UNITED STATES
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, 2003 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 |_|
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2).
Yes |X| No |_|
The number of shares outstanding of registrant's common stock, as of
October 30, 2003 is 29,049,234 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 11
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 20
Item 4. Controls and Procedures 20
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 21
Signatures 22
Item 1.
CONMED CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(in thousands except per share amounts)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
2002 2003 2002 2003
-------- -------- -------- --------
Net sales ........................... $113,332 $120,747 $337,806 $363,321
Cost of sales ....................... 54,429 57,516 160,244 173,303
-------- -------- -------- --------
Gross profit ........................ 58,903 63,231 177,562 190,018
Selling and administrative .......... 34,562 38,596 104,171 115,094
Research and development ............ 4,253 4,487 12,155 12,568
Write-off of purchased in-process
research and development assets ... -- -- -- 7,900
Other expense ....................... 1,475 1,153 1,475 4,883
-------- -------- -------- --------
40,290 44,236 117,801 140,445
-------- -------- -------- --------
Income from operations .............. 18,613 18,995 59,761 49,573
Interest expense .................... 5,765 3,829 18,748 15,228
-------- -------- -------- --------
Income before income taxes .......... 12,848 15,166 41,013 34,345
Provision for income taxes .......... 4,625 5,460 14,764 15,208
-------- -------- -------- --------
Net income .......................... $ 8,223 $ 9,706 $ 26,249 $ 19,137
======== ======== ======== ========
Per share data:
Net income
Basic ........................... $ .29 $ .34 $ .98 $ .66
Diluted ......................... .28 .33 .96 .66
Weighted average common shares
Basic ........................... 28,613 28,941 26,870 28,909
Diluted ......................... 29,043 29,391 27,470 29,190
See notes to consolidated condensed financial statements.
1
CONMED CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands except share amounts)
(unaudited)
December 31, September.30,
2002 2003
--------- ---------
ASSETS
Current assets:
Cash and cash equivalents .......................... $ 5,626 $ 11,122
Accounts receivable, net ........................... 58,093 61,206
Inventories ........................................ 120,443 127,583
Deferred income taxes .............................. 6,304 5,829
Prepaid expenses and other current assets .......... 3,200 3,430
--------- ---------
Total current assets ............................. 193,666 209,170
--------- ---------
Property, plant and equipment, net ................... 95,608 96,717
Goodwill ............................................. 262,394 292,152
Other intangible assets, net ......................... 180,271 192,330
Other assets ......................................... 10,201 11,117
--------- ---------
Total assets ..................................... $ 742,140 $ 801,486
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt .................. $ 2,631 $ 4,067
Accounts payable ................................... 22,074 20,296
Accrued compensation ............................... 10,463 7,954
Income taxes payable ............................... 5,885 8,142
Accrued interest ................................... 3,794 1,604
Other current liabilities .......................... 13,127 15,051
--------- ---------
Total current liabilities ........................ 57,974 57,114
--------- ---------
Long-term debt ....................................... 254,756 276,883
Deferred income taxes ................................ 28,446 42,212
Other long-term liabilities .......................... 14,025 12,644
--------- ---------
Total liabilities ................................ 355,201 388,853
--------- ---------
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; 28,808,105 and
28,997,488 shares issued and outstanding in
2002 and 2003, respectively .................... 288 291
Paid-in capital .................................... 231,832 235,144
Retained earnings .................................. 162,391 181,528
Accumulated other comprehensive loss ............... (7,153) (3,911)
Less 37,500 shares of common stock in treasury,
at cost .......................................... (419) (419)
--------- ---------
Total shareholders' equity ....................... 386,939 412,633
--------- ---------
Total liabilities and shareholders equity ....... $ 742,140 $ 801,486
========= =========
See notes to consolidated condensed financial statements.
2
CONMED CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, 2002 and 2003
(in thousands)
(unaudited)
2002 2003
--------- ---------
Cash flows from operating activities:
Net income ............................................... $ 26,249 $ 19,137
--------- ---------
Adjustments to reconcile net income
to net cash provided by operations:
Depreciation ....................................... 6,731 7,717
Amortization ....................................... 9,843 10,516
Deferred income taxes .............................. 7,973 8,302
Pension settlement charge .......................... -- 2,839
Write-off of deferred financing fees ............... 1,475 2,181
Write-off of purchased in-process research and
development assets ............................. -- 7,900
Increase (decrease) in cash flows
from changes in assets and liabilities:
Accounts receivable ...................... (2,588) (2,162)
Increase (decrease) in sale of
accounts receivable .................... (2,000) 2,000
Inventories .............................. (14,006) (8,588)
Accounts payable ......................... 4,808 (3,129)
Income taxes payable ..................... 883 2,642
Accrued compensation ..................... (2,081) (2,879)
Accrued interest ......................... (3,796) (2,190)
Other assets/liabilities, net ............ (4,961) (5,625)
--------- ---------
2,281 19,524
--------- ---------
Net cash provided by operating activities .......... 28,530 38,661
--------- ---------
Cash flows from investing activities:
Payments related to business acquisitions,
net of cash acquired ............................... (2,359) (52,307)
Purchases of property, plant, and equipment ............ (10,561) (6,291)
--------- ---------
Net cash used by investing activities .............. (12,920) (58,598)
--------- ---------
Cash flows from financing activities:
Net proceeds from issuance of common stock ............... 66,123 --
Net proceeds from exercise of stock options .............. 3,669 1,255
Repurchase of warrant on common stock .................... (2,000) --
Payments on debt ......................................... (183,097) (136,437)
Proceeds of debt ......................................... 101,000 160,000
Payments related to issuance of debt ..................... (1,513) (1,300)
--------- ---------
Net cash provided (used) by financing activities ... (15,818) 23,518
--------- ---------
Effect of exchange rate changes
on cash and cash equivalents ........................... 1,319 1,915
--------- ---------
Net increase in cash and cash equivalents .................. 1,111 5,496
Cash and cash equivalents at beginning of period ........... 1,402 5,626
--------- ---------
Cash and cash equivalents at end of period ................. $ 2,513 $ 11,122
========= =========
See notes to consolidated condensed financial statements.
3
CONMED CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(in thousands except share amounts)
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, implants and video
equipment for arthroscopic sports medicine, and powered surgical instruments,
such as drills and saws, for orthopedic, ENT, neuro-surgery and other surgical
specialties. We are a leading developer, manufacturer and supplier of RF
electrosurgery systems used routinely to cut and cauterize tissue in nearly all
types of surgical procedures worldwide, endoscopy products such as trocars, clip
appliers, scissors and surgical staplers and a full line of ECG electrodes for
heart monitoring and other patient care products. We also offer integrated
operating room systems and intensive care unit service managers. 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.
Stock-based Compensation
We account for our stock-based compensation plans under the provisions of
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees". No compensation expense has been recognized in the accompanying
financial statements relative to our stock option plans. Pro forma information
regarding net income and earnings per share is required by Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" , as amended, and has been determined as if we had accounted for
our employee stock options under the fair value method described in that
statement.
For purposes of the pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information follows:
Three months ended Nine months ended
September 30, September 30,
----------------- -------------------
2002 2003 2002 2003
------ ------ ------- -------
Net income - as reported .......... $8,223 $9,706 $26,249 $19,137
------ ------ ------- -------
Pro forma stock-based employee
compensation expense, net of
related income tax effect ....... (559) (586) (1,583) (1,689)
------ ------ ------- -------
Net income - pro forma ............ $7,664 $9,120 $24,666 $17,448
====== ====== ======= =======
EPS - as reported:
Basic ........................... $ .29 $ .34 $ .98 $ .66
Diluted ......................... .28 .33 .96 .66
EPS - pro forma:
Basic ........................... $ .27 $ .32 $ .92 $ .60
Diluted ......................... .26 .31 .90 .60
4
Note 2 - Interim financial information
The statements for the three and nine months ended September 30, 2002 and 2003
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 results of operations for the
three and nine months ended September 30, 2003 are not necessarily indicative of
the results of operations to be expected for any other quarter nor for the year
ending December 31, 2003. The consolidated condensed financial statements and
notes thereto should be read in conjunction with the financial statements and
notes for the year ended December 31, 2002 included in our Annual Report to the
Securities and Exchange Commission on Form 10-K.
Note 3 - Other comprehensive income (loss)
Comprehensive income (loss) consists of the following:
Three months ended Nine months ended
September 30, September 30,
2002 2003 2002 2003
------- ------- ------- -------
Net income ...................... $ 8,223 $ 9,706 $26,249 $19,137
------- ------- ------- -------
Other comprehensive income:
Foreign currency
translation adjustment ...... (139) 208 1,338 2,396
Cash flow hedging
(net of income taxes) ....... 221 191 659 846
------- ------- ------- -------
Comprehensive income .......... $ 8,305 $10,105 $28,246 $22,379
======= ======= ======= =======
Accumulated other comprehensive income (loss) consists of the following:
Accumulated
Minimum Cumulative Cash Other
Pension Translation Flow Comprehensive
Liability Adjustments Hedges Income (loss)
--------- ----------- ------ -------------
Balance, December 31, 2002 ........... $(5,086) $(1,159) $(908) $(7,153)
Foreign currency translation
adjustments .................... -- 2,396 -- 2,396
Cash flow hedging (net of
income taxes) .................. -- -- 846 846
------- ------- ----- -------
Balance, September 30, 2003 .......... $(5,086) $ 1,237 $ (62) $(3,911)
======= ======= ===== =======
Note 4 - Inventories
The components of inventory are as follows:
December 31, September 30,
2002 2003
------------ -------------
Raw materials .................................... $ 44,701 $ 39,905
Work-in-process .................................. 12,869 14,898
Finished goods ................................... 62,873 72,780
-------- --------
Total ...................................... $120,443 $127,583
======== ========
5
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 (i.e., 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 30, September 30,
------------------ -----------------
2002 2003 2002 2003
------ ------ ------ ------
Shares used in the calculation
of Basic EPS(weighted average
shares outstanding) .................. 28,613 28,941 26,870 28,909
Effect of dilutive potential
securities ........................... 430 450 600 281
------ ------ ------ ------
Shares used in the calculation
of Diluted EPS ....................... 29,043 29,391 27,470 29,190
====== ====== ====== ======
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 approximately 1.2
million for the three months ended September 30, 2002, and .6 million for the
nine months ended September 30, 2002. Such shares aggregated approximately .9
million for the three months ended September 30, 2003 and 1.5 million for the
nine months ended September 30, 2003.
Note 6 - Business acquisitions
As more fully described in our report on Form 10-Q/A for the quarter ended March
31, 2003, we acquired the stock of Bionx Implants, Inc. on March 10, 2003 for
$47.0 million in cash (the "Bionx acquisition"). Bionx develops and manufactures
self-reinforced resorbable polymer implants for use in a variety of orthopedic
applications. In connection with the Bionx acquisition, during the quarter-ended
March 31, 2003, we wrote-off $7.9 million in purchased in-process research and
development assets. No benefit for income taxes was recorded on the write-off of
purchased in-process research and development assets as these costs are not
deductible for income tax purposes.
