0000094845-01-500045.txt : 20011009
0000094845-01-500045.hdr.sgml : 20011009
ACCESSION NUMBER: 0000094845-01-500045
CONFORMED SUBMISSION TYPE: 10-Q
PUBLIC DOCUMENT COUNT: 7
CONFORMED PERIOD OF REPORT: 20010826
FILED AS OF DATE: 20011003
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: LEVI STRAUSS & CO
CENTRAL INDEX KEY: 0000094845
STANDARD INDUSTRIAL CLASSIFICATION: APPAREL & OTHER FINISHED PRODS OF FABRICS & SIMILAR MATERIAL [2300]
IRS NUMBER: 940905160
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1125
FILING VALUES:
FORM TYPE: 10-Q
SEC ACT: 1934 Act
SEC FILE NUMBER: 002-90139
FILM NUMBER: 1751463
BUSINESS ADDRESS:
STREET 1: 1155 BATTERY ST
CITY: SAN FRANCISCO
STATE: CA
ZIP: 94111
BUSINESS PHONE: 4155446000
MAIL ADDRESS:
STREET 1: 1155 BATTERY STREET
CITY: SAN FRAINCISCO
STATE: CA
ZIP: 94111
10-Q
1
body10q3.txt
FORM 10-Q
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED AUGUST 26, 2001
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number: 333-36234
LEVI STRAUSS & CO.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 94-0905160
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1155 BATTERY STREET, SAN FRANCISCO, CALIFORNIA 94111
(Address of Principal Executive Offices)
(415) 501-6000
(Registrant's Telephone Number, Including Area Code)
None
(Former Name, Former Address, and Former Fiscal Year, if Changed
Since Last Report)
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock $.01 par value --- 37,278,238 shares outstanding on October 3, 2001
LEVI STRAUSS & CO.
INDEX TO FORM 10-Q
AUGUST 26, 2001
PAGE
NUMBER
------
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets as of August 26, 2001 and November 26, 2000.............. 3
Consolidated Statements of Income for the Three and Nine Months Ended
August 26, 2001 and August 27, 2000................................................. 4
Consolidated Statements of Cash Flows for the Nine Months Ended
August 26, 2001 and August 27, 2000................................................. 5
Notes to the Consolidated Financial Statements....................................... 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations......................................................................... 19
Item 3. Quantitative and Qualitative Disclosures about Market Risk........................... 25
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K..................................................... 26
SIGNATURE....................................................................................... 27
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LEVI STRAUSS & CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
August 26, November 26,
2001 2000
---- ----
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents...................................................... $ 63,765 $ 117,058
Trade receivables, net of allowance for doubtful accounts of $29,923 in 2001
and $29,717 in 2000......................................................... 576,880 660,128
Inventories:
Raw materials.............................................................. 121,171 120,760
Work-in-process............................................................ 78,674 84,871
Finished goods............................................................. 596,318 446,618
---------- ----------
Total inventories....................................................... 796,163 652,249
Deferred tax assets............................................................ 247,325 250,817
Other current assets........................................................... 134,037 168,621
---------- ----------
Total current assets............................................... 1,818,170 1,848,873
Property, plant and equipment, net of accumulated depreciation of $529,808 in
2001 and $495,986 in 2000......................................................... 528,577 574,039
Goodwill and other intangibles, net of accumulated amortization of $172,877 in
2001 and $164,826 in 2000......................................................... 257,103 264,956
Non-current deferred tax assets...................................................... 420,532 439,692
Other assets ........................................................................ 113,639 78,168
---------- ----------
Total Assets....................................................... $3,138,021 $3,205,728
========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Current maturities of long-term debt and short-term borrowings................. $ 109,273 $ 231,290
Accounts payable............................................................... 208,452 268,473
Restructuring reserves......................................................... 53,411 71,595
Accrued liabilities............................................................ 359,813 395,660
Accrued salaries, wages and employee benefits.................................. 180,010 257,021
Accrued taxes.................................................................. 14,281 69,772
---------- ----------
Total current liabilities.......................................... 925,240 1,293,811
Long-term debt, less current maturities.............................................. 2,048,677 1,895,140
Postretirement medical benefits...................................................... 550,331 545,574
Long-term employee related benefits.................................................. 392,103 358,849
Long-term tax liability.............................................................. 175,492 166,854
Other long-term liabilities.......................................................... 21,394 20,588
Minority interest ................................................................... 21,055 23,485
---------- ----------
Total liabilities.................................................. 4,134,292 4,304,301
---------- ----------
Stockholders' Deficit:
Common stock--$.01 par value; authorized 270,000,000 shares; issued and
outstanding: 37,278,238 shares.............................................. 373 373
Additional paid-in capital..................................................... 88,808 88,808
Accumulated deficit............................................................ (1,083,841) (1,171,864)
Accumulated other comprehensive loss........................................... (1,611) (15,890)
---------- ----------
Total stockholders' deficit........................................ (996,271) (1,098,573)
---------- ----------
Total Liabilities and Stockholders' Deficit........................ $3,138,021 $3,205,728
========== ==========
The accompanying notes are an integral part of these financial statements.
3
LEVI STRAUSS & CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in Thousands, Except Per Share Data)
(Unaudited)
Three Months Ended Nine Months Ended
------------------ -----------------
August 26, August 27, August 26, August 27,
2001 2000 2001 2000
---- ---- ---- ----
Net sales........................................................ $ 983,508 $1,127,740 $3,023,828 $3,359,221
Cost of goods sold............................................... 584,279 663,418 1,732,170 1,957,328
---------- ---------- ---------- ----------
Gross profit.................................................. 399,229 464,322 1,291,658 1,401,893
Marketing, general and administrative expenses................... 314,482 358,524 976,706 1,048,052
Other operating income........................................... 8,377 10,404 22,916 20,852
---------- ---------- ---------- ----------
Operating income.............................................. 93,124 116,202 337,868 374,693
Interest expense................................................. 55,429 59,406 178,532 177,177
Other (income) expense, net...................................... 13,850 (1,359) 19,617 (30,151)
---------- ---------- ---------- ----------
Income before taxes........................................... 23,845 58,155 139,719 227,667
Provision for taxes.............................................. 8,822 20,354 51,696 79,683
---------- ---------- ---------- ----------
Net income.................................................... $ 15,023 $ 37,801 $ 88,023 $ 147,984
========== ========== ========== ==========
Earnings per share--basic and diluted............................. $ 0.40 $ 1.01 $ 2.36 $ 3.97
========== ========== ========== ==========
Weighted-average common shares outstanding....................... 37,278,238 37,278,238 37,278,238 37,278,238
========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements.
4
LEVI STRAUSS & CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
Nine Months Ended
-----------------
August 26, August 27,
2001 2000
---- ----
Cash Flows from Operating Activities:
Net income................................................................... $ 88,023 $147,984
Adjustments to reconcile net cash (used for) provided by operating activities:
Depreciation and amortization........................................ 60,810 69,563
(Gain) loss on disposition of property, plant and equipment.......... 1,167 (26,025)
Unrealized foreign exchange gains.................................... (5,143) (6,877)
Decrease in trade receivables........................................ 84,532 74,746
Decrease in income taxes receivables................................. -- 70,000
(Increase) decrease in inventories................................... (135,120) 10,836
Decrease (increase) in other current assets.......................... 31,151 (5,198)
Increase in other long-term assets................................... (35,189) (18,377)
Decrease in net deferred tax assets.................................. 18,310 42,836
Decrease in accounts payable and accrued liabilities................. (100,729) (13,010)
Decrease in restructuring reserves................................... (18,184) (169,043)
(Decrease) increase in accrued salaries, wages and employee benefits. (78,315) 9,358
(Decrease) increase in accrued taxes................................. (54,418) 37,815
Increase in long-term employee benefits.............................. 38,070 22,529
Increase (decrease) in other long-term liabilities................... 8,251 (33,921)
Other, net........................................................... 3,440 (13,924)
---------- --------
Net cash (used for) provided by operating activities.............. (93,344) 199,292
---------- --------
Cash Flows from Investing Activities:
Purchases of property, plant and equipment........................... (14,621) (15,799)
Proceeds from sale of property, plant and equipment.................. 2,903 106,965
(Increase) decrease in net investment hedges......................... (1,664) 52,884
Other, net........................................................... -- 152
--------- --------
Net cash (used for) provided by investing activities.............. (13,382) 144,202
--------- --------
Cash Flows from Financing Activities:
Proceeds from issuance of long-term debt............................. 1,801,702 340,500
Repayments of long-term debt......................................... (1,744,955) (799,238)
Net (decrease) increase in short-term borrowings..................... (6,439) 1,549
---------- --------
Net cash provided by (used for) financing activities.............. 50,308 (457,189)
---------- --------
Effect of exchange rate changes on cash...................................... 3,125 (3,675)
---------- --------
Net decrease in cash and cash equivalents......................... (53,293) (117,370)
Beginning cash and cash equivalents.......................................... 117,058 192,816
---------- --------
Ending Cash and Cash Equivalents............................................. $ 63,765 $ 75,446
========== ========
Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for:
Interest............................................................. $ 138,702 $135,052
Income taxes......................................................... 78,664 30,641
Restructuring initiatives............................................ 18,184 169,043
The accompanying notes are an integral part of these financial statements.
5
LEVI STRAUSS & CO. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1: PREPARATION OF FINANCIAL STATEMENTS
The unaudited consolidated financial statements of Levi Strauss & Co. and
subsidiaries ("LS&CO." or "Company") are prepared in conformity with generally
accepted accounting principles for interim financial information. In the opinion
of management, all adjustments necessary for a fair presentation of the
financial position and operating results for the periods presented have been
included. These unaudited consolidated financial statements should be read in
conjunction with the audited consolidated financial statements of LS&CO. for the
year ended November 26, 2000 included in the annual report on Form 10-K filed by
LS&CO. with the Securities and Exchange Commission (the "SEC") on February 5,
2001.
The consolidated financial statements include the accounts of LS&CO. and
its subsidiaries. All intercompany transactions have been eliminated. Management
believes that, along with the following information, the disclosures are
adequate to make the information presented herein not misleading. Certain prior
year amounts have been reclassified to conform to the current presentation. The
results of operations for the three and nine months ended August 26, 2001 may
not be indicative of the results to be expected for the year ending November 25,
2001.
The Company adopted Statement of Financial Accounting Standards No.("SFAS")
133, "Accounting for Derivative Instruments and Hedging Activities," on the
first day of fiscal year 2001. Due to the adoption of SFAS 133, the Company
reported a net transition gain in other income/expense for the nine months ended
August 26, 2001 of $87 thousand. This transition amount was not recorded as a
separate line item as a change in accounting principle, net of tax, due to the
minimal impact on the Company's results of operations. In addition, the Company
recorded a transition amount of $0.7 million (or $0.4 million net of related
income taxes) that reduced other comprehensive income. (See Note 7 to the
Consolidated Financial Statements.)
The Company adopted SFAS 140, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities," which replaces SFAS 125,
"Accounting for Transfers and Services of Financial Assets and Extinguishments
of Liabilities," in fiscal year 2001. SFAS 140 revises the methods for
accounting for securitizations and other transfers of financial assets and
collateral as outlined in SFAS 125, and requires certain additional disclosures.
The adoption of SFAS 140 had no financial impact on the Company. (See Note 4 to
the Consolidated Financial Statements.)
The Financial Accounting Standards Board issued SFAS 142, "Goodwill and
Other Intangible Assets," dated June 2001, which requires that goodwill and
intangible assets with indefinite useful lives no longer be amortized but
instead be reviewed annually for impairment using a fair-value based approach.
Intangible assets that have a finite life will continue to be amortized over
their respective estimated useful lives. The Company is required to adopt the
provisions of SFAS 142 on the first day of fiscal year 2003; however, early
application is permitted in which the Company can adopt SFAS 142 on November 26,
2001. The Company has not yet determined if it will adopt this standard early
and is currently evaluating the impact SFAS 142 may have on its financial
position and results of operations.
6
LEVI STRAUSS & CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
(Unaudited)
NOTE 2: COMPREHENSIVE INCOME
The following is a summary of the components of total comprehensive income, net of related income taxes:
Three Months Ended Nine Months Ended
------------------ -----------------
August 26, August 27, August 26, August 27,
2001 2000 2001 2000
---- ---- ---- ----
(Dollars in Thousands)
Net income.......................................................... $15,023 $37,801 $ 88,023 $147,984
------- ------- -------- --------
Other comprehensive income (loss):
Transition adjustments:
Unrealized losses on cash flow hedges........................ -- -- (522) --
Reclassification of cash flow hedges to other
income/expense............................................. 130 -- 391 --
------- ------- -------- --------
Net gains (losses) on cash flow hedges...................... 130 -- (131) --
Net investment hedges........................................ -- -- 76 --
------- ------- -------- --------
Total transition adjustments............................... 130 -- (55) --
------- ------- -------- --------
Foreign currency translation adjustments:
Net investment hedges........................................ (5,403) 6,011 (3,081) 23,207
Foreign currency translations................................ 10,628 12,657 18,009 (20,190)
------- ------- -------- --------
Total foreign currency translation adjustments............. 5,225 18,668 14,928 3,017
------- ------- -------- --------
Unrealized gains (losses) on cash flow hedges.................. (2,163) -- 1,364 --
Reclassification of cash flow hedges to other
income/expense............................................... (953) -- (1,958) --
------- ------- -------- --------
Net gains on cash flow hedges................................ (3,116) -- (594) --
------- ------- -------- --------
Total other comprehensive income........................... 2,239 18,668 14,279 3,017
------- ------- -------- --------
Total comprehensive income.......................................... $17,262 $56,469 $102,302 $151,001
======= ======= ======== ========
The following is a summary of the components of accumulated other comprehensive income (loss) balances:
August 26, November 26,
2001 2000
---- ----
(Dollars in Thousands)
Cumulated transition adjustments:
Beginning balance of cash flow hedges.................. $ -- $ --
Unrealized losses on cash flow hedges................. (522) --
Reclassification of cash flow hedges to other
income/expense...................................... 391 --
------- --------
Ending balance of cash flow hedges..................... (131) --
Net investment hedges.................................. 76 --
------- --------
Total cumulated transition adjustments............... (55) --
------- --------
Cumulated translation adjustments:
Net investment hedges.................................. 36,393 39,474
Foreign currency translations.......................... (37,355) (55,364)
------- --------
Total cumulated translation adjustments.............. (962) (15,890)
------- --------
Beginning balance of cash flow hedges.................. -- --
Unrealized gains on cash flow hedges.................. 1,364 --
Reclassification of cash flow hedges to other
income/expense...................................... (1,958) --
------- --------
Ending balance of cash flow hedges..................... (594) --
------- --------
Accumulated other comprehensive loss..................... $(1,611) $(15,890)
======= ========
7
LEVI STRAUSS & CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
(Unaudited)
NOTE 3: EXCESS CAPACITY/RESTRUCTURING RESERVES
NORTH AMERICA PLANT CLOSURES
In view of declining sales that started in 1997, the need to bring
manufacturing capacity in line with sales projections and the need to reduce
costs, the Company decided to close some of its owned and operated production
facilities in North America. The Company announced in 1997 the closure of ten
manufacturing facilities and a finishing center in the U.S., which were closed
during 1998 and displaced approximately 6,400 employees. The table below
displays the activity and liability balances of this reserve.
In 1998, the Company announced the closures of two more finishing centers
in the U.S. that were closed during 1999 and displaced approximately 990
employees. The table below displays the activity and liability balances of this
reserve.
The Company announced in February 1999 plans to close 11 manufacturing
facilities in North America. The 11 manufacturing facilities were closed during
1999 and approximately 5,900 employees were displaced. The table below displays
the activity and liability balances of this reserve.
1997 NORTH AMERICA PLANT CLOSURES
Balance Balance
11/26/00 Reductions 8/26/01
-------- ---------- -------
(Dollars in Thousands)
Severance and employee benefits........................................ $ 221 $ (35) $ 186
Other restructuring costs.............................................. 2,226 (473) 1,753
------ ----- ------
Total............................................................... $2,447 $(508) $1,939
====== ===== ======
1998 NORTH AMERICA PLANT CLOSURES
Balance Balance
11/26/00 Reductions 8/26/01
-------- ---------- -------
(Dollars in Thousands)
Severance and employee benefits........................................ $1,449 $(121) $1,328
Other restructuring costs.............................................. 608 (4) 604
------ ----- ------
Total............................................................... $2,057 $(125) $1,932
====== ===== ======
1999 NORTH AMERICA PLANT CLOSURES
Balance Balance
11/26/00 Reductions 8/26/01
-------- ---------- -------
(Dollars in Thousands)
Severance and employee benefits........................................ $19,852 $ (6,965) $12,887
Other restructuring costs.............................................. 34,765 (5,238) 29,527
------- -------- -------
Total............................................................... $54,617 $(12,203) $42,414
======= ======== =======
8
LEVI STRAUSS & CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
(Unaudited)
CORPORATE REORGANIZATION INITIATIVES
Starting in 1998, the Company instituted various overhead reorganization
initiatives to reduce overhead costs and consolidate operations. The
reorganization initiative instituted in 1998 displaced approximately 770
employees. The table below displays the activity and liability balances of this
reserve.
In conjunction with the overhead reorganization initiatives, the Company
announced restructuring plans during 1999 that are estimated to displace
approximately 730 employees. As of August 26, 2001, approximately 715 employees
had been displaced. The table below displays the activity and liability balances
of this reserve.
1998 CORPORATE REORGANIZATION INITIATIVES
Balance Balance
11/26/00 Reductions 8/26/01
--------- ---------- -------
(Dollars in Thousands)
Severance and employee benefits..................................... $ 100 $ (100) $ -
Other restructuring costs........................................... 1,773 (230) 1,543
------ ------ ------
Total............................................................ $1,873 $ (330) $1,543
====== ====== ======
1999 CORPORATE REORGANIZATION INITIATIVES
Balance Balance
11/26/00 Reductions 8/26/01
-------- ---------- -------
(Dollars in Thousands)
Severance and employee benefits..................................... $2,762 $(1,198) $1,564
====== ======= ======
EUROPE REORGANIZATION AND PLANT CLOSURES
In 1998, the Company announced plans to close two manufacturing and two
finishing facilities, and reorganize operations throughout Europe, displacing
approximately 1,650 employees. These plans were prompted by decreased demand for
denim jeans products and a resulting over-capacity in the Company's European
owned and operated plants. The production facilities were closed by the end of
1999 and as of August 26, 2001, approximately 1,645 employees had been
displaced. The table below displays the activity and liability balances of this
reserve.
In conjunction with these plans in Europe, the Company announced in
September 1999 plans to close a production facility and reduce capacity at a
finishing facility in the United Kingdom. The production facility closed in
December 1999. As of August 26, 2001, approximately 945 employees were
displaced. The table below displays the activity and liability balances of this
reserve.
9
LEVI STRAUSS & CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
(Unaudited)
1998 EUROPE REORGANIZATION AND PLANT CLOSURES
Balance Balance
11/26/00 Reductions 8/26/01
-------- ---------- -------
(Dollars in Thousands)
Severance and employee benefits................................... $1,508 $(989) $519
====== ===== ====
1999 EUROPE REORGANIZATION AND PLANT CLOSURES
Balance Balance
11/26/00 Reductions 8/26/01
-------- ---------- -------
(Dollars in Thousands)
Severance and employee benefits................................... $5,691 $(2,831) $2,860
Other restructuring costs......................................... 640 -- 640
------ ------- ------
Total.......................................................... $6,331 $(2,831) $3,500
====== ======= ======
Reductions consist of payments for severance and employee benefits and
other restructuring costs. The balance of severance and employee benefits and
other restructuring costs are included under restructuring reserves on the
balance sheet.
NOTE 4: FINANCING
SENIOR NOTES OFFERING
On January 18, 2001, the Company issued two series of notes payable
totaling the equivalent of $497.5 million to qualified institutional investors
in reliance on Rule 144A under the Securities Act of 1933 (the "Securities Act")
and outside the U.S. in accordance with Regulation S under the Securities Act.
The notes are unsecured obligations of the Company and may be redeemed at any
time after January 15, 2005. The issuance was divided into two series: U.S.
$380.0 million dollar notes ("Dollar Notes") and 125.0 million euro notes ("Euro
Notes"), (collectively, the "Notes"). Both series of notes are seven-year notes
maturing on January 15, 2008 and bear interest at 11.625% per annum, payable
semi-annually in January and July of each year. These Notes were offered at a
discount of $5.2 million to be amortized over the term of the Notes. Costs
representing underwriting fees and other expenses of $14.4 million on the
original issue will be amortized over the term of the Notes. Net proceeds from
the offering were used to repay a portion of the indebtedness outstanding under
the credit facility.
The indentures governing the Notes contain covenants that limit the
Company's and its subsidiaries' ability to incur additional debt; pay dividends
or make other restricted payments; consummate specified asset sales; enter into
transactions with affiliates; incur liens; impose restrictions on the ability of
a subsidiary to pay dividends or make payments to the Company and its
subsidiaries; merge or consolidate with any other person; and sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of the
Company's assets or the assets of the Company's subsidiaries. If the Company
experiences a change in control as defined in the indentures governing the
Notes, the Company will be required under the indentures to make an offer to
repurchase the Notes at a price equal to 101% of the principal amount plus
accrued and unpaid interest, if any, to the date of repurchase. If the Notes
receive and maintain an investment grade rating by both Standard and Poor's
Ratings Service and Moody's Investors Service and the Company and its
subsidiaries are and remain in compliance with the indentures, then the Company
and its subsidiaries will not be required to comply with specified covenants
contained in the indentures.
10
LEVI STRAUSS & CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
(Unaudited)
SENIOR NOTES EXCHANGE OFFER
In March 2001, the Company, as required under registration rights
agreements it entered into when it issued the Notes, filed a registration
statement on Form S-4 under the Securities Act with the SEC relating to an
exchange offer for the Notes. The exchange offer gave holders the opportunity to
exchange the Notes for new notes that are registered under the Securities Act.
The new notes are identical in all material respects to the old notes except
that the new notes are registered under the Securities Act. The exchange offer
ended on April 6, 2001. As a result of the exchange offer, all but $200 thousand
of the $380.0 million aggregate principal amount of old Dollar Notes were
exchanged for new Dollar Notes, and all but 595 thousand euro of the 125.0
million aggregate principal amount of old Euro Notes were exchanged for new Euro
Notes.
SENIOR SECURED CREDIT FACILITY
On February 1, 2001, the Company entered into a $1.05 billion senior
secured credit facility to replace its existing credit facility on more
favorable terms. The credit facility consists of a $700.0 million revolving
credit facility and $350.0 million of term loans. This facility reduces the
Company's borrowing costs and extends the maturity of the Company's principal
bank credit facility to August 2003.
The facility is secured in substantially the same manner as the prior
facility. Collateral includes: domestic inventories, certain domestic equipment,
trademarks, other intellectual property, 100% of the stock in domestic
subsidiaries, 65% of the stock of certain foreign subsidiaries and other assets.
Borrowings under the facility bear interest at LIBOR or the agent bank's base
rate plus an incremental borrowing spread. Before the domestic receivables
securitization transaction described below, the collateral also included
domestic receivables. In connection with the securitization transaction, the
lenders under the credit facility released their security interest in
receivables sold in that transaction, and retained security interests in certain
related assets.
The facility contains customary covenants restricting the Company's
activities as well as those of its subsidiaries, including limitations on the
Company's and its subsidiaries' ability to sell assets; engage in mergers; enter
into operating leases or capital leases; enter into transactions involving
related parties, derivatives or letters of credit; enter into intercompany
transactions; incur indebtedness or grant liens or negative pledges on the
Company's assets; make loans or other investments; pay dividends or repurchase
stock or other securities; guaranty third party obligations; make capital
expenditures; and make changes in the Company's corporate structure. The
facility also contains financial covenants that the Company must satisfy on an
ongoing basis, including maximum leverage ratios and minimum coverage ratios. As
of August 26, 2001, the Company was in compliance with the financial covenants
under the facility.
EUROPEAN RECEIVABLES SECURITIZATION AGREEMENTS
In February 2000, several of the Company's European subsidiaries entered
into receivable securitization financing agreements with several lenders to
borrow up to $125.0 million. Borrowings are collateralized by a security
interest in the receivables of these subsidiaries. The Company adopted SFAS 140,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities," in fiscal year 2001. The securitizations did not meet the
criteria for sales accounting under SFAS 140 and therefore have been
consistently accounted for as a secured borrowing.
11
LEVI STRAUSS & CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
(Unaudited)
DOMESTIC RECEIVABLES SECURITIZATION TRANSACTION
On July 31, 2001, the Company and several of its subsidiaries completed a
receivables securitization transaction involving receivables generated from
sales of products to the Company's U.S. customers. The transaction involved the
issuance by Levi Strauss Receivables Funding, LLC, an indirect subsidiary of the
Company, of $110.0 million in secured term notes. The notes, which are secured
by trade receivables originated by Levi Strauss & Co., bear interest at a rate
equal to the one-month LIBOR rate plus 0.32% per annum, and have a stated
maturity date of November 2005. Net proceeds of the offering were used to repay
a portion of the outstanding debt under the Company's senior secured credit
facility. The transaction is accounted for under SFAS 140. The transaction did
not meet the criteria for sales accounting under SFAS 140 and therefore is
accounted for as a secured borrowing. The purpose of the transaction was to
lower the Company's interest expense and diversify its funding sources. The
notes were issued in a private placement transaction in accordance with Rule
144A under the Securities Act and, accordingly, have not been registered under
the Securities Act and may not be sold in the United States absent registration
or an applicable exemption from the registration requirements under the
Securities Act.
Under the securitization arrangement, collections on receivables remaining
after payment of interest and fees relating to the notes are used to purchase
new receivables from Levi Strauss & Co. The securitization agreements provide
that, in specified cases, the collections will not be released but will instead
be deposited and used to pay the principal amount of the notes. Those
circumstances include, among other things, failure to maintain the required
level of overcollaterization due to deterioration in the credit quality of the
receivables, failure to pay interest or other amounts which is not cured,
breaches of covenants, representations and warranties or events of bankruptcy
relating to the Company and certain of its subsidiaries.
INTEREST RATE CONTRACTS
The Company is exposed to interest rate risk. It is the Company's policy
and practice to use derivative instruments, primarily interest rate swaps and
options, to manage and reduce interest rate exposures.
The Company has entered into interest rate option contracts to reduce or
neutralize the exposure to changes in variable interest rates. As of August 26,
2001, the contracts represent an outstanding notional amount of $425.0 million
and cover a series of variable cash flows through November 2001. The contracts
do not qualify for hedge accounting and therefore the Company reports changes in
fair value in other income/expense (see Note 7 to the Consolidated Financial
Statements). At August 26, 2001, the Company had no interest rate swap
transactions outstanding.
The Company's market risk is generally related to fluctuations in interest
rates. The Company is exposed to credit loss in the event of nonperformance by
the counterparties to the interest rate derivative transactions. However, the
Company believes these counterparties are creditworthy financial institutions
and does not anticipate nonperformance.
INTEREST RATES ON BORROWINGS
The Company's weighted average interest rate on average borrowings
outstanding during the three and nine months ended August 26, 2001, including
the amortization of capitalized bank fees, interest rate swap cancellations and
underwriting fees, was 9.4% and 9.6%, respectively. These interest rates exclude
the write-off of fees that resulted from the replacement of the credit agreement
dated January 31, 2000 (see "Senior Secured Credit Facility" above).
12
LEVI STRAUSS & CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
(Unaudited)
NOTE 5: COMMITMENTS AND CONTINGENCIES
FOREIGN EXCHANGE CONTRACTS
At August 26, 2001, the Company had U.S. dollar forward currency contracts
to buy $1.0 billion and to sell $515.6 million against various foreign
currencies. The Company also had euro forward currency contracts to buy 119.6
million euro against various foreign currencies and to sell 70.3 million euro
against various foreign currencies. In addition, the Company had U.S. dollar
option contracts to buy $1.5 billion and to sell $841.0 million against various
foreign currencies. The Company also had euro option currency contracts to buy
160.0 million euro against various foreign currencies and to sell 60.0 million
euro against various foreign currencies. These contracts are at various exchange
rates and expire at various dates through December 2002.
The Company has entered into option contracts to hedge its exposure to
numerous foreign currencies. Option transactions included in the amounts above
are principally for the exchange of the euro and U.S. dollar. At August 26,
2001, the Company had bought U.S. dollar options to sell $347.0 million against
the euro. To finance the option premiums related to these options, the Company
sold options having the obligation to buy $245.7 million against the euro.
The Company's market risk is generally related to fluctuations in the
currency exchange rates. The Company is exposed to credit loss in the event of
nonperformance by the counterparties to the foreign exchange contracts. However,
the Company believes these counterparties are creditworthy financial
institutions and does not anticipate nonperformance.
OTHER CONTINGENCIES
In the ordinary course of its business, the Company has pending various
cases involving contractual, employee-related, distribution, product liability,
product recall, trademark infringement and other matters. The Company does not
believe there are any pending legal proceedings that will have a material impact
on the Company's financial position or results of operations.
The operations and properties of the Company comply with all applicable
federal, state and local laws enacted for the protection of the environment, and
with permits and approvals issued in connection therewith, except where the
failure to comply would not reasonably be expected to have a material adverse
effect on the Company's financial position or business operations. Based on
currently available information, the Company does not consider there to be any
circumstances existing that would be reasonably likely to form the basis of an
action against the Company that could have a material adverse effect on the
Company's financial position or business operations.
13
LEVI STRAUSS & CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
(Unaudited)
NOTE 6: FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value of certain financial instruments has been
determined by the Company using available market information and appropriate
valuation methodologies. However, considerable judgment is required in
interpreting market data. Accordingly, the estimates presented herein are not
necessarily indicative of the amounts that the Company could realize in a
current market exchange.
The carrying amount and estimated fair value (in each case including
accrued interest) of the Company's financial instrument assets and (liabilities)
at August 26, 2001 and November 26, 2000 are as follows:
August 26, November 26,
2001 2000
---- ----
Carrying Estimated Carrying Estimated
Value Fair Value Value Fair Value
----- ---------- ----- ----------
(Dollars in Thousands)
DEBT INSTRUMENTS:
Credit facilities.................................. $ (439,009) $(439,009) $(1,000,131) $(1,000,131)
Yen-denominated eurobond placement................. (168,943) (123,333) (184,043) (133,945)
U.S. dollar notes offering......................... (1,195,394) (983,500) (799,606) (628,000)
Euro notes offering................................ (115,397) (101,905) -- --
European receivables-backed securitization......... (42,960) (42,960) (31,148) (31,148)
Domestic receivables-backed securitization......... (110,145) (110,145) -- --
Industrial development revenue refunding bond...... (10,021) (10,021) (10,036) (10,036)
Customer service center equipment financing........ (80,065) (80,065) (86,901) (86,901)
CURRENCY AND INTEREST RATE HEDGES:
Foreign exchange forward contracts................. $ (6,482) $ (6,482) $ 9,830 $ 9,593
Foreign exchange option contracts.................. (1,312) (1,312) 7,309 6,289
Interest rate option contracts..................... (4,643) (4,643) 457 (789)
Quoted market prices or dealer quotes are used to determine the estimated
fair value of foreign exchange contracts, option contracts and interest rate
swap contracts. Dealer quotes and other valuation methods, such as the
discounted value of future cash flows, replacement cost and termination cost
have been used to determine the estimated fair value for long-term debt and the
remaining financial instruments. The carrying values of cash and cash
equivalents, trade receivables, current assets, certain current and non-current
maturities of long-term debt, short-term borrowings and taxes approximate fair
value.
The fair value estimates presented herein are based on information
available to the Company as of August 26, 2001 and November 26, 2000. These
amounts have not been updated since those dates and, therefore, the current
estimates of fair value at dates subsequent to August 26, 2001 and November 26,
2000 may differ substantially from these amounts. In addition, the aggregation
of the fair value calculations presented herein do not represent and should not
be construed to represent the underlying value of the Company.
