SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 2001
Commission File Number 0-16093
CONMED CORPORATION
(Exact name of the registrant as specified in its charter)
New York 16-0977505
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
525 French Road, Utica, New York 13502
(Address of principal executive offices) (Zip Code)
(315) 797-8375
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [ X ] No [ ]
The number of shares outstanding of registrant's common stock, as
of October 16, 2001 is 25,215,378 shares.
CONMED CORPORATION
TABLE OF CONTENTS
FORM 10-Q
PART I FINANCIAL INFORMATION
Item Number Page
Item 1. Financial Statements
- Consolidated Condensed Statements
of Income 1
- Consolidated Condensed Balance Sheets 2
- Consolidated Condensed Statements
of Cash Flows 3
- Notes to Consolidated Condensed
Financial Statements 4
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 17
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 22
Signatures 23
Exhibit Index 24
Item 1.
CONMED CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(in thousands except per share amounts)
(unaudited)
Three Months Ended Nine Months Ended
September September
2000 2001 2000 2001
---- ---- ---- ----
Net sales $ 92,838 $105,318 $293,527 $315,398
-------- -------- -------- --------
Cost of sales 44,136 51,332 140,124 150,971
Selling and administrative 31,495 35,029 95,504 103,780
Research and development 4,109 3,491 11,087 10,663
-------- -------- -------- --------
79,740 89,852 246,715 265,414
-------- -------- -------- --------
Income from operations 13,098 15,466 46,812 49,984
Interest expense, net 8,834 7,630 25,477 23,809
-------- -------- -------- --------
Income before income taxes 4,264 7,836 21,335 26,175
Provision for income taxes 1,535 2,821 7,681 9,423
-------- -------- -------- --------
Net income $ 2,729 $ 5,015 $ 13,654 $ 16,752
======== ======== ======== ========
Per share data:
Net income
Basic $ .12 $ .20 $ .59 $ .71
Diluted .12 .20 .59 .70
Weighted average common shares
Basic 22,986 24,806 22,961 23,657
Diluted 23,132 25,381 23,246 23,990
See notes to consolidated condensed financial statements.
1
CONMED CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands except share amounts)
(unaudited)
December September
2000 2001
--------- ---------
ASSETS
Current assets:
Cash and cash equivalents $ 3,470 $ 2,015
Accounts receivable, net 78,626 85,719
Inventories 104,612 107,337
Deferred income taxes 1,761 1,761
Prepaid expenses and other current assets 3,562 3,806
--------- ---------
Total current assets 192,031 200,638
--------- ---------
Property, plant and equipment, net 62,450 91,898
Goodwill, net 225,801 251,574
Other intangible assets, net 195,008 190,058
Other assets 4,281 5,173
--------- ---------
Total assets $ 679,571 $ 739,341
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 36,068 $ 39,581
Accounts payable 20,350 20,314
Accrued compensation 9,913 9,893
Income taxes payable 1,979 1,378
Accrued interest 5,130 2,541
Other current liabilities 4,836 5,398
--------- ---------
Total current liabilities 78,276 79,105
--------- ---------
Long-term debt 342,680 348,826
Deferred income taxes 12,154 19,318
Other long-term liabilities 15,858 16,285
--------- ---------
Total liabilities 448,968 463,534
--------- ---------
Shareholders' equity:
Preferred stock, par value $.01 per share;
authorized 500,000 shares; none outstanding -- --
Common stock, par value $.01 per share;
100,000,000 shares authorized; 23,028,279 and
25,212,338 shares issued and outstanding in
2000 and 2001, respectively 230 252
Paid-in capital 127,985 159,415
Retained earnings 103,834 120,586
Accumulated other comprehensive loss (1,027) (4,027)
Less 37,500 shares of common stock in treasury,
at cost (419) (419)
--------- ---------
Total shareholders' equity 230,603 275,807
--------- ---------
Total liabilities and shareholders' equity $ 679,571 $ 739,341
========= =========
See notes to consolidated condensed financial statements.
2
CONMED CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
Nine Months Ended September 2000 and 2001
(in thousands)
(unaudited)
2000 2001
-------- --------
Cash flows from operating activities:
Net income ............................................. $ 13,654 $ 16,752
-------- --------
Adjustments to reconcile net income
to net cash provided by operations:
Depreciation ................................. 7,006 6,648
Amortization ................................. 14,813 16,381
Increase (decrease) in cash flows
from changes in assets and liabilities,
net of effects from acquisitions:
Accounts receivable ......... 986 (7,052)
Inventories ................. (18,373) (3,174)
Prepaid expenses and
other current assets ...... (571) (283)
Accounts payable ............ 5,974 (80)
Income taxes payable ........ (4,339) (601)
Accrued compensation ........ (3,014) (20)
Accrued interest ............ (1,934) (2,614)
Other assets/liabilities, net 2,848 (2,385)
-------- --------
3,396 6,820
-------- --------
Net cash provided by operating activities .... 17,050 23,572
-------- --------
Cash flows from investing activities:
Purchases of property, plant, and equipment ............ (11,869) (12,704)
-------- --------
Net cash used by investing activities ........ (11,869) (12,704)
-------- --------
Cash flows from financing activities:
Borrowings under revolving credit facility ............. 19,000 14,000
Proceeds from issuance of common stock ................. 448 1,591
Payments on long-term debt ............................. (24,690) (27,034)
-------- --------
Net cash used by financing activities ........ (5,242) (11,443)
-------- --------
Effect of exchange rate changes
on cash and cash equivalents ......................... (378) (880)
-------- --------
Net decrease in cash and cash equivalents ................ (439) (1,455)
Cash and cash equivalents at beginning of period ......... 3,747 3,470
-------- --------
Cash and cash equivalents at end of period ............... $ 3,308 $ 2,015
======== ========
Supplemental non-cash investing and financing activities:
As more fully described in Note 6, we acquired a business in the third quarter
of 2001 through the exchange of 1,950,000 shares of our common stock.
As more fully described in Note 6, we acquired certain property in the third
quarter of 2001 through the assumption of approximately $22.8 million of debt
and accrued interest.
See notes to consolidated condensed financial statements.
3
CONMED CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Note 1 - Organization and operations
The consolidated condensed financial statements include the accounts of CONMED
Corporation and its subsidiaries ("CONMED", the "Company", "we" or "us"). All
intercompany accounts and transactions have been eliminated. CONMED Corporation
is a medical technology company specializing in instruments and implants for
arthroscopic sports medicine, and powered surgical instruments, for orthopaedic,
ENT, neuro-surgery and other surgical specialties. We are also a leading
developer, manufacturer and supplier of advanced medical devices, including RF
electrosurgery systems used in all types of surgery, ECG electrodes for heart
monitoring, and minimally invasive surgical devices. Our products are used in a
variety of clinical settings, such as operating rooms, surgery centers,
physicians' offices and critical care areas of hospitals. Our business is
organized, managed and internally reported as a single segment, since our
product offerings have similar economic, operating and other related
characteristics.
Note 2 - Interim financial information
The statements for the three and nine months ended September 2000 and 2001 are
unaudited; in our opinion such unaudited statements include all adjustments
(which comprise only normal recurring accruals) necessary for a fair
presentation of the results for such periods. The consolidated condensed
financial statements for the year ending December 2001 are subject to adjustment
at the end of the year when they will be audited by independent accountants. The
results of operations for the three and nine months ended September 2001 are not
necessarily indicative of the results of operations to be expected for any other
quarter nor for the year ending December 2001. The consolidated condensed
financial statements and notes thereto should be read in conjunction with the
financial statements and notes for the year ended December 2000 included in our
Annual Report to the Securities and Exchange Commission on Form 10-K. Certain
prior year amounts have been reclassified to conform with the presentation used
in 2001.
Note 3 - Other comprehensive income (loss)
Comprehensive income (loss) consists of the following:
Three months ended Nine months ended
September September
--------- ---------
2000 2001 2000 2001
---- ---- ---- ----
Net income ................ $ 2,729 $ 5,015 $ 13,654 $ 16,752
-------- -------- -------- --------
Other comprehensive income:
Foreign currency
translation adjustment (135) 35 (397) (857)
Cash flow hedging
(net of income taxes) . -- (707) -- (2,143)
-------- -------- -------- --------
Comprehensive income .... $ 2,594 $ 4,343 $ 13,257 $ 13,752
======== ======== ======== ========
4
Accumulated other comprehensive income (loss) consists of the following:
Accumulated
Cumulative Cash Other
Translation Flow Comprehensive
Adjustments Hedges Income (loss)
--------- --------- -------------
Balance, December 2000 ................................$ (1,027) $ -- $ (1,027)
--------- --------- ---------
Foreign currency translation adjustments ........ (857) -- (857)
Cash flow hedging (net of income taxes) ......... -- (2,143) (2,143)
--------- --------- ---------
Balance, September 2001 ...............................$ (1,884) $ (2,143) $ (4,027)
========= ========= =========
Note 4 - Inventories
The components of inventory are as follows (in thousands):
December September
2000 2001
--------- ---------
Raw materials ............................ $ 38,278 $ 39,945
Work-in-process .......................... 12,612 11,288
Finished goods ........................... 53,722 56,104
--------- ---------
Total ................. $ 104,612 $ 107,337
========= =========
Note 5 - Earnings per share
Basic earnings per share (EPS) is computed based on the weighted average number
of common shares outstanding for the period. Diluted EPS gives effect to all
dilutive potential shares outstanding (ie., options and warrants) during the
period. The following is a reconciliation of the weighted average shares used in
the calculation of basic and diluted EPS (in thousands):
Three months ended Nine months ended
September September
--------- ---------
2000 2001 2000 2001
---- ---- ---- ----
Shares used in the calculation
of Basic EPS(weighted average
shares outstanding) ......... 22,986 24,806 22,961 23,657
------ ------ ------ ------
Effect of dilutive potential
securities .................. 146 575 285 333
------ ------ ------ ------
Shares used in the calculation
of Diluted EPS .............. 23,132 25,381 23,246 23,990
====== ====== ====== ======
The shares used in the calculation of diluted EPS exclude warrants and options
to purchase shares where the exercise price was greater than the average market
price of common shares for the period. Such shares aggregated 3,617,000 and
1,988,000 for the three months ended September 2000 and 2001, respectively, and
3,241,000 and 3,027,000 for the nine months ended September 2000 and 2001,
respectively.
5
Note 6 - Business acquisitions
On November 20, 2000 we acquired certain assets of the disposable minimally
invasive surgical business of Imagyn Medical Technologies, Inc. (the "Imagyn
acquisition") for a purchase price of $6,000,000. The acquisition was funded
through borrowings under our revolving credit facility. Annual sales of the
acquired product lines are approximately $5.0 million. The results of operations
of the acquired business are included in our consolidated results from the date
of acquisition.
On June 11, 2001, we reached a definitive agreement to acquire the remaining
assets of the minimally invasive surgical business of Imagyn Medical
Technologies, Inc. that we did not acquire in November 2000 (the "second Imagyn
acquisition"). The results of operations of the acquired business are included
in our consolidated results from July 6, 2001, the date of acquisition. The new
products, with expected annual revenues of $18.0 to $20.0 million, give us a
significant presence in the laparoscopic instrument market. Under the terms of
the acquisition agreement, we issued Imagyn 1,950,000 shares of CONMED common
stock, valuing the transaction at $29.9 million based on the average market
price of our common stock over the 2-day period before and after the terms of
the acquisition were agreed to and announced. The issued stock is subject to
certain sales restrictions. As discussed in Note 7, during the third quarter of
2001, we incurred certain nonrecurring costs in connection with the second
Imagyn acquisition.
On August 3, 2001, we purchased the real estate partnerships which own the
Largo, Florida property leased by our Linvatec subsidiary for an aggregate
purchase price of $22,782,000 (the "Largo acquisition"). In connection with the
acquisition, we assumed the existing debt on the property and financed the
remainder with the seller. The assumed debt on the property consists of a note
bearing interest at 7.50% per annum with semiannual payments of principal and
interest through June 2009 (the "Class A note"); and a note bearing interest at
8.25% per annum compounded semiannually through June 2009, after which
semiannual payments of principal and interest will commence, continuing through
June 2019 (the "Class C note"). The seller-financed note bears interest at 6.50%
per annum with monthly payments of principal and interest through July 2013 (the
"Seller note"). The principal balances assumed on the Class A note, Class C
note and Seller note aggregate $12,185,000, $6,254,000 and $4,228,000,
respectively, at the date of acquisition.
6
Note 7 - Nonrecurring charges
During the quarter ended June 2000, we announced we would replace our
arthroscopy direct sales force with non-stocking, exclusive sales agent groups
in certain geographic regions of the United States. As a result, we incurred a
severance charge of $1,509,000, before income taxes, or $.04 per diluted share,
in the second quarter of 2000. This nonrecurring charge is included in selling
and administrative expense.
During the quarter ended September 2001, we incurred various nonrecurring
charges in connection with the second Imagyn acquisition. These costs were
primarily related to the transition in manufacturing of the Imagyn product lines
from Imagyn's Richland, Michigan facility to our manufacturing plants in Utica,
New York. Such costs totaled $886,000, before income taxes, or $.02 per diluted
share in the third quarter of 2001 and are included in cost of sales. We expect
an additional $500,000 of such costs in the fourth quarter of 2001.
Note 8 - Common stock dividend
On August 8, 2001, our Board of Directors declared a three-for-two split of our
common stock to be effected in the form of a common stock dividend. This
dividend was payable on September 7, 2001 to shareholders of record on August
21, 2001. Accordingly, common stock, the number of shares outstanding, earnings
per share, and the number of shares used in the calculation of earnings per
share have all been restated to retroactively reflect the split.
Note 9 - Subsequent events
On November 1, 2001, we established a five-year accounts receivable
securitization facility pursuant to which we and certain of our subsidiaries
sell on an ongoing basis certain accounts receivable to CONMED Receivables
Corporation ("CRC"), a wholly-owned special-purpose subsidiary of CONMED
Corporation. CRC may in turn sell up to an aggregate $50.0 million undivided
percentage ownership interest in such receivables to a commercial paper conduit.
Sale of these receivables will be reflected in the balance sheet as a reduction
in accounts receivable. Creditors of CRC have a claim to its assets before any
equity becomes available to us. We used the initial $40.0 million in proceeds
from the facility to repay a portion of our loans under our bank credit
facility.
Note 10 - New accounting pronouncements
In June 2001, the Financial Accounting Standards Board approved Statements of
Financial Accounting Standards No. 141 "Business Combinations" ("SFAS 141") and
No. 142 "Goodwill and Other Intangible Assets" ("SFAS 142") which are effective
for us July 1, 2001 and January 1, 2002, respectively. SFAS 141 requires that
the purchase method of accounting be used for all business combinations
initiated after June 30, 2001. Under SFAS 142, amortization of goodwill and
certain intangibles, including goodwill and certain intangibles recorded in past
business combinations, will discontinue upon adoption of this standard. In
addition, goodwill and certain intangibles recorded as a result of business
combinations completed during the six-month period ending December 31, 2001 will
not be amortized. All goodwill and intangible assets will be tested for
impairment in accordance with the provisions of the Statement. We are currently
reviewing the provisions of SFAS 141
7
and SFAS 142 and assessing the impact of adoption.
Note 11 - Guarantor financial statements
Our credit facility and subordinated notes (the "Notes") are guaranteed (the
"Subsidiary Guarantees") by each of our subsidiaries except CRC (the "Subsidiary
Guarantors"). The Subsidiary Guarantees provide that each Subsidiary Guarantor
will fully and unconditionally guarantee our obligations under the credit
facility and the Notes on a joint and several basis. Each Subsidiary Guarantor
is wholly-owned by CONMED Corporation. The following supplemental financial
information sets forth on a condensed consolidating basis, consolidating balance
sheet, statement of income and statement of cash flows for the Parent Company
Only, Subsidiary Guarantors and for the Company as of December 2000 and
September 2001 and for the three and nine months ended September 2000 and 2001.
8
CONMED CORPORATION
CONSOLIDATING CONDENSED BALANCE SHEET
December 2000
(in thousands)
Parent
Company Subsidiary Company
Only Guarantors Eliminations Total
---- ---------- ------------ -----
ASSETS
Current assets:
Cash and cash equivalents ....... $ -- $ 3,470 $ -- $ 3,470
Accounts receivable, net ........ 35,218 43,408 -- 78,626
Inventories ..................... 20,174 84,438 -- 104,612
Deferred income taxes ........... 1,761 -- -- 1,761
Prepaid expenses and other
current assets ............ 598 2,964 -- 3,562
--------- --------- --------- ---------
Total current assets .... 57,751 134,280 -- 192,031
--------- --------- --------- ---------
Property, plant and equipment, net .... 38,275 24,175 -- 62,450
Goodwill, net ......................... 61,651 164,150 -- 225,801
Other intangible assets, net .......... 7,498 187,510 -- 195,008
Other assets .......................... 473,408 5,217 (474,344) 4,281
--------- --------- --------- ---------
Total assets .................... $ 638,583 $ 515,332 $(474,344) $ 679,571
========= ========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 36,068 $ -- $ -- $ 36,068
Accounts payable ................ 4,398 15,952 -- 20,350
Accrued compensation ............ 2,147 7,766 -- 9,913
Income taxes payable ............ 1,338 641 -- 1,979
Accrued interest ................ 5,130 -- -- 5,130
Other current liabilities ....... 1,890 2,946 -- 4,836
--------- --------- --------- ---------
Total current liabilities ... 50,971 27,305 -- 78,276
--------- --------- --------- ---------
Long-term debt ........................ 342,680 -- -- 342,680
Deferred income taxes ................. 12,154 -- -- 12,154
Other long-term liabilities ........... 2,175 349,295 (335,612) 15,858
--------- --------- --------- ---------
Total liabilities ............... 407,980 376,600 (335,612) 448,968
--------- --------- --------- ---------
Shareholders' equity:
Preferred stock ................. -- -- -- --
Common stock .................... 230 1 (1) 230
Paid-in capital ................. 127,985 -- -- 127,985
Retained earnings ............... 103,834 139,758 (139,758) 103,834
Accumulated other comprehensive
loss ...................... (1,027) (1,027) 1,027 (1,027)
Less common stock in
treasury, at cost ................ (419) -- -- (419)
--------- --------- --------- ---------
Total shareholders' equity 230,603 138,732 (138,732) 230,603
--------- --------- --------- ---------
Total liabilities and
shareholders' equity ...... $ 638,583 $ 515,332 $(474,344) $ 679,571
========= ========= ========= =========
9
CONMED CORPORATION
CONSOLIDATING CONDENSED BALANCE SHEET
September 2001
(in thousands)
(unaudited)
Parent
Company Subsidiary Company
Only Guarantors Eliminations Total
---- ---------- ------------ -----
ASSETS
Current assets:
Cash and cash equivalents ....... $ -- $ 2,015 $ -- $ 2,015
Accounts receivable, net ........ 37,252 48,467 -- 85,719
Inventories ..................... 22,747 84,590 -- 107,337
Deferred income taxes ........... 1,761 -- -- 1,761
Prepaid expenses and other
current assets ............ 920 2,886 -- 3,806
--------- --------- --------- ---------
Total current assets .... 62,680 137,958 -- 200,638
--------- --------- --------- ---------
Property, plant and equipment, net .... 45,927 45,971 -- 91,898
Goodwill, net ......................... 86,760 164,814 -- 251,574
Other intangible assets, net .......... 7,727 182,331 -- 190,058
Other assets .......................... 478,923 40,736 (514,486) 5,173
--------- --------- --------- ---------
Total assets .................... $ 682,017 $ 571,810 $(514,486) $ 739,341
========= ========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 38,463 $ 1,118 $ -- $ 39,581
Accounts payable ................ 4,478 15,836 -- 20,314
Accrued compensation ............ 3,443 6,450 -- 9,893
Income taxes payable ............ 1,243 135 -- 1,378
Accrued interest ................ 2,274 267 -- 2,541
Other current liabilities ....... 2,653 2,745 -- 5,398
--------- --------- --------- ---------
Total current liabilities ... 52,554 26,551 -- 79,105
--------- --------- --------- ---------
Long-term debt ........................ 327,284 21,542 -- 348,826
Deferred income taxes ................. 19,318 -- -- 19,318
Other long-term liabilities ........... 7,054 372,832 (363,601) 16,285
--------- --------- --------- ---------
Total liabilities ............... 406,210 420,925 (363,601) 463,534
--------- --------- --------- ---------
Shareholders' equity:
Preferred stock ................. -- -- -- --
Common stock .................... 252 1 (1) 252
Paid-in capital ................. 159,415 -- -- 159,415
Retained earnings ............... 120,586 152,768 (152,768) 120,586
Accumulated other comprehensive
loss ...................... (4,027) (1,884) 1,884 (4,027)
Less common stock in
treasury, at cost ................ (419) -- -- (419)
--------- --------- --------- ---------
Total shareholders' equity 275,807 150,885 (150,885) 275,807
--------- --------- --------- ---------
Total liabilities and
shareholders' equity ...... $ 682,017 $ 571,810 $(514,486) $ 739,341
========= ========= ========= =========
10
CONMED CORPORATION
CONSOLIDATING CONDENSED STATEMENT OF INCOME
Three Months Ended September 2000
(in thousands)
(unaudited)
Parent
Company Subsidiary Company
Only Guarantors Eliminations Total
---- ---------- ------------ -----
Net sales .......................... $ 17,577 $ 75,261 $ -- $ 92,838
-------- -------- -------- --------
Cost of sales ...................... 9,961 34,175 -- 44,136
Selling and administrative expense . 5,577 25,918 -- 31,495
Research and development expense ... 508 3,601 -- 4,109
-------- -------- -------- --------
16,046 63,694 -- 79,740
-------- -------- -------- --------
Income from operations ............. 1,531 11,567 -- 13,098
Interest expense, net .............. -- 8,834 -- 8,834
-------- -------- -------- --------
Income before income taxes ......... 1,531 2,733 -- 4,264
Provision for income taxes ......... 551 984 -- 1,535
-------- -------- -------- --------
Income before equity in earnings
of unconsolidated subsidiaries ... 980 1,749 -- 2,729
Equity in earnings of unconsolidated
subsidiaries ..................... 1,749 -- (1,749) --
-------- -------- -------- --------
Net income ......................... $ 2,729 $ 1,749 $ (1,749) $ 2,729
======== ======== ======== ========
11
CONMED CORPORATION
CONSOLIDATING CONDENSED STATEMENT OF INCOME
Three Months Ended September 2001
(in thousands)
(unaudited)
Parent
Company Subsidiary Company
Only Guarantors Eliminations Total
---- ---------- ------------ -----
Net sales .......................... $ 24,715 $ 80,603 $ -- $105,318
-------- -------- -------- --------
Cost of sales ...................... 14,342 36,990 -- 51,332
Selling and administrative expense . 7,970 27,059 -- 35,029
Research and development expense ... 332 3,159 -- 3,491
-------- -------- -------- --------
22,644 67,208 -- 89,852
-------- -------- -------- --------
Income from operations ............. 2,071 13,395 -- 15,466
Interest expense, net .............. -- 7,630 -- 7,630
-------- -------- -------- --------
Income before income taxes ......... 2,071 5,765 -- 7,836
Provision for income taxes ......... 746 2,075 -- 2,821
-------- -------- -------- --------
Income before equity in earnings
of unconsolidated subsidiaries ... 1,325 3,690 -- 5,015
Equity in earnings of unconsolidated
subsidiaries ..................... 3,690 -- (3,690) --
-------- -------- -------- --------
Net income ......................... $ 5,015 $ 3,690 $ (3,690) $ 5,015
======== ======== ======== ========
12
CONMED CORPORATION
CONSOLIDATING CONDENSED STATEMENT OF INCOME
Nine Months Ended September 2000
(in thousands)
(unaudited)
Parent
Company Subsidiary Company
Only Guarantors Eliminations Total
---- ---------- ------------ -----
Net sales .......................... $ 57,124 $ 236,403 $ -- $ 293,527
--------- --------- --------- ---------
Cost of sales ...................... 31,933 108,191 -- 140,124
Selling and administrative expense . 16,234 79,270 -- 95,504
Research and development expense ... 1,465 9,622 -- 11,087
--------- --------- --------- ---------
49,632 197,083 -- 246,715
--------- --------- --------- ---------
Income from operations ............. 7,492 39,320 -- 46,812
Interest expense, net .............. -- 25,477 -- 25,477
--------- --------- --------- ---------
Income before income taxes ......... 7,492 13,843 -- 21,335
Provision for income taxes ......... 2,697 4,984 -- 7,681
--------- --------- --------- ---------
Income before equity in earnings
of unconsolidated subsidiaries ... 4,795 8,859 -- 13,654
Equity in earnings of unconsolidated
subsidiaries ..................... 8,859 -- (8,859) --
--------- --------- --------- ---------
Net income ......................... $ 13,654 $ 8,859 $ (8,859) $ 13,654
========= ========= ========= =========
13
CONMED CORPORATION
CONSOLIDATING CONDENSED STATEMENT OF INCOME
Nine Months Ended September 2001
(in thousands)
(unaudited)
Parent
Company Subsidiary Company
Only Guarantors Eliminations Total
---- ---------- ------------ -----
Net sales .......................... $ 65,688 $ 249,710 $ -- $ 315,398
--------- --------- --------- ---------
Cost of sales ...................... 38,641 112,330 -- 150,971
Selling and administrative expense . 20,135 83,645 -- 103,780
Research and development expense ... 1,064 9,599 -- 10,663
--------- --------- --------- ---------
59,840 205,574 -- 265,414
--------- --------- --------- ---------
Income from operations ............. 5,848 44,136 -- 49,984
Interest expense, net .............. -- 23,809 -- 23,809
--------- --------- --------- ---------
Income before income taxes ......... 5,848 20,327 -- 26,175
Provision for income taxes ......... 2,106 7,317 -- 9,423
--------- --------- --------- ---------
Income before equity in earnings
of unconsolidated subsidiaries ... 3,742 13,010 -- 16,752
Equity in earnings of unconsolidated
subsidiaries ..................... 13,010 -- (13,010) --
--------- --------- --------- ---------
Net income ......................... $ 16,752 $ 13,010 $ (13,010) $ 16,752
========= ========= ========= =========
14
CONMED CORPORATION
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
Nine Months Ended September 2000
(in thousands)
(unaudited)
Parent
Company Subsidiary Company
Only Guarantors Eliminations Total
---- ---------- ------------ -----
Net cash flows from operating
activities ............................. $ 4,529 $ 12,521 $ -- $ 17,050
-------- -------- -------- --------
Cash flows from investing activities:
Distributions from subsidiaries ....... 9,498 -- (9,498) --
Purchases of property, plant and
equipment ................... (9,383) (2,486) -- (11,869)
-------- -------- -------- --------
Net cash provided (used)
by investing activities . 115 (2,486) (9,498) (11,869)
-------- -------- -------- --------
Cash flows from financing:
Distributions to parent ........... -- (9,498) 9,498 --
Borrowings under revolving
credit facility ............. 19,000 -- -- 19,000
Proceeds from issuance of
common stock ................ 448 -- -- 448
Payments on long-term debt ........ (24,690) -- -- (24,690)
-------- -------- -------- --------
Net cash provided (used) by
financing activities ......... (5,242) (9,498) 9,498 (5,242)
-------- -------- -------- --------
Effect of exchange rate changes on cash
and cash equivalents .................. -- (378) -- (378)
-------- -------- -------- --------
Net increase (decrease) in cash and
cash equivalents ....................... (598) 159 -- (439)
Cash and cash equivalents at
beginning of period .................... 598 3,149 -- 3,747
-------- -------- -------- --------
Cash and cash equivalents at
end of period .......................... $ -- $ 3,308 $ -- $ 3,308
======== ======== ======== ========
15
CONMED CORPORATION
CONSOLIDATING STATEMENT OF CASH FLOWS
Nine Months Ended September 2001
(in thousands)
(unaudited)
Parent
Company Subsidiary Company
Only Guarantors Eliminations Total
---- ---------- ------------ -----
Net cash flows from operating
activities ............................ $ 5,092 $ 18,480 $ -- $ 23,572
-------- -------- -------- --------
Cash flows from investing activities:
Distributions from subsidiaries ...... 15,990 -- (15,990) --
Purchases of property, plant and
equipment .................. (9,639) (3,065) -- (12,704)
-------- -------- -------- --------
Net cash provided (used)
by investing activities 6,351 (3,065) (15,990) (12,704)
-------- -------- -------- --------
Cash flows from financing:
Distributions to parent .......... -- (15,990) 15,990 --
Borrowings under revolving
credit facility ............ 14,000 -- -- 14,000
Proceeds from issuance of
common stock ............... 1,591 -- -- 1,591
Payments on long-term debt ....... (27,034) -- -- (27,034)
-------- -------- -------- --------
Net cash provided (used)by
financing activities ........ (11,443) (15,990) 15,990 (11,443)
-------- -------- -------- --------
Effect of exchange rate changes on cash
and cash equivalents ................. -- (880) -- (880)
-------- -------- -------- --------
Net decrease in cash and
cash equivalents ...................... -- (1,455) -- (1,455)
Cash and cash equivalents at
beginning of period ................... -- 3,470 -- 3,470
-------- -------- -------- --------
Cash and cash equivalents at
end of period ......................... $ -- $ 2,015 $ -- $ 2,015
======== ======== ======== ========
16
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This Quarterly Report on Form 10-Q contains certain forward-looking statements
(as such term is defined in the Private Securities Litigation Reform Act of
1995) and information that is based on the beliefs of management, as well as
assumptions made by and information currently available to management.
When used in this Form 10-Q, the words "estimate", "project", "believe",
"anticipate", "intend", "expect", and similar expressions are intended to
identify forward-looking statements. These statements involve known and unknown
risks, uncertainties and other factors, including those discussed in our Annual
Report on Form 10-K for the year ended December 2000, that may cause our actual
results, performance or achievements, or industry results, to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. Such factors include, among others,
the following: general economic and business conditions; changes in customer
preferences; competition; changes in technology; the introduction of new
products; the integration of any acquisition; changes in business strategy; the
possibility that United States or foreign regulatory and/or administrative
agencies might initiate enforcement actions against us or our distributors; our
indebtedness; quality of our management and business abilities and the judgment
of our personnel; the availability, terms and deployment of capital; the risk of
litigation, especially patent litigation as well as the cost associated with
patent and other litigation and changes in regulatory requirements.
You are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date hereof. We do not undertake any
obligation to publicly release any revisions to these forward-looking statements
to reflect events or circumstances after the date of this Form 10-Q or to
reflect the occurrence of unanticipated events.
Three months ended September 2001 compared to three months ended September 2000
Sales for the quarter ended September 2001 were $105.3 million, an increase of
13.5% compared to sales of $92.8 million in the same quarter a year ago.
Sales in our orthopaedic businesses grew 4.4% to $63.8 million from $61.1
million in the comparable quarter last year. Arthroscopy sales, which represent
approximately 58.2% of total orthopaedic revenues, grew 11.4% to $37.1 million
from $33.3 million in the same period a year ago. Powered surgical instrument
sales, which represent approximately 41.8% of orthopaedic revenues, declined
4.0% to $26.7 million from $27.8 million in the same quarter last year. Adjusted
for constant foreign currency exchange rates, orthopaedic sales growth in the
third quarter of 2001 would have been approximately 5.5% compared with the third
quarter of 2000.
Patient care sales for the three months ended September 2001 were $16.8 million,
a 5.0% increase from $16.0 million in the same period a year ago, as sales of
our ECG and surgical suction product lines improved compared to the same period
a year ago.
Electrosurgery sales for the three months ended September 2001 were $16.8
million, an increase of 17.5% from $14.3 million in the third quarter of last
year, reflecting improved capital and disposable product sales.
Endoscopy sales for the three months ended September 2001 were $7.9 million, an
increase of 464% from $1.4 million in the third quarter of last year. Excluding
the impact of the Imagyn acquisitions (Note 6 to the consolidated condensed
financial statements), the increase in sales was approximately 12.4%.
Cost of sales increased to $51,332,000 in the current quarter as compared to
$44,136,000 in the same quarter a year ago, primarily as a result of the
increased sales volumes described above. As discussed in Note 7 to the
consolidated condensed
17
financial statements, during the quarter ended September 2001, we incurred
various nonrecurring charges in connection with the second Imagyn acquisition.
These costs were primarily related to the transition in manufacturing of the
Imagyn product lines from Imagyn's Richland, Michigan facility to our
manufacturing plants in Utica, New York. Such costs totaled $886,000 in the
third quarter of 2001 and are included in cost of sales. Excluding the impact of
these non-recurring adjustments, cost of sales was $50,446,000. Gross margin
percentage for the third quarter 2001, excluding the Imagyn-related charges, was
52.1% compared to 52.5% in the third quarter of 2000. The decrease in gross
margin percentage is primarily a result of product mix, as sales in the higher
gross margin orthopaedic product lines declined to 60.6% of total sales in the
quarter ended September 2001 compared to 65.8% in the quarter ended September
2000.
Selling and administrative expenses increased to $35,029,000 in the third
quarter of 2001 as compared to $31,495,000 in the third quarter of 2000. As a
percentage of sales, selling and administrative expenses totaled 33.3% in the
third quarter of 2001,consistent with 33.9% in the third quarter of 2000. The
increase in selling and administrative expense is a result of higher commissions
and other selling expenses in the third quarter of 2001 as compared to the third
quarter of 2000 associated with the increased sales volumes described above.
Research and development expense decreased to $3,491,000 in the third quarter of
2001 as compared to $4,109,000 in the third quarter of 2000. As a percentage of
sales, research and development expense decreased to 3.3% in the current quarter
compared to 4.4% in the same quarter a year ago.
Interest expense in the third quarter of 2001 was $7,630,000 compared to
$8,834,000 in the third quarter of 2000. The decrease in interest expense is
primarily a result of lower weighted average interest rates on our term loans
and revolving credit facility which have declined to 5.66% and 5.62%,
respectively at September 2001 as compared to 8.53% and 8.93%, respectively at
September 2001 resulting in decreased interest expense. (See Liquidity and
Capital Resources section of Management's Discussion and Analysis of Financial
Condition and Results of Operations).
Nine months ended September 2001 compared to nine months ended September 2000
Sales for the nine months ended September 2001 were $315.4 million, an increase
of 7.5% compared to sales of $293.5 million in the same quarter a year ago.
Sales in our orthopaedic businesses grew 4.4% to $201.0 million from $192.6
million in the comparable period last year. Arthroscopy sales, which represent
approximately 57.4% of total orthopaedic revenues, grew 6.0% to $115.3 million
from $108.8 million in the same period a year ago. Powered surgical instrument
sales, which represent approximately 42.6% of orthopaedic revenues, grew 2.3% to
$85.7 million from $83.8 million in the same period last year. Adjusted for
constant foreign currency exchange rates, orthopaedic sales growth in the first
nine months of 2001 would have been approximately 6.0% compared with the first
nine months of 2000.
Patient care sales for the nine months ended September 2001 were $52.0 million,
a 1.0% increase from $51.5 million in the same period a year ago, reflecting
modest increases in sales of our ECG and surgical suction product lines.
Electrosurgery sales for the nine months ended September 2001 were $48.9
million, an increase of 8.7% from $45.0 million in the first nine months of last
year, reflecting improved generator and disposable product sales.
Endoscopy sales for the nine months ended September 2001 were $13.4 million, an
increase of 212% from $4.3 million in the same period a year ago. Excluding the
18
impact of the Imagyn acquisitions (Note 6 to the consolidated condensed
financial statements), the increase in sales was approximately 9.5%.
Cost of sales increased to $150,971,000 in the nine months ended September 2001
compared to $140,124,000 in the same period a year ago, primarily as a result of
the increased sales volumes described above. As discussed in Note 7 to the
consolidated condensed financial statements, during the quarter ended September
2001, we incurred various nonrecurring charges in connection with the second
Imagyn acquisition. These costs were primarily related to the transition in
manufacturing of the Imagyn product lines from Imagyn's Richland, Michigan
facility to our manufacturing plants in Utica, New York. Such costs totaled
$886,000 in the third quarter of 2001 and are included in cost of sales.