Pro forma statements of income for the three and nine months ended September 30,
2003, assuming the Bionx acquisition occurred as of January 1, 2002 are
presented below. The proforma net income and earnings per share for each period
presented exclude the $7.9 million write-off of purchased in-process research
and development assets.
Three months ended Nine months ended
September 30, September 30,
-------------------- --------------------
2002 2003 2002 2003
-------- -------- -------- --------
Net sales ...................... $117,633 $120,747 $351,434 $367,003
Net income ..................... $ 7,558 $ 9,706 $ 24,806 $ 26,473
Basic ........................ $ .26 $ .34 $ .92 $ .92
Diluted ...................... .26 .33 .90 .91
During the three and nine months ended September 30, 2003, we incurred
approximately $.4 million and $3.7 million, respectively, in other acquisition
expenses related primarily
6
to the December 31, 2002 acquisition of CORE Dynamics, Inc. (the "CORE
acquisition") and the Bionx acquisition of which $.4 million and $3.0 million,
respectively, have been recorded in other expense in the three and nine months
ended September 30, 2003, and $.7 million has been recorded to cost of sales in
the nine months ended September 30, 2003. Those expenses recorded to other
expense consist of various acquisition integration costs to wind down CORE
operations in Jacksonville, Florida and Bionx operations in Blue Bell,
Pennsylvania. Those expenses recorded to cost of sales consist of the step-up to
fair value related to the sale of inventory acquired as a result of the CORE and
Bionx acquisitions as well as certain training and transition-related costs
related to the transfer of CORE's manufacturing operations.
On June 30, 2003, we acquired an electrosurgery business for $2.9 million in
cash. Goodwill recognized in the transaction amounted to $2.4 million and is
expected to be fully deductible for income tax purposes.
Note 7 - Other expense
Other expense (income) consists of the following:
Three months ended Nine months ended
September 30, September 30,
------------------ -----------------
2002 2003 2002 2003
------ ------ ------ -------
Gain on settlement of a contractual
dispute, net of legal costs ...... $ -- $ -- $ -- $(9,000)
Pension settlement costs ............. -- 758 -- 2,839
Acquisition-related costs ............ -- 395 -- 2,966
Loss on early extinguishments
of debt .......................... 1,475 -- 1,475 8,078
------ ------ ------ -------
Other expense ................ $1,475 $1,153 $1,475 $ 4,883
====== ====== ====== =======
On March 10, 2003, we entered into an agreement with Bristol-Myers Squibb
Company ("BMS") and Zimmer, Inc., ("Zimmer") to settle a contractual dispute
related to the 1997 sale by BMS and its then subsidiary, Zimmer, of Linvatec
Corporation to CONMED Corporation. As a result of the agreement, BMS paid us
$9.5 million in cash, which was recorded in the quarter ended March 31, 2003, as
a gain on settlement of a contractual dispute, net of $.5 million in legal
costs.
During the quarter ended June 30, 2003, we announced a plan to restructure our
orthopedic sales force by increasing our domestic sales force from 180 to 230
sales representatives. The increase is part of our integration plan for the
Bionx acquisition discussed in Note 6 to the consolidated condensed financial
statements. As part of the orthopedic sales force restructuring, we converted 90
direct employee sales representatives into nine independent sales agent groups.
As a result of this restructuring, we now have 18 exclusive orthopedic sales
agent groups managing 230 orthopedic sales representatives. As a result of the
termination of the 90 direct employee sales representatives, we incurred costs
of $.8 million and $2.8 million, respectively, in the three and nine months
ended September 30, 2003, related to settlement losses of pension obligations,
pursuant to Statement of Financial Accounting Standards No. 88 , "Employers'
Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and
for Termination Benefits".
During the three and nine months ended September 30, 2003, we incurred $.4
million and $3.7 million, respectively, in costs related primarily to the CORE
acquisition and the Bionx acquisition of which $.4 million and $3.0 million,
respectively, has been recorded in other expense as discussed in Note 6 to the
consolidated condensed financial statements.
7
During the six months ended June 30, 2003 we purchased all $130.0 million of our
9% senior subordinated notes (the "Notes") and recorded expense of $8.1 million
in premium and unamortized deferred financing costs to other expense related to
these purchases. We financed the purchases through amendment of our $200.0
million senior credit agreement which expanded the existing term loan facility
under the senior credit agreement by $160.0 million to $360.0 million (the
"expanded term loan facility"). The proceeds of the expanded term loan facility
were used to reduce borrowings outstanding on the revolving credit facility, to
fund the purchase of the outstanding Notes and related accrued interest, and
fund payment of the 4.5% call premium on the Notes. Proceeds of the expanded
term loan facility were also used to fund payment of bank and legal fees
associated with amending the senior credit agreement. In connection with the
purchase of the Notes, we wrote off $5.8 million in 4.5% call premium and $2.3
million in unamortized deferred financing costs to other expense in the nine
months ended September 30, 2003.
During the quarter ended September 30, 2002, we entered into our $200 million
senior credit agreement. Deferred financing fees of $1.5 million related to the
previously existing credit agreement were written off as an extraordinary charge
in 2002 but have been reclassified to other expense as a result of our adoption
of Statement of Financial Accounting Standards No. 145, "Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections", in 2003.
Note 8- Goodwill and other intangible assets
The changes in the net carrying amount of goodwill for the nine months ended
September 30, 2003 are as follows:
Balance as of January 1, 2003 ...................................... $262,394
Goodwill acquired .................................................. 29,360
Foreign currency translation ....................................... 398
--------
Balance as of September 30, 2003 ................................... $292,152
========
Other intangible assets consist of the following:
December 31, 2002 September 30, 2003
-------------------------- -------------------------
Gross Gross
Carrying Accumulated Carrying Accumulated
Amortized intangible assets: Amount Amortization Amount Amortization
--------- ------------ --------- ------------
Customer relationships ................. $ 96,712 $ (12,725) $ 105,712 $(14,752)
Patents and other intangible assets .... 23,674 (13,534) 30,098 (15,672)
Unamortized intangible assets:
Trademarks and tradenames .............. 86,144 -- 86,944 --
--------- --------- --------- --------
$ 206,530 $ (26,259) $ 222,754 $(30,424)
========= ========= ========= ========
Other intangible assets primarily represent allocations of purchase price to
identifiable intangible assets of acquired businesses. The weighted average
amortization period for intangible assets which are amortized is 22 years.
Customer relationships are being amortized over 38 years. Patents and other
intangible assets are being amortized over a weighted average life of 9 years.
The trademarks and tradenames intangible asset has been determined to have an
indefinite life and therefore is not amortized.
8
Amortization expense related to intangible assets which are subject to
amortization totaled $1,561 and $4,165 in the three and nine months ended
September 30, 2003, respectively, and $1,397 and $4,171 in the three and nine
months ended September 30, 2002, respectively, and is included in selling and
administrative expense on the consolidated condensed statement of income.
The estimated amortization expense for the year ending December 31, 2003 and for
each of the five succeeding years is as follows:
2003 $5,744
2004 5,953
2005 5,058
2006 4,484
2007 4,184
2008 3,888
In accordance with Statement of Financial Accounting Standards ("SFAS") No. 142,
"Goodwill and Other Intangible Assets," ("SFAS 142"), goodwill and intangible
assets deemed to have indefinite lives are not amortized, but are subject to
annual impairment testing. The identification and measurement of goodwill
impairment involves the estimation of the fair value of our business. The
estimates of fair value are based on the best information available as of the
date of the assessment, which primarily incorporate management assumptions about
expected future cash flows and contemplate other valuation techniques. Future
cash flows can be affected by changes in industry or market conditions or the
rate and extent to which anticipated synergies or cost savings are realized with
newly acquired entities. Intangible assets with a finite life are amortized over
the estimated useful life of the asset. Intangible assets which continue to be
subject to amortization are also evaluated on an annual basis to determine
whether events and circumstances warrant a revision to the remaining period of
amortization. An intangible asset is determined to be impaired when estimate
future cash flows indicate the carrying amount of the asset may not be
recoverable. We intend to perform impairment testing of our goodwill and
intangible assets during the fourth quarter of 2003. Although no goodwill or
other intangible asset impairment has been recorded to date, there can be no
assurances that future impairment will not occur.
Note 9 -- Guarantees
We provide service and warranty policies on certain of our products at the time
of sale. Liability under service and warranty policies is based upon a review of
historical warranty and service claim experience. Adjustments are made to
accruals as claim data and historical experience warrant.
The changes in the carrying amount of service and product warranties for the
nine months ended September 30, 2003 are as follows:
Balance as of January 1, 2003 ...................................... $ 3,213
Provision for warranties ........................................... 3,272
Claims made ........................................................ (3,005)
-------
Balance as of September 30, 2003 ................................... $ 3,480
=======
Note 10 - New Accounting Pronouncements
In January 2003, FIN No. 46, "Consolidation of Variable Interest Entities" was
issued. The interpretation provides guidance on consolidating variable interest
entities and applies immediately to variable interests created after January 31,
2003. The guidelines of the interpretation are applicable for us in the fourth
quarter 2003 financial statements for variable interest entities created before
February 1, 2003. The interpretation requires variable interest entities to be
consolidated if the equity investment at risk is not sufficient to permit an
entity to finance its activities without support from other parties or the
equity investors lack certain specified
9
characteristics. Adoption of this pronouncement has not had and is not expected
to have any material impact on our financial condition or results of operations
during 2003.
In April 2003, SFAS No. 149 "Amendment of Statement 133 on Derivative
Instruments and Hedging Activities" was issued. SFAS No. 149 amends and
clarifies financial accounting and reporting for derivative instruments embedded
in other contracts and for hedging activities under SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities". SFAS No. 149 became
applicable for us in our third quarter 2003. Adoption of this pronouncement has
not had any material impact on our financial condition or results of operations
during 2003.
In May 2003, SFAS No. 150 "Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity" was issued. SFAS No. 150
establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. It
requires that an issuer classify a financial instrument that is within its scope
as a liability, many of which were previously classified as equity. SFAS No. 150
became applicable for us in our third quarter 2003. Adoption of this
pronouncement has not had any material impact on our financial condition or
results of operations during 2003.
In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No.
4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections,"
which updates, clarifies, and simplifies certain existing accounting
pronouncements beginning at various dates in 2002 and 2003. This Statement
rescinds SFAS 4 and SFAS 64, which required net gains or losses from the
extinguishment of debt to be classified as an extraordinary item in the income
statement. These gains and losses will now be classified as extraordinary only
if they meet the criteria for such classification as outlined in Accounting
Principles Board ("APB") Opinion 30, which allows for extraordinary treatment if
the item is material and both unusual and infrequent in nature. We adopted this
pronouncement during 2003. As a result we have reclassified the extraordinary
loss recognized in the third quarter of 2002 related to the refinancing of debt
to ordinary income in this Form 10-Q.
In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities," which addresses financial accounting and
reporting for costs associated with exit or disposal activities. This Statement
supersedes Emerging Issues Task Force Issue No. 94-3, "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit and Activity
(including Certain Costs Incurred in a Restructuring)." The provisions of this
Statement are effective for exit or disposal activities that are initiated after
December 31, 2002, with early application encouraged. This pronouncement has not
had an impact on our financial condition or results of operations during 2003.