14
LEVI STRAUSS & CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
(Unaudited)
NOTE 7: DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
The Company adopted SFAS 133, "Accounting for Derivative Instruments and
Hedging Activities," on the first day of fiscal year 2001. Due to the adoption
of SFAS 133, the Company reported a net gain transition amount of $87 thousand
in other income/expense. This transition amount was not recorded on a separate
line item as a change in accounting principle net of tax, due to the minimal
impact on the Company's results of operations. In addition, the Company recorded
a transition amount of $0.7 million (or $0.4 million net of related income
taxes) that reduced accumulated other comprehensive income.
Foreign Exchange Hedging
The primary purpose of the Company's foreign exchange hedging activities
is to maximize the U.S. dollar value over the long term. The Company manages
foreign currency exposures in a way that makes it unlikely to obtain hedge
accounting treatment for all exposure management activities. The Company
attempts to take a long-term view of managing exposures on an economic basis,
using forecasts to develop exposure positions and engaging in active management
of those exposures with the objective of protecting future cash flows and
mitigating risks. As a result, not all exposure management activities and
foreign currency derivative instruments will qualify for hedge accounting
treatment. Derivative instruments utilized in these transactions are being
valued at fair value with changes in fair value classified into earnings. The
Company does not enter into or hold any derivative instruments for trading
purposes.
The Company uses a variety of derivative instruments, including forward,
swap and option contracts, to protect against foreign currency exposures related
to sourcing, net investment positions, royalties and cash management.
The derivative instruments used to hedge sourcing exposures do not qualify
for hedge accounting treatment and are recorded at their fair value and any
changes in fair value are included in other income/expense.
The Company hedges its net investment position in its subsidiaries in
major currencies by using forward, swap and option contracts. Part of the
contracts hedging these net investments qualify for hedge accounting and the
related gains and losses are consequently categorized in the cumulative
translation adjustment in the accumulated other comprehensive income section of
stockholders' deficit. At August 26, 2001, the fair value of qualifying net
investment hedges was a $0.5 million net asset of which $0.5 million was
recorded in the cumulative translation adjustment section of accumulated other
comprehensive income. There were no gains or losses excluded from hedge
effectiveness testing. In addition, the Company holds derivatives hedging the
net investment positions in major currencies that do not qualify for hedge
accounting. The fair value of these net investment hedges at August 26, 2001
represented a $1.6 million net asset.
The Company designates a portion of its outstanding yen-denominated
eurobond as a net investment hedge. As of August 26, 2001, a $5.3 million net
asset related to the translation effects of the eurobond was recorded in the
cumulative translation adjustment section of accumulated other comprehensive
income.
15
LEVI STRAUSS & CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
(Unaudited)
The Company holds derivatives hedging forecasted intercompany royalty flows
that qualify as cash flow hedges. The fair value of the outstanding contracts
qualifying as cash flow hedges amounted to a $1.3 million net liability as of
August 26, 2001. The gains and losses on the contracts that qualify for hedge
accounting treatment are recorded in accumulated other comprehensive income
until the underlying royalty flow has been settled. Hedging activity for
qualifying cash flow hedges of a net loss of $0.9 million is expected to be
reclassified to earnings in the next sixteen months as the underlying hedged
items affect earnings. For the three months ended August 26, 2001, a net loss of
$0.3 million related to ineffectiveness of qualifying cash flow hedges of such
intercompany royalty flows was recorded in other income/expense. The amount of
matured cash flow hedges reclassified during the three months ended August 26,
2001 from accumulated other comprehensive income to other income/expense
amounted to a net gain of $1.5 million. No cash flow hedges were discontinued
during the three months ended August 26, 2001. The Company also enters into
contracts hedging forecasted intercompany royalty flows that do not qualify as
cash flow hedges. The fair value of these instruments as of August 26, 2001 was
a $1.2 million net liability.
The derivative instruments utilized in transactions hedging cash
management exposures are currently marked to market at their fair value and any
changes in fair value are recorded in other income/expense.
The Company also entered into transactions hedging the exposure related to
the Euro Notes issued on January 18, 2001. These derivative instruments are
currently marked to market at their fair value and any changes in fair value are
recorded in other income/expense.
Fair values of forward transactions and of the forward portion of swap
transactions are calculated using the discounted difference between the contract
forward price and the forward price at the closing date for the remaining life
of the contract. Prior to the adoption of SFAS 133, forward points and option
premiums were recorded as assets or liabilities on the balance sheet and
amortized over the life of the contract. Option contracts are also recorded at
fair value. Due to the adoption of SFAS 133, these changes in valuation methods
resulted in a net gain of $1.3 million that was recorded in other
income/expense. In addition, the accumulated other comprehensive income section
of stockholders' deficit decreased by approximately $0.7 million. As of August
26, 2001, the transition adjustment related to qualifying cash flow hedges
amounted to a net loss of $0.2 million. This net loss is expected to be
reclassified to earnings in the next three months as the underlying hedged items
affect earnings. For the three months ended August 26, 2001, the Company
reclassified a net realized loss of $0.2 million related to transition
adjustment of matured cash flow hedges from accumulated other comprehensive
income to other income/expense.
Interest Rate Hedging
The Company is exposed to interest rate risk. It is the Company's policy
and practice to use derivative instruments, primarily interest rate swaps and
options, to manage and reduce interest rate exposures using a mix of fixed and
variable debt.
The fair value of the derivative instruments hedging interest rate risk as
of August 26, 2001 was a $4.6 million net liability. As the outstanding
transactions either do not qualify for hedge accounting or management has
elected not to designate such transactions for hedge accounting, the Company
reports the changes in fair value of such derivatives in other income/expense.
Due to the adoption of SFAS 133, the Company adjusted the carrying value
of the outstanding interest rate derivatives to their fair value, which resulted
in a net loss of $1.2 million and was recorded in other income/expense during
the first quarter of fiscal year 2001.
16
LEVI STRAUSS & CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
(Unaudited)
The tables below give an overview of the realized and unrealized gains and
losses reported in other income/expense, realized and unrealized other
comprehensive income ("OCI") balances, realized and unrealized cumulated
translation adjustments ("CTA") balances, and the fair values of derivative
instruments reported as an asset or liability. OCI and CTA are components of the
accumulated other comprehensive income section of stockholders' deficit.
-------------------------------- -------------------------- ------------------------ -----------------------------------------------
Three Months Ended Nine Months Ended
August 26, 2001 August 26, 2001 At August 26, 2001
-------------------------------- -------------------------- ------------------------ -----------------------------------------------
Other (income)/expense Other (income)/expense OCI gain/(loss) CTA gain/(loss)
-------------------------------- -------------------------- ------------------------ ----------------------- -----------------------
(Dollars in Thousands) Realized Unrealized Realized Unrealized Realized Unrealized Realized Unrealized
-------------------------------- ----------- -------------- ----------- ------------ ---------- ------------ ---------- ------------
Foreign Exchange Hedging:
Sourcing $12,985 $ 12,387 $10,488 $19,143 $-- $ -- $ -- $ --
Net Investment 1,736 (3,970) 2,381 (1,419) -- -- 52,112 497
Yen Bond -- 1,829 -- (7,569) -- -- -- 5,277
Royalties (323) (1,290) (6,785) 3,734 -- (943) -- --
Cash Management (10,179) 5,597 (8,751) 994 -- -- -- --
Transition Adjustments 207 -- 621 -- -- (207) -- 120
Euro Notes Offering (6,307) (315) 1,929 845 -- -- -- --
-------------------------------- ----------- -------------- ----------- ------------ ---------- ------------ ---------- ------------
Interest Rate Hedging $ -- $(1,008) $ -- $ 3,854 $ -- $ --
Transition Adjustments -- -- -- 1,246 -- --
-------------------------------- ----------- -------------- ----------- ------------ ----------------------- -----------------------
------------------------------ ----------------
At August 26,
2001
------------------------------ ----------------
Fair value
asset/(liability)
------------------------------ ----------------
(Dollars in Thousands)
------------------------------ ----------------
Foreign Exchange Hedging:
Sourcing $(4,017)
Net Investment 2,139
Royalties (2,549)
Cash Management (2,522)
Euro Notes Offering (845)
------------------------------ ----------------
Interest Rate Hedging $(4,643)
------------------------------ ----------------
17
LEVI STRAUSS & CO.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(continued)
(Unaudited)
NOTE 8: BUSINESS SEGMENT INFORMATION
Asia All
Americas Europe Pacific Other Consolidated
-------- ------ ------- ----- ------------
(Dollars in Thousands)
THREE MONTHS ENDED AUGUST 26, 2001:
Net sales....................................... $689,892 $222,515 $71,101 $ -- $983,508
Earnings contribution........................... 74,161 33,530 6,027 -- 113,718
Interest expense................................ -- -- -- 55,429 55,429
Corporate and other expense, net................ -- -- -- 34,444 34,444
Income before income taxes...................... -- -- -- -- 23,845
THREE MONTHS ENDED AUGUST 27, 2000:
Net sales....................................... $802,637 $235,869 $89,234 $ -- $1,127,740
Earnings contribution........................... 132,524 33,916 10,623 -- 177,063
Interest expense................................ -- -- -- 59,406 59,406
Corporate and other expense, net................ -- -- -- 59,502 59,502
Income before income taxes...................... -- -- -- -- 58,155
Asia All
Americas Europe Pacific Other Consolidated
-------- ------ ------- ----- ------------
(Dollars in Thousands)
NINE MONTHS ENDED AUGUST 26, 2001:
Net sales....................................... $2,034,171 $756,524 $233,133 $ -- $3,023,828
Earnings contribution........................... 270,370 147,905 31,078 -- 449,353
Interest expense................................ -- -- -- 178,532 178,532
Corporate and other expense, net................ -- -- -- 131,102 131,102
Income before income taxes...................... -- -- -- -- 139,719
NINE MONTHS ENDED AUGUST 27, 2000:
Net sales....................................... $2,255,279 $817,529 $286,413 $ -- $3,359,221
Earnings contribution........................... 304,623 175,689 37,176 -- 517,488
Interest expense................................ -- -- -- 177,177 177,177
Corporate and other expense, net................ -- -- -- 112,644 112,644
Income before income taxes...................... -- -- -- -- 227,667
18
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, selected items
in our consolidated statements of operations, expressed as a percentage of net
sales (amounts may not total due to rounding).
Three Months Ended Nine Months Ended
------------------ -----------------
August 26, August 27, August 26, August 27,
2001 2000 2001 2000
---- ----- ----- -----
MARGIN DATA:
Net sales..................................................... 100.0% 100.0% 100.0% 100.0%
Cost of goods sold............................................ 59.4 58.8 57.3 58.3
----- ----- ----- -----
Gross profit.................................................. 40.6 41.2 42.7 41.7
Marketing, general and administrative expenses................ 32.0 31.8 32.3 31.2
Other operating income........................................ 0.9 0.9 0.8 0.6
----- ----- ----- -----
Operating income.............................................. 9.5 10.3 11.2 11.2
Interest expense.............................................. 5.6 5.3 5.9 5.3
Other (income) expense, net................................... 1.4 (0.1) 0.6 (0.9)
----- ----- ----- -----
Income before taxes........................................... 2.4 5.2 4.6 6.8
Income tax expense............................................ 0.9 1.8 1.7 2.4
----- ----- ----- -----
Net income.................................................... 1.5% 3.4% 2.9% 4.4%
===== ===== ===== =====
NET SALES SEGMENT DATA:
Geographic
Americas............................................. 70.1% 71.2% 67.3% 67.1%
Europe............................................... 22.6 20.9 25.0 24.3
Asia Pacific......................................... 7.2 7.9 7.7 8.5
Net sales. Net sales for the three months ended August 26, 2001 decreased
12.8% to $983.5 million, as compared to $1,127.7 million for the same period in
2000. Net sales for the nine months ended August 26, 2001 decreased 10.0% to
$3,023.8 million, as compared to $3,359.2 million for the same period in 2000.
These decreases reflect volume declines primarily due to weak economies and
retail markets in the U.S. and Japan and the impact of a weaker euro and yen. If
currency exchange rates were unchanged from the prior year periods, net sales
for the three months ended August 26, 2001 would have declined approximately
10.7% and net sales for the nine months ended August 26, 2001 would have
declined approximately 7.5% from the same periods in 2000.
Although net sales levels decreased from the prior year periods, we are
seeing positive developments across several dimensions of our business where
improvements are needed. They include our experience with new products, our
service levels, our relations with customers and presentation of our products at
retail. In addition, we continued to maintain our margins and control our
operating expenses and, during the third quarter of fiscal year 2001, we reduced
our debt.
Before the terrorist attacks of September 11, 2001, we had expected a
decline in net sales for the full fiscal year in the high single digits on a
constant currency basis. This expectation reflected continuing poor retail and
economic conditions in the U.S. and Japan, coupled with some positive indicators
for the fourth fiscal quarter of 2001. Those indicators included sell-through
data, early experience with new products such as our Levi's(R) Superlow jeans
and planned advertising activities for the quarter.
19
Since the terrorist attacks, several retailers have issued warnings that
they may have to cut their earnings outlook, and there are widespread
expressions of concern about the U.S. and European economies. We believe the
events of September 11th create considerable uncertainty about the world economy
in general and the retail apparel environment, and retailer and consumer buying
behavior specifically, and add greater risk to our expectations for the balance
of the year. In addition, we currently anticipate difficult retail and economic
conditions to continue into 2002, along with the continued need for executional
improvements, including bringing greater focus on core products and innovation
to the U.S. product line. As a result, we believe our net sales will decline in
2002, and we are planning our production and operating expenses accordingly.
In the Americas, net sales for the three months ended August 26, 2001
decreased 14.0% to $689.9 million, as compared to $802.6 million for the same
period in 2000. Net sales for the nine months ended August 26, 2001 decreased
9.8% to $2,034.2 million, as compared to $2,255.3 million for the same period in
2000. These decreases were primarily attributable to the weak economy and retail
apparel market in the U.S. We also believe retailers are reducing their
open-to-buy and overall inventory levels in response to the weak apparel market.
However, where we have introduced updated and relevant products, supporting them
with the right advertising and retail programs, our data shows good sell-through
to consumers. This is the case with our Levi's(R) Superlow jeans and Dockers(R)
Mobile(TM) pant.
In Europe, net sales for the three months ended August 26, 2001 decreased
5.7% to $222.5 million, as compared to $235.9 million for the same period in
2000. Net sales for the nine months ended August 26, 2001 decreased 7.5% to
$756.5 million, as compared to $817.5 million for the same period in 2000. The
net sales decreases for the three and nine months ended August 26, 2001 were
primarily due to the effects of translation to U.S. dollar reported results. The
net sales decrease for the nine months ended August 26, 2001 was also due to a
decline in volume. On a constant currency basis, net sales would have increased
by approximately 0.6% for the three months ended August 26, 2001 compared to the
same period in 2000, and would have decreased approximately 0.7% for the nine
months ended August 26, 2001 compared to the same period in 2000. We believe the
constant currency results indicate that our business in Europe is beginning to
stabilize, reflecting the impact of our innovative products, such as Levi's(R)
Engineered Jeans(TM), marketing, retail presentation programs, and improved
delivery performance.
In our Asia Pacific region, net sales for the three months ended August 26,
2001 decreased 20.3% to $71.1 million, as compared to $89.2 million for the same
period in 2000. Net sales for the nine months ended August 26, 2001 decreased
18.6% to $233.1 million, as compared to $286.4 million. These decreases were
primarily driven by the economic uncertainty in Japan and the effects of
translation to U.S. dollar reported results. If exchange rates were unchanged
from the prior year periods, the net sales decreases would have been
approximately 10.3% for the three months ended August 26, 2001 and 9.2% for the
nine months ended August 26, 2001 compared to the same periods in 2000. In
Japan, which accounts for approximately 55% of our business in Asia, difficult
business conditions have resulted in retail consolidation, closure of retail
store locations and bankruptcies, including four of our key retail customers.
Gross profit. Gross profit for the three months ended August 26, 2001
totaled $399.2 million compared with $464.3 million for the same period in 2000.
Gross profit as a percentage of net sales, or gross margin, for the three months
ended August 26, 2001 decreased to 40.6%, as compared to 41.2% for the same
period in 2000. Gross profit for the nine months ended August 26, 2001 totaled
$1,291.7 million, compared to $1,401.9 million. Gross margin increased for the
nine months ended August 26, 2001 to 42.7%, as compared to 41.7% for the same
period in 2000. The gross margin decline for the three months ended August 26,
2001 was primarily due to costs of approximately $8.0 million associated with
production down time we took in our domestic plants in response to the weak
retail market, as well as costs of approximately $3.0 million attributed to a
product recall in Europe. In late August, we recalled a limited collection of
"glossy finish" Levi's(R) jeans, shirts and jackets that were on the market for
just under one month and accounted for less than one percent of our Levi's brand
volume in Europe. The gross margin improvement for the nine months ended August
26, 2001 was primarily due to lower sourcing and fabric costs, and reduced
inventory markdowns. The Caribbean Basin Initiative trade act was a key reason
for the sourcing cost improvements. We anticipate that our full year gross
margin for 2001 will be within our target range of 40% to 42%.
20
Marketing, general and administrative expenses. Marketing, general and
administrative expenses for the three months ended August 26, 2001 decreased
12.3% to $314.5 million as compared to $358.5 million for the same period in
2000. Marketing, general and administrative expenses as a percentage of sales
for the three months ended August 26, 2001 increased slightly to 32.0% as
compared to 31.8% for the same period in 2000. Marketing, general and
administrative expenses for the nine months ended August 26, 2001 decreased 6.8%
to $976.7 million as compared to $1,048.1 million for the same period in 2000.
Marketing, general and administrative expenses as a percentage of sales for the
nine months ended August 26, 2001 increased slightly to 32.3% as compared to
31.2% for the same period in 2000.
The dollar decreases in marketing, general and administrative expenses for
the three and nine months ended August 26, 2001 were primarily due to our
continuing cost containment efforts, including lower levels of incentive plan
accruals and advertising expenses, as well as lower volume-related costs. The
lower levels of incentive plan accruals include a reversal of costs associated
with an employee long-term incentive plan as a result of forfeitures of $12.0
million for the three months ended August 26, 2001 and $18.0 million for the
nine months ended August 26, 2001. Marketing, general and administrative
expenses for the three and nine months ended August 27, 2000 also included a
reversal of employee benefit costs of approximately $24.0 million due to changes
in the demographic profile of our workforce. We continue to look for
opportunities to streamline our organization, in line with our core product
focus and related initiatives to reduce business complexity.
Advertising expense for the three months ended August 26, 2001 decreased
13.1% to $84.5 million, as compared to $97.3 million for the same period in
2000. Advertising expense as a percentage of sales for the three months ended
August 26, 2001 was flat at 8.6% compared to the same period in 2000.
Advertising expense for the nine months ended August 26, 2001 decreased 12.0% to
$252.0 million, as compared to $286.3 million for the same period in 2000.
Advertising expense as a percentage of sales for the nine months ended August
26, 2001 decreased slightly to 8.3%, as compared to 8.5% for the same period in
2000. Advertising expense as a percentage of sales for the three and nine month
periods in 2001 is consistent with our annual target range of 8% to 9%. We
expect to be within our target range for fiscal year 2001.
Other operating income. Licensing income for the three months ended August
26, 2001 of $8.4 million decreased 19.5%, as compared to $10.4 million for the
same period in 2000. The decrease for the three months ended August 26, 2001 was
primarily due to the timing of licensing income accruals. Licensing income for
the nine months ended August 26, 2001 of $22.9 million increased 9.9%, as
compared to $20.9 million for the same period in 2000. This increase was
primarily due to an increase in licensed merchandise such as outerwear, shoes,
belts, headwear and handbags.
Operating income. Operating income for the three months ended August 26,
2001 of $93.1 million decreased 19.9%, as compared to $116.2 million from the
same period in 2000. The decrease was primarily due to lower sales, partially
offset by lower marketing, general and administrative expenses. Operating income
for the nine months ended August 26, 2001 of $337.9 million decreased 9.8%, as
compared to $374.7 million from the same period in 2000. The decrease was
primarily due to lower sales, partially offset by an improved gross margin and
lower marketing, general and administrative expenses.
Interest expense. Interest expense for the three months ended August 26,
2001 decreased 6.7% to $55.4 million, as compared to $59.4 million for the same
period in 2000. The decrease was primarily due to lower market interest rates
and lower average debt levels. The average cost of borrowings for the three
months ended August 26, 2001 and August 27, 2000 were 9.4% and 10.0%,
respectively. Interest expense for the nine months ended August 26, 2001
increased 0.8% to $178.5 million, as compared to $177.2 million for the same
period in 2000. The increase was due to a write-off of fees related to the
credit agreement replaced by a new credit facility in February 2001 (see Note 4
to the Consolidated Financial Statements). Excluding the fee write-off, interest
expense would have been 5.3% lower than the same period in 2000 primarily due to
lower average debt levels, partially offset by higher interest rates associated
with the senior notes issued January 18, 2001. The average cost of borrowings
for the nine months ended August 26, 2001 and August 27, 2000 were 9.6% and
9.4%, respectively, excluding the write-off of fees.
21
Other income/expense, net. Other expense, net for the three months ended
August 26, 2001 was $13.9 million, as compared to income of $1.4 million for the
same period in 2000. Other expense, net for the nine months ended August 26,
2001 was $19.6 million, as compared to income of $30.2 million for the same
period in 2000. The expenses for the three and nine months ended August 26, 2001
were primarily due to net losses from foreign currency exposures and the
contracts to hedge foreign currency exposures. These net losses are primarily
due to foreign currency and market value fluctuations, which introduces an
element of volatility in our income statement quarter-to-quarter. (See Note 7 to
the Consolidated Financial Statements.) In addition, the income for the nine
months ended August 27, 2000 was primarily attributable to a $26.1 million gain
from the sale of two office buildings in San Francisco located next to our
corporate headquarters.
Income tax expense. Income tax expense for the three months ended August
26, 2001 decreased 56.7% to $8.8 million as compared to $20.4 million for the
same period in 2000. Income tax expense for the nine months ended August 26,
2001 decreased 35.1% to $51.7 million as compared to $79.7 million for the same
period in 2000. The decrease in income taxes for both periods in 2001 was
primarily due to lower income before taxes. Our effective tax rate for the three
and nine month periods in 2001 was 37% compared to 35% for the same periods in
2000.
Net income. Net income for the three months ended August 26, 2001 decreased
60.3% to $15.0 million from $37.8 million for the same period in 2000. Net
income for the nine months ended August 26, 2001 decreased 40.5% to $88.0
million from $148.0 million for the same period in 2000. These decreases were
primarily due to lower sales and the impact of currency volatility on our
foreign currency hedging activities, partially offset by lower marketing,
general and administrative expenses and, for the nine months ended August 26,
2001, higher gross margins. The nine months ended August 27, 2000 results also
included a gain from the sale of office buildings.
RESTRUCTURING AND EXCESS CAPACITY REDUCTION
Since 1997, we have closed 29 of our owned and operated production and
finishing facilities in North America and Europe and instituted restructuring
initiatives in order to reduce costs, eliminate excess capacity and align our
sourcing strategy with changes in the industry and in consumer demand. The total
balance of the reserves at August 26, 2001 was $53.4 million compared to $71.6
million at November 26, 2000. (See Note 3 to the Consolidated Financial
Statements.)
LIQUIDITY AND CAPITAL RESOURCES
Our principal capital requirements have been to fund working capital and
capital expenditures. As of August 26, 2001, total cash and cash equivalents
were $63.8 million, a $53.3 million decrease from the $117.1 million cash
balance reported as of November 26, 2000.
Cash used for/provided by operations. Cash used for operating activities
for the nine months ended August 26, 2001 was $93.3 million, as compared to cash
provided by operating activities of $199.3 million for the same period in 2000.
The use of cash for the nine months ended August 26, 2001 was primarily
attributable to payments on annual incentive programs, an increase in inventory
and the payment of income taxes on an Internal Revenue Service settlement.
Inventory, primarily first quality basic products, increased during the nine
months ended August 26, 2001 primarily due to lower sales in the U.S. We are
focusing on managing inventory levels to be more in line with sales but we do
not expect to be able to work through the entire excess by year-end. In
addition, we took production down time of approximately $8.0 million in the
third quarter of fiscal year 2001 to help manage our inventories and expect our
total down time cost to be approximately $15.0 million by the end of this fiscal
year. Inventory consists primarily of first quality basic products in which we
do not expect significant markdowns of that inventory.
22
Other long-term assets increased during the nine months ended August 26,
2001 primarily due to the capitalization of underwriting and other fees for the
senior notes issued in January 2001 and fees associated with the credit facility
entered into in February 2001. Net deferred tax assets and restructuring
reserves decreased during the nine months ended August 26, 2001 primarily due to
spending related to the restructuring initiatives. Accrued salaries, wages, and
employee benefits decreased during the nine months ended August 26, 2001
primarily due to the payment of annual employee incentives. Long-term employee
benefits increased primarily due to increased accruals for long-term employee
incentive plans. Accrued taxes decreased during the nine months ended August 26,
2001 primarily due to a payment of approximately $40.0 million to the Internal
Revenue Service in connection with an examination of our income tax returns for
the years 1986 - 1989.
Cash used for/provided by investing activities. Cash used for investing
activities during the nine months ended August 26, 2001 was $13.4 million, as
compared to cash provided by investing activities of $144.2 million during the
same period in 2000. Cash used for investing activities during the nine months
ended August 26, 2001 resulted primarily from purchases of property, plant and
equipment. Cash provided by investing activities during the nine months ended
August 27, 2000 was primarily attributable to proceeds received from the sale of
office buildings. We expect that capital expenditures for fiscal year 2001 will
not exceed the 2000 fiscal year-end level of $28.0 million.
Cash provided by/used for financing activities. Cash provided by financing
activities for the nine months ended August 26, 2001 was $50.3 million, as
compared to cash used for financing activities of $457.2 million for the same
period in 2000. Cash provided by financing activities during the nine months
ended August 26, 2001 was primarily from the senior notes issued in January and
the domestic receivables securitization transaction completed in July (see Note
4 to the Consolidated Financial Statements).
Financial Condition
Credit Agreement. On February 1, 2001, we entered into a $1.05 billion
senior secured credit facility to replace the then existing 2000 credit facility
on more favorable terms. The credit facility consists of a $700.0 million
revolving credit facility and $350.0 million of term loans. This facility
reduces our borrowing costs and extends the maturity of our principal bank
credit facility to August 2003.
The facility is secured in substantially the same manner as the 2000 credit
facility. Collateral includes: domestic inventories, certain domestic equipment,
trademarks, other intellectual property, 100% of the stock of domestic
subsidiaries, 65% of the stock of certain foreign subsidiaries and other assets.
Borrowings under the facility bear interest at LIBOR or the agent bank's base
rate plus an incremental borrowing spread. Before the domestic receivables
securitization transaction described below, the collateral also included
domestic receivables. In connection with the securitization transaction, the
lenders under the credit facility released their security interest in
receivables sold in that transaction, and retained security interests in certain
related assets.
The facility contains customary covenants restricting our activities as
well as those of our subsidiaries, including limitations on our and our
subsidiaries' ability to sell assets; engage in mergers; enter into operating
leases or capital leases; enter into transactions involving related parties,
derivatives or letters of credit; enter into intercompany transactions; incur
indebtedness or grant liens or negative pledges on our assets; make loans or
other investments; pay dividends or repurchase stock or other securities;
guaranty third party obligations; make capital expenditures; and make changes in
our corporate structure. The credit agreements will also contain financial
covenants that we must satisfy on an ongoing basis, including maximum leverage
ratios and minimum coverage ratios. As of August 26, 2001, we were in compliance
with the financial covenants under the facility.
Notes Offering. In January 2001, we issued two series of notes payable,
U.S. $380.0 million dollar notes and 125.0 million euro notes, totaling the
equivalent of $497.5 million to qualified institutional investors. The notes are
unsecured obligations and may be redeemed at any time after January 15, 2005.
The notes mature on January 15, 2008. We used the net proceeds from the offering
to repay a portion of the indebtedness outstanding under the 2000 credit
facility.
23
The indentures governing the notes contain covenants that limit our and
our subsidiaries' ability to incur additional debt; pay dividends or make other
restricted payments; consummate specified asset sales; enter into transactions
with affiliates; incur liens; impose restrictions on the ability of a subsidiary
to pay dividends or make payments to us and our subsidiaries; merge or
consolidate with any other person; and sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of our assets or the assets of our
subsidiaries. If the notes receive and maintain an investment grade rating by
both Standard and Poor's Ratings Service and Moody's Investors Service and we
and our subsidiaries are and remain in compliance with the indentures, then we
and our subsidiaries will not be required to comply with specified covenants
contained in the indentures. (See Note 4 to the Consolidated Financial
Statements.)
On August 31, 2001, Moody's Investors Service downgraded the ratings of
both our senior secured credit facility and our senior unsecured notes. The
senior secured credit facility was downgraded to "Ba3" from "Ba2" and the senior
unsecured notes were downgraded to "B2" from "Ba3" with a negative outlook
primarily due, according to Moody's, to our declining sales and excess
inventory.
Domestic Securitization. On July 31, 2001, we completed a receivables
securitization transaction involving receivables generated from sales of
products to our U.S. customers. The transaction involved the issuance by Levi
Strauss Receivables Funding, LLC, an indirect subsidiary, of $110.0 million of
term notes. The notes, which are secured by trade receivables originated by Levi
Strauss & Co., bear interest at a rate equal to the one-month LIBOR rate plus
0.32% per annum, and have a stated maturity date of November 2005. Net proceeds
of the offering were used to repay a portion of the outstanding debt under our
senior secured credit facility. The transaction is accounted for under SFAS 140.
The transaction did not meet the criteria for sales accounting under SFAS 140
and therefore is accounted for as a secured borrowing. The purpose of the
transaction was to lower our interest expense and diversify funding sources. The
notes were issued in a private placement transaction in accordance with Rule
144A under the Securities Act and, accordingly, have not been registered under
the Securities Act and may not be sold in the United States absent registration
or an applicable exemption from the registration requirements under the
Securities Act.
Under the securitization arrangement, collections on receivables remaining
after payment of interest and fees relating to the notes are used to purchase
new receivables from Levi Strauss & Co. The securitization agreements provide
that, in specified cases, the collections will not be released but will instead
be deposited and used to pay the principal amount of the notes. Those
circumstances include, among other things, failure to maintain the required
level of overcollaterization due to deterioration in the credit quality of the
receivables, failure to pay interest or other amounts which is not cured,
breaches of covenants, representations and warranties or events of bankruptcy
relating to us and certain of our subsidiaries. Non-release of collections in
these limited circumstances could have an adverse effect on our liquidity.
NEW ACCOUNTING STANDARDS
We adopted Statement of Financial Accounting Standards No. ("SFAS") 133,
"Accounting for Derivative Instruments and Hedging Activities," on the first day
of fiscal year 2001. Due to the adoption of SFAS 133, we reported a net
transition gain in other income/expense for the nine months ended August 26,
2001 of $87 thousand. This transition amount was not recorded as a separate line
item as a change in accounting principle, net of tax, due to the minimal impact
on results of operations. In addition, we recorded a transition amount of $0.7
million (or $0.4 million net of related income taxes) that reduced other
comprehensive income. (See Note 7 to the Consolidated Financial Statements.)
We adopted SFAS 140, "Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities," which replaces SFAS 125, "Accounting
for Transfers and Services of Financial Assets and Extinguishments of
Liabilities," in fiscal year 2001. SFAS 140 revises the methods for accounting
for securitizations and other transfers of financial assets and collateral as
outlined in SFAS 125, and requires certain additional disclosures. The adoption
of SFAS 140 had no financial impact. (See Note 4 to the Consolidated Financial
Statements.)