Excluding the impact of these non-recurring adjustments, cost of sales for the
nine months ended September 2001 was $150,085,000. Gross margin percentage for
the nine months ended September 2001, excluding the Imagyn-related charges, was
52.4% comparable with the 52.3% experienced in the same period a year ago.
Selling and administrative expenses increased to $103,780,000 in the first nine
months of 2001 as compared to $95,504,000 in the first nine months of 2000. As a
percentage of sales, selling and administrative expenses totaled 32.9% in the
first nine months of 2001, consistent with 32.5% in the first nine months of
2000. The increase in selling and administrative expense is a result of higher
commissions and other selling expenses in the first nine months of 2001 as
compared to 2000 associated with the increased sales volumes described above.
Research and development expense decreased to $10,663,000 in the first nine
months of 2001 as compared to $11,087,000 in the first nine months of 2000. As a
percentage of sales, research and development expense decreased to 3.4% in the
current period compared to 3.8% in the same period a year ago.
Interest expense in the first nine months of 2001 was $23,809,000 compared to
$25,477,000 in the first nine months of 2000. The decrease in interest expense
is primarily a result of lower weighted average interest rates on our term loans
and revolving credit facility which have declined, to 5.66% and 5.62%,
respectively, at September 2001 as compared to 8.53% and 8.93%, respectively, at
September 2000 resulting in decreased interest expense. (See Liquidity and
Capital Resources section of Management's Discussion and Analysis of Financial
Condition and Results of Operations).
Liquidity and Capital Resources
Our net working capital position increased to $121,533,000 at September 2001
compared to $113,755,000 at December 2000. The increase in net working capital
is largely a result of increases in accounts receivable and inventories at
September 2001 compared to December 2000 as a result of higher overall sales
levels in 2001 compared to 2000 and the effects of the second Imagyn
acquisition.
Net cash used by investing activities for the nine months ended September 2001
and 2000 consisted of $12,704,000 and $11,869,000, respectively, in capital
expenditures.
Financing activities during the nine months ended September 2001 consisted
primarily of scheduled payments of $27,034,000 on our term loans and $14,000,000
in borrowings on our revolving credit facility. Financing activities during the
nine months ended September 2000 consisted primarily of scheduled payments of
$24,690,000 on our term loans and $19,000,000 in borrowings on our revolving
credit facility.
Our term loans under our credit facility at September 2001 aggregate
$173,952,000. Our term loans are repayable quarterly over remaining terms of
approximately four years. Our credit facility also includes a $100,000,000
revolving credit facility which expires and is expected to be renegotiated prior
to December 2002, of which
19
$39,000,000 was available at September 2001. The borrowings under the credit
facility carry interest rates based on a spread over LIBOR or an alternative
base interest rate. The covenants of the credit facility provide for increase
and decrease to this interest rate spread based on our operating results. The
weighted average interest rates at September 2001 under the term loans and the
revolving credit facility were 5.66% and 5.62%, respectively. Additionally, we
are obligated to pay a fee of .375% per annum on the unused portion of the
revolving credit facility.
The credit facility is collateralized by all of our personal property, except
for our accounts receivable and related rights, which are pledged in connection
with the accounts receivable securitization facility described below. The credit
facility contains covenants and restrictions which, among other things, require
maintenance of certain working capital levels and financial ratios, prohibit
dividend payments and restrict the incurrence of certain indebtedness and other
activities, including acquisitions and dispositions. We are also required to
make mandatory prepayments from net cash proceeds from any issue of equity and
asset sales. Mandatory prepayments are to be applied first to the prepayment of
the term loans and then to reduce borrowings under the revolving credit
facility.
The Notes are in aggregate principal amount of $130,000,000 and have a maturity
date of March 15, 2008. The Notes bear interest at 9.0% per annum which is
payable semi-annually. The indenture governing the Notes has certain restrictive
covenants and provides for, among other things, mandatory and optional
redemptions by us.
The credit facility and Notes are guaranteed by each of our subsidiaries except
CRC. The Subsidiary Guarantees provide that each Subsidiary Guarantor will fully
and unconditionally guarantee our obligations on a joint and several basis. Each
Subsidiary Guarantor is wholly-owned by CONMED Corporation. Under the credit
facility and Note indenture, our subsidiaries except CRC are subject to the same
covenants and restrictions that apply to us (except that the Subsidiary
Guarantors are permitted to make dividend payments and distributions, including
cash dividend payments, to us or another Subsidiary Guarantor).
The principal balances outstanding related to the Largo acquisition, discussed
in Note 6 to the consolidated condensed financial statements, aggregated
$12,185,000, $6,275,000 and $4,200,000, at September 2001 on the Class A note,
Class C note and Seller note respectively, which are secured by, among other
things, recorded and unrecorded mortgage liens on the Largo property.
As discussed in Note 9 to the consolidated condensed financial statements, on
November 1, 2001, we established a five-year accounts receivable securitization
facility. We used the initial $40.0 million in proceeds from the facility to
repay a portion of our loans under the credit facility.
We use an interest rate swap, a form of derivative financial instrument, to
manage interest rate risk. We have designated as a cash-flow hedge, an interest
rate swap which effectively converts $50,000,000 of LIBOR-based floating rate
debt under our credit facility into fixed rate debt with a base interest rate of
7.01%. The interest rate swap expires in June 2003 and is included in
liabilities on the balance sheet with a fair value approximating $3,348,000.
There were no material changes in our market risk during the quarter ended
September 2001. For a detailed discussion of market risk, see our Annual Report
on Form 10-K for the year ended December 2000, Part II, Item 7A, Quantitative
and Qualitative Disclosures About Market Risk.
We believe that cash generated from operations, our current cash resources and
funds available under our credit facility will provide sufficient liquidity to
ensure continued working capital for operations, debt service and funding of
capital expenditures in the foreseeable future.
20
Foreign Operations
Our foreign operations are subject to special risks inherent in doing business
outside the United States, including governmental instability, war and other
international conflicts, civil and labor disturbances, requirements of local
ownership, partial or total expropriation, nationalization, currency
devaluation, foreign exchange controls and foreign laws and policies, each of
which may limit the movement of assets or funds or result in the deprivation of
contract rights or the taking of property without fair compensation.
21
Item 6. Exhibits and Reports on Form 8-K
List of Exhibits
Exhibit No. Description of Instrument
- ----------- -------------------------
10.1 The Purchase and Sale Agreement dated November 1, 2001 among
CONMED Corporation, et al and CONMED Receivables Corporation
(included in EDGAR filing only)
10.2 The Receivables Purchase Agreement dated November 1, 2001 among
CONMED Receivables Corporation, Blue Keel Funding, LLC and
Fleet National Bank (included in EDGAR filing only)
Reports on Form 8-K
None
22
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.
CONMED CORPORATION
(Registrant)
Date: November 13, 2001
/s/ Robert D. Shallish, Jr.
-----------------------------
Robert D. Shallish, Jr.
Vice President - Finance
(Principal Financial Officer)
23
Exhibit Index
Sequential Page
Exhibit Number
- ------- ------
10.1 The Purchase and Sale Agreement dated November 1, 2001 among CONMED
Corporation, et al and CONMED Receivables Corporation (included in EDGAR
filing only)
10.2 The Receivables Purchase Agreement dated November 1, 2001 among CONMED
Receivables Corporation, Blue Keel Funding, LLC and Fleet National Bank.
(included in EDGAR
filing only)
24
Exhibit 10.1
================================================================================
PURCHASE AND SALE AGREEMENT
among
CONMED CORPORATION
as an Originator and initial Servicer,
LINVATEC CORPORATION, LINVATEC CANADA ULC
AND CERTAIN OTHER SUBSIDIARIES OF
CONMED CORPORATION
THAT MAY BECOME PARTY HERETO,
as Originators
and
CONMED RECEIVABLES CORPORATION,
as the Initial Purchaser
Dated as of November 1, 2001
================================================================================
TABLE OF CONTENTS
PAGE
DEFINITIONS.......................................................................................................1
ARTICLE I
AMOUNTS AND TERMS OF THE PURCHASES........................................4
SECTION 1.1. Agreement to Purchase and Sell.........................................................4
SECTION 1.2. Timing of Purchases....................................................................5
SECTION 1.3. No Recourse............................................................................5
SECTION 1.4. True Sales.............................................................................6
SECTION 1.5. Consideration for Purchases............................................................6
SECTION 1.6. Initial Purchaser Agreement to Make Demand Loans.......................................6
SECTION 1.7. Addition of Originators................................................................7
ARTICLE II
CALCULATION OF PURCHASE PRICE..........................................7
SECTION 2.1. Calculation of Purchase Price..........................................................7
ARTICLE III
PAYMENT OF PURCHASE PRICE............................................9
SECTION 3.1. The Initial Purchase Price Payment.....................................................9
SECTION 3.2. Purchase Price Payments...............................................................10
SECTION 3.3. Deemed Collections, Etc...............................................................11
SECTION 3.4. Payments and Computations, Etc........................................................12
ARTICLE IV
CONDITIONS TO PURCHASES............................................12
SECTION 4.1. Conditions Precedent to Initial Purchase..............................................12
SECTION 4.2. Conditions Precedent to All Purchases.................................................14
SECTION 4.3. Certification as to Representations and Warranties....................................14
SECTION 4.4. Effect of Payment of Purchase Price...................................................14
(i)
PAGE
ARTICLE V
REPRESENTATIONS AND WARRANTIES.........................................15
SECTION 5.1. Representations and Warranties........................................................15
ARTICLE VI
COVENANTS...................................................18
SECTION 6.1. Affirmative Covenants.................................................................18
SECTION 6.2. Negative Covenants....................................................................19
SECTION 6.3. Separate Existence....................................................................20
ARTICLE VII
INDEMNIFICATION................................................21
SECTION 7.1. Indemnities by the Originators........................................................21
SECTION 7.2. After-Tax Basis.......................................................................23
ARTICLE VIII
ADMINISTRATION AND COLLECTIONS; ADDITIONAL RIGHTS
AND OBLIGATIONS IN RESPECT OF THE POOL RECEIVABLES...............................23
SECTION 8.1. Servicing of Pool Receivables and Related Rights......................................23
SECTION 8.2. Rights of the Initial Purchaser; Enforcement Rights...................................23
SECTION 8.3. Responsibilities of the Originator....................................................25
SECTION 8.4. Further Action Evidencing Purchases...................................................25
ARTICLE IX
MISCELLANEOUS.................................................26
SECTION 9.1. Amendments, Etc.......................................................................26
SECTION 9.2. Notices, Etc..........................................................................26
SECTION 9.3. Acknowledgment and Consent............................................................26
SECTION 9.4. Binding Effect; Assignability.........................................................27
SECTION 9.5. Costs, Expenses and Taxes.............................................................28
SECTION 9.6. No Proceedings; Limitation on Payments................................................28
SECTION 9.7. GOVERNING LAW AND JURISDICTION........................................................28
SECTION 9.8. Execution in Counterparts.............................................................29
SECTION 9.9. Survival of Termination...............................................................29
(ii)
PAGE
SECTION 9.10. WAIVER OF JURY TRIAL..................................................................29
SECTION 9.11. Entire Agreement......................................................................29
SECTION 9.12. Headings..............................................................................29
ARTICLE X
GUARANTY....................................................30
SECTION 10.1. Guaranty of Obligations...............................................................30
SECTION 10.2. Reinstatement.........................................................................30
SECTION 10.3. Waiver................................................................................30
SCHEDULE 9.2 NOTICE ADDRESSES
SCHEDULE I LOCK-BOX BANKS AND LOCK-BOX ACCOUNTS
EXHIBIT A FORM OF PURCHASE REPORT
EXHIBIT B FORM OF INITIAL PURCHASER NOTE
EXHIBIT C FORM OF ORIGINATOR NOTE
EXHIBIT D FORM OF JOINDER AGREEMENT
(iii)
PURCHASE AND SALE AGREEMENT
This PURCHASE AND SALE AGREEMENT (as amended, supplemented or otherwise
modified from time to time, this "Agreement") is entered into as of November 1,
2001, between CONMED CORPORATION, a New York corporation ("ConMed"), as a seller
and as initial Servicer, LINVATEC CORPORATION, a Florida corporation
("Linvatec"), LINVATEC CANADA ULC, a corporation formed under the laws of Nova
Scotia ("Linvatec Canada"; Linvatec, Linvatec Canada and ConMed, together with
the other Persons who may become parties hereto pursuant to Section 1.7, are
individually called an "Originator" and collectively called the "Originators"),
and CONMED RECEIVABLES CORPORATION, a New York corporation, as initial purchaser
(the "Initial Purchaser").
DEFINITIONS
Unless otherwise defined herein or the context otherwise requires,
certain terms that are used throughout this Agreement (including the Exhibits
hereto) are defined in Appendix A to the Receivables Purchase Agreement, dated
as of even date herewith, among the Initial Purchaser, as Seller, ConMed, as the
initial Servicer, Blue Keel Funding, LLC, as Conduit Purchaser, Fleet National
Bank, as Committed Purchaser, and Fleet Securities, Inc., as Administrator (as
the same may be amended, modified or supplemented from time to time, the
"Receivables Purchase Agreement"). Any reference to "this Agreement" or "the
Purchase and Sale Agreement", including any such reference in any Exhibit
hereto, shall mean this Agreement in its entirety, including the Exhibits and
other attachments hereto, as amended, modified or supplemented from time to time
in accordance with the terms hereof.
Available Funds shall have the meaning assigned to such term in Section
3.2(a) hereof.
Contributed Receivables shall have the meaning assigned to such term in
Section 1.2(b) hereof.
Cost Discount shall have the meaning assigned to such term in Section
2.1 hereof.
Cost Rate shall have the meaning assigned to such term in Section 2.1
hereof.
Deemed Collection means amounts payable by an Originator pursuant to
Section 3.3.
Earned Discount Rate Percentage shall be equal to a fraction (expressed
as a percentage) (x) the numerator of which is the sum of the products obtained
by multiplying (A) each Earned Discount Rate applicable to any portion of the
Asset Interest as of the first day of the relevant Settlement Period, times (B)
the amount of the Capital (or portion thereof) to which such Earned Discount
Rate applied on such first day, and (y) the denominator of which is the Capital
on such first day.
-1-
Fair Market Value Discount Factor shall have the meaning assigned to
such term in Section 2.1 hereof.
Ineligible Receivable shall have the meaning assigned to such term in
Section 3.3(b) hereof.
Initial Closing Date shall have the meaning assigned to such term in
Section 1.2(a) hereof.
Initial Contributed Receivables shall have the meaning assigned to such
term in Section 1.1(b) hereof.
Initial Cut-Off Date means the Business Day immediately preceding the
Initial Closing Date.
Initial Purchaser Note shall have the meaning assigned to such term in
Section 3.1 hereof.
LIBO Rate shall have the meaning assigned to such term in Section 2.1
hereof.
Loss Discount shall have the meaning assigned to such term in Section
2.1 hereof.
Originator Loan shall have the meaning assigned to such term in Section
1.6 hereof.
Originator Note shall have the meaning assigned to such term in Section
1.6(a) hereof.
Payment Day means (i) the date hereof and (ii) each Business Day
thereafter that an Originator is open for business.
Purchase Price shall have the meaning assigned to such term in Section
2.1 hereof.
Purchase Report shall have the meaning assigned to such term in Section
2.1 hereof.
Related Rights shall have the meaning assigned to such term in Section
1.1(a) hereof.
Sale Indemnified Amounts shall have the meaning assigned to such term
in Section 7.1 hereof.
Sale Indemnified Party shall have the meaning assigned to such term in
Section 7.1 hereof.
Sale Termination Date shall be the Purchase Termination Date under the
Receivables Purchase Agreement.
Seller Material Adverse Effect means, with respect to any event or
circumstance a material adverse effect on:
(i) the results of operations, business, financial position
or assets of ConMed;
-2-
(ii) the ability of any Originator to perform its obligations
under this Agreement or any other Transaction Document to which such
Originator, in its capacity as such, is a party;
(iii) a the validity or enforceability as against any
Originator of this Agreement or any other Transaction Document to which
any Originator, in its capacity as such, is a party;
(iv) the status, existence, perfection, priority or
enforceability of the Initial Purchaser's interest in the Receivables
Pool and the Related Rights; or
(v) the validity, enforceability or collectibility of a
material portion of the Receivables Pool.
PRELIMINARY STATEMENTS
1. The Initial Purchaser is a limited purpose corporation, all of the
issued and outstanding shares of capital stock of which are wholly owned by
ConMed.
2. Each Originator wishes to sell Receivables that it now owns and from
time to time hereafter will own to the Initial Purchaser, and the Initial
Purchaser is willing, on the terms and subject to the conditions contained in
this Agreement, to purchase such Receivables from such each Originator at such
time.
3. The Initial Purchaser has entered into the Receivables Purchase
Agreement, pursuant to which, among other things, the Initial Purchaser may sell
to the Administrator, for the benefit of the Purchasers, undivided ownership
interests in the Receivables and certain Related Rights.
NOW, THEREFORE, 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. Agreement to Purchase and Sell.
(a) On the terms and conditions hereinafter set forth, and in
consideration of the Purchase Price, each Originator agrees to sell to the
Initial Purchaser, and the Initial Purchaser agrees to purchase from such
Originator, at the times set forth in Section 1.2, but prior to the Sale
Termination Date, all of such Originator's right, title, and interest in and to:
-3-
(i) each Receivable (other than Initial Contributed
Receivables) of such Originator that existed and was owing to such
Originator as of the close of such Originator's business on the Initial
Cut-Off Date, in the case of ConMed, Linvatec Canada and Linvatec, or
on the Business Day immediately preceding the day on which such
Originator became a party hereto pursuant to Section 1.7 in the case of
each other Originator;
(ii) each Receivable (other than Contributed Receivables)
created or originated by such Originator from the close of such
Originator's business on the Initial Cut-Off Date, in the case of
ConMed, Linvatec Canada and Linvatec, or on the Business Day
immediately preceding the day on which such Originator became a party
hereto pursuant to Section 1.7 in the case of each other Originator, to
and including the Sale Termination Date;
(iii) all rights to, but not the obligations under, all
related Contracts and all Related Security with respect thereto;
(iv) all monies due or to become due with respect to the
foregoing;
(v) all books and records related to any of the foregoing;
(vi) all Lock-Boxes, Lock-Box Accounts, all amounts on deposit
therein and all related agreements between such Originator and the
Lock-Box Banks, in each case to the extent constituting or representing
items described in paragraph (vii) below; and
(vii) all Collections in respect of, and other proceeds of,
Receivables or any other of the foregoing (as defined in the UCC)
received on or after the Initial Cut-Off Date, in the case of ConMed,
Linvatec Canada and Linvatec, or on the Business Day immediately
preceding the day on which such Originator became a party hereto
pursuant to Section 1.7 in the case of each other Originator,
including, without limitation, all funds which either are received by
such Originator, the Initial Purchaser or the Servicer from or on
behalf of the Obligors in payment of any amounts owed (including,
without limitation, finance charges, interest and all other charges) in
respect of Receivables, or are applied to such amounts owed by the
Obligors (including, without limitation, insurance payments, if any,
that such Originator or the Servicer applies in the ordinary course of
its business to amounts owed in respect of any Receivable and net
proceeds of sale or other disposition of repossessed goods or other
collateral or property of the Obligors or any other party directly or
indirectly liable for payment of such Receivable and available to be
applied thereon).
All purchases and capital contributions hereunder shall be made without
recourse, but shall be made pursuant to and in reliance upon the
representations, warranties and covenants of the Originators set forth in each
Transaction Document. The proceeds and rights described in subsections (iii)
through (vii) of this Section 1.1(a) are herein collectively called the "Related
Rights".
(b) Agreement to Contribute. In consideration of the capital stock of
the Initial Purchaser issued to ConMed, ConMed agrees to contribute, and does
hereby contribute to the Initial Purchaser,
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and the Initial Purchaser agrees to accept, and does hereby accept, from ConMed,
in each case, on the Initial Closing Date, all of ConMed's right, title and
interest in and to (i) Receivables and the Related Rights with respect thereto
existing on the Initial Cut-Off Date, starting with the oldest such Receivables
such that the aggregate Unpaid Balance of all such Receivables shall be as close
as possible to, but not less than, $2,000,000 (the "Initial Contributed
Receivables") and (ii) all other Contributed Receivables originated by ConMed.
SECTION 1.2. Timing of Purchases.
(a) Initial Closing Date Purchase. On the date of the first Purchase
under the Receivables Purchase Agreement (the "Initial Closing Date"), each of
ConMed, Linvatec Canada and Linvatec shall sell to the Initial Purchaser, and
the Initial Purchaser shall purchase, pursuant to Section 1.1, such Originator's
entire right, title and interest in (i) each Receivable (other than the Initial
Contributed Receivables) that existed and was owing to such Originator as of the
close of such Originator's business on the Initial Cut-Off Date, and (ii) all
Related Rights with respect thereto.
(b) Regular Purchases and Contributions. After the Initial Closing
Date, and continuing until the Sale Termination Date, each Receivable described
in Section 1.1(a)(ii) hereof, and all the Related Rights with respect thereto,
created or originated by each Originator shall be sold or contributed by such
Originator to the Initial Purchaser (without any further action) upon the
creation or origination of such Receivable. All such Receivables, other than
those Receivables indicated on a Purchase Report as having been contributed by
the related Originator to the Initial Purchaser (such other Receivables,
together with the Initial Contributed Receivables, the "Contributed
Receivables"), shall be sold to the Initial Purchaser on such date; all
Contributed Receivables shall be contributed by the related Originator to the
Initial Purchaser on such date.
SECTION 1.3. No Recourse. Except as specifically provided in this
Agreement, the purchase and sale of Pool Receivables and Related Rights under
this Agreement shall be without recourse to the related Originator; provided
that each Originator shall be liable to the Initial Purchaser for all
representations, warranties, covenants and indemnities made by such Originator
pursuant to the terms of this Agreement, it being understood that such
obligation of such Originator will not arise on account of the failure of the
Obligor for credit reasons to make any payment in respect of a Pool Receivable.
SECTION 1.4. True Sales.
(a) Each of each Originator and the Initial Purchaser intend the
transactions hereunder to constitute true sales (or in the case of Contributed
Receivables, conveyances in the form of capital contributions) of Pool
Receivables and the Related Rights by such Originator to the Initial Purchaser
providing the Initial Purchaser with the full benefits of ownership thereof, and
no party hereto intends the transactions contemplated hereunder to be, or for
any purpose to be characterized as, a loan from the Initial Purchaser to such
Originator.
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(b) In the event (but only to the extent) that the conveyance of Pool
Receivables and Related Rights hereunder is characterized by a court or other
governmental authority as a loan rather than a sale or contribution, each
Originator shall be deemed hereunder to have granted to the Initial Purchaser,
and each Originator hereby grants to the Initial Purchaser, a security interest
in all of such Originator's right, title and interest in, to and under all of
the Pool Receivables and Related Rights originated by it, whether now or
hereafter owned, existing or arising. Such security interest shall secure all of
such Originator's obligations (monetary or otherwise) under this Agreement and
the other Transaction Documents to which it is a party, whether now or hereafter
existing or arising, due or to become due, direct or indirect, absolute or
contingent. The Initial Purchaser shall have, with respect to the property
described in this Section 1.4(b), and in addition to all the other rights and
remedies available to the Initial Purchaser under this Agreement and applicable
law, all the rights and remedies of a secured party under the UCC, and this
Agreement shall constitute a security agreement under Applicable Law.
SECTION 1.5. Consideration for Purchases. On the terms and subject to
the conditions set forth in this Agreement, the Initial Purchaser agrees to make
all Purchase Price payments to the Originators in accordance with Article III.
SECTION 1.6. Initial Purchaser Agreement to Make Demand Loans. On the
terms and subject to the conditions set forth in this Agreement and in the
Receivables Purchase Agreement, the Initial Purchaser agrees to make demand
loans (each such loan being herein called an "Originator Loan") to ConMed prior
to the Sale Termination Date in such amounts as ConMed may request from time to
time; provided, however, that:
(a) The Originator Loans made to ConMed shall be evidenced by
a demand promissory note in the form of Exhibit C to this Agreement
issued by ConMed to the order of the Initial Purchaser (such demand
promissory note, as it may be amended, supplemented, endorsed or
otherwise modified from time to time in accordance with the Transaction
Documents, together with all promissory notes issued from time to time
in substitution therefor or renewal thereof in accordance with the
Transaction Documents, being called the "Originator Note"); and
(b) No Originator Loan shall be made to ConMed to the extent
that the making of such Originator Loan would violate the Receivables
Purchase Agreement.
SECTION 1.7. Addition of Originators. Subsidiaries of ConMed may be
added as Originators under this Agreement provided that all of the following
conditions have been met:
(i) the conditions precedent set forth in paragraphs (b)
through (k) of Section 4.1 are satisfied with respect to such
Subsidiary;
(ii) such Subsidiary executes a joinder agreement in the form
of Exhibit D hereto, in form and substance satisfactory to the Initial
Purchaser and Administrator, pursuant to which such Subsidiary agrees
to become an Originator hereunder, assumes all of the
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obligations of an Originator hereunder and under the other Transaction
Documents and makes all of the representations and warranties set forth
in Section 5.1; and
(iii) the Initial Purchaser and the Administrator consent to
such addition in writing.
ARTICLE II
CALCULATION OF PURCHASE PRICE
SECTION 2.1. Calculation of Purchase Price. On each Reporting Date
(commencing with the first Reporting Date following the Initial Closing Date),
the Servicer shall deliver to the Initial Purchaser, the Administrator and
ConMed (if the Servicer is other than ConMed) a report in substantially the form
of Exhibit A (each such report being herein called a "Purchase Report") with
respect to the Initial Purchaser's purchases of Receivables from the Originators
(a) that arose on or prior to the Initial Cut-Off Date (in the
case of the first Purchase Report to be delivered hereunder) and
(b) that arose during the Settlement Period immediately
preceding such Reporting Date (in the case of each successive Purchase
Report).
Each Purchase Report shall designate the amount of such Receivables that were
Eligible Receivables on the date of origination (or, in the case of Receivables
transferred or contributed on the Initial Closing Date, on the Initial Closing
Date).
The "Purchase Price" (to be paid to the Originators in accordance with
the terms of Article III) for the Receivables and the Related Rights shall be
determined in accordance with the following formula:
PP = AUB - (AUB x FMVD)
where:
PP = Purchase Price (to be paid to the Originators in
accordance with the terms of Article III) as
calculated on the relevant Reporting Date;
AUB = (i) for purposes of calculating the Purchase Price
on the Initial Closing Date, the aggregate Unpaid
Balance of all Receivables that existed and were
owing to the related Originator as measured as at the
Initial Cut-Off Date, less an amount equal to the sum
of the aggregate Unpaid Balance of all Initial
Contributed Receivables, and
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(ii) for purposes of calculating the Purchase Price
for Receivables on each Reporting Date thereafter,
the aggregate Unpaid Balance of the Receivables
described in Section 1.1(a)(ii) hereof that were
generated by the related Originator during the
immediately preceding Settlement Period, less an
amount equal to the sum of the aggregate Unpaid
Balance of all Contributed Receivables, if any,
indicated on the related Purchase Report; and
FMVD = "Fair Market Value Discount Factor" on the
determination date, which is the sum of the Loss
Discount and the Cost Discount, in each case as
calculated on the most recent Reporting Date as set
forth in the definitions below.
"Loss Discount" as measured on the Initial Closing Date or any
Reporting Date means the ratio, expressed as a percentage, of (i) the losses
(i.e. write-offs to the bad debt reserve or other write-offs consistent with the
Credit and Collection Policy, in each case, net of recoveries) recognized for
all Pool Receivables during the period equal to twelve (12) months ending on the
Cut-Off Date immediately preceding the Initial Closing Date or such Reporting
Date, as the case may be, divided by (ii) the Collections on all Pool
Receivables received during such period.
"Cost Discount" as measured on the Initial Closing Date or any
Reporting Date means a percentage determined in accordance with the following
formula:
CD = (TD/360) x CR
where:
CD = the Cost Discount as measured on such date;
TD = the Days Sales Outstanding, as set forth in the most
recent Purchase Report; and
CR = the Cost Rate as measured on such date.
"Cost Rate" as measured on the Initial Closing Date or any Reporting
Date means a per annum percentage rate equal to the sum of (i) the LIBO Rate for
the Initial Closing Date or the related Settlement Period, as the case may be,
plus (ii) 1.50%.
"LIBO Rate" for the Initial Closing Date or any Settlement Period means
the offered rate per annum (rounded upwards, if necessary, to the nearest 1/16th
of one percent) appearing in The Wall Street Journal for one month LIBOR loans
on the Initial Closing Date or the first Business Day of such Settlement Period,
as the case may be.
"Days Sales Outstanding" means a number of days calculated as (i) Sales
as of the end of the second preceding month divided by the Collections for the
preceding month multiplied by (ii) 30.
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ARTICLE III
PAYMENT OF PURCHASE PRICE
SECTION 3.1. The Initial Purchase Price Payment.
(a) On or prior to the Initial Closing Date, the Initial Purchaser
shall pay the Purchase Price for the purchase to be made from each Originator
with respect to the Receivables existing on or prior to the Initial Cut-Off Date
(other than the Initial Contributed Receivables) (i) in cash in an amount equal
to such Originator's pro rata share (based on the ratio of the Unpaid Balance of
the Receivables sold on such date generated by such Originator to the aggregate
Unpaid Balance of the Receivables sold on such date generated by all of the
Originators) the amount received by the Initial Purchaser from the Purchaser in
connection with the first Purchase made pursuant to the Receivables Purchase
Agreement and (ii) by the issuance of a promissory note in the form of Exhibit B
to this Agreement payable to the order of such Originator in the initial
principal amount equal to the remainder of the Purchase Price owing after
subtracting the amount paid in cash (such promissory note together with the
promissory note issued to any other Originator hereunder, as it may be amended,
supplemented, endorsed or otherwise modified from time to time, together with
any promissory notes issued from time to time in substitution therefor or
renewal thereof in accordance with the Transaction Documents, being called an
"Initial Purchaser Note"), each of which Initial Purchaser Notes shall, in
accordance with its terms, be subordinated to all interests in Pool Receivables
and Related Rights and all obligations of the Initial Purchaser, of any nature,
whether now or hereafter arising under or in connection with the Receivables
Purchase Agreement.
(b) The Servicer shall hold the Initial Purchaser Note for the benefit
of the related Originator, and shall make all appropriate record-keeping entries
with respect to the Initial Purchaser Note or otherwise to reflect payments on
and adjustments of the Initial Purchaser Note. The Servicer's books and records
shall constitute rebuttable presumptive evidence of the principal amount of and
accrued and unpaid interest on the Initial Purchaser Note at any time. Each
Originator hereby irrevocably authorizes the Servicer to mark its Initial
Purchaser Note "CANCELED" and to return such Initial Purchaser Note to the
Initial Purchaser upon the full and final payment thereof after the Sale
Termination Date.
SECTION 3.2. Purchase Price Payments. On each Business Day falling
after the date of the Initial Closing Date until the termination of this
Agreement pursuant to Section 9.4, on the terms and subject to the conditions of
this Agreement, the Initial Purchaser shall pay to each Originator the Purchase
Price for the Pool Receivables and Related Rights purchased from such Originator
during the immediately preceding Settlement Period as follows:
(i) First, by paying to such Originator a portion of the
Purchase Price due pursuant to Section 2.1 by depositing into such
account as such Originator shall specify immediately available funds
from monies held by or on behalf of the Initial Purchaser solely
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to the extent that such monies do not constitute Collections that are
required to be segregated and held by the Servicer or distributed to
the Administrator or any Purchaser pursuant to the Receivables Purchase
Agreement on the next Settlement Date or required to be paid to the
Servicer as the Servicer's Fee on the next Settlement Date, or
otherwise necessary to pay current expenses of the Initial Purchaser
(in its reasonable discretion)(such available monies, the "Available
Funds"), subject to the terms of the Receivables Purchase Agreement.
Any Collections that have been paid to, or retained by, the related
Originator during such Settlement Period shall be credited towards the
Initial Purchaser's obligation pursuant to this clause first; provided,
however, that, if Collections paid to, or retained by, such Originator
exceed the Purchase Price for Pool Receivables and Related Rights
purchased from such Originator for such Settlement Period, or, absent a
cash payment, the Initial Purchaser shall not have sufficient cash to
meet its payment obligations pursuant to the Receivables Purchase
Agreement, such Originator shall turn over such excess to the Initial
Purchaser;
(ii) Second, to the extent any portion of the Purchase Price
remains unpaid, the principal amount outstanding under the related
Originator Note automatically shall be reduced and deemed paid in an
amount equal to such remaining Purchase Price, until such outstanding
principal amount is reduced to zero; and
(iii) Third, to the extent any portion of the Purchase Price
remains unpaid, the principal amount outstanding under the Initial
Purchaser Note issued to such Originator automatically shall be
increased in an amount equal to such remaining Purchase Price.
To the extent that (x) the amount due pursuant to Section 2.1 with respect to
all Receivables created or originated by an Originator that arose during the
corresponding Settlement Period is exceeded by (y) the amount paid to such
Originator during such Settlement Period pursuant to the foregoing sentences for
such Receivables, such excess shall be treated as a reduction in the principal
amount of the Initial Purchaser Note, effective as of the last day of the
related Settlement Period; provided, however, that if at any time the unpaid
principal amount of the Initial Purchaser Note has been reduced to zero, such
Originator shall pay the Initial Purchaser the remainder owed with respect
thereto in immediately available funds.
SECTION 3.3. Deemed Collections, Etc.
(a) If on any day the Unpaid Balance of any Pool Receivable owed by an
Obligor is reduced or adjusted as a result of any defective, rejected or
returned merchandise or services, any cash discount, any credit, any incorrect
billing, pricing adjustment or any other adjustment by an Originator or any
Affiliate of an Originator, or is reduced or canceled as a result of a setoff in
respect of any claim by the Obligor thereof against an Originator or any
Affiliate of ConMed (whether such claim arises out of the same or a related or
unrelated transaction) or as a result of any dispute or any obligation of an
Originator or any Affiliate of an Originator to pay to the related Obligor any
rebate or refund, or to rework any product or service, such Originator shall
deliver to the Servicer in same day funds an amount equal to the amount of such
reduction or adjustment, provided that, prior to
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the Sale Termination Date, such amount may be paid by a reduction to the
Purchase Price to be paid to such Originator on the next occurring Reporting
Date;
(b) if on any day any of the representations or warranties in Sections
5.1 (i), (k), and (u) hereto is not true with respect to any Pool Receivable
(each such Receivable, an "Ineligible Receivable"), the related Originator shall
deliver to the Servicer in same day funds an amount equal to the Unpaid Balance
of such Pool Receivable for application by the Servicer to the same extent as if
Collections of such Unpaid Balance had actually been received on such date,
provided that prior to the Sale Termination Date, such amount may be paid by a
reduction to the Purchase Price to be paid to such Originator on the next
occurring Reporting Date;
(c) except as provided in paragraph (a) or (b) of this Section 3.3, or
as otherwise required by Applicable Law or the relevant Contract, all
Collections received from an Obligor of any Pool Receivables shall be applied to
the Pool Receivables of such Obligor in the order of the age of such Pool
Receivables, starting with the oldest such Pool Receivable, unless such Obligor
designates in writing its payment for application to specific Pool Receivables;
(d) if and to the extent that the Initial Purchaser shall be required
for any reason to pay over to an Obligor (or any trustee, receiver, custodian or
similar official in any Event of Bankruptcy) 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 related Originator and, accordingly, the Initial
Purchaser shall have a claim against such Originator for such amount, payable
when and to the extent that any distribution from or on behalf of such Obligor
is made in respect thereof; and
(e) in the event that an Originator has paid (by effecting a Purchase
Price reduction or otherwise) to the Initial Purchaser the full Unpaid Balance
of any Receivable pursuant to this Section 3.3, the Initial Purchaser shall
reconvey such Receivable and all Related Rights with respect thereto to such
Originator, without recourse, representation or warranty, but free and clear of
all Liens created by the Initial Purchaser; such reconveyed Receivables and all
Related Rights shall no longer be subject to the terms of this Agreement
(including any obligation to turn over Collections with respect thereto).