In November 2002, FASB Interpretation ("FIN") No. 45, "Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others" was issued. The interpretation provides guidance on the
guarantor's accounting and disclosure requirements for guarantees, including
indirect guarantees of indebtedness of others. We have adopted the disclosure
requirements of the interpretation as of December 31, 2002. The accounting
guidelines are applicable to guarantees issued after December 31, 2002 and
require that we record a liability for the fair value of such guarantees in the
balance sheet. FIN 45 has not had any material accounting impact on our
financial condition or results of operations.
10
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Forward-Looking Statements Made in this Form 10-Q
In this Form 10-Q, we make forward-looking statements about our financial
condition, results of operations and business. Forward-looking statements are
statements made by us concerning events that may or may not occur in the future.
These statements may be made directly in this document or may be "incorporated
by reference" from other documents. You can find many of these statements by
looking for words like "believes," "expects," "anticipates," "estimates" or
similar expressions.
Forward-Looking Statements are not Guarantees of Future Performance
Forward-looking statements involve known and unknown risks, uncertainties and
other factors, including those 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 those identified under "Risk
Factors" in our Annual Report on Form 10-K for the year-ended December 31, 2002
and the following, among others:
o general economic and business conditions;
o cyclical customer purchasing patterns due to budgetary and other
constraints;
o changes in customer preferences;
o competition;
o changes in technology;
o our ability to manufacture product consistently and in a timely manner,
especially those products involving delicate or complex manufacturing
processes;
o the introduction and acceptance of new products, including our
PowerPro(R) battery-powered instrument product line;
o the success of our distribution arrangement with DePuy Orthopaedics;
o the integration of any acquisition, including the Bionx acquisition;
o changes in business strategy;
o the possibility that United States or foreign regulatory and/or
administrative agencies might initiate enforcement actions against us or
our distributors;
o our indebtedness;
o quality of our management and business abilities and the judgment of our
personnel;
o the risk of litigation, especially patent litigation as well as the cost
associated with patent and other litigation;
o changes in regulatory requirements; and
o the availability, terms and deployment of capital.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations" below and "Business" in our Annual Report on Form 10-K for the
year-ended December 31, 2002 for a further discussion of these factors. 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.
11
Critical Accounting Estimates
Preparation of our financial statements requires us to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues
and expenses. Note 1 to the consolidated financial statements in our Annual
Report on Form 10K for the year-ended December 31, 2002 describes the
significant accounting policies used in preparation of the consolidated
financial statements. The most significant areas involving management judgments
and estimates are described below and are considered by management to be
critical to understanding the financial condition and results of operations of
CONMED Corporation.
Revenue Recognition
We recognize revenue upon shipment of product and passage of title to our
customers. Factors considered in our revenue recognition policy are as follows:
o Sales to customers are evidenced by firm purchase orders. Title and
the risks and rewards of ownership are transferred to the customer
when product is shipped.
o Payment by the customer is due under fixed payment terms. Even when
the sale is to a distributor, payment to us is not contractually or
implicitly delayed until the product is resold by the distributor.
o We place certain of our capital equipment with customers in return
for commitments to purchase disposable products over time periods
generally ranging from one to three years. In these circumstances,
no revenue is recognized upon capital shipment and we recognize
revenue upon the disposable product shipment. The cost of the
equipment is amortized over the terms of the commitment agreements.
o Product returns are only accepted at the discretion of the Company
and in keeping with our "Returned Goods Policy". Product returns
have not been significant historically. We accrue for sales returns,
rebates and allowances based upon analysis of historical data.
o The terms of the Company's sales to customers do not involve any
obligations for the Company to perform future services. Limited
warranties are generally provided for capital equipment sales and
provisions for warranty are provided at the time of product
shipment.
o Amounts billed to customers related to shipping and handling are
included in net sales. Shipping and handling costs are included in
selling and administrative expense.
o We sell to a diversified base of customers around the world and,
therefore, believe there is no material concentration of credit
risk.
o We assess the risk of loss on accounts receivable and adjust the
allowance for doubtful accounts based on this risk assessment.
Historically, losses on accounts receivable have not been material.
Management believes the allowance for doubtful accounts of $1.6
million at September 30, 2003 is adequate to provide for any
probable losses from accounts receivable.
12
Business Acquisitions
We completed acquisitions in 2003 with purchase prices totaling approximately
$50.0 million and have a history of growth through acquisitions. The assets and
liabilities of acquired businesses are recorded under the purchase method at
their estimated fair values at the dates of acquisition. Goodwill represents
costs in excess of fair values assigned to the underlying net assets of acquired
businesses. Other intangible assets primarily represent allocations of purchase
price to identifiable intangible assets of acquired businesses. We have
accumulated goodwill of $292.2 million and other intangible assets of $192.3
million at September 30, 2003.
In accordance with Statement of Financial Accounting Standards ("SFAS") No. 142,
"Goodwill and Other Intangible Assets," ("SFAS 142"), goodwill and intangible
assets deemed to have indefinite lives are not amortized, but are subject to
annual impairment testing. The identification and measurement of goodwill
impairment involves the estimation of the fair value of our business. The
estimates of fair value are based on the best information available as of the
date of the assessment, which primarily incorporate management assumptions about
expected future cash flows and contemplate other valuation techniques. Future
cash flows can be affected by changes in industry or market conditions or the
rate and extent to which anticipated synergies or cost savings are realized with
newly acquired entities. Intangible assets with a finite life are amortized over
the estimated useful life of the asset. Intangible assets which continue to be
subject to amortization are also evaluated on an annual basis to determine
whether events and circumstances warrant a revision to the remaining period of
amortization. An intangible asset is determined to be impaired when estimated
future cash flows indicate the carrying amount of the asset may not be
recoverable. Although no goodwill or other intangible asset impairment has been
recorded to date, there can be no assurances that future impairment will not
occur.
In connection with the Bionx acquisition, significant estimates were made in the
valuation of the purchased in-process research and development assets. With the
assistance of a third-party valuation, $7.9 million of the purchase price was
determined to represent the estimated fair value of projects that, as of the
acquisition date had not reached technological feasibility and had no
alternative future use. Accordingly, this amount of purchased in-process
research and development assets was written-off in accordance with FASB
Interpretation No. 4, "Applicability of FASB Statement No. 2 to Business
Combinations Accounted for by the Purchase Method". The purchased in-process
research and development value relates to next generation sports medicine and
orthopedic products, which have been or are expected to be released between the
second quarter of 2003 and fourth quarter of 2004. The acquired projects include
enhancements and upgrades to existing device technology, introduction of new
device functionality and the development of new materials technology for sports
medicine and orthopedic applications.
The value of the in-process research and development was calculated using a
discounted cash flow analysis of the anticipated net cash flow stream associated
with the in-process technology of the related product sales. The estimated net
cash flows were discounted using a discount rate of 22%, which was based on the
weighted-average cost of capital for publicly-traded companies within the
medical device industry and adjusted for the stage of completion of each of the
in-process research and development projects. The risk and return considerations
surrounding the stage of completion were based on costs, man-hours and
complexity of the work completed versus to be completed and other risks
associated with achieving technological feasibility. In total, these projects
were approximately 40% complete as of the acquisition date. The total budgeted
costs for the projects were approximately $5.5 million and the remaining costs
to complete these projects were approximately $3.3 million as of the acquisition
date.
The major risks and uncertainties associated with the timely and successful
completion of these projects consist of the ability to confirm the safety and
efficacy of the technologies and products based on the data from clinical trials
and obtaining the necessary regulatory approvals. In addition, no assurance can
be given that the underlying assumptions used to forecast the cash flows or the
timely and successful
13
completion of such projects will materialize, as estimated. For these reasons,
among others, actual results may vary significantly from the estimated results.
Pension Plans
We sponsor defined benefit pension plans for the Company and its subsidiaries.
Major assumptions used in the accounting for these plans include the discount
rate, expected return on plan assets and rate of increase in employee
compensation levels. Assumptions are determined based on Company data and
appropriate market indicators, and are evaluated each year as of the plans'
measurement date. A change in any of these assumptions would have an effect on
net periodic pension costs reported in the consolidated financial statements.
Lower market interest rates and plan asset returns have resulted in declines in
pension plan asset performance and funded status and higher pension expense. The
discount rate used in determining pension expense in 2003 is 6.75%.
Income Taxes
The recorded future tax benefit arising from net deductible temporary
differences and tax carryforwards is approximately $11.0 million at September
30, 2003. Management believes that our earnings during the periods when the
temporary differences become deductible will be sufficient to realize the
related future income tax benefits.
In assessing the need for a valuation allowance, we estimate future taxable
income, considering the feasibility of ongoing tax planning strategies and the
realizability of tax loss carryforwards. Valuation allowances related to
deferred tax assets can be impacted by changes to tax laws, changes to statutory
tax rates and future taxable income levels. In the event we were to determine
that we would not be able to realize all or a portion of our deferred tax assets
in the future, we would reduce such amounts through a charge to income in the
period that such determination was made.
Results of Operations
Three months ended September 30, 2003 compared to three months ended September
30, 2002
The following table presents, as a percentage of net sales, certain categories
included in our unaudited consolidated statements of income for the periods
indicated:
Three Months Ended
September 30,
2002 2003
------ ------
(unaudited)
Net sales .............................................. 100.0% 100.0%
Cost of sales .......................................... 48.0 47.6
------ ------
Gross profit ...................................... 52.0 52.4
Selling and administrative ............................. 30.5 32.0
Research and development ............................... 3.8 3.7
Other expense .......................................... 1.3 1.0
------ ------
Income from operations ............................ 16.4 15.7
Interest expense ....................................... 5.0 3.2
------ ------
Income before income taxes ........................ 11.4 12.5
Provision for income taxes ............................. 4.1 4.5
------ ------
Net income ........................................ 7.3% 8.0%
====== ======
14
Sales for the quarter ended September 30, 2003 were $120.7 million, an increase
of 6.5% compared to sales of $113.3 million in the same quarter a year ago.
Favorable changes in foreign currency exchange rates accounted for 1.8% of our
sales growth.
o Sales in our orthopedic businesses increased 3.5% to $71.5 million
from $69.1 million in the same quarter last year.
o Arthroscopy sales, which represented 59.0% of total third quarter
2003 orthopedic revenues, grew 9.3% to $42.2 million from $38.6
million in the same quarter last year, as a result of the Bionx
acquisition (Note 6 to the consolidated condensed financial
statements).
o Powered surgical instrument sales, which represented 41.0% of total
third quarter orthopedic revenues, decreased 3.9% to $29.3 million
from $30.5 million in the same quarter last year. Sales in the same
quarter a year ago included a $3.0 million initial stocking order to
DePuy Orthopaedics in conjunction with a co-marketing agreement for
the PowerPro(R) battery powered instrument product line.
o Patient care sales for the three months ended September 30, 2003
were $17.1 million, a decrease of 5.5% when compared to $18.1
million in the same quarter last year on lower sales of ECG products
to distributors.
o Electrosurgery sales for the three months ended September 30, 2003
were $20.6 million, an increase of 21.2% when compared to $17.0
million in the same quarter last year, as we gained sales as a
result of our newly-introduced System 5000(R) electrosurgical
generator.
o Sales of endoscopy products increased 20.9% to $11.0 million in the
three months ended September 30, 2003 from $9.1 million in the same
quarter last year, as a result of the CORE acquisition (See Note 6
to the consolidated condensed financial statements).
o Sales of integrated operating room systems were $.5 million in the
third quarter of 2003. This business is the result of our fourth
quarter 2002 acquisitions of ValMed Corporation and Nortrex Medical
Corporation.