24
The Financial Accounting Standards Board issued SFAS 142, "Goodwill and
Other Intangible Assets," dated June 2001, which requires that goodwill and
intangible assets with indefinite useful lives no longer be amortized but
instead be reviewed annually for impairment using a fair-value based approach.
Intangible assets that have a finite life will continue to be amortized over
their respective estimated useful lives. We are required to adopt the provisions
of SFAS 142 on the first day of fiscal year 2003; however, early application is
permitted in which we can adopt SFAS 142 on November 26, 2001. We have not yet
determined if we will adopt this standard early and are currently evaluating the
impact SFAS 142 may have on our financial position and results of operations.
STATEMENT REGARDING FORWARD-LOOKING DISCLOSURE
This Form 10-Q includes forward-looking statements about retail conditions;
sales performance and trends; inventory position and management; debt repayment
and liquidity; gross margins; product innovation and new product development in
our brands; expense levels including overhead and advertising expense; retail
relationships and developments including sell-through; presentation of product
at retail and marketing collaborations; marketing and advertising initiatives;
and other matters. We have based these forward-looking statements on our current
assumptions, expectations and projections about future events. When used in this
document, the words "believe," "anticipate," "intend," "estimate," "expect,"
"project" and similar expressions are intended to identify forward-looking
statements, although not all forward-looking statements contain these words.
These forward-looking statements are subject to risks and uncertainties
including, without limitation, risks related to the impact of changing domestic
and international retail environments; changes in the level of consumer spending
or preferences in apparel; impact of the terrorist attacks in the U.S. on
September 11, 2001; dependence on key distribution channels, customers and
suppliers; changing fashion trends; our supply chain executional performance;
internal impact of organizational developments; ongoing competitive pressures in
the apparel industry; trade restrictions; political or financial instability in
countries where our products are manufactured; and other risks detailed in our
annual report on Form 10-K for the year ended November 26, 2000, registration
statements and other filings with the Securities and Exchange Commission. Our
actual results might differ materially from historical performance or current
expectations. We do not undertake any obligation to update or revise publicly
any forward-looking statements, whether as a result of new information, future
events or otherwise.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
DERIVATIVE FINANCIAL INSTRUMENTS
We are exposed to market risk primarily related to foreign exchange,
interest rates and the price of cotton. We actively manage foreign currency and
interest rate risk with the objective of reducing fluctuations in actual and
anticipated cash flows by entering into a variety of derivative instruments
including spot, forward, options and swaps. We currently do not hedge our
exposure to the price of cotton with derivative instruments.
FOREIGN EXCHANGE RISK
Foreign exchange market risk exposures are primarily related to cash
management activities, raw material and finished goods purchases, net
investments and royalty flows from affiliates.
INTEREST RATE RISK
We have an interest rate risk management policy designed to manage the
interest rate risk on our borrowings by entering into a variety of interest rate
derivatives.
For more information about market risk, see Notes 4, 5 and 7 to the
Consolidated Financial Statements.
25
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
(A) EXHIBITS:
10.1 First Amendment to Credit Agreement, dated as of July 11,
2001, among the Registrant, the Initial Lenders and Issuing
Banks named therein, Bank of America, N.A., as
Administrative Agency and Collateral Agent, Bank of America
Securities LLC and Salomon Smith Barney Inc., as Co-Lead
Arrangers and Joint Book Managers, Citicorp USA, Inc., as
Syndication Agent, and The Bank of Nova Scotia, as
Documentation Agent. Filed herewith.
10.2 Master Indenture, dated as of July 31, 2001, by and between
Levi Strauss Receivables Funding, LLC, as issuer, and
Citibank, N.A. as Indenture Trustee, Paying Agent,
Authentication Agent and Transfer Agent and Registrar. Filed
herewith.
10.3 Indenture Supplement, dated as of July 31, 2001, by and
among Levi Strauss Receivables Funding, LLC, as Issuer, Levi
Strauss Financial Center Corporation as Servicer and
Citibank, N.A. as Indenture Trustee, Paying Agent,
Authentication Agent and Transfer Agent and Registrar. Filed
herewith.
10.4 Receivables Purchase Agreement, dated as of July 31, 2001,
is made by and among Levi Strauss Receivables Funding, LLC,
as Issuer, Levi Strauss Funding, LLC, as Transferor, Levi
Strauss Financial Center Corporation, as Seller and
Servicer, and Levi Strauss Securitization Corp. as SPC
Member. Filed herewith.
10.5 Parent Undertaking, dated as of July 31, 2001, made by
the Registrant in favor of Levi Strauss Receivables Funding,
LLC. Filed herewith.
10.6 Consent and Release Agreement, dated as of July 31, 2001,
is entered into by and among Levi Strauss Funding, LLC, as
Transferor, Levi Strauss Financial Center Corporation, as
Seller, the Registrant, as Originator, Levi Strauss
Receivables Funding, LLC, as Issuer, Citibank, N.A. as
Indenture Trustee, and Bank of America, N.A. as Agent.
Filed herewith.
(B) REPORTS ON FORM 8-K:
Current Report on Form 8-K on July 31, 2001 filed pursuant to Item 5 of
the report and relating to completion, on July 31, 2001, by Levi
Strauss & Co. and various of its subsidiaries of a receivables
securitization transaction involving receivables generated from sales
of products to the Company's U.S. customers.
Current Report on Form 8-K on September 19, 2001 filed pursuant to Item
5 of the report and containing a copy of the Company's press release
titled "Levi Strauss & Co. Reports Third-Quarter Financial Results."
26
SIGNATURE
---------
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.
Date: October 3, 2001 Levi Strauss & Co.
------------------
(Registrant)
By: /s/ William B. Chiasson
-----------------------
William B. Chiasson
Senior Vice President and Chief Financial Officer
27
EX-10
2
a10qex101.txt
EXHIBIT 10.1 FIRST AMENDMENT TO CREDIT AGREEMENT
EXHIBIT 10.1
EXECUTION COPY
LEVI STRAUSS & CO.
FIRST AMENDMENT TO CREDIT AGREEMENT
This FIRST AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is
dated as of July 11, 2001 and entered into by and among LEVI STRAUSS & CO., a
Delaware corporation (the "Borrower"), the banks, financial institutions and
other institutional lenders listed on the signature pages hereof ("Lenders"),
BANK OF AMERICA, N.A. ("Bank of America"), as the provider of Swing Line
Advances (as hereinafter defined) hereunder (the "Swing Line Bank"), BANC OF
AMERICA SECURITIES LLC and SALOMON SMITH BARNEY INC., as co-lead arrangers and
joint book managers (the "Co-Lead Arrangers"), CITICORP USA, INC., as the
syndication agent (the "Syndication Agent"), THE BANK OF NOVA SCOTIA, as the
documentation agent (the "Documentation Agent"), and BANK OF AMERICA, N.A., as
the administrative and collateral agent (the "Administrative Agent"), and is
made with reference to that certain Credit Agreement dated as of February 1,
2001 (as so amended, the "Credit Agreement"), by and among the Borrower,
Lenders, Swing Line Bank, Syndication Agent, Documentation Agent and
Administrative Agent. Capitalized terms used herein without definition shall
have the same meanings herein as set forth in the Credit Agreement.
RECITALS
WHEREAS, LSFLLC, which is an indirect, wholly-owned Subsidiary
of the Borrower, has formed Levi Strauss Receivables Funding, LLC ("Issuer"),
initially a wholly-owned Subsidiary of LSFLLC, for the purpose of entering into
a securitization transaction with Banc One Capital Markets in order to issue
term notes pursuant to Rule 144A under the Securities Act of 1933, as amended
("Proposed Transaction");
WHEREAS, prior to the First Amendment Effective Date (as
defined in Section 2 below), LSFLLC will have transferred its 100% membership
interest in Issuer as follows: (i) 1% to Levi Strauss Securitization Corp., a
Delaware corporation wholly-owned by LSFLLC; and (ii) 99% to NF Industries,
Inc., a wholly-owned Subsidiary of the Borrower;
WHEREAS, in connection with the Proposed Transaction, on the
effective date thereof, LSFLLC will sell to Issuer all of LSFLLC's right, title
and interest in and to all Domestic Receivables then owned by LSFLLC;
WHEREAS, after the date of the initial sale of such Domestic
Receivables from LSFLLC to Issuer, (i) LSFLLC shall cease to purchase Domestic
Receivables from LSFCC, (ii)
1
LSFCC shall thereafter sell to Issuer directly all of the Domestic Receivables
and (iii) LSFLLC shall make a liquidating distribution and shall be formally
liquidated and dissolved;
WHEREAS, the Borrower and Lenders desire to amend the Credit
Agreement in order to facilitate the Proposed Transaction and the other matters
described herein;
NOW, THEREFORE, in consideration of the premises and the
agreements, provisions and covenants herein contained, the parties hereto agree
as follows:
Section 1. AMENDMENTS TO THE CREDIT AGREEMENT
1.1 Amendment to Article 1: Definitions and Accounting Terms
---------------------------------------------------------
A. Section 1.01 of the Credit Agreement is hereby amended by
adding thereto the following definition, which shall be inserted in proper
alphabetical order:
"'Issuer' means Levi Strauss Receivables Funding, LLC."
"'Newco' means Levi Strauss Securitization Corp."
B. Section 1.01 of the Credit Agreement is hereby further
amended by amending the definition of "Receivables Transfer Agreements" to read
in its entirety as follows:
"'Receivables Transfer Agreements' means that certain
Receivables Purchase and Sale Agreement dated as of January 28, 2000 among the
Borrower, LSFCC, Levi Strauss Funding Corp., and LSFLLC and that certain Third
Amended and Fully Restated Receivables Purchase and Sale Agreement between LSFCC
and the Borrower effective January 28, 2000, each as amended by that certain
Master Amendment and Consent to Receivables Sale Agreements to be dated on or
about July 27, 2001."
1.2 Amendments to Article V: Covenants of the Borrower
A. Section 5.01(i) of the Credit Agreement is hereby amended by
adding the following at the end thereof:
"provided, further, that neither Issuer nor Newco shall be
considered to be a Material Subsidiary for purposes of this Section
5.01(i) during any period that either such Person has any obligations
under a Permitted Domestic Receivables Transaction."
B. Section 5.01(k) of the Credit Agreement is hereby amended to
read in its entirety as follows:
"Additional Material Subsidiaries. In the event that, as of the
--------------------------------
end of any Fiscal Quarter, the aggregate gross revenue of the
Subsidiaries of the Borrower not constituting Material
Subsidiaries for the four-Fiscal Quarter period then ended were
more than 5% of the aggregate gross revenues of the Borrower and
its Subsidiaries on a Consolidated basis for such period, the
Borrower shall designate
2
one or more of its Subsidiaries (other than Issuer and Newco
during any period that either such Person has any obligations
under a Permitted Domestic Receivables Transaction) as Material
Subsidiaries for purposes of this Agreement and shall take all
action required by Sections 5.01(i) and 5.01(j) with respect to
such Subsidiary."
C. Section 5.01(l)(iv) of the Credit Agreement is hereby
amended to read in its entirety as follows:
"deliver to the Administrative Agent executed control agreements
with respect to all material deposit, savings, investment and other
accounts maintained by the Borrower or any of its Material Domestic
Subsidiaries (other than Issuer and Newco during any period that either
such Person has any obligations under a Permitted Domestic Receivables
Transaction or, to the extent that it maintains or controls accounts in
its role as servicer under a Permitted Domestic Receivables
Transaction, LSFCC); and"
D. Section 5.01(n) of the Credit Agreement is hereby amended to
read in its entirety as follows:
"Except during any period that Domestic Receivables are being
sold to Issuer under a Permitted Domestic Receivables Transaction,
LSFCC shall sell to LSFLLC or to another Subsidiary of the Borrower
acceptable to Administrative Agent all accounts receivable purchased by
it from the Borrower immediately upon consummation of such purchase."
E. The first sentence of Section 5.01(p) of the Credit
Agreement is hereby amended to read in its entirety as follows:
"Maintain, and cause each of its Material Domestic Subsidiaries
(other than Issuer and Newco during any period that either such Person
has any obligations under a Permitted Domestic Receivables Transaction
or, to the extent that it maintains or controls accounts in its role as
servicer under a Permitted Domestic Receivables Transaction, LSFCC) to
maintain, the Cash Collateral Account and the L/C Cash Collateral
Account with Bank of America or another commercial bank located in the
United States which has accepted the assignment of such accounts to the
Administrative Agent for the benefit of the Secured Parties pursuant to
the Pledge and Security Agreement."
F. Section 5.02(b)(i)(A) of the Credit Agreement is hereby
amended to read in its entirety as follows:
"Debt owed to a Material Domestic Subsidiary (other than Issuer
and Newco during any period that either such Person has any obligations
under a Permitted Domestic Receivables Transaction) of the Borrower,
which Debt (x) shall constitute Pledged Debt and (y) shall be evidenced
by promissory notes in form and substance satisfactory to the
Administrative Agent, shall be subordinated in right of payment to the
payment in full of the Obligations and such promissory notes shall be
pledged as security for the Obligations of the holder thereof under the
Loan Documents to which such holder is a
3
party and delivered to the Administrative Agent pursuant to the terms
of the Pledge and Security Agreement;"
G. Section 5.02(b)(ii)(A) of the Credit Agreement is hereby
amended to read in its entirety as follows:
"(A) Debt owed to the Borrower or to a Material Domestic
Subsidiary of the Borrower (other than Issuer and Newco during any
period that either such Person has any obligations under a Permitted
Domestic Receivables Transaction) by a Material Domestic Subsidiary or
a Pledged Foreign Subsidiary (other than Debt owed by a Restricted
Subsidiary), which Debt (x) shall constitute Pledged Debt and (y)
shall, except in the case of redeemable preferred stock, be evidenced
by promissory notes in form and substance satisfactory to the
Administrative Agent, shall be subordinated in right of payment in full
of the Obligations, and such promissory notes shall be pledged as
security for the Obligations of the holder thereof under the Loan
Documents to which such holder is a party and delivered to the
Administrative Agent pursuant to the terms of the Pledge and Security
Agreement;"
H. Section 5.02(b) of the Credit Agreement is hereby further
amended by (i) deleting the period at the end of clause (iii)(Q) thereof and
substituting a semicolon therefor and (ii) adding the following as new clause
(iv) thereof:
"(iv) in the case of the Borrower, LSFCC, LSFLLC and LSRFLLC,
(A) Debt of the Borrower, Newco, NF Industries, Inc., LSFCC,
LSFLLC or Issuer to the Borrower, LSFCC, LSFLLC or Issuer incurred from
time to time in connection with a Permitted Domestic Receivables
Transaction permitted under Section 5.02(b)(iii)(J) in an amount not to
exceed the purchase price of any Domestic Receivables purchased and
sold in connection therewith, which Debt, in the case of Debt owed to
the Borrower, LSFCC or LSFLLC, (x) shall constitute Pledged Debt and
(y) shall be evidenced by promissory notes in form and substance
satisfactory to the Administrative Agent, shall, except in the case of
Debt owed by Issuer, be subordinated in right of payment to the payment
in full of the Obligations and such promissory notes shall be pledged
as security for the Obligations of the holder thereof under the Loan
Documents to which such holder is a party and delivered to the
Administrative Agent pursuant to the terms of the Pledge and Security
Agreement; and
(B) customary indemnification obligations and other Contingent
Obligations of the Borrower, LSFCC, LSFLLC or Issuer incurred in
connection with a Permitted Domestic Receivables Transaction permitted
under Section 5.02(b)(iii)(J)."
I. Section 5.02(c) of the Credit Agreement is hereby amended by
amending the third sentence contained therein to read in its entirety as
follows:
"The Borrower shall not suffer or permit LSFLLC or any other Subsidiary
of the Borrower (other than Issuer) to which LSFCC sells receivables to engage
in any business other than the purchase, holding and securitization of accounts
receivable and shall not suffer or permit LSFCC to engage in any business other
than the purchase, sale to LSFLLC, another Subsidiary
4
of the Borrower acceptable to Administrative Agent or, during any period that
Domestic Receivables are being sold to Issuer under a Permitted Domestic
Receivables Transaction, to Issuer and servicing of accounts receivable
generated by the Borrower, the processing of accounts payable of the Borrower
and its Subsidiaries, procurement support services for the Borrower and its
Subsidiaries and other accounting and general customer relationship functions."
J. Section 5.02(d)(i) of the Credit Agreement is hereby amended
to read in its entirety as follows:
"any Domestic Subsidiary (other than Issuer and Newco during
any period that either such Person has any obligations under a
Permitted Domestic Receivables Transaction) of the Borrower may merge
into or consolidate with any other Domestic Subsidiary (other than
Issuer and Newco during any period that either such Person has any
obligations under a Permitted Domestic Receivables Transaction) of the
Borrower or be liquidated, wound-up or dissolved or all or any part of
its business, property or assets may be conveyed, sold, leased,
transferred or otherwise disposed of to any other Domestic Subsidiary
(other than Issuer and Newco during any period that either such Person
has any obligations under a Permitted Domestic Receivables Transaction)
of the Borrower, provided that, in the case of any such merger or
consolidation, the Person formed by such merger or consolidation shall
be a Domestic Subsidiary of the Borrower, provided further that, in the
case of any such merger or consolidation to which a Material Domestic
Subsidiary is a party, the Person formed by such merger or
consolidation shall be or become a Material Domestic Subsidiary;"
K. Section 5.02(d)(ii) of the Credit Agreement is hereby
amended to read in its entirety as follows:
"any Pledged Foreign Subsidiary may merge into or consolidate
with any other Pledged Foreign Subsidiary or be liquidated, wound-up or
dissolved or all or any part of its business, property or assets may be
conveyed, sold, leased, transferred or otherwise disposed of to the
Borrower, any Material Domestic Subsidiary (other than Issuer and Newco
during any period that either such Person has any obligations under a
Permitted Domestic Receivables Transaction) or any other Pledged
Foreign Subsidiary; and"
L. Section 5.02(e)(iv) of the Credit Agreement is hereby
amended to read in its entirety as follows:
"dispositions of accounts receivable (A) from the Borrower to
LSFCC, (B) from LSFCC to LSFLLC, another Subsidiary of the Borrower
acceptable to Administrative Agent or, during any period that Domestic
Receivables are being sold to Issuer under a Permitted Domestic
Receivables Transaction, to Issuer, and (C) during any period that
Issuer has any obligations under a Permitted Domestic Receivables
Transaction, from LSFLLC to Issuer;"
M. Section 5.02(f)(v) of the Credit Agreement is hereby amended
by (i) deleting the word "or" immediately preceding the reference to
"5.02(b)(iii)(P)" contained therein and substituting a comma therefor and (ii)
adding the phrase "or 5.02(b)(iv)" at the end thereof.
5
N. Section 5.02(f) of the Credit Agreement is hereby further
amended by (i) deleting the word "and" at the end of clause (xiii) thereof, (ii)
deleting the period at the end of clause (xiv) thereof and substituting the
phrase"; and "therefor, and (iii) adding the following as new clause (xv)
thereof:
"(xv) contribution of a promissory note executed by Levi Strauss
& Co. Europe S.A. in favor of Levi Strauss Continental S.A. from Levi
Strauss Continental S.A. to Levi Strauss International Group Finance
Coordination Services C.V.A./S.C.A. in connection with the sale by Levi
Strauss Continental S.A. of Levi Strauss (U.K.) Limited to Levi Strauss
& Co. Europe S.A. as permitted under Section 5.02(e)(xii)."
O. Section 5.02(k) of the Credit Agreement is hereby amended by
(i) deleting the word "and" before clause (v) thereof and (ii) adding the
following at the end of clause (v) thereof:
", and (vi) the prepayment of Debt in the form of Permitted
Domestic Receivables Transactions (A) when, through amortization only
10% of the initial principal balance of such Debt remains outstanding
or (B) in the event that the average aggregate outstanding principal
balance of such Debt exceeds the average net eligible receivables
balance of the applicable Domestic Receivables (as determined in
accordance with the formula set forth in the related documentation) by
more than $25,000,000 for more than 90 consecutive days."
P. Section 5.02(l)(v) of the Credit Agreement is hereby amended
by deleting the phrase "negative pledges on accounts receivable of Domestic
Subsidiaries and associated assets" contained therein and substituting the
phrase "negative pledges on Domestic Receivables" therefor.
1.3 Clarification of Defined Terms
------------------------------
A. The term "Permitted Domestic Receivables Purchase
Transaction" is hereby deleted each time it appears in the Credit Agreement and
the term "Permitted Domestic Receivables Transaction" is hereby substituted
therefor.
B. The term "Permitted Foreign Receivables Purchase
Transaction" is hereby deleted each time it appears in the Credit Agreement and
the term "Permitted Foreign Receivables Transaction" is hereby substituted
therefore.
1.4. Modification of Schedules
-------------------------
A. Schedule 4.01(b): Subsidiaries. Schedule 4.01(b) and
----------------
Schedule 4.01(bb) to the Credit Agreement are hereby amended by adding thereto
-----------------
the information contained in Annex A to this Amendment.
-------
1.5. Consent to Permitted Domestic Receivables Transaction
-----------------------------------------------------
The Administrative Agent hereby consents, pursuant to Section
5.02(b)(iii)(J) of the Credit Agreement, to the Proposed Transaction. Lenders
hereby authorize the Administrative
6
Agent to execute that certain Consent and Release Agreement to be dated on or
about July 27, 2001, on behalf of the Lenders and to take all actions and make
all determinations required to be taken or made by the Administrative Agent
thereunder.
Section 2. CONDITIONS TO EFFECTIVENESS
Section 1 of this Amendment shall become effective only upon the
satisfaction of all of the following conditions precedent (the date of
satisfaction of such conditions being referred to herein as the "First Amendment
Effective Date"):
A. On or before the First Amendment Effective Date, the
Borrower shall deliver to Lenders (or to the Administrative Agent for Lenders
with sufficient originally executed copies, where appropriate, for each Lender
and its counsel) the following, each, unless otherwise noted, dated the First
Amendment Effective Date:
1. Certified copies of its Articles of Incorporation,
together with a good standing certificate from the Secretary of State of
the State of Delaware, each dated a recent date prior to the First
Amendment Effective Date; copies of the Bylaws, certified as of the
First Amendment Effective Date by its corporate secretary or an
assistant secretary;
2. Resolutions of its Board of Directors approving and
authorizing the execution, delivery, and performance of this Amendment,
certified as of the First Amendment Effective Date by its corporate
secretary or an assistant secretary as being in full force and effect
without modification or amendment; and
3. Signature and incumbency certificates of its
officers executing this Amendment.
B. On or before the First Amendment Effective Date, the
Borrower shall deliver to Lenders amendments to the Receivables Transfer
Agreements in form and substance satisfactory to Administrative Agent.
C. On or before the First Amendment Effective Date, the
Administrative Agent and the parties to the Proposed Transaction shall have
entered into a Consent and Release Agreement in form and substance satisfactory
to Administrative Agent.
D. On or before the First Amendment Effective Date, the
Borrower shall deliver to the Administrative Agent, a Pledge Supplement in
respect of the capital stock of Newco held by LSFCC, the membership interests in
Issuer held by NF Industries, Inc. and the intercompany debt, if any, created in
connection with the Proposed Transaction and required to be pledged under
Section 5.02(b)(iv).
E. On or before the First Amendment Effective Date, all
corporate and other proceedings taken or to be taken in connection with the
transactions contemplated hereby and all documents incidental thereto not
previously found acceptable by Agent, acting on behalf of Lenders, and its
counsel shall be satisfactory in form and substance to Agent and such counsel,
7
and Agent and such counsel shall have received all such counterpart originals or
certified copies of such documents as Agent may reasonably request.
Section 3. BORROWER'S REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Amendment and to
amend the Credit Agreement in the manner provided herein, the Borrower
represents and warrants to each Lender that the following statements are true,
correct and complete:
A. Organization and Powers. The Borrower is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, (ii) is duly qualified and in good standing
as a foreign corporation in each other jurisdiction in which it owns or leases
property or in which the conduct of its business requires it to so qualify or be
licensed except where the failure to so qualify or be licensed would not be
reasonably likely to have a Material Adverse Effect and (iii) has all requisite
corporate power and authority (including, without limitation, all Governmental
Authorizations) to enter into this Amendment and to carry out the transactions
contemplated by, and perform its obligations under, the Credit Agreement as
amended by this Amendment (the "Amended Agreement").
B. No Conflict. The execution and delivery of this Amendment
and performance by the Borrower of the Amended Agreement is within the
Borrower's corporate powers, has been duly authorized by all necessary corporate
action, and do not (i) contravene the Borrower's Constitutive Documents, (ii)
violate any Requirements of Law, (iii) conflict with or result in the breach of,
or constitute a default or require any payment to be made under, any contract,
loan agreement, indenture, mortgage, deed of trust, lease or other instrument
binding on or affecting the Borrower, any of its Subsidiaries or any of their
properties or (iv) except for the Liens created or permitted under the Loan
Documents, result in or require the creation or imposition of any Lien upon or
with respect to any of the properties of the Borrower or any of its
Subsidiaries. Neither the Borrower nor any of its Subsidiaries is in violation
of any such Requirements of Law or in breach of any such contract, loan
agreement, indenture, mortgage, deed of trust, lease or other instrument, the
violation or breach of which would be reasonably likely to have a Material
Adverse Effect.
C. Governmental Consents. No Governmental Authorization, and
no other authorization or approval or other action by, and no notice to or
filing with, any Governmental Authority or any other third party is required for
the due execution, delivery, recordation or filing of this Amendment or the
performance by the Borrower of the Amended Agreement.
D. Binding Obligation. This Amendment and the Amended
Agreement have been duly executed and delivered by the Borrower, and are, the
legal, valid and binding obligation of each Loan Party party thereto,
enforceable against such Loan Party in accordance with its terms.
E. Incorporation of Representations and Warranties From Credit
Agreement. The representations and warranties contained in Article IV of the
Credit Agreement are and will be true, correct and complete in all material
respects on and as of the First Amendment Effective Date to the same extent as
though made on and as of that date, except to
8
the extent such representations and warranties specifically relate to an earlier
date, in which case they were true, correct and complete in all material
respects on and as of such earlier date.
F. Absence of Default. No event has occurred and is continuing
or will result from the consummation of the transactions contemplated by this
Amendment that would constitute an Event of Default or a Potential Event of
Default.
Section 4. MISCELLANEOUS
A. Reference to and Effect on the Credit Agreement and the
Other Loan Documents.
(i) On and after the First Amendment Effective Date, each
reference in the Credit Agreement to "this Agreement", "hereunder", "hereof",
"herein" or words of like import referring to the Credit Agreement, and each
reference in the other Loan Documents to the "Credit Agreement", "thereunder",
"thereof" or words of like import referring to the Credit Agreement shall mean
and be a reference to the Amended Agreement.
(ii) Except as specifically amended by this Amendment, the
Credit Agreement and the other Loan Documents shall remain in full force and
effect and are hereby ratified and confirmed.
(iii) The execution, delivery and performance of this Amendment
shall not, except as expressly provided herein, constitute a waiver of any
provision of, or operate as a waiver of any right, power or remedy of Agent or
any Lender under, the Credit Agreement or any of the other Loan Documents.
B. Fees and Expenses. The Borrower acknowledges that all
costs, fees and expenses as described in Section 2.08 of the Credit Agreement
incurred by Agent and its counsel with respect to this Amendment and the
documents and transactions contemplated hereby shall be for the account of the
Borrower.
C. Headings. Section and subsection 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 or be given any substantive effect.
D. Governing Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK
(INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW
YORK) WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THAT WOULD REQUIRE
APPLICATION OF ANOTHER LAW.
E. 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 shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
Delivery by telecopier of an executed counterpart of a signature page to this
Amendment shall be effective as delivery of an original executed counterpart of
this Amendment. This Amendment shall become effective upon the execution of a
9
counterpart hereof by the Borrower and Required Lenders and receipt by the
Borrower and the Administrative Agent of written or telephonic notification of
such execution and authorization of delivery thereof.
[Remainder of page intentionally left blank]
10
ANNEX A
-------
Supplement to Schedules 4.01(b) and 4.01(bb)
Levi Strauss Receivables Funding, LLC Delaware 99% NF Industries, Inc.
1% Levi Strauss
Securitization Corp.
A-1
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
LEVI STRAUSS & CO.