SECTION 3.4. Payments and Computations, Etc.
(a) All amounts to be paid or deposited by an Originator or the
Servicer hereunder shall be paid or deposited no later than 10:00 a.m. (New York
time) on the day when due in same day funds. All amounts received after 10:00
a.m. (New York time) will be deemed to have been received on the immediately
succeeding Business Day.
(b) Each Originator shall, to the extent permitted by law, pay interest
on any amount not paid or deposited by such Originator (whether as Servicer, or
otherwise) when due hereunder, at an interest rate equal to 2.0% per annum above
the Alternate Base Rate, payable on demand.
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(c) All computations of interest under Section 3.4(b) and all
computations of the Purchase Price, fees, and other amounts hereunder shall be
made on the basis of a 360-day year and actual days elapsed. Whenever any
payment or deposit to be made hereunder shall be due on a day other than a
Business Day, such payment or deposit shall be made on the next succeeding
Business Day and such extension of time shall be included in the computation of
such payment or deposit.
ARTICLE IV
CONDITIONS TO PURCHASES
SECTION 4.1. Conditions Precedent to Initial Purchase. The initial
Purchase under this Agreement is subject to the condition precedent that the
Initial Purchaser shall have received each of the following (with copies to the
Administrator), on or before the date of such purchase, each in form and
substance (including the date thereof) satisfactory to the Initial Purchaser and
the Administrator:
(a) The Receivables Purchase Agreement, duly executed by the
parties thereto, together with evidence reasonably satisfactory to the
Initial Purchaser that all conditions precedent to the initial Purchase
of an undivided interest thereunder (other than any condition relating
to the effectiveness of the purchase commitment under this Agreement)
shall have been met;
(b) A certificate of the Secretary of each of ConMed, Linvatec
Canada and Linvatec certifying (i) a copy of the resolutions of its
Board of Directors approving this Agreement and the other Transaction
Documents to be delivered by it hereunder and the transactions
contemplated hereby; (ii) the names and true signatures of the officers
authorized on its behalf to sign this Agreement and the other
Transaction Documents to be delivered by it hereunder (on which
certificate the Administrator and Initial Purchaser may conclusively
rely until such time as the Administrator shall receive from ConMed,
Linvatec Canada or Linvatec, as the case may be, a revised certificate
meeting the requirements of this subsection (b)); (iii) a copy of its
by-laws; and (iv) all documents evidencing other necessary corporate
action and governmental approvals, if any, with respect to this
Agreement and the other Transaction Documents;
(c) The Articles of Incorporation of each of ConMed, Linvatec
Canada and Linvatec, duly certified by the Secretary of State (or
comparable Governmental Authority) of the jurisdiction of its
organization, as of a recent date;
(d) Acknowledgment copies or time stamped receipt copies, of
the proper financing statements (Form UCC-1) that name ConMed and
Linvatec, respectively, as the debtor and seller and the Initial
Purchaser as the secured party and purchaser (and the Administrator,
for the benefit of the Purchaser, as assignee of the Initial Purchaser)
of the Receivables and the Related Rights or other, similar instruments
or documents, as may be
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necessary or, in Servicer's or the Administrators's opinion, desirable
under the UCC or any comparable law of all appropriate jurisdictions to
perfect the Initial Purchaser's ownership interest in all Receivables
and Related Rights in which an ownership interest may be assigned to it
hereunder;
(e) A search report provided in writing to and approved by the
Administrator, listing all effective financing statements that name
ConMed as debtor or assignor and that are filed in the jurisdictions in
which filings were made pursuant to subsection (d) above and in such
other jurisdictions that Administrator shall reasonably request,
together with copies of such financing statements (none of which shall
cover any Pool Assets), and tax and judgment lien search reports from a
Person satisfactory to Servicer and the Administrator showing no
evidence of such liens filed against ConMed or Linvatec;
(f) Duly executed copies of the Lock-Box Agreements with the
Lock-Box Banks;
(g) A pro forma Purchase Report, prepared in respect of the
proposed initial Purchase, assuming an Initial Cut-Off Date of
September 30, 2001;
(h) An Initial Purchaser Note in favor of each of ConMed,
Linvatec Canada and Linvatec, respectively, duly executed by the
Initial Purchaser;
(i) A certificate from an officer of each of ConMed, Linvatec
Canada and Linvatec, respectively, to the effect that Servicer and each
of ConMed, Linvatec Canada and Linvatec, respectively, 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 CONMED
RECEIVABLES CORPORATION PURSUANT TO A PURCHASE AND SALE
AGREEMENT, DATED AS OF NOVEMBER 1, 2001, AS AMENDED FROM TIME
TO TIME, BETWEEN CONMED CORPORATION, CERTAIN SUBSIDIARIES OF
CONMED CORPORATION AND CONMED RECEIVABLES CORPORATION; AND AN
OWNERSHIP AND SECURITY INTEREST IN THE RECEIVABLES DESCRIBED
HEREIN HAS BEEN GRANTED AND ASSIGNED TO FLEET SECURITIES,
INC., AS ADMINISTRATOR, PURSUANT TO A RECEIVABLES PURCHASE
AGREEMENT, DATED AS OF NOVEMBER 1, 2001, AMONG CONMED
CORPORATION, CONMED RECEIVABLES CORPORATION, BLUE KEEL
FUNDING, LLC, FLEET NATIONAL BANK AND FLEET SECURITIES INC.,
AS THE ADMINISTRATOR; and
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(j) Such other agreements, instruments, UCC financing
statements, certificates, opinions and other documents as the Initial
Purchaser or the Administrator may reasonably request.
SECTION 4.2. Conditions Precedent to All Purchases. Each purchase under
this Agreement is subject to the condition precedent that the agreement of the
Originators to sell Pool Receivables and Related Rights, and the agreement of
the Initial Purchaser to purchase Pool Receivables and Related Rights, shall not
have terminated pursuant to Section 9.4 of this Agreement, and shall be subject
further to the conditions precedent that:
(a) in the case of each purchase, the Servicer shall have
delivered to the Initial Purchaser on or prior to such purchase, a
completed Purchase Report with respect to the immediately preceding
calendar month, together with such additional information as may be
reasonably requested by the Initial Purchaser; and
(b) the representations and warranties contained in Article V
are correct on and as of such day in all material respects as though
made on and as of such day and shall be deemed to have been made on
such day (except that any such representation or warranty that is
expressly stated as being made only as of a specified earlier date
shall be true and correct in all material respects as of such earlier
date).
SECTION 4.3. Certification as to Representations and Warranties. Each
Originator, by accepting the Purchase Price (whether in cash or by an increase
in the principal amount outstanding under the Initial Purchaser Note or a
reduction of the Originator Note) paid for each purchase of Pool Receivables and
Related Rights on any day, shall be deemed to have certified that its
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.
SECTION 4.4. Effect of Payment of Purchase Price. Upon the payment of
the Purchase Price (whether in cash or by an increase in the principal amount
outstanding under an Initial Purchaser Note or a reduction of an Originator
Note) for any purchase of Pool Receivables and Related Rights, title to such
Pool Receivables and Related Rights shall vest in the Initial Purchaser, whether
or not the conditions precedent to such purchase were in fact satisfied;
provided that the Initial Purchaser shall not be deemed to have waived any claim
it may have under this Agreement for the failure by an Originator in fact to
satisfy any such condition precedent.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.1. Representations and Warranties. In order to induce the
Initial Purchaser to enter into this Agreement and to make purchases thereunder,
each Originator hereby represents and warrants as follows:
(a) Organization and Good Standing. Such Originator has been
duly organized and is validly existing as a corporation in good
standing under the laws of the state of its incorporation, with power
and authority to own its properties as such properties are presently
owned and to conduct its business as such business is presently
conducted.
(b) Due Qualification. Such Originator is duly qualified to do
business as a foreign corporation in good standing, and has obtained
all necessary licenses and approvals, in all jurisdictions in which the
ownership or lease of property or the conduct of its business requires
such qualification, licenses or approvals, except where the failure to
so qualify or have such licenses or approvals has not had, and could
not reasonably be expected to have, a Seller Material Adverse Effect.
(c) Power and Authority; Due Authorization. Such Originator
(i) has all necessary corporate power, authority and legal right to (A)
execute and deliver this Agreement and the other Transaction Documents
to which it is a party, (B) carry out the terms of the Transaction
Documents to which it is a party, and (C) sell and assign the
Receivables and Related Rights on the terms and conditions herein
provided and (ii) has duly authorized by all necessary corporate action
the execution, delivery and performance of this Agreement and the other
Transaction Documents to which it is a party.
(d) Binding Obligations. This Agreement constitutes, and each
other Transaction Document to be signed by such Originator when duly
executed and delivered will constitute, a legal, valid and binding
obligation of such 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.
(e) No Violation. The consummation of the transactions
contemplated by this Agreement and the other Transaction Documents to
which such Originator is a party and the fulfillment of the terms
hereof and thereof will not (i) 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 the such Originator's
articles of incorporation or by-laws, (ii) 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 any
Contractual Obligation of such
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Originator that could reasonably be expected to have a Seller Material
Adverse Effect, (iii) result in the creation or imposition of any Lien
upon any of such Originator's properties pursuant to the terms of any
such Contractual Obligation, other than any Lien created pursuant to
this Agreement or any other Transaction Document, or (iv) violate any
Applicable Law, the violation of which could reasonably be expected to
have a Seller Material Adverse Effect.
(f) No Proceedings. There is no litigation, proceedings or
investigations pending or, to the best of such Originator's knowledge,
threatened, before any Governmental Authority or arbitrator (i)
asserting the invalidity of this Agreement or any other Transaction
Document to which such Originator is a party, (ii) seeking to prevent
the sale and assignment of the Receivables and Related Rights, the
collectibility of the Receivables or the consummation of any of the
other transactions contemplated by this Agreement or any other
Transaction Document, or (iii) seeking any determination or ruling that
could reasonably be expected to have a Seller Material Adverse Effect.
(g) Government Approvals. No Governmental Action is required
for the due execution, delivery and performance by such Originator of
this Agreement or any other Transaction Document to which it is a
party, other than the filing of the UCC financing statements referred
to in Section 4.1, all of which, at the time required in Section 4.1,
shall have been duly made and shall be in full force and effect.
(h) Securities Exchange Act. No proceeds of any purchase will
be used to acquire any equity security of a class which is registered
pursuant to Section 12 of the Securities Exchange Act of 1934.
(i) Quality of Title; Valid Sale; Etc. Upon its creation and
prior to its sale or contribution to the Initial Purchaser under this
Agreement, such Originator is the legal and beneficial owner of each of
the Receivables and the Related Rights originated by it free and clear
of any Lien; and upon each purchase or contribution the Initial
Purchaser shall acquire a valid and enforceable ownership interest in
each Pool Receivable then existing or thereafter arising and in the
Related Rights with respect thereto, free and clear of any Lien,
enforceable against all creditors of, and purchasers from, such
Originator. Each Pool Receivable constitutes an "account" as such term
is defined in the UCC. No effective financing statement or other
instrument similar in effect covering any Pool Receivable or Related
Rights with respect thereto is on file in any recording office, except
those filed in favor of the Initial Purchaser pursuant to this
Agreement and in favor of the Administrator pursuant to the Receivables
Purchase Agreement.
(j) Accuracy of Information. No report, information, exhibit,
financial statement, document, book, record or report furnished by or
on behalf of it to the Initial Purchaser or the Administrator in
connection with this Agreement was accurate in any material respects as
of the date it was dated or (except as otherwise disclosed in writing
to the Administrator at such time) as of the date so furnished, or
contained any untrue statement
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of a material fact or omitted to state a material fact necessary to
make the statements contained therein, in the light of the
circumstances under which they were made, not misleading.
(k) Offices. The principal place of business and chief
executive office of such Originator are located at the address of such
Originator referred to in Section 9.2, and the offices where such
Originator keeps all its books, records and documents evidencing or
relating to Pool Receivables are located at the address of such
Originator referred to in Section 9.2 (or at such other locations,
notified to the Administrator in accordance with Section 6.1(e), in
jurisdictions where all action required by Section 8.4 has been taken
and completed).
(l) Bulk Sales Act. No transaction contemplated hereby
requires compliance with any bulk sales act or similar law.
(m) Margin Regulations. The use of all funds obtained by such
Originator under this Agreement will not conflict with or contravene
any of Regulation T, U or X promulgated by the Federal Reserve Board
from time to time.
(n) Maintenance of Books and Records. Such Originator has
accounted for each sale of Pool Receivables and Related Rights in its
books and financial statements as sales, consistent with GAAP.
(o) Credit and Collection Policy. Such Originator has complied
in all material respects with the Credit and Collection Policy with
regard to each Receivable.
(p) Solvency. Such Originator is solvent; and at the time of
(and immediately after) each sale pursuant to this Agreement it shall
be solvent.
(q) Compliance with Transaction Documents. Such Originator, as
Servicer (in the case of ConMed) or as an Originator, has complied in
all material respects with all of the terms, covenants and agreements
contained in this Agreement and the other Transaction Documents
applicable to it.
(r) Corporate Name. Such Originator's complete corporate name
is set forth in the preamble to this Agreement, and such Originator
does not use and has not during the last six years used any other
corporate name, trade name, doing business name or fictitious name.
(s) Investment Company Act. Such Originator is not, and is not
controlled by, an "investment company" registered or required to be
registered under the Investment Company Act of 1940, as amended.
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(t) Eligible Receivables. Each Pool Receivable sold or
contributed by such Originator to the Initial Purchaser hereunder that
is designated as an Eligible Receivable on a Purchase Report is in fact
an Eligible Receivable.
ARTICLE VI
COVENANTS
SECTION 6.1. Affirmative Covenants. From the date hereof until the
Final Payout Date:
(a) Compliance with Laws, Etc. Each Originator will comply in
all material respects with all Applicable Laws, including those with
respect to the Pool Receivables and the related Contracts, except where
noncompliance could not reasonably be expected to have a Seller
Material Adverse Effect.
(b) Preservation of Corporate Existence. Each Originator will
preserve and maintain its corporate existence in the jurisdiction of
its formation, and qualify and remain qualified in good standing as a
foreign corporation in each jurisdiction where the failure to preserve
and maintain such existence and qualification could reasonably be
expected to have a Seller Material Adverse Effect.
(c) Audits. (i) Each Originator will from time to time during
regular business hours and, unless a Liquidation Event has occurred and
is continuing, on reasonable prior written notice, permit the
Administrator or any of its 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 its
possession or under its control relating to Pool Receivables, (B) to
visit its offices and properties for the purpose of examining such
materials described in clause (i)(A) above, and to discuss matters
relating to Pool Receivables or its performance hereunder with any of
its officers or employees having knowledge of such matters, and (C) to
verify the existence and amount of the Pool Receivables; and (ii)
without limiting the provisions of clause (i) above, from time to time
on the written request of Administrator during regular business hours,
permit certified public accountants or other auditors acceptable to the
Administrator and, unless a Liquidation Event has occurred and is
continuing, reasonably acceptable to ConMed, to conduct, at such
Originator's expense, a review of its books and records with respect to
the Pool Receivables; provided, however that, unless a Liquidation
Event has occurred and is continuing, no Originator shall be obligated
to pay for more than one review in each calendar year. Any such
certified public accountants or other auditors shall be obligated to
enter into a customary confidentiality agreement with such Originator.
(d) Keeping of Records and Books of Account. Each Originator
will maintain and implement administrative and operating procedures
(including, without limitation, an
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ability to recreate records evidencing Pool Receivables in the event of
the destruction of the originals thereof) and keep and maintain all
documents, books, records and other information reasonably necessary or
advisable for the collection of all Pool Receivables (including,
without limitation, records adequate to permit the daily identification
of each new Pool Receivable and all Collections of and adjustments to
each existing Pool Receivable).
(e) Performance and Compliance with Receivables and Contracts.
Each Originator will timely and fully perform and comply with all
provisions, covenants and other promises required to be observed by it
under the Contracts related to the Pool Receivables and all other
agreements related to such Pool Receivables, except where failure to do
so would not materially adversely affect the validity, enforceability
or collectibility of the related Pool Receivable.
(f) Location of Records. Each Originator will keep its
principal place of business and chief executive office, and the offices
where it keeps its records concerning the Pool Receivables and all
related Contracts and all other agreements related to such Pool
Receivables (and all original documents relating thereto), at its
address(es) referred to in Section 9.2 or, upon 30 days' prior written
notice to the Administrator, at such other locations in jurisdictions
where all action required by Section 8.4 shall have been taken and
completed.
(g) Credit and Collection Policies. Each Originator, at its
own expense, will timely and fully perform and comply in all material
respects with the Credit and Collection Policy in regard to each Pool
Receivable and the related Contracts.
(h) Collections. Each Originator will instruct (i) all
Obligors to cause all Collections to be sent to a Lock-Box that is the
subject of a Lock-Box Agreement and (ii) each Lock-Box Bank to deposit
all such Collections directly into a Lock-Box Account that is the
subject of a Lock-Box Agreement. In the event that any Originator
receives Collections directly from any Obligor, such Originator shall
deposit such Collections into a Lock-Box Account within two Business
Days of receipt thereof.
SECTION 6.2. Negative Covenants. From the date hereof until the Final
Payout Date:
(a) Sales, Liens, Etc. No Originator will, 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 Lien upon or with respect to, any Pool Receivable
or any interest therein.
(b) Extension or Amendment of Receivables. No Originator will,
except as otherwise permitted in any other Transaction Document,
extend, amend or otherwise modify, or permit Servicer to extend, amend
or otherwise modify, the terms of any Pool Receivable;
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or amend, modify or waive, or permit Servicer to amend, modify or
waive, any term or condition of any Contract related to a Pool
Receivable.
(c) Change in Business or Credit and Collection Policy. No
Originator will make any change in the character of its business or in
the Credit and Collection Policy, which change could impair the
collectibility of any Pool Receivable or otherwise adversely affect the
interests or remedies of the Administrator, any Purchaser or the
Initial Purchaser under this Agreement or any other Transaction
Document.
(d) Change in Payment Instructions to Obligors. No Originator
will add or terminate any bank as a Lock-Box Bank or any Lock-Box
Account from those listed in Schedule I or make any change, or permit
Servicer to make any change, in its instructions to Obligors regarding
payments to be made to the Initial Purchaser or Servicer or payments to
be made to any Lock-Box Bank, unless the Administrator shall have
received notice of such addition, termination or change and duly
executed copies of Lock-Box Agreements with each new Lock-Box Bank or
with respect to each new Lock-Box Account, as the case may be.
(e) Mergers, Acquisitions, Sales, etc. No Originator will (i)
be a party to any merger with or acquisition of any other Person, other
than a Wholly-Owned Subsidiary of ConMed, without the consent of the
Administrator, (ii) sell, transfer, convey or lease all or
substantially all of its assets, or sell or assign with or without
recourse any Receivables or any interest therein (other than pursuant
hereto or to the Receivables Purchase Agreement) or (iii) unless such
Originator has given Initial Purchaser and the Administrator not less
than thirty days prior notice and taken all of the actions specified in
Section 8.4, change the state of its incorporation.
(f) Deposits to Special Accounts. No Originator will deposit
or otherwise credit, or cause or permit to be so deposited or credited,
to any Lock-Box Account cash or cash proceeds other than Collections of
Pool Receivables.
SECTION 6.3. Separate Existence. Each Originator hereby acknowledges
that each Purchaser and the Administrator are entering into the transactions
contemplated by the other Transaction Documents in reliance upon the Initial
Purchaser's identity as a legal entity separate from each Originator. Therefore,
from and after the date hereof, each Originator shall take all steps
specifically required by the Transaction Documents, including those set forth in
Section 7.04 of the Receivables Purchase Agreement, or by the Initial Purchaser,
any Purchaser or Administrator to continue the Initial Purchaser's identity as a
separate legal entity and to make it apparent to third Persons that the Initial
Purchaser is an entity with assets and liabilities distinct from those of such
Originator and any other Person, and is not a division of such Originator or any
other Person.
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ARTICLE VII
INDEMNIFICATION
SECTION 7.1. Indemnities by the Originators. Without limiting any other
rights which the Initial Purchaser and each of its permitted assigns, officers,
directors, employees and agents (each of the foregoing Persons being
individually called a "Sale Indemnified Party") may have hereunder or under
applicable law, each Originator, jointly and severally, hereby agrees to
indemnify the Initial Purchaser and each Sale Indemnified Party 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 collectively being called "Sale Indemnified Amounts") arising out of
or resulting from this Agreement (whether directly or indirectly) or the use of
proceeds of purchases or the ownership of any Pool Receivable or Related Rights,
excluding, however, (a) Sale Indemnified Amounts to the extent resulting from
gross negligence, bad faith or willful misconduct on the part of the Initial
Purchaser or such Sale Indemnified Party, (b) Sale Indemnified Amounts to the
extent the same includes losses in respect of Pool Receivables and reimbursement
therefor that would constitute credit recourse to the Originators for the amount
of any Pool Receivable or Related Rights not paid by the related Obligor for
credit reasons, or (c) any net income taxes or franchise taxes imposed on the
Initial Purchaser or such Sale Indemnified Party by the jurisdiction under the
laws of which such Sale Indemnified Party is organized or any political
subdivision thereof. Without limiting or being limited by the foregoing, but
subject to the exclusions set forth in the immediately preceding sentence, each
Originator, jointly and severally, shall pay on demand to the Initial Purchaser
and each Sale Indemnified Party any and all amounts necessary to indemnify the
Initial Purchaser and such Sale Indemnified Party from and against any and all
Sale Indemnified Amounts relating to or resulting from any of the following:
(i) the transfer by any Originator of an interest in any
Receivable or Related Rights to any Person other than the Initial
Purchaser;
(ii) the failure of any information provided by any
Originator, as Servicer or otherwise, to the Initial Purchaser, any
Purchaser, the Administrator or the Servicer with respect to Pool
Receivables or this Agreement to be true, correct and complete;
(iii) the failure of any representation or warranty or
statement made or deemed made by any Originator (or any of its
officers), as Servicer or otherwise, under or in connection with this
Agreement to have been true and correct when made;
(iv) the failure by any Originator, as Servicer or otherwise,
to comply with any Applicable Law with respect to any Pool Receivable
or Related Rights; or the failure of any Pool Receivable or Related
Rights to conform to any such Applicable Law;
(v) the failure to vest and maintain vested in the Initial
Purchaser a valid and enforceable ownership interest in each Pool
Receivable at any time existing and the Related Rights with respect
thereto, free and clear of any Lien, other than a Lien arising solely
as a
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result of an act of the Initial Purchaser, any Purchaser or the
Administrator, whether existing as the time of purchase of such Pool
Receivable or at any time thereafter;
(vi) the failure of any Originator 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 Pool Receivables and the Related
Rights in respect thereof, whether at the time of any purchase or at
any subsequent time;
(vii) any dispute, claim, offset or defense (other than
discharge in bankruptcy) of the Obligor to the payment of any Pool
Receivable (including, without limitation, a defense based on such Pool
Receivable or the related Contract not being a legal, valid and binding
obligation of such Obligor enforceable against it in accordance with
its terms), or any other claim resulting from the sale of the goods or
services related to such Pool Receivable or the furnishing or failure
to furnish such goods or services or relating to collection activities
with respect to such Pool Receivable (if such collection activities
were performed by any Originator or any of its Affiliates, acting as
Servicer or by any agent or independent contractor retained by any
Originator or any of its Affiliates);
(viii) any breach by any Originator, as Servicer or otherwise,
of any of its covenants or agreements under this Agreement or to
perform its duties or obligations under the Contracts;
(ix) any products liability or other claim, investigation,
litigation or proceeding arising out of or in connection with
merchandise, insurance or services which are the subject of any
Contract;
(x) the commingling of Collections of Pool Receivables at any
time with other funds;
(xi) any investigation, litigation or proceeding related to
this Agreement or the use of proceeds of purchases or the ownership of
any Pool Receivable or Related Rights;
(xii) any tax or governmental fee or charge (but not including
taxes upon or measured by net income or representing a franchise or
unincorporated business tax on such Sale Indemnified Party), 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 or ownership of the Receivables generated by any
Originator or any Related Rights connected with any such Receivables;
or
(xiii) any requirement that all or a portion of the
distributions made to the Initial Purchaser pursuant to this Agreement
shall be rescinded or otherwise must be returned to any Originator for
any reason.
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SECTION 7.2. After-Tax Basis. Indemnification hereunder shall be in an
amount necessary to make the Sale Indemnified Party whole after taking into
account any tax consequences to the Sale Indemnified Party of the receipt of the
indemnity provided hereunder, including the effect of such tax or refund on the
amount of tax measured by net income or profits which is or was payable by the
Sale Indemnified Party.
ARTICLE VIII
ADMINISTRATION AND COLLECTIONS; ADDITIONAL RIGHTS
AND OBLIGATIONS IN RESPECT OF THE POOL RECEIVABLES
SECTION 8.1. Servicing of Pool Receivables and Related Rights.
Consistent with the Initial Purchaser's ownership of the Pool Receivables and
the Related Rights, the Initial Purchaser shall have the sole right to service,
administer and collect the Pool Receivables, to assign such right and to
delegate such right to others. In consideration of the Initial Purchaser's
purchase of the Pool Receivables and the Related Rights, each Originator agrees
to cooperate fully with the Initial Purchaser to facilitate the full and proper
performance of such duties and obligations for the benefit of the Initial
Purchaser, the Purchasers, and the Administrator. To the extent that the Initial
Purchaser, individually or through the Servicer, has granted or grants powers of
attorney to the Administrator under the Receivables Purchase Agreement, each
Originator hereby grants a corresponding power of attorney on the same terms to
the Initial Purchaser. Each Originator hereby acknowledges and agrees that the
Initial Purchaser, in all of its capacities, shall assign to the Administrator
for the benefit of the Purchasers and the Administrator such powers of attorney
and other rights and interests granted by such Originator to the Initial
Purchaser hereunder, and agrees to cooperate fully with the Administrator in the
exercise of such rights.
SECTION 8.2. Rights of the Initial Purchaser; Enforcement Rights.
(a) The Initial Purchaser shall have no obligation to account for, to
replace, to substitute or to return any Receivables and Related Rights to any
Originator. The Initial Purchaser shall have no obligation to account for, or to
return to any Originator, Collections, or any interest or other finance charge
collected pursuant thereto, without regard to whether such Collections and
charges are in excess of the Purchase Price for such Pool Receivables and
Related Rights.
(b) The Initial Purchaser shall have the unrestricted right to further
assign, transfer, deliver, hypothecate, subdivide or otherwise deal with the
Pool Receivables and Related Rights, and all of the Initial Purchaser's right,
title and interest in, to and under this Agreement, on whatever terms the
Initial Purchaser shall determine, pursuant to the Receivables Purchase
Agreement or otherwise.
(c) The Initial Purchaser shall have the sole right to retain any gains
or profits created by buying, selling or holding the Pool Receivables and
Related Rights and, except as expressly set
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forth in the Transaction Documents, shall have the sole risk of and
responsibility for losses or damages created by such buying, selling or holding.
(d) At any time following the designation of a Servicer (other than
ConMed) in accordance with the Receivables Purchase Agreement:
(i) the Administrator may direct the Obligors that payment of
all amounts payable under any Pool Receivable be made directly to the
Administrator or its designee;
(ii) the Administrator may instruct ConMed to give notice of
the Initial Purchaser's interest in the Pool Receivables or the
Purchaser's interest in Pool Receivables to each Obligor, which notice
shall direct that payments with respect to Pool Receivables be made
directly to the Administrator or its designee, and upon such
instruction from the Administrator ConMed shall give such notice at its
expense; provided, that if ConMed fails to so notify each Obligor, the
Administrator may so notify the Obligors; and
(iii) the Administrator may request ConMed to, and upon such
request ConMed shall, (A) assemble all of the records necessary or
desirable to collect the Pool Receivables and the Related Rights
(including, without limitation, computer programs, tapes and disks,
other than excluded data), and make the same available to the
Administrator or its designee at a place selected by the Administrator,
and (B) segregate all cash, checks and other instruments received by it
from time to time constituting Collections with respect to the Pool
Receivables in a manner acceptable to the Administrator and, promptly
upon receipt, remit all such cash, checks and instruments, duly
endorsed or with duly executed instruments of transfer, to the
Administrator or its designee.
(e) Each Originator hereby authorizes the Initial Purchaser, and
irrevocably appoints the Initial Purchaser as its attorney-in-fact with full
power of substitution and with full authority in the place and stead of such
Originator, which appointment is coupled with an interest, to take any and all
steps in the name of such Originator and on behalf of such Originator necessary
or desirable, in the determination of the Initial Purchaser, to collect any and
all amounts or portions thereof due under any and all Pool Receivables or
Related Rights, including, without limitation, endorsing the name of such
Originator on checks and other instruments representing Collections and
enforcing such Pool Receivables and Related Rights.
SECTION 8.3. Responsibilities of the Originator. Anything herein to the
contrary notwithstanding:
(a) each Originator agrees to deliver directly to the Servicer (for the
Initial Purchaser's account), within two (2) Business Days of receipt thereof,
any Collections that it receives, in the form so received, and agrees that all
Collections shall be deemed to be received in trust for the Initial Purchaser;
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(b) each Originator agrees to instruct (i) all Obligors to cause all
Collections to be sent to a Lock-Box that is the subject of a Lock-Box Agreement
and (ii) each Lock-Box Bank to deposit all such Collections directly into a
Lock-Box Account that is the subject of a Lock-Box Agreement; and
(c) each Originator shall (i) perform all of its obligations hereunder
and under the Contracts related to the Pool Receivables and Related Rights (and
under its agreements with the Lock-Box Banks) to the same extent as if the Pool
Receivables and Related Rights had not been sold hereunder, and the exercise by
the Initial Purchaser or its designee or assignee of the Initial Purchaser's
rights hereunder or in connection herewith shall not relieve such Originator
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. Notwithstanding anything to the contrary in
this Agreement, none of the Initial Purchaser, the Administrator or any
Purchaser shall have any obligation or liability with respect to any Receivable
or Related Rights nor shall any of them be obligated to perform any of the
obligations of any Originator under any of the foregoing.
SECTION 8.4. Further Action Evidencing Purchases. Each 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, in
order to perfect, protect or more fully evidence the purchase of the Pool
Receivables and the Related Rights by the Initial Purchaser hereunder, or to
enable the Initial Purchaser to exercise or enforce any of its rights hereunder
or under any other Transaction Document. Each Originator further agrees from
time to time, at its expense, promptly to take all action that the Initial
Purchaser, the Servicer or the Administrator may reasonably request in order to
perfect, protect or more fully evidence such purchase of the Pool Receivables
and the Related Rights or to enable the Initial Purchaser or the Purchasers (as
assignee of the Initial Purchaser) or the Administrator to exercise or enforce
any of its or their respective rights hereunder or under any other Transaction
Document in respect of the Pool Receivables and the Related Rights. Without
limiting the generality of the foregoing each Originator will:
(a) execute and file such financing or continuation
statements, or amendments thereto or assignments thereof, and such
other instruments or notices, as the Initial Purchaser or the
Administrator may reasonably determine to be necessary or appropriate;
and
(b) mark the master data processing records evidencing the
Pool Receivables and, if requested by the Initial Purchaser or the
Administrator, to the extent reasonably practicable, legend the related
Contracts, to reflect the sale of the Pool Receivables and Related
Rights pursuant to this Agreement and the Receivables Purchase
Agreement.
Each Originator hereby authorizes the Initial Purchaser or its designee
or assignee to file one or more financing or continuation statements, and
amendments thereto and assignments thereof, relative to all or any of the Pool
Receivables and Related Rights of such Originator, in each case whether now
existing or hereafter generated. If an Originator fails to perform any of its
agreements or obligations under this Agreement, the Initial Purchaser or its
designee or assignee may (but shall
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not be required to) itself perform, or cause performance of, such agreement or
obligation, and the reasonable expenses of the Initial Purchaser or its designee
or assignee incurred in connection therewith shall be payable by such Originator
under Section 7.1.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. Amendments, Etc. No amendment or waiver of any provision
of this Agreement or consent to any departure by any Originator therefrom shall
be effective unless in a writing signed by the Initial Purchaser, and consented
to in writing by the Administrator, and any such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given. No failure on the part of the Initial Purchaser or the Administrator to
exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right.
SECTION 9.2. Notices, Etc. All notices and other communications
provided for hereunder shall, unless otherwise expressly stated herein, be in
writing (including facsimile communication) and shall be personally delivered or
sent by certified mail, postage prepaid, or by facsimile, to the intended party
at the address or facsimile number of such party set forth on Schedule 9.2 or at
such other address or facsimile number as shall be designated by such party in a
written notice to the other parties hereto. All such notices and communications
shall be effective, (a) if personally delivered or sent by express mail or
courier or if sent by certified mail, when received and (b) if transmitted by
facsimile, when sent, receipt confirmed by telephone or electronic means, if
sent during business hours on a Business Day or on the next Business Day in all
other cases.
SECTION 9.3. Acknowledgment and Consent.
(a) Each of ConMed, as an Originator and as initial Servicer, and each
other Originator acknowledges that, contemporaneously herewith or at any time
hereafter, the Initial Purchaser is assigning or will assign to the
Administrator, for the benefit of the Purchasers, pursuant to the Receivables
Purchase Agreement, one or more undivided interests in all of the Initial
Purchaser's rights, title, claims and interest in, to and under the Pool
Receivables and Related Rights, and all of the Initial Purchaser's right, title
and interest in, to and under this Agreement, it being understood that such
assignment shall not relieve any party hereto from (or require the Purchaser or
the Administrator to undertake) the performance of any term, covenant or
agreement on the part of any party hereto to be performed or observed under or
in connection with this Agreement. Each of ConMed, as Originator and as initial
Servicer, and each other Originator hereby consents to such assignments,
including, without limitation, the assignment by the Initial Purchaser of (i)
the right of the Initial Purchaser, at any time, to enforce this Agreement
against the Originators and the obligations of the Originators hereunder, (ii)
the right to appoint a successor to the Servicer as set
-26-
forth in the Receivables Purchase Agreement, (iii) the right, at any time, to
give or withhold any and all consents, requests, notices, directions, approvals,
demands, extensions or waivers under or with respect to this Agreement, any
other Transaction Document or the obligations in respect of the Originators
thereunder to the same extent as the Initial Purchaser may do, and (iv) all of
the Initial Purchaser's rights, remedies, powers and privileges, and all claims
of the Initial Purchaser against each Originator, under or with respect to this
Agreement and the other Transaction Documents (whether arising pursuant to the
terms of this Agreement or otherwise available at law or in equity). Each of the
parties hereto acknowledges and agrees that the Purchasers, the Administrator
and the other Indemnified Parties are third party beneficiaries of the rights of
the Initial Purchaser arising hereunder and under the other Transaction
Documents to which any Originator is a party.
(b) Each Originator hereby agrees to execute all agreements,
instruments and documents, and to take all other action, that the Initial
Purchaser or the Administrator determines is necessary or reasonably desirable
to evidence its consent described in Section 9.3(a).
(c) Each Originator hereby acknowledges that its obligations to the
Purchasers and the Administrator as assignees of the Initial Purchaser are and
shall be, to the extent permitted by Applicable Law or not prohibited by any
order of any court or administrative or regulatory authority, absolute and
unconditional under any and all circumstances and shall be unaffected by any
claims, offsets or other defenses such Originator may have against the Initial
Purchaser, and each Originator agrees that it shall not assert or interpose any
such claims, offsets or defenses as a defense to its performance of its
obligations under the Transaction Documents to which it is a party.
SECTION 9.4. Binding Effect; Assignability. This Agreement shall be
binding upon and inure to the benefit of the Initial Purchaser, each Originator
and their respective successors and permitted assigns. No Originator may assign
its rights hereunder or any interest herein without the prior written consent of
the Initial Purchaser, the Administrator and the Liquidity Agent; subject to
Section 9.3, the Initial Purchaser may not assign its rights hereunder or any
interest herein without the prior written consent of ConMed, the Administrator
and the Liquidity 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 Sale Termination
Date on which each Originator has received payment in full for all of its
Receivables and Related Rights conveyed pursuant to Section 1.1 hereof and has
paid and performed all of its obligations hereunder in full. The rights and
remedies with respect to any breach of any representation and warranty made by
any Originator pursuant to Article V shall be continuing and shall survive any
termination of this Agreement.