Cost of sales increased to $57.5 million in the third quarter 2003 as compared
to $54.4 million in the same quarter last year, primarily as a result of the
increased sales volumes described above while gross margin percentage improved
to 52.4% in the third quarter of 2003, as compared to 52.0% in the third quarter
of 2002.
Selling and administrative expense increased to $38.6 million in the third
quarter of 2003 as compared to $34.6 million in the third quarter of 2002. As a
percentage of sales, selling and administrative expense totaled 32.0% in the
third quarter of 2003, compared to 30.5% in the third quarter of 2002. During
the second quarter we announced a plan to restructure our orthopedic sales force
by increasing our domestic sales force from 180 to 230 sales representatives.
The increase is part of our integration plan for the Bionx acquisition. As part
of the orthopedic sales force restructuring, we converted 90 direct employee
sales representatives into nine independent sales agent groups. As a result of
this restructuring, we will have 18 exclusive orthopedic sales agent groups
managing 230 orthopedic sales representatives. The increase in selling and
administrative expense as a percentage of sales is a result of higher costs
associated with this sales force expansion which is intended to result in
improved sales growth in our orthopedic product lines.
Research and development expense increased to $4.5 million in the third quarter
of 2003 as compared to $4.3 million in the third quarter of 2002. As a
percentage of sales, research and development expense was 3.7% in the current
quarter, consistent with the 3.8% experienced in the same quarter a year ago.
15
As discussed in Note 7 to the consolidated condensed financial statements, other
expense in the third quarter 2003 is comprised of pension settlement costs of
$.8 million and acquisition-related costs of $.4 million. In the third quarter
2002, we entered into our present senior credit agreement. As a result, $1.5
million in unamortized deferred financing fees related to the previously
existing credit agreement were written-off and are included in other expense.
Interest expense in the third quarter of 2003 was $3.8 million compared to $5.8
million in the third quarter of 2002. The decrease in interest expense is
primarily a result of lower weighted average interest rates on our borrowings,
which have declined to 4.15% at September 30, 2003 as compared to 6.53% at
September 30, 2002, offsetting an increase in borrowings at September 30, 2003
compared to September 30, 2002 of approximately $27.2 million, related to the
Bionx acquisition. The decrease in weighted average interest rates on our
borrowings is primarily due to our redemption in the second quarter 2003 of our
$130 million in 9% senior subordinated notes through borrowings under our senior
credit agreement at LIBOR plus 2.75% or 3.89% at September 30, 2003 as discussed
in Note 7 to the consolidated condensed financial statements.
Provision for income taxes has been recorded at an effective rate of 36% for the
third quarter 2003 and 2002. A reconciliation of the United States statutory
income tax rate to our effective tax rate is included in Note 7 to the Company's
financial statements for the year ended December 31, 2002 included in our Annual
Report to the Securities and Exchange Commission on Form 10-K.
Results of Operations
Nine months ended September 30, 2003 compared to nine months ended September 30,
2002
The following table presents, as a percentage of net sales, certain categories
included in our unaudited consolidated statements of income for the periods
indicated:
Nine Months Ended
September 30,
2002 2003
------ ------
(unaudited)
Net sales .............................................. 100.0% 100.0%
Cost of sales .......................................... 47.4 47.7
------ ------
Gross profit ...................................... 52.6 52.3
Selling and administrative ............................. 30.8 31.7
Research and development ............................... 3.6 3.5
In-process R & D write-off ............................. -- 2.2
Other expense .......................................... .4 1.3
------ ------
Income from operations ............................ 17.8 13.6
Interest expense ....................................... 5.5 4.2
------ ------
Income before income taxes ........................ 12.3 9.4
Provision for income taxes ............................. 4.5 4.1
------ ------
Net income ........................................ 7.8% 5.3%
====== ======
Sales for the nine months ended September 30, 2003 were $363.3 million, an
increase of 7.5% compared to sales of $337.8 million in the same period a year
ago. Favorable changes in foreign currency exchange rates accounted for 2.2% of
our sales growth.
o Sales in our orthopedic businesses increased 5.5% to $218.3 million
from $207.0 million in the same period last year.
o Arthroscopy sales, which represented 59.0% of first nine months of
2003 orthopedic revenues, grew 5.9% to $128.3 million from $121.1
million in the same period last
16
year, as a result of the Bionx acquisition (Note 6 to the
consolidated condensed financial statements).
o Powered surgical instrument sales, which represented 41.0% of first
nine months of 2003 orthopedic revenues, increased 4.8% to $90.0
million from $85.9 million in the same period last year on higher
sales of our newly-introduced PowerPro(R) battery powered instrument
product line.
o Patient care sales for the nine months ended September 30, 2003 were
$52.1 million, compared to $52.5 million in the same period last
year as decreases in sales of our ECG and suction instrument product
lines offset increases in sales of automatic defibrillator pads and
other patient care products.
o Electrosurgery sales for the nine months ended September 30, 2003
were $56.3 million, compared to $50.8 million in the same period
last year as we gained sales as a result of our newly-introduced
System 5000(R) electrosurgical generator compared with the same
period last year.
o Sales of endoscopy products increased 22.2% to $33.6 million in the
nine months ended September 30, 2003 from $27.5 million in the same
period last year, as a result of the CORE acquisition (Note 6 to the
consolidated condensed financial statements).
o Sales of integrated operating room systems were $2.9 million in the
nine months ended September 30, 2003. This business is the result of
our fourth quarter 2002 acquisitions of ValMed Corporation and
Nortrex Medical Corporation.
Cost of sales increased to $173.3 million in the first nine months of 2003 as
compared to $160.2 million in the same period a year ago, primarily as a result
of the increased sales volumes described above while gross margin percentage was
52.3% in the nine months of 2003, compared with the 52.6% experienced in the
nine months of 2002. Included in cost of sales during the nine months ended
September 30, 2003 were approximately $.7 million in acquisition-related costs.
Selling and administrative expense increased to $115.1 million in the first nine
months of 2003 as compared to $104.2 million in the same period a year ago. As a
percentage of sales, selling and administrative expense totaled 31.7% in the
first nine months of 2003 compared to 30.8% in the first nine months of 2002.
The increase in selling and administrative expense as a percentage of sales is
due to increased marketing costs associated with recently launched product lines
including the integrated operating room systems product lines, PowerPro(R), and
new electrosurgical generators, as well as higher costs associated with the
orthopedic sales force expansion discussed above which is expected to result in
improved sales growth in our orthopedic product lines.
Research and development expense amounted to $12.6 million in the first nine
months of 2003 as compared to $12.2 million in the first nine months of 2002. As
a percentage of sales, research and development expense was 3.5% in the first
nine months of 2003, consistent with the 3.6% in the same period a year ago.
As discussed in Note 6 to the consolidated condensed financial statements, we
wrote off purchased in-process research and development assets in connection
with the Bionx acquisition of $7.9 million in the first quarter of 2003.
As discussed in Note 7 to the consolidated condensed financial statements, other
expense is comprised of a net gain on settlement of a contractual dispute of
$9.0 million, pension settlement costs of $2.8 million, acquisition related
costs of $3.0 million and the loss of $8.1 million on the early extinguishment
of subordinated debt. In the third quarter 2002, we entered into our present
senior credit agreement. As a result, $1.5 million in unamortized deferred
financing fees related to the previously existing credit
17
agreement were written-off and are included in other expense in the nine months
ended September 30, 2002.
Interest expense in the first nine months of 2003 was $15.2 million compared to
$18.7 million in the first nine months of 2002. The decrease in interest expense
is primarily a result of lower weighted average interest rates on our
borrowings, which have declined to 4.19% at September 30, 2003 as compared to
6.53% at September 30, 2002, offsetting an increase in borrowings at September
30, 2003 compared to September 30, 2002 of approximately $27.2 million, related
to the Bionx acquisition. The decrease in weighted average interest rates on our
borrowings is primarily due to our redemption in the second quarter 2003 of our
$130 million in 9% senior subordinated notes through borrowings under our senior
credit agreement at LIBOR plus 2.75% or 3.89% at September 30, 2003 as discussed
in Note 7 to the consolidated condensed financial statements.
Provision for income taxes has been recorded at an effective rate of 44% for the
first nine months of 2003 and 36% for the nine months of 2002. The effective
rate of 44% for the nine months of 2003 is substantially higher than the 36%
which we have experienced historically as a result of the non-deductibility for
income tax purposes of the $7.9 million in-process research and development
write-off recorded in the third quarter 2003 in conjunction with the Bionx
acquisition. A reconciliation of the United States statutory income tax rate of
35% to our historical effective tax rate of 36% (excluding the effect of the
in-process research and development write-off) is included in Note 7 to the
Company's financial statements for the year ended December 31, 2002 included in
our Annual Report to the Securities and Exchange Commission on Form 10-K.
Liquidity and Capital Resources
Cash generated from our operations, including sales of accounts receivable and
borrowings under our revolving credit facility, provide the working capital for
our operations, debt service under our senior credit agreement and the funding
of our capital expenditures. In addition, we have used term borrowings,
including:
o borrowings under our senior credit agreement;
o Senior Subordinated Notes issued to refinance borrowings under our
senior credit agreement, in the case of the acquisition of Linvatec
Corporation in 1997;
o borrowings under separate loan facilities, in the case of real
property acquisitions, to finance our acquisitions.
Our senior credit agreement consists of a $260 million term loan and a $100
million revolving credit facility of which $258.9 million was outstanding on the
term loan facility at September 30, 2003. There were no borrowings outstanding
at September 30, 2003 on the revolving credit facility. The $260 million term
loan facility extends for approximately 6 years, with scheduled principal
payments of $2.6 million annually through December 2007 increasing to $70.8
million in 2008 and the remaining balance outstanding due in December 2009. We
may be required, under certain circumstances, to make additional principal
payments based on excess cash flow as defined in the senior credit agreement.
Borrowings, if any, on the revolving credit facility are due and payable on
August 28, 2007, the revolving credit facility termination date. Interest rates
on the new term facility are LIBOR plus 2.75% or 3.89% at September 30, 2003.
Interest rates on the revolving credit facility are LIBOR plus 2.50%.
Our senior credit agreement is collateralized by substantially all of our
personal property and assets, except for our accounts receivable and related
rights which have been sold in connection with our accounts receivable sales
agreement. The senior credit agreement 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. The senior credit agreement contains a material adverse effect
clause that could limit our ability to access additional funding
18
under our senior credit agreement should a material adverse change in our
business occur. We are also required, under certain circumstances, to make
mandatory prepayments from net cash proceeds from any issue of equity and asset
sales.