By:
-----------------------------------
Joseph M. Maurer
Vice President & Treasurer
BANK OF AMERICA, N.A. as
Administrative Agent
By:
-----------------------------------
Title:
--------------------------------
BANK OF AMERICA, N.A. as an Issuing
Bank, Swing Line Bank and a Lender
By:
-----------------------------------
Title:
--------------------------------
THE BANK OF NOVA SCOTIA, as
Documentation Agent, an Issuing Bank
and a Lender
By:
-----------------------------------
Title:
--------------------------------
CITICORP USA, INC., as Syndication
Agent and a Lender
By:
-----------------------------------
Title:
--------------------------------
CITIBANK, N.A., as an Issuing Bank
By:
-----------------------------------
Title:
--------------------------------
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, as a
Lender
By:
-----------------------------------
Title:
--------------------------------
BANK ONE, NA, as a Lender
By:
-----------------------------------
Title:
--------------------------------
ABN AMRO BANK, N.V., as an Issuing
Bank and a Lender
By:
-----------------------------------
Title:
--------------------------------
By:
-----------------------------------
Title:
--------------------------------
TRANSAMERICA BUSINESS CREDIT
CORPORATION, as a Lender
By:
-----------------------------------
Title:
--------------------------------
THE CIT GROUP/COMMERCIAL
SERVICES, INC., as a Lender
By:
-----------------------------------
Title:
--------------------------------
OAK BROOK BANK, as a Lender
By:
-----------------------------------
Title:
--------------------------------
FLEET NATIONAL BANK, as an
Issuing Bank and a Lender
By:
-----------------------------------
Title:
--------------------------------
KEMPER FLOATING RATE FUND, as
a Lender
By:
-----------------------------------
Title:
--------------------------------
OPPENHEIMER SENIOR FLOATING
RATE FUND, as a Lender
By:
-----------------------------------
Title:
--------------------------------
PILGRIM PRIME RATE TRUST, as a
Lender
By: ING Pilgrim Investments, Inc., as its
Investment Manager
By:
-----------------------------------
Title:
--------------------------------
MASS MUTUAL HIGH YIELD
PARTNERS II LLC, as a Lender
By: HYP Management, Inc., as
Managing Member
By:
-----------------------------------
Title:
--------------------------------
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY, as a Lender
By: David L. Babson & Company, Inc.,
as Investment Advisor
By:
-----------------------------------
Title:
--------------------------------
BILL & MELINDA GATES
FOUNDATION, as a Lender
By: David L. Babson & Company, Inc.,
as Investment Advisor
By:
-----------------------------------
Title:
--------------------------------
ADDISON CDO, LIMITED, as a Lender
By: Pacific Investment Management
Company LLC, as its Investment
Advisor
By:
-----------------------------------
Title:
--------------------------------
AIMCO CDO SERIES 2000-A, as a
Lender
By:
-----------------------------------
Title:
--------------------------------
ALLSTATE LIFE INSURANCE
COMPANY, as a Lender
By:
-----------------------------------
Title:
--------------------------------
AMARA-I FINANCE, LTD., as a Lender
By: INVESCO Senior Secured
Management, Inc., as Subadvisor
By:
-----------------------------------
Title:
--------------------------------
ARCHIMEDES FUNDING IV
(CAYMAN), LTD., as a Lender
By:
-----------------------------------
Title:
--------------------------------
ARES III CLO LTD., as a Lender
By: ARES CLO Management LLC,
Investment Manager
By:
-----------------------------------
Title:
--------------------------------
ARES IV CLO LTD., as a Lender
By: Ares CLO Management IV, L.P.,
Investment Manager
By: Ares CLO GP IV, LLC, its
Managing Manager
By:
-----------------------------------
Title:
--------------------------------
AVALON CAPITAL LTD. 2, as a Lender
By: INVESCO Senior Secured
Management, Inc., as Portfolio Advisor
By:
-----------------------------------
Title:
--------------------------------
BANK OF SCOTLAND, as a Lender
By:
-----------------------------------
Title:
--------------------------------
BLACK DIAMOND CLO 2000-1 LTD.,
as a Lender
By:
-----------------------------------
Title:
--------------------------------
BNP PARIBAS, as a Lender
By:
-----------------------------------
Title:
--------------------------------
By:
-----------------------------------
Title:
--------------------------------
CAPTIVA IV FINANCE LTD., as a
Lender as advised by Pacific Investment
Management Company LLC
By:
-----------------------------------
Title:
--------------------------------
CARLYLE HIGH YIELD PARTNERS
II, LTD., as a Lender
By:
-----------------------------------
Title:
--------------------------------
CARLYLE HIGH YIELD PARTNERS
III, LTD., as a Lender
By:
-----------------------------------
Title:
--------------------------------
CENTURION CDO II, LTD., as a Lender
By: American Express Asset
Management Group Inc., as
Collateral Agent
By:
-----------------------------------
Title:
--------------------------------
CENTURION CDO III, LIMITED, as a
Lender
By:
-----------------------------------
Title:
--------------------------------
CERES II FINANCE LTD., as a Lender
By: INVESCO Senior Secured
Management, Inc., as Sub-Managing
Agent (Financial)
By:
-----------------------------------
Title:
--------------------------------
CHARTER VIEW PORTFOLIO, as a
Lender
By: INVESCO Senior Secured
Management, Inc., as Investment Advisor
By:
-----------------------------------
Title:
--------------------------------
CITADEL HILL 2000 LTD., as a Lender
By:
-----------------------------------
Title:
--------------------------------
CREDIT SUISSE FIRST BOSTON, as a
Lender
By:
-----------------------------------
Title:
--------------------------------
CSAM FUNDING I, as a Lender
By:
-----------------------------------
Title:
--------------------------------
DELANO COMPANY, as a Lender
By: Pacific Investment Management
LLC, as its Investment Advisor
By:
-----------------------------------
Title:
--------------------------------
ELT LTD., as a Lender
By:
-----------------------------------
Title:
--------------------------------
EMERALD ORCHARD LIMITED, as a
Lender
By:
-----------------------------------
Title:
--------------------------------
FIDELITY ADVISOR SERIES II:
FIDELITY ADVISOR FLOATING
RATE HIGH INCOME FUND, as a
Lender
By:
-----------------------------------
Title:
--------------------------------
FLOATING RATE PORTFOLIO, as a
Lender
By: INVESCO Senior Secured
Management, Inc., as attorney in fact
By:
-----------------------------------
Title:
--------------------------------
FRANKLIN CLO I, LIMITED, as a
Lender
By:
-----------------------------------
Title:
--------------------------------
FRANKLIN FLOATING RATE DAILY
ACCESS FUND, as a Lender
By:
-----------------------------------
Title:
--------------------------------
FRANKLIN FLOATING RATE
MASTER SERIES, as a Lender
By:
-----------------------------------
Title:
--------------------------------
FRANKLIN CLO II, LIMITED, as a
Lender
By:
-----------------------------------
Title:
--------------------------------
HAMPDEN CBO LTD., as a Lender
By: David L. Babson & Company Inc.,
as Investment Advisor
By:
-----------------------------------
Title:
--------------------------------
HARBOURVIEW CDO II LTD., FUND,
as a Lender
By:
-----------------------------------
Title:
--------------------------------
HIGHLAND OFFSHORE PARTNERS,
L.P., as a Lender
By:
-----------------------------------
Title:
--------------------------------
INDOSUEZ CAPITAL FUNDING IIA,
LIMITED, as a Lender
By: Indosuez Capital Luxembourg, as
Collateral Manager
By:
-----------------------------------
Title:
--------------------------------
INDOSUEZ CAPITAL FUNDING IV,
L.P., as a Lender
By: Indosuez Capital Luxembourg, as
Collateral Manager
By:
-----------------------------------
Title:
--------------------------------
INDOSUEZ CAPITAL FUNDING VI,
LIMITED, as a Lender
By:
-----------------------------------
Title:
--------------------------------
JHW CASH FLOW FUND I, L.P., as a
Lender
By:
-----------------------------------
Title:
--------------------------------
JISSEKIKUN FUNDING, LTD., as a
Lender
By: Pacific Investment Management
Company LLC, as its Investment
Advisor
By:
-----------------------------------
Title:
--------------------------------
KEMPER FLOATING RATE FUND, as
a Lender
By:
-----------------------------------
Title:
--------------------------------
SteinRoe & Farnham Incorporated As
Agent for Keyport Life Insurance
Company, as a Lender
By:
-----------------------------------
Title:
--------------------------------
KZH CYPRESS TREE-1 LLC, as a
Lender
By:
-----------------------------------
Title:
--------------------------------
KZH LANGDALE LLC, as a Lender
By:
-----------------------------------
Title:
--------------------------------
KZH PONDVIEW LLC, as a Lender
By:
-----------------------------------
Title:
--------------------------------
KZH RIVERSIDE LLC, as a Lender
By:
-----------------------------------
Title:
--------------------------------
KZH SHOSHONE LLC, as a Lender
By:
-----------------------------------
Title:
--------------------------------
KZH STERLING LLC, as a Lender
By:
-----------------------------------
Title:
--------------------------------
KZH WATERSIDE LLC, as a Lender
By:
-----------------------------------
Title:
--------------------------------
LIBERTY-STEIN ROE ADVISOR
FLOATING RATE ADVANTAGE
FUND, as a Lender
By: Stein Roe & Farnham
Incorporated as Advisor
By:
-----------------------------------
Title:
--------------------------------
LONGHORN CDO (CAYMAN) LTD, as
a Lender
By: Merrill Lynch Investment
Managers, L.P., as Investment Advisor
By:
-----------------------------------
Title:
--------------------------------
MAGNETITE ASSET INVESTORS III
L.L.C., as a Lender
By:
-----------------------------------
Title:
--------------------------------
MAGNETITE ASSET INVESTORS,
LLC, as a Lender
By:
-----------------------------------
Title:
--------------------------------
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY, as a Lender
By:
-----------------------------------
Title:
--------------------------------
MASSMUTUAL HIGH YIELD
PARTNERS II, LLC, as a Lender
By:
-----------------------------------
Title:
--------------------------------
ML CLO XV PILGRIM AMERICA
(CAYMAN) LTD., as a Lender
By: Pilgrim Investments, Inc.
By:
-----------------------------------
Title:
--------------------------------
ML CLO XX PILGRIM AMERICA
(CAYMAN) LTD., as a Lender
By: ING Pilgrim Investments, Inc., as its
Investment Manager
By:
-----------------------------------
Title:
--------------------------------
MORGAN STANLEY DEAN WITTER
PRIME INCOME TRUST, as a Lender
By:
-----------------------------------
Title:
--------------------------------
NATEXIS BANQUE POPULAIRES, as a
Lender
By:
-----------------------------------
Title:
--------------------------------
NEMEAN CLO, LTD., as a Lender
By:
-----------------------------------
Title:
--------------------------------
NORTHWOODS CAPITAL II,
LIMITED, as a Lender
By: Angelo, Gordon & Co., L.P., as
Collateral Manager
By:
-----------------------------------
Title:
--------------------------------
NORTHWOODS CAPITAL, LIMITED,
as a Lender
By: Angelo, Gordon & Co., L.P., as
Collateral Manager
By:
-----------------------------------
Title:
--------------------------------
NOVA CDO 2000, LTD., as a Lender
By:
-----------------------------------
Title:
--------------------------------
OAK HILL SECURITIES FUND II, L.P.,
as a Lender
By: Oak Hill Securities GenPar II, L.P.,
its General Partner
By: Oak Hill Securities MGP II, Inc., its
General Partner
By:
-----------------------------------
Title:
--------------------------------
OAK HILL SECURITIES FUND, L.P.,
as a Lender
By: Oak Hill Securities Gen Par, L.P.,
its General Partner
By: Oak Hill Securities MGP, Inc., its
General Partner
By:
-----------------------------------
Title:
--------------------------------
OAK HILL CREDIT PARTNERS I,
LIMITED, as a Lender
BY: Oakhill CLO Management I, LLC
as Investment Manager
By:
-----------------------------------
Title:
--------------------------------
OFFIT INVESTMENT FUND, INC., as a
Lender
By:
-----------------------------------
Title:
--------------------------------
RIVIERA FUNDING LLC, as a Lender
By:
-----------------------------------
Title:
--------------------------------
SEQUILS I, LTD., as a Lender
By:
-----------------------------------
Title:
--------------------------------
SEABOARD CLO 2000 LTD, as a
Lender
By:
-----------------------------------
Title:
--------------------------------
SEQUILS CENTURION V, LTD., as a
Lender
By:
-----------------------------------
Title:
--------------------------------
SEQUILS IV, LTD., as a Lender
By: TCW Advisors, Inc., as its Collateral
Manager
By:
-----------------------------------
Title:
--------------------------------
SRF TRADING, INC., as a Lender
By:
-----------------------------------
Title:
--------------------------------
STANFIELD CLO, LTD., as a Lender
By:
-----------------------------------
Title:
--------------------------------
STANFIELD RMF/TRANSATLANTIC
CDO, LTD., as a Lender
By:
-----------------------------------
Title:
--------------------------------
STEIN ROE & FARNHAM CLO I LTD.,
as a Lender
By: Stein Roe & Farnham Incorporated,
as Portfolio Manager
By:
-----------------------------------
Title:
--------------------------------
STEIN ROE FLOATING RATE
LIMITED LIABILITY COMPANY, as a
Lender
By:
-----------------------------------
Title:
--------------------------------
STRONG SHORT TERM HIGH YIELD
BOND FUND, a Series of Strong Income
Funds, Inc., as a Lender
By:
-----------------------------------
Title:
--------------------------------
SUFFIELD CLO, LIMITED, as a Lender
By: David L. Babson & Company Inc.,
as Collateral Manager
By:
-----------------------------------
Title:
--------------------------------
SUMITOMO MITSUI BANKING
CORPORATION, formerly known as
The Sumitomo Bank, Limited, as a
Lender
By:
-----------------------------------
Title:
--------------------------------
SUNTRUST BANKS, INC., as a Lender
By:
-----------------------------------
Title:
--------------------------------
TCW SELECT LOAN FUND, LIMITED,
as a Lender
By:
-----------------------------------
Title:
--------------------------------
TEXTRON FINANCIAL
CORPORATION, as a Lender
By:
-----------------------------------
Title:
--------------------------------
THERMOPYLAE FUNDING CORP., as a
Lender
By:
-----------------------------------
Title:
--------------------------------
TRANSAMERICA BUSINESS CREDIT
CORPORATION, as a Lender
By:
-----------------------------------
Title:
--------------------------------
TYLER TRADING INC., as a Lender
By:
-----------------------------------
Title:
--------------------------------
WINDSOR LOAN FUNDING,
LIMITED, as a Lender
By: Stanfield Capital Partners LLC, as
its Investment Manager
By:
-----------------------------------
Title:
--------------------------------
ACKNOWLEDGED:
BATTERY STREET ENTERPRISES,
INC.
By:
-----------------------------------
Joseph M. Maurer
Treasurer
LEVI STRAUSS FINANCIAL CENTER
CORPORATION
By:
-----------------------------------
Joseph M. Maurer
Treasurer
LEVI STRAUSS FUNDINC, LLC
By:
-----------------------------------
Joseph M. Maurer
Treasurer
LEVI STRAUSS GLOBAL
FULFILLMENT SERVICES, INC.
By:
-----------------------------------
Joseph M. Maurer
Treasurer
LEVI STRAUSS GLOBAL
OPERATIONS, INC.
By:
-----------------------------------
Joseph M. Maurer
Treasurer
LEVI STRAUSS INTERNATIONAL
By:
-----------------------------------
Joseph M. Maurer
Treasurer
LEVI STRAUSS LATIN AMERICA,
INC.
By:
-----------------------------------
Joseph M. Maurer
Treasurer
LEVI'S ONLY STORES, INC.
By:
-----------------------------------
Joseph M. Maurer
Treasurer
NF INDUSTRIES, INC.
By:
-----------------------------------
Joseph M. Maurer
Treasurer
EX-10
3
a10qex102.txt
EXHIBIT 10.2 MASTER INDENTURE
EXHIBIT 10.2
EXECUTION COPY
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MASTER INDENTURE
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LEVI STRAUSS RECEIVABLES FUNDING, LLC
as Issuer,
CITIBANK, N.A.
as Indenture Trustee
and
as Paying Agent, Authentication Agent and
Transfer Agent and Registrar
MASTER INDENTURE
Dated as of July 31, 2001
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TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
Section 1.01. Definitions....................................................................................2
Section 1.02. Other Definitional Provisions.................................................................24
ARTICLE II
THE NOTES
Section 2.01. Form Generally................................................................................25
Section 2.02. Denominations.................................................................................26
Section 2.03. Execution, Authentication and Delivery........................................................26
Section 2.04. Authentication Agent..........................................................................26
Section 2.05. Registration of and Limitations on Transfer and Exchange of Notes.............................28
Section 2.06. Mutilated, Destroyed, Lost or Stolen Notes....................................................29
Section 2.07. Persons Deemed Owners.........................................................................30
Section 2.08. Paying Agent..................................................................................30
Section 2.09. Cancellation..................................................................................31
Section 2.10. New Issuances.................................................................................32
Section 2.11. Book-Entry Notes..............................................................................33
Section 2.12. Notices to Clearing Agency or Foreign Clearing Agency.........................................34
Section 2.13. Definitive Notes..............................................................................35
Section 2.14. Global Note; Euro-Note Exchange Date..........................................................35
Section 2.15. Representations and Covenants of Paying Agent, Authentication Agent and Transfer Agent
and Registrar.................................................................................35
ARTICLE III
REPRESENTATIONS AND COVENANTS OF THE ISSUER
Section 3.01. Representations and Warranties of the Issuer..................................................36
Section 3.02. Affirmative Covenants of the Issuer...........................................................40
Section 3.03. Negative Covenants of the Issuer..............................................................42
Section 3.04. Protection of Pledged Assets..................................................................43
Section 3.05. Opinions as to Pledged Assets.................................................................44
i
Section 3.06. Obligations Regarding Servicing of Receivables................................................44
Section 3.07. Separate Existence of the Issuer..............................................................45
ARTICLE IV
SATISFACTION AND DISCHARGE
Section 4.01. Satisfaction and Discharge of this Indenture..................................................47
Section 4.02. Application of Trust Money....................................................................48
ARTICLE V
EVENTS OF DEFAULT AND REMEDIES
Section 5.01. Events of Default.............................................................................48
Section 5.02. Acceleration of Maturity; Rescission and Annulment............................................48
Section 5.03. Collection of Indebtedness and Suits for Enforcement by the Indenture Trustee.................49
Section 5.04. Remedies; Priorities..........................................................................51
Section 5.05. Sale of Assets................................................................................52
Section 5.06. Limitations on Suits..........................................................................52
Section 5.07. Unconditional Right of Noteholders to Receive Principal and Interest..........................53
Section 5.08. Restoration of Rights and Remedies............................................................53
Section 5.09. Rights and Remedies Cumulative................................................................54
Section 5.10. Delay or Omission Not a Waiver................................................................54
Section 5.11. Control by Noteholders........................................................................54
Section 5.12. Waiver of Past Defaults.......................................................................55
Section 5.13. Undertaking for Costs.........................................................................55
Section 5.14. Waiver of Stay or Extension Laws..............................................................55
Section 5.15. Action on Notes...............................................................................56
ARTICLE VI
THE INDENTURE TRUSTEE
Section 6.01. Duties of the Indenture Trustee...............................................................56
Section 6.02. Notice of Event of Default....................................................................58
Section 6.03. Rights of Indenture Trustee...................................................................58
Section 6.04. Not Responsible for Recitals or Issuance of Notes.............................................60
Section 6.05. May Hold Notes................................................................................60
ii
Section 6.06. Money Held in Trust...........................................................................60
Section 6.07. Compensation, Reimbursement and Indemnification...............................................60
Section 6.08. Replacement of Indenture Trustee..............................................................61
Section 6.09. Successor Indenture Trustee by Merger.........................................................62
Section 6.10. Appointment of Co-Indenture Trustee or Separate Indenture Trustee.............................62
Section 6.11. Eligibility; Disqualification.................................................................63
Section 6.12. Representations and Covenants of the Indenture Trustee........................................63
Section 6.13. Custody of Pledged Assets and Other Collateral................................................64
ARTICLE VII
NOTEHOLDERS' LIST AND REPORTS BY INDENTURE TRUSTEE
Section 7.01. Issuer to Furnish Indenture Trustee Names and Addresses of Noteholders........................64
Section 7.02. Preservation of Information...................................................................64
ARTICLE VIII
ALLOCATION AND APPLICATION OF COLLECTIONS
Section 8.01. Collection of Money...........................................................................65
Section 8.02. Rights of Noteholders.........................................................................65
Section 8.03. Establishment of Accounts.....................................................................65
Section 8.04. Collections and Allocations...................................................................66
Section 8.05. Release of Pledged Assets.....................................................................68
Section 8.06. Officer's Certificate.........................................................................69
Section 8.07. Money for Note Payments to Be Held in Trust...................................................69
ARTICLE IX
DISTRIBUTIONS AND REPORTS TO NOTEHOLDERS
ARTICLE X
SUPPLEMENTAL INDENTURES
Section 10.01. Supplemental Indentures Without Consent of Noteholders........................................69
Section 10.02. Supplemental Indentures with Consent of Noteholders...........................................71
Section 10.03. Execution of Supplemental Indentures..........................................................72
Section 10.04. Effect of Supplemental Indenture..............................................................73
Section 10.05. Reference in Notes to Supplemental Indentures.................................................73
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ARTICLE XI
DEFEASANCE
Section 11.01. Defeasance....................................................................................73
ARTICLE XII
MISCELLANEOUS
Section 12.01. Compliance Certificates and Opinions, etc.....................................................75
Section 12.02. Form of Documents Delivered to Indenture Trustee..............................................77
Section 12.03. Acts of Noteholders...........................................................................77
Section 12.04. Notices to Issuer, Indenture Trustee, Paying Agent, Authentication Agent and Transfer
Agent and Registrar...........................................................................78
Section 12.05. Notices to Noteholders; Waiver................................................................78
Section 12.06. Alternate Payment and Notice Provisions.......................................................79
Section 12.07. Effect of Headings and Table of Contents......................................................79
Section 12.08. Successors and Assigns........................................................................79
Section 12.09. Separability..................................................................................79
Section 12.10. Benefits of Indenture.........................................................................79
Section 12.11. Legal Holidays................................................................................80
Section 12.12. GOVERNING LAW.................................................................................80
Section 12.13. Counterparts..................................................................................80
Section 12.14. No Petition; Limited Recourse to Issuer.......................................................80
Section 12.15. Provision of Information to Rating Agencies...................................................81
iv
This MASTER INDENTURE, dated as of July 31, 2001 (as amended,
modified or supplemented from time to time, the "Indenture"), by and between
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Levi Strauss Receivables Funding, LLC, a Delaware limited liability company
together with its permitted successors and assigns, the "Issuer") and Citibank,
------
N.A., a national banking association, as indenture trustee (in such capacity,
together with its successors in the trusts hereunder, the "Indenture Trustee"),
-----------------
and in its separate capacities as paying agent, authentication agent and
transfer agent and registrar (together with its permitted successors and
assigns, the "Agent"). This Indenture may be supplemented at any time and from
-----
time to time by a supplemental indenture in accordance with Article X hereof,
---------
including a supplemental indenture providing for the issuance of a particular
Series of Notes (each such supplemental indenture, an "Indenture Supplement").
---------------------
If a conflict exists between the terms and provisions of this Indenture and any
Indenture Supplement, the terms and provisions of the Indenture Supplement shall
be controlling with respect to the related Series.
PRELIMINARY STATEMENT
The Issuer has duly authorized the execution and delivery of
this Indenture to provide for issuances from time to time of its asset-backed
notes as provided in this Indenture. All covenants and agreements made by the
Issuer herein are for the benefit and security of the Noteholders. The Issuer is
entering into this Indenture, and the Indenture Trustee is accepting the trusts
created hereby, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged.
Simultaneously with the delivery of this Indenture the Issuer
is entering into the Receivables Purchase Agreement (the "Receivables Purchase
---------------------
Agreement") with Levi Strauss Funding, LLC, a Delaware limited liability company
---------
as transferor (the "Transferor") and Levi Strauss Financial Center Corporation,
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a California corporation, in its separate capacities as seller (the "Seller")
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and as servicer (the "Servicer"), pursuant to which (a) each of the Seller and
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the Transferor will sell to the Issuer all of its right, title and interest in,
to and under the Pledged Assets and (b) the Servicer will agree to service the
Pledged Assets and make collections thereon on behalf of the Noteholders. The
Pledged Assets were, and in the future will be, originated by Levi Strauss &
Co., a Delaware corporation (the "Originator") and have been and will continue
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to be purchased by the Seller from the Originator pursuant to the Receivables
Purchase and Sale Agreement and, solely with respect to the Pledged Assets as of
the date hereof, have been purchased by the Transferor from the Seller pursuant
to the Receivables Sale Agreement.
Under the Receivables Purchase Agreement, additional Pledged
Assets from time to time will automatically be conveyed thereunder to the Issuer
without any further action by the Originator, the Seller or the Transferor.
GRANTING CLAUSE
The Issuer hereby Grants to the Indenture Trustee, for the
benefit of the Holders of the Notes, all of the Issuer's right, title and
interest, whether now owned or hereafter acquired, in, to and under all of the
following: (i) all Receivables; (ii) all Related Security; (iii) all
Collections; (iv) the Collection Account, the Distribution Account, and all
money, instruments, investment property and other property credited to or
deposited in such accounts; (v) the Parent Undertaking, the Receivables Sale
Agreements and the Consent and Release Agreement; (vi) all accounts, money,
chattel paper, investment property, instruments, documents, deposit accounts,
certificates of deposit, letters of credit, advices of credit, general
intangibles and goods consisting of, arising from or relating to any of the
foregoing; (vii) all other property of the Issuer; and (viii) all proceeds of
the foregoing (collectively, the "Pledged Assets").
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ARTICLE I
DEFINITIONS
Section 1.01 Definitions.
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Whenever used in this Indenture, the following words and
phrases shall have the following meanings, and the definitions of such terms are
applicable to the singular as well as the plural forms of such terms and to the
masculine as well as to the feminine and neuter genders of such terms.
"Act" shall have the meaning specified in Section 12.03(a).
---
"Actual Knowledge" shall mean, with respect to any Person, the
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actual knowledge of an officer of such Person responsible for overseeing the
administration of or ensuring compliance with this Indenture.
"Adjusted Obligor Balance" shall mean, with respect to any
------------------------
Obligor, its Obligor Balance times the Advance Factor.
"Advance Factor" shall mean, as of any date of determination,
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an amount equal to one minus the greater of (x) 18% and (y) the "Loss Reserve
Ratio" (as such term is defined in the Indenture Supplement for the Series
2001-A Notes).
"Affiliate" shall mean, when used with respect to any Person,
---------
any other Person directly or indirectly controlling, controlled by or under
common control with, such Person. As used in this definition of Affiliate, the
term "control" means the power, directly or indirectly, to direct or cause the
direction of the management and policies of a Person, whether through ownership
of such Person's voting securities, by contract or otherwise, and the terms
"affiliated," "controlling" and "controlled" have correlative meanings.
"Agent" shall mean Citibank, N.A., in its capacity as
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Authentication Agent, Paying Agent and Transfer Agent and Note Registrar.
"Aggregate Adjustment Amount" shall mean, as of any date of
---------------------------
determination, an amount equal to the sum of (a) the Aggregate Overconcentration
Amount plus (b) the amount, if any, by which the aggregate Unpaid Balance of
Eligible Receivables owed by the United States federal government, or
2
any subdivision thereof or any agency, department, or instrumentality thereof,
exceeds 2.5% of the Aggregate Receivables Balance plus (c) the amount, if any,
by which the aggregate Unpaid Balance of Eligible Receivables owed by any state
or local government or any subdivision thereof or any agency, department, or
instrumentality thereof exceeds 1.5% of the Aggregate Receivables Balance plus
(d) the amount, if any, by which the Aggregate Unpaid Balance of Eligible
Receivables constituting Specialty Receivables exceeds 10% of the Aggregate
Receivables Balance plus (e) the Marketing Allowance Reserve.
"Aggregate Loss Reserve" shall mean, as of any date of
------------------------
determination, the product of (i) the greater of (x) 18% and (y) the "Loss
Reserve Ratio" (as such term is defined in the Indenture Supplement for the
Series 2001-A Notes) as calculated for the last day of the related Monthly
Period times (ii) the Net Eligible Receivables Balance as of the last day of
such Monthly Period.
"Aggregate Overconcentration Amount" shall mean, as of any
----------------------------------
date of determination, an amount equal to the sum of the Overconcentration
Amounts of all Eligible Obligors at the end of the preceding Business Day.
"Aggregate Receivables Balance" shall mean, as of any date of
-----------------------------
determination, the aggregate Unpaid Balances of all Eligible Receivables
included in the Purchased Assets.
"Amortization Event" with respect to each Series of Notes
------------------
shall be specified in the related Indenture Supplement.
"Amortization Period" shall mean, with respect to any Series,
-------------------
a period following the Revolving Period during which Collections are distributed
to Noteholders, in each case as defined with respect to such Series in the
related Indenture Supplement.
"Annual Budgeted Expenditures" shall mean, as of the end of
----------------------------
any Monthly Period during any calendar year (i) the aggregate dollar amount of
Marketing Support Expenditures included in the Originator's annual advertising
budget determined as of the beginning of such year plus (ii) the amount, if any,
by which cumulative Marketing Support Expenditures during such calendar year
through such Monthly Period exceed the amount described in clause (i).
"Applicable Payment Terms" shall mean, with respect to a
------------------------
particular Receivable described below, the number of days set forth opposite
such Receivable below:
Type of Applicable Payment
Receivable Terms
--------------------------- ------------------
Finished Goods Up to 37 Days
Fabric Sales Up to 60 Days
Offshore Shipments Up to 67 Days
Preshipped Goods Up to 52 Days
3
New Store/Natural Disaster Up to 120 Days
Specialty Receivables Up to 90 Days
"Asset Deficiency" shall mean, on any date of determination,
----------------
the amount, if any, by which the sum of the Target Receivables Amounts as of
such date exceeds the Net Eligible Receivables Balance as of such date.
"Authentication Agent" shall mean Citibank, N.A., and any
--------------------
successor thereto.
"Authorized Officer" shall mean:
------------------
(a) with respect to the Issuer, any officer of the Issuer or
other Person who is authorized to act for the Issuer in matters
relating to the Issuer and who is identified on the list of Authorized
Officers (containing the specimen signature of each such Person)
delivered by the Issuer to the Indenture Trustee on the initial Closing
Date (as such list may be modified or supplemented from time to time
thereafter); or
(b) with respect to the Servicer, any officer of the Servicer
or other Person who is authorized to act for the Servicer in matters
relating to the Servicer and who is identified on the list of
Authorized Officers (containing the specimen signature of each such
Person) delivered by the Servicer to the Indenture Trustee on the
initial Closing Date (as such list may be modified or supplemented from
time to time thereafter).
"Average Seasonality Ratio" shall mean, for any Monthly
-------------------------
Period, the sum of (i) the average of the Monthly Marketing Ratios for the
succeeding calendar month during the three immediately preceding calendar years
(i.e., so that for the Monthly Period ending January 31, the amount in this
clause (i) shall be the average of the Monthly Marketing Ratios for the three
preceding months of February) plus (ii) the average of the Monthly Marketing
Ratios for the second succeeding calendar month during the three immediately
preceding calendar years (i.e., so that for the Monthly Period ending January
31, the amount in this clause (ii) shall be the average of the Monthly Marketing
Ratios for the three preceding months of March) plus (iii) the average of the
Monthly Marketing Ratios for the third succeeding calendar month during the
three immediately preceding calendar years (i.e., so that for the Monthly Period
ending January 31, the amount in this clause (iii) shall be the average of the
Monthly Marketing Ratios for the three preceding months of April).
"Bankruptcy Code" shall mean the provisions of title 11 of
----------------
the United States Code, 11 U.S.C. (2 section symbols) 101 et seq.
------
"Beneficial Owner" shall mean, with respect to a Book-Entry
----------------
Note, the Person who is the owner of such Book-Entry Note, as reflected on the
books of the Clearing Agency or Foreign Clearing Agency, or on the books of a
Person maintaining an account with such Clearing Agency or Foreign Clearing
Agency (directly as a Clearing Agency Participant or as an Indirect Participant,
in accordance with the rules of such Clearing Agency or Foreign Clearing
Agency).
4
"Book-Entry Notes" shall mean beneficial interests in the
-----------------
Notes, ownership and transfers of which shall be made through book entries by a
Clearing Agency or Foreign Clearing Agency as described in Section 2.11.
"Business Day" shall mean any day that is not a Saturday, a
------------
Sunday or a day on which banks are required or permitted to be closed in the
State of New York or the State of California.
"Clearing Agency" shall mean an organization registered as a
---------------
"clearing agency" pursuant to Section 17A of the Securities Exchange Act of
1934, as amended, and serving as clearing agency for a Series of Book-Entry
Notes.
"Clearing Agency Participant" shall mean a broker, dealer,
---------------------------
bank, other financial institution or other Person for whom from time to time a
Clearing Agency effects book-entry transfers and pledges of securities deposited
with the Clearing Agency.
"Clearstream Banking" shall mean Clearstream Banking, societe
-------------------
anonyme, a professional depository incorporated under the laws of Luxembourg,
and its successors.
"Closing Date" shall mean, with respect to any Series, the
------------
closing date specified in the related Indenture Supplement.
"Code" shall mean the Internal Revenue Code of 1986, as
----
amended.
"Collection Account" shall have the meaning provided in
-------------------
Section 4.02 of the Receivables Purchase Agreement.
"Collections" shall mean, with respect to any Receivable, all
-----------
cash collections and other proceeds of such Receivable, including without
limitation, all proceeds of Related Security (including late charges, fees and
interest arising thereon, and all recoveries with respect thereto that have been
written off as uncollectible).
"Commission" shall mean the Securities and Exchange Commission
----------
or any successor thereto.
"Concentration Factor" shall mean, for any Monthly Period, an
--------------------
amount computed by (i) adding the sums of the Adjusted Obligor Balances as of
the end of such Monthly Period for the Obligors with the largest Adjusted
Obligor Balances, starting with the Obligor with the largest Adjusted Obligor
Balance and continuing until the aggregate amount calculated in this clause (i)
equals the Aggregate Loss Reserve; (ii) adding the total dollar amount of the
Marketing Support Expenditures paid during such Monthly Period to the Obligors
whose Adjusted Obligor Balances are included in the calculation described in the
preceding clause (i); and (iii) calculating a fraction, the numerator of which
equals the amount in clause (ii) and the denominator of which equals the total
dollar amount of Marketing Support Expenditures paid to all Obligors during such
Monthly Period. The Concentration Factor shall equal the fraction calculated in
clause (iii).
5
"Consent and Release Agreement" shall mean that certain
--------------------------------
Consent and Release Agreement dated as of July 31, 2001, as amended from time to
time, among the Originator, the Seller, the Indenture Trustee and Bank of
America, N.A., as the holder of the security interest under the terms of the
Credit Agreement, in certain inventory and accounts receivable of any of the
Originator, the Seller or the Transferor.
"Contract" shall mean any agreement or invoice pursuant to, or
--------
under which, an Obligor shall be obligated to make payments with respect to any
Receivable.