SECTION 9.5. Costs, Expenses and Taxes. In addition to the rights of
indemnification granted under Article VII, each Originator, jointly and
severally, agrees to pay on demand all costs and expenses in connection with any
amendment, modification or waiver of or consent to any of the foregoing,
including, without limitation, reasonable attorneys' fees for the Administrator,
the Initial Purchaser and their respective Affiliates and agents with respect
thereto and with respect to advising the Administrator, the Initial Purchaser
and their respective Affiliates and agents as to their rights and remedies under
this Agreement and the other Transaction
-27-
Documents, and all costs and expenses, if any (including, without limitation,
reasonable attorneys' fees), of the Administrator, the Initial Purchaser and
their respective Affiliates and agents, in connection with the enforcement of
this Agreement and the other Transaction Documents.
SECTION 9.6. No Proceedings; Limitation on Payments.
(a) Each Originator hereby agrees that it will not institute against,
or join any other Person in instituting against, the Initial Purchaser 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 Final Payout Date. The foregoing shall not limit
any Originator's right to file any claim in or otherwise take any action with
respect to any insolvency proceeding that was instituted by any Person other
than an Originator.
(b) Notwithstanding any provisions contained in this Agreement to the
contrary, the Initial Purchaser shall not, and shall not be obligated to, pay
any amount pursuant to this Agreement unless the Initial Purchaser has excess
cash flow from operations or has received funds with respect to such obligation
which may be used to make such payment and, in each case, such payment is
permitted by the Receivables Purchase Agreement.
SECTION 9.7. GOVERNING LAW AND JURISDICTION.
(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT THE
PERFECTION (OR THE EFFECT OF PERFECTION OR NON- PERFECTION) OF THE INTERESTS OF
THE INITIAL PURCHASER IN THE POOL RECEIVABLES AND THE RELATED RIGHTS IS GOVERNED
BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY
BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR ANY UNITED STATES FEDERAL
COURT, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE PARTIES
HERETO CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE
JURISDICTION OF THOSE COURTS. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES, TO
THE MAXIMUM EXTENT PERMITTED BY LAW, ANY OBJECTION, INCLUDING ANY OBJECTION TO
THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, 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 TRANSACTION DOCUMENT. EACH
PARTY HERETO WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS,
WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY NEW YORK LAW.
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SECTION 9.8. 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 9.9. Survival of Termination. The provisions of Section 1.4,
Article VII, Section 9.3, Section 9.5, Section 9.6, Section 9.7, Section 9.10
and this Section 9.9 shall survive any termination of this Agreement.
SECTION 9.10. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
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
BE 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 A JURY TRIAL.
SECTION 9.11. Entire Agreement. This Agreement and the other
Transaction Documents embodies the entire agreement and understanding of the
parties hereto, and supersedes all prior or contemporaneous agreements and
understandings of such Persons, verbal or written, relating to the subject
matter hereof and thereof. The Exhibits, Schedules and Annexes to this Agreement
shall be deemed incorporated by reference into this Agreement as if set forth
herein.
SECTION 9.12. 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.
ARTICLE X
GUARANTY
SECTION 10.1. Guaranty of Obligations. ConMed hereby unconditionally
guarantees the full and prompt payment when due, whether by acceleration or
otherwise, and at all times thereafter, and the full and prompt performance by
each Originator (other than ConMed) of all of such Originator's obligations
under this Agreement and under any other Transaction Document to which such
Originator is a party, including interest and earnings on any such obligations,
whether accruing before or after any bankruptcy or insolvency case or proceeding
involving such Originator (and, if interest or yield on any portion of such
obligations ceases to accrue by operation of law by reason of the commencement
of any such case or proceeding, including such interest and yield as would have
accrued on any such portion of such obligations if such case or proceeding had
not commenced). The foregoing guaranty shall in all respects be a continuing,
absolute and unconditional guaranty of the prompt and complete payment and
performance (and not merely of
-29-
collection) and shall remain in full force and effect, until such date occurring
after the Sale Termination Date on which each Originator has fully and finally
paid all amounts due from it under this Agreement and any other Transaction
Document to which it is a party.
SECTION 10.2. Reinstatement. ConMed agrees that, if at any time all or
any part of any payment made by any Originator hereunder is or must be rescinded
or returned for any reason whatsoever (including, without limitation, the
insolvency, bankruptcy or reorganization of such Originator), such obligation
shall, for purposes of the guaranty set forth in this Article X, to the extent
that such payment is or must be rescinded or returned, be deemed to have
continued in existence, and the guaranty set forth in this Article X shall
continue to be effective or be reinstated, as the case may be, as to such
obligation.
SECTION 10.3. Waiver. ConMed hereby expressly waives (a) notice of the
acceptance of the guaranty set forth in this Article X, (b) notice of the
existence or creation or nonpayment of all or any of the obligations of any
Originator hereunder or under any other Transaction Document, (c) presentment,
demand, notice of dishonor, protest and all other notices whatsoever and (d) all
diligence and collection or protection of a realization upon any obligation of
any Originator hereunder or any security for or guaranty of any of the
foregoing.
-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.
CONMED CORPORATION, as an Originator and as
initial Servicer
By:
------------------------------------------
Name:
Title:
LINVATEC CORPORATION, as an Originator
By:
------------------------------------------
Name:
Title:
LINVATEC CANADA ULC, as an Originator
By:
------------------------------------------
Name:
Title:
CONMED RECEIVABLES CORPORATION, as
Initial Purchaser
By:
------------------------------------------
Name:
Title:
S-1
SCHEDULE I
LOCK-BOX BANKS AND LOCK-BOX ACCOUNTS
The Chase Manhattan Bank
Account No.: 550123571 (Linvatec Corporation)
Account No.: 550129383 (CONMED Corporation)
I-1
EXHIBIT A
FORM OF PURCHASE REPORT
PURCHASE REPORT
CONMED Receivables Corporation
As of ______________
Cut-Off Date
Total Receivables UPB $ - Input
Initial Contributed Receivables $ Fixed
Aggregate Unpaid Balance of Receivables AUB $ Calculated
LIBOR 0.0000% Input
Days Sales Outstanding TD 0 Input
12 Month Losses $ - Input
12 Month Collections $ - Input
Purchaser's Total Investment PTI $ Fixed
Cost Rate (LIBOR +1.50%) CR Calculated
Cost Discount (TD/360)*CR CD 0 Calculated
Loss Discount (12 Month Losses/12 Month Coll) LD #DIV/0! Calculated
Fair Market Value Discount (LD+CD) FMVD #DIV/0! Calculated
Purchase Price (AUB-(AUB*FMVD)) PP #DIV/0! Calculated
Eligible Receivables $ - Input
Ineligible Receivables $ - Input
A-1
EXHIBIT B
FORM OF INITIAL PURCHASER NOTE
NON-NEGOTIABLE PROMISSORY NOTE
November 1, 2001
FOR VALUE RECEIVED, the undersigned, CONMED RECEIVABLES CORPORATION, a
Delaware corporation (the "Initial Purchaser"), promises to pay to [NAME OF
ORIGINATOR], _____________________ a corporation (the "Originator"), at its
office at _____________________ , on the terms and subject to the conditions set
forth herein and in the Purchase and Sale Agreement referred to below, the
aggregate unpaid Purchase Price of all Pool Receivables and Related Rights of
the Originator purchased and to be purchased by the Initial Purchaser pursuant
to the Purchase and Sale Agreement (subject to adjustment pursuant to Section
3.3 of such Purchase and Sale Agreement). Such amount as shown in the records of
the Servicer will be rebuttable presumptive evidence of the principal amount
owing under this Note.
1. Purchase and Sale Agreement. This Note is an "Initial Purchaser
Note" described in, and is subject to the terms and conditions set forth in,
that certain Purchase and Sale Agreement, dated as of November 1, 2001 (as the
same may be amended, supplemented, or otherwise modified in accordance with its
terms, the "Purchase and Sale Agreement"), among the Originator, certain other
originators and the Initial Purchaser. Reference is hereby made to the Purchase
and Sale Agreement for a statement of certain other rights and obligations of
the Initial Purchaser and the Originator. In the case of any conflict between
the terms of this Note and the terms of the Purchase and Sale Agreement, the
terms of the Purchase and Sale Agreement shall control.
2. Definitions. Capitalized terms used (but not defined) herein have
the meanings ascribed thereto in the Purchase and Sale Agreement. In addition,
as used herein, the following terms have the following meanings:
"Final Maturity Date" means the date that falls ninety one
(91) days after the later of (x) the Sale Termination Date and (y) the
Final Payout Date.
"Junior Liabilities" means all obligations of the Initial
Purchaser to the Originator under this Note.
"Senior Agent" means the Administrator.
"Senior Interests" means (a) the undivided percentage
ownership interests acquired by the Administrator pursuant to the
Receivables Purchase Agreement, and (b) all obligations of the Initial
Purchaser to the Senior Interest Holders, howsoever created, arising
B-1
or evidenced, whether direct or indirect, absolute or contingent, now
or hereafter existing, or due or to become due on or before the Final
Maturity Date.
"Senior Interest Holders" means, collectively, the Purchasers,
the Administrator and the other Indemnified Parties.
"Subordination Provisions" means, collectively, clauses (a)
through (k) of Section 7 hereof.
3. Interest. Subject to the Subordination Provisions, the Initial
Purchaser promises to pay interest on the aggregate unpaid principal amount of
this Note outstanding on each day (a) prior to the final payment in full and in
cash of the Senior Interests, at a variable rate per annum equal to the Earned
Discount Rate Percentage, determined as of the then most recent Reporting Date,
and (b) after such final payment, at a variable rate per annum equal to the
Alternate Base Rate, as determined by the Servicer.
4. Interest Payment Dates. Subject to the Subordination Provisions, the
Initial Purchaser shall pay accrued interest on this Note on each Settlement
Date and on the Final Maturity Date (or, if any such day is not a Business Day,
the next succeeding Business Day). The Initial Purchaser also shall pay accrued
interest on the principal amount of each prepayment hereof on the date of each
such prepayment.
5. Basis of Computation. Interest accrued hereunder shall be computed
for the actual number of days elapsed on the basis of a 360-day year.
6. Principal Payment Dates. Subject to the Subordination Provisions,
any unpaid principal of this Note shall be paid on the Final Maturity Date (or,
if such date is not a Business Day, the next succeeding Business Day). Subject
to the Subordination Provisions, the principal amount of and accrued interest on
this Note may be prepaid on any Business Day without premium or penalty.
7. Subordination Provisions. The Initial Purchaser covenants and
agrees, and the Originator, by its acceptance of this Note, likewise covenants
and agrees, that the payment of all Junior Liabilities is hereby expressly
subordinated in right of payment to the payment and performance of the Senior
Interests to the extent and in the manner set forth in the following clauses of
this Section 7:
(a) No payment or other distribution of the Initial
Purchaser's assets of any kind or character, whether in cash,
securities, or other rights or property, shall be made on account of
this Note except to the extent such payment or other distribution is
(i) permitted under the Receivables Purchase Agreement or (ii) made
pursuant to Sections 4 or 6 of this Note;
(b) (i) In the event of any Event of Bankruptcy involving the
Initial Purchaser, and (ii) on and after the occurrence of the Sale
Termination Date, the Senior Interests shall
B-2
first be paid and performed in full and in cash before the Originator
shall be entitled to receive and to retain any payment or distribution
in respect of the Junior Liabilities. In order to implement the
foregoing: (x) all payments and distributions of any kind or character
in respect of the Junior Liabilities to which the Originator would be
entitled except for this subsection 7(b) shall be made directly to the
Senior Agent (for the benefit of the Senior Interest Holders); and (y)
the Originator hereby irrevocably agrees that the Senior Agent, in the
name of the Originator or otherwise, may demand, sue for, collect,
receive and receipt for any and all such payments or distributions, and
file, prove and vote or consent in any such proceeding with respect to
any and all claims of the Originator relating to the Junior
Liabilities, in each case until the Senior Interests shall have been
paid and performed in full and in cash.
(c) In the event that the Originator receives any payment or
other distribution of any kind or character from the Initial Purchaser
or from any other source whatsoever, in respect of the Junior
Liabilities, other than as expressly permitted by the terms of this
Note, such payment or other distribution shall be received in trust for
the Senior Interest Holders and shall be turned over by the Originator
to the Senior Agent (for the benefit of the Senior Interest Holders)
forthwith until the Senior Interests have been paid in full. All
payments and distributions received by the Senior Agent in respect of
this Note, to the extent received in or converted into cash, may be
applied by the Senior Agent (for the benefit of the Senior Interest
Holders) first to the payment of any and all reasonable expenses
(including, without limitation, reasonable attorneys' fees and other
legal expenses) paid or incurred by the Senior Agent or the Senior
Interest Holders in enforcing these Subordination Provisions, or in
endeavoring to collect or realize upon the Junior Liabilities, and any
balance thereof shall, solely as between the Originator and the Senior
Interest Holders, be applied by the Senior Agent toward the payment of
the Senior Interests in a manner determined by the Senior Agent to be
in accordance with the Receivables Purchase Agreement; but as between
the Initial Purchaser and its creditors, no such payments or
distributions of any kind or character shall be deemed to be payments
or distributions in respect of the Senior Interests.
(d) Upon the final payment in full and in cash of all Senior
Interests, the Originator shall be subrogated to the rights of the
Senior Interest Holders to receive payments or distributions from the
Initial Purchaser that are applicable to the Senior Interests until the
Junior Liabilities are paid in full.
(e) These Subordination Provisions are intended solely for the
purpose of defining the relative rights of the Originator, on the one
hand, and the Senior Interest Holders, on the other hand. Nothing
contained in the Subordination Provisions or elsewhere in this Note is
intended to or shall impair, as between the Initial Purchaser, its
creditors (other than the Senior Interest Holders) and the Originator,
the Initial Purchaser's obligation, which is unconditional and
absolute, to pay the Junior Liabilities as and when the same shall
become due and payable in accordance with the terms hereof and of the
Purchase and Sale Agreement or to affect the relative rights of the
Originator and creditors of the Initial Purchaser (other than the
Senior Interest Holders).
B-3
(f) The Originator shall not, until the Senior Interests have
been finally paid and performed in full and in cash, (i) cancel, waive,
forgive, transfer or assign, or commence legal proceedings to enforce
or collect, or subordinate to any obligation of the Initial Purchaser,
howsoever created, arising or evidenced, whether direct or indirect,
absolute or contingent, or now or hereafter existing, or due or to
become due, other than the Senior Interests, the Junior Liabilities, or
any rights in respect thereof or (ii) convert the Junior Liabilities
into an equity interest in the Initial Purchaser, unless, in the case
of each of clauses (i) and (ii) above, the Originator shall have
received the prior written consent of the Administrator in each case.
(g) The Originator shall not, without the advance written
consent of the Administrator, commence, or join with any other Person
in commencing, any proceedings related to an Event of Bankruptcy with
respect to the Initial Purchaser until at least one year and one day
shall have passed since the Senior Interests shall have been finally
paid and performed in full and in cash.
(h) If, at any time, any payment (in whole or in part) made
with respect to any Senior Interest is rescinded or must be restored or
returned by a Senior Interest Holder (whether in connection with any
Event of Bankruptcy or otherwise), these Subordination Provisions shall
continue to be effective or shall be reinstated, as the case may be, as
though such payment had not been made.
(i) Each of the Senior Interest Holders may, from time to
time, at its sole discretion, without notice to the Originator, and
without waiving any of its rights under these Subordination Provisions,
take any or all of the following actions: (i) retain or obtain an
interest in any property to secure any of the Senior Interests; (ii)
retain or obtain the primary or secondary obligations of any other
obligor or obligors with respect to any of the Senior Interests; (iii)
extend or renew for one or more periods (whether or not longer than the
original period), alter or exchange any of the Senior Interests, or
release or compromise any obligation of any nature with respect to any
of the Senior Interests; (iv) amend, supplement, or otherwise modify
any Transaction Document; and (v) release its security interest in, or
surrender, release or permit any substitution or exchange for all or
any part of any rights or property securing any of the Senior
Interests, or extend or renew for one or more periods (whether or not
longer than the original period), or release, compromise, alter or
exchange any obligations of any nature of any obligor with respect to
any such rights or property.
(j) The Originator hereby waives: (i) notice of acceptance of
these Subordination Provisions by any of the Senior Interest Holders;
(ii) notice of the existence, creation, non-payment or non-performance
of all or any of the Senior Interests; and (iii) all diligence in
enforcement, collection or protection of, or realization upon the
Senior Interests, or any thereof, or any security therefor.
(k) These Subordination Provisions constitute a continuing
offer from the Initial Purchaser to all Persons who become the holders
of, or who continue to hold, Senior
B-4
Interests; and these Subordination Provisions are made for the benefit
of the Senior Interest Holders, and the Administrator may proceed to
enforce such provisions on behalf of each of such Persons.
8. Amendments, Etc. No failure or delay on the part of the Originator
in exercising any power or right hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any such power or right preclude any
other or further exercise thereof or the exercise of any other power or right.
No amendment, modification or waiver of, or consent with respect to, any
provision of this Note shall in any event be effective unless (a) the same shall
be in writing and signed and delivered by the Initial Purchaser and the
Originator, and (b) all consents required for such actions under the Transaction
Documents shall have been received by the appropriate Persons.
9. Limitation on Interest. Notwithstanding anything in this Note to the
contrary, the Initial Purchaser shall never be required to pay unearned interest
on any amount outstanding hereunder, and shall never be required to pay interest
on the principal amount outstanding hereunder, at a rate in excess of the
maximum interest rate that may be contracted for, charged or received without
violating applicable federal or state law.
10. No Negotiation. This Note is not negotiable.
11. Governing Law. THIS NOTE SHALL GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT
GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF).
12. Captions. Paragraph captions used in this Note are provided solely
for convenience of reference only and shall not affect the meaning or
interpretation of any provision of this Note.
B-5
IN WITNESS WHEREOF, the undersigned has caused this Note to be executed
by its officer thereunto duly authorized on the date first above written.
CONMED RECEIVABLES CORPORATION
By:
--------------------------------------
Title:
-----------------------------------
B-6
EXHIBIT C
FORM OF ORIGINATOR NOTE
DEMAND NOTE
November 1, 2001
The undersigned, CONMED CORPORATION, a New York corporation (the
"Originator"), for value received, promises to pay to the order of CONMED
RECEIVABLES CORPORATION, a Delaware corporation (the "Initial Purchaser"), ON
DEMAND, the aggregate unpaid principal amount of all loans made by the Initial
Purchaser to the Originator (the "Originator Loans") together with accrued
interest on such amounts from time to time outstanding hereunder at the rate
provided below. Such amounts as shown in the records of the Servicer (as such
term is defined in the Purchase and Sale Agreement referred to below) will be
rebuttable presumptive evidence of the principal amount owing under this Demand
Note.
The unpaid principal amount of each Originator Loan from time to time
outstanding shall bear interest (which also shall be payable ON DEMAND) from
(and including) the date on which such Originator Loan was made to (but
excluding) the date on which such Originator Loan is paid in full (a) prior to
the final payment in full and in cash of the Senior Interests (as such term is
defined in the Initial Purchaser Note), at a variable rate per annum equal to
the Earned Discount Rate Percentage, determined as of the then most recent
Payment Date, and (b) after such final payment, at a variable rate per annum
equal to the Alternative Base Rate, as determined by the Servicer. Interest
hereunder shall be computed for the actual number of days elapsed on the basis
of a year consisting of 360 days.
This Demand Note is an Originator Note described in, and is subject to
the terms and conditions set forth in, that certain Purchase and Sale Agreement,
dated as of November 1, 2001 (as the same may at any time be amended,
supplemented, or otherwise modified from time to time in accordance with its
terms, the "Purchase and Sale Agreement"), among the Initial Purchaser, the
Originator and the other originators party thereto. Reference is hereby made to
the Purchase and Sale Agreement for a statement of certain other rights and
obligations of the Initial Purchaser. All capitalized terms used but not
otherwise defined herein have the meanings assigned thereto in the Purchase and
Sale Agreement.
All payments of principal and interest hereunder are to be made in
lawful money of the United States of America in same day funds to the account
designated from time to time by the Servicer to the Initial Purchaser.
In addition to and not in limitation of the foregoing, the Originator
further agrees, subject to any limitation imposed by applicable law, to pay all
expenses, including without limitation
C-1
reasonable attorney fees, incurred by the holder of this Demand Note in seeking
to collect any amounts payable hereunder which are not paid when due.
No failure or delay on the part of the Initial Purchaser or any other
holder of this Demand Note 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 Originator
shall entitle it to any notice or demand in similar or other circumstances. No
amendment, modification or waiver of, or consent with respect to, any provision
of this Demand Note shall in any event be effective unless (i) the same shall be
in writing and signed and delivered by the holder hereof and (ii) all consents
required for such action under the Transaction Documents shall have been given
by the appropriate Persons.
Upon the occurrence of any Event of Bankruptcy with respect to the
Originator, the principal balance hereof and all interest accrued hereon shall
be immediately due and payable, without demand, presentment, protest or notice
of dishonor.
Notwithstanding anything in this Demand Note to the contrary, the
Originator shall never be required to pay unearned interest on any amount
outstanding hereunder, and shall never be required to pay interest on the
principal amount outstanding hereunder, at a rate in excess of the maximum
nonusurious interest rate that may be contracted for, charged or received under
applicable federal or state law.
THIS DEMAND NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE CONFLICT
OF LAWS PRINCIPLES THEREOF).
[NAME OF ORIGINATOR]
By:
----------------------------------------
Title:
-------------------------------------
C-2
PAY TO THE ORDER OF Fleet Securities, Inc., as Administrator, pursuant to that
certain Receivables Purchase Agreement dated as of November 1, 2001, as the same
may be further amended, supplemented, or otherwise modified from time to time.
CONMED RECEIVABLES CORPORATION
By:
----------------------------------------
Title:
-------------------------------------
C-3
Exhibit 10.2
================================================================================
RECEIVABLES PURCHASE AGREEMENT
Dated as of November 1, 2001
Among
CONMED RECEIVABLES CORPORATION
as Seller
and
CONMED CORPORATION
as initial Servicer
and
BLUE KEEL FUNDING, LLC
as Conduit Purchaser
and
FLEET NATIONAL BANK
as Committed Purchaser
and
FLEET SECURITIES, INC.
as Administrator
================================================================================
TABLE OF CONTENTS
Page
ARTICLE I
PURCHASES AND REINVESTMENTS
SECTION 1.01. Commitment to Purchase; Limits on Purchasers' Obligations............................2
SECTION 1.02. Purchase Procedures; Assignment of Purchaser's Interests.............................2
SECTION 1.03. Reinvestments of Certain Collections; Payment of Remaining Collections...............2
SECTION 1.04. Asset Interest.......................................................................3
SECTION 1.05. Voluntary Termination of Purchase and Reinvestment Obligations or
Reduction of Purchase Limit..........................................................4
ARTICLE II
COMPUTATIONAL RULES
SECTION 2.01. Computation of Capital...............................................................5
SECTION 2.02. Computation of Concentration Limit...................................................5
SECTION 2.03. Computation of Earned Discount.......................................................5
SECTION 2.04. Estimates of Earned Discount Rate, Fees, Etc.........................................5
ARTICLE III
SETTLEMENTS
SECTION 3.01. Settlement Procedures................................................................6
SECTION 3.02. Deemed Collections; Reduction of Capital, Etc........................................8
SECTION 3.03. Payments and Computations, Etc.......................................................9
ARTICLE IV
FEES AND YIELD PROTECTION
SECTION 4.01. Fees................................................................................10
SECTION 4.02. Yield Protection....................................................................10
SECTION 4.03. Funding Losses......................................................................12
ARTICLE V
CONDITIONS TO PURCHASES
SECTION 5.01. Conditions Precedent to Initial Purchase............................................12
SECTION 5.02. Conditions Precedent to All Purchases and Reinvestments.............................14
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
SECTION 6.01. Representations and Warranties of Seller............................................15
SECTION 6.02. Representations and Warranties of Parent............................................18
ARTICLE VII
GENERAL COVENANTS
SECTION 7.01. Affirmative Covenants...............................................................20
SECTION 7.02. Reporting Requirements..............................................................22
SECTION 7.03. Negative Covenants..................................................................24
SECTION 7.04. Separate Existence..................................................................25
ARTICLE VIII
ADMINISTRATION AND COLLECTION
SECTION 8.01. Designation of Servicer.............................................................27
SECTION 8.02. Duties of Servicer..................................................................28
SECTION 8.03. Rights of the Administrator.........................................................30
SECTION 8.04. Responsibilities of Seller..........................................................31
SECTION 8.05. Further Action Evidencing Purchases and Reinvestments...............................31
SECTION 8.06. Application of Collections..........................................................32
ARTICLE IX
SECURITY INTEREST
SECTION 9.01. Grant of Security Interest..........................................................32
SECTION 9.02. Further Assurances..................................................................33
SECTION 9.03. Remedies............................................................................33
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Page
ARTICLE X
LIQUIDATION EVENTS
SECTION 10.01. Liquidation Events..................................................................33
SECTION 10.02. Remedies............................................................................35
ARTICLE XI
THE ADMINISTRATOR
SECTION 11.01. Authorization and Action............................................................35
SECTION 11.02. Administrator's Reliance, Etc.......................................................35
SECTION 11.03. Fleet and Affiliates................................................................36
ARTICLE XII
ASSIGNMENT OF PURCHASER'S INTEREST
SECTION 12.01. Restrictions on Assignments.........................................................36
SECTION 12.02. Rights of Assignee..................................................................37
ARTICLE XIII
INDEMNIFICATION
SECTION 13.01. Indemnities.........................................................................37
ARTICLE XIV
MISCELLANEOUS
SECTION 14.01. Amendments, Etc.....................................................................39
SECTION 14.02. Notices, Etc........................................................................39
SECTION 14.03. No Waiver; Remedies.................................................................40
SECTION 14.04. Binding Effect; Survival............................................................40
SECTION 14.05. Costs, Expenses and Taxes...........................................................40
SECTION 14.06. No Proceedings; Limitations on Recourse.............................................40
SECTION 14.07. Confidentiality of Program Information..............................................41
SECTION 14.08. Confidentiality of Parent Information...............................................42
SECTION 14.09. Captions and Cross References.......................................................44
SECTION 14.10. Integration.........................................................................44
SECTION 14.11. Governing Law.......................................................................44
SECTION 14.12. Waiver Of Jury Trial................................................................44
SECTION 14.13. Consent To Jurisdiction; Waiver Of Immunities.......................................44
SECTION 14.14. Execution in Counterparts...........................................................45
SECTION 14.15. No Recourse Against Other Parties...................................................45
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APPENDICES
APPENDIX A Definitions
SCHEDULES
SCHEDULE 6.01(m) List of Offices of Seller where Records Are Kept
SCHEDULE 6.01(n) List of Lock-Box Banks
SCHEDULE 7.01(g) Description of Credit and Collection Policy
SCHEDULE 14.02 Notice Addresses
EXHIBITS
EXHIBIT 1.02(a) Form of Purchase Notice
EXHIBIT 3.01(a) Form of Servicer Report
EXHIBIT 3.01(a)-W Form of Weekly Report
EXHIBIT 5.01(f) Form of Lock-Box Agreement
EXHIBIT 5.01(g)-1 Form of Enforceability/Perfection Opinion
EXHIBIT 5.01(g)-2 Form of True Sale/Substantive Consolidation Opinion
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RECEIVABLES PURCHASE AGREEMENT
Dated as of November 1, 2001
THIS IS A RECEIVABLES PURCHASE AGREEMENT, among CONMED RECEIVABLES
CORPORATION, a New York corporation ("Seller"), CONMED CORPORATION, a New York
corporation ("Parent"), as initial Servicer, BLUE KEEL FUNDING, LLC, a Delaware
limited liability company (the "Conduit Purchaser"), FLEET NATIONAL BANK, a
national banking association (together with any other financial institution
hereafter party hereto, each a "Committed Purchaser", and collectively with the
Conduit Purchaser, the "Purchasers") and FLEET SECURITIES, INC., a New York
corporation ("Fleet Securities"), as administrator for Purchasers (in such
capacity, the "Administrator"). Unless otherwise indicated, capitalized terms
used in this Agreement are defined in Appendix A.
Background
1. The Originators are engaged in the business of distribution and sale
of medical devices, equipment and related products.
2. Seller is a single purpose corporation formed for the purpose of
purchasing, and accepting contributions of, Receivables generated by the
Originators.
3. Seller has, and expects to have, Pool Receivables in which Seller,
subject to the terms and conditions of this Agreement, intends to sell an
undivided interest. Seller has requested Purchasers, and Conduit Purchaser may
(and if Conduit Purchaser does not, Committed Purchasers shall), subject to the
terms and conditions contained in this Agreement, fund the purchase of such
undivided interest, referred to herein as the Asset Interest, from Seller from
time to time during the term of this Agreement.
4. Seller and Purchasers also desire that, subject to the terms and
conditions of this Agreement, certain of the daily Collections in respect of the
Asset Interest be reinvested in Pool Receivables, which reinvestment shall
constitute part of the Asset Interest.
5. Parent has been requested, and is willing, to act as initial
Servicer.
6. Fleet Securities has been requested, and is willing, to act as the
Administrator.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the parties hereto agree as follows:
1
ARTICLE I
PURCHASES AND REINVESTMENTS
SECTION 1.01. Commitment to Purchase; Limits on Purchasers'
Obligations. Upon the terms and subject to the conditions of this Agreement,
from time to time prior to the Termination Date, Seller may request that
Administrator, for the benefit of Purchasers, purchase from Seller an undivided
ownership interest in the Pool Assets (each being a "Purchase") and Conduit
Purchaser may, in its sole discretion, fund each Purchase. If Conduit Purchaser
elects not to fund such Purchase, each Committed Purchaser shall fund its
Percentage of such Purchase, and the Administrator, for the benefit of
Purchasers, shall make such Purchase with the proceeds of such funding by the
Committed Purchasers; provided that no Purchase shall be funded by any Purchaser
if, after giving effect thereto, either (a) the Capital after giving effect to
such Purchase would exceed $50,000,000 (the "Purchase Limit"), as such Purchase
Limit may be decreased from time to time as provided in Section 1.05, or (b) the
Asset Interest would exceed 100% (the "Allocation Limit"); and provided further
that each Purchase made pursuant to this Section 1.01 shall have a purchase
price of at least $1,000,000.
SECTION 1.02. Purchase Procedures; Assignment of Purchaser's Interests.
(a) Notice of Purchase. Each Purchase from Seller shall be made on
notice from Seller to the Administrator received by the Administrator not later
than 11:00 a.m. (Boston, Massachusetts time) on the second Business Day next
preceding the date of such proposed Purchase. Each such notice of a proposed
Purchase shall be substantially in the form of Exhibit 1.02(a) (each a "Purchase
Notice"), and shall specify the desired amount and date of such Purchase, which
shall be a Settlement Date.
(b) Funding of Purchase. On the date of each Purchase, Conduit
Purchaser (or, if Conduit Purchaser has elected not to fund such Purchase, each
Committed Purchaser) shall, upon satisfaction of the applicable conditions set
forth in Article V, make available to the Administrator at the Administrator's
Office the amount of its Purchase in immediately available funds, and after
receipt by the Administrator of such funds, the Administrator shall
wire-transfer immediately available funds to an account designated by Seller in
the related Purchase Notice.
(c) Assignment of Asset Interest. Seller hereby sells, assigns and
transfers to Administrator, for the benefit of Purchasers, the Asset Interest.
SECTION 1.03. Reinvestments of Certain Collections; Payment of
Remaining Collections. (a) As of the close of business on each day during the
period from the date hereof to the Termination Date, Servicer shall, out of all
Collections received on such day:
(i) determine the portion of Collections attributable on any
day to the Asset Interest by multiplying (x) the amount of all
Collections received on such day times (y) the Asset Interest;
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(ii) out of the portion of Collections allocated to the Asset
Interest pursuant to clause (i), set aside and hold in trust for
Purchasers an amount equal to the sum of the estimated amount of Earned
Discount accrued in respect of the Capital (based on rate information
provided by the Administrator pursuant to Section 2.04), the accrued
Fees, all other amounts due to Purchasers, the Administrator, the
Affected Parties or the Indemnified Parties hereunder (other than the
Capital) and the Purchasers' Share of Servicer's Fee (in each case,
accrued through such day) and not so previously set aside;
(iii) apply the Collections allocated to the Asset Interest
pursuant to clause (i) and not set aside pursuant to clause (ii) to the
purchase from Seller of ownership interests in Pool Assets (each such
purchase being a "Reinvestment"); provided that (A) if there is an
Excess Amount after giving effect to other Collections previously set
aside pursuant to this clause (iii) and then so held, then Servicer
shall not make a Reinvestment to such extent, but shall set aside and
hold for the benefit of Purchasers, a portion of such Collections
which, together with other Collections previously set aside and then so
held, shall equal the Excess Amount; and (B) if the conditions
precedent to Reinvestment in Section 5.02 are not satisfied, then
Servicer shall not reinvest any of such Collections;
(iv) pay to Seller (A) the portion of Collections not
allocated to the Asset Interest pursuant to clause (i), less Seller's
Share of Servicer's Fee accrued through such day, and (B) the
Collections applied to Reinvestment pursuant to clause (iii); and
(v) out of the portion of Collections not allocated to the
Asset Interest pursuant to clause (i), pay to Servicer Seller's Share
of Servicer's Fee accrued through such day.
(b) Unreinvested Collections. Servicer shall set aside and hold in
trust for the benefit of Purchasers all Collections which pursuant to clause
(ii) or (iii) of Section 1.03(a) may not be reinvested in Pool Assets; provided
that unless the Administrator shall request it to do so in writing, Servicer
shall not be required to hold Collections that have been set aside in a separate
deposit account containing only such Collections. If, prior to the date when
such Collections are required to be paid to the Administrator pursuant to
Section 3.01, the amount of Collections set aside pursuant to clause (iii) of
Section 1.03(a) exceeds the Excess Amount, if any, and the conditions precedent
to Reinvestment set forth in Section 5.02 are satisfied, then Servicer shall
apply such Collections (or, if less, a portion of such Collections equal to the
amount of such excess) to the making of a Reinvestment.
SECTION 1.04. Asset Interest. (a) Components of Asset Interest. On any
date the Asset Interest will represent Administrator's (for the benefit of
Purchasers) combined undivided percentage ownership interest in (i) all then
outstanding Pool Receivables, (ii) all Related Security with respect to such
Pool Receivables, (iii) all of Seller's right and claims under the Purchase
Agreement, (iv) all lock-boxes and lock-box or collection accounts into which
Collections of Pool Receivables are or may be deposited, and all funds and
investments therein, (v) all Collections with respect to, and other proceeds of,
the foregoing and (vi) all books and records (including computer disks, tapes
and software) evidencing or relating to any of the foregoing, in each case,
whether now
3
owned by Seller or hereafter acquired or arising, and wherever located (all of
the foregoing, collectively referred to as "Pool Assets").
(b) Computation of Asset Interest. On any date of computation, the
Asset Interest will be equal to a percentage, expressed as the following
fraction:
C
--------------------------
NPB x (1 - RRP)
where:
C = the Capital on such date.
RRP = the Required Reserve Percentage on such date.
NPB = the Net Pool Balance on such date;
provided, however, that from and after the Termination Date, the Asset Interest
will be 100%.
(c) Frequency of Computation. The Asset Interest shall be computed as
of the Cut-Off Date for each Settlement Period. In addition, the Administrator
may require Servicer to provide a Servicer Report for purposes of computing the
Asset Interest as of any other date, and Servicer agrees to do so within two
Business Days of its receipt of the Administrator's request in writing.