We used term loans to purchase the property in Largo, Florida utilized by our
Linvatec subsidiary. The term loans consist of a Class A note bearing interest
at 7.50%, a Class C note bearing interest at 8.25% and a seller-financed note
bearing interest at 6.50%. The principal balances outstanding on the Class A
note, Class C note and seller-financed note aggregate $10.2 million, $7.4
million and $3.8 million, respectively, at September 30, 2003. These loans are
secured by our Largo, Florida property.
We have an accounts receivable sales agreement pursuant to which we and certain
of our subsidiaries sell on an ongoing basis certain accounts receivable to
CONMED Receivables Corporation, 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 (the "conduit purchaser"). As of December 31, 2002 and September
30, 2003, the undivided percentage ownership interest in receivables sold by CRC
to the conduit purchaser aggregated $37.0 million and $39.0 million,
respectively, which has been accounted for as a sale and reflected in the
balance sheet as a reduction in accounts receivable. We entered into an amended
and restated accounts receivable sales agreement as of October 23, 2003, under
substantially the same terms and conditions as the previous agreement except
that the conduit purchaser has been replaced by a bank.
Our net working capital position was $152.1 million at September 30, 2003. Net
cash provided by operations increased to $38.7 million in the nine months ended
September 30, 2003 compared to $28.5 million for the same period a year ago.
Net cash provided by operations in the nine months of 2003 was positively
impacted by depreciation, amortization, deferred income taxes, non-cash pension
settlement charges, the non-cash write-off of the remaining unamortized deferred
financing fees related to the extinguishment of our 9% senior subordinated
notes, the non-cash write-off of purchased in-process research and development
assets, increased sales of accounts receivable and an increase in income taxes
payable.
Net cash provided by operations in the nine months of 2003 was negatively
impacted by the increase in working capital as a result of the Bionx acquisition
(discussed in Note 6 to the consolidated condensed financial statements),
increases in accounts receivable and inventory as a result of growth in our
business, and decreases in accounts payable, accrued compensation and interest
and changes in other assets/liabilities, primarily related to the timing of the
payment of liabilities.
Capital expenditures in the nine months ended September 30, 2003 were $6.3
million compared to $10.6 million in the same period a year ago. The decrease in
capital expenditures compared to the same period a year ago is a result of the
completion of several large capital projects. Capital expenditures representing
the ongoing capital investment requirements of our business are expected to
continue at the rate of approximately $9.0 to $12.0 million annually. Net cash
used by investing activities in the nine months ended September 30, 2003 also
included $52.3 million in payments related to business acquisitions, net of cash
acquired, of which $47.3 million related to the Bionx acquisition and the
remainder related to the CORE acquisition and the acquisition of an
electrosurgery business as discussed in Note 6 to the consolidated condensed
financial statements.
Financing activities in the nine months ended September 30, 2003 consist
primarily of $160.0 million in borrowings under the senior credit agreement and
the retirement of $130.0 million in 9.0% senior subordinated notes (discussed in
Note 7 to the consolidated condensed financial statements). The remaining
borrowings under the expanded term loan facility were used to reduce borrowings
outstanding on the revolving credit facility as a result of the Bionx
acquisition (discussed in Note 6 to the consolidated condensed financial
statements) and to fund payment of bank and legal fees associated with amending
the senior credit agreement. Based on the interest rates in
19
effect at September 30, 2003, annual savings in interest costs as a result of
this debt restructuring are estimated at approximately $6.0 million.
Management believes that cash generated from operations, including accounts
receivable sales, our current cash resources and funds available under our
amended senior credit agreement will provide sufficient liquidity to ensure
continued working capital for operations, debt service and funding of capital
expenditures in the foreseeable future.
Contractual Obligations
There were no capital lease obligations or unconditional purchase obligations as
of September 30, 2003. The following table summarizes our contractual
obligations related to operating leases and long-term debt as of September 30,
2003:
(Amounts in thousands)
2003 2004 2005 2006 2007 Thereafter
------ ------ ------ ------ ------ ----------
Long-term debt ........ $1,306 $4,149 $4,336 $4,538 $4,759 $261,862
Operating lease
obligations ......... 446 1,589 1,310 1,238 1,259 3,173
------ ------ ------ ------ ------ --------
Total contractual
cash obligations .... $1,752 $5,738 $5,646 $5,776 $6,018 $265,035
====== ====== ====== ====== ====== ========
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There has been no significant change in our exposures to market risk during the
three and nine months ended September 30, 2003. For a detailed discussion of
market risk, see our Annual Report on Form 10K for the year-ended December 31,
2002, Part II, Item 7A, Quantitative and Qualitative Disclosures About Market
Risk.
Item 4. Controls and Procedures
An evaluation of the effectiveness of the design and operation of the Company's
disclosure controls and procedures was carried out under the supervision and
with the participation of the Company's management, including the Chairman and
Chief Executive Officer and the Vice President - Finance and Chief Financial
Officer ("the Certifying Officers") as of September 30, 2003. Based on that
evaluation, the Certifying Officers concluded that the Company's disclosure
controls and procedures are effective to bring to the attention of the Company's
management the relevant information necessary to permit an assessment of the
need to disclose material developments and risks pertaining to the Company's
business in its periodic filings with the Securities and Exchange Commission.
There was no change to the Company's internal control over financial reporting
during the quarter ended September 30, 2003 that materially affected, or is
reasonable likely to materially affect, the Company's internal control over
financial reporting.
20
Item 6. Exhibits and Reports on Form 8-K
List of Exhibits
Exhibit No. Description of Exhibit
----------- ----------------------
10.1 Amended and Restated Receivables Purchase Agreement, dated
October 23, 2003, among CONMED Receivables Corporation, CONMED
Corporation and Fleet National Bank.
10.2 Amendment No. 1 dated October 23, 2003 to the Purchase and
Sale Agreement dated November 1, 2001 among CONMED
Corporation, et al and CONMED Receivables Corporation.
31.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Reports on Form 8-K
On October 29, 2003, the Company filed a Report on Form 8-K furnishing as
Exhibit 99.1 under Item 12, an October 24, 2003 press release announcing third
quarter and first nine months of 2003 results.
21
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 10, 2003
/s/ Robert D. Shallish, Jr.
------------------------------------
Robert D. Shallish, Jr.
Vice President - Finance
(Principal Financial Officer)
22
Exhibit Index
Sequential Page
Exhibit Number
- ------- ---------------
10.1 Amended and Restated Receivables Purchase Agreement,
dated October 23, 2003, among CONMED Receivables
Corporation, CONMED Corporation, and Fleet (included in EDGAR
National Bank. filing only)
10.2 Amendment No. 1 dated October 23, 2003 to the
Purchase and Sale Agreement dated November 1, 2001 (included in EDGAR
among CONMED Corporation, et al and CONMED filing only)
Receivables Corporation
31.1 Certification pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 302 of the E-1
Sarbanes-Oxley Act of 2002.
31.2 Certification pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 302 of the E-2
Sarbanes-Oxley Act of 2002.
32.1 Certification pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the E-3
Sarbanes-Oxley Act of 2002.
23
Exhibit 10.1
Execution Version
================================================================================
AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT
Dated as of October 23, 2003
Among
CONMED RECEIVABLES CORPORATION
as Seller
and
CONMED CORPORATION
as initial Servicer
and
FLEET NATIONAL BANK
as Purchaser
and
FLEET NATIONAL BANK
as Administrator
================================================================================
TABLE OF CONTENTS
Page
ARTICLE I
PURCHASES AND REINVESTMENTS
SECTION 1.01. Commitment to Purchase; Limits on Purchasers' Obligations ............... 1
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 .................................................. 4
SECTION 2.02. Computation of Concentration Limit ...................................... 4
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 ................................................... 5
SECTION 3.02. Deemed Collections; Reduction of Capital, Etc ........................... 7
SECTION 3.03. Payments and Computations, Etc .......................................... 9
ARTICLE IV
FEES AND YIELD PROTECTION
SECTION 4.01. Fees .................................................................... 9
SECTION 4.02. Yield Protection ........................................................ 9
SECTION 4.03. Funding Losses .......................................................... 11
ARTICLE V
CONDITIONS TO PURCHASES
SECTION 5.01. Conditions Precedent to the Effectiveness of the Original Receivables
Purchase Agreement ...................................................... 11
SECTION 5.02 Conditions Precedent to Restatement ..................................... 13
SECTION 5.03. Conditions Precedent to All Purchases and Reinvestments ................. 14
-i-
Table of Contents
(continued)
Page
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
SECTION 6.01. Representations and Warranties of Seller ................................ 14
SECTION 6.02. Representations and Warranties of Parent ................................ 16
ARTICLE VII
GENERAL COVENANTS
SECTION 7.01. Affirmative Covenants ................................................... 18
SECTION 7.02. Reporting Requirements .................................................. 20
SECTION 7.03. Negative Covenants ...................................................... 22
SECTION 7.04. Separate Existence ...................................................... 23
ARTICLE VIII
ADMINISTRATION AND COLLECTION
SECTION 8.01. Designation of Servicer ................................................. 25
SECTION 8.02. Duties of Servicer ...................................................... 26
SECTION 8.03. Rights of the Administrator ............................................. 28
SECTION 8.04. Responsibilities of Seller .............................................. 29
SECTION 8.05. Further Action Evidencing Purchases and Reinvestments ................... 29
SECTION 8.06. Application of Collections .............................................. 30
ARTICLE IX
SECURITY INTEREST
SECTION 9.01. Grant of Security Interest .............................................. 30
SECTION 9.02. Further Assurances ...................................................... 31
SECTION 9.03. Remedies ................................................................ 31
ARTICLE X
LIQUIDATION EVENTS
SECTION 10.01. Liquidation Events ...................................................... 31
SECTION 10.02. Remedies ................................................................ 32
ARTICLE XI
THE ADMINISTRATOR
SECTION 11.01. Authorization and Action ................................................ 33
SECTION 11.02. Administrator's Reliance, Etc ........................................... 33
SECTION 11.03. Fleet and Affiliates .................................................... 34
ARTICLE XII
ASSIGNMENT OF PURCHASER'S INTEREST
SECTION 12.01. Restrictions on Assignments ............................................. 34
-ii-
Table of Contents
(continued)
Page
SECTION 12.02. Rights of Assignee ...................................................... 34
ARTICLE XIII
INDEMNIFICATION
SECTION 13.01. Indemnities ............................................................. 35
ARTICLE XIV
MISCELLANEOUS
SECTION 14.01. Amendments, Etc ......................................................... 36
SECTION 14.02. Notices, Etc ............................................................ 37
SECTION 14.03. No Waiver; Remedies ..................................................... 37
SECTION 14.04. Binding Effect; Survival ................................................ 37
SECTION 14.05. Costs, Expenses and Taxes ............................................... 37
SECTION 14.06. Confidentiality of Program Information .................................. 38
SECTION 14.07. Confidentiality of Parent Information ................................... 38
SECTION 14.08. Waiver of Confidentiality ............................................... 40
SECTION 14.09. Captions and Cross References ........................................... 41
SECTION 14.10. Integration ............................................................. 41
SECTION 14.11. Governing Law ........................................................... 41
SECTION 14.12. Waiver Of Jury Trial .................................................... 41
SECTION 14.13. Consent To Jurisdiction; Waiver Of Immunities ........................... 42
SECTION 14.14. Execution in Counterparts ............................................... 42
SECTION 14.15. Assignment; Effect of Restatement ....................................... 43
-iii-
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 and Lock-Box Accounts
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)-I Form of Interim Report
EXHIBIT 5.01(f) Form of Lock-Box Agreement
iv
AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT
THIS AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT, dated as of
October 23, 2003, is among CONMED RECEIVABLES CORPORATION, a New York
corporation ("Seller"), CONMED CORPORATION, a New York corporation ("Parent"),
as initial Servicer, FLEET NATIONAL BANK ("FNB"), a national banking association
(together with any other financial institution hereafter party hereto, each a
"Purchaser" and collectively, the "Purchasers") and FLEET NATIONAL BANK, 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 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.