"Corporate Trust Office" shall mean the principal office of
----------------------
the Indenture Trustee at which at any particular time its corporate trust
business shall be administered, which office on the date of the execution of
this Indenture is located at 111 Wall Street, 14th Floor, NY, NY 10005, Attn:
Agency and Trust Structured Finance, Levi Strauss Series 2001-A or at such other
address as the Indenture Trustee may designate from time to time by notice to
the Noteholders and the Issuer, or the principal corporate trust office of any
successor Indenture Trustee (of which address any successor Indenture Trustee
shall notify the Noteholders and the Issuer).
"Credit Agreement" shall mean that certain Credit Agreement
----------------
dated as of February 1, 2001, as amended, among the Originator, as borrower, the
initial lenders, initial issuing banks and swing line lenders party thereto,
Bank of America, as administrative agent and collateral agent; Bank of America
Securities LLC and Salomon Smith Barney Inc., as co-lead arrangers and joint
book managers, Citicorp USA, Inc., as syndication agent, and The Bank of Nova
Scotia, as documentation agent.
"Credit and Collection Policy" shall have the meaning set
----------------------------
forth in the Receivables Purchase Agreement.
"Daily Receivables Activity Report" shall have the meaning set
---------------------------------
forth in the Receivables Purchase Agreement.
"Default" shall mean any occurrence that is, or with notice or
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the lapse of time or both would become, an Event of Default.
"Defaulted Receivables" shall mean any Receivable (a) the
----------------------
Obligor of which is subject to an Insolvency Proceeding, (b) which is unpaid in
whole or in part for more than 60 days after its original due date or (c) which
is determined to be or that should have been determined to be classified as
"doubtful" or written off as uncollectible in accordance with the Credit and
Collection Policy.
"Defeasance" shall have the meaning specified in Section
---------- -------
11.01(a).
--------
"Defeased Series" shall have the meaning specified in Section
--------------- -------
11.01(a).
--------
"Definitive Notes" shall mean Notes in definitive, fully
----------------
registered form.
6
"Deposit Date" shall mean each day on which Collections are
------------
deposited in the Collection Account.
"Distribution Account" shall have the meaning specified in
--------------------
Section 8.03(b).
---------------
"Dollars" or "$" shall mean United States dollars.
------- -
"DTC" shall mean The Depository Trust Company.
---
"Effective Date" shall mean July 31, 2001.
--------------
"Eligible Investments" shall mean the following instruments,
--------------------
investment property, or other property, in each case denominated in Dollars,
other than securities issued by or obligations of the Originator or any of its
Affiliates:
(a) direct obligations of, or obligations fully guaranteed
as to timely payment by, the United States of America;
(b) time deposit accounts, banker's acceptances, certificates
of deposit and money market deposits issued by (i) a bank or trust
company (A) organized under the laws of the United States of America or
any state thereof, (B) having capital, surplus and undivided profits
aggregating in excess of $500 million and (C) whose short-term debt is
rated A-1+ by S&P and P-1 by Moody's or (ii) a commercial bank (A)
organized under the laws of any country other than the United States
that is a member of the Organization for Economic Cooperation and
Development and has a foreign currency rating of A-1+ by S&P and P-1 by
Moody's, (B) having total assets in excess of $500 million (or its
foreign currency equivalent at the time), and (C) whose short-term debt
is rated A-1+ by S&P and P-1 by Moody's;
(c) commercial paper (having original or remaining maturities
of no more than 30 days) issued by a corporation organized and in
existence under the laws of the United States of America or any other
country that is a member of the Organization for Economic Cooperation
and Development and has a foreign currency rating of A-1+ by S&P and
P-1 by Moody's, in any case, having, at the time of the Issuer's
investment or contractual commitment to invest therein, a short-term
debt rating of A-1+ by S&P and P-1 by Moody's;
(d) demand deposits, time deposits and certificates of deposit
that are fully insured by the FDIC having, at the time of the Issuer's
investment therein, a short-term debt rating of A-1+ by S&P and P-1 by
Moody's;
(e) repurchase obligations with a term of not more than 30
days for underlying securities of the types described in clause (a)
----------
entered into with:
(i) a bank meeting the qualifications described in
clause (b) above, or
----------
7
(ii) any primary government securities dealer having
the debt ratings described in clause (c) above reporting to
----------
the Market Reports Division of the Federal Reserve Bank of New
York;
(f) time deposits and eurodollar deposits (having maturities
not later than the succeeding Payment Date) other than as referred to
in clause (d) above, with a Person the commercial paper of which has a
---------
credit rating of at least A-1+ by S&P and P-1 by Moody's;
(g) investments in money market funds or money market mutual
funds having (i) a rating from each of S&P and Moody's in the highest
investment category granted thereby, (ii) capital and undivided profits
aggregating at least $500 million and (iii) total assets in excess of
$500 million, including funds for which the Indenture Trustee or any of
its affiliates is investment manager or advisor; or
(h) any other investment of a type or rating that satisfies
the Rating Agency Condition.
"Eligible Obligor" shall mean each Obligor that satisfies the
----------------
following criteria (and as further defined in the existing documentation):
(a) it is a United States resident (which term includes a
United States division or branch of a foreign entity so long as such
division or branch maintains a place of business within the United
States to which all Receivables are billed);
(b) it is not the Originator or an Affiliate of the
Originator;
(c) it is not the Obligor of any Defaulted Receivables which
in the aggregate constitute more than 30% of the aggregate Unpaid
Balance of all Receivables owed by such Obligor (with the foregoing to
be determined as if an Obligor and its Affiliates were a single
Obligor);
(d) it is not the Obligor of any Receivables written off as
uncollectible; and
(e) it is not the subject of any voluntary or involuntary
bankruptcy proceeding.
"Eligible Receivable" shall mean, as of any date of
--------------------
determination, each Receivable owing by an Eligible Obligor in existence as of
such date that satisfies the following criteria (and as further defined in the
existing documentation):
(a) it constitutes an "account" within the meaning of
Article 9 of the Uniform Commercial Code of the state whose law
governs the perfection of the interest granted in it;
(b) it represents an enforceable obligation of such Obligor to
pay the full principal amount thereof, and it is not subject to any
disputes in whole or in part, or to
8
any offset, right of rescission, counterclaim or defense; provided that
-------
an otherwise Eligible Receivable that is subject only in part to any of
the foregoing shall be an Eligible Receivable to the extent not subject
to dispute, offset, right of rescission, counterclaim or defense;
(c) it is not a Defaulted Receivable;
(d) it is denominated and payable only in Dollars in the
United States of America;
(e) it arose in the ordinary course of business from the sale
of products or services (which may include sales of fabric or other
unfinished goods and including shipping, freight or other
non-merchandise costs) of the Originator and in accordance with the
Credit and Collection Policy of the Servicer and was not purchased by
the Originator from any Person;
(f) it does not contravene any applicable law, rule or
regulation and none of the Seller, the Originator or the Transferor is
in violation of any law, rule or regulation in connection with it which
in any way renders it unenforceable or would otherwise impair in any
material respect the collectibility of such Receivable;
(g) it is an "eligible asset" within the meaning of Rule 3a-7
of the Investment Company Act, and it is an account receivable
representing all or part of the sales price of merchandise, insurance
or services within the meaning of Section 3(c)(5) of the Investment
Company Act;
(h) it is not a Receivable for which the Originator or the
Servicer has established an offsetting specific reserve;
(i) it is not a Receivable in respect of which the Originator
has (i) entered into an arrangement with the Obligor pursuant to which
payment of any portion of the purchase price has been extended or
deferred, whether by means of a promissory note or by any other means,
to a date more than 60 days from the otherwise applicable due date
provided, however, that no more than 2% of the aggregate outstanding
-------- -------
balance of the Receivables may allow such extended payment terms, (ii)
altered the basis of the aging from the initial due date for payment
such that the final due date extends to a date more than 90 days from
the billing date or (iii) otherwise made any modification except in the
ordinary course of business and consistent with the Credit and
Collection Policy;
(j) (i) the related goods shall have been delivered to the
related Obligor or to a third-party shipping company for delivery to
the related Obligor or (ii) the related services shall have been
performed and, in either case, the Receivable shall have been billed to
the related Obligor;
(k) the Issuer has good and marketable title thereto free and
clear of all Liens (except for Liens in favor of the Indenture
Trustee);
9
(l) the Indenture Trustee has a valid and first priority
perfected security interest in such Receivable;
(m) the Originator is not in default in any material
respect under the terms of the contract, if any, from which such
Receivable arose;
(n) all required consents, approvals or authorizations
(including without limitation, any consent of the Obligor thereof
required for the assignment and sale thereof to the Issuer) have been
obtained with respect to such Receivable;
(o) all right, title and interest of the Originator, the
Seller and/or the Transferor in such Receivable has been validly sold
to the Issuer pursuant to the Receivables Sale Agreements;
(p) at the time such Receivable was sold to the Issuer under
the Receivables Purchase Agreement, no Insolvency Proceeding was
pending against the Originator, the Seller or the Transferor;
(q) the Originator, the Seller and the Transferor or its
designees have duly given all notices of assignment of such Receivable
in form and substance required by, and is otherwise in compliance in
all respects with, applicable law, all such notices are in full force
and effect to permit the legal, valid and enforceable transfer of such
Receivable to the Issuer;
(r) the obligation to pay such Receivable will at all times be
the legal, valid and binding payment obligation of the Obligor thereon,
enforceable against such Obligor in accordance with its terms, except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles
(whether enforcement is sought by proceedings in equity or at law);
(s) on the relevant purchase date of such Receivable, none of
the Originator, the Seller or the Transferor has (i) taken any action
that would impair the rights of the Issuer or the Indenture Trustee
therein or (ii) failed to take any action that was necessary to avoid
impairing the rights of the Issuer or the Indenture Trustee for the
benefit of the Noteholders;
(t) it is fully assignable (except insofar as assignability
may be limited by the Federal Assignment of Claims Act);
(u) each of the representations and warranties made by the
Originator, the Seller and the Transferor in the Receivables Sale
Agreements with respect to such Receivable is true and correct in all
material respects;
(v) it is not required by the Originator to be secured by
collateral; provided that an otherwise Eligible Receivable secured by
--------
(i) cash deposits in the possession or
10
control of the Indenture Trustee and/or (ii) a letter of credit from a
domestic financial institution, shall be an Eligible Receivable to the
extent such Receivable is so secured;
(w) the Obligor of which is an Eligible Obligor;
(x) such Receivable is not created under a long-term supply
contract unless the Rating Agency Condition has been satisfied with
respect to the inclusion of Receivables under such long-term contract
as Eligible Receivables;
(y) no portion of such Receivable is payable on account of
sales taxes; and
(z) pursuant to the contract related to such Receivable, such
Receivable is required to be paid in full within the Applicable Payment
Terms for such Receivable.
For the avoidance of doubt, a Receivable which meets the
foregoing criteria will be an Eligible Receivable notwithstanding that the
Servicer has not yet entered the outstanding balance of such Receivable into its
master data processing records so long as the Servicer makes such entries within
the next Business Day.
"ERISA Affiliate" shall mean any trade or business (whether or
---------------
not incorporated) that is treated as a single employer with the Originator under
Section 414 of the Code.
"Euroclear Operator" shall mean Euroclear Bank S.A., N.V., as
------------------
operator of the Euroclear System.
"Event of Bankruptcy" shall mean, for any Person:
-------------------
(a) that such Person shall admit in writing its inability, or
fail generally, to pay its debts as they become due; or
(b) (i) an Insolvency Proceeding shall have been instituted by
a creditor of such Person in a court having jurisdiction in the
premises seeking a decree or order for relief in respect of such
Person, or for the appointment of a receiver, liquidator, assignee,
trustee, custodian, sequestrator, conservator or other similar official
of such Person or for any substantial part of its property, or for the
winding-up or liquidation of its affairs and (ii) either such
Insolvency Proceeding shall remain undismissed or unstayed for a period
of 60 days or any of the actions sought in such proceedings shall
occur, provided that the grace period allowed for by this clause (ii)
-------- -----------
shall not apply to any Insolvency Proceeding instituted by an Affiliate
of such Person in furtherance of any of the actions set forth in the
preceding clause (i); or
----------
(c) a Insolvency Proceeding shall have been commenced by such
Person or such Person's consent to the entry of an order for relief in
an Insolvency Proceeding commenced against it by another party, or
consent to the appointment of or taking possession by a receiver,
liquidator, assignee, trustee, custodian, sequestrator, conservator
11
or other similar official of such Person or for any substantial part of
its property, or any general assignment for the benefit of creditors;
or
(d) if such Person is a corporation or a limited liability
company, such Person or any Subsidiary of such Person shall take any
corporate or limited liability company action in furtherance of any of
the actions set forth in the preceding clause (a), (b) or (c).
---------- --- ---
"Event of Default" shall have the meaning specified in
------------------
Section 5.01.
------------
"Expense Subaccount" shall mean, with respect to any Series of
------------------
Notes, the subaccount of the Collection Account established under the related
Indenture Supplement for the payment of Monthly Interest and Fees.
"FDIC" shall mean the Federal Deposit Insurance Corporation or
----
any successor.
"Final Stated Maturity Date" shall mean, with respect to any
--------------------------
Series, the date specified in the related Indenture Supplement.
"Foreign Clearing Agency" shall mean Clearstream Banking and
-----------------------
the Euroclear Operator.
"Funding" shall mean Levi Strauss Funding Corp., a Delaware
-------
corporation.
"GAAP" shall mean generally accepted accounting principles,
----
including the opinions, statements and pronouncements of the American Institute
of Certified Public Accountants, the Financial Accounting Standards Board and
the Commission, as in effect from time to time.
"Global Note" shall have the meaning specified in Section
------------ -------
2.14.
----
"Governmental Authority" shall mean any nation or government,
----------------------
any state or other political subdivision thereof, and any agency, department or
other entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Grant" shall mean to mortgage, pledge, bargain, warrant,
-----
alienate, remise, release, convey, assign, transfer, create and grant a Lien
upon and a security interest in and right of set-off against, deposit, set over
and confirm pursuant to this Indenture. A Grant of the Pledged Assets or of any
other agreement or instrument shall include all rights, powers and options (but
none of the obligations) of the granting party thereunder, including the
immediate and continuing right to claim for, collect, receive and give receipt
for principal and interest payments in respect of the Pledged Assets and all
other moneys payable thereunder, to give and receive notices and other
communications, to make waivers or other agreements, to exercise all rights and
options, to bring Proceedings in the name of the granting party or otherwise and
generally to do and receive anything that the granting party is or may be
entitled to do or receive thereunder or with respect thereto.
12
"Guaranty" shall mean any agreement, undertaking or
--------
arrangement by which any Person guarantees, endorses, agrees to purchase or
otherwise becomes or is contingently liable upon (by direct or indirect
agreement, contingent or otherwise, to provide funds for payment, to supply
funds to, or otherwise to invest in, a debtor, or otherwise to assure a creditor
against loss) the indebtedness, obligation or any other liability of any other
Person (other than by endorsements of instruments in the course of collection),
or guarantees the payment of dividends or other distributions on the shares of
any other Person.
"Indebtedness" of any Person shall mean, in the aggregate,
------------
without duplication, (i) all indebtedness, obligations and other liabilities of
such Person and its Subsidiaries that are, at the date as of which Indebtedness
is to be determined, includable as liabilities in a consolidated balance sheet
of such Person and its Subsidiaries, other than (x) accounts payable and accrued
expenses, and (y) current and deferred income taxes, (ii) all liabilities of
such Person or any of its Subsidiaries under any Guaranty, indemnity or similar
undertaking given or assumed of or in respect of, the indebtedness, obligations
or other liabilities, of any other Person or any agreement to maintain the net
worth or working capital of any other Person, (iii) all other obligations or
liabilities of such Person evidenced by notes, acceptances and similar
instruments, (iv) net liabilities of such Person under any interest rate swap,
cap or exchange agreements and (v) all obligations whether or not assumed,
secured by any liens on the property of such Person.
"Indenture" shall have the meaning set forth in the
---------
introductory paragraph to this Indenture.
"Indenture Supplement" shall have the meaning set forth in the
--------------------
introductory paragraph to this Indenture.
"Indenture Trustee" shall have the meaning set forth in the
-----------------
introductory paragraph of this Indenture.
"Independent" shall mean, when used with respect to any
-----------
specified Person, that the Person (a) is in fact independent of the Issuer, any
other obligor upon the Notes, the Transferor, the Originator, the Seller and any
Affiliate of any of the foregoing Persons, (b) does not have any direct
financial interest or any material indirect financial interest in the
outstanding equity or debt securities of the Issuer, any such other obligor, the
Transferor, the Originator, the Seller or any Affiliate of any of the foregoing
Persons and (c) is not connected with the Transferor, the Originator, the Seller
or any Affiliate of any of the foregoing Persons (other than the Issuer or the
SPC Member) as an officer, employee, promoter, underwriter, trustee, partner or
person performing similar functions.
"Independent Certificate" shall mean a certificate or opinion
-----------------------
to be delivered to the Indenture Trustee under the circumstances described in,
and otherwise complying with, the applicable requirements of Section 12.01, made
-------------
by an Independent appraiser or other expert, and such opinion or certificate
shall state that the signer has read the definition of "Independent" in this
-----------
Indenture and that the signer is Independent within the meaning thereof.
13
"Independent Director" shall mean, with respect to any entity,
--------------------
an individual who is an Independent Director as defined in the organizational
documents of such entity as in effect on the date of this Indenture.
"Indirect Participant" shall mean Persons such as securities
--------------------
brokers and dealers, banks and trust companies that clear or maintain a
custodial relationship with a participant of DTC, either directly or indirectly.
"Insolvency Proceeding" shall mean, with respect to any
----------------------
Person, any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceeding under any federal or state bankruptcy or similar law now or hereafter
in effect or any other similar proceeding, whether voluntary or involuntary.
"Investment Company Act" shall mean the Investment Company Act
----------------------
of 1940, as amended.
"Issuer" shall have the meaning set forth in the introductory
------
paragraph to this Indenture.
"Issuer Order" shall mean a written order or request signed in
------------
the name of the Issuer by any one of its Authorized Officers and delivered to
the Indenture Trustee or the Agent, as the case may be.
"Lien" shall mean, when used with respect to any Person, any
----
mortgage, lien, pledge, encumbrance, charge, retained security title of a
conditional vendor or lessor, security interest or other right or claim in or on
such Person's assets or properties in favor of any other Person.
"Lockbox Account" shall mean any lockbox account,
-----------------
concentration account, depositary account or similar account (including any
associated demand deposit account) established by the Originator or the Servicer
and into which any Collections are collected or deposited.
"Lockbox Agreement" shall have the meaning set forth in the
-----------------
Receivables Purchase Agreement.
"Majority Investors" shall mean Noteholders holding Notes
------------------
evidencing more than 50% of the Outstanding Amount.
"Marketing Allowance Reserve" shall mean, as of any date of
---------------------------
determination, an amount equal to the greater of (x) the total dollar amount of
Marketing Support Expenditures paid by the Originator to Obligors during the
most recently ended Monthly Period and (y) the sum of (i) the Monthly Marketing
Reserves for such Monthly Period plus (ii) all accrued Marketing Support
----
Expenditures approved for payment as of the end of such Monthly Period but not
yet paid.
14
"Marketing Stress Factor" shall mean 1.25, provided that, if,
-----------------------
as of the end of any Monthly Period, (x) the cumulative Marketing Support
Expenditures for the calendar year to date exceed (y) 75% of the Annual Budgeted
Expenditures for such year, then, commencing at such time and continuing until
an entire calendar year has elapsed during which the total Marketing Support
Expenditures paid during such year remained below 75% of the Annual Budgeted
Expenditures for such year, the Marketing Stress Factor shall equal (i) 1.25
times (ii) a percentage factor equal to the sum of (A) 100% plus (B) the lesser
of (1) a fraction (expressed as a percentage), the numerator of which equals the
amount described in clause (x) above minus the amount described in clause (y)
above, and the denominator of which equals 100% of the Annual Budgeted
Expenditures for such year and (2) the lowest incremental percentage, if any,
with respect to which the Rating Agency Condition has been satisfied, provided,
that the Marketing Stress Factor shall not exceed 1.5.
"Marketing Support Expenditures" shall mean expenditures paid
------------------------------
by the Parent or any Affiliate to Obligors in connection with cooperative
advertising programs and other retail marketing funding programs involving
reimbursement by the Parent of Obligors through specified procedures for certain
approved advertising and other marketing activities by such Obligors.
"Master Amendment and Consent" shall mean that certain Master
----------------------------
Amendment and Consent dated as of July 31, 2001 among the Originator, the
Seller, the Transferor and the Issuer.
"Material Adverse Effect" shall mean, with respect to any
-------------------------
event or circumstance, a material adverse effect on (a) the business, financial
condition, operations or assets of the Issuer or of the Transaction Parties
(taken as a whole) (b) the ability of any Transaction Party to perform its
obligations under any Transaction Document to which it is a party, (c) the
validity or enforceability of, or collectibility of, amounts payable by any
Transaction Party under any Transaction Document to which it is a party, (d) the
status, existence, perfection or priority of the interest of the Issuer or the
Indenture Trustee thereof in the Pledged Assets, or (e) the validity,
enforceability or collectibility of all or any substantial portion of the
Pledged Assets; provided, however, that a downturn, recession or similar
-------- -------
economic condition in respect of the apparel industry or of the United States
economy shall not, in and of itself, constitute a "Material Adverse Effect."
"Monthly Marketing Ratio" shall mean, for any Monthly Period,
-----------------------
a ratio computed as (i) the dollar amount of Marketing Support Expenditures paid
during such Monthly Period divided by (ii) the total dollar amount of Marketing
----------
Support Expenditures paid during the calendar year during which such Monthly
Period occurs.
"Monthly Marketing Reserves" for any Monthly Period shall mean
--------------------------
an amount computed in accordance with the following formula:
MMR = (ASR x ABE x MSF x NCF) where:
MMR = the Monthly Marketing Reserves;
15
ASR = the Average Seasonality Ratio for such Monthly Period;
ABE = the Annual Budgeted Expenditures for the calendar year
during which such Monthly Period occurs;
MSF = the Marketing Stress Factor; and
NCF = the greater of (x) 20% and (y)one minus the
Concentration Factor for such Monthly Period.
"Monthly Interest and Fees" shall mean, with respect to any
-------------------------
Series of Notes, interest on such Notes, the Servicing Fee allocable to such
Series, premium payable to any Series Enhancer, and any other fees which are
included in the calculation of the Required Reserves for such Series as
specified in the related Indenture Supplement.
"Monthly Period" shall mean (i) a calendar month or (ii) with
--------------
respect to the initial Monthly Period, the period commencing on the Closing Date
with respect to the initial Series of Notes and ending on the last day of the
same month, or such other period set forth in the related Indenture Supplement.
"Moody's" shall mean Moody's Investors Service, Inc.
-------
"Net Eligible Receivables Balance" shall mean, as of any date
--------------------------------
of determination, the excess of (a) the Aggregate Receivables Balance on such
date over (b) the Aggregate Adjustment Amount on such date.
"New Issuance" shall have the meaning specified in Section
------------ -------
2.10.
----
"Note Interest Rate" shall mean, as of any date of
-------------------
determination and with respect to any Series, the rate at which interest accrues
on the Notes of such Series (or formula on the basis of which such rate shall be
determined) specified therefor in the related Indenture Supplement.
"Note Register" shall have the meaning specified in Section
------------- -------
2.05.
----
"Noteholder" or "Holder" shall mean the Person in whose name a
---------- ------
Note is registered on the Note Register or such other Person deemed to be a
"Noteholder" or "Holder" in any related Indenture Supplement.
---------- ------
"Notes" shall mean all Series of Notes issued by the Issuer
-----
pursuant to this Indenture and the applicable Indenture Supplement.
"Obligor" shall mean, with respect to any Receivable, the
-------
Person or Persons obligated to make payments in respect thereof.
"Obligor Balance" shall mean, for each Obligor at any time of
---------------
determination, the lesser of (i) the aggregate Unpaid Balance of all Eligible
Receivables owed by such Obligor and (ii) its Obligor Limit.
16
"Obligor Limit" shall mean, as of any date of determination,
-------------
with respect to each Eligible Obligor having a short-term debt rating (or, if it
has no short-term debt rating, the equivalent unsecured long-term debt rating)
from each of S&P and Moody's as described below, an amount equal to the
applicable percentage listed opposite such Obligor's debt rating times the
Aggregate Receivables Balance as of the immediately preceding Business Day:
-------------------------- ------------------------------ -----------------
Short-Term Equivalent Applicable
Rating Long-Term Percentage
of Obligor Unsecured Rating
-------------------------- ------------------------------ -----------------
A-1+/P-1 AAA/Aaa or higher 10%
-------------------------- ------------------------------ -----------------
A-1/P-1 AA-/Aa3 or higher (but lower
than 8% AAA/Aaa) 8%
-------------------------- ------------------------------ -----------------
A-2/P-2 A-/A3 or higher (but lower
than AA/Aa3) 6%
-------------------------- ------------------------------ -----------------
A-3/P-3 BBB-/Baa3 or higher (but
lower than A-/A3) 5%
-------------------------- ------------------------------ -----------------
Lower than A-3/P-3 Lower than BBB-/Baa3 or not
rated 3%
-------------------------- ------------------------------ -----------------
For purposes of calculating the foregoing, (i) if an Eligible Obligor's
short-term debt rating (or equivalent unsecured long-term rating) results in two
different Obligor Limits (because of differences in the debt ratings assigned by
each of the Rating Agencies), the lower Obligor Limit shall be the Obligor Limit
for such Obligor and (ii) in the case of an Eligible Obligor which is affiliated
with one or more other Eligible Obligors, the foregoing Obligor Limits shall be
calculated as if such Obligor and such affiliated Obligors were one Obligor.
"Officer's Certificate" shall mean, unless otherwise specified
---------------------
in this Indenture, a certificate delivered as provided herein, signed by:
(a) an Authorized Officer of the Issuer or the Servicer, as
the case may be, or
(b) by the President, any Vice President, the Treasurer or
any Assistant Treasurer or the financial controller of any Successor
Servicer
(or by an officer holding an office with equivalent or more senior
responsibilities or, in the case of the Servicer or Successor Servicer, a
Servicing Officer).
"Opinion of Counsel" shall mean a written opinion, subject to
------------------
the usual and customary assumptions and exclusions with regard to the subject
matter thereof, of counsel, who may be counsel for, or an employee of, the
Person providing the opinion and who shall be reasonably acceptable to the
Indenture Trustee and each Series Enhancer.
17
"Originator" shall have the meaning set forth in the
----------
preliminary statement to this Indenture.
"Outstanding" shall mean, with respect to the Notes as of any
-----------
date of determination, all Notes authenticated and delivered under this
Indenture except:
(i) Notes previously cancelled by the Transfer Agent and
Registrar or delivered to the Transfer Agent and Registrar for
cancellation;
(ii) Notes or portions thereof the payment for which money in
the necessary amount has been previously deposited with the Indenture
Trustee or any Paying Agent in trust for the Holders of such Notes
(provided, however, that if such Notes are to be redeemed, notice of
such redemption has been duly given pursuant to the applicable
Indenture Supplement or provision therefor, satisfactory to the
Indenture Trustee, has been made); and
(iii) Notes in exchange for or in lieu of other Notes that
have been authenticated and delivered pursuant to this Indenture unless
proof satisfactory to the Indenture Trustee is presented that any such
Notes are held by a protected purchaser;
provided that in determining whether the Holders of the requisite Outstanding
Amount of the Notes have given any request, demand, authorization, direction,
notice, consent or waiver hereunder, Notes owned by the Issuer, any other
obligor on the Notes, the Transferor, the Seller, the Servicer or any Affiliate
of any of the foregoing Persons shall be disregarded and deemed not to be
Outstanding (except that, in determining whether the Indenture Trustee shall be
protected in relying upon any such request, demand, authorization, direction,
notice, consent or waiver, only Notes that a Trustee Officer actually knows to
be so owned shall be so disregarded). Notes so owned that have been pledged in
good faith may be regarded as Outstanding if the pledgee establishes to the
satisfaction of the Indenture Trustee the pledgee's right so to act with respect
to such Notes and that the pledgee is not the Issuer, any other obligor on the
Notes, the Transferor, the Originator, the Seller, the Servicer or any Affiliate
of any of the foregoing Persons. In making any such determination, the Indenture
Trustee may rely on the representations of the pledgee and shall not be required
to undertake any independent investigation.
"Outstanding Amount" shall mean the aggregate Series
------------------
Outstanding Amount of all Series of Notes Outstanding at the date of
determination.
"Overconcentration Amount" shall mean, with respect to each
------------------------
Eligible Obligor as of any date of determination, the amount by which the
aggregate Unpaid Balance of all Receivables owed by such Eligible Obligor
exceeds its Obligor Limit.
"Parent" shall mean Levi Strauss & Co., a Delaware
------
corporation.
"Parent Affiliated Group" shall mean the Parent and each
-------------------------
of its Affiliates other than the Issuer.
18
"Parent Undertaking" shall mean the Parent Undertaking dated
------------------
as of July 31, 2001 from the Parent to the Issuer.
"Paying Agent" shall mean Citibank, N.A., and any successor
------------
thereto.
"Payment Date" shall mean, with respect to any Series, the
------------
date specified in the applicable Indenture Supplement.
"Permitted Lien" shall mean any Lien (i) created under any of
--------------
the Transaction Documents, (ii) on goods contemplated to remain in effect
pursuant to the Consent and Release Agreement, (iii) which is released pursuant
to the Consent and Release Agreement or (iv) any materialman's, workman's,
warehouseman's or shipper's or other similar lien on any goods arising by
operation of law or in the ordinary course of the Transaction Parties' business.
"Person" shall mean any person or entity, including any
------
individual, corporation, limited liability company, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization,
governmental entity or other entity of any nature.
"Pledged Assets" shall have the meaning set forth in the
--------------
granting clause of this Indenture.
"Principal Subaccount" shall mean, with respect to any Series
--------------------
of Notes, the subaccount of the Collection Account established under the related
Indenture Supplement for the amortization of principal of such Notes.
"Principal Terms" shall mean, with respect to any Series, (a)
---------------
the name or designation; (b) the initial principal amount (or method for
calculating such amount) and the Series Outstanding Amount; (c) the Note
Interest Rate for the Notes of such Series (or method for the determination
thereof); (d) the payment date or dates and the date or dates from which
interest shall accrue; (e) Required Reserves for such Series and the method by
which the principal amount for the Notes of such Series shall amortize; (f) the
designation of any Series Accounts and the terms governing the operation of any
such Series Accounts; (g) the portion of the Servicing Fee allocable to such
Series; (h) the Series Enhancer and terms of any of Series Enhancement, if
applicable; (i) the terms on which the Notes of such Series may be exchanged for
Notes of another Series, repurchased or redeemed by the Issuer or remarketed to
other investors; (j) the maturity date; (k) the extent to which the Notes of
such Series will be issuable in temporary or permanent global form (and, in such
case, the depositary for such global note or notes, the terms and conditions, if
any, upon which such global note may be exchanged, in whole or in part, for
Definitive Notes, and the manner in which any interest payable on a temporary or
global note will be paid); (l) the priority of such Series with respect to any
other Series; (m) the Payment Date with respect to such Series; and (n) any
other terms of such Series.
"Proceeding" shall mean any suit in equity, action at law or
----------
other judicial or administrative proceeding.
"Qualified Account" shall mean either (a) a segregated account
-----------------
with a Qualified Institution or (b) a segregated trust account with the
corporate trust department of a depository
19
institution organized under the laws of the United States of America or any one
of the states thereof, or the District of Columbia (or any domestic branch of a
foreign bank), and acting as a trustee for funds deposited in such account, so
long as any of the unsecured, unguaranteed senior debt securities of such
depository institution shall have a credit rating from each Rating Agency in one
of its generic credit rating categories that signifies investment grade.