SECTION 1.05. Voluntary Termination of Purchase and Reinvestment
Obligations or Reduction of Purchase Limit. Seller may, upon at least 60 days'
prior written notice to the Administrator, either (a) terminate Conduit
Purchaser's option to fund, and each Committed Purchaser's commitment to make,
Purchases and Reinvestments hereunder, or (b) reduce the Purchase Limit to an
amount not less than $25,000,000; provided, however, that (i) each partial
reduction of the Purchase Limit shall be in an amount equal to $1,000,000 or an
integral multiple thereof, and (ii) after giving effect to such reduction, the
Capital will not exceed the Purchase Limit as so reduced. Any such reduction of
the Purchase Limit shall reduce each Committed Purchaser's Commitment on a pro
rata basis. The Purchase Limit may be increased upon the request of Seller and
the written consent of the Administrator and each Purchaser thereto, which
consent may be granted or withheld in their sole discretion and may be subject
to such conditions as they may require.
ARTICLE II
COMPUTATIONAL RULES
SECTION 2.01. Computation of Capital. In making any determination of
Capital, the following rules shall apply:
4
(a) Capital shall not be considered reduced by any allocation,
setting aside or distribution of any portion of Collections unless such
Collections shall have been actually delivered to the Administrator
pursuant hereto for application to the Capital; and
(b) Capital shall not be considered reduced by any
distribution of any portion of Collections if at any time such
distribution is rescinded or must otherwise be returned for any reason.
SECTION 2.02. Computation of Concentration Limit. In the case of any
Obligor that is (a) a Subsidiary of any other Obligor, (b) a parent of any other
Obligor, or (c) a Subsidiary of the same parent as any other Obligor, the
Concentration Limit and the aggregate Unpaid Balance of Pool Receivables of such
Obligors shall be calculated as if such Obligors were one Obligor.
SECTION 2.03. Computation of Earned Discount. In making any
determination of Earned Discount, the following rules shall apply:
(a) no provision of this Agreement shall require the payment
or permit the collection of Earned Discount in excess of the maximum
permitted by Applicable Law; and
(b) Earned Discount for any period shall not be considered
paid by any distribution if at any time such distribution is rescinded
or must otherwise be returned for any reason.
SECTION 2.04. Estimates of Earned Discount Rate, Fees, Etc. For
purposes of determining the amounts required to be set aside by Servicer
pursuant to Section 1.03, the Administrator shall notify Servicer from time to
time of the Earned Discount Rate applicable to the Capital and the rates at
which fees and other amounts are accruing hereunder. It is understood and agreed
that (i) the Earned Discount Rate may change from time to time, (ii) certain
rate information provided by the Administrator to Servicer shall be based upon
the Administrator's good faith estimate, (iii) the amount of Earned Discount
actually accrued with respect to the Capital during any Settlement Period may
exceed, or be less than, the amount set aside with respect thereto by Servicer,
and (iv) the amount of fees or other payables accrued hereunder with respect to
any Settlement Period may exceed, or be less than, the amount set aside with
respect thereto by Servicer. Failure to set aside any amount so accrued shall
not relieve Servicer of its obligation to remit Collections to the Administrator
with respect to such accrued amount, as and to the extent provided in Section
3.01.
ARTICLE III
SETTLEMENTS
SECTION 3.01. Settlement Procedures.
The parties hereto will take the following actions with respect to each
Settlement Period:
5
(a) Servicer Report; Weekly Report. On or before the tenth
(10th) calendar day (or if such day is not a Business Day, the next
succeeding Business Day) of each month prior to the Final Payout Date
(each, a "Reporting Date"), Servicer shall deliver to the Administrator
a report containing the information described in Exhibit 3.01(a) (each,
a "Servicer Report"). On or before the close of business on each
Tuesday (or if such day is not a Business Day, the next succeeding
Business Day) prior to the Final Payment Date, Servicer shall deliver
to the Administrator a report for the immediately preceding calendar
week containing the information described in Exhibit 3.01(a)-W (each, a
"Weekly Report").
(b) Earned Discount; Other Amounts Due. Two Business Days
prior to each Reporting Date, the Administrator shall notify Servicer
of (i) the amount of Earned Discount that will have accrued in respect
of the Capital as of the next Settlement Date and (ii) all Fees and
other amounts that will have accrued and be payable by Seller under
this Agreement on the next Settlement Date (other than Capital).
(c) Settlement Date Procedure - Reinvestment Period. On the
second Business Day after each Reporting Date (each, a "Settlement
Date") prior to the Termination Date, Servicer shall distribute from
Collections set aside pursuant to Sections 1.03(a)(ii) and (iii) during
the immediately preceding Settlement Period the following amounts in
the following order:
(1) to the Administrator, an amount equal to the
Earned Discount accrued during such Settlement Period, plus
any previously accrued Earned Discount not paid on a prior
Settlement Date, which amount shall be distributed by the
Administrator to each Purchaser for application to the accrued
Earned Discount with respect to such Purchaser's Capital;
(2) to the Administrator, an amount equal to the
Program Fee and Commitment Fee accrued during such Settlement
Period, plus any previously accrued Program Fee and Commitment
Fee not paid on a prior Settlement Date;
(3) to Servicer, if Servicer is not Parent, an amount
equal to the Purchasers' Share of Servicer's Fee accrued
during such Settlement Period, plus any previously accrued
Purchasers' Share of Servicer's Fee not paid on a prior
Settlement Date (it being understood that so long as Servicer
is Parent, no amount shall be distributed pursuant to this
clause (3));
(4) to the Administrator, an amount equal to the
Excess Amount, if any, which amount shall be distributed by
the Administrator to each Purchaser, based upon such
Purchaser's Funded Percentage, for application to such
Purchaser's outstanding Capital;
6
(5) to the Administrator, all other amounts (other
than Capital) then due under this Agreement to the
Administrator, the Purchasers, the Affected Parties or the
Indemnified Parties;
(6) to Servicer, if Servicer is Parent, an amount
equal to the Purchasers' Share of Servicer's Fee accrued
during such Settlement Period, plus any previously accrued
Purchasers' Share of Servicer's Fee not paid on a prior
Settlement Day (it being understood that so long as Servicer
is not the Parent, no amount shall be distributed pursuant to
clause (6)); and
(7) to Seller, any remaining amounts.
(d) Settlement Date Procedure - Liquidation Period. On each
Settlement Date occurring after the Termination Date, Servicer shall
distribute from Purchasers' Share of Collections received, or deemed
received pursuant to Section 3.02, during the immediately preceding
Settlement Period the following amounts in the following order:
(1) to the Administrator, an amount equal to the
Earned Discount accrued during such Settlement Period, plus
any previously accrued Earned Discount not paid on a prior
Settlement Date, which amount shall be distributed by the
Administrator to each Purchaser for application to the accrued
Earned Discount with respect to such Purchaser's Capital;
(2) to the Administrator, an amount equal to the
Program Fee and Commitment Fee accrued during such Settlement
Period, plus any previously accrued Program Fee and Commitment
Fee not paid on a prior Settlement Date;
(3) to Servicer, if Servicer is not Parent, an amount
equal to the Purchasers' Share of Servicer's Fee accrued
during such Settlement Period, plus any previously accrued
Purchasers' Share of Servicer's Fee not paid on a prior
Settlement Date (it being understood that so long as Servicer
is Parent, no amount shall be distributed pursuant to this
clause (3));
(4) to the Administrator, an amount equal to the
remaining Purchasers' Share of Collections until the Capital
is reduced to zero, which amount shall be distributed by the
Administrator to each Purchaser, based upon such Purchaser's
Funded Percentage, for application to such Purchaser's
outstanding Capital;
(5) to the Administrator, all other amounts (other
than Capital) then due under this Agreement to the
Administrator, the Purchasers, the Affected Parties or the
Indemnified Parties;
(6) to Servicer, if Servicer is Parent, an amount
equal to the Purchasers' Share of Servicer's Fee accrued
during such Settlement Period, plus any previously
7
accrued Purchasers' Share of Servicer's Fee not paid on a
prior Settlement Date (it being understood that so long as
Servicer is not the Parent, no amount shall be distributed
pursuant to clause (6)); and
(7) to Seller, any remaining amounts.
(e) Delayed Payment. If on any day described in this Section
3.01, because Collections during the relevant Settlement Period were
less than the aggregate amounts payable, Servicer does not make any
payment described in clauses (1) through (6) of Section 3.01(c) or (d),
as applicable, the next available Collections in respect of the Asset
Interest shall be applied to such payment, and no Reinvestment shall be
permitted hereunder until such amount payable has been paid in full.
SECTION 3.02. Deemed Collections; Reduction of Capital, Etc.
(a) Deemed Collections. If
(i) a Dilution occurs or the Unpaid Balance of any Pool
Receivable is less than the amount included in calculating the Net Pool
Balance for purposes of any Servicer Report for any other reason, or
(ii) any of the representations or warranties of Seller set
forth in Section 6.01(k) or (o) with respect to any Pool Receivable
were not true when made with respect to any Pool Receivable, or any of
the representations or warranties of Seller set forth in Section
6.01(k) are no longer true with respect to any Pool Receivable, or
(iii) without duplication, Seller receives a Deemed Collection
pursuant to the Purchase Agreement,
then, on the next succeeding Settlement Date (or, if earlier, on the date an
Originator pays a Deemed Collection pursuant to the Purchase Agreement), Seller
shall be deemed to have received a Collection of such Pool Receivable
(I) in the case of clause (i) above, in the amount of such
Dilution or the difference between the actual Unpaid Balance and the
amount included in calculating such Net Pool Balance, as applicable;
and
(II) in the case of clause (ii) above, in the amount of the
Unpaid Balance of such Pool Receivable; and
(III) in the case of clause (iii) above, in the amount of such
Deemed Collection.
(b) Seller's Optional Reduction of Capital. Seller may at any time
elect to reduce the Capital as follows:
8
(i) Seller shall give the Administrator at least five (5)
Business Days' prior written notice of such reduction (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, Servicer shall refrain from reinvesting
Collections pursuant to Section 1.03 until the amount thereof not so
reinvested shall equal the desired amount of reduction, and
(iii) Servicer shall hold such Collections in trust for
Purchasers, pending payment to the Administrator on the next Settlement
Date, as provided in Section 1.03;
provided that,
(A) the amount of any such reduction shall be not less than
$1,000,000, and the Capital after giving effect to such reduction shall
be not less than $25,000,000 (unless Capital shall thereby be reduced
to zero), and
(B) Seller shall use reasonable efforts to attempt to choose a
reduction amount, and the date of commencement thereof, so that such
reduction shall commence and conclude in the same Settlement Period.
SECTION 3.03. Payments and Computations, Etc.
(a) Payments. All amounts to be paid or deposited by Seller or Servicer
to the Administrator hereunder shall be paid or deposited in accordance with the
terms hereof no later than 10:00 a.m. (Boston, Massachusetts time) on the day
when due in lawful money of the United States of America in immediately
available funds to the Administrator at ABA# 011 000 138, account # 940 518
9033; attention: Blue Keel.
(b) Late Payments. Seller or Servicer, as applicable, shall, to the
extent permitted by law, pay to the Administrator, interest on all amounts not
paid or deposited when such amount is due hereunder at 2% per annum above the
Alternate Base Rate, payable on demand, provided, however, that such interest
rate shall not at any time exceed the maximum rate permitted by Applicable Law.
(c) Method of Computation. All computations of interest, Earned
Discount and any fees payable hereunder shall be made on the basis of a year of
360 days for the actual number of days (including the first day but excluding
the last day) elapsed.
9
ARTICLE IV
FEES AND YIELD PROTECTION
SECTION 4.01. Fees. Seller shall pay to the Administrator and
Purchasers the fees in the amounts and at the times set forth in the fee letter,
dated as of the date hereof, among the Administrator, Parent and Seller (as
amended or supplemented from time to time, the "Fee Letter").
SECTION 4.02. Yield Protection.
(a) If (i) Regulation D or (ii) any Regulatory Change occurring after
the date hereof
(A) shall subject an Affected Party to any tax, duty or other
charge with respect to any Asset Interest owned by or funded by it, or
any obligations or right to make Purchases or Reinvestments or to
provide funding therefor, or shall change the basis of taxation of
payments to the Affected Party of any Capital or Earned Discount owned
by, owed to or funded in whole or in part by it or any other amounts
due under this Agreement in respect of the Asset Interest owned by or
funded by it or its obligations or rights, if any, to make Purchases or
Reinvestments or to provide funding therefor (except for franchise
taxes or changes in the rate of tax on the net income of such Affected
Party imposed by any jurisdiction); or
(B) shall impose, modify or deem applicable any reserve
(including, without limitation, any reserve imposed by the Federal
Reserve Board), special deposit, compulsory loan or similar requirement
against assets of any Affected Party, deposits or obligations with or
for the account of any Affected Party or with or for the account of any
affiliate (or entity deemed by the Federal Reserve Board to be an
affiliate) of any Affected Party, or credit extended by any Affected
Party, but excluding any reserve, special deposit or similar
requirement included in the determination of Earned Discount; or
(C) shall change the amount of capital maintained or required
or requested or directed to be maintained by any Affected Party; or
(D) shall impose any other condition affecting any Asset
Interest owned or funded in whole or in part by any Affected Party, or
its obligations or rights, if any, to make Purchases or Reinvestments
or to provide funding therefor; or
(E) shall change the rate for, or the manner in which the
Federal Deposit Insurance Corporation (or a successor thereto)
assesses, deposit insurance premiums or similar charges;
and the result of any of the foregoing is
10
(x) to increase the cost to or to impose a cost on an Affected
Party funding or making or maintaining any Purchases or Reinvestments,
any purchases, reinvestments, or loans or other extensions of credit
under any Program Agreement, or any commitment of such Affected Party
with respect to any of the foregoing,
(y) to reduce the amount of any sum received or receivable by
an Affected Party under this Agreement, or under any Program Agreement
with respect thereto, or
(z) to reduce the rate of return on the capital of an Affected
Party as a consequence of its obligations hereunder or under any
Program Agreement or arising in connection herewith to a level below
that which such Affected Party could otherwise have achieved,
then within thirty days after demand by such Affected Party (which demand shall
be accompanied by a statement setting forth the basis for, calculation of, and
amount of such additional costs or reduced amount receivable; provided, however,
that no Affected Party shall be required to disclose any confidential or tax
planning information in any such statement), Seller shall pay directly to such
Affected Party such additional amount or amounts as will compensate such
Affected Party for such additional or increased cost or such reduction, but
without duplication of any other similar additional amounts due under any other
Program Agreement.
(b) Seller shall not be required to compensate an Affected Party
pursuant to this Section 4.02 for any amounts incurred more than twelve (12)
months prior to the date such Affected Party notifies Seller of such Affected
Party's intention to claim compensation therefor, provided that, if the
circumstances giving rise to such claim have a retroactive effect, then such
twelve (12) month period shall be extended to include the period of such
retroactive effect.
(c) In determining any amount provided for or referred to in this
Section 4.02, an Affected Party may use any reasonable averaging and attribution
methods that it shall deem applicable. Any Affected Party when making a claim
under this Section 4.02 shall submit to Seller a statement as to such increased
cost or reduced return (including reasonable calculations and an explanation in
connection therewith), which statement shall, in the absence of manifest error,
be conclusive and binding upon Seller.
SECTION 4.03. Funding Losses. In the event that any Affected Party
shall incur any loss or expense (including any loss or expense incurred by
reason of the liquidation or reemployment of deposits or other funds acquired by
such Affected Party to make or maintain any funding with respect to the Asset
Interest) as a result of (i) any settlement with respect to any portion of
Capital funded by such Affected Party being made on any day other than the
scheduled last day of an applicable Settlement Period with respect thereto, (ii)
any Purchase not being made in accordance with a request therefor under Section
1.02, or (iii) any reduction in the Capital that was funded on the date of the
initial Purchase prior to the Settlement Date occurring in January of 2002,
then, upon demand by the Administrator to Seller, Seller shall pay to the
Administrator for the account of such Affected Party, the amount of such loss or
expense. Such written notice (which
11
shall include calculations in reasonable detail) shall, in the absence of
manifest error, be conclusive and binding upon Seller.
ARTICLE V
CONDITIONS TO PURCHASES
SECTION 5.01. Conditions Precedent to Initial Purchase. The initial
Purchase hereunder is subject to the condition precedent that the Administrator
shall have received, on or before the date of such Purchase, the following, each
(unless otherwise indicated) dated such date and in form and substance
reasonably satisfactory to the Administrator:
(a) Good standing certificates for each of Parent, each
Originator and Seller issued by the Secretaries of State of the
jurisdiction of its incorporation and its principal place of business;
(b) A certificate of the Secretary or Assistant Secretary of
each of Seller, each Originator and Parent certifying (i) a copy of the
resolutions of its Board of Directors approving the Transaction
Documents to be delivered by it hereunder and the transactions
contemplated hereby; (ii) the names and true signatures of the officers
authorized on its behalf to sign the Transaction Documents to be
delivered by it hereunder (on which certificate the Administrator and
each Purchaser may conclusively rely until such time as the
Administrator shall receive from Seller, such Originator or Parent, as
the case may be, a revised certificate meeting the requirements of this
subsection (b)); (iii) a copy of its by- laws; and (iv) all documents
evidencing other necessary corporate action and governmental approvals,
if any, with respect to the Transaction Documents to which such Person
is a party;
(c) The Certificate of Incorporation or Articles of
Incorporation, as applicable, of each of Seller, each Originator and
Parent, duly certified by the Secretary of State of the jurisdiction of
its incorporation, as of a recent date;
(d) Acknowledgment copies, or time stamped receipt copies, of
proper financing statements (Form UCC-1), filed on or prior to the date
of the initial Purchase, naming (i) each Originator as a debtor and
seller of Receivables, Seller as the secured party and purchaser and
Administrator, for the benefit of Purchasers, as the assignee and (ii)
Seller as the debtor and seller of Receivables or an undivided interest
therein and Administrator, for the benefit of Purchasers, as the
secured party and purchaser, or other, similar instruments or
documents, as may be necessary or, in the opinion of the Administrator,
desirable under the UCC or any comparable law of all appropriate
jurisdictions to perfect Seller's and Purchasers' interests in the Pool
Assets;
(e) A search report provided in writing to and approved by the
Administrator listing all effective financing statements that name any
Originator as debtor or assignor and
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that are filed in the jurisdictions in which filings were made pursuant
to subsection (d) above and in such other jurisdictions that
Administrator shall reasonably request, together with copies of such
financing statements (none of which shall cover any Pool Assets, unless
executed termination statements and/or partial releases with respect
thereto have been delivered to the Administrator), and tax and judgment
lien search reports from a Person satisfactory to Servicer and the
Administrator showing no evidence of such liens filed against any
Originator;
(f) Duly executed copies of the Lock-Box Agreements with the
Lock-Box Banks (other than a Lock-Box Agreement with Royal Bank of
Canada);
(g) Opinions of (i) Sullivan & Cromwell, counsel to Parent,
the Originator and Seller, in substantially the forms of Exhibits
5.01(g)-1 and 5.01(g)-2, respectively and (ii) special Florida and
Canadian counsel reasonably satisfactory to the Administrator covering
such matters as the Administrator may request;
(h) Such powers of attorney as the Administrator shall
reasonably request to enable the Administrator to collect all amounts
due under any and all Pool Assets;
(i) A pro forma Servicer Report, prepared in respect of the
proposed initial Purchase, assuming a Cut-Off Date of September 30,
2001;
(j) Satisfactory results of a review and audit, conducted by
Fleet Securities, of Parent's collection, operating and reporting
systems, Credit and Collection Policy, historical receivables data and
accounts, including satisfactory results of a review of the Parent's
operating location(s) and satisfactory review and approval of the
Eligible Receivables in existence on the date of the initial Purchase;
(k) Evidence of payment of Seller by 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 attorneys' fees of the Administrator to the extent
invoiced at least two Business Days prior to such date, including any
such costs, fees and expenses arising under or referenced in Section
14.05;
(l) The Liquidity Agreement, duly executed by Purchaser, the
Liquidity Agent and each Liquidity Bank; and
(m) The Purchase Agreement, duly executed by each Originator
and Seller, and a copy of all documents required to be delivered
thereunder.
SECTION 5.02. Conditions Precedent to All Purchases and Reinvestments.
Each Purchase (including the initial Purchase) and each Reinvestment hereunder,
shall be subject to the further conditions precedent that:
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(a) in the case of each Purchase, Servicer shall have
delivered to the Administrator on or prior to such Purchase, in form
and substance reasonably satisfactory to the Administrator, a completed
Servicer Report with respect to the immediately preceding calendar
month, dated within two (2) Business Days prior to the date of such
Purchase, together with such additional information as may be
reasonably requested by the Administrator; and
(b) on the date of such Purchase or Reinvestment the following
statements shall be true (and Seller by accepting the amount of such
Purchase or by receiving the proceeds of such Reinvestment shall be
deemed to have certified that):
(i) the representations and warranties contained in
Article VI are correct on and as of such day in all material
respects as though made on and as of such day and shall be
deemed to have been made on such day (except that any such
representation or warranty that is expressly stated as being
made only as of a specified earlier date shall be true and
correct in all material respects as of such earlier date),
(ii) no event has occurred and is continuing, or
would result from such Purchase or Reinvestment, that
constitutes a Liquidation Event or Unmatured Liquidation
Event,
(iii) after giving effect to each proposed Purchase
or Reinvestment, Capital will not exceed the Purchase Limit
and the Asset Interest will not exceed the Allocation Limit,
and
(iv) the Termination Date shall not have occurred;
provided, however, the absence of the occurrence and continuance of an Unmatured
Liquidation Event shall not be a condition precedent to any Reinvestment.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
SECTION 6.01. Representations and Warranties of Seller. Seller
represents and warrants as follows:
(a) Organization and Good Standing. Seller has been duly
organized and is validly existing as a corporation in good standing
under the laws of the State of New York, with power and authority to
own its properties as such properties are presently owned and to
conduct its business as such business is presently conducted, and had
at all relevant times, and now has, all necessary power, authority, and
legal right to acquire and own the Pool Assets.
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(b) Due Qualification. Seller is duly qualified to do business
as a foreign corporation in good standing, and has obtained all
necessary licenses and approvals, in all other jurisdictions in which
the ownership or lease of property or the conduct of its business
requires such qualification, licenses or approvals, except where the
failure to so qualify or have such licenses or approvals has not had,
and could not reasonably be expected to have, a Material Adverse
Effect.
(c) Power and Authority; Due Authorization. Seller (i) has all
necessary corporate power, authority and legal right to (A) execute and
deliver this Agreement and the other Transaction Documents to which it
is a party, (B) carry out the terms of the Transaction Documents to
which it is a party, and (C) sell and assign the Asset Interest on the
terms and conditions herein provided and (ii) has duly authorized by
all necessary corporate action the execution, delivery and performance
of this Agreement and the other Transaction Documents to which it is a
party and the sale and assignment of the Asset Interest on the terms
and conditions herein provided.
(d) Valid Transfer; Binding Obligations. This Agreement
constitutes a valid transfer and assignment of the Asset Interest to
the Administrator, for the benefit of Purchasers; and this Agreement
constitutes, and each other Transaction Document to be signed by Seller
when duly executed and delivered will constitute, a legal, valid and
binding obligation of Seller 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.
(e) No Violation. The consummation of the transactions
contemplated by this Agreement and the other Transaction Documents to
which Seller is a party and the fulfillment of the terms hereof and
thereof will not (i) 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, Seller's certificate of incorporation
or by-laws, (ii) 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 any Contractual Obligation of Seller
that could reasonably be expected to have a Material Adverse Effect,
(iii) result in the creation or imposition of any Lien upon any of
Seller's properties pursuant to the terms of any such Contractual
Obligation, other than any Lien created pursuant to this Agreement or
any other Transaction Document, or (iv) violate any Applicable Law, the
violation of which could reasonably be expected to have Material
Adverse Effect.
(f) No Proceedings. There is no litigation, proceeding or
investigation pending, or to the best of Seller's knowledge,
threatened, before any Governmental Authority or arbitrator (i)
asserting the invalidity of this Agreement or any other Transaction
Document to which Seller is a party, (ii) seeking to prevent the sale
and assignment of the Asset Interest or the consummation of any of the
other transactions contemplated by this Agreement or any
15
other Transaction Document, or (iii) seeking any determination or
ruling that could reasonably be expected to have a Material Adverse
Effect.
(g) Bulk Sales Act. No transaction contemplated hereby
requires compliance with any bulk sales act or similar law.
(h) Government Approvals. No Governmental Action is required
for the due execution, delivery and performance by Seller of this
Agreement or any other Transaction Document to which Seller is a party,
except for the filing of the UCC financing statements referred to in
Article V, all of which, at the time required in Article V, shall have
been duly made and shall be in full force and effect.
(i) Financial Condition. Since the date of Seller's formation,
there has been no material adverse change in Seller's results of
operations, financial condition or assets.
(j) Margin Regulations. The use of all funds obtained by
Seller under this Agreement will not conflict with or contravene any of
Regulations T, U and X promulgated by the Board of Governors of the
Federal Reserve System from time to time.
(k) Quality of Title. Each Pool Asset is legally and
beneficially owned by Seller free and clear of any Lien (other than any
Lien created hereby or arising solely as the result of any action taken
by a Purchaser or the Administrator); when the Administrator, for the
benefit of Purchasers, makes a Purchase or Reinvestment, it shall
acquire a valid and enforceable perfected first priority undivided
percentage interest to the extent of the Asset Interest in each Pool
Asset, free and clear of any Lien (other than any Lien created hereby
or arising solely as the result of any action taken by a Purchaser or
the Administrator), enforceable against any creditor of, or purchaser
from, Seller or any Originator; and no financing statement or other
instrument similar in effect covering any Pool Asset is on file in any
recording office except such as may be filed (i) in favor of an
Originator in accordance with the Contracts, (ii) in favor of Seller in
accordance with the Purchase Agreement, or (iii) in favor of a
Purchaser or the Administrator in accordance with this Agreement or in
connection with any Lien arising solely as the result of any action
taken by a Purchaser or the Administrator.
(l) Accurate Reports. No information included in any Servicer
Report or Weekly Report to the extent supplied by Seller, or other
information, exhibit, financial statement, document, book, record or
report furnished by or on behalf of Seller to the Administrator or any
Purchaser in connection with this Agreement was inaccurate in any
material respect as of the date it was dated or (except as otherwise
disclosed in writing to the Administrator at such time) as of the date
so furnished, or contained any untrue statement of a material fact or
omitted to state a material fact necessary to make the statements
contained therein, in light of the circumstances under which they were
made, not misleading.
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(m) Offices. The principal place of business and chief
executive office of Seller are located at the address of Seller
referred to in Section 14.02, and the offices where Seller keeps all
its books, records and documents evidencing or relating to Pool
Receivables are located at the addresses specified in Schedule 6.01(m)
(or at such other locations, notified to the Administrator in
accordance with Section 7.01(f), in jurisdictions where all action
required by Section 8.05 has been taken and completed).
(n) Lock-Box Accounts. The names and addresses of all the
Lock-Box Banks, together with the account numbers of the lock-box
accounts of Seller at such Lock-Box Banks, are specified in Schedule
6.01(n) (or have been notified to the Administrator in accordance with
Section 7.03(d)).
(o) Eligible Receivables. Each Receivable included in the Net
Pool Balance as an Eligible Receivable on the date of any Purchase,
Reinvestment or other calculation of Net Pool Balance was an Eligible
Receivable on such date.
(p) Accounting Sale. Seller has accounted for each sale of
undivided percentage ownership interests in Receivables in its books
and financial statements as sales, consistent with GAAP.
(q) Credit and Collection Policy. Seller has complied in all
material respects with the Credit and Collection Policy with regard to
each Receivable.
(r) Corporate Name. Seller's complete corporate name is set
forth in the preamble to this Agreement, and 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.
SECTION 6.02. Representations and Warranties of Parent. Parent
represents and warrants as follows:
(a) Organization and Good Standing. Parent has been duly
organized and is validly existing as a corporation in good standing
under the laws of the State of New York, with power and authority to
own its properties as such properties are presently owned and to
conduct its business as such business is presently conducted.
(b) Due Qualification. Parent is duly qualified to do business
as a foreign corporation in good standing, and has obtained all
necessary licenses and approvals, in all jurisdictions in which the
ownership or lease of property or the conduct of its business requires
such qualification, licenses or approvals, except where the failure to
so qualify or have such licenses or approvals has not had, and could
not reasonably be expected to have, a Material Adverse Effect.
(c) Power and Authority; Due Authorization. Parent (i) has all
necessary corporate power, authority and legal right to (A) execute and
deliver this Agreement and the
17
other Transaction Documents to which it is a party and (B) carry out
the terms of the Transaction Documents to which it is a party and (ii)
has duly authorized by all necessary corporate action the execution,
delivery and performance of this Agreement and the other Transaction
Documents to which it is a party.
(d) Binding Obligations. This Agreement constitutes, and each
other Transaction Document to be signed by Parent when duly executed
and delivered will constitute, a legal, valid and binding obligation of
Parent 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.
(e) No Violation. The consummation of the transactions
contemplated by this Agreement and the other Transaction Documents to
which Parent is a party and the fulfillment of the terms hereof and
thereof will not (i) 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 the Parent's articles of incorporation
or by-laws, (ii) 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 any Contractual Obligation of Parent
that could reasonably be expected to have a Material Adverse Effect,
(iii) result in the creation or imposition of any Lien upon any of
Parent's properties pursuant to the terms of any such Contractual
Obligation (other than any Lien created pursuant to the Transaction
Documents), or (iv) violate any Applicable Law, the violation of which
could reasonably be expected to have a Material Adverse Effect.
(f) No Proceedings. Except as set forth on Schedule 6.02(f),
there is no litigation, proceeding or investigation pending or, to the
best of Parent's knowledge, threatened, before any Governmental
Authority or arbitrator (i) asserting the invalidity of this Agreement
or any other Transaction Document to which Parent is a party, (ii)
seeking to prevent the sale and assignment of the Asset Interest or the
consummation of any of the other transactions contemplated by this
Agreement or any other Transaction Document, or (iii) seeking any
determination or ruling that could reasonably be expected to have a
Material Adverse Effect.
(g) Government Approvals. No Governmental Action is required
for the due execution, delivery and performance by Parent of this
Agreement or any other Transaction Document to which it is a party,
other than the filing of the UCC financing statements referred to in
Article V, all of which, at the time required in Article V, shall have
been duly made and shall be in full force and effect.
(h) Financial Condition. The audited consolidated balance
sheets of Parent as at December 31, 1988, December 31, 1999 and
December 31, 2000, and the related consolidated statements of income
and cash flows for the fiscal years ended on such dates
18
reported on by and accompanied by an unqualified report from
PricewaterhouseCoopers LLP, present fairly the consolidated financial
position of Parent as at such dates and the consolidated results of its
operations and its consolidated cash flows for the respective fiscal
years then ended. The unaudited consolidated balance sheet of Parent as
at March 31, 2001 and June 31, 2001, and the related unaudited
consolidated statements of income and cash flows for the three-month
and six-month, respectively, periods ended on such dates, present
fairly the consolidated financial position of Parent as at such dates,
and the consolidated results of its operations and its consolidated
cash flows for the three-month and six-month, respectively, periods
then ended (subject to normal year- end audit adjustments). All such
financial statements, including the related schedules and any notes
thereto (except in the case of any notes to the financial statements
dated as of March 31, 2001 or June 30, 2001), have been prepared in
accordance with GAAP applied consistently throughout the periods
involved (except as approved by the aforementioned firm of accountants
and disclosed therein). Since December 31, 2001 there has been no
material adverse change in any such business, results of operations,
assets or financial position.
(i) Accurate Reports. No information included in any Servicer
Report or Weekly Report to the extent supplied by Parent, or other
information, exhibit, financial statement, document, book, record or
report furnished by or on behalf of Parent to the Administrator or any
Purchaser, in connection with this Agreement was inaccurate in any
material respect as of the date it was dated or (except as otherwise
disclosed in writing to the Administrator at such time) as of the date
so furnished, or contained any untrue statement of a material fact or
omitted to state a material fact necessary to make the statements
contained therein, in light of the circumstances under which they were
made, not misleading.
ARTICLE VII
GENERAL COVENANTS
SECTION 7.01. Affirmative Covenants. From the date hereof until the
Final Payout Date:
(a) Compliance with Laws, Etc. Each of Seller and Parent will
comply in all material respects with all Applicable Laws, including
those with respect to the Pool Receivables and the related Contracts,
except where noncompliance could not reasonably be expected to have a
Material Adverse Effect.
(b) Preservation of Corporate Existence. Each of Seller and
Parent will preserve and maintain its corporate existence in the
jurisdiction of its formation, and qualify and remain qualified in good
standing as a foreign corporation in each jurisdiction where the
failure to preserve and maintain such existence and qualification could
reasonably be expected to have a Material Adverse Effect.
19
(c) Audits. (i) Each of Parent and Seller will from time to
time during regular business hours and, unless a Liquidation Event has
occurred and is continuing, on reasonable prior written notice, permit
the Administrator or any of its 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
its possession or under its control relating to Pool Assets, (B) to
visit its offices and properties for the purpose of examining such
materials described in clause (i)(A) above, and to discuss matters
relating to Pool Assets or its performance hereunder with any of its
officers or employees having knowledge of such matters, and (C) to
verify the existence and amount of the Receivables; and (ii) without
limiting the provisions of clause (i) above, from time to time on the
written request of Administrator during regular business hours, permit
certified public accountants or other auditors acceptable to the
Administrator and, unless a Liquidation Event has occurred and is
continuing, reasonably acceptable to Parent to conduct, at Seller's or
Parent's, as the case may be, expense, a review of its books and
records with respect to the Pool Receivables; provided, however that
unless a Liquidation Event has occurred and is continuing, Seller and
Parent shall not be obligated to pay for more than one such review in
each calendar year. Any such certified public accountants or other
auditors shall be obligated to enter into a customary confidentiality
agreement with Parent.
(d) Keeping of Records and Books of Account. Each of Seller
and Parent will maintain and implement administrative and operating
procedures (including, without limitation, an ability to recreate
records evidencing Pool Receivables in the event of the destruction of
the originals thereof) and keep and maintain all documents, books,
records and other information reasonably necessary or advisable for the
collection of all Pool Assets (including, without limitation, records
adequate to permit the daily identification of each new Pool Receivable
and all Collections of and adjustments to each existing Pool
Receivable).
(e) Performance and Compliance with Receivables and Contracts.
Seller will timely and fully perform and comply (or cause an Originator
to perform and comply pursuant to the Purchase Agreement) with all
provisions, covenants and other promises required to be observed by it
under the Contracts related to the Pool Receivables and all other
agreements related to such Pool Receivables, except where failure to do
so would not materially adversely affect the validity, enforceability
or collectibility of the related Pool Receivable.
(f) Location of Records. Each of Seller and Parent will keep
its principal place of business and chief executive office, and the
offices where it keeps its records concerning the Pool Receivables and
all related Contracts and all other agreements related to such Pool
Receivables (and all original documents relating thereto), at its
address(es) referred to in Section 14.02 or, upon 30 days' prior
written notice to the Administrator, at such other locations in
jurisdictions where all action required by Section 8.05 shall have been
taken and completed.
20
(g) Credit and Collection Policies. Each of Seller and Parent,
at its own expense, will timely and fully perform and comply in all
material respects with the Credit and Collection Policy in regard to
each Pool Receivable and the related Contracts.
(h) Collections. Each of Seller and Parent will instruct (i)
all Obligors to cause all Collections to be sent to a Lock-Box that is
the subject of a Lock-Box Agreement and (ii) each Lock-Box Bank to
deposit all such Collections directly into a Lock-Box Account that is
the subject of a Lock-Box Agreement. In the event that Parent or Seller
receives Collections directly from any Obligor, Parent or Seller, as
the case may be, shall deposit such Collections into a Lock-Box Account
within two Business Days of receipt thereof.
(i) Net Worth. Seller will maintain a Tangible Net Worth of at
least $2,000,000.
(j) Quality of Title. Each of Seller and Parent will take all
action reasonably necessary or advisable to establish and maintain a
valid and enforceable perfected first priority undivided percentage
interest in favor of the Administrator, for the benefit of the
Purchasers, to the extent of the Asset Interest in each Pool Asset,
free and clear of any Lien (other than any Lien created by this
Agreement or any other Transaction Document or arising solely as a
result of any action taken by a Purchaser or the Administrator),
enforceable against any creditor of, or purchaser from, Seller or
Parent.