7. Each of the parties hereto wish to amend and restate that certain
Receivables Purchase Agreement dated as of November 1, 2001 (as amended by that
certain Amendment No. 1 dated as of December 12, 2003, the "Original Receivables
Purchase Agreement") to provide for (i) the assignment by EagleFunding Capital
Corporation (as assignee of Blue Keel Funding, LLC) of its Capital hereunder to
FNB as Purchaser, (ii) the assignment by Fleet Securities, Inc. ("Fleet
Securities") of its rights and obligations thereunder as Administrator, and
(iii) certain other amendments as set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, the parties hereto agree as follows:
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
1
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 each 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 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 $250,000.
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, each 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 transfer immediately
available funds to an account designated by Seller in the related Purchase
Notice.
(c) Assignment of Asset Interest. Effective as of the closing date of the
Original Receivables Purchase Agreement, Seller sold, assigned and transferred
to Fleet Securities, for the benefit of Purchasers, the Asset Interest.
Effective as of the Restatement Date, pursuant to Section 14.15(a) hereof, Fleet
Securities is assigning and transferring the Asset Interest to FNB, as
Administrator.
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;
(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;
2
(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 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:
3
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 each 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 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:
(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.
4
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:
(a) Servicer Report. On or before the 10th calendar day and, upon
the Administrator's request, on or before the 24th calendar day (or, if
either 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 (each, a "Servicer
Report") containing the information described in (i) Exhibit 3.01(a), in
the case of a Servicer Report delivered on or before the 10th calendar day
of each month, and (ii) Exhibit 3.01(a)-I, in the case of a Servicer
Report delivered on or before the 24th calendar day of each month.
(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).
5
(c) Settlement Date Procedure - Reinvestment Period. On the second
Business Day after the first Reporting Date occurring in each calendar
month (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;
(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
6
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 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
7
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:
(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),
(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, and
(c) Broken Funding Costs. In the event that (i) Seller reduces the Capital
of a Purchaser on a date other than a Settlement Date, including by termination
of a Purchaser's commitment to make purchases and reinvestments hereunder, or
(ii) Seller does not reduce the Capital of a Purchaser pursuant to Section
3.02(b) following the delivery of a written notice of
8
such reduction, Seller shall pay to such Purchaser an amount equal to the
excess, if any, of (A) the Earned Discount that would have accrued during the
remainder of the Settlement Period subsequent to the date of such reduction or
termination (or in respect of clause (ii) above, the date such reduction was
designated to occur pursuant to the written notice of same) of such Capital if
such reduction or termination had not occurred or such notice had not been
delivered, over (B) the sum of (x) to the extent all or a portion of such
Capital remains outstanding, the amount of Earned Discount actually accrued
during the remainder of such period on such Capital, and (y) to the extent such
Capital is repaid, the income, if any, actually received during the remainder of
such period by the holder of such Capital from investing the portion of such
Capital so repaid. In the event that the amount referred to in clause (B)
exceeds the amount referred to in clause (A), the relevant Purchaser or
Purchasers agree to pay to Seller the amount of such excess. All such amounts
shall be due and payable hereunder within five Business Days after written
demand.
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 # 021300019, account #
1510351-15901, attention: Brenda Augunas.
(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.
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
9
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
(x) to increase the cost to or to impose a cost on an Affected Party
funding or making or maintaining any Purchases or Reinvestments, 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
(z) to reduce the rate of return on the capital of an Affected Party
as a consequence of its obligations hereunder or arising in connection
herewith to a level below that which such Affected Party could otherwise
have achieved,
then within 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.
10
(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 or
(ii) any Purchase not being made in accordance with a request therefor under
Section 1.02, 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 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 the Effectiveness of the Original
Receivables Purchase Agreement. The Seller hereby confirms that concurrently
with the effectiveness of the Original Receivables Purchase Agreement, Fleet
Securities, as Administrator received on or before the date of the initial
Purchase thereunder the following:
(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 delivered by it
thereunder and the transactions contemplated thereby; (ii) the names and true
signatures of the officers authorized on its behalf to sign the Transaction
Documents delivered by it thereunder; (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;
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(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 date
reasonably close to such 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 Fleet Securities, as
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 Fleet
Securities, as Administrator, for the benefit of Purchasers, as the secured
party and purchaser, or other, similar instruments or documents, as may have
been necessary or, in the opinion of Fleet Securities, as 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 Fleet
Securities, as Administrator, listing all effective financing statements that
name any Originator 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 Fleet Securities, as Administrator, shall have
reasonably requested, together with copies of such financing statements (none of
which covered any Pool Assets, unless executed termination statements and/or
partial releases with respect thereto have been delivered to Fleet Securities,
as Administrator), and tax and judgment lien search reports from a Person
satisfactory to Servicer and Fleet Securities, as 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) Reasonably satisfactory opinions of (i) Sullivan & Cromwell LLP,
counsel to Parent, the Originator and Seller, and (ii) special Florida and
Canadian counsel to Parent and the Originator;
(h) Such powers of attorney as Fleet Securities, as Administrator, shall
have reasonably requested to enable Fleet Securities, as 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 Fleet Securities, as Administrator, to the extent
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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 in respect thereof, duly executed by the
parties thereto; and
(m) The Purchase Agreement, duly executed by each Originator and Seller,
and a copy of all documents required to have been delivered thereunder.
SECTION 5.02. Conditions Precedent to Restatement. The amendment and
restatement of this Agreement is subject to the condition precedent that each
Transaction Document shall be in full force and effect and the further condition
that the Administrator shall have received, on or before the Restatement Date,
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 and Seller issued
by the Secretaries of State of the jurisdiction of its incorporation and
its principal place of business, as at a recent date;
(b) A certificate of the Secretary or Assistant Secretary of each of
Seller 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 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-3), filed on or prior to the Restatement
Date, naming the Administrator as secured party;
(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 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
13
a Person satisfactory to Servicer and the Administrator showing no
evidence of such liens filed against any Originator;
(f) Assignments of the Lock-Box Agreements with the Lock-Box Banks;
(g) 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; and
(h) A pro forma Servicer Report, dated as of the Restatement Date,
assuming a Cut-Off Date of September 30, 2003.
SECTION 5.03. 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:
(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.
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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.
(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 and the
agreements of Fleet Securities and Fleet National Bank in Section 14.15(a)
hereof constitute a valid transfer and assignment of the Asset Interest to
the Administrator, for the benefit of Purchasers, assuming the
effectiveness of the agreements of Fleet Securities and Fleet National
Bank in Section 14.15(a); 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
15
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 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, provided, that the parties hereto hereby
acknowledge that the Seller's performance of its obligations and exercise
of its rights under this Agreement and the other Transaction Documents
shall not give rise to a 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
16
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.
(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
17
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 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.
18
(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, 2000, December 31, 2001 and December 31, 2002,
and the related consolidated statements of income and cash flows for the
fiscal years ended on such dates 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, 2003 and June 30, 2003, 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,
2003 or June 30, 2003), 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, 2002, 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.
19
(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.
(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
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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.
(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) $290,000,000 plus (ii) 75% of positive
Consolidated Net Income since December 31, 2002 plus (iii) Net Cash
Proceeds from the sale of Capital Stock of Parent on a cumulative basis
since December 31, 2002.
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 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
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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;
(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
22
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 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.
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(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
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 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
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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 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;
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(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 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.
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(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.
(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
27
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 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
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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.
(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
29
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.
(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 NATIONAL BANK, AS
ADMINISTRATOR, PURSUANT TO AN AMENDED AND RESTATED RECEIVABLES
PURCHASE AGREEMENT, DATED AS OF OCTOBER 23, 2003, AMONG CONMED
RECEIVABLES CORPORATION, CONMED CORPORATION, AND FLEET NATIONAL
BANK, AS PURCHASER AND 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
30
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.
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.
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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
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
32
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
(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.
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ARTICLE XI
THE ADMINISTRATOR
SECTION 11.01. Authorization and Action. Each Purchaser hereby appoints
and authorizes 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 hereto.
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
34
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.
(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.
(c) Notwithstanding anything herein to the contrary, any Purchaser may at
any time without the consent of Seller, pledge or assign all or any portion of
its rights hereunder to any of the Federal Reserve Banks organized under Section
4 of the Federal Reserve Act, 12 U.S.C. Section 341 in support of borrowings
made to such Purchaser by such Federal Reserve Bank, provided that no such
pledge or assignment or enforcement thereof shall release such Purchaser from
any of its obligations hereunder.
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 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:
(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
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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 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.
36
(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.
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 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.
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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 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.
SECTION 14.06. Confidentiality of Program Information.
(a) Confidential Information. Each party hereto acknowledges that FNB
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 FNB 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 14.06),
(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
38
operations of Purchaser generally or the services performed by the
Administrator for Purchaser, or (C) any information which is furnished by
FNB to such party and which is designated by FNB 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;
(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 FNB, all documents or other written material
(other than documents executed by such party) received from FNB, 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 14.06 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 FNB or were known to such party on a nonconfidential basis
prior to its disclosure by FNB.
(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 FNB with prompt written notice so that FNB may seek a
protective order or other appropriate remedy and/or waive compliance with
the provisions of this Section 14.06; and
(ii) unless FNB waives compliance by such party with the provisions
of this Section 14.06, 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 14.06.
In the event that such protective order or other remedy is not obtained, or FNB
waives compliance with the provisions of this Section 14.06, such party will
furnish only that portion of
39
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 14.06 shall survive termination of this
Agreement.
SECTION 14.07. 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:
(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 14.07),
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 14.07), (VI) to any rating agency, or (VII) to any potential
assignee or participant of any Purchaser (provided such Person has agreed
to be bound by the terms of this Section 14.07); 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 14.07 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 14.07; and
40
(ii) unless Parent 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 Parent Information on the basis that such
Parent 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
Parent waives compliance with the provisions of this Section 14.07, 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 14.07 shall survive termination of this
Agreement.
SECTION 14.08. Waiver of Confidentiality. Anything herein to the contrary
notwithstanding, each of Seller, Parent, each Purchaser, the Administrator, each
Indemnified Party and any successor or assign of any of the foregoing (and each
employee, director, representative or other agent of any of the foregoing) may
disclose to any and all Persons, without limitation of any kind, the "tax
treatment" and "tax structure" (in each case, within the meaning of Treasury
Regulation Section 1.6011-4) of the transactions contemplated herein and all
materials of any kind (including opinions or other tax analyses) that are or
have been provided to any of the foregoing relating to such tax treatment or tax
structure, and it is hereby confirmed that each of the foregoing have been so
authorized since the commencement of discussions regarding the transactions.