"Qualified Institution" shall mean (a) a depository
----------------------
institution, which may include the Indenture Trustee (if it is a Paying Agent
hereunder), organized under the laws of the United States of America or any one
of the states thereof, or the District of Columbia, the deposits in which are
insured by the Federal Deposit Insurance Corporation and that at all times has a
short-term unsecured debt rating of at least A-1+ by S&P and P-1 by Moody's or a
long-term unsecured debt rating of AA- by S&P and Aa3 by Moody's or (b) a
depository institution acceptable to each Rating Agency.
"Rating Agency" shall mean, with respect to any outstanding
-------------
Series, each rating agency selected by the Issuer to rate the Notes of such
Series, as specified in the applicable Indenture Supplement.
"Rating Agency Condition" shall mean, with respect to any
-----------------------
action, that each Rating Agency shall have notified the Issuer, the Servicer,
any Series Enhancer and the Indenture Trustee in writing that such action will
not result in a reduction or withdrawal of the then existing rating of any
outstanding Series with respect to which it is a Rating Agency (both with and
without giving effect to any letter of credit, surety bond or insurance policy
issued by any Series Enhancer) or, with respect to any outstanding Series not
rated by any Rating Agency, such written consent as is specified in the
Indenture Supplement for such Series.
"Receivables" shall mean with respect to an Obligor, the
-----------
indebtedness of such Obligor arising under a Contract with the Originator from
the sale of merchandise or services by or on behalf of the Originator, whether
constituting an account, chattel paper, instrument or general intangible and
shall include the right of payment of any interest, finance charges, returned
check or late charges and other obligations of such Obligor with respect
thereto.
"Receivables Purchase Agreement" shall mean the Receivables
------------------------------
Purchase Agreement, dated as of the date hereof, among the Transferor, the
Seller, the Servicer and the Issuer, as the same may be amended, supplemented or
otherwise modified from time to time.
"Receivables Purchase and Sale Agreement" shall mean the Third
---------------------------------------
Amended and Fully Restated Receivables Purchase and Sale Agreement dated as of
January 28, 2000 between the Originator and the Seller, as amended from time to
time.
"Receivables Sale Agreement" shall mean the Receivables
----------------------------
Purchase and Sale Agreement dated as of January 28, 2000, among the Originator,
the Seller, Funding and the Transferor, as amended from time to time.
"Receivables Sale Agreements" shall mean the Receivables
-----------------------------
Purchase and Sale Agreement, the Receivables Sale Agreement and the Receivables
Purchase Agreement.
20
"Record Date" shall mean, with respect to any Payment Date,
-----------
the last Business Day of the preceding Monthly Period, unless otherwise
specified for a Series in the related Indenture Supplement.
"Records" shall mean all Contracts, purchase orders, invoices,
-------
customer lists, credit files and other agreements, documents, books, records and
other media for the storage of information (including without limitation tapes,
disks, punch cards, computer software and databases and related property) with
respect to the Receivables, the Related Security and/or the related Obligors;
provided, that Records shall not include any software licenses relating to the
foregoing to the extent that the assignment thereof to the Issuer would breach
the terms of such licenses.
"Redemption Date" shall mean, with respect to any Series, the
---------------
date the Notes of any Series are redeemed in accordance with the related
Indenture Supplement.
"Related Security" shall mean, with respect to each
-----------------
Receivable:
(a) all security interests or Liens and property subject
thereto from time to time purporting to secure payment of such
Receivable, whether pursuant to the Contract related to such Receivable
or otherwise, together with all financing statements and security
agreements describing any collateral securing such Receivable;
(b) all guaranties, letters of credit, insurance, warranties,
indemnities and other agreements or arrangements of whatever character
from time to time supporting or securing the payment obligation of the
Obligor with respect to such Receivable whether pursuant to the
Contract related to such Receivable or otherwise;
(c) all of the Originator's, the Seller's, the Transferor's
and the Issuer's interest in the goods (including returned or
repossessed goods), if any, the sale, financing, lease or licensing of
which gave rise to such Receivable;
(d) all Records related to such Receivable;
(e) all service contracts and other contracts and agreements
associated with such Receivable;
(f) all of the Issuer's right, title and interest in, to and
under the Receivables Sale Agreements, the Consent and Release
Agreement and the Parent Undertaking in respect of such Receivable;
and
(g) all proceeds of any of the foregoing.
"Required Amount" shall mean, with respect to any Series of
---------------
Notes, the required amount to be on deposit in the Expense Subaccount for such
Series as specified in the related Indenture Supplement.
21
"Required Reserves" shall mean, with respect to any Series of
-----------------
Notes, the required reserves for such Series of Notes as specified in the
related Indenture Supplement.
"Revolving Period" shall have, with respect to each Series,
-----------------
the meaning specified in the related Indenture Supplement.
"S&P" shall mean Standard & Poor's Ratings Services, a
---
division of The McGraw Hill Companies, Inc.
"Seller" shall have the meaning set forth in the preliminary
------
statement to this Indenture.
"Series" shall mean any series of Notes issued pursuant to
------
this Indenture and the related Indenture Supplement.
"Series Account" shall mean any deposit, trust, securities,
--------------
escrow or similar account maintained for the benefit of the Noteholders of any
Series, as specified in any Indenture Supplement.
"Series Adjusted Outstanding Amount" shall mean the Series
----------------------------------
Outstanding Amount less amounts on deposit in any Principal Subaccount for such
Series.
"Series Enhancement" shall mean the rights and benefits
-------------------
provided to the Issuer or the Noteholders of any Series pursuant to any letter
of credit, surety bond, cash collateral account, collateral invested amount,
insurance policy or other similar arrangement. The subordination of any Series
to another Series also shall be deemed to be a Series Enhancement.
"Series Enhancer" shall mean the Person or Persons providing
---------------
any Series Enhancement, other than (except to the extent otherwise provided with
respect to any Series in the Indenture Supplement for such Series) the
Noteholders of any Series that is subordinated to another Series.
"Series Fixed Allocation Percentage" shall mean, with respect
----------------------------------
to any Series of Notes for any date during the Amortization Period for such
Series, the higher of (i) the Series Floating Allocation Percentage for such
Series as of the date such Amortization Period commenced and (ii) the percentage
designated by the Issuer in a written notice to the Servicer and the Indenture
Trustee and the Rating Agencies as the "Series Fixed Allocation Percentage" for
such Series; provided that if more than one Series of Notes is in an
--------
Amortization Period and the sum of the Series Fixed Allocation Percentages for
each such Series would otherwise exceed 100%, then the Series Fixed Allocation
Percentage for any amortizing Series will equal a fraction, the numerator of
which equals its Target Receivables Amount as of the date its Amortization
Period commenced and the denominator of which equals the sum of the Target
Receivables Amounts for all Series which are in an Amortization Period,
calculated as of the date of the commencement of the Amortization Period for
each such Series.
"Series Floating Allocation Percentage" shall mean, with
----------------------------------------
respect to any Series of Notes and for any date during the Revolving Period for
such Series, a fraction, the numerator
22
of which equals its Target Receivables Amount and the denominator of which
equals the greater of (i) the Net Eligible Receivables Balance and (ii) the sum
of the Target Receivables Amounts for all Series then outstanding.
"Series Issuance Date" shall mean, with respect to any Series,
--------------------
the date on which the Notes of such Series are to be originally issued in
accordance with Section 2.10 and the related Indenture Supplement.
------------
"Series Outstanding Amount" shall mean, with respect to any
-------------------------
Series of Notes, the aggregate principal amount thereof.
"Servicer" shall have the meaning set forth in the preliminary
--------
statement to this Indenture.
"Servicer Default" shall have the meaning specified in Section
---------------- -------
8.01 of the Receivables Purchase Agreement.
----
"Servicing Fee" shall have the meaning specified in Section
------------- -------
3.03 of the Receivables Purchase Agreement.
----
"Servicing Officer" shall have the meaning specified in the
-----------------
Receivables Purchase Agreement.
"SPC Member" shall mean Levi Strauss Securitization Corp., a
----------
Delaware corporation.
"Specialty Receivables" shall mean Receivables generated by
---------------------
sales to new or different distribution channels or to specialty retailers for
which the Originator establishes payment terms in excess of 37 days.
"Stated Amount" shall mean, with respect to any Variable
-------------
Funding Note, the maximum principal amount that may be required to be funded by
the Holder of such Variable Funding Note pursuant to the applicable Indenture
Supplement.
"Subsidiary" shall mean, with respect to any Person, any
----------
corporation or other entity of which more than 50% of the outstanding capital
stock or other ownership interests having ordinary voting power to elect a
majority of the board of directors of such corporation (notwithstanding that at
the time capital stock of any other class or classes of such corporation shall
or might have voting power upon the occurrence of any contingency) or other
persons performing similar functions is at the time directly or indirectly owned
by such Person.
"Successor Servicer" shall have the meaning provided in
-------------------
Section 8.03(a) of the Receivables Purchase Agreement.
--------------
"Target Receivables Amount" shall mean, with respect to any
---------------------------
Series, the sum of the Series Adjusted Outstanding Amount plus the Required
Reserves for such Series.
23
"Tax Opinion" shall mean, with respect to any action, an
-----------
Opinion of Counsel to the effect that, for federal income tax purposes, (a) such
action will not adversely affect the tax characterization, as debt, of the Notes
of any outstanding Series that were characterized as debt at the time of their
issuance and (b) in connection with an issuance of Notes pursuant to an
Indenture Supplement, except as is otherwise provided in the Indenture
Supplement, the Notes of the Series established pursuant to such Indenture
Supplement will be properly characterized as debt of the Issuer.
"Transaction Documents" shall mean, collectively, the
----------------------
Receivables Sale Agreements, this Indenture, and with respect to any Series of
Notes, the applicable Indenture Supplement, the Parent Undertaking, the Lockbox
Agreements, the Master Amendment and Consent, the Consent and Release Agreement
and all agreements, instruments, certificates, reports and documents (other than
any of the Contracts) executed and delivered or to be executed and delivered by
the Issuer under or in connection with any of the foregoing, as any of the
foregoing may be amended, supplemented, restated or otherwise modified from time
to time.
"Transaction Parties" shall mean the Issuer, the Seller, the
-------------------
Servicer, the Transferor and the Originator.
"Transfer Agent and Registrar" shall mean Citibank, N.A., and
----------------------------
any successor thereto.
"Transferor" shall have the meaning set forth in the
----------
preliminary statement to this Indenture.
"Trustee Officer" shall mean, with respect to the Indenture
---------------
Trustee, any officer assigned to the Corporate Trust Office, including any
officer of the Indenture Trustee having direct responsibility for the
administration of the applicable Transaction Documents, and also, with respect
to a particular matter, any other officer to whom such matter is referred
because of such officer's knowledge of and familiarity with the particular
subject.
"UCC" shall have the meaning specified in Section 2.05.
--- ------------
"Unmatured Amortization Event" shall mean any occurrence or
------------------------------
event which, with the giving of notice, the passage of time or both, would
constitute an Amortization Event.
"Unpaid Balance" of any Receivable shall mean at any time the
--------------
unpaid amounts due in respect of such Receivable from the relevant Obligor
(exclusive of interest and penalties therein) at such time.
"Variable Funding Note" shall mean any Note, the principal
---------------------
amount of which may be increased and/or decreased from time to time and which is
designated as a "Variable Funding Note" in the Indenture Supplement pursuant to
---------------------
which such Note is issued.
Section 1.02 Other Definitional Provisions.
-----------------------------
24
(a) With respect to any Series, all terms used herein and not
otherwise defined herein shall have meanings ascribed to them in the Receivables
Purchase Agreement.
(b) All terms defined in this Indenture shall have the defined
meanings when used in any certificate or other document made or delivered
pursuant hereto unless otherwise defined therein.
(c) As used in this Indenture and in any certificate or other
document made or delivered pursuant hereto or thereto, accounting terms not
defined in this Indenture or in any such certificate or other document, and
accounting terms partly defined in this Indenture or in any such certificate or
other document to the extent not defined, shall have the respective meanings
given to them under GAAP. To the extent that the definitions of accounting terms
in this Indenture or in any such certificate or other document are inconsistent
with the meanings of such terms under GAAP, the definitions contained in this
Indenture or in any such certificate or other document shall control.
(d) Any reference to each Rating Agency shall only apply to
any specific rating agency if such rating agency is then rating any outstanding
Series.
(e) Unless otherwise specified, references to any amount as on
deposit or outstanding on any particular date shall mean such amount at the
close of business on such day.
(f) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Indenture shall refer to this Indenture as a
whole and not to any particular provision of this Indenture; references to any
subsection, Section, Schedule or Exhibit are references to subsections,
Sections, Schedules and Exhibits in or to this Indenture unless otherwise
specified; and the term "including" means "including without limitation."
ARTICLE II
THE NOTES
Section 2.01 Form Generally.
--------------
Any Series of Notes, together with the Authentication Agent's
certificate of authentication related thereto, shall be issued in fully
registered form without coupons, and shall be substantially in the form of an
exhibit to the related Indenture Supplement with such appropriate insertions,
omissions, substitutions and other variations as are required or permitted by
this Indenture or such Indenture Supplement, and may have such letters, numbers
or other marks of identification and such legends or endorsements placed thereon
as may be determined by the officers of the Issuer executing such Notes
consistently herewith, as evidenced by their execution of such Notes. Any
portion of the text of any Note may be set forth on the reverse thereof, with an
appropriate reference thereto on the face of the Note. The terms of any Notes
set forth in an exhibit to the related Indenture Supplement are part of the
terms of this Indenture, as applicable.
25
The Definitive Notes shall be typewritten, printed,
lithographed or engraved or produced by any combination of these methods, all as
determined by the officers executing such Notes, as evidenced by such officers'
execution of such Notes.
Each Note shall be dated as of the date of its authentication.
Section 2.02 Denominations.
-------------
Except as otherwise specified in the related Indenture
Supplement, the Notes of each Series shall be issued in fully registered form in
minimum amounts of $250,000 and in integral multiples of $1,000 in excess
thereof (except that one Note of each Series may be issued in a different
amount, so long as such amount exceeds the applicable minimum denomination for
such Series), and shall be issued upon initial issuance as one or more Notes in
an aggregate original principal amount equal to the initial Series Outstanding
Amount for such Series or, in the case of any Variable Funding Note, in an
amount equal to its applicable Stated Amount.
Section 2.03 Execution, Authentication and Delivery.
--------------------------------------
Each Note shall be executed by manual or facsimile signature
on behalf of the Issuer by an Authorized Officer.
Notes bearing the manual or facsimile signature of an
individual who was authorized to sign on behalf of the Issuer at the time when
such signature was affixed shall not be rendered invalid, notwithstanding the
fact that such individual ceased to be so authorized prior to the authentication
and delivery of such Notes or does not hold such office at the date of issuance
such Notes.
At any time and from time to time after the execution and
delivery of this Indenture, the Issuer may deliver Notes executed by the Issuer
to the Authentication Agent for authentication and delivery, and the
Authentication Agent shall authenticate and deliver such Notes as provided in
this Indenture (with the designation provided in the related Indenture
Supplement) and not otherwise.
No Note shall be entitled to any benefit under this Indenture
or the applicable Indenture Supplement or be valid or obligatory for any
purpose, unless there appears on such Note a certificate of authentication
substantially in the form provided for herein executed by or on behalf of the
Authentication Agent by the manual signature of a duly authorized signatory, and
such certificate of authentication on any Note shall be conclusive evidence, and
the only evidence, that such Note has been duly authenticated and delivered
under this Indenture.
Section 2.04 Authentication Agent.
--------------------
(a) The Authentication Agent undertakes to perform such duties
and only such duties as are specifically set forth in this Indenture and any
Indenture Supplement and no implied covenants or obligations shall be read into
this Indenture or such Indenture Supplement against the Authentication Agent.
The Issuer may remove the Authentication Agent if the Issuer determines in its
sole discretion that the Authentication Agent shall have failed to perform its
26
obligations under this Indenture or any Indenture Supplement in any material
respect or for other good reason. The Authentication Agent shall be permitted to
resign upon 30 days' written notice to the Issuer. Upon the removal or
resignation of the Authentication Agent, the Issuer shall appoint a successor to
act as Authentication Agent. The Issuer shall notify the Indenture Trustee and
the Rating Agencies of the removal or resignation of the Authentication Agent
and the identity and location of the successor Authentication Agent. The
resignation provisions of this Section 2.04(a) shall apply to the Indenture
---------------
Trustee in its capacity as Transfer Agent and Registrar as well as in its
capacity as Authentication Agent.
(b) Pursuant to the Receivables Purchase Agreement, the Issuer
shall direct the Servicer to pay to the Agent from time to time reasonable
compensation for its services and all reasonable out-of-pocket expenses incurred
or made by it, including costs of collection. Such expenses shall include the
reasonable compensation and expenses, disbursements and advances of the Agent's
counsel, accountants, agents and experts. The Issuer shall cause the Servicer to
indemnify the Agent against any and all loss, liability or expense (including
the fees and expenses of either in-house counsel or outside counsel, but not
both) incurred by it in connection with the performance of its duties hereunder
and under any Indenture Supplement. The Agent shall notify the Issuer and the
Servicer promptly of any claim for which it may seek indemnity. Failure by the
Agent to so notify the Issuer and the Servicer shall not relieve the Issuer of
its obligations hereunder unless such loss, liability or expense could have been
avoided with such prompt notification and then only to the extent of such loss,
expense or liability which could have been so avoided. Neither the Issuer nor
the Servicer need reimburse any expense or indemnify against any loss, liability
or expense incurred by the Agent through the Agent's own willful misconduct,
negligence or bad faith.
(c) The provisions of Sections 6.01, 6.03, 6.04 and 6.05 shall
------------- ---- ---- ----
be applicable to the Agent.
(d) Pursuant to any appointment made under this Section 2.04,
------------
the Notes may have endorsed thereon, in lieu of or in addition to the
Authentication Agent's certificate of authentication, an alternative certificate
of authentication in substantially the following form:
"This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
-------------------------,
as Authentication Agent
By: __________________________
Authorized Signatory
27
Section 2.05 Registration of and Limitations on Transfer and Exchange
--------------------------------------------------------
of Notes.
--------
The Transfer Agent and Registrar shall keep a register (the
"Note Register") in which the Transfer Agent and Registrar shall provide for the
-------------
registration of Notes and the registration of transfers of Notes. Upon any
resignation of any Transfer Agent and Registrar, the Issuer shall promptly
appoint a successor or, if it elects not to make such an appointment, assume the
duties of Transfer Agent and Registrar. The Issuer shall notify the Indenture
Trustee of the identity and location of any successor Transfer Agent and
Registrar.
The Indenture Trustee shall have the right to inspect the Note
Register at all reasonable times and to obtain copies thereof, and the Indenture
Trustee shall have the right to rely upon a certificate executed on behalf of
the Transfer Agent and Registrar by an officer thereof as to the names and
addresses of the Noteholders and the principal amounts and numbers of such
Notes.
Upon surrender for registration of transfer of any Note at the
office or agency of the Transfer Agent and Registrar to be maintained as
provided in Section 3.02(i), if the requirements of Section 8-401(a) of the
---------------
Uniform Commercial Code (the "UCC") as in effect in the State of New York are
---
met and any applicable requirements for transfer set forth in the related
Indenture Supplement are satisfied, the Issuer shall execute, and upon receipt
of such surrendered Note the Authentication Agent shall authenticate and deliver
to the Noteholder, in the name of the designated transferee or transferees, one
or more new Notes (of the same Series) in any authorized denominations of like
aggregate principal amount or, in the case of any Variable Funding Notes, of
like aggregate Stated Amounts.
At the option of a Noteholder, Notes may be exchanged for
other Notes of the same Series, in any authorized denominations and of like
aggregate principal amount or, in the case of any Variable Funding Notes, of
like aggregate Stated Amounts, upon surrender of such Notes to be exchanged at
the office or agency of the Transfer Agent and Registrar. Whenever any Notes are
so surrendered for exchange, if the requirements of Section 8-401(a) of the UCC
are met, the Issuer shall execute, and upon receipt of such surrendered Note the
Authentication Agent shall authenticate and deliver to the Noteholder, the Notes
that the Noteholder making the exchange is entitled to receive.
All Notes issued upon any registration of transfer or exchange
of Notes shall evidence the same obligations, evidence the same debt, and be
entitled to the same rights and privileges under this Indenture and the related
Indenture Supplement as the Notes surrendered upon such registration of transfer
or exchange.
Every Note presented or surrendered for registration of
transfer or exchange shall be duly endorsed by, or be accompanied by a written
instrument of transfer in a form satisfactory to the Transfer Agent and
Registrar duly executed by, the Noteholder thereof or its attorney-in-fact duly
authorized in writing, and by such other documents as the Transfer Agent and
Registrar may reasonably require.
28
The registration of transfer of any Note shall be subject to
the additional requirements, if any, set forth in the related Indenture
Supplement.
No service charge shall be made for any registration of
transfer or exchange of Notes, but the Issuer or the Transfer Agent and
Registrar may require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any registration of
transfer or exchange of such Notes.
All Notes surrendered for registration of transfer or exchange
shall be cancelled by the Transfer Agent and Registrar and disposed of by the
Transfer Agent and Registrar in accordance with its customary procedures. The
Transfer Agent and Registrar shall dispose of any Global Note upon its exchange
in full for Definitive Notes (of the same Series) in accordance with its
customary procedures.
The preceding provisions of this section notwithstanding, the
Issuer shall not be required to make, and the Transfer Agent and Registrar need
not register, transfers or exchanges of Notes for a period of 20 days preceding
the due date for any payment with respect to the Notes.
If and so long as any Series of Notes are listed on the
Luxembourg Stock Exchange and such exchange shall so require, the Transfer Agent
and Registrar shall, at the discretion and expense of the Issuer, appoint a
co-transfer agent and registrar in Luxembourg or another European city. Any
reference in this Indenture to the Transfer Agent and Registrar shall include
any such co-transfer agent and registrar unless the context otherwise requires.
The Transfer Agent and Registrar shall enter into any appropriate agency
agreement with any co-transfer agent and registrar not a party to this
Indenture, that will implement the provisions of this Indenture that relate to
such agent.
Section 2.06 Mutilated, Destroyed, Lost or Stolen Notes.
------------------------------------------
If (a) any mutilated Note is surrendered to the Transfer Agent
and Registrar, or the Transfer Agent and Registrar receives evidence to its
reasonable satisfaction of the destruction, loss or theft of any Note and (b) in
the case of a destroyed, lost or stolen Note there is delivered to the Transfer
Agent and Registrar such security or indemnity as may be required by it to hold
the Issuer and the Transfer Agent and Registrar harmless and the requirements of
Section 8-405 of the UCC are met, then the Issuer shall execute, and the
Authentication Agent shall authenticate and deliver, a replacement Note of like
tenor (including the same date of issuance) and principal amount or, in the case
of a replacement Variable Funding Note, of like tenor and Stated Amount, bearing
a number not contemporaneously outstanding in exchange for or in lieu of any
such mutilated, destroyed, lost or stolen Note; provided, however, that if any
-------- -------
such mutilated, destroyed, lost or stolen Note shall have become, or within 7
days shall be, due and payable, or shall have been selected or called for
redemption, the Issuer may pay such Note without surrender thereof instead of
issuing a replacement Note, except that any mutilated Note shall be surrendered.
After the delivery of such replacement Note or payment of a destroyed, lost or
stolen Note pursuant to the proviso to the preceding sentence, if a protected
purchaser of the original Note in lieu of which such replacement Note was issued
presents such original Note
29
for payment, the Issuer and the Transfer Agent and Registrar shall be entitled
to recover such replacement Note (or such payment) from the Person to whom it
was delivered or any Person taking such replacement Note from such Person to
whom such replacement Note was delivered or any assignee of such Person other
than a protected purchaser, and shall be entitled to recover upon the security
or indemnity provided therefor to the extent of any loss, damage, cost or
expense incurred by the Issuer or the Transfer Agent and Registrar in connection
therewith.
Upon the issuance of any replacement Note under this Section
-------
2.06, the Issuer or the Transfer Agent and Registrar may require the payment by
----
the Holder of such Note of a sum sufficient to cover any tax or other
governmental charge that may be imposed with respect thereto and any other
reasonable expenses (including the fees and expenses of the Transfer Agent and
Registrar) in connection therewith.
Every replacement Note issued in replacement of any mutilated,
destroyed, lost or stolen Note pursuant to this Section 2.06 shall constitute
------------
complete and indefeasible evidence of an obligation of the Issuer as if
originally issued, whether or not the mutilated, destroyed, lost or stolen Note
shall be found at any time, and shall be entitled to all the benefits of this
Indenture equally and proportionately with any and all other Notes duly issued
hereunder.
The provisions of this Section 2.06 are exclusive and shall
------------
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Notes.
Section 2.07 Persons Deemed Owners.
---------------------
Unless otherwise specified in the applicable Indenture
Supplement, prior to due presentment for registration of transfer of any Note,
the Issuer, the Indenture Trustee, the Paying Agent, the Authentication Agent,
the Transfer Agent and Registrar and any agent of the foregoing shall treat the
Person in whose name any Note is registered as the owner of such Note for all
purposes of this Indenture and the applicable Indenture Supplement, whether or
not such Note is overdue, and neither the Issuer, the Indenture Trustee, the
Paying Agent, the Authentication Agent, the Transfer Agent and Registrar nor any
agent of the foregoing shall be affected by any notice to the contrary.
Section 2.08 Paying Agent.
------------
(a) The Paying Agent shall have the revocable power to
withdraw funds and make distributions to Noteholders from the appropriate
account or accounts maintained for the benefit of Noteholders as specified in
this Indenture or the related Indenture Supplement for any Series. The Issuer
may revoke such power and remove the Paying Agent if the Issuer determines in
its sole discretion that the Paying Agent shall have failed to perform its
obligations under this Indenture in any material respect or for other good
cause. The Paying Agent shall be permitted to resign upon 30 days' written
notice to the Issuer. Upon the removal or resignation of the Paying Agent, the
Issuer shall appoint a successor to act as Paying Agent (which successor shall
be a bank or trust company). Any reference in this Indenture to the Paying Agent
shall include any co-paying agent unless the context requires otherwise. The
Issuer shall notify the Indenture
30
Trustee, each Series Enhancer and the Rating Agencies of the removal or the
resignation of any Paying Agent and the identity and location of the successor
Paying Agent.
(b) If and so long as any Series of Notes are listed on the
Luxembourg Stock Exchange or other stock exchange and such exchange shall so
require, the Paying Agent shall, at the discretion and expense of the Issuer,
appoint a co-paying agent in Luxembourg or other city or country as may be
required by such other stock exchange. The Paying Agent shall enter into an
appropriate agency agreement with any co-paying agent not a party to this
Indenture, which will implement the provisions of this Indenture that relate to
such agent.
(c) The Paying Agent agrees that it will:
(i) hold all sums held by it for the payment of amounts
due with respect to the Notes in trust for the benefit of the
Persons entitled thereto until such sums shall be paid to such
Persons or otherwise disposed of as herein provided, and pay
such sums to such Persons as herein provided;
(ii) give the Indenture Trustee notice of any default by
the Issuer (or any other obligor upon the Notes) of which it
has Actual Knowledge in the making of any payment required to
be made with respect to the Notes;
(iii) at any time during the continuance of any such
default, upon the written request of the Indenture Trustee,
forthwith pay to the Indenture Trustee all sums so held in
trust by such Paying Agent; and
(iv) comply with all requirements of the Code with
respect to the withholding from any payments made by it on any
Notes of any applicable withholding taxes imposed thereon and
with respect to any applicable reporting requirements in
connection therewith.
(d) The Issuer may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, by Issuer
Order direct the Paying Agent to pay to the Indenture Trustee all sums held in
trust by such Paying Agent, such sums to be held by the Indenture Trustee upon
the same trusts as those upon which such sums were held by such Paying Agent
and, upon such payment by any Paying Agent to the Indenture Trustee, such Paying
Agent shall be released from all further liability with respect to such money.
Section 2.09 Cancellation.
------------
All Notes surrendered for payment, registration of transfer,
exchange or redemption shall, if surrendered to any Person other than the
Transfer Agent and Registrar, be delivered to the Transfer Agent and Registrar
and shall be promptly cancelled by it. The Issuer may at any time deliver to the
Transfer Agent and Registrar for cancellation any Notes previously authenticated
and delivered hereunder that the Issuer may have acquired in any lawful manner
whatsoever, and all Notes so delivered shall be promptly cancelled by the
Transfer Agent and Registrar. No Notes shall be authenticated in lieu of or in
exchange for any Notes cancelled as provided in this Section 2.09, except as
------------
expressly permitted by this Indenture. All
31
cancelled Notes held by the Transfer Agent and Registrar shall be disposed of by
the Transfer Agent and Register in accordance with its customary procedures.
Section 2.10 New Issuances.
-------------
(a) Pursuant to one or more Indenture Supplements, the Issuer
may from time to time issue one or more new Series of Notes (a "New Issuance").
------------
The Notes of all outstanding Series shall be equally and ratably entitled to the
benefits of this Indenture without preference, priority or distinction, all in
accordance with the terms and provisions of this Indenture and the applicable
Indenture Supplement, except as provided in the related Indenture Supplement
with respect to any Series. Interest on the Notes of all outstanding Series
shall be paid on each Payment Date therefor as specified in the Indenture
Supplement relating to such outstanding Series. Principal of the Notes of each
outstanding Series shall be paid as specified in the Indenture Supplement
relating to such outstanding Series.
(b) On or before the Series Issuance Date for any new Series
of Notes, the parties hereto shall execute and deliver an Indenture Supplement
specifying the Principal Terms of such Series. The terms of such Indenture
Supplement may modify or amend the terms of this Indenture solely as applied to
such new Series. The obligation of the Authentication Agent to authenticate and
deliver the Notes of any Series to or upon the order of the Issuer (other than
any Series issued pursuant to an Indenture Supplement dated as of the date
hereof) and the obligation of the Authentication Agent and the Indenture Trustee
to execute and deliver the related Indenture Supplement is subject to the
satisfaction of the following conditions:
(i) on or before the 30th day immediately preceding the
Series Issuance Date, the Issuer shall have given the
Indenture Trustee, the Servicer, the Paying Agent, the
Authentication Agent, the Transfer Agent and Registrar, each
Series Enhancer and each Rating Agency written notice (unless
such notice requirement is otherwise waived) of such issuance
and the applicable Series Issuance Date;
(ii) the Issuer shall have delivered to the
Authentication Agent and the Indenture Trustee any related
Indenture Supplement, in form satisfactory to the
Authentication Agent and the Indenture Trustee, executed by
each party hereto other than the Authentication Agent and the
Indenture Trustee;
(iii) the Issuer shall have delivered to the Indenture
Trustee any related Enhancement Agreement executed by each of
the parties thereto other than the Indenture Trustee;
(iv) the Rating Agency Condition shall have been
satisfied with respect to such issuance;
(v) there shall have been delivered to the Indenture
Trustee (with a copy to each Rating Agency) (A) the Opinion of
Counsel required pursuant to Section 3.05(a) and (B) a Tax
---------------
Opinion with respect to such issuance, dated the applicable
Series Issuance Date;
32
(vi) the Issuer and the Servicer shall each have
delivered to the Indenture Trustee an Officer's Certificate to
the effect that on the Series Issuance Date after giving
effect to the issuance of such new Series of Notes, neither an
Amortization Event nor an Unmatured Amortization Event with
respect to any Series of Notes nor an Asset Deficiency or
Event of Default is continuing or will occur as the result of
the issuance of such Series of Notes;
(vii) the Issuer and the Servicer shall have delivered
to the Indenture Trustee an Officer's Certificate to the
effect that on the Series Issuance Date after giving effect
to the issuance of such new Series of Notes, all conditions
precedent provided in this Indenture and the related Indenture
Supplement with respect to the authentication and delivery of
the new Series of Notes have been complied with;
(viii) the Servicer shall have delivered to the Indenture
Trustee a Daily Receivables Activity Report disclosing that,
after giving effect to such New Issuance, the Net Eligible
Receivables Balance will exceed the sum of the Target
Receivables Amounts for all Series then outstanding; and
(ix) the Issuer shall have delivered to the
Authentication Agent a written order or request signed in the
name of the Issuer by any one of its Authorized Officers and
delivered to the Authentication Agent authorizing and
directing the authentication and delivery of the Notes of such
Series by the Authentication Agent.