(k) Financial Covenants. Parent will not permit Consolidated
Net Worth as of the end of any fiscal quarter during any fiscal year of
Parent to be less than the sum of (i) $223,406,000 plus (ii) 75% of
Consolidated Net Income since June 30, 2001 plus (iii) Net Cash
Proceeds from the sale of Capital Stock of Parent on a cumulative basis
since June 30, 2001.
(l) Availability. Parent will at all times maintain undrawn
commitments under the Credit Agreement that are available to Parent in
an amount not less than an amount equal to (A) the greater of (i)
$5,000,000 and (ii) the aggregate Dilutions for the most recently ended
month, minus (B) the amount of cash and cash equivalents (as determined
pursuant to GAAP) of Parent and its Subsidiaries as of the date of
determination..
SECTION 7.02. Reporting Requirements. From the date hereof until the
Final Payout Date:
(a) Quarterly Financial Statements. As soon as available and
in any event within 45 days after the end of each of the first three
quarterly periods of each fiscal year (i) Seller will furnish to the
Administrator copies of its unaudited financial statements, consisting
of at least a balance sheet of Seller as at the close of such quarter
and the related unaudited statements of income and of cash flows for
such quarter and for the portion of the fiscal year through the end of
such quarter, setting forth in each case in comparative form the
figures for the previous year, certified by the chief financial officer
of Seller as being fairly stated in all material respects (subject to
normal year-end audit adjustments) and (ii) Parent will
21
furnish to the Administrator copies of the unaudited consolidated
financial statements of Parent, consisting of at least an unaudited
consolidated balance sheet of Parent and its Subsidiaries as at the end
of such quarter and the related unaudited statements of income and cash
flows for such quarter and for the portion of the fiscal year through
the end of such quarter, setting forth in each case in comparative form
the figures for the previous year, certified by the principal financial
officer of Parent as being fairly stated in all material respects
(subject to normal year-end audit adjustments); all of the foregoing
financial statements shall be complete and correct in all material
respects and shall be prepared in reasonable detail and in accordance
with GAAP applied consistently throughout the periods reflected therein
and with prior periods (except as approved by such officer and
disclosed therein, provided that such financial statements need not
contain footnotes);
(b) Annual Financial Statements. As soon as available and in
any event within 90 days after the end of each fiscal year (i) Seller
will furnish to the Administrator copies of its audited financial
statements, consisting of at least a balance sheet of Seller as at the
end of such year and the related audited consolidated statements of
income and cash flows for such year, setting forth in each case in
comparative form the figures for the previous year reported on without
a "going-concern" or like qualification or exception, or qualification
arising out of the scope of the audit, by PricewaterhouseCoopers LLP or
other independent certified public accountants of nationally recognized
standing; and (ii) Parent will furnish to the Administrator copies of
its audited financial statements, consisting of at least the audited
consolidated balance sheet of Parent and its Subsidiaries as at the end
of such year and a related audited consolidated statements of income
and of cash flow for such year, setting forth in each case in
comparative form the figures for the previous year, reported on without
a "going-concern" or like qualification or exception, or qualification
arising out of the scope of the audit, by PricewaterhouseCoopers LLP or
other independent certified public accountants of national recognized
standing; all of the foregoing financial statements shall be complete
and correct in all material respects and shall be prepared in
reasonable detail and in accordance with GAAP applied consistently
throughout the periods reflected therein and with prior periods (except
as approved by such accountants and disclosed therein);
(c) Compliance Certificate. Together with each quarterly and
annual financial statement delivered in accordance with the preceding
paragraphs, Parent will furnish to the Administrator a compliance
certificate showing a calculation of the financial covenant set forth
in Section 7.01(k) certified by the principal financial officer of
Parent;
(d) Liquidation Events. Each of Seller and Parent will furnish
to the Administrator, as soon as possible and in any event within two
Business Days after an officer of Seller or Parent obtains actual
knowledge of the occurrence of each Liquidation Event and each
Unmatured Liquidation Event, a written statement of the chief financial
officer or chief accounting officer of Seller or Parent, as the case
may be, setting forth details of such event and the action that Seller
or Parent, as the case may be, proposes to take with respect thereto;
22
(e) Litigation. Each of Seller and Parent will furnish to the
Administrator, as soon as possible and in any event within three
Business Days of Seller's or Parent's actual knowledge thereof, notice
of (i) any litigation, investigation or proceeding which may exist at
any time which is not fully covered by insurance and which could be
reasonably expected to have a Material Adverse Effect and (ii) any
material adverse development in previously disclosed litigation;
(f) Change in Credit and Collection Policy. Each of Seller and
Parent will furnish to the Administrator, prior to its effective date,
notice of any material change in the Credit and Collection Policy;
(g) Change in Name. Seller will furnish to the Administrator,
at least thirty days prior to any change in Seller's name, principal
business, location, jurisdiction of organization or any other change
requiring the amendment of UCC financing statements, a notice setting
forth such changes and the effective date thereof; and
(h) Other Information. Each of Seller and Parent will furnish
to the Administrator such other information respecting the Receivables
or the condition or operations, financial or otherwise, of the Parent
or Seller or any of Parent's Subsidiaries as the Administrator may from
time to time reasonably request.
SECTION 7.03. Negative Covenants. From the date hereof until the Final
Payout Date:
(a) Sales, Liens, Etc. Seller will not, except as otherwise
provided herein or in the other Transaction Documents, sell, assign (by
operation of law or otherwise) or otherwise dispose of, or create or
suffer to exist any Lien upon or with respect to, any Pool Asset or any
interest therein.
(b) Extension or Amendment of Receivables. Neither Parent nor
Seller will, except as otherwise permitted in Section 8.02, extend,
amend or otherwise modify, or permit Servicer to extend, amend or
otherwise modify, the terms of any Pool Receivable; or amend, modify or
waive, or permit Servicer to amend, modify or waive, any term or
condition of any Contract related to a Pool Receivable.
(c) Change in Business or Credit and Collection Policy.
Neither Parent nor Seller will make any change in the character of its
business or in the Credit and Collection Policy, which change could
materially impair the collectibility of any Pool Receivable or
otherwise materially adversely affect the interests or remedies of the
Administrator or any Purchaser under this Agreement or any other
Transaction Document.
(d) Change in Payment Instructions to Obligors. Neither Parent
nor Seller will add or terminate any bank as a Lock-Box Bank or any
Lock-Box Account from those listed in Schedule 6.01(n) or make any
change, or permit Servicer to make any change, in its
23
instructions to Obligors regarding payments to be made to Seller or
Servicer or payments to be made to any Lock-Box Bank, unless the
Administrator shall have received prior notice of such addition,
termination or change and duly executed copies of Lock-Box Agreements
with each new Lock-Box Bank or with respect to each new Lock-Box
Account, as the case may be.
(e) Mergers, Acquisitions, Sales, etc. Neither Parent nor
Seller will (i) be a party to any merger with or acquisition of any
other Person without the consent of the Administrator, unless, in the
case of Parent, Parent is the surviving corporation and no Liquidation
Event has occurred and is continuing or would result therefrom, or (ii)
sell, transfer, convey or lease all or substantially all of its assets,
or sell or assign with or without recourse any Receivables or any
interest therein (other than pursuant hereto or to the Purchase
Agreement). Parent will not sell any of the capital stock of Seller, or
permit any Lien to exist thereon.
(f) Deposits to Special Accounts. Neither Parent nor Seller
will deposit or otherwise credit, or cause or permit to be so deposited
or credited, to any Lock-Box Account cash or cash proceeds other than
Collections of Pool Receivables.
(g) Other Business. Seller will not (i) engage in any business
other than the transactions contemplated by the Transaction Documents;
(ii) incur any indebtedness, obligation, liability or contingent
obligation of any kind other than pursuant to this Agreement or the
Purchase Agreement; or (iii) form any Subsidiary or make any
investments in any other Person.
(h) Certificate of Incorporation; Purchase Agreement. Seller
will not amend, modify, terminate, revoke or waive any provision of its
certificate of incorporation, any Initial Purchaser Note or the
Purchase Agreement.
(i) Restricted Payments. Seller will not declare or make any
dividend or other distributions to any of its shareholders, redeem or
purchase any of its capital stock or make any loan or other payments to
any of its shareholders (other than (1) payments of the purchase price
of Receivables as set forth in the Purchase Agreement, (2) the
turn-over of Collections of Reconveyed Receivables to an Originator as
set forth in the Purchase Agreement, (3) payment of Servicer's Fee so
long as Parent is Servicer and (4) payment of reasonable management
fees and reimbursement of reasonable expenses of Parent incurred in
connection with managing Seller) unless, in each case, no Liquidation
Event or Unmatured Liquidation Event has occurred and is continuing or
would result therefrom.
(j) Change of Name or Location. Seller will not change its
name or the location of its principal place of business or chief
executive office or its corporate structure or its jurisdiction or
organization, unless Seller has given the Administrator at least thirty
(30) days prior notice thereof, and has taken all steps necessary or
advisable under the UCC to
24
continue the perfection and priority of the Administrator's and each
Purchaser's interest in the Pool Assets.
SECTION 7.04. Separate Existence. Each of Seller and Parent hereby
acknowledges that each Purchaser, the Program Support Providers and the
Administrator are entering into the transactions contemplated by this Agreement
and the other Transaction Documents in reliance upon Seller's identity as a
legal entity separate from Parent. Therefore, from and after the date hereof,
each of Seller and Parent shall take all steps specifically required by this
Agreement or by any Purchaser or the Administrator to continue Seller's identity
as a separate legal entity and to make it apparent to third Persons that Seller
is an entity with assets and liabilities distinct from those of Parent and any
other Person, and is not a division of Parent or any other Person. Without
limiting the generality of the foregoing and in addition to and consistent with
the other covenants set forth herein, each of Seller and Parent shall take such
actions as shall be required in order that:
(a) Seller will be a limited purpose corporation whose primary
activities are restricted in its certificate of incorporation to
purchasing or otherwise acquiring from the Originators, owning,
holding, granting security interests, or selling interests, in Pool
Assets, entering into agreements for the selling and servicing of the
Receivables Pool, and conducting such other activities as it deems
necessary or appropriate to carry out its primary activities;
(b) Seller shall not engage in any business or activity, or
incur any indebtedness or liability other than as expressly permitted
by the Transaction Documents;
(c) Not less than one member of Seller's Board of Directors
shall be an Independent Director. The certificate of incorporation of
Seller shall provide that (i) Seller's Board of Directors shall not
approve, or take any other action to cause the filing of, a voluntary
bankruptcy or insolvency petition or similar proceeding or a merger or
dissolution with respect to Seller unless the Independent Director
shall approve the taking of such action in writing prior to the taking
of such action and (ii) such provision cannot be amended without the
prior written consent of the Independent Director;
(d) The Independent Director shall not at any time serve as a
trustee in bankruptcy for Seller, Parent or any Affiliate thereof;
(e) Any employee, consultant or agent of Seller will be
compensated from Seller's funds for services provided to Seller. Seller
will not engage any agents other than its attorneys, auditors and other
professionals, and a Servicer as contemplated by the Transaction
Documents for the Receivables Pool, which Servicer will be fully
compensated for its services by payment of Servicer's Fee and a
manager, which manager will be fully compensated from Seller's funds;
(f) Seller will not incur any material indirect or overhead
expenses for items shared with Parent (or any other Affiliate thereof)
which are not reflected in Servicer's Fee
25
or the fee to Parent in its role as manager for Seller. To the extent,
if any, that Seller (or any other Affiliate thereof) share items of
expenses not reflected in Servicer's Fee or the manager's fee, such as
legal, auditing and other professional services, such expenses will be
allocated to the extent practical on the basis of actual use or the
value of services rendered, and otherwise on a basis reasonably related
to the actual use or the value of services rendered, it being
understood that Parent shall pay all expenses relating to the
preparation, negotiation, execution and delivery of the Transaction
Documents, including, without limitation, legal and other fees;
(g) Seller's operating expenses will not be paid by Parent or
any other Affiliate thereof;
(h) Seller will have its own stationery;
(i) Seller's books and records will be maintained separately
from those of Parent and any other Affiliate thereof;
(j) All financial statements of Parent or any Affiliate
thereof that are consolidated to include Seller will contain detailed
notes clearly stating that (A) all of Seller's assets are owned by
Seller, and (B) Seller is a separate entity with creditors who have
received security interests in Seller's assets;
(k) Seller's assets will be maintained in a manner that
facilitates their identification and segregation from those of Parent
or any Affiliate thereof;
(l) Seller will strictly observe corporate formalities in its
dealings with Parent or any Affiliate thereof, and funds or other
assets of Seller will not be commingled with those of Parent or any
Affiliate thereof except as permitted by this Agreement in connection
with servicing the Pool Receivables. Seller shall not maintain joint
bank accounts or other depository accounts to which Parent or any
Affiliate thereof (other than Parent in its capacity as Servicer) has
independent access;
(m) Seller will maintain arms'-length relationships with
Parent (and any Affiliate thereof). Any Person that renders or
otherwise furnishes services to Seller will be compensated by Seller at
market rates for such services it renders or otherwise furnishes to
Seller. Neither Seller nor Parent 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. Seller and
Parent will immediately correct any known misrepresentation with
respect to the foregoing, and they will not operate or purport to
operate as an integrated single economic unit with respect to each
other or in their dealing with any other entity; and
(n) Seller and Parent will take such other actions as may be
necessary to ensure that the facts and assumptions set forth in the
opinion issued by Sullivan & Cromwell in
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connection with the initial Purchase and in the certificate
accompanying such opinion remain true and correct.
ARTICLE VIII
ADMINISTRATION AND COLLECTION
SECTION 8.01. Designation of Servicer.
(a) Parent as Initial Servicer. The servicing, administering and
collection of the Pool Receivables shall be conducted by the Person designated
as servicer hereunder ("Servicer") from time to time in accordance with this
Section 8.01. Until the Administrator gives to Parent a Successor Notice, Parent
is hereby designated as, and hereby agrees to perform the duties and obligations
of, Servicer pursuant to the terms hereof.
(b) Successor Notice; Servicer Transfer Events. Upon Parent's receipt
of notice from the Administrator of the Administrator's designation of a new
Servicer (a "Successor Notice"), Parent agrees that it will terminate its
activities as Servicer hereunder in a manner that the Administrator reasonably
believes will facilitate the transition of the performance of such activities to
the new Servicer, and the new Servicer shall assume each and all of Parent's
obligations to service and administer such Pool Receivables, on the terms and
subject to the conditions herein set forth, and Parent shall use its reasonable
best efforts to assist the new Servicer in assuming such obligations. The
Administrator agrees not to give Parent a Successor Notice until after the
occurrence of a Liquidation Event (any such Liquidation Event being herein
called a "Servicer Transfer Event"), in which case such Successor Notice may be
given at any time in the Administrator's discretion.
(c) Resignation. The Parent acknowledges that the Administrator and
each Purchaser have relied on the Parent's agreement to act as Servicer
hereunder in making their decision to execute and deliver this Agreement.
Accordingly, the Parent agrees that it will not voluntarily resign as Servicer.
(d) Subcontracts. Servicer may, with the prior consent of the
Administrator, subcontract with any other Person for servicing, administering or
collecting the Pool Receivables, provided that (i) such sub-servicer shall agree
in writing to perform its duties and obligations in a manner not inconsistent
with the duties and obligations of Servicer pursuant to the terms hereof; (ii)
Servicer shall remain primarily liable for the performance of the duties and
obligations of Servicer pursuant to the terms hereof, (iii) Seller, the
Administrator and each Purchaser shall have the right to look solely to Servicer
for performance, and (iv) any such subcontract may be terminated at the option
of the Administrator upon the occurrence of a Servicer Transfer Event. The
Administrator and each Purchaser acknowledges that Servicer has appointed each
Originator as a sub-servicer with respect to the Receivables generated by such
Originator, and each of the Administrator and each Purchaser hereby consents
thereto. Servicer may, in its sole and absolute discretion, remove any
subservicer at any time.
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(e) Servicing Programs. In the event that Servicer uses any software
program in servicing the Pool Receivables that it licenses from a third party,
upon the occurrence of a Servicer Transfer Event, Servicer shall use its
reasonable best efforts to obtain whatever licenses or approvals are necessary
to allow the Administrator or the new Servicer to use such program.
SECTION 8.02. Duties of Servicer.
(a) Appointment; Duties in General. Each of Seller, each Purchaser and
the Administrator hereby appoints Servicer as its agent, as from time to time
designated pursuant to Section 8.01, to enforce its rights and interests in and
under the Pool Assets. Servicer shall take or cause to be taken all such actions
as may be necessary or advisable to collect each Pool Receivable from time to
time, all in accordance with Applicable Law and the Credit and Collection
Policy.
(b) Allocation of Collections; Segregation. Servicer shall set aside
for the account of Seller and Purchasers their respective allocable shares of
the Collections of Pool Receivables in accordance with Section 1.03 but shall
not be required (unless otherwise instructed by the Administrator) to segregate
the funds constituting such portions of such Collections prior to the remittance
thereof in accordance with Section 3.01. If instructed by the Administrator,
Servicer shall segregate and deposit with a bank designated by the
Administrator, Purchasers' Share of Collections, on the second Business Day
following receipt by Servicer of such Collections in immediately available
funds.
(c) Modification of Receivables. So long as no Liquidation Event or
Unmatured Liquidation Event shall have occurred and be continuing, Servicer may
(i) in accordance with the Credit and Collection Policy, adjust the Unpaid
Balance of any Defaulted Receivable or extend the time for payment of any
Defaulted Receivable (but in no event to a date later than 120 days from the
date of the original invoice), provided that (A) such extension or adjustment
shall not alter the status of such Pool Receivable as an Overdue Receivable or a
Defaulted Receivable or limit the rights of any Purchaser or the Administrator
under this Agreement, and (B) the aggregate amount of all such adjustments made
in any Settlement Period, plus the aggregate Unpaid Balance of all Pool
Receivables that have been extended during such Settlement Period, shall not
exceed 2% of the aggregate Unpaid Balance of all Pool Receivables as at the
Cut-Off Date for such Settlement Period and (ii) adjust the Unpaid Balance of
any Receivable to reflect the reductions or cancellations described in the first
sentence of Section 3.02(a).
(d) Documents and Records. Seller shall deliver to Servicer, and
Servicer shall hold in trust for Seller and Purchasers in accordance with their
respective interests, all documents, instruments and records (including, without
limitation, computer tapes or disks) that evidence Pool Receivables.
(e) Certain Duties to Seller. Servicer shall, as soon as practicable
following receipt, turn over to Seller that portion of Collections of Pool
Receivables representing Seller's undivided interest therein, less Seller's
Share of Servicer's Fee. Seller hereby directs Servicer to pay any Collections
of any Reconveyed Receivable directly to the related Originator to be applied
pursuant to the
28
Purchase Agreement. Servicer shall, as soon as practicable upon demand, deliver
to Seller copies of documents, instruments and records in its possession that
evidence Pool Receivables.
(f) Termination. Servicer's authorization under this Agreement shall
terminate upon the Final Payout Date.
(g) Power of Attorney. Seller hereby grants to Servicer an irrevocable
power of attorney, with full power of substitution, coupled with an interest, to
take in the name of Seller all steps which are necessary or advisable to
endorse, negotiate or otherwise realize on any writing or other right of any
kind held or transmitted by Seller or transmitted or received by a Purchaser
(whether or not from Seller) in connection with any Receivable. Notwithstanding
anything to the contrary contained herein, the Administrator may direct 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 either (i) a Liquidation
Event has occurred or (ii) the Administrator believes in good faith that failure
to commence, settle, or effect such legal action, foreclosure or repossession,
could adversely affect Receivables constituting a material portion of the Pool
Receivables, provided that the Administrator has given Servicer at least two
Business Days' notice of its intention to give such direction.
SECTION 8.03. Rights of the Administrator.
(a) Notice to Obligors. At any time after the occurrence of a
Liquidation Event, the Administrator may notify the Obligors of Pool
Receivables, or any of them, of the ownership of the Asset Interest by the
Administrator, for the benefit of Purchasers.
(b) Notice to Lock-Box Banks. At any time following the earlier to
occur of (i) the occurrence of a Liquidation Event, and (ii) the commencement of
the Liquidation Period, the Administrator is hereby authorized to give notice to
the Lock-Box Banks, as provided in the Lock-Box Agreements, of the transfer to
the Administrator of dominion and control over the lock-boxes and Lock-Box
Accounts. Each of Servicer and Seller hereby transfers to the Administrator,
effective when the Administrator shall give notice to the Lock-Box Banks as
provided in the Lock-Box Agreements, the exclusive dominion and control over
such lock-boxes and accounts, and shall take any further action that the
Administrator may reasonably request to effect such transfer. Any proceeds of
Pool Receivables received by Seller or Parent, as Servicer or otherwise,
thereafter shall be sent immediately to the Administrator.
(c) Rights on Servicer Transfer Event. At any time following the
designation of a Servicer other than Parent pursuant to Section 8.01:
(i) The Administrator may direct the Obligors of Pool
Receivables, or any of them, to pay all amounts payable under any Pool
Receivable directly to the Administrator or its designee.
29
(ii) Parent shall, at the Administrator's request and at
Parent's expense, give notice of such ownership to each said Obligor
and direct that payments be made directly to the Administrator or its
designee.
(iii) Parent and Seller shall, at the Administrator's request,
(A) assemble all of the documents, instruments and other records
(including, without limitation, computer programs, tapes and disks)
which evidence the Pool Receivables and the related Contracts and
Related Security, or which are otherwise necessary or desirable to
collect such Pool Receivables and make the same available to the
Administrator at a place selected by the Administrator, and (B)
segregate all cash, checks and other instruments received by it from
time to time constituting Collections in a manner acceptable to the
Administrator and promptly upon receipt, remit all such cash, checks
and instruments, duly endorsed or with duly executed instruments of
transfer, to the Administrator.
(iv) Each of Seller and each Purchaser hereby authorizes the
Administrator, and grants to the Administrator an irrevocable power of
attorney, to take any and all steps in Seller's name and on behalf of
Seller and any Purchaser which are necessary or desirable, in the
reasonable determination of the Administrator, to collect all amounts
due under any and all Pool Receivables including, without limitation,
endorsing Seller's name on checks and other instruments representing
Collections and enforcing such Pool Receivables and the related
Contracts, provided that, notwithstanding anything to the contrary set
forth herein, in the Purchase and Sale Agreement or in any separate
power of attorney granted by Seller or any Originator in connection
herewith, the Administrator shall not exercise such power of attorney
unless and until a Servicer other than Parent has been appointed
pursuant to Section 8.01.
SECTION 8.04. Responsibilities of Seller. Anything herein to the
contrary notwithstanding:
(a) Contracts. Seller shall perform, or cause an Originator to
perform under the Purchase Agreement, all of its material obligations
under the Contracts related to the Pool Receivables and under the other
agreements related thereto to the same extent as if the Asset Interest
had not been sold hereunder, and the exercise by the Administrator or
its designee of its rights hereunder shall not relieve Seller from any
obligations under such Contracts and other agreements.
(b) Limitation of Liability. Neither the Administrator nor any
Purchaser shall have any obligation or liability with respect to any
Pool Receivables, the related Contracts or any other related
agreements, nor shall any of them be obligated to perform any of the
obligations of Seller or any Originator thereunder.
SECTION 8.05. Further Action Evidencing Purchases and Reinvestments.
30
(a) Further Assurances. Seller shall, at its expense, take all action
necessary or advisable to establish and maintain a valid and enforceable first
priority perfected undivided ownership interest, to the extent of the Asset
Interest, in the Pool Assets, free and clear of any Lien, in favor of the
Administrator, for the benefit of Purchasers. Without limiting the generality of
the foregoing, Seller will upon the request of the Administrator or its designee
execute 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 to evidence or perfect the interest described in the
previous sentence.
(b) Data Processing Records. Each of Parent and Seller will mark its
master data processing records evidencing the Pool Receivables with the legend
set forth below evidencing that the Asset Interest has been sold in accordance
with this Agreement.
AN OWNERSHIP AND SECURITY INTEREST IN THE RECEIVABLES
DESCRIBED HEREIN HAS BEEN GRANTED AND ASSIGNED TO FLEET
SECURITIES, INC., AS ADMINISTRATOR, PURSUANT TO A RECEIVABLES
PURCHASE AGREEMENT, DATED AS OF NOVEMBER 1, 2001, AMONG CONMED
CORPORATION, CONMED RECEIVABLES CORPORATION, BLUE KEEL
FUNDING, LLC, FLEET NATIONAL BANK AND FLEET SECURITIES, INC.,
AS THE ADMINISTRATOR.
(c) Additional Financing Statements; Performance by Administrator.
Seller hereby authorizes the Administrator or its designee to file one or more
financing or continuation statements, and amendments thereto and assignments
thereof, relative to all or any portion of the Asset Interest now existing or
hereafter arising in the name of Seller. If Seller or Parent fails to perform
any of its agreements or obligations under this Agreement, the Administrator or
its designee may (but shall not be required to), after notice to Seller or
Parent (unless immediate action is reasonably required to protect the interests
of the Administrator or Purchasers), itself perform, or cause performance of,
such agreement or obligation, and the expenses of the Administrator or its
designee incurred in connection therewith shall be payable by Seller or Parent,
as the case may be.
(d) Continuation Statements; Opinion. Without limiting the generality
of subsection (a), Seller will, not earlier than six (6) months and not later
than three (3) months prior to the fifth anniversary of the date of filing of
the financing statement referred to in Section 5.01(d) or any other financing
statement filed pursuant to this Agreement or in connection with any Purchase
hereunder, unless the Final Payout Date shall have occurred, execute, if
required, and deliver and file or cause to be filed an appropriate continuation
statement with respect to such financing statement.
(e) Lock-Box Agreement. On or before December 26, 2001, Servicer shall
cause a Lock-Box Agreement in form and substance reasonably satisfactory to the
Administrator to be executed by Servicer, Seller and Royal Bank of Canada and
delivered to the Administrator.
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SECTION 8.06. Application of Collections. Any payment by an Obligor in
respect of any indebtedness owed by it to Seller shall, (i) except as otherwise
specified by such Obligor, (ii) except as otherwise required by the underlying
Contract or law or (iii) unless the Administrator instructs otherwise, be
applied, first, as a Collection of any Pool Receivable or Receivables then
outstanding of such Obligor in the order of the age of such Pool Receivables,
starting with the oldest of such Pool Receivable and, second, to any other
indebtedness of such Obligor.
ARTICLE IX
SECURITY INTEREST
SECTION 9.01. Grant of Security Interest. To secure all obligations of
Seller arising in connection with this Agreement and each other Transaction
Document, whether now or hereafter existing, due or to become due, direct or
indirect, or absolute or contingent, including, without limitation, all
Indemnified Amounts, payments on account of Collections of Pool Receivables
received or deemed to be received and fees, Seller hereby assigns and grants to
Administrator, for the benefit of the Secured Parties, a security interest in
all of Seller's right, title and interest (including specifically any undivided
interest retained by Seller hereunder) now or hereafter existing in, to and
under all of the Pool Assets.
SECTION 9.02. Further Assurances. The provisions of Section 8.05 shall
apply to the security interest granted under Section 9.01 as well as to the
Purchases, Reinvestments and the Asset Interest hereunder.
SECTION 9.03. Remedies. Upon the occurrence of a Liquidation Event, the
Administrator and Purchaser shall have, with respect to the collateral granted
pursuant to Section 9.01, and in addition to all other rights and remedies
available to Purchaser or the Administrator under this Agreement or other
applicable law, all the rights and remedies of a secured party upon default
under the UCC.
ARTICLE X
LIQUIDATION EVENTS
SECTION 10.01. Liquidation Events. The following events shall be
"Liquidation Events" hereunder:
(a) (i) Servicer (if Parent or an Affiliate of Parent is
Servicer) shall fail to perform or observe any obligation of Servicer
to provide any Servicer Report or Weekly Report when due hereunder or
any obligation of Servicer pursuant to Section 8.02 and such failure
shall remain unremedied for more than three Business Days after written
notice thereof shall have been given by the Administrator to Servicer
(provided that no notice shall
32
be required in the case of the failure to provide any Servicer Report
when due) or (ii) Seller or Servicer (if Parent or its Affiliate is
Servicer) shall fail to make any payment or deposit to be made by it
hereunder within two (2) Business Days of when due; or
(b) Any representation or warranty made or deemed to be made
by Seller, Parent or any Originator under or in connection with this
Agreement, any other Transaction Document, any Weekly Report or any
Servicer Report or other information or report delivered pursuant
hereto shall prove to have been inaccurate in any material respect when
made; or
(c) Seller, Parent or any Originator shall fail to perform or
observe any other term, covenant or agreement contained in this
Agreement (other than the covenant set forth in Section 8.05(e)) or any
of the other Transaction Documents on its part to be performed or
observed and any such failure shall continue unremedied for ten (10)
Business Days after written notice thereof shall have been given by the
Administrator to Seller or Parent, as the case may be; or
(d) A default shall have occurred and be continuing under any
instrument or agreement evidencing, securing or relating to
Indebtedness in excess of $20,000,000 of, or guaranteed by, Parent or
any Subsidiary thereof, which default is a payment default or if
unremedied, uncured, or unwaived (with or without the passage of time
or the giving of notice or both) would permit acceleration of the
maturity of such indebtedness and such default shall have continued
unremedied, uncured or unwaived for a period long enough to permit such
acceleration; or
(e) This Agreement or any Purchase or any Reinvestment
pursuant to this Agreement shall for any reason (other than pursuant to
the terms hereof) (i) cease to create, or the Asset Interest shall for
any reason cease to be, a valid and enforceable perfected undivided
percentage interest to the extent of the Asset Interest in each Pool
Asset, free and clear of any other Lien (other than a Lien arising
solely as the result of any action taken by a Purchaser or the
Administrator) or (ii) cease to create with respect to the items
described in Section 9.01, or the interest of the Administrator (for
the benefit of Purchasers) with respect to such items shall cease to
be, a valid and enforceable first priority perfected security interest,
free and clear of any other Lien (other than a Lien arising solely as
the result of any action taken by a Purchaser or the Administrator); or
(f) An Event of Bankruptcy shall have occurred and remain
continuing with respect to Seller, Parent or any Originator; or
(g) The average of the Sales-Based Dilution Ratios for any
three successive Cut-Off Dates exceeds 20%; or
(h) The average of the Default Ratios for any three successive
Cut-Off Dates exceeds 5%; or
33
(i) On any Settlement Date, after giving effect to the
payments made under Section 3.01(c), the Asset Interest exceeds the
Allocation Limit; or
(j) The average of the Delinquency Ratios for any three
successive Cut-Off Dates is greater than 10%; or
(k) There shall exist any event or occurrence that has caused
a Material Adverse Effect; or
(l) Seller or Parent is subject to a Change-in-Control; or
(m) The Internal Revenue Service shall file notice of a lien
pursuant to Section 6323 of the Internal Revenue Code with regard to
any of the assets of Seller or Parent and such lien shall not have been
released within 5 Business Days, or the Pension Benefit Guaranty
Corporation shall file notice of a lien pursuant to Section 4068 of the
Employee Retirement Income Security Act of 1974 with regard to any of
the assets of Seller or Parent and such lien shall not have been
released within 5 Business Days.
SECTION 10.02. Remedies.
(a) Optional Liquidation. Upon the occurrence of a Liquidation Event
(other than a Liquidation Event described in subsection (f) of Section 10.01),
the Administrator shall, at the request, or may with the consent, of Purchasers,
by notice to Seller declare the Purchase Termination Date to have occurred and
the Liquidation Period to have commenced.
(b) Automatic Liquidation. Upon the occurrence of a Liquidation Event
described in subsection (f) of Section 10.01 with respect to Parent or Seller,
the Purchase Termination Date shall occur and the Liquidation Period shall
commence automatically.
(c) Additional Remedies. Upon any Purchase Termination Date occurring
pursuant to this Section 10.02, no Purchases or Reinvestments thereafter will be
made, and the Administrator and each Purchaser 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 Law, which rights shall be cumulative.
ARTICLE XI
THE ADMINISTRATOR
SECTION 11.01. Authorization and Action. Pursuant to the Program
Agreements, each Purchaser has appointed and authorized the Administrator (or
its designees) to take such action as agent on its behalf and to exercise such
powers under this Agreement as are delegated to the Administrator by the terms
hereof, together with such powers as are reasonably incidental thereto.
34
SECTION 11.02. Administrator's Reliance, Etc. The Administrator and its
directors, officers, agents or employees shall not be liable for any action
taken or omitted to be taken by it or them under or in connection with the
Transaction Documents (including, without limitation, the servicing,
administering or collecting of Pool Receivables as Servicer pursuant to Section
8.01), except for its or their own gross negligence, bad faith or willful
misconduct. Without limiting the generality of the foregoing, the Administrator:
(a) may consult with legal counsel, independent certified public accountants and
other experts selected by it and shall not be liable for any action taken or
omitted to be taken in good faith by it in accordance with the advice of such
counsel, accountants or experts; (b) makes no warranty or representation to
Purchaser or any other holder of any interest in Pool Receivables and shall not
be responsible to any Purchaser or any such other holder for any statements,
warranties or representations made in or in connection with any Transaction
Document; (c) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of any
Transaction Document on the part of Seller or Parent or to inspect the property
(including the books and records) of Seller, any Originator or Parent; (d) shall
not be responsible to Purchaser or any other holder of any interest in Pool
Receivables for the due execution, legality, validity, enforceability,
genuineness, sufficiency or value of any Transaction Document or any Receivable;
and (e) shall incur no liability under or in respect of this Agreement by acting
upon any notice (including notice by telephone), consent, certificate or other
instrument or writing (which may be by facsimile) believed by it in good faith
to be genuine and signed or sent by the proper party or parties.
SECTION 11.03. Fleet and Affiliates. Fleet and any of its Affiliates
may generally engage in any kind of business with Seller, Parent, any Originator
or any Obligor, any of their respective Affiliates and any Person who may do
business with or own securities of Seller, Parent, any Originator or any Obligor
or any of their respective Affiliates, all as if Fleet were not the
Administrator, and without any duty to account therefor to Purchaser or any
other holder of an interest in Pool Receivables.
ARTICLE XII
ASSIGNMENT OF PURCHASER'S INTEREST
SECTION 12.01. Restrictions on Assignments.
(a) Neither Seller nor Parent may assign its rights, or delegate its
duties, hereunder or any interest herein without the prior written consent of
the Administrator. No Purchaser may assign its rights hereunder (although it may
delegate its duties hereunder as expressly indicated herein) or the Asset
Interest (or any portion thereof) to any Person without the prior written
consent of Seller, which consent shall not be unreasonably withheld; provided,
however, that, without such consent, Conduit Purchaser may assign all of its
rights and interests in the Transaction Documents, together with all its
interest in the Asset Interest, to (i) Fleet or any Subsidiary thereof, or (ii)
to any "bankruptcy remote" special purpose entity the business of which is
administered by Fleet or any Subsidiary thereof, so long as such entity has the
ability to issue commercial paper notes, or to cause
35
the issuance of commercial paper notes, to fund the Asset Interest or (iii) to
any Liquidity Bank (or agent on behalf of the Liquidity Banks). If Conduit
Purchaser notifies Seller and Parent that it has decided to assign its rights
and delegate its duties hereunder to the Liquidity Banks (or an agent therefor)
and the Liquidity Banks agree to assume the obligations of the Conduit Purchaser
hereunder, Seller and Parent agree to enter into such amendments hereto and to
the other Transaction Documents as the Administrator may reasonably request to
reflect such assignment and delegation.
(b) Seller agrees to advise the Administrator within ten (10) Business
Days after notice to Seller of any proposed assignment by a Purchaser of the
Asset Interest (or any portion thereof), not otherwise permitted under
subsection (a), of Seller's consent or non-consent to such assignment. All of
the aforementioned assignments shall be upon such terms and conditions as the
assigning Purchaser and the assignee may mutually agree.
SECTION 12.02. Rights of Assignee. Upon the assignment by a Purchaser
in accordance with this Article XII, the assignee receiving such assignment
shall have all of the rights and shall assume in writing all of the obligations
of the assigning Purchaser with respect to the Transaction Documents and the
Asset Interest (or such portion thereof as has been assigned), and the assigning
Purchaser shall be released from such obligations.