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
41
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
HERETO 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, 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
42
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. Assignment; Effect of Restatement.
(a) Effective on the Restatement Date, Fleet Securities hereby assigns its
rights and obligations as Administrator under the Original Receivables Purchase
Agreement (including, without limitation, the Asset Interest) to FNB, and FNB
hereby accepts such assignment and shall, from and after the Restatement Date,
be the Administrator hereunder. Fleet Securities shall, from and after such
assignment, cease to be a party to this Agreement, and shall have no further
rights or obligations hereunder (other than those rights and indemnifications
which by their terms survive such assignment).
(b) Effective on the Restatement Date, EagleFunding Capital Corporation
(as assignee of Blue Keel Funding, LLC), hereby assigns its rights and interest
in the outstanding Capital hereunder to FNB, so that FNB shall have, after
giving effect to this assignment, all outstanding Capital hereunder, and FNB
hereby accepts such assignment. The purchase price for the assignment to FNB
shall be equal to the sum of (i) the outstanding amount of such Capital, (ii)
outstanding Earned Discount thereon, and (iii) fees accrued under the
Transaction Documents through the Restatement Date, which purchase price shall
be payable by FNB to an account designated by EagleFunding Capital Corporation.
EagleFunding Capital Corporation makes no representation or warranty and assumes
no responsibility with respect to the financial condition of the Seller or the
performance or observance by the Seller of any of its obligations under this
Agreement or any other Transaction Document. EagleFunding Capital Corporation
shall, from and after such assignment, cease to be a party to this Agreement,
and shall have no further rights or obligations hereunder (other than those
rights and indemnifications which by their terms survive such assignment).
(c) Effective on the Restatement Date, subject to the satisfaction of the
conditions precedent set forth in Section 5.02, the Original Receivables
Purchase Agreement shall be replaced by this Agreement and shall be deemed to be
amended and restated in its entirety in the form of this Agreement, and all of
the rights and obligations of the parties under the Original Receivables
Purchase Agreement shall be deemed to be amended, restated and modified by the
terms of this Agreement.
[Remainder of page intentionally left blank]
43
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: _________________________________
FLEET NATIONAL BANK,
as Purchaser
Commitment: $50,000,000
By: ____________________________________
Name Printed: __________________________
Title: _________________________________
FLEET NATIONAL BANK, as Administrator
By: ____________________________________
Name Printed: __________________________
Title: _________________________________
S-1 RECEIVABLES PURCHASE
AGREEMENT
Acknowledged and Agreed for purposes of
the assignment set forth in Section 14.15 only:
FLEET SECURITIES, INC., as assigning
Administrator
By: ____________________________________
Name Printed: __________________________
Title: _________________________________
EAGLEFUNDING CAPITAL CORPORATION
(assignee of Blue Keel Funding, LLC), as
assigning Purchaser
By: Fleet Securities, Inc. as
attorney-in-fact
By: ____________________________________
Name Printed: __________________________
Title: _________________________________
2
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 BANKS AND LOCK-BOX ACCOUNTS
The Chase Manhattan Bank
Account No.: 550123571 (Linvatec Corporation)
Account No.: 550129383 (CONMED Corporation)
Fleet National Bank
Account No.: 7015046907
Royal Bank of Canada
Account No.: 106-037-5@03132
SCHEDULE 7.01(g)
DESCRIPTION OF CREDIT AND COLLECTION POLICY
(see attached)
SCHEDULE 14.02
NOTICE ADDRESSES
Administrator:
Fleet National Bank
Mail Stop: NY-UT-36105C
One Clinton Square
P. O. Box 4821 Syracuse, New York 13202
Attention: Michael Brunner
Telephone: 315/426-4357
Facsimile: 315/426-4374
Purchaser:
Fleet National Bank
Mail Stop: NY-UT-36105C
One Clinton Square
P. O. Box 4821 Syracuse, New York 13202
Attention: Michael Brunner
Telephone: 315/426-4357
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
2
EXHIBIT 5.01(f)
FORM OF LOCK-BOX AGREEMENT
(see attached)
EXHIBIT 3.01(a)
FORM OF SERVICER REPORT
(see attached)
EXHIBIT 3.01(a)-I
FORM OF INTERIM REPORT
(see attached)
APPENDIX A
DEFINITIONS
This is Appendix A to the Amended and Restated Receivables Purchase
Agreement dated as of October 23, 2003 among CONMED Receivables Corporation, as
Seller, CONMED Corporation, as initial Servicer and Fleet National Bank, as
Purchaser and 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 One
Clinton Square, Syracuse, New York 13221, 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, any assignee or participant
of any Purchaser, FNB, any successor to FNB 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.
"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 Reference
Bank in Boston, Massachusetts, as its prime rate; and
(b) the Federal Funds Rate most recently determined by the Reference
Bank plus 0.50% per annum.
The Alternate Base Rate is not necessarily intended to be the lowest rate of
interest determined by the Reference Bank 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.
"Applicable Stress Factor" means 1.30.
"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 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 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 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).
- 2 -
"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.
"Commitment" means with respect to any Purchaser, the amount listed
opposite such 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 Commitment 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.
"Commitment Termination Date" means October 21, 2004, as such date may be
extended from time to time with the consent of the parties to the Agreement.
"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, or, in the
case of any Obligor listed on Exhibit A hereto, the percentage and amount 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 5.0%
BBB-/Baa3 BBB-/Baa3
or Not Rated or Not Rated
"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
- 3 -
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 (i)
any net non-cash adjustments to such amounts after August 28, 2002 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, (ii) any net
non-cash adjustments to such amounts after August 22, 2002 resulting from the
application of FASB 142 shall not be included in such amounts and (iii) any net
non-cash adjustments to such amounts after August 22, 2002 resulting from
charges to in-process research and development in connection with a Permitted
Business Acquisition (as defined in the Credit Agreement) shall not be included
in such amounts.
"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 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.
"Credit Agreement" means the Amended and Restated Credit Agreement among
Parent, as Borrower, the several lenders from time to time party thereto and JP
Morgan Chase Bank, as Administrative Agent, dated as of June 30, 2003, as the
same may be amended, restated, modified, supplemented or replaced from time to
time upon written notice to the Administrator.
"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.
"Days Sales Outstanding Ratio" means, for any calendar month, (i) the
aggregate Outstanding Balance of all Receivables as of the Cut-Off Date for the
preceding calendar month, divided by (ii) the aggregate amount of Collections
received during such calendar month.
"Deemed Collection" has the meaning set forth in the Purchase Agreement.
- 4 -
"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.
"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.
"Dilution Horizon Factor" means, for any calendar month, a percentage
equal to (i) the aggregate Original Balance of all Receivables originated during
such calendar month divided by (ii) the Net Pool Balance as of the Cut-Off Date
for such month.
"Dilution Ratio" means, for any calendar month, a percentage equal to (i)
the aggregate amount of Dilutions which occurred during such month divided by
(ii) the aggregate Original Balance of all Receivables generated by the
Originators during the immediately preceding calendar month.
"Dilution Reserve Percentage" means as of any date of determination, a
percentage calculated in accordance with the following formula:
DRP = DHF x {(ASF x ED) + [(DS - ED) x (DS/ED)]}
where:
DRP = the Dilution Reserve Percentage;
DHF = the Dilution Horizon Factor at such time;
ASF = Applicable Stress Factor;
ED = the rolling average of the Dilution Ratios occurring during the
12 most recent calendar months; and
DS = the highest three-month average Dilution Ratio occurring during
the 12 most recent calendar months.
"Dollars" means dollars in lawful money of the United States of America.
- 5 -
"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, the sum of (i)
the LIBO Rate for such Settlement Period, plus (ii) 0.25% per annum, 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 annum and (ii) the LIBO Rate for such
Settlement Period plus 3.25% per annum, provided, however, that in no event
shall the Earned Discount Rate at any time exceed the maximum interest rate
permitted by Applicable Law.
"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;
(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;
- 6 -
(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;
(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.
"Event of Bankruptcy" shall be deemed to have occurred with respect to a
Person if either:
- 7 -
(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.
"Exchange Act" means the Securities and Exchange Act of 1934, as amended.
"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 FNB 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.
- 8 -
"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.
"Final Maturity Date" means October 23, 2006.
"Fleet Securities" has the meaning set forth in the preliminary statements
to the Agreement.
"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, 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 Write-offs" 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
- 9 -
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, (iii) 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.
"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 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.
- 10 -
"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.
"LIBO Rate" means, for any Settlement Period, the rate per annum as
determined on the basis of the offered rates for deposits in U.S. Dollars, for a
period of time comparable to such period which appears on the Telerate page 3750
as of 11:00 a.m. London time on the day that is two London Business Days
preceding the first day of such period; provided, however, if the rate described
above does not appear on the Telerate System on any applicable interest
determination date, the LIBO Rate shall be the rate (rounded upward, if
necessary, to the nearest one hundred-thousandth of a percentage point),
determined on the basis of the offered rates for deposits in U.S. dollars for a
period of time comparable to such period which are offered by four major banks
in the London interbank market at approximately 11:00 a.m. London time, on the
day that is two (2) London Business Days preceding the first day of such period
as selected by the Administrator. The principal London office of each of the
four major London banks will be requested to provide a quotation of its U.S.
Dollar deposit offered rate. If at least two such quotations are provided, the
rate for that date will be the arithmetic mean of the quotations. If fewer than
two quotations are provided as requested, the rate for that date will be
determined on the basis of the rates quoted for loans in U.S. dollars to leading
European banks for a period of time comparable to such period offered by major
banks in New York City at approximately 11:00 a.m. New York City time, on the
day that is two London Business Days preceding the first day of such period. In
the event that the Administrator is unable to obtain any such quotation as
provided above, it will be deemed that the LIBO Rate cannot be determined, and
the Alternate Base Rate shall apply. In the event that the Board of Governors of
the Federal Reserve System shall impose a Reserve Percentage with respect to
LIBO Rate deposits, then for any period during which such Reserve Percentage
shall apply, the LIBO Rate shall be equal to the amount determined above divided
by an amount equal to 1 minus the Reserve Percentage, where "Reserve Percentage"
shall mean the maximum aggregate reserve requirement (including all basic,
supplemental, marginal and other reserves) which is imposed on member banks of
the Federal Reserve System against "Euro-currency Liabilities" as defined in
Regulation D.
"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,
- 11 -
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.
"Lock-Box" means any post office box to which Collections of Pool
Receivables are sent.
"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.
"London 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.
"Loss Horizon Factor" means, for any Cut-Off Date, a fraction, the
numerator of which equals the aggregate Original Balance of all Receivables
originated during the five immediately preceding calendar months, and the
denominator of which equals the Net Pool Balance as of such Cut-Off Date.
"Loss Ratio" means, for any calendar month, the highest three calendar
month rolling average of the Monthly Loss Ratios occurring during the twelve
most recent calendar months.