(c) Upon satisfaction of the above conditions, the Issuer
shall execute, and the Authentication Agent shall authenticate and deliver, the
Notes of such Series as provided in this Indenture and the applicable Indenture
Supplement. Neither the Authentication Agent nor the Indenture Trustee shall be
obligated to enter into any such Indenture Supplement that adversely affects the
Authentication Agent's or the Indenture Trustee's own rights, duties or
immunities under this Indenture.
Section 2.11 Book-Entry Notes.
----------------
Unless otherwise provided in any related Indenture Supplement,
upon original issuance, each Series of Notes shall be issued in the form of
typewritten Notes representing the Book-Entry Notes to be delivered to the
depository specified in such Indenture Supplement (which shall be the Clearing
Agency or Foreign Clearing Agency), by or on behalf of such Series.
Unless otherwise provided in the related Indenture Supplement,
the Notes of each Series initially shall be registered in the Note Register in
the name of the nominee of the Clearing Agency or Foreign Clearing Agency, as
applicable, for such Book Entry Notes and shall be delivered to the
Authentication Agent or, pursuant to such Clearing Agency's or Foreign Clearing
Agency's instructions, held by the Authentication Agent's agent as custodian for
the Clearing Agency or Foreign Clearing Agency.
33
Unless and until Definitive Notes are issued under the limited
circumstances described in Section 2.13, no Beneficial Owner shall be entitled
------------
to receive a Definitive Note representing such Beneficial Owner's interest in
such Note. Unless and until Definitive Notes have been issued to the Beneficial
Owners pursuant to Section 2.13:
------------
(a) the provisions of this Section 2.11 shall be in full force
------------
and effect with respect to each such Series;
(b) the Indenture Trustee shall be entitled to deal with the
Clearing Agency or Foreign Clearing Agency and the Clearing Agency Participants
for all purposes of this Indenture and any related Indenture Supplement
(including the payment of principal of and interest on the Notes of each such
Series) as the authorized representatives of the Beneficial Owners;
(c) to the extent that the provisions of this Section 2.11
------------
conflict with any other provisions of this Indenture, the provisions of this
Section 2.11 shall control with respect to each such Series;
------------
(d) the rights of Beneficial Owners of each such Series shall
be exercised only through the Clearing Agency or Foreign Clearing Agency and the
applicable Clearing Agency Participants and shall be limited to those
established by law and agreements between such Beneficial Owners and the
Clearing Agency or Foreign Clearing Agency and/or the Clearing Agency
Participants. Pursuant to the depository agreement applicable to a Series,
unless and until Definitive Notes of such Series are issued pursuant to Section
-------
2.13, the initial Clearing Agency shall make book-entry transfers among the
----
Clearing Agency Participants and receive and transmit distributions of principal
and interest on the Notes to such Clearing Agency Participants; and
(e) whenever this Indenture requires or permits actions to be
taken based upon instructions or directions of the Holders of Notes evidencing a
specified percentage of the Outstanding Amount, the Clearing Agency or Foreign
Clearing Agency shall be deemed to represent such percentage only to the extent
that it has received instructions to such effect from the Beneficial Owners
and/or Clearing Agency Participants owning or representing, respectively, such
required percentage of the beneficial interest in the Notes and has delivered
such instructions to the Indenture Trustee.
Section 2.12 Notices to Clearing Agency or Foreign Clearing Agency.
------------------------------------------------------
Unless and until Definitive Notes shall have been issued to
Beneficial Owners pursuant to Section 2.13, whenever a notice or other
------------
communication to the Noteholders is required under this Indenture, the Indenture
Trustee shall give such notice or communication to the Clearing Agency or
Foreign Clearing Agency, as applicable, for distribution to Beneficial Owners
and shall have no obligation to distribute such notice or other communication
directly to the Beneficial Owners.
34
Section 2.13 Definitive Notes.
----------------
If (i) (a) the Issuer advises the Indenture Trustee in writing
that the Clearing Agency or Foreign Clearing Agency is no longer willing or able
to properly discharge its responsibilities as Clearing Agency or Foreign
Clearing Agency with respect to the Book-Entry Notes of a given Series and (b)
the Issuer is unable to locate and reach an agreement on satisfactory terms with
a qualified successor, (ii) the Issuer, at its option, advises the Indenture
Trustee in writing that it elects to terminate the book-entry system through the
Clearing Agency or Foreign Clearing Agency with respect to such Series or (iii)
after the occurrence of an Event of Default, Beneficial Owners aggregating a
majority of the Outstanding Amount of the Notes of such Series advise the
Indenture Trustee and the applicable Clearing Agency or Foreign Clearing Agency
through the applicable Clearing Agency Participants in writing that the
continuation of a book-entry system is no longer in the best interests of the
Beneficial Owners of such Series, the Indenture Trustee shall notify (with a
copy to the Transfer Agent and Registrar) all Beneficial Owners of such Series
of the occurrence of such event and of the availability of Definitive Notes to
Beneficial Owners of such Series requesting the same. Upon surrender to the
Transfer Agent and Registrar of the Notes of such Series accompanied by
registration instructions from the applicable Clearing Agency or Foreign
Clearing Agency, the Issuer shall execute, and the Authentication Agent shall
authenticate and deliver, Definitive Notes of such Series and shall recognize
the registered holders of such Definitive Notes as Noteholders under this
Indenture. Neither the Issuer nor the Indenture Trustee shall be liable for any
delay in delivery of such instructions, and the Issuer and the Indenture Trustee
may conclusively rely on, and shall be protected in relying on, such
instructions. Upon the issuance of Definitive Notes of such Series, all
references herein to obligations imposed upon or to be performed by the
applicable Clearing Agency or Foreign Clearing Agency shall be deemed to be
imposed upon and performed by the Indenture Trustee to the extent applicable
with respect to such Definitive Notes, and the Indenture Trustee and the Paying
Agent shall recognize the registered holders of the Definitive Notes of such
Series as Noteholders of such Series hereunder. Definitive Notes will be
transferable and exchangeable at the offices of the Transfer Agent and
Registrar.
Section 2.14 Global Note; Euro-Note Exchange Date.
------------------------------------
If specified in the related Indenture Supplement for any
Series, Notes initially may be issued in the form of a single temporary global
note (each, a "Global Note") in the denomination of the initial Series
-----------
Outstanding Amount and substantially in the form attached to the related
Indenture Supplement. Unless otherwise specified in the related Indenture
Supplement, the provisions of this Section 2.14 shall apply to such Global Note.
------------
Global Notes shall be authenticated by the Authentication Agent upon the same
conditions, in substantially the same manner and with the same effect as the
Definitive Notes. Global Notes may be exchanged in the manner described in the
related Indenture Supplement for Definitive Notes.
Section 2.15 Representations and Covenants of Paying Agent,
----------------------------------------------
Authentication Agent and Transfer Agent and Registrar.
-----------------------------------------------------
The Indenture Trustee, as Paying Agent, Authentication Agent
and Transfer Agent and Registrar, represents, warrants and covenants that:
35
(a) The Indenture Trustee is a national banking association
duly organized and validly existing under the laws of the United States of
America;
(b) The Indenture Trustee has full power and authority to
deliver and perform this Indenture and has taken all necessary action to
authorize the execution, delivery and performance by it of this Indenture and
any Indenture Supplement; and
(c) Each of this Indenture and other Transaction Documents to
which it is a party has been duly executed and delivered by The Indenture
Trustee and constitutes its legal, valid and binding obligation in accordance
with its terms.
ARTICLE III
REPRESENTATIONS AND COVENANTS OF THE ISSUER
Section 3.01 Representations and Warranties of the Issuer. The
-------------------------------------------------
Issuer hereby makes the representations and warranties set forth in this Section
-------
3.01, in each case as of the date hereof, as of the Effective Date, as of each
----
Series Issuance Date and as of any other date specified in such representation
and warranty.
(a) Organization and Good Standing. The Issuer is a limited
------------------------------
liability company duly formed and validly existing in good standing under the
laws of the State of Delaware and has full power and authority to own its
properties and to conduct its business as such properties are presently owned
and such business is presently conducted.
(b) Due Qualification. The Issuer is duly qualified to do
business, is in good standing as a foreign entity and has obtained all necessary
licenses and approvals in all jurisdictions in which the conduct of its business
requires such qualification, licenses or approvals and in which the failure so
to qualify or to obtain such licenses and approvals or to preserve and maintain
such qualification, licenses or approvals could reasonably be expected to give
rise to a Material Adverse Effect.
(c) Power and Authority: Due Authorization. The Issuer (i) has
--------------------------------------
all necessary power and authority to (A) execute and deliver this Indenture and
the other Transaction Documents to which it is a party, (B) perform its
obligations under this Indenture and the other Transaction Documents to which it
is a party and (C) make a Grant of the Pledged Assets to the Indenture Trustee
on the terms and subject to the conditions herein provided and (ii) has duly
authorized by all necessary action such Grant and the execution, delivery and
performance of, and the consummation of the transactions provided for in, this
Indenture and the other Transaction Documents to which it is a party. Each
Transaction Document to which the Issuer is a party has been duly executed and
delivered by the Issuer.
(d) Binding Obligations. This Indenture (i) constitutes a
--------------------
Grant of a security interest (as defined in the UCC) in all of the Issuer's
right, title and interest in, to and under the Pledged Assets, free and clear of
any Lien (other than Permitted Liens) to the Indenture Trustee, which is
enforceable with respect to the existing Receivables owned by the Issuer and the
36
proceeds thereof upon execution and delivery of this Indenture and which will be
enforceable with respect to the Receivables hereafter acquired by the Issuer and
the proceeds thereof upon such acquisition by the Issuer and (ii) constitutes,
and each other Transaction Document to which the Issuer is a party when duly
executed and delivered will constitute, a legal, valid and binding obligation of
the Issuer, enforceable against the Issuer in accordance with its terms, except
(A) as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and (B) as such enforceability may be limited by
general principles of equity, regardless of whether such enforceability is
considered in a proceeding in equity or at law.
(e) No Conflict or Violation. The execution, delivery and
---------------------------
performance of, and the consummation of the transactions contemplated by, this
Indenture and the other Transaction Documents to be signed by the Issuer, 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 material default under the
certificate of formation or the limited liability company agreement of the
Issuer or any material indenture, loan agreement, mortgage, deed of trust, or
other agreement or instrument to which the Issuer is a party or by which it or
any of its respective properties is bound, (ii) result in the creation or
imposition of any Lien (other than Permitted Liens) on any of the Pledged Assets
pursuant to the terms of any such material indenture, loan agreement, mortgage,
deed of trust, or other material agreement or instrument other than this
Indenture and the other Transaction Documents or (iii) conflict with or violate
any federal, state, local or foreign law or any decision, decree, order, rule or
regulation applicable to the Issuer or of any Governmental Authority having
jurisdiction over the Issuer, which conflict or violation described in this
clause (iii), individually or in the aggregate, could reasonably be expected to
------------
have a Material Adverse Effect.
(f) Litigation and Other Proceedings. (i) There is no action,
--------------------------------
suit, proceeding or investigation pending or, to the best knowledge of the
Issuer, threatened, against the Issuer before any Governmental Authority and
(ii) the Issuer is not subject to any order, judgment, decree, injunction,
stipulation or consent order of or with any Governmental Authority that, in the
case of either of the foregoing clauses (i) and (ii), (A) asserts the invalidity
----------- ----
of this Indenture or any other Transaction Document, (B) seeks to prevent the
Grant of any Pledged Asset by the Issuer to the Indenture Trustee, the ownership
or acquisition by the Issuer of a material amount of Receivables or the
consummation of any of the transactions contemplated by this Indenture or any
other Transaction Document, (C) seeks any determination or ruling that, in the
reasonable judgment of the Issuer, would materially and adversely affect the
performance by the Issuer of its obligations under this Indenture or any other
Transaction Document or the validity or enforceability of this Indenture or any
other Transaction Document or (D) individually or in the aggregate for all such
actions, suits, proceedings and investigations could reasonably be expected to
have a Material Adverse Effect.
(g) Governmental Approvals. Except where the failure to obtain
----------------------
or make such authorization, consent, order, approval or action could not
reasonably be expected to have a Material Adverse Effect, all authorizations,
consents, orders and approvals of, or other actions by, any Governmental
Authority that are required to be obtained by the Issuer in connection with the
Grant of the Pledged Assets or the due execution, delivery and performance by
the Issuer of
37
this Indenture or any other Transaction Document to which it is a party and the
consummation by the Issuer of the transactions contemplated by this Indenture
and the other Transaction Documents to which it is a party have been obtained or
made and are in full force and effect.
(h) Margin Regulations. The Issuer is not engaged, principally
------------------
or as one its important activities, in the business of extending credit for the
purpose of purchasing or carrying margin stock (within the meanings of
Regulations T, U and X of the Board of Governors of the Federal Reserve System).
The Issuer has not taken and will not take any action to cause the use of
proceeds of the Notes to purchase or carry margin stock.
(i) Taxes. The Issuer has filed (or there have been filed on
-----
its behalf as a member of a consolidated group) all tax returns and reports
required by law to have been filed by it and has paid all taxes, assessments and
governmental charges thereby shown to be owing by it, other than any such taxes,
assessments or charges that are being diligently contested in good faith by
appropriate proceedings, for which adequate reserves in accordance with GAAP
have been set aside on its books and that have not given rise to any Liens
(other than Permitted Liens); provided, however, that as of the date of this
-------- -------
Indenture, the Issuer is a newly established entity and as such has not been
required to file any tax returns.
(j) Solvency. After giving effect to the transactions
--------
contemplated by this Indenture and the other Transaction Documents, the Issuer
is solvent and able to pay its debts as they come due and has adequate capital
to conduct its business as presently conducted.
(k) Offices. The principal place of business and chief
-------
executive office of the Issuer is located at 3125 Chad Drive, Eugene, Oregon
97408.
(l) Investment Company Act. The Issuer is not, and is not
----------------------
controlled by, an "investment company" registered or required to be registered
under the Investment Company Act.
(m) Accuracy of Financial Information and Other Information.
---------------------------------------------------------
All balance sheets, all statements of operations and of cash flow and other
financial data that have been or shall hereafter be furnished by the Issuer to
the Indenture Trustee pursuant to Section 3.02 have been prepared in accordance
------------
with GAAP (to the extent applicable) and fairly present in all material respects
the financial condition of the Issuer as of the dates thereof. All certificates,
reports, statements, documents and other information furnished to the Indenture
Trustee by or on behalf of the Issuer pursuant to any provision of this
Indenture or any other Transaction Document, or in connection with or pursuant
to any amendment or modification of, or waiver under, this Indenture or any
other Transaction Document, shall, at the time the same are so furnished, be
complete and correct in all material respects on the date the same are furnished
to the Indenture Trustee.
(n) Security Interests. Other than the security interest
-------------------
granted to the Indenture Trustee pursuant to this Indenture, the Issuer has not
pledged, granted, sold, conveyed or otherwise assigned any interests or security
interests in the Pledged Assets, and no security agreement, financing statement
or equivalent security or lien instrument listing the Issuer as
38
debtor covering all or any part of the Pledged Assets is on file or of record in
any jurisdiction, except such as may have been filed, recorded or made by the
Issuer in favor of the Indenture Trustee on behalf of the Noteholders in
connection with this Indenture. This Indenture constitutes a valid and
continuing security interest (as defined in the UCC) in and Lien on the Pledged
Assets in favor of the Indenture Trustee on behalf of the Noteholders, which
security interest and Lien is prior to all other Liens (other than Permitted
Liens) and is enforceable as such as against creditors of and purchasers from
the Issuer in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws affecting creditors' rights generally or by
general equitable principles, whether considered in a proceeding at law or in
equity and by an implied covenant of good faith and fair dealing. The Issuer
owns good and marketable title to the Pledged Assets free and clear of any Lien,
claim or encumbrance of any Person other than Permitted Liens. All of the
Pledged Assets constitute either accounts, deposit accounts, investment property
or general intangibles (as each such term is defined in the UCC) except that
proceeds of the Pledged Assets may also take the form of instruments. The Issuer
has taken all action necessary to perfect the security interest granted in this
Indenture. The Issuer has filed (or has caused the Servicer to file) all
appropriate financing statements in the proper filing offices in the appropriate
jurisdictions under applicable law in order to perfect the security interest in
the Pledged Assets granted to the Indenture Trustee. The Issuer has not
authorized the filing of and is not aware of any financing statements against
the Issuer that include a description of collateral covering the Pledged Assets
other than the financing statements filed in favor of the Indenture Trustee. The
Issuer is not aware of any judgment or tax lien filings against the Issuer. The
Purchased Assets, as defined in the Receivables Purchase Agreement, are either
accounts or general intangibles within the meaning of the UCC. The Collection
Account, the Distribution Account and each Series Account each constitute either
a securities account or a deposit account within the meaning of the UCC. The
Issuer has taken all steps necessary to cause the Indenture Trustee to be the
account holder of each such deposit account and the Issuer has taken all steps
necessary to cause each securities intermediary of each such securities account
to identify in its records the Indenture Trustee as the person having a security
entitlement against the securities intermediary in such securities account. The
Lockbox Accounts constitute deposit accounts within the meaning of the UCC and
the Issuer (or the Servicer on its behalf) has delivered to the Indenture
Trustee a fully executed agreement pursuant to which the Bank maintaining the
Lockbox Accounts has agreed to comply with all instructions originated by the
Indenture Trustee directing disposition of the funds in the Lockbox Accounts
without further consent by the Issuer, the Servicer or the Originator. None of
the Lockbox Accounts, Collection Account, Distribution Account or Series
Accounts are in the name of any person other than Issuer or the Indenture
Trustee, and the Issuer has not consented to the banks maintaining any such
accounts to comply with instructions of any person other than the Indenture
Trustee and the Issuer has not consented to the securities intermediary of any
such securities accounts to comply with entitlement orders of any person other
than the Indenture Trustee. Accordingly, The Indenture Trustee has a first
priority perfected security interest in all such deposit and securities
accounts, all funds and financial assets on deposit therein, and all securities
entitlements relating thereto. The representations and warranties set forth in
this Section 3.01(n) shall survive the execution and delivery of this Indenture
---------------
and the issuance of any Notes, shall be deemed re-made on each date on which any
funds in the Collection Account are distributed to Issuer or otherwise released
39
from the Lien of the Indenture and may not be waived by any party hereto except
pursuant to a supplemental indenture executed in accordance with Article X and
---------
as to which the Rating Agency Condition has been satisfied. The Indenture
Trustee, as securities intermediary for the Collection Account and each Series
Account, has agreed to treat all assets credited to any such account as
"financial assets" within the meaning of the UCC.
Section 3.02 Affirmative Covenants of the Issuer. From the Effective
-----------------------------------
Date until the termination of this Indenture, the Issuer hereby agrees that it
will perform the covenants and agreements set forth in this Section 3.02.
-------------
(a) Financial Reports by the Issuer. As soon as available, but
-------------------------------
in any event within 120 days after the end of each fiscal year of the Issuer,
the Issuer shall deliver to the Indenture Trustee and each Series Enhancer and
the Indenture Trustee shall forward to each Noteholder a copy of the balance
sheet and income statement of the Issuer at the end of such year.
(b) Books and Records. The Issuer shall keep proper books of
-------------------
record and account in which full, true and correct entries shall be made of all
dealings and transactions in relation to the Pledged Assets and its business
activities in accordance with GAAP, and shall permit the Indenture Trustee and
each Series Enhancer at their own cost and expense to visit and inspect any of
its properties, to examine and make abstracts from any of its books and records
and to discuss its affairs, finances and accounts with its officers, directors,
employees and independent public accountants, all at such reasonable times upon
reasonable notice and as often as may reasonably be requested.
(c) Notice of Defaults and Events of Default. The Issuer shall
----------------------------------------
give the Indenture Trustee, each Series Enhancer and the Rating Agencies prompt
written notice of each Default and Event of Default hereunder and the occurrence
of any Unmatured Amortization Event or Amortization Event with respect to any
Series of Notes and, immediately after obtaining Actual Knowledge of any of the
following occurrences, written notice of each default on the part of the
Servicer, the Transferor, the Seller or the Originator of their respective
obligations under the Receivables Sale Agreements, and the action, if any, being
taken with respect to each such default.
(d) Maintenance of Existence. The Issuer shall keep in full
--------------------------
effect its existence, rights and franchises as a limited liability company under
the laws of the State of Delaware (unless it becomes, or any successor Issuer
hereunder is or becomes, organized under the laws of any other State or of the
United States of America, in which case the Issuer will keep in full effect its
existence, rights and franchises under the laws of such other jurisdiction) and
shall obtain and preserve its qualification to do business in each jurisdiction
in which such qualification is or shall be necessary to protect the validity and
enforceability of this Indenture, the Notes, the Pledged Assets and each other
related instrument or agreement.
(e) Compliance with Laws. The Issuer will comply with the
----------------------
requirements of all applicable laws, rules, regulations and orders of all
Governmental Authorities, a violation of which, individually or in the aggregate
for all such violations, is reasonably likely to have a
40
Material Adverse Effect. Notwithstanding the foregoing, the Issuer has no
contractual duty to comply with the Federal Assignment of Claims Act to the
extent that the aggregate Unpaid Balances of the Eligible Receivables owed by
the United States federal government or any subdivision thereof, or any agency,
department, or instrumentality thereof, do not exceed 2.5% of the Aggregate
Receivables Balance.
(f) Rule 144A Information. For so long as any of the Notes are
---------------------
"restricted securities" within the meaning of Rule 144(a)(3) under the
Securities Act of 1933, as amended, the Issuer agrees to provide to any
Noteholder or Beneficial Owner, and to any prospective purchaser of Notes
designated by such Noteholder or Beneficial Owner upon the request of such
Noteholder or Beneficial Owner or prospective purchaser, any information
required to be provided to such holder or prospective purchaser to satisfy the
conditions set forth in Rule 144A(d)(4) under the Securities Act of 1933, as
amended.
(g) Annual Tax Information. Unless otherwise specified in the
----------------------
related Indenture Supplement, on or before January 31 of each calendar year,
beginning with calendar year 2002, the Indenture Trustee or the Paying Agent
shall furnish to each Person who at any time during the preceding calendar year
was a Noteholder of a Series of Notes a statement prepared by or on behalf of
the Issuer containing the information that is necessary or desirable to enable
the Noteholders to prepare their tax returns. The obligations of the Issuer to
prepare and the Indenture Trustee or the Paying Agent to distribute such
information shall be deemed to have been satisfied to the extent that
substantially comparable information shall be provided by the Indenture Trustee
or the Paying Agent pursuant to any requirements of the Code as from time to
time in effect.
(h) Statements as to Compliance. The Issuer shall deliver to
---------------------------
the Indenture Trustee, within 120 days after the end of each fiscal year of the
Issuer (commencing within 120 days after the end of the fiscal year 2001), an
Officer's Certificate stating, as to the Authorized Officer signing such
Officer's Certificate, that
(i) a review of the activities of the Issuer during the
12-month period ending at the end of such fiscal year (or in
the case of the fiscal year ending November 25, 2001; the
period from the initial Series Issuance Date to November 25,
2001) and of performance under this Indenture has been made
under such Authorized Officer's supervision, and
(ii) to the best of such Authorized Officer's knowledge,
based on such review, the Issuer has complied with all
material conditions and covenants under this Indenture
throughout such year or, if there has been a default in its
compliance with any such condition or covenant, specifying
each such default known to such Authorized Officer and the
nature and status thereof.
(i) Maintenance of Office or Agency. The Issuer shall maintain
-------------------------------
an office or agency within New York City, New York where Notes may be presented
or surrendered for payment, where Notes may be surrendered for registration of
transfer or exchange and where notices and demands to or upon the Issuer in
respect of the Notes and this Indenture may be
41
served. The Issuer hereby initially appoints the Transfer Agent and Registrar at
the Corporate Trust Office to serve as its agent for the foregoing purposes.
(j) Further Instruments and Acts. Upon request of the
-------------------------------
Indenture Trustee, the Issuer shall execute and deliver such further instruments
and do such further acts as may be reasonably necessary or proper to carry out
more effectively the purpose of this Indenture.
Section 3.03 Negative Covenants of the Issuer. From the Effective
---------------------------------
Date until the termination of this Indenture, the Issuer hereby agrees that it
shall not:
(a) Amendment of Limited Liability Company Agreement. Amend
--------------------------------------------------
the Limited Liability Company Agreement unless, prior to such amendment, each
Rating Agency confirms that after such amendment the Rating Agency Condition
will be met and each Series Enhancer consents thereto;
(b) Change in Location of Chief Executive Office. (a) Change
----------------------------------------------
the location of its chief executive office or principal place of business
(within the meaning of the applicable Uniform Commercial Code) without 60 days'
prior written notice to the Indenture Trustee or (b) change its name or the
jurisdiction of its formation without prior written notice to the Indenture
Trustee sufficient to allow the Indenture Trustee to execute all filings
prepared by the Issuer (including filings of financing statements on form UCC-1)
and recordings necessary to maintain the perfection of the interest of the
Indenture Trustee on behalf of the Noteholders in the Pledged Assets pursuant to
this Indenture. If the Issuer desires to so change its office or change its name
or the jurisdiction of its formation, the Issuer will make any required filings
and prior to actually changing its office or its name or the jurisdiction of its
formation the Issuer shall deliver to the Indenture Trustee (i) an Officer's
Certificate and (ii) copies of all such required filings with the filing
information duly noted thereon by the office in which such filings were made;
(c) Capital Expenditures. Make expenditures (by long-term or
--------------------
operating lease or otherwise) for capital assets (either realty or personality)
in an aggregate amount that is in excess of $25,000 in any single year;
(d) No Other Business or Agreements. Engage in any business
-----------------------------------
other than financing, purchasing, owning and selling and managing the Pledged
Assets in the manner contemplated by this Indenture and the other Transaction
Documents and all activities incidental thereto, or enter into or be a party to
any agreement or instrument other than any Transaction Document or documents and
agreements incidental thereto;
(e) Consolidation, Merger or Other Form of Combination and Sale
------------------------------------------------------------
of Assets. Enter into any consolidation, merger, joint venture, syndicate or
---------
other form of combination with any Person or sell, lease or transfer of
otherwise dispose of any assets, including without limitation the Pledged
Assets, other than as expressly provided for in the Transaction Documents, or
engage in any other transaction, that would result in a change of control of the
Issuer;
(f) Guarantees, Loans, Advances and other Liabilities. Except as
-------------------------------------------------
contemplated by this Indenture or the other Transaction Documents (including the
issuance of
42
the "Subordinated Note" in accordance with the terms of the Receivables Purchase
Agreement), make any loan or advance or credit to, or guarantee (directly or
indirectly or by an instrument having the effect of assuring another's payment
or performance on any obligation or capability of so doing or otherwise),
endorse or otherwise become contingently liable, directly or indirectly, in
connection with the obligations, stocks or dividends of, or own, purchase,
repurchase or acquire (or agree contingently to do so) any stock, obligations,
assets or securities of, or any other interest in, or make any capital
contribution to, any other Person;
(g) Indebtedness. Issue, incur, assume, guarantee or otherwise
------------
become liable, directly or indirectly, for any indebtedness except as expressly
provided for pursuant to the terms of the Transaction Documents (including the
issuance of the "Subordinated Note" in accordance with the terms of the
Receivables Purchase Agreement) and the Notes;
(h) Deduction from Principal and Interest. Claim any credit on,
-------------------------------------
or make any deduction from, the principal and interest payable in respect of the
Notes (other than amounts properly withheld from such payments under the Code or
applicable state law) or assert any claim against any present or former
Noteholder by reason of the payment of any taxes levied or assessed upon any
part of the Pledged Assets;
(i) Effectiveness of Indenture, Liens. (i) Permit the validity
---------------------------------
or effectiveness of this Indenture to be impaired, or permit the Lien of this
Indenture to be amended, hypothecated, subordinated, terminated or discharged,
or permit any Person to be released from any covenants or obligations with
respect to the Notes under this Indenture except as may be expressly permitted
hereby (it being understood that the adjustment or write-off of any Receivable
in accordance with the Credit and Collection Policy shall not be deemed a
release within the meaning of this clause), (ii) permit any Lien, charge,
excise, claim, security interest, mortgage or other encumbrance (other than the
Lien of this Indenture) to be created on or extend to or otherwise arise upon or
burden the Pledged Assets or any part thereof or any interest therein or the
proceeds thereof or (iii) permit the Lien of this Indenture not to constitute a
valid first priority perfected security interest in the Pledged Assets; or
(j) Dissolve or Liquidate. Dissolve or liquidate in whole or in
---------------------
part.
Section 3.04 Protection of Pledged Assets.
----------------------------
The Issuer shall from time to time prepare (or cause to be
prepared), execute and deliver all such supplements and amendments hereto and
all such financing statements, continuation statements, instruments of further
assurance and other instruments, and shall take such other action reasonably
necessary or advisable to:
(a) grant more effectively all or any portion of the Pledged
Assets for the Notes;
(b) maintain or preserve the Lien (and the priority thereof)
of this Indenture or to carry out more effectively the purposes hereof;
43
(c) perfect, publish notice of, or protect the validity of, any
Grant made or to be made by this Indenture;
(d) enforce any of the Pledged Assets; or
(e) preserve and defend title to the Pledged Assets securing the
Notes and the rights therein of the Indenture Trustee and the Noteholders
secured thereby against the claims of all persons and parties.
The Issuer hereby designates the Indenture Trustee its agent and
attorney-in-fact to execute any financing statement, continuation statement or
other instrument required pursuant to this Section 3.04.
------------
Section 3.05 Opinions as to Pledged Assets.
-----------------------------
(a) On the Series Issuance Date relating to any new Series of
Notes, the Issuer shall furnish to the Indenture Trustee an Opinion of Counsel
either stating that, in the opinion of such counsel, such action has been taken
as is necessary to perfect the Lien and security interest of this Indenture,
including without limitation with respect to the recording and filing of this
Indenture, any indentures supplemental hereto and any other requisite documents,
and with respect to the execution and filing of any financing statements and
continuation statements, and reciting the details of such action, or stating
that in the opinion of such counsel no such action is necessary to maintain the
perfection of such Lien and security interest.
(b) On or before June 30 in each calendar year, beginning in
the year 2002, the Issuer shall furnish to the Indenture Trustee an Opinion of
Counsel either stating that, in the opinion of such counsel, such action has
been taken as is necessary to perfect the Lien and security interest of this
Indenture, including without limitation with respect to the recording, filing,
re-recording and refiling of this Indenture, any indentures supplemental hereto
and any other requisite documents, and with respect to the execution and filing
of any financing statements and continuation statements, and reciting the
details of such action or stating that in the opinion of such counsel no such
action is necessary to maintain the perfection of such Lien and security
interest. Such Opinion of Counsel also shall describe the recording, filing,
re-recording and refiling of this Indenture, any indentures supplemental hereto
and any other requisite documents and the execution and filing of any financing
statements and continuation statements that, in the opinion of such counsel,
will be required to maintain the perfection of the Lien and security interest of
this Indenture until June 30 in the following calendar year.
Section 3.06 Obligations Regarding Servicing of Receivables.