ARTICLE XIII
INDEMNIFICATION
SECTION 13.01. Indemnities.
(a) General Indemnity by Seller. Without limiting any other rights
which any such Person may have hereunder or under Applicable Law, Seller hereby
agrees to indemnify each of the Administrator, each Purchaser, each Program
Support Provider, each of their respective Affiliates, and all successors,
permitted transferees, participants and permitted assigns and all officers,
directors, shareholders, members, controlling persons, employees and agents of
any of the foregoing (each an "Indemnified Party"), within ten (10) Business
Days of demand, from and against any and all damages, losses, claims,
liabilities and related costs and expenses, including reasonable attorneys' fees
and disbursements (all of the foregoing being collectively referred to as
"Indemnified Amounts") awarded against or incurred by any of them arising out of
or relating to the Transaction Documents or the ownership or funding of the
Asset Interest or in respect of any Receivable or any Contract, excluding,
however, (a) Indemnified Amounts to the extent resulting from gross negligence,
bad faith or willful misconduct on the part of such Indemnified Party or (b)
Indemnified Amounts which have the effect of recourse for non-payment of the
Pool Receivables due to credit problems of the Obligors (except as otherwise
specifically provided in this Agreement). Without limiting the foregoing, Seller
shall indemnify each Indemnified Party for Indemnified Amounts arising out of or
relating to:
36
(i) the transfer by Seller of any interest in any Pool
Receivable other than the transfer of an Asset Interest to the
Administrator, for the benefit of Purchasers, pursuant to this
Agreement and the grant of a security interest to the Administrator
pursuant to Section 9.01;
(ii) any representation or warranty made by Seller under or in
connection with any Transaction Document, any Servicer Report, any
Weekly Report or any other information or report delivered by or on
behalf of Seller pursuant hereto, which shall have been false,
incorrect or misleading in any respect when made;
(iii) the failure by Seller to comply with any Applicable Law,
or the nonconformity of any Pool Receivable or the related Contract
with any Applicable Law;
(iv) the failure to vest and maintain vested in the
Administrator, for the benefit of Purchasers, an undivided percentage
ownership interest, to the extent of the Asset Interest, in the Pool
Assets, free and clear of any Lien, other than a Lien created pursuant
to this Agreement or any other Transaction Document or arising solely
as a result of an act of a Purchaser or the Administrator, whether
existing at the time of any Purchase or Reinvestment of such Asset
Interest or at any time thereafter;
(v) the failure to file, or any delay in filing, financing
statements or other similar instruments or documents under the UCC of
any applicable jurisdiction or other applicable laws with respect to
any Pool Assets, whether at the time of any Purchase or Reinvestment or
at any time thereafter;
(vi) any dispute, claim, offset or defense (other than
discharge in bankruptcy or payment) of the Obligor to the payment of
any Receivable included in the Net Pool Balance (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 the sale of the merchandise or services related to
such Receivable or the furnishing or failure to furnish such
merchandise or services;
(vii) any breach by Seller of any of its covenants or
agreements under this Agreement or any other Transaction Document;
(viii) any products liability claim arising out of or in
connection with merchandise or services that are the subject of any
Pool Receivable;
(ix) any litigation, proceeding or investigation against
Seller; or
(x) any tax or governmental fee or charge (but not including
taxes upon or measured by net income or representing a franchise or
unincorporated business tax of such Person), all interest and penalties
thereon or with respect thereto, and all out-of-pocket costs
37
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 Asset Interest, or any other interest in the Pool
Receivables or in any goods which secure any such Pool Receivables.
(b) Indemnity by Servicer. Without limiting any other rights which any
such Person may have hereunder or under applicable law, Servicer hereby agrees
to indemnify each Indemnified Party, within five (5) Business Days of demand,
from and against any and all Indemnified Amounts awarded against or incurred by
any of them arising out of or relating to (i) any representation or warranty
made by Servicer under or in connection with any Transaction Document, any
Servicer Report, any Weekly Report or any other information or report delivered
by or on behalf of Servicer pursuant hereto, which shall have been false,
incorrect or misleading when made, (ii) the failure by Servicer to comply with
any Applicable Law, (iii) any breach by Servicer of any of its covenants or
agreements under this Agreement or any other Transaction Document or (iv) the
commingling of any Collections with other funds.
(c) After-Tax Basis. Indemnification hereunder shall be in an amount
necessary to make the Indemnified Party whole after taking into account any tax
consequences to the Indemnified Party of the receipt of the indemnity provided
hereunder, including the effect of such tax or refund on the amount of tax
measured by net income or profits which is or was payable by the Indemnified
Party.
ARTICLE XIV
MISCELLANEOUS
SECTION 14.01. Amendments, Etc. No amendment or waiver of any provision
of this Agreement nor consent to any departure by any party therefrom shall in
any event be effective unless the same shall be in writing and signed by (a)
Seller, the Administrator, Parent and each Purchaser (with respect to an
amendment) or (b) the Administrator and each Purchaser (with respect to a waiver
or consent by them) or Seller or Parent (with respect to a waiver or consent by
it), as the case may be, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given. The
parties acknowledge that, before entering into such an amendment or granting
such a waiver or consent, Conduit Purchaser may also be required to obtain the
approval of some or all of the Program Support Providers or to obtain
confirmation from certain rating agencies that such amendment, waiver or consent
will not result in a withdrawal or reduction of the ratings of the Commercial
Paper Notes.
SECTION 14.02. Notices, Etc. All notices and other communications
provided for hereunder shall, unless otherwise stated herein, be in writing
(including facsimile communication) and shall be personally delivered or sent by
express mail or courier or by certified mail, postage prepaid, or by facsimile,
to the intended party at the address or facsimile number of such party set forth
under its name on Schedule 14.02 or at such other address or facsimile number as
shall be designated by such party in a written notice to the other parties
hereto. All such notices and communications shall be effective, (a) if
personally delivered or sent by express mail or courier or
38
if sent by certified mail, when received, and (b) if transmitted by facsimile,
when sent, receipt confirmed by telephone or electronic means, if sent during
business hours on a Business Day or on the next Business Day in all other cases.
SECTION 14.03. No Waiver; Remedies. No failure on the part of the
Administrator, any Affected Party, any Indemnified Party, any Purchaser or any
other holder of the Asset Interest (or any portion thereof) to exercise, and no
delay in exercising, any right hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise of any right hereunder preclude any other
or further exercise thereof or the exercise of any other right. The remedies
herein provided are cumulative and not exclusive of any remedies provided by
law.
SECTION 14.04. Binding Effect; Survival. This Agreement shall be
binding upon and inure to the benefit of Seller, Parent, the Administrator, each
Purchaser and their respective successors and assigns, and the provisions of
Section 4.02 and Article XIII shall inure to the benefit of the Affected Parties
and the Indemnified Parties, respectively, and their respective successors and
assigns; provided, however, nothing in the foregoing shall be deemed to
authorize any assignment not permitted by Section 12.01. 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
Final Payout Date. The rights and remedies with respect to any breach of any
representation and warranty made by Seller or Parent pursuant to Article VI and
the provisions of Article XIII and Sections 4.02, 14.05, 14.06, 14.07, 14.08 and
14.15 shall be continuing and shall survive any termination of this Agreement.
SECTION 14.05. Costs, Expenses and Taxes. In addition to its
obligations under Article XIII, Seller or Parent, as the case may be, agrees to
pay within five Business Days of demand;
(a) all costs and expenses incurred by the Administrator, any
Program Support Provider and any Purchaser and their respective
Affiliates, in connection with the enforcement after the occurrence of
a Liquidation Event against Seller or Parent, as the case may be, of,
or any actual or claimed breach by Seller or Parent, as the case may
be, of, this Agreement and the other Transaction Documents, including,
without limitation (A) the reasonable fees and expenses of counsel to
any of such Persons incurred in connection with any of the foregoing or
in advising such Persons as to their respective rights and remedies
under any of the Transaction Documents, and (B) all reasonable
out-of-pocket expenses (including reasonable fees and expenses of
independent accountants incurred in connection with any review of
Seller's or Parent's, as the case may be, books and records either
prior to the execution and delivery hereof or pursuant to Section
7.01(c) or otherwise); and
(b) all stamp and other taxes and fees payable or determined
to be payable in connection with the execution, delivery, filing and
recording of this Agreement or the other Transaction Documents, and
agrees to indemnify each Indemnified Party against any liabilities with
respect to or resulting from any delay in paying or omission to pay
such taxes and fees.
39
SECTION 14.06. No Proceedings; Limitations on Recourse. Seller, Parent,
Servicer and Fleet Securities (individually and as Administrator) each hereby
agrees that it will not institute against Conduit Purchaser, or join any other
Person in instituting against Conduit Purchaser, any insolvency proceeding
(namely, any proceeding of the type referred to in the definition of Event of
Bankruptcy) so long as any Commercial Paper Notes shall be outstanding or there
shall not have elapsed one year plus one day since the last day on which any
such Commercial Paper Notes shall have been outstanding. The parties hereto
agree that Conduit Purchaser shall have no obligations to make any payments
hereunder (collectively, "Purchaser Payments"), and that such Purchaser Payments
shall not constitute a claim against Conduit Purchaser as defined in ss.101 of
the Bankruptcy Code, unless and until Conduit Purchaser has amounts sufficient
to pay such Purchaser Payments from the Asset Interest or pursuant to the
Liquidity Agreement and such amounts are not required to repay Commercial Paper
Notes of Conduit Purchaser or loans to Conduit Purchaser funded by Commercial
Paper Notes. Conduit Purchaser shall not have any obligation to pay any amounts
owing hereunder unless and until Conduit Purchaser has received such amounts.
SECTION 14.07. Confidentiality of Program Information.
(a) Confidential Information. Each party hereto acknowledges that Fleet
Securities regards the structure of the transactions contemplated by this
Agreement to be proprietary, and each such party severally agrees that:
(i) it will not disclose without the prior consent of Fleet
Securities or as is required or authorized by the Transaction Documents
(other than to the directors, employees, agents, auditors, counsel or
affiliates (collectively, "representatives") of such party, each of
whom shall be informed by such party of the confidential nature of the
Program Information (as defined below) and of the terms of this Section
14.07), (A) any information regarding the pricing in, or copies of,
this Agreement or any transaction contemplated hereby, (B) any
information regarding the organization, business or operations of
Purchaser generally or the services performed by the Administrator for
Purchaser, or (C) any information which is furnished by Fleet
Securities to such party and which is designated by Fleet Securities to
such party in writing as confidential or not otherwise available to the
general public (the information referred to in clauses (A), (B) and (C)
is collectively referred to as the "Program Information"); provided,
however, that such party may disclose any such Program Information (I)
to any other party to this Agreement for the purposes contemplated
hereby, (II) as may be required by any Governmental Authority having or
claiming to have jurisdiction over such party, (III) in order to comply
with Applicable Law, including, without limitation, by filing the
Transaction Documents with the Securities and Exchange Commission
(provided that neither Seller nor Parent shall file the Fee Letter, or,
if required by Applicable Law to file the Fee Letter, Parent or Seller,
as the case may be, shall request confidential treatment therefor) or
(IV) subject to subsection (c), in the event such party is legally
compelled (by interrogatories, requests for information or copies,
subpoena, civil investigative demand or similar process) to disclose
any such Program Information, unless legally compelled not to do so;
40
(ii) it will use the Program Information solely for the
purposes of evaluating, administering and enforcing the transactions
contemplated by this Agreement and making any necessary business
judgments with respect thereto; and
(iii) it will, upon demand, return (and cause each of its
representatives to return) to Fleet Securities, all documents or other
written material (other than documents executed by such party) received
from Fleet Securities, as the case may be, in connection with (a)(i)(B)
or (C) above and all copies thereof made by such party which contain
the Program Information.
(b) Availability of Confidential Information. This Section 14.07 shall
be inoperative as to such portions of the Program Information which are or
become generally available to the public or such party on a nonconfidential
basis from a source other than Fleet Securities or were known to such party on a
nonconfidential basis prior to its disclosure by Fleet Securities.
(c) Legal Compulsion to Disclose. In the event that any party or anyone
to whom such party or its representatives transmits the Program Information is
requested or becomes legally compelled (by interrogatories, requests for
information or documents, subpoena, civil investigative demand or similar
process) to disclose any of the Program Information, such party will, to the
extent that it may legally do so,
(i) provide Fleet Securities with prompt written notice so
that Fleet Securities may seek a protective order or other appropriate
remedy and/or waive compliance with the provisions of this Section
14.07; and
(ii) unless Fleet Securities waives compliance by such party
with the provisions of this Section 14.07, make a timely objection to
the request or confirmation to provide such Program Information on the
basis that such Program Information is confidential and subject to the
agreements contained in this Section 14.07.
In the event that such protective order or other remedy is not obtained, or
Fleet Securities waives compliance with the provisions of this Section 14.07,
such party will furnish only that portion of the Program Information which (in
such party's good faith judgment) is legally required to be furnished and will
exercise reasonable efforts to obtain reliable assurance that confidential
treatment will be accorded the Program Information.
(d) Survival. This Section 14.07 shall survive termination of this
Agreement.
SECTION 14.08. Confidentiality of Parent Information.
(a) Confidential Information. Each party hereto acknowledges that each
of Seller and Parent regards certain information to be proprietary, and each
such party severally agrees that:
41
(i) it will not disclose without the prior consent of Parent
or as is required or authorized by the Transaction Documents (other
than to the directors, employees, agents, auditors, counsel or
affiliates (collectively, "representatives") of such party, each of
whom shall be informed by such party of the confidential nature of the
Parent Information (as defined below) and of the terms of this Section
14.08), any information which is furnished by Parent to such party and
which is designated by Parent or Seller to such party in writing as
confidential or not otherwise available to the general public ("Parent
Information"); provided, however, that such party may disclose any such
Parent Information (I) to any other party to this Agreement for the
purposes contemplated hereby, (II) as may be required by any
Governmental Authority having or claiming to have jurisdiction over
such party, (III) in order to comply with any Applicable Law, (IV)
subject to subsection (c), in the event such party is legally compelled
(by interrogatories, requests for information or copies, subpoena,
civil investigative demand or similar process) to disclose any such
Parent Information, (V) to any Affected Party (provided such Person has
agreed to be bound by the terms of this Section 14.08), (VI) to the
Rating Agencies, or (VII) to any potential Liquidity Bank or any
potential assignee or participant of any Liquidity Bank (provided such
Person has agreed to be bound by the terms of this Section 14.08), and
any placement agent for, or investor or potential investor in, the
Commercial Paper Notes; and
(ii) it will use the Parent Information solely for the
purposes of evaluating, administering and enforcing the transactions
contemplated by this Agreement and making any necessary business
judgments with respect thereto.
(b) Availability of Confidential Information. This Section 14.08 shall
be inoperative as to such portions of the Parent Information which are or become
generally available to the public or such party on a nonconfidential basis from
a source other than Parent or were known to such party on a nonconfidential
basis prior to its disclosure by Parent.
(c) Legal Compulsion to Disclose. In the event that any party or anyone
to whom such party or its representatives transmits the Parent Information is
requested or becomes legally compelled (by interrogatories, requests for
information or documents, subpoena, civil investigative demand or similar
process) to disclose any of the Parent Information, such party will, to the
extent that it may legally do so,
(i) provide Parent with prompt written notice so that Parent
may seek a protective order or other appropriate remedy and/or waive
compliance with the provisions of this Section 14.08; and
(ii) unless Parent waives compliance by such party with the
provisions of this Section 14.08, make a timely objection to the
request or confirmation to provide such Parent Information on the basis
that such Parent Information is confidential and subject to the
agreements contained in this Section 14.08.
42
In the event that such protective order or other remedy is not obtained, or
Parent waives compliance with the provisions of this Section 14.08, such party
will furnish only that portion of the Parent Information which (in such party's
good faith judgment) is legally required to be furnished and will exercise
reasonable efforts to obtain reliable assurance that confidential treatment will
be accorded the Parent Information.
(d) Survival. This Section 14.08 shall survive termination of this
Agreement.
SECTION 14.09. Captions and Cross References. The various captions
(including, without limitation, the table of contents) in this Agreement are
provided solely for convenience of reference and shall not affect the meaning or
interpretation of any provision of this Agreement. Unless otherwise indicated,
references in this Agreement to any Section, Appendix, Schedule or Exhibit are
to such Section of or Appendix, Schedule or Exhibit to this Agreement, as the
case may be, and references in any Section, subsection, or clause to any
subsection, clause or subclause are to such subsection, clause or subclause of
such Section, subsection or clause.
SECTION 14.10. Integration. This Agreement and the other Transaction
Documents contain a final and complete integration of all prior expressions by
the parties hereto with respect to the subject matter hereof and shall
constitute the entire understanding among the parties hereto with respect to the
subject matter hereof, superseding all prior oral or written understandings.
SECTION 14.11. Governing Law. THIS AGREEMENT, INCLUDING THE RIGHTS AND
DUTIES OF THE PARTIES HERETO, SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT THE
PERFECTION OF THE INTERESTS OF THE ADMINISTRATOR IN THE POOL ASSETS IS GOVERNED
BY THE LAWS OF THE JURISDICTION OTHER THAN THE STATE OF NEW YORK.
SECTION 14.12. Waiver Of Jury Trial. EACH OF THE PARTIES HERETO HEREBY
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
BE 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 A JURY TRIAL.
SECTION 14.13. Consent To Jurisdiction; Waiver Of Immunities. EACH
PARTY HEREBY ACKNOWLEDGES AND AGREES THAT:
(a) IT HEREBY IRREVOCABLY (i) SUBMITS TO THE
NON-EXCLUSIVE JURISDICTION OF ANY NEW YORK STATE OR UNITED
STATES FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN,
43
STATE OF NEW YORK, OVER ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO ANY TRANSACTION DOCUMENT; (ii) AGREES THAT ALL CLAIMS IN
RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN
SUCH STATE OR UNITED STATES FEDERAL COURT; (iii) 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;
(iv) 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 14.02; AND (v) TO THE EXTENT
ALLOWED BY LAW, AGREES THAT A 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 14.13 SHALL AFFECT THE ADMINISTRATOR'S
OR ANY PURCHASER'S RIGHT TO SERVE LEGAL PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO BRING ANY ACTION OR PROCEEDING AGAINST ANY OF
SELLER OR PARENT OR ITS PROPERTY IN THE COURTS OF ANY OTHER
JURISDICTIONS.
(b) TO THE EXTENT THAT IT HAS OR HEREAFTER MAY ACQUIRE ANY
IMMUNITY FROM THE JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS
(WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT,
ATTACHMENT IN AID TO EXECUTION, EXECUTION OR OTHERWISE) WITH RESPECT TO
ITSELF OR ITS PROPERTY, IT HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN
RESPECT OF ITS OBLIGATIONS UNDER OR IN CONNECTION WITH THIS AGREEMENT.
SECTION 14.14. Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by the different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which when taken together shall constitute one and the same
agreement.
SECTION 14.15. No Recourse Against Other Parties. No recourse under any
obligation, covenant or agreement of Conduit Purchaser contained in this
Agreement shall be had against any stockholder (solely in its capacity as
stockholder), employee, officer, director, member or incorporator of Conduit
Purchaser, provided, however, that nothing in this Section 14.15 shall relieve
any of the foregoing Persons from any liability which such Person may otherwise
have for his/her or its gross negligence, bad faith or willful misconduct.
44
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.
CONMED RECEIVABLES CORPORATION,
as Seller
By:
-------------------------------------------
Name Printed:
-------------------------------
Title:
----------------------------------------
CONMED CORPORATION, as initial Servicer
By:
-------------------------------------------
Name Printed:
-------------------------------
Title:
----------------------------------------
BLUE KEEL FUNDING, LLC,
as Conduit Purchaser
By:
-------------------------------------------
Name Printed:
-------------------------------
Title:
----------------------------------------
FLEET NATIONAL BANK,
as Committed Purchaser
Commitment: $50,000,000
By:
-------------------------------------------
Name Printed:
-------------------------------
Title:
----------------------------------------
FLEET SECURITIES, INC., as Administrator
By:
-------------------------------------------
Name Printed:
-------------------------------
Title:
----------------------------------------
S-1
SCHEDULE 6.01(m)
LIST OF OFFICES OF SELLER WHERE RECORDS ARE KEPT
1. Parent and Seller currently have the following business locations, and no
others:
Parent: 525 French Road
Utica, NY 13502
11311 Concept Blvd.
Largo, FL 33773
(for Linvatec Corporation)
6335 Millcreek Drive
Unit 4
Mississauga, Ontario L5N 2M2
Canada
(for Linvatec Canada ULC)
Seller: 525 French Road
Utica, NY 13502
2. Parent and Seller maintain their books and records relating to Accounts
and General Intangibles at:
The addresses set forth above.
SCHEDULE 6.01(n)
LIST OF LOCK-BOX AGREEMENTS
The Chase Manhattan Bank
Account No.: 550123571 (Linvatec Corporation)
Account No.: 550129383 (CONMED Corporation)
Fleet National Bank
Account No.: 7015046907
SCHEDULE 7.01(g)
DESCRIPTION OF CREDIT AND COLLECTION POLICY
(see attached)
SCHEDULE 14.02
NOTICE ADDRESSES
Conduit Purchaser:
Blue Keel Funding, LLC
c/o Global Securitization Services, LLC
25 West 43rd Street, Suite 704
New York, New York 10036
Telephone: 212/302-5157
Facsimile: 212/302-8767
with a copy to the Administrator
Administrator:
Fleet Securities, Inc.
100 Federal Street
11th Floor
Boston, Massachusetts 02110
Attention: Paul M. Schmieder
Telephone: 617/434-3064
Facsimile: 617/434-5719
Committed Purchaser:
Fleet National Bank
Mail Stop: NY-UT-36105C
One Clinton Square
P. O. Box 4821
Syracuse, New York 13202
Attention: David Kavney
Telephone: 315/426-4343
Facsimile: 315/426-4374
Seller:
CONMED Receivables Corporation
525 French Road
Utica, New York 13502-5994
Attention: President, with copies to
Chief Financial Officer and
General Counsel
Telephone: 315/624-3000
Facsimile: 315/793-8929
Parent:
CONMED Corporation
525 French Road
Utica, New York 13502-5994
Attention: President, with copies to
Chief Financial Officer and
General Counsel
Telephone: 315/624-3000
Facsimile: 315/793-8929
EXHIBIT 5.01(f)
FORM OF LOCK-BOX AGREEMENT
[Letterhead of Seller]
LOCK-BOX AGREEMENT
___________, 20___
[Name and Address of
Lock-Box Bank]
Ladies and Gentlemen:
1
Reference is made to our [lock-box]*/ account[s] no[s]. maintained with
you (the "Account[s]"). Pursuant to a Receivables Purchase Agreement dated as of
November 1, 2001 among us, as Seller, Blue Keel Funding, LLC ("Blue Keel"), as
Conduit Purchaser, CONMED Corporation, as Servicer, Fleet National Bank, as
Committed Purchaser, and Fleet Securities, Inc., as administrator (the
"Administrator"), we have assigned and/or may hereafter assign to the
Administrator, for the benefit of Blue Keel and its assigns, one or more
undivided percentage interests in accounts, chattel paper, instruments or
general intangibles (collectively, "Receivables") with respect to which payments
are or may hereafter be made to the Account[s], and have granted to the
Administrator, for the benefit of Blue Keel and its assigns, a security interest
in such Receivables, the Account[s], amounts on deposit therein and related
property. Your execution of this letter agreement is a condition precedent to
our continued maintenance of the Account[s] with you.
We hereby transfer exclusive ownership and control of the Account[s] to
the Administrator on behalf of Blue Keel and its assigns, subject only to the
condition subsequent that the Administrator shall have given you notice of its
election to assume such ownership and control, which notice may be in the form
attached hereto as Exhibit A or in any other form that gives you reasonable
notice of such election. Prior to the giving of such notice, you shall continue
to act on our instructions.
We hereby irrevocably instruct you, at all times from and after the
date of your receipt of notice from the Administrator as described above, to
make all payments to be made by you out of or in connection with the Account[s]
directly to the Administrator, at its address set forth below its signature
hereto or as the Administrator otherwise notifies you, for the account of Blue
Keel (account #__________, ABA #_________), or otherwise in accordance with the
instructions of the Administrator.
We also hereby notify you that, at all times from and after the date of
your receipt of notice from the Administrator as described above, the
Administrator shall be irrevocably entitled to exercise in our place and stead
any and all rights in respect of or in connection with the Account[s],
including, without limitation, (a) the right to specify when payments are to be
made out of or in connection with the Account[s] and (b) the right to require
preparation of duplicate monthly bank statements on the Account[s] for the
Administrator's audit purposes and mailing of such statements directly to an
address specified by the Administrator.
Notice from the Administrator may be personally served or sent by
facsimile or U.S. mail, certified return receipt requested, to the address or
facsimile number set forth under your signature to this letter agreement (or to
such other address or facsimile number as to which you shall notify the
Administrator in writing). If notice is given by facsimile, it will be deemed to
have been received when the notice is sent and the receipt is confirmed by
telephone or other electronic means. All other notices will be deemed to have
been received when actually received or, in the case of personal delivery,
delivered.
- --------
*/ Delete in the case of direct wire transfer accounts.
2
By executing this letter agreement, you acknowledge and consent to the
existence of the Administrator's right to ownership and control of the
Account[s] and the Administrator's security interest in the Account[s] and
amounts from time to time on deposit therein and agree that from the date hereof
the Account[s] shall be maintained by you for the benefit of, and amounts from
time to time therein held by you as agent for, the Administrator on the terms
provided herein. The Account[s] [is/are] to be titled "CONMED Receivables
Corporation and Fleet Securities, Inc. as the Administrator for Blue Keel, Fleet
National Bank and their respective assigns, as their interests may appear".
Except as otherwise provided in this letter agreement, payments to the
Account[s] are to be processed in accordance with the standard procedures
currently in effect. All service charges and fees with respect to the Account[s]
shall continue to be payable by us as under the arrangements currently in
effect.
By executing this letter agreement, you irrevocably waive and agree not
to assert, claim or endeavor to exercise, irrevocably bar and estop yourself
from asserting, claiming or exercising, and acknowledge that you have not
heretofore received a notice, writ, order or any form of legal process from any
other person or entity asserting, claiming or exercising, any right of set-off,
banker's lien or other purported form of claim with respect to [any of] the
Account[s] or any funds from time to time therein. Except for your right to
payment of your service charges and fees and to make deductions for returned
items, you shall have no rights in the Account[s] or funds therein. To the
extent you may ever have such rights, you hereby expressly subordinate all such
rights to all rights of the Administrator.
You may terminate this letter agreement by canceling the Account[s]
maintained with you, which cancellation and termination shall become effective
only upon thirty days' prior written notice thereof from you to the
Administrator. Incoming [mail addressed to] [wire transfers to] the Account[s]
received after such cancellation shall be forwarded in accordance with the
Administrator's instructions. This letter agreement may also be terminated upon
written notice to you by the Administrator stating that the Receivables Purchase
Agreement pursuant to which this letter agreement was obtained is no longer in
effect. Except as otherwise provided in this paragraph, this letter agreement
may not be terminated or amended without the prior written consent of the
Administrator. This letter agreement may be executed in any number of
counterparts, and by the parties hereto on 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.
3
Please acknowledge your agreement to the terms set forth in this letter
agreement by signing the two copies of this letter agreement enclosed herewith
in the space provided below, sending one such signed copy to the Administrator
at its address provided above and returning the other signed copy to us.
Very truly yours,
CONMED RECEIVABLES CORPORATION
By:
----------------------------------------------
Name Printed:
-------------------------------
Title:
-------------------------------------------
Acknowledged and agreed to
as of the date first
written above:
BLUE KEEL FUNDING, LLC
By:
----------------------------------------------
Name Printed:
-------------------------------
Title:
-------------------------------------------
FLEET SECURITIES, INC., as Administrator
By:
----------------------------------------------
Name Printed:
-------------------------------
Title:
-------------------------------------------
Address for notice:
Fleet Corporate Finance
Mail Stop MA-DE-100-11F
100 Federal Street, Eleventh Floor
Boston, Massachusetts 02110
Tel. No. 617/434-1522
Facsimile No. 617/434-5719
4
[NAME OF LOCK-BOX BANK]
By:
----------------------------------------------
Name Printed:
-------------------------------
Title:
-------------------------------------------
Address for notice:
By:
----------------------------------------------
Name Printed:
-------------------------------
Title:
-------------------------------------------
5
EXHIBIT A to
Lock-Box Agreement
[Letterhead of Fleet National Bank]
[Name and Address
of Lock-Box Bank]
Re: CONMED Receivables Corporation
[Lock-Box]**/ Account No[s]. [and ]
------------ ---------------------------------
Ladies and Gentlemen:
Reference is made to the letter agreement dated , 20___(the "Letter
Agreement") among CONMED Receivables Corporation, Blue Keel Funding, LLC ("Blue
Keel"), the undersigned, as Administrator and you concerning the above described
[lock-box]* account[s] (the "Account[s]"). We hereby give you notice of our
assumption of ownership and control of the Account[s] as provided in the Letter
Agreement.
We hereby instruct you to make all payments to be made by you out of or in
connection with the Account[s] [directly to the undersigned, at [our address set
forth above], for the account of Blue Keel (account no. )].
[other instructions]
Very truly yours,
FLEET SECURITIES, INC., as Administrator
By:
---------------------------------------
Name Printed:
-----------------------------
Title:
------------------------------------
cc: CONMED Receivables Corporation
- --------
**/ Delete in the case of direct wire transfer accounts.
APPENDIX A
DEFINITIONS
This is Appendix A to the Receivables Purchase Agreement dated as of
November 1, 2001 among CONMED Receivables Corporation, as Seller, Blue Keel
Funding, LLC, as Conduit Purchaser, CONMED Corporation, as initial Servicer,
Fleet National Bank, as Committed Purchaser, and Fleet Securities, Inc., as
Administrator (as amended, supplemented or otherwise modified from time to time,
the "Agreement"). Unless otherwise indicated, all Section, Exhibit and schedule
references in this Appendix are to Sections of and Exhibits and Schedules to the
Agreement.
A. Defined Terms. As used in the Agreement, unless the context requires
a different meaning, the following terms have the meanings indicated
hereinbelow:
"Accounts" means all accounts, contract rights, chattel paper,
instruments and documents, whether now owned or hereafter created or acquired by
Parent or in which Parent now has or hereafter acquires any interest.
"Administrator" has the meaning set forth in the preamble.
"Administrator's Office" means the office of the Administrator at 100
Federal Street, Eleventh Floor, Boston, Massachusetts 02110 or such other
address as shall be designated by the Administrator in writing to Seller, Parent
and each Purchaser.
"Affected Party" means each of each Purchaser, each Program Support
Provider, any assignee or participant of any Purchaser or any Program Support
Provider, Fleet Securities, any successor to Fleet Securities as Administrator,
and any sub-agent of the Administrator.
"Affiliate" when used with respect to a Person means any other Person,
directly or indirectly, controlling, controlled by, or under common control with
such Person, except, when used with respect to the Conduit Purchaser, Affiliate
shall mean the holder(s) of its limited liability company interests.
"Allocation Limit" has the meaning set forth in Section 1.01.
"Alternate Base Rate" means, on any date, a fluctuating rate of
interest per annum equal to the higher of
(a) the rate of interest most recently announced by the
Liquidity Agent in Boston, Massachusetts, as its prime rate; and
-1-
(b) the Federal Funds Rate most recently determined by the
Liquidity Agent plus 0.50% per annum.
The Alternate Base Rate is not necessarily intended to be the lowest rate of
interest determined by the Liquidity Agent in connection with extensions of
credit.
"Applicable Law" means all applicable laws, rules, regulations
(including temporary and final income tax regulations), statutes, treaties,
codes, ordinances, permits, certificates, orders and licenses of and
interpretations by any Governmental Authority, and applicable judgments,
decrees, injunctions, writs, orders or like action of any court, arbitrator or
other administrative, judicial or quasi-judicial tribunal or agency of competent
jurisdiction.
"Asset Interest" means an undivided ownership interest determined from
time to time as provided in Section 1.04(b) in all Pool Assets.
"Business Day" means a day other than a Saturday or a Sunday on which
both (a) the Administrator at its principal office in Boston, Massachusetts is
open for business and (b) commercial banks in New York City and Chicago,
Illinois are not authorized or required to be closed for business.
"Capital" means at any time with respect to the Asset Interest an
amount equal to (a) the aggregate of the amounts theretofore paid to Seller for
Purchases pursuant to Section 1.01, less (b) the aggregate amount of Collections
theretofore received and actually distributed to, and received by, a Purchaser
on account of the Capital pursuant to Section 3.01.
"Capital Lease Obligations" means as to any Person, the obligations of
such Person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP,
and, for the purposes of the Agreement, the amount of such obligations at any
time shall be the capitalized amount thereof at such time determined in
accordance with GAAP.
"Capital Stock" means any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a corporation, any
and all equivalent ownership interests in a Person (other than a corporation)
and any and all warrants, rights or options to purchase any of the foregoing.
"Change in Control" means any of the following:
(a) in relation to Parent, the acquisition following the date
hereof by any person or group of persons (within the meaning of Section
13 or 14 of the Exchange Act) of beneficial ownership (within the
meaning of Rule 13d-3 promulgated by the Securities and Exchange
Commission under the Exchange Act) of issued and outstanding shares of
the capital stock of Parent entitled (without regard to the
-2-
occurrence of any contingency) to vote for the election of members of
the board of directors of Parent and having a then present right to
exercise 51% or more of the voting power for the election of members of
the board of directors of Parent attached to all such outstanding
shares of capital stock of Parent, unless otherwise agreed in writing
by the Liquidity Banks and the Administrator; or
(b) the creation or imposition of any Lien on any shares of
capital stock of Seller; or
(c) the failure by Parent to own all of the issued and
outstanding capital stock of Seller and each Originator (other than
Parent).
"Collections" means, with respect to any Receivable, all funds which
either (a) are received by Seller, Servicer, an Originator or any other Person
from or on behalf of the related Obligors in payment of any amounts owed
(including, without limitation, purchase prices, finance charges, interest and
all other charges) in respect of such Receivable, or applied to such amounts
owed by such Obligors (including, without limitation, insurance payments that
Seller, an Originator or Servicer applies in the ordinary course of its business
to amounts owed in respect of such Receivable and net proceeds of sale or other
disposition of repossessed goods or other collateral or property of the Obligor
or any other party directly or indirectly liable for payment of such Receivable
and available to be applied thereon), or (b) are deemed to have been received by
Seller or any other Person as a Collection pursuant to Section 3.02.
"Commercial Paper Holders" means the holders from time to time of the
Commercial Paper Notes.
"Commercial Paper Notes" means short-term promissory notes issued or to
be issued by Conduit Purchaser, or the proceeds of which are loaned to Conduit
Purchaser, to fund its investments in accounts receivable or other financial
assets.
"Committed Purchaser" has the meaning set forth in the preamble.
"Commitment" means with respect to any Committed Purchaser, the amount
listed opposite such Committed Purchaser's name on the signature page to the
Agreement.
"Commitment Fee" means, for each day, the amount equal to the product
of (x) the unused Liquidity Commitment Amount on such day, times (y) the
Commitment Fee Rate, times (z) 1/360.
"Commitment Fee Rate" has the meaning set forth in the Fee Letter.
"Concentration Limit" for any Obligor at any time means an amount equal
to (i) the aggregate Unpaid Balance of all Eligible Receivables at such time
times (ii) the applicable percentage as set forth below opposite the appropriate
ratings of such Obligor's long-term and short-term unsecured debt,
-3-
or, in the case of any Obligor listed on Exhibit A hereto, the percentage set
forth opposite such Obligor's name on such Exhibit A, until such time as the
Administrator notifies the Servicer that any such Obligor listed on Exhibit A is
no longer eligible for such special percentage. Any Obligor that has a split
rating shall be deemed to be in the lower rating category.