"Loss Reserve Percentage" means, for any Cut-Off Date, a percentage
calculated in accordance with the following formula:
LRP = ASF x LHF x LR
where:
- 12 -
LRP = the Loss Reserve Percentage;
ASF = Applicable Stress Factor;
LHF = the Loss Horizon Factor; and
LR = the Loss Ratio.
"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.
"Monthly Loss Ratio" means, for any calendar month, the ratio (expressed
as a percentage) equal to (i) the aggregate Outstanding Balance of all
Receivables which are more than one hundred twenty (120) and less than one
hundred fifty-one (151) days past invoice as of the Cut-Off Date occurring in
such calendar month plus, without duplication, all Gross Write-offs occurring
during such calendar month with respect to Receivables which are fewer than one
hundred twenty-one (121) days past invoice as of the Cut-Off Date occurring in
such calendar month divided by (ii) the aggregate Original Balance of all
Receivables originated during the calendar month which ended four calendar
months prior to such calendar months.
"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 the lesser of (A)
15% of the Unadjusted Net Pool Balance or (B) $12,000,000.
"Obligor" means a Person obligated to make payments with respect to a
Receivable, including any guarantor thereof.
"Original Balance" means, with respect to any Receivable, the Outstanding
Balance of such Receivable on the date it was originated.
- 13 -
"Original Receivables Purchase Agreement" has the meaning set forth in the
preamble.
"Originator" means the Parent in its capacity as originator of
Receivables, together with the other originators party to the Purchase
Agreement.
"Outstanding Balance" of any Receivable at any time means the then
outstanding principal balance thereof.
"Overdue Receivable" means a Receivable that remains unpaid for more than
120 days from the original invoice date for such Receivable, or that has been
charged off before it has become 121 days past due. "Parent" has the meaning set
forth in the preamble.
"Percentage" means, with respect to any Purchaser, the ratio, expressed as
a percentage, of (i) such Purchaser's Commitment divided by (ii) the aggregate
Commitments of all of the 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 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 14.06.
"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.
"Purchase Agreement" means the Purchase and Sale Agreement, dated as of
November 1, 2001, among Seller and the Originators, as amended, restated,
supplemented or otherwise modified from time to time.
- 14 -
"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" has the meaning set forth in the preamble.
"Purchasers' Share" of any amount means the then Asset Interest, expressed
as a percentage (but not greater than 100%), times such amount.
"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.
"Reference Bank" means Fleet National Bank, a national banking
association.
"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.
"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
- 15 -
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, a percentage equal to the
greater of (i) 25% and (ii) the sum of (1) the most recently calculated Dilution
Reserve Percentage plus (2) the most recently calculated Loss Reserve Percentage
plus (3) the most recently calculated Yield Reserve Percentage.
"Required Reserves" means, on any day, an amount equal to the product of
(i) the Required Reserve Percentage multiplied by (ii) the Net Pool Balance as
of the close of business of the Servicer on such date.
"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 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.
"Restatement Date" means October 23, 2003.
"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc.
"Sales" means sales of the Originators which generate trade receivables.
- 16 -
"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.
"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.
- 17 -
"Termination Date" means the earliest of
(a) the Commitment Termination Date;
(b) the Purchase Termination Date;
(c) the Final Maturity Date; 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.
"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.
"Yield Reserve Percentage" means, for any Cut-Off Date, an amount
calculated in accordance with the following formula:
YRP = [(ED + PFR) x DSO x ASF]
--------
12
where:
YRP = the Yield Reserve Percentage
ED = the Earned Discount Rate;
PFR = Program Fee Rate;
DSO = Days Sales Outstanding Ratio; and
ASF = Applicable Stress Factor.
- 18 -
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.
- 19 -
Exhibit A
- --------------------------------------------------------------------------------
Obligor Applicable
Percentage
----------
- --------------------------------------------------------------------------------
At any time Owens & Minor's long- 9.0%, or such lesser percentage, not
term unsecured debt is rated at least less than 6.0% that results in not more
BB+ by S&P than $7,000,000 in Receivables of
Owens & Minor being Eligible
Receivables
- --------------------------------------------------------------------------------
At any time Owens & Minor's long- 6.0%
term unsecured debt is rated less than
BB+ by S&P
- --------------------------------------------------------------------------------
Exhibit B
Permitted Countries
PART I:
England
France
Germany
Japan
PART II:
Australia Ireland Sweden
Austria Italy Switzerland
Belgium Luxembourg Taiwan
Bermuda The Netherlands
Denmark New Zealand
Finland Norway
Greece Portugal
Hong Kong Singapore
Iceland Spain
Exhibit 10.2
Execution Version
AMENDMENT NO. 1
TO
PURCHASE AND SALE AGREEMENT
THIS AMENDMENT NO. 1 TO PURCHASE AND SALE AGREEMENT (this
"Amendment") dated as of October 23, 2003, is entered into among CONMED
CORPORATION ("ConMed"), as an originator and as initial Servicer ("Servicer"),
LINVATEC CORPORATION ("Linvatec"), LINVATEC CANADA ULC ("Linvatec Canada"),
together with CONMED and the other Persons who may become party hereto as
originators (each individually "Originator" and collectively the "Originators"),
and CONMED RECEIVABLES CORPORATION, as initial purchaser (the "Initial
Purchaser"). Capitalized terms used herein without definition shall have the
meanings ascribed thereto in the Purchase and Sale Agreement, referred to below.
PRELIMINARY STATEMENTS
A. Reference is made to that certain Purchase and Sale Agreement
dated as of November 1, 2001 among Originators, Servicer and the Initial
Purchaser (as amended, restated, supplemented or modified from time to time, the
"Purchase and Sale Agreement").
B. The parties hereto have agreed to amend certain provisions of the
Purchase and Sale Agreement upon the terms and conditions set forth herein.
SECTION 1. Amendment. The parties hereto hereby agree to amend the
Purchase and Sale Agreement as follows:
(i) to delete the definition of Receivables Purchase Agreement
set forth in the first paragraph of the definitions and substitute
the following therefor:
Amended and Restated Receivables Purchase Agreement, dated as
of even date herewith, among the Initial Purchaser, as Seller,
ConMed, as the initial Servicer, and Fleet National Bank, as
Purchaser and as Administrator (as the same may be amended,
modified or supplemented from time to time, the "Receivables
Purchase Agreement");
; and
(ii) to delete the legend set forth in clause (i) of Section
4.1 and substitute the following therefor:
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 NATIONAL BANK,
AS ADMINISTRATOR, PURSUANT TO AN AMENDED AND RESTATED
RECEIVABLES PURCHASE AGREEMENT, DATED AS OF OCTOBER 23, 2003,
AMONG CONMED RECEIVABLES CORPORATION, CONMED CORPORATION, AND
FLEET NATIONAL BANK, AS PURCHASER AND AS THE ADMINISTRATOR;
SECTION 2. Representations and Warranties. Each of the parties hereto
hereby represents and warrants to each other, as to itself that:
(a) this Amendment constitutes its legal, valid and binding
obligation, enforceable against it in accordance with its terms except as
enforceability may be limited by bankruptcy, insolvency, reorganization or
other similar laws affecting the enforcement of creditors' rights
generally and by general principles of equity, regardless of whether such
enforceability is considered in a proceeding in equity or at law; and
(b) on the date hereof, before and after giving effect to this
Amendment, no Liquidation Event has occurred and is continuing.
SECTION 3. Reference to and Effect on the Transaction Documents.
(a) Upon the effectiveness of this Amendment, (i) each reference in
the Purchase and Sale Agreement to "this Purchase and Sale Agreement",
"this Agreement", "hereunder", "hereof", "herein" or words of like import
shall mean and be a reference to the Purchase and Sale Agreement as
amended or otherwise modified hereby, and (ii) each reference to the
Purchase and Sale Agreement in any other Transaction Document or any other
document, instrument or agreement executed and/or delivered in connection
therewith, shall mean and be a reference to the Purchase and Sale
Agreement as amended or otherwise modified hereby.
(b) Except as specifically amended, terminated or otherwise modified
above, the terms and conditions of the Purchase and Sale Agreement, of all
other Transaction Documents and any other documents, instruments and
agreements executed and/or delivered in connection therewith, shall remain
in full force and effect and are hereby ratified and confirmed.
(c) The execution, delivery and effectiveness of this Amendment
shall not operate as a waiver of any right, power or remedy of the
Originators, Servicer or the Initial Purchaser under the Purchase and Sale
Agreement or any other Transaction Document or any other document,
instrument or agreement executed in connection
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therewith, nor constitute a waiver of any provision contained therein, in
each case except as specifically set forth herein.
SECTION 4. Execution in Counterparts. This Amendment may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which taken together shall constitute but one and the
same instrument. Delivery of an executed counterpart of a signature page to this
Amendment by telecopier shall be effective as delivery of a manually executed
counterpart of this Amendment.
SECTION 5. GOVERNING LAW.
THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK.
SECTION 6. Headings. Section headings in this Amendment are included
herein for convenience of reference only and shall not constitute a part of this
Amendment for any other purpose.
[Remainder of Page Deliberately Left Blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed by their respective officers 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:
Signature Page to Amendment No. 1
FLEET NATIONAL BANK, as Administrator
By:_________________________________
Name:
Title:
Exhibit 31.1
CERTIFICATION
I, Eugene R. Corasanti, certify that:
1. I have reviewed this quarterly report on Form 10-Q of CONMED Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
and have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the
period in which this report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such
evaluation; and
c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth
fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent
function):
a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
November 10, 2003
/s/ Eugene R. Corasanti
-----------------------
Eugene R. Corasanti
Chairman and Chief Executive Officer
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Exhibit 31.2
CERTIFICATION
I, Robert D. Shallish, certify that:
1. I have reviewed this quarterly report on Form 10-Q of CONMED Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
and have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the
period in which this report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such
evaluation; and
c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth
fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent
function):
a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
November 10, 2003
/s/ Robert D. Shallish Jr.
--------------------------
Robert D. Shallish, Jr.
Vice President - Finance and
Chief Financial Officer
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Exhibit 32.1
Section 1350 Certifications
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18,
United States Code)
Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a)
and (b) of section 1350, chapter 63 of title 18, United States Code), each of
the undersigned officers of CONMED Corporation, a New York corporation (the
"Corporation"), does hereby certify that:
The Quarterly Report on Form 10-Q for the quarter ended September 30, 2003
(the "Form 10-Q") of the Corporation fully complies with the requirements of
section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information
contained in the Form 10-Q fairly presents, in all material respects, the
financial condition and results of operations of the Corporation.
Date: November 10, 2003 /s/ Eugene R. Corasanti
-----------------------
Eugene R. Corasanti
Chairman and Chief Executive Officer
Date: November 10, 2003 /s/ Robert D. Shallish, Jr.
---------------------------
Robert D. Shallish, Jr.
Vice President-Finance and Chief
Financial Officer
The foregoing certification is being furnished as an exhibit to the Form 10-Q
pursuant to Item 601(b)(32) of Regulation S-K and section 906 of the
Sarbanes-Oxley Act of 2002 (subsection (a) and (b) of section 1350, chapter 63
of title 18, United States Code) and, accordingly, is not being filed as part of
the Form 10-Q.
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