S-1 (Amended and Restated PSA)
STATE OF INDIANA )
) SS
COUNTY OF MARION )
Before me the undersigned, a Notary Public in and for the said
County and State, personally appeared CURTIS L. PHILLIPS, an officer of AFC
Funding Corporation, personally known to me who acknowledged the execution of
the foregoing this 31ST day of MAY, 2002.
/s/ Francesca C. York My Commission Expires: 12/5/08
- ---------------------------- ---------------------
Signature
Francesca C. York My County of Residence: Hamilton
- ---------------------------- --------------------
Printed Name
FRANCESCA C. YORK
NOTARY PUBLIC STATE OF INDIANA
HAMILTON COUNTY
MY COMMISSION EXP DEC 5, 2008
STATE OF INDIANA )
) SS
COUNTY OF MARION )
Before me the undersigned, a Notary Public in and for the said County
and State, personally appeared CURTIS L. PHILLIPS, an officer of Automotive
Finance Corporation, personally known to me who acknowledged the execution of
the foregoing this 31ST day of MAY, 2002.
/s/ Francesca C. York My Commission Expires: 12/5/08
- ---------------------------- --------------------
Signature
Francesca C. York My County of Residence: Hamilton
- ---------------------------- --------------------
Printed Name
FRANCESCA C. YORK
NOTARY PUBLIC STATE OF INDIANA
HAMILTON COUNTY
MY COMMISSION EXP DEC 5, 2008
S-2 (Amended and Restated PSA)
CONFIDENTIAL TREATMENT
SCHEDULE 1.1b
EXCLUDED RECEIVABLES
"EXCLUDED RECEIVABLES" means any right to payment under:
[ * ]
S-3 (Amended and Restated PSA)
* TEXT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
CONFIDENTIAL TREATMENT
[ * ]
S-4 (Amended and Restated PSA)
* TEXT HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND HAS
BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
Exhibit 99(a)
CERTIFICATION OF PERIODIC REPORT
I, David G. Gartzke, Chairman, President and Chief Executive Officer of ALLETE,
Inc. (Company), certify pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, 18 U.S.C. Section 1350, that:
(1) the Quarterly Report on Form 10-Q of the Company for the quarterly period
ended June 30, 2002 (Report) fully complies with the requirements of
Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or
78o(d)); and
(2) the information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
Dated: August 5, 2002
David G. Gartzke
------------------------------------
David G. Gartzke
Chairman, President and
Chief Executive Officer
Exhibit 99(b)
CERTIFICATION OF PERIODIC REPORT
I, James K. Vizanko, Vice President, Chief Financial Officer and Treasurer of
ALLETE, Inc. (Company), certify pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, 18 U.S.C. Section 1350, that:
(1) the Quarterly Report on Form 10-Q of the Company for the quarterly period
ended June 30, 2002 (Report) fully complies with the requirements of
Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or
78o(d)); and
(2) the information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
Dated: August 5, 2002
James K. Vizanko
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James K. Vizanko
Vice President, Chief Financial
Officer and Treasurer