----------------------------------------------
(a) The Issuer shall not take any action, and shall use its best
efforts not to permit any action to be taken by others, that would release any
Person from any of such Person's material covenants or obligations under any
instrument or agreement included in the Pledged Assets or that would result in
the amendment, hypothecation, subordination, termination or discharge of, or
impair the validity or effectiveness of, any such instrument or agreement,
except as expressly provided in this Indenture, the Receivables Sale Agreements
or such other instrument or agreement (it being understood that the adjustment
or write-off of any Receivable
44
in accordance with the Credit and Collection Policy shall not be deemed a
release within the meaning of this clause).
(b) The Issuer may contract with other Persons to assist it in
performing its duties under this Indenture, and any performance of such duties
by such Person shall be deemed to be action taken by the Issuer. The Issuer
shall cause the Servicer to comply with all the Servicer's obligations under the
Transaction Documents to which the Servicer is a party and shall not agree to
the resignation of the Servicer from its obligations and duties imposed by the
Receivables Purchase Agreement unless (i) the Majority Investors have consented
to such resignation and (ii) the Rating Agency Condition has been satisfied.
(c) The Issuer shall punctually perform and observe all of its
obligations and agreements contained in this Indenture, the other Transaction
Documents and in the instruments and agreements relating to the Pledged Assets,
including but not limited to filing or causing to be filed all UCC financing
statements and continuation statements required to be filed by the terms of this
Indenture and the Receivables Purchase Agreement in accordance with and within
the time periods provided for herein and therein.
(d) If a Servicer Default shall arise from the failure of the
Servicer to perform any of its duties or obligations under the Receivables
Purchase Agreement with respect to the Receivables, the Issuer shall take all
reasonable steps available to it to remedy such failure.
(e) Without derogating from the absolute nature of the
assignment granted to the Indenture Trustee or the rights of the Indenture
Trustee under this Indenture, the Issuer agrees (i) that it will not, without
the prior written consent of the Indenture Trustee and the Majority Investors,
amend, modify, waive, supplement, terminate or surrender, or agree to any
amendment, modification, supplement, termination, waiver or surrender of, the
terms of any Pledged Assets (except to the extent otherwise provided in the
Receivables Purchase Agreement) or the Transaction Documents (except to the
extent otherwise provided in the Transaction Documents), or waive timely
performance or observance by the Servicer, the Transferor, the Seller or the
Originator of their respective obligations under the Receivables Sale Agreements
or of the Parent of its obligations under the Parent Undertaking; and (ii) that
any such amendment shall not (except to the extent otherwise provided in the
Transaction Documents) (A) increase or reduce in any manner the amount of, or
accelerate or delay the timing of, Collections of payments on the Pledged Assets
or distributions that are required to be made for the benefit of the Noteholders
or (B) change the definition of Majority Investors, without the consent of the
Holders of all the Outstanding Notes. If any such amendment, modification,
supplement or waiver shall be so consented to by the Indenture Trustee and the
Majority Investors or the Holders of all the Outstanding Notes, as required, the
Issuer agrees to execute and deliver, in its own name and at its own expense,
such agreements, instruments, consents and other documents as the Indenture
Trustee may deem necessary or appropriate in the circumstances.
Section 3.07 Separate Existence of the Issuer. The Issuer hereby
----------------------------------
acknowledges that the parties to the Transaction Documents are entering into the
transactions contemplated by the Transaction Documents in reliance on the
Issuer's identity as a legal entity separate from the Originator, the Seller,
the Transferor and all other members of the Parent Affiliated Group.
45
From and after the date hereof until one year and one day after the date on
which there are no Notes of any Series Outstanding, the Issuer shall take such
actions as shall be required in order that:
(a) The Issuer will conduct its business in office space
allocated to it and for which it pays an appropriate rent and overhead
allocation;
(b) The Issuer will maintain records and books of account
separate from those of each of its Affiliates and telephone numbers and
stationery that are separate and distinct from those of each of its Affiliates;
(c) The Issuer's assets will be maintained in a manner that
facilitates their identification and segregation from those of any of its
Affiliates;
(d) The Issuer will strictly observe formalities relating to
its separate existence in its dealings with the public and with each of its
Affiliates, and funds or other assets of the Issuer will not be commingled with
those of any of its Affiliates, except as may be permitted by the Transaction
Documents. The Issuer will at all times, in its dealings with the public and
with each of its Affiliates, hold itself out and conduct itself as a legal
entity separate and distinct from each of its Affiliates. The Issuer will not
maintain joint bank accounts or other depository accounts to which any of its
Affiliates (other than the Servicer) has independent access;
(e) The duly admitted members of the Issuer and duly appointed
managers or officers of the Issuer will at all times have sole authority to
control decisions and actions with respect to the daily business affairs of the
Issuer;
(f) Levi Strauss Securitization Corp. shall remain one of the
members of the Issuer. Not less than two directors of Levi Strauss
Securitization Corp. will be Independent Directors. The Issuer will observe
those provisions in its limited liability company agreement that provide that
the Issuer will not approve, or take any other action to cause the filing of, a
voluntary bankruptcy petition with respect to the Issuer unless each director on
the board of directors of Levi Strauss Securitization Corp. (including each
Independent Director thereof) and all other managers unanimously approve the
taking of such action in writing prior to the taking of such action;
(g) The Issuer will compensate each of its employees,
consultants and agents from the Issuer's own funds for services provided to the
Issuer;
(h) The Issuer will not hold itself out to be responsible for
the debts of any of its Affiliates; and
(i) The Issuer will take all actions necessary on its part to be
taken in order to ensure that the facts and assumptions relating to the Issuer
set forth in the opinion of Bingham Dana LLP of even date herewith Relating to
substantive consolidation matters with respect to the Transferor, the Seller,
the Originator and the Issuer will be true and correct at all times.
46
ARTICLE IV
SATISFACTION AND DISCHARGE
Section 4.01 Satisfaction and Discharge of this Indenture.
---------------------------------------------
This Indenture shall cease to be of further effect with respect
to the Notes (except as to (a) rights of registration of transfer and exchange,
(b) substitution of mutilated, destroyed, lost or stolen Notes, (c) the rights
of Noteholders to receive payments of principal thereof and interest thereon,
(d) Sections 3.02(j), 3.03, 3.05, 3.06 and 12.14, (e) the rights and immunities
---------------- ---- ---- ---- -----
of the Indenture Trustee hereunder, including the rights of the Indenture
Trustee under Sections 6.01, 6.03 and 6.07 and the obligations of the Indenture
------------- ---- ----
Trustee under Section 4.02, the rights and immunities of the Agent hereunder,
------------
including the rights of the Agent under Section 2.04(b) and the obligations of
---------------
the Agent under Sections 2.05, 2.06, 2.08 and 2.09 and (g) the rights of
-------------- ---- ---- ----
Noteholders as beneficiaries hereof with respect to the property so deposited
with the Indenture Trustee and payable to all or any of them) and the Indenture
Trustee, on demand of and at the expense of the Issuer, shall execute proper
instruments acknowledging satisfaction and discharge of this Indenture with
respect to the Notes when:
(i) either
(A) all Notes theretofore authenticated and delivered
other than (1) Notes that have been destroyed, lost or stolen and that
have been replaced, or paid as provided in Section 2.06 and (2) Notes
------------
for which full payment money has theretofore been deposited in trust or
segregated and held in trust by the Issuer and thereafter repaid to the
Issuer or discharged from such trust, as provided in Section 11.01) have
-------------
been delivered to the Indenture Trustee for cancellation; or
(B) all Notes not theretofore delivered to the Indenture
Trustee for cancellation:
(1) have become due and payable; or
(2) will become due and payable at the maturity date for
such Series of Notes;
(ii) the Issuer has paid or caused to be paid all other sums
payable hereunder by the Issuer (including without limitation all
amounts due to the Indenture Trustee);
(iii) the Issuer has delivered to the Indenture Trustee an
Officer's Certificate and an Opinion of Counsel and an Independent
Certificate from a firm of certified public accountants, each meeting
the applicable requirements of Section 12.01(a)and each stating that all
----------------
conditions precedent herein provided for relating to the satisfaction
and discharge of this Indenture have been complied with; and
47
(iv) the Rating Agency Condition is satisfied with respect to
each Series of Outstanding Notes.
Section 4.02 Application of Trust Money.
--------------------------
All monies deposited with the Indenture Trustee pursuant to
Section 4.01 shall be held in trust and applied by it in accordance with the
-------------
provisions of the Notes, this Indenture and the applicable Indenture Supplement,
to make payments, through the Paying Agent, to the Noteholders and for the
payment in respect of which such monies have been deposited with the Indenture
Trustee, of all sums due and to become due thereon for principal and interest;
but such monies need not be segregated from other funds except to the extent
required herein or required by law.
ARTICLE V
EVENTS OF DEFAULT AND REMEDIES
Section 5.01 Events of Default.
-----------------
Each of the following events shall be an "Event of Default"
with respect to any Series of Notes hereunder:
(a) Any Note shall not be paid in full by the Stated Final
Maturity Date of such Note; or
(b) An Event of Bankruptcy shall have occurred and be
continuing with respect to the Issuer; or
(c) The Issuer shall become an "investment company" within the
meaning of the Investment Company Act.
The Issuer shall deliver to the Indenture Trustee, within 5
days after the occurrence thereof, written notice in the form of an Officer's
Certificate of any event that with the giving of notice and the lapse of time
would become an Event of Default, its status and what action the Issuer is
taking or proposes to take with respect thereto.
Section 5.02 Acceleration of Maturity; Rescission and Annulment.
--------------------------------------------------
If an Event of Default referred to in clause (b) or (c) of
---------- ---
Section 5.01 has occurred, the unpaid principal amount of all Series of Notes,
------------
together with interest accrued but unpaid thereon, and all other amounts due to
the Noteholders under this Indenture shall immediately and without further act
become due and payable. If an Event of Default referred to in clause (a) of
----------
Section 5.01 shall occur and be continuing with respect to any Series of Notes,
------------
then and in every such case the Indenture Trustee may, and at the direction of
Noteholders holding Notes evidencing a majority of the Series Outstanding Amount
of such Series of Notes, shall declare all
48
the Notes of such Series to be immediately due and payable, by a notice in
writing to the Issuer (and to the Indenture Trustee if given by the
Noteholders), and upon any such declaration the unpaid principal amount of such
Notes, together with accrued and unpaid interest thereon through the date of
acceleration, shall become immediately due and payable.
Section 5.03 Collection of Indebtedness and Suits for Enforcement by
--------------------------------------------------------
the Indenture Trustee.
---------------------
The Issuer covenants that if a default is made in the payment of the
principal of any Note when the same becomes due and payable, by acceleration or
at stated maturity, the Issuer will, upon demand of the Indenture Trustee, pay
to the Indenture Trustee, for the benefit of the Holders of such Notes, the
entire amount then due and payable on such Notes for principal and interest,
with interest on the overdue principal, and to the extent payment at such rate
of interest shall be legally enforceable, on overdue installments of interest,
at the Note Interest Rate borne by the Notes and, in addition thereto, such
further amount as shall be sufficient to cover the reasonable costs and expenses
of collection, including the reasonable compensation, expenses, disbursements
and advances of the Indenture Trustee and its agents and counsel.
If the Issuer shall fail forthwith to pay such amounts upon such
demand, the Indenture Trustee, in its own name and on behalf of the Noteholders
of such Series, may institute a proceeding for the collection of the sums so due
and unpaid, and may prosecute such proceeding to judgment or final decree, and
may enforce the same against the Issuer or other obligor upon such Notes and
collect in the manner provided by law out of the property of the Issuer the
moneys adjudged or decreed to be payable.
If an Event of Default occurs and is continuing, the Indenture Trustee
may in its discretion, as more particularly provided in Section 5.04, proceed to
------------
protect and enforce its rights and the rights of the Noteholders by such
appropriate proceedings as the Indenture Trustee deems most effective to protect
and enforce any such rights, whether for the specific enforcement of any
covenant or agreement in this Indenture or any Indenture Supplement or in aid of
the exercise of any power granted herein or therein, or to enforce any other
proper remedy or legal or equitable right vested in the Indenture Trustee by
this Indenture, any Indenture Supplement or by law.
If there shall be pending, relative to the Issuer or any Person having
or claiming an ownership interest in the Pledged Assets, proceedings under the
Bankruptcy Code or any other applicable federal or state bankruptcy, insolvency
or other similar law, or in case a receiver, assignee or trustee in bankruptcy
or reorganization, liquidator, sequestrator or similar official shall have been
appointed for or taken possession of the Issuer or its property or such other
obligor or Person, or in the event of any other comparable judicial proceedings
relative to the Issuer or to the creditors or property of the Issuer, then the
Indenture Trustee shall be entitled and empowered, by intervention in such
proceedings or otherwise and whether or not the principal of any Notes shall
then be due and payable as therein expressed or by declaration or otherwise and
whether or not the Indenture Trustee shall have made any demand pursuant to the
provisions of this Section 5.03:
------------
49
(i) to file and prove a claim or claims for the whole amount
of principal and interest owing and unpaid in Respect of the Notes and
to file such other papers or documents as may be necessary or
advisable in order to have the claims of the Indenture Trustee
(including any claim for reasonable compensation to the Indenture
Trustee and each predecessor Indenture Trustee, and their respective
agents, attorneys and counsel, and for reimbursement of all reasonable
expenses and liabilities incurred and all advances made by the
Indenture Trustee and each predecessor Indenture Trustee, except as a
result of negligence, bad faith or willful misconduct) and of the
Noteholders allowed in such proceedings;
(ii) unless prohibited by applicable law and regulations, to
vote on behalf of the Holders of the Notes in any election of a trustee,
a standby trustee or person performing similar functions in any such
proceedings;
(iii) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute all amounts
received with respect to the claims of the Noteholders and of the
Indenture Trustee on their behalf; and
(iv) to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims
of the Indenture Trustee or the Holders of the Notes allowed in any
judicial proceedings relative to the Issuer, its creditors and its
property;
and any trustee, receiver, liquidator, custodian or other similar official in
any such proceeding is hereby authorized by each of such Noteholders to make
payments to the Indenture Trustee and, if the Indenture Trustee consents to the
making of payments directly to such Noteholders, to pay to the Indenture Trustee
such amounts as shall be sufficient to cover reasonable compensation to the
Indenture Trustee, each predecessor Indenture Trustee and their respective
agents, attorneys and counsel, and all other reasonable expenses and liabilities
incurred, and all advances made, by the Indenture Trustee and each predecessor
Indenture Trustee except as a result of negligence or bad faith.
Nothing herein contained shall be deemed to authorize the Indenture
Trustee to authorize or consent to, or vote for or accept or adopt on behalf of
any Noteholder, any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder thereof or to
authorize the Indenture Trustee to vote in respect of the claim of any
Noteholder in any such proceeding except to vote for the election of a trustee
in bankruptcy or similar person as aforesaid.
All rights of action and of asserting claims under this Indenture
or any Indenture Supplement or under any of the Notes may be enforced by the
Indenture Trustee without the possession of any of the Notes or the production
thereof in any trial or other proceedings relative thereto, and any such action
or proceedings instituted by the Indenture Trustee shall be brought in its own
name as trustee, and any recovery of judgment, subject to the payment of the
expenses, disbursements and compensation of the Indenture Trustee, each
predecessor Indenture
50
Trustee and their respective agents and attorneys, shall Be for the ratable
benefit of the Holders of the Notes.
In any proceedings brought by the Indenture Trustee (and also
any proceedings involving the interpretation of any provision of this Indenture
or any Indenture Supplement to which the Indenture Trustee shall be a party),
the Indenture Trustee shall be held to represent all the Holders of the Notes,
and it shall not be necessary to make any Noteholder a party to any such
proceedings.
Section 5.04 Remedies; Priorities.
--------------------
(a) If an Event of Default shall have occurred and be continuing
with respect to any Series of Outstanding Notes and such Series of Notes has
been accelerated under Section 5.02, the Indenture Trustee may institute
-------------
proceedings to enforce the obligations of the Issuer hereunder and under the
Indenture Supplement with respect to such Series of Notes in its own name and on
behalf of the Noteholders of such Series for the collection of all amounts then
payable on the Notes of such Series or under this Indenture or such Indenture
Supplement with respect thereto, whether by declaration or otherwise, enforce
any judgment obtained, and collect from the Issuer moneys adjudged due.
(b) If an Event of Default shall have occurred and be continuing
with respect to all Series of Outstanding Notes and all Series of Outstanding
Notes have been accelerated under Section 5.02, the Indenture Trustee may or, if
------------
so directed by the Majority Investors, the Indenture Trustee shall, do one or
more of the following:
(i) institute proceedings from time to time for the
complete or partial foreclosure of this Indenture with respect
to the Pledged Assets;
(ii) exercise any remedies of a secured party under the UCC
and take any other appropriate action to protect and enforce
the rights and remedies of the Indenture Trustee and the
Holders of the Notes; and
(iii) in the case of an Event of Default referred to in
clause (a) of Section 5.01, sell the Pledged Assets or rights
---------- ------------
or interest therein, at one or more public or private sales
called and conducted in accordance with Section 5.05;
------------
provided that the Indenture Trustee may not sell or otherwise liquidate the
--------
Pledged Assets following an Event of Default referred to in clause (a) of
-----------
Section 5.01 unless (A) the proceeds of the sale or liquidation of the Pledged
------------
Assets are sufficient to discharge in full all amounts due and unpaid with
respect to the Notes or (B) if the Indenture Trustee has determined that the
Pledged Assets will not continue to provide sufficient funds for the payment of
principal of and interest on the Notes, Holders of Notes evidencing 66 2/3% of
the Outstanding Amount, voting as a single class, consent to such sale or
liquidation. In determining such sufficiency or insufficiency with respect to
clauses (A) and (B), the Indenture Trustee may, but is not required to, obtain
----------- ---
and rely upon an opinion of an Independent investment banking or accounting firm
of national reputation as to the feasibility of such proposed action and as to
the sufficiency of the
51
Pledged Assets for such purpose. All reasonable costs and expenses incurred in
obtaining such opinion shall be paid by the Issuer.
(c) If the Indenture Trustee collects any money or property
pursuant to this Article V, such money or property shall be held by the
-----------
Indenture Trustee as additional collateral hereunder and the Indenture Trustee
shall pay out such money or property to the Collection Account for distribution
in accordance with the provisions of Article VIII.
------------
Section 5.05 Sale of Assets.
--------------
(a) The method, manner and time, place and terms of any sale of
all of the Pledged Assets pursuant to Section 5.04(b) shall be commercially
----------------
reasonable. The Indenture Trustee may from time to time postpone any sale by
public announcement made at the time and place of such sale. The Indenture
Trustee hereby expressly waives its right to any amount fixed by law as
compensation for such sale.
(b) In connection with a sale of all of the Pledged Assets
pursuant to Section 5.04(b), any Noteholder may bid for and purchase the
----------------
property offered for sale, and upon compliance with the terms of such sale may
hold, retain and possess and dispose of such property, without further
accountability, and may, in paying the purchase money therefor, deliver any
Outstanding Notes or claims for interest thereon in lieu of cash up to the
amount that shall, upon distribution of the net proceeds of such sale, be
payable thereon.
(c) The Indenture Trustee may bid for and acquire any portion of
the Pledged Assets securing the Notes in connection with a public sale thereof,
and may pay all or part of the purchase price by crediting against amounts owing
to the Indenture Trustee under this Indenture, including without limitation the
costs, charges and expenses incurred by the Indenture Trustee in connection with
such sale.
(d) The Indenture Trustee shall execute and deliver an
appropriate instrument of conveyance transferring its interest in any portion of
the Pledged Assets in connection with a sale thereof. In addition, the Indenture
Trustee is hereby irrevocably appointed the agent and attorney-in-fact of the
Issuer to transfer and convey its interest in any portion of the Pledged Assets
in connection with a sale thereof, and to take all action necessary to effect
such sale. No purchaser or transferee at such a sale shall be bound to ascertain
the Indenture Trustee's authority, inquire into the satisfaction of any
conditions precedent or see to the application of any monies.
Section 5.06 Limitations on Suits.
--------------------
No Noteholder shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture or any
Indenture Supplement, or for the appointment of a receiver or trustee, or for
any other remedy hereunder, unless:
(a) such Holder has previously given written notice to the
Indenture Trustee of a continuing Event of Default;
52
(b) Noteholders holding Notes evidencing at least 33-1/3% of the
Series Outstanding Amount of each Series of Outstanding Notes have made written
request to the Indenture Trustee to institute such proceeding in respect of such
Event of Default in its own name as the Indenture Trustee hereunder;
(c) such Noteholder or Noteholders have offered to the Indenture
Trustee indemnity reasonably satisfactory to it against the costs, expenses and
liabilities to be incurred in complying with such request;
(d) the Indenture Trustee has failed to institute such
proceedings for 60 days after its receipt of such notice, request and offer of
indemnity; and
(e) no direction inconsistent with such written request has been
given to the Indenture Trustee during such 60-day period by the Majority
Investors;
it being understood and intended that no one or more Noteholders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other
Noteholders or to obtain or to seek to obtain priority or preference over any
other Noteholders or to enforce any right under this Indenture, except in the
manner herein provided.
If the Indenture Trustee receives conflicting or inconsistent
requests and indemnity from two or more groups of Noteholders holding Notes,
each evidencing less than a majority of the Series Outstanding Amount of each
Series of Outstanding Notes, the Indenture Trustee shall act at the direction of
the group of Noteholders holding Notes evidencing the greater amount of Notes;
provided, however, that, notwithstanding any other provisions of this Indenture,
-------- -------
if the Indenture Trustee receives conflicting or inconsistent requests and
indemnity from two or more groups of Noteholders holding an equal amount of
Notes, the Indenture Trustee in its sole discretion may determine what, if any,
action shall be taken.
Section 5.07 Unconditional Right of Noteholders to Receive Principal
--------------------------------------------------------
and Interest.
------------
Notwithstanding any other provision of this Indenture, other
than provisions hereof limiting the right to recover amounts due on the Notes to
recoveries from the Pledged Assets, the holder of any Note shall have the
absolute and unconditional right to receive payment of the principal of and
interest on such Note as such principal and interest becomes due and payable and
to institute suit for the enforcement of any such payment, and such right shall
not be impaired without the consent of such Noteholder.
Section 5.08 Restoration of Rights and Remedies.
----------------------------------
If the Indenture Trustee or any Noteholder has instituted any
Proceeding to enforce any right or remedy under this Indenture or any Indenture
Supplement and such Proceeding has been discontinued or abandoned for any reason
or has been determined adversely to the Indenture Trustee or to such Noteholder,
then and in every such case the Issuer, the Indenture Trustee and the
Noteholders shall, subject to any determination in such Proceeding, be restored
severally and respectively to their former positions hereunder, and thereafter
all rights
53
and remedies of the Indenture Trustee and the Noteholders shall continue as
though no such Proceeding had been instituted.
Section 5.09 Rights and Remedies Cumulative.
------------------------------
No right or remedy herein conferred upon or reserved to the
Indenture Trustee or to the Noteholders is intended to be exclusive of any other
right or remedy, and every right and remedy shall, to the extent permitted by
law, be cumulative and in addition to every other right and remedy given
hereunder or now or hereafter existing at law or in equity or otherwise. The
assertion or employment of any right or remedy hereunder, or otherwise, shall
not prevent the concurrent assertion or employment of any other appropriate
right or remedy.
Section 5.10 Delay or Omission Not a Waiver.
------------------------------
No delay or omission of the Indenture Trustee or any Noteholder
to exercise any right or remedy accruing upon any Default or Event of Default
shall impair any such right or remedy or constitute a waiver of any such Default
or Event of Default or an acquiescence therein. Every right and remedy given by
this Article V or by law to the Indenture Trustee or to the Noteholders may be
exercised from time to time, and as often as may be deemed expedient, by the
Indenture Trustee or by the Noteholders, as the case may be.
Section 5.11 Control by Noteholders.
----------------------
Except as specifically set forth herein, and subject to
Section 6.03(d), the Majority Investors shall have the right to direct the time,
--------------
method and place of conducting any proceeding for any remedy available to the
Indenture Trustee with respect to the Notes or exercising any trust or power
conferred on the Indenture Trustee, provided that:
--------
(a) such direction shall not be in conflict with any rule of law
or with this Indenture nor, with respect to each Noteholder in such majority,
the Indenture Supplement pursuant to which such Noteholder's Notes were issued;
(b) if an Event of Default occurs with respect to less than all
Series of Outstanding Notes, then the Indenture Trustee's rights and remedies
shall be limited to the rights and remedies pertaining only to those Series of
Notes with respect to which such Event of Default has occurred, and the
Indenture Trustee shall exercise such rights and remedies at the direction of
the Noteholders holding Notes evidencing a majority of the Series Outstanding
Amount of all such Series of Notes;
(c) the Indenture Trustee may take any other action deemed
proper by the Indenture Trustee that is not inconsistent with such direction;
and
(d) such direction shall be in writing;
and provided, further, that subject to Section 6.01, the Indenture Trustee need
-------- ------- ------------
not take any action that it determines might involve it in liability or might
materially adversely affect the rights of any Noteholders not consenting to such
action.
54
Section 5.12 Waiver of Past Defaults.
-----------------------
Prior to the declaration of the acceleration of the maturity of
the Notes of any Series as provided in Section 5.02, Noteholders holding Notes
------------
evidencing a majority of the Series Outstanding Amount of such Series of Notes
may, on behalf of all such Noteholders, waive any past Default or Event of
Default with respect to such Series of Notes and its consequences except a
Default (a) in payment of principal of or interest on any of the Notes of such
Series or (b) in respect of a covenant or provision hereof that cannot be
modified or amended without the consent of the Holder of each Note of such
Series. In the event of any such waiver, the Issuer, the Indenture Trustee and
the Noteholders of such outstanding Series shall be restored to their former
positions and rights hereunder, respectively, but no such waiver shall extend to
any subsequent or other Default or impair any right consequent thereto.
Upon any such waiver, such Default shall cease to exist and be
deemed to have been cured and not to have occurred, and any Event of Default
arising therefrom shall be deemed to have been cured and not to have occurred,
for every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other Default or Event of Default or impair any right consequent
thereto. The Issuer shall give prompt written notice of any waiver to the Rating
Agencies.
Section 5.13 Undertaking for Costs.
---------------------
All parties to this Indenture agree, and each Noteholder by such
Noteholder's acceptance thereof shall be deemed to have agreed, that any court
may in its discretion require, in any suit for the enforcement of any right or
remedy under this Indenture, or in any suit against the Indenture Trustee for
any action taken, suffered or omitted by it as the Indenture Trustee, the filing
by any party litigant in such Proceeding of an undertaking to pay the costs of
such Proceeding, and that such court may in its discretion assess reasonable
costs, including reasonable attorneys' fees, against any party litigant in such
Proceeding, having due regard to the merits and good faith of the claims or
defenses made by such party litigant; provided, however, the provisions of this
-------- -------
Section 5.13 shall not apply to (a) any suit instituted by the Indenture
-------------
Trustee, (b) any suit instituted by any Noteholder or group of Noteholders, in
each case holding Notes evidencing in the aggregate more than 33-1/3% of the
Series Outstanding Amount of any Series of Notes, or (c) any suit instituted by
any Noteholder for the enforcement of the payment of principal of or interest on
any Note on or after the respective due dates expressed in such Note and in this
Indenture.
Section 5.14 Waiver of Stay or Extension Laws.
--------------------------------
The Issuer covenants (to the extent that it may lawfully do so)
that it will not at any time insist upon, or plead or in any manner whatsoever,
claim or take the benefit or advantage of, any stay or extension law wherever
enacted, now or at any time hereafter in force, that may affect the covenants or
the performance of this Indenture, and the Issuer (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not hinder, delay or impede the execution of any
power herein granted to
55
the Indenture Trustee, but will suffer and permit the execution of every such
power as though no such law had been enacted.
Section 5.15 Action on Notes.
---------------
The Indenture Trustee's right to seek and recover judgment on
the Notes or under this Indenture shall not be affected by the seeking,
obtaining or application of any other relief under or with respect to this
Indenture. Neither the Lien of this Indenture nor any rights or remedies of the
Indenture Trustee or the Noteholders shall be impaired by the recovery of any
judgment by the Indenture Trustee against the Issuer or by the levy of any
execution under such judgment upon any portion of the Pledged Assets or upon any
of the assets of the Issuer.
ARTICLE VI
THE INDENTURE TRUSTEE
Section 6.01 Duties of the Indenture Trustee.
-------------------------------
(a) If an Event of Default has occurred and is continuing and a
Trustee Officer shall have actual knowledge or written notice of such Event of
Default, the Indenture Trustee shall exercise the rights and powers vested in it
by this Indenture and use the same degree of care and skill in their exercise as
a prudent person would exercise or use under the circumstances in the conduct of
such person's own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Indenture Trustee undertakes to perform such duties
and only such duties as are specifically set forth in this
Indenture, and no implied covenants or obligations shall be
read into this Indenture against the Indenture Trustee; and
(ii) in the absence of bad faith or negligence on its part,
the Indenture Trustee may conclusively rely, as to the truth
of the statements and the correctness of the opinions and
calculations expressed therein, upon certificates or opinions
furnished to the Indenture Trustee and conforming to the
requirements o this Indenture; provided, however, that the
-------- -------
Indenture Trustee, upon receipt of any resolutions,
certificates, statements, opinions, reports, documents, orders
or other instruments furnished to the Indenture Trustee that
are specifically required to be furnished pursuant to any
provision of this Indenture or any Indenture Supplement, shall
examine them to determine whether they substantially conform,
without verification of the accuracy of any computations
therein, to the requirements of this Indenture or any Indenture
Supplement. The Indenture Trustee shall give prompt written
notice to the Noteholders and each Rating Agency of any material
lack of conformity of any such instrument to the applicable
requirements of this Indenture or any Indenture Supplement
discovered by the Indenture Trustee in the event that the
Indenture Trustee, after so requesting, does not receive a
satisfactory corrected instrument.
56
(c) No provision of this Indenture shall be construed to relieve
the Indenture Trustee from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that:
(i) this Section 6.01(c) shall not be construed to limit
---------------
the effect of Section 6.01(a);
---------------
(ii) permissive rights of the Indenture Trustee shall not
be construed as duties;
(iii) the Indenture Trustee shall not be liable for any
error of judgment made in good faith by a Trustee Officer unless
it is proved that the Indenture Trustee was negligent in
ascertaining the pertinent facts;
(iv) the Indenture Trustee shall not be liable with respect
to any action taken, suffered or omitted to be taken by it in
good faith in accordance with this Indenture, any Indenture
Supplement or at the direction of the Majority Investors
relating to the time, method and place of conducting any
proceeding for any remedy available to the Indenture Trustee, or
for exercising any trust or power conferred upon the Indenture
Trustee under this Indenture or any Indenture Supplement; and
(v) no provision of this Indenture or of any Transaction
Document shall require the Indenture Trustee to be responsible
for the acts or omissions of the Servicer or to act as Successor
Servicer until such time as it is required to act as Successor
Servicer under this Indenture.
(d) No provision of this Indenture shall require the Indenture
Trustee to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder or in the exercise
of any of its rights or powers if it shall have reasonable grounds for believing
that repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it.
(e) Each provision of this Indenture that in any way relates to
the Indenture Trustee is subject to Sections 6.01(a) and (b).
---------------- ---
(f) The Indenture Trustee shall have no responsibility or
liability for investment losses on Eligible Investments, except for losses
attributable to the Indenture Trustee's failure to make payments on such
Eligible Investments issued by the Indenture Trustee, in its commercial capacity
as principal obligor, in accordance with the terms of such Eligible Investments.
(g) The Indenture Trustee shall notify each Rating Agency of any
change in any rating of the Notes of any other Rating Agency of which the
Indenture Trustee has received written notice pursuant to any of the Transaction
Documents.
57
(h) For all purposes under this Indenture, the Indenture Trustee
shall not be deemed to have notice or knowledge of any Event of Default,
Servicer Default or Amortization Event unless a Trustee