Applicable
Long Term Rating Short-Term Rating Percentage
- ---------------- ----------------- ----------
S&P Moody's S&P Moody's
- --- ------- --- -------
A+ or better A+ or better A-1 P-1 12.0%
BBB+ to A Baa1 to A2 A-2 P-2 9.0%
BBB- to BBB Baa3 to Baa2 A-3 P-3 6.0%
Lower than Lower than 3.0%
BBB-/Baa3 BBB-/Baa3
or Not Rated or Not Rated
"Conduit" means any entity that issues Commercial Paper Notes the
proceeds of which are loaned to Conduit Purchaser to fund its investments in
accounts receivable or other financial assets.
"Conduit Purchaser" has the meaning set forth in the preamble.
"Consolidated Net Income" means for any period, the consolidated net
income (or loss) of the Parent and its Subsidiaries, determined on a
consolidated basis in accordance with GAAP; provided that there shall be
excluded (a) the income (or deficit) of any Person accrued prior to the date it
becomes a Subsidiary of the Parent or is merged into or consolidated with the
Parent or any of its Subsidiaries, (b) the income (or deficit) of any Person
(other than a Subsidiary of the Parent) in which the Parent or any of its
Subsidiaries has an ownership interest, except to the extent that any such
income is actually received by the Parent or such Subsidiary in the form of
dividends or similar distributions and (c) the undistributed earnings of any
Subsidiary of the Parent to the extent that the declaration or payment of
dividends or similar distribution by such Subsidiary is prohibited by the terms
of any Contractual Obligation (other than under any Loan Document (as defined in
the Credit Agreement)) or Requirement of Law applicable to such Subsidiary.
"Consolidated Net Worth" means at any date, all amounts which would, in
accordance with GAAP, be included on a consolidated balance sheet of the Parent
and its Subsidiaries under stockholders' equity at such date; provided that any
net non-cash adjustments to such amounts after August 11, 1999 resulting from
foreign currency transactions, unfunded pension liabilities or unrealized gains
or losses in respect of securities shall be included to the extent such
adjustments exceed $2,000,000 as of the end of any fiscal quarter.
"Contract" means a contract between an Originator and any Person, or an
invoice from an Originator to any Person, or any purchase order from any Person
to an Originator pursuant to or
-4-
under which such Person shall be obligated to make payments for products or
services to an Originator. A "related" Contract with respect to the Receivables
means a Contract under which Receivables in the Receivables Pool arise, which
evidence such Receivables, or which is relevant to the collection or enforcement
of such Receivables.
"Contractual Obligation" with respect to any Person, means any
provision of any security issued by such Person or of any agreement, instrument
or other undertaking to which such Person is party or by which it or any of its
Property is bound.
"Cost of Funds Rate" means with respect to any Settlement Period (or
portion thereof), the per annum rate equivalent to the weighted average of the
per annum rates which may be paid or payable by such Conduit Purchaser from time
to time as interest on or otherwise (by means of Hedge Agreements or otherwise)
in respect of those commercial paper notes issued by or on behalf of such
Conduit Purchaser that are allocated in whole or in part by or on behalf of such
Conduit Purchaser to fund or maintain Purchases during such Settlement Period as
determined by or on behalf of such Conduit Purchaser, which rates shall reflect
and give effect to the commissions of placement agents and dealers in respect of
such commercial paper notes and to net payments owed or received by such Conduit
Purchaser under any Hedge Agreements entered into by such Conduit Purchaser in
connection with such allocated commercial paper; provided, however, that if any
component of such rate is a discount rate, in calculating the "Cost of Funds
Rate" for such Settlement Period for the purposes of this definition, the
Conduit Purchaser shall for such component use the rate resulting from
converting such discount rate into an interest bearing equivalent rate per
annum.
"Credit Agreement" means the Amended and Restated Credit Agreement
among Parent, as Borrower, the several lenders from time to time party thereto,
Chase Securities, Inc., as Sole Book-Manager, Lead Arranger and as Syndication
Agent, Salomon Smith Barney, Inc., as Documentation Agent, and The Chase
Manhattan Bank, as Administrative Agent, dated as of August 11, 1999.
"Credit and Collection Policy" means those credit and collection
policies and practices relating to Contracts and Receivables described in
Schedule 7.01(g), as modified in accordance with Section 7.03(c).
"Cut-Off Date" means the last day of each calendar month.
"Deemed Collection" has the meaning set forth in the Purchase
Agreement.
"Default Ratio" means the ratio (expressed as a percentage) computed as
of a Cut-Off Date by dividing (x) the Gross Write-off for the month ending on
such Cut-Off Date by (y) the aggregate Unpaid Balance of all Receivables as to
which any payment, or part thereof, remains unpaid for more than 120, but less
than 151, days from the original invoice date for such Receivable as of the
Cut-Off Date for the immediately preceding month.
-5-
"Defaulted Receivable" means a Receivable: (a) as to which any payment,
or part thereof, remains unpaid for more than 120 days from the original invoice
date for such Receivable, (b) as to which the Obligor thereof is the subject of
an Event of Bankruptcy, or (c) which, consistent with the Credit and Collection
Policy, would be written off the Seller's books as uncollectible.
"Delinquency Ratio" means, for any Cut-Off Date, the ratio (expressed
as a percentage) computed as of such Cut-Off Date by dividing (x) the aggregate
Unpaid Balance of all Receivables that remain unpaid for more than 90, but less
than 120 days, from the original invoice date therefor by (y) the aggregate
Unpaid Balance of all Pool Receivables on such Cut-Off Date.
"Dilution" means any credit, adjustment, rebate, refund or setoff with
respect to any Receivable granted or allowed by Seller or any Affiliate of
Seller.
"Dollars" means dollars in lawful money of the United States of
America.
"Earned Discount" means for any Settlement Period:
C x ER x ED + LF
-----------
360
where:
C = the daily average (calculated at the close of business each
day) of the Capital during such Settlement Period,
ER = the Earned Discount Rate for such Settlement Period,
ED = the actual number of days elapsed during such Settlement Period,
and
LF = the Liquidation Fee, if any, during such Settlement Period.
"Earned Discount Rate" means for any Settlement Period:
(a) in the case of any portion of the Capital funded by a
Liquidity Funding, the greater of (1) the sum of (i) the Eurodollar
Rate (Reserve Adjusted) for such Settlement Period, plus (ii) 1.25% per
annum and (2) the then applicable interest rate pursuant to the Credit
Agreement; and
(b) in the case of any portion of the Capital funded by any
Commercial Paper Notes, the Cost of Funds Rate for such Settlement
Period;
provided, however, that on any day during a Settlement Period when any
Liquidation Event or Unmatured Liquidation Event shall have occurred and be
continuing, the Earned Discount Rate for the Capital shall mean the higher of
(i) the Alternate Base Rate in effect on such day plus 2% per
-6-
annum and (ii) the Eurodollar Rate (Reserve Adjusted) for such Settlement Period
plus 3.25% per annum.
"Eligible Receivable" means, at any time, a Receivable:
(a) which is originated by an Originator in the ordinary
course of its business for the sale or service of medical devices,
equipment and related products, provided that if the Servicer fails to
perform its obligation pursuant to Section 8.05(e) of the Agreement, no
Receivables originated by Linvatec Canada ULC will be Eligible
Receivables until the Servicer has delivered to the Administrator the
Lock-Box Agreement described therein;
(b) which constitutes an "account" or a "general intangible"
as defined in the UCC;
(c) the Obligor of which is (1) not an Affiliate of Seller,
(2) is not a Governmental Authority (unless the assignment thereof is
not subject to the Assignment of Claims Act (41 U.S.C.ss.15) or a
similar state assignment of claims act) and (3) is a resident of the
United States, Canada or a Permitted Country;
(d) which was purchased or otherwise acquired by Seller
pursuant to the Purchase Agreement and which was designated by the
related Originator as an "Eligible Receivable" pursuant to the Purchase
Agreement;
(e) which is not an Overdue Receivable or a Defaulted
Receivable;
(f) with respect to which the warranty of Seller in Section
6.01(k) is true and correct;
(g) the sale of which, or of an undivided interest in which,
does not contravene or conflict with Applicable Law, or require the
consent of the Obligor or any other Person;
(h) which is denominated and payable only in Dollars in the
United States, provided that not more than 10% of the Net Pool Balance
may be denominated in Canadian Dollars;
(i) which arises under a Contract, which contract has been
duly authorized by the parties thereto and that, together with such
Receivable, is in full force and effect and constitutes the legal,
valid and binding obligation of the Obligor of such Receivable
enforceable against such Obligor in accordance with its terms and is
not subject to any defense whatsoever (other than discharge in
bankruptcy and payment);
(j) which, together with the Contract related thereto, does
not contravene in any material respect any Applicable Law and with
respect to which no party to the Contract related thereto is in
violation of any Applicable Law in any material respect;
-7-
(k) which (i) satisfies all material applicable requirements
of the Credit and Collection Policy and (ii) complies with such other
criteria and requirements (other than those relating to the
collectibility of such Receivable) as the Administrator may from time
to time specify to Seller in writing in the exercise of reasonable
business judgment;
(l) as to which the payment terms have not been altered or
extended so as to materially affect the collectibility of such
Receivable;
(m) the Unpaid Balance of which, when combined with the Unpaid
Balance of all other Eligible Receivables, results in the Eligible
Receivables being payable, on average (based on Dollar amount), within
45 days or less from the invoice date therefor;
(n) which are not Receivables owed by an Obligor for which
more than 20% of the aggregate Unpaid Balance of Receivables of such
Obligor constitute Defaulted Receivables;
(o) which arise from the completion of the sale and delivery
of goods and services performed, and which do not represent an invoice
in advance of such completion; and
(p) which are not subject to any contingent performance
requirements of the Seller or the related Originator unless such
requirements are guaranteed or insured by third parties acceptable to
the Administrator.
"ERISA" means the U.S. Employee Retirement Income Security Act of 1974,
as amended from time to time.
"Eurodollar Business Day" means a day of the year on which dealings are
carried on in the eurodollar interbank market and banks are open for business in
London and are not required or authorized to close in New York City.
"Eurodollar Rate (Reserve Adjusted)" means, with respect to any
Settlement Period and any portion of the Capital, a rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) determined pursuant to the
following formula:
Eurodollar Rate = Eurodollar Rate
(Reserve Adjusted) 1 - Eurodollar
Reserve Percentage
where:
"Eurodollar Rate" means, with respect to any Settlement Period and any
portion of the Capital, the rate per annum at which Dollar deposits in
immediately available funds are offered to the Eurodollar Office of the
Administrator two Eurodollar Business Days prior to the beginning of such period
by prime banks in the interbank eurodollar market at or about 11:00 a.m., New
York City time
-8-
for delivery on the first day of such Settlement Period, for the number of days
comprised therein and in an amount equal or comparable to the applicable portion
of the Capital for such Settlement Period.
"Eurodollar Reserve Percentage" means, with respect to any Settlement
Period, the then maximum reserve percentage (expressed as a decimal, rounded
upward to the nearest 1/100th of 1%) prescribed by the Federal Reserve Board for
determining the maximum reserve requirements applicable to "Eurocurrency
Liabilities" pursuant to Regulation D having a term comparable to such
Settlement Period.
"Event of Bankruptcy" shall be deemed to have occurred with respect to
a Person if either:
(a) any case or other proceeding shall be commenced, without
the application or consent of such Person, in any court, seeking the
liquidation, reorganization, debt arrangement, dissolution, winding up,
or composition or readjustment of debts of such Person, the appointment
of a trustee, receiver, custodian, liquidator, assignee, sequestrator
or the like for such Person or all or substantially all of its assets,
or any similar action with respect to such Person under any law
relating to bankruptcy, insolvency, reorganization, winding up or
composition or adjustment of debts, and such case or proceeding shall
continue undismissed, or unstayed and in effect, for a period of 60
consecutive days; or an order for relief in respect of such Person
shall be entered in an involuntary case under the federal bankruptcy
laws or other similar laws now or hereafter in effect and shall either
not be contested or shall remain undismissed for 60 consecutive days;
or
(b) such Person shall commence a voluntary case or other
proceeding under any applicable bankruptcy, insolvency, reorganization,
debt arrangement, dissolution or other similar law now or hereafter in
effect, or shall consent to the appointment of or taking possession by
a receiver, liquidator, assignee, trustee, custodian, sequestrator (or
other similar official) for such Person or for any substantial part of
its property, or shall make any general assignment for the benefit of
creditors, or shall fail to, or admit in writing its inability to, pay
its debts generally as they become due, or, if a corporation or similar
entity, its board of directors shall vote to implement any of the
foregoing.
"Excess Amount" as of any date, means the amount, if any, by which the
sum of the Capital, plus the Required Reserves on such date exceeds the Net Pool
Balance, as most recently calculated.
"Excess Default Ratio" means the ratio (expressed as a percentage)
computed as of a Cut-Off Date by dividing (x) the aggregate Unpaid Balance of
all Defaulted Receivables as of such Cut-Off Date by (y) the aggregate Unpaid
Balance of all Eligible Receivables as of such Cut-Off Date.
"Excess Default Reserve Percentage" means the amount, if any, by which
the Excess Default Ratio exceeds 10%.
"Exchange Act" means the Securities and Exchange Act of 1934, as
amended.
-9-
"Federal Funds Rate" means, for any period, a fluctuating interest rate
per annum equal (for each day during such period) to
(a) the weighted average of the rates on overnight federal
funds transactions with members of the Federal Reserve System arranged
by federal funds brokers, as published for such day (or, if such day is
not a Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York; or
(b) if such rate is not so published for any day which is a
Business Day, the average of the quotations for such day on such
transactions received by Fleet Securities 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 successor thereto or to the functions thereof.
"Fee Letter" has the meaning set forth in Section 4.01.
"Fees" means the Commitment Fee and the Program Fee.
"Final Payout Date" means the date following the Termination Date on
which the Capital shall have been reduced to zero and all other amounts payable
by Seller to Purchasers, the Administrator, the Affected Parties and the
Indemnified Parties under the Transaction Documents shall have been paid in
full.
"Fleet Securities" has the meaning set forth in the preamble.
"Foreign Obligor" means an Obligor that is a resident of (i) a
Permitted Country or (ii) a province of Canada that has not enacted legislation
similar to the UCC pursuant to which a secured creditor may perfect its interest
in accounts and general intangibles by making a central filing.
"Funded Percentage" with respect to any Purchaser as of any date means
the ratio (expressed as a percentage) of (i) the portion of the then outstanding
Capital funded by such Purchaser divided by (ii) the entire then outstanding
Capital.
"GAAP" means generally accepted accounting principles applicable in the
United States for reporting entities domiciled in the United States as in effect
from time to time, except that for purposes of Section 7.01(k) of the Agreement,
GAAP shall be determined on the basis of such principles in effect on the date
of the Agreement and consistent with those used in the preparation of the most
recent audited financial statements delivered pursuant to Section 7.02(b) of the
Agreement.
"Governmental Action" means all permits, authorizations, registrations,
consents, approvals, waivers, exceptions, variances, orders, judgements,
decrees, licenses, exemptions, publications,
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filings, notices to and declaration of or with, or required by, any Governmental
Authority, or required by any Applicable Law.
"Governmental Authority" means any foreign or domestic federal, state,
county, municipal or other governmental or regulatory authority, agency, board,
body, commission, instrumentality, court or any political subdivision thereof.
"Gross Writeoffs" means for any period the aggregate Unpaid Balance of
all Receivables that are deemed to be uncollectible in accordance with the
Credit and Collection Policy during such period, or that are owed by an Obligor
that is the subject of an Event of Bankruptcy, or that should be written off
during such period in accordance with GAAP.
"Guarantee Obligation" means as to any Person (the "guaranteeing
person"), any obligation of (a) the guaranteeing person or (b) another Person
(including, without limitation, any bank under any letter of credit) to induce
the creation of which the guaranteeing person has issued a reimbursement,
counter indemnity or similar obligation, in either case guaranteeing or in
effect guaranteeing any Indebtedness, leases, dividends or other obligations
(the "primary obligations") of any other third Person (the "primary obligor") in
any manner, whether directly or indirectly, including, without limitation, any
obligation of the guaranteeing person, whether or not contingent, (i) to
purchase any such primary obligation or any Property constituting direct or
indirect security therefor, (ii) to advance or supply funds (1) for the purchase
or payment of any such primary obligation or (2) to maintain working capital or
equity capital of the primary obligor or otherwise to maintain the net worth or
solvency of the primary obligor, (ii) to purchase Property, securities or
services primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such primary
obligation or (iv) otherwise to assure or hold harmless the owner of any such
primary obligation against loss in respect thereof; provided, however, that the
term Guarantee Obligation shall not include endorsements of instruments for
deposit or collection in the ordinary course of business. The amount of any
Guarantee Obligation of any guaranteeing person shall be deemed to be the lower
of (a) an amount equal to the stated or determinable amount of the primary
obligation in respect of which such Guarantee Obligation is made and (b) the
maximum amount for which such guaranteeing person may be liable pursuant to the
terms of the instrument embodying such Guarantee Obligation, unless such primary
obligation and the maximum amount for which such guaranteeing person may be
liable are not stated or determinable, in which case the amount of such
Guarantee Obligation shall be such guaranteeing person's maximum reasonably
anticipated liability in respect thereof as determined by Parent in good faith.
"Hedge Agreements" means any financial futures contract, option,
forward contract, warrant, swap, swaption, collar, floor, cap and other
agreement, instrument and derivative and other transactions of a similar nature
(whether currency linked, rate linked, index linked, insurance risk linked,
credit risk linked or otherwise) entered into by or on behalf of a Conduit
Purchaser.
"Indebtedness" means of any person at any date, without duplication,
(a) all indebtedness of such person for borrowed money, (b) all obligations of
such Person for the deferred purchase price
-11-
of Property or services (other than current trade payables incurred in the
ordinary course of such Person's business, and overdue trade payables incurred
in the ordinary course of such Person's business to the extent the amount or
validity thereof is currently being contested in good faith by appropriate
procedures and reserves in conformity with GAAP with respect thereto have been
provided on the books of Parent or its Subsidiaries, as the case may be), (c)
all obligations of such Person evidenced by notes, bonds, debentures or other
similar instruments, (d) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to Property
acquired by such person (even though the rights and remedies of the seller or
lender under such agreement in the event of default are limited to repossession
or sale of such Property), (e) all Capital Lease Obligations of such Person (the
amount of which shall be calculated without regard to imputed interest), (f) all
obligations of such Person, contingent or otherwise, as an account party under
acceptance, letter of credit or similar facilities, (g) all obligations of such
Person, contingent or otherwise, to purchase, redeem, retire or otherwise
acquire for value any Capital Stock (other than common stock) of such Person,
(h) all Guarantee Obligations of such Person in respect of obligations of the
kind referred to in clauses (a) through (g) above to the extent quantified as
liabilities, contingent obligations or like term in accordance with GAAP on the
balance sheet (including notes thereto) of such Person, (i) all obligations of
the kind referred to in clause (a) through (h) above secured by (or for which
the holder of such obligation has an existing right, contingent or otherwise, to
be secured by) any Lien on Property (including, without limitation, accords and
contract rights) owned by such Person, whether or not such Person has assumed or
become liable for the payment of such obligation (but only to the extent of the
fair market value of such Property), (j) for purposes of Section 10.01(d) of the
Agreement, all obligations of such Person in respect of Interest Rate Protection
Agreements and (k) the liquidation value of any preferred Capital Stock of such
Person or its Subsidiaries held by any Person other than such Person and its
Wholly Owned Subsidiaries.
"Indemnified Amounts" has the meaning set forth in Section 13.01.
"Indemnified Party" has the meaning set forth in Section 13.01.
"Independent Director" shall mean an individual who is not, and never
was, (1) a member, stockholder, director, officer, employee, Affiliate, customer
or supplier of, or an individual that has received any benefit (excluding,
however, any compensation received in such individual's capacity as Independent
Director) in any form whatever from, or an individual who has provided any
service (excluding, however, any service provided by such individual in such
individual's capacity as Independent Director) in any form whatever to, the
Parent or any of its subsidiaries or Affiliates, or (2) an individual owning
beneficially, directly or indirectly, any interest in the Parent, or (3) an
individual who is a relative or spouse of an individual described in clause (1)
or (2) above.
"Interest Rate Protection Agreement" means any interest rate protection
agreement, interest rate futures contract, interest rate option, interest rate
cap or other interest rate hedge arrangement to or under which Parent or any of
its Subsidiaries is a party or a beneficiary on the date of the Agreement or
becomes a party or a beneficiary after the date of the Agreement.
-12-
"Lien" means any mortgage, lien, pledge, encumbrance, charge, title
retention or other security interest of any kind, whether arising under a
security agreement, mortgage, deed of trust, assignment, pledge or financing
statement or arising as a matter of law, judicial process or otherwise.
"Liquidation Event" has the meaning set forth in Section 10.01.
"Liquidation Fee" means, for each day in any Settlement Period during
the Liquidation Period following the occurrence of a Liquidation Event, the
amount, if any, by which:
(a) the additional Earned Discount (calculated without taking
into account any Liquidation Fee) which would have accrued on the
reductions of the Capital during such Settlement Period (as so
computed) if such reductions had not been made, exceeds
(b) the income, if any, received by the related Purchaser from
investing the proceeds of such reductions of the Capital.
"Liquidation Period" means the period commencing on the Termination
Date and ending on the Final Payout Date.
"Liquidity Agent" means Fleet National Bank, as agent for the Liquidity
Banks under the Liquidity Agreement, or any successor to Fleet National Bank in
such capacity.
"Liquidity Agreement" means and includes the Liquidity Agreement dated
as of November 1, 2001 among Conduit Purchaser, Fleet National Bank, as
Liquidity Agent, and certain financial institutions, party thereto as liquidity
providers, and any other agreement hereafter entered into by Conduit Purchaser
providing for the making of loans, purchases or undivided interests or other
extensions of credit to Conduit Purchaser to support all or part of Conduit
Purchaser's payment obligations with respect to the Commercial Paper Notes or to
provide an alternate means of funding Purchaser's investments in accounts
receivable or other financial assets.
"Liquidity Bank" means any one of, and "Liquidity Banks" means all of,
Fleet National Bank and the other financial institutions that are at any time
parties to a Liquidity Agreement as liquidity providers.
"Liquidity Commitment Amount" means, at any time, the then aggregate
amount of the Liquidity Banks' commitments under the Liquidity Agreement.
"Liquidity Funding" means a loan or purchase made by the Liquidity Bank
(or simultaneous loans or purchases made by the Liquidity Banks) pursuant to a
Liquidity Agreement.
"Lock-Box" means any post office box to which Collections of Pool
Receivables are sent.
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"Lock-Box Account" means any bank account to which Collections of Pool
Receivables are sent or deposited.
"Lock-Box Agreement" means a letter agreement, in substantially the
form of Exhibit 5.01(f), among Seller, Parent and any Lock-Box Bank.
"Lock-Box Bank" means any of the banks holding one or more Lock-Box
Accounts for receiving Collections from Pool Receivables.
"Material Adverse Effect" with respect to any event or circumstance,
means a material adverse effect on:
(i) the results of operation, financial condition or assets of
Seller or Parent;
(ii) the ability of Servicer, any Originator or Parent to
perform its obligations under this Agreement or any other Transaction
Document;
(iii) the validity, enforceability or collectibility of this
Agreement or any other Transaction Document or the validity,
enforceability or collectibility of a material portion of the
Receivables; or
(iv) the status, existence, perfection, priority or
enforceability of the Administrator's or any Purchaser's interest in
the Pool Assets.
"Moody's" means Moody's Investors Service, Inc.
"Net Pool Balance" at any time means an amount equal to (i) the
aggregate Unpaid Balance of the Eligible Receivables in the Receivables Pool at
such time, minus (ii) the aggregate amount by which the aggregate Unpaid Balance
of the Eligible Receivables of each Obligor and its Affiliates exceeds the
Concentration Limit for such Obligor at such time (the amount equal to clause
(i) minus clause (ii) called the "Unadjusted Net Pool Balance"), minus (iii) the
aggregate amount by which the aggregate Unpaid Balance of those Eligible
Receivables the Obligor of which is a Foreign Obligor exceeds 10% of the
Unadjusted Net Pool Balance.
"Obligor" means a Person obligated to make payments with respect to a
Receivable, including any guarantor thereof.
"Originator" means the Parent in its capacity as originator of
Receivables, together with the other originators party to the Purchase
Agreement.
"Overdue Receivable" means a Receivable that remains unpaid for more
than 90 (or, in the case of a Receivable owed by an Obligor that is not a
resident of the United States, 120) days from the original invoice date for such
Receivable, or that has been charged off before it has become 91
-14-
(or, in the case of a Receivable owed by an Obligor that is not a resident of
the United States, 121) days past due.
"Parent" has the meaning set forth in the preamble.
"Percentage" means, with respect to any Committed Purchaser, the ratio,
expressed as a percentage, of (i) such Committed Purchaser's Commitment divided
by (ii) the aggregate Commitments of all of the Committed Purchasers.
"Permitted Country" means a country that satisfies all of the following
criteria: (i) it has a long-term foreign currency rating of at least A by S&P
and A2 by Moody's, (ii) it has a short-term foreign currency rating of at least
A-1 by S&P and P-1 by Moody's, (iii) it is listed in Part I or Part II of
Exhibit B hereto and (iv) the Administrator has not notified the Servicer that
such country shall no longer be a Permitted Country.
"Person" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association, joint
venture, limited liability company, government or any agency or political
subdivision thereof or any other entity.
"Pool Assets" has the meaning set forth in Section 1.04(a).
"Pool Receivable" means a Receivable in the Receivables Pool.
"Program Agreement" means each Liquidity Agreement, each agreement
pursuant to which Conduit Purchaser obtains funding, through the issuance of
Commercial Paper Notes or otherwise, and each other agreement entered into by
Conduit Purchaser in connection with its securitization program.
"Program Fee" means, for each day, the amount equal to the product of
(x) the Capital on such day, times (y) the Program Fee Rate, times (z) 1/360.
"Program Fee Rate" has the meaning set forth in the Fee Letter.
"Program Information" has the meaning set forth in Section 14.07.
"Program Support Provider" means each of each entity that issues
Commercial Paper Notes, each Liquidity Bank and the Administrator.
"Property" means any right or interest in or to property of any kind
whatsoever, whether real, personal or mixed, and whether tangible or intangible,
including, without limitation, Capital Stock.
"Purchase" has the meaning set forth in Section 1.01.
-15-
"Purchase Agreement" means the Purchase and Sale Agreement, dated as of
November 1, 2001, among Seller and the Originators.
"Purchase Limit" has the meaning set forth in Section 1.01.
"Purchase Termination Date" means that day
(a) the Administrator declares a Purchase Termination Date in
a notice to Seller in accordance with Section 10.02(a); or
(b) in accordance with Section 10.02(b), becomes the Purchase
Termination Date automatically.
"Purchaser" means any of Conduit Purchaser and any Committed Purchaser.
"Purchasers' Share" of any amount means the then Asset Interest,
expressed as a percentage (but not greater than 100%), times such amount.
"Rating Agencies" at any time means those rating agencies then rating
the Commercial Paper Notes.
"Receivable" means any right to payment from a Person, whether
constituting an account, chattel paper, instrument or general intangible,
arising under a Contract and includes the right to payment of any interest or
finance charges and other obligations of such Person with respect thereto.
Indebtedness and other obligations arising from any one transaction, including,
without limitation, indebtedness and other obligations represented by an
individual invoice or agreement, shall constitute a Receivable separate from a
Receivable consisting of the indebtedness and other obligations arising from any
other transaction.
"Receivables Pool" means at any time all then outstanding Receivables,
other than Reconveyed Receivables.
"Reconveyed Receivable" means a Receivable for which an Originator has
paid the full Unpaid Balance pursuant to the Purchase Agreement.
"Regulation D" means Regulation D of the Federal Reserve Board, or any
other regulation of the Federal Reserve Board that prescribes reserve
requirements applicable to nonpersonal time deposits or "Eurocurrency
Liabilities" as presently defined in Regulation D, as in effect from time to
time.
-16-
"Regulatory Change" means, relative to any Affected Party
(a) any change in (or the adoption, implementation, change in
phase-in or commencement of effectiveness of) any
(i) United States federal or state law or foreign law
applicable to such Affected Party;
(ii) regulation, interpretation, directive,
requirement or request (whether or not having the force of
law) applicable to such Affected Party of (A) any court,
government authority charged with the interpretation or
administration of any law referred to in clause (a)(i) or of
(B) any fiscal, monetary or other authority having
jurisdiction over such Affected Party; or
(iii) GAAP or regulatory accounting principles
applicable to such Affected Party and affecting the
application to such Affected Party of any law, regulation,
interpretation, directive, requirement or request referred to
in clause (a)(i) or (a)(ii) above; or
(b) any change in the application to such Affected Party of
any existing law, regulation, interpretation, directive, requirement,
request or accounting principles referred to in clause (a)(i), (a)(ii)
or (a)(iii) above.
"Reinvestment" has the meaning set forth in Section 1.03.
"Related Security" means, with respect to any Pool Receivable: (a) all
of Seller's or the related Originator's right, title and interest in and to all
Contracts that relate to such Pool Receivable; (b) all security interests or
liens and property subject thereto from time to time purporting to secure
payment of such Pool Receivable, whether pursuant to the Contract related to
such Pool Receivable or otherwise; (c) all UCC financing statements covering any
collateral securing payment of such Pool Receivable; (d) all guarantees and
other agreements or arrangements of whatever character from time to time
supporting or securing payment of such Pool Receivable whether pursuant to the
Contract related to such Pool Receivable or otherwise; and (e) all of Seller's
and the related Originator's interest in the merchandise (including returned
merchandise), if any, relating to the sale that gave rise to such Pool
Receivable.
"Reporting Date" has the meaning set forth in Section 3.01(a).
"Required Reserve Percentage" means, on any day, an amount equal to the
sum of (1) 15% plus (2) the most recently calculated Excess Default Reserve
Percentage.
"Requirement of Law" means as to any Person, the certificate of
incorporation and by-laws or other organizational or governing documents of such
Person, and any law, treaty, rule or
-17-
regulation or determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such person or any of its
Property or to which such Person or any of its Property is subject.
"S&P" means Standard & Poor's Ratings Services.
"Sales" means sales of the Originators which generate trade
receivables.
"Sales-Based Dilution Ratio" as of any Cut-Off Date means (a) the
aggregate reduction attributable to Dilutions occurring in the Unpaid Balance of
Pool Receivables which Dilutions were granted during the month ending on such
Cut-Off Date; divided by (b) the aggregate amount of Sales for the month
immediately preceding the month ending as of such Cut-Off Date.
"Secured Parties" means Purchasers, the Administrator, the Indemnified
Parties and the Affected Parties.
"Selected Country" means a country listed on Part II of Exhibit B
hereto.
"Seller" has the meaning set forth in the preamble.
"Seller's Share" of any amount means (x) 100% minus the Asset Interest
(but such Asset Interest shall not be greater than 100%) times (y) such amount.
"Servicer" has the meaning set forth in Section 8.01(a).
"Servicer Report" has the meaning set forth in Section 3.01.
"Servicer Transfer Event" has the meaning set forth in Section 8.01(b).
"Servicer's Fee" means, for each day, an amount equal to (x) the
Servicer's Fee Rate, times (y) the aggregate Unpaid Balance of all Pool
Receivables at the close of business on such day, times (z) 1/360.
"Servicer's Fee Rate" means 0.50% per annum or, in the event that
Parent is no longer the Servicer, such higher rate as may be charged by the
successor Servicer.
"Settlement Date" has the meaning set forth in Section 3.01(c).
"Settlement Period" means the period (i) in the case of the first
Settlement Period, from, and including, the date of the initial Purchase to, but
excluding the next Settlement Date and (ii) thereafter, from, and including,
each Settlement Date to, but excluding, the next Settlement Date.
-18-
"Subsidiary" means a corporation of which Parent and/or its other
Subsidiaries own, directly or indirectly, such number of outstanding shares as
have more than 50% of the ordinary voting power for the election of directors.
"Successor Notice" has the meaning set forth in Section 8.01(b).
"Tangible Net Worth" at any date means a sum equal to: (i) the net book
value (after deducting related depreciation, obsolescence, amortization,
valuation, and other proper reserves) at which the tangible assets (which for
purposes of this definition shall include Receivables owned by such Person) of a
Person would be shown on a balance sheet at such date in accordance with GAAP
minus (ii) the amount at which such Person's liabilities (other than capital
stock and surplus) would be shown on such balance sheet in accordance with GAAP,
and including as liabilities all reserves for contingencies and other potential
liabilities.
"Termination Date" means the earliest of
(a) the date of termination (whether by scheduled expiration,
termination on default or otherwise) of any Liquidity Bank's Commitment
under the Liquidity Agreement;
(b) the Purchase Termination Date;
(c) with respect to Conduit Purchaser, November 1, 2006, and
with respect to each Committed Purchaser, the date of the termination
of such Committed Purchaser's commitment under the Liquidity Agreement;
and
(d) the date on which Seller terminates Purchasers' right to
make Purchases and Reinvestments pursuant to Section 1.05.
"Transaction Documents" means this Agreement, the Lock-Box Agreements,
the Purchase Agreement, the Fee Letter and the Initial Purchaser Notes.
"UCC" means the Uniform Commercial Code as from time to time in effect
in the applicable jurisdiction or jurisdictions.
"Unmatured Liquidation Event" means any event which, with the giving of
notice or lapse of time, or both, would become a Liquidation Event.
"Unpaid Balance" of any Receivable means at any time the unpaid
principal amount thereof; provided that, if such Receivable is denominated in
Canadian Dollars, the unpaid principal amount thereof shall be converted to
Dollars using the applicable conversion rate published on such day in The Wall
Street Journal as the conversion rate; provided, further that if such Receivable
is owed by an Obligor that is a resident of a Selected Country, the Unpaid
Balance of such Receivable shall mean 50% of the unpaid principal amount
thereof.
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"Weekly Report" has the meaning set forth in Section 3.01(a).
"Wholly Owned Subsidiary" mean, as to any Person, any other Person all
of the Capital Stock of which (other than (i) a nominal number of shares held by
foreign nationals to the extent required by local law or (ii) directors'
qualifying shares required by law) is owned by such person directly and/or
through other Wholly Owned Subsidiaries.
B. Other Terms. All accounting terms not specifically defined herein
shall be construed in accordance with GAAP. All terms used in Article 9 of the
UCC in the State of New York, and not specifically defined herein, are used
herein as defined in such Article 9.
C. Computation of Time Periods. Unless otherwise stated in this
Agreement, in the computation of a period of time from a specified date to a
later specified date, the word "from" means "from and including" and the words
"to" and "until" each means "to but excluding".
D. Interpretation. In each Transaction Document, unless a clear
contrary intention appears:
(i) the singular number includes the plural number and vice
versa;
(ii) reference to any Person includes such Person's successors
and assigns but, if applicable, only if such successors and assigns are
permitted by the Transaction Documents, and reference to a Person in a
particular capacity excludes such Person in any other capacity or
individually;
(iii) reference to any gender includes each other gender;
(iv) reference to any agreement (including any Transaction
Document), document or instrument means such agreement, document or
instrument as amended, supplemented or modified and in effect from time
to time in accordance with the terms thereof and, if applicable, the
terms of the other Transaction Documents and reference to any
promissory note includes any promissory note which is an extension or
renewal thereof or a substitute or replacement therefor; and
(v) reference to any Applicable Law means such Applicable Law
as amended, modified, codified, replaced or reenacted, in whole or in
part, and in effect from time to time, including rules and regulations
promulgated thereunder and reference to any section or other provision
of any Applicable Law means that provision of such Applicable Law from
time to time in effect and constituting the substantive amendment,
modification, codification, replacement or reenactment of such section
or other provision.
-20-
Exhibit A
Applicable
Obligor Percentage
------- ----------
Owens & Minor 6%
-21-
Exhibit B
Permitted Countries
PART I:
England
France
Italy
Germany
Japan
PART II:
Australia Hong Kong Sweden
Austria Iceland Switzerland
Belgium Ireland Taiwan
Bermuda Luxembourg
Denmark New Zealand
Finland Norway
Greece Portugal
The Netherlands Singapore
Spain
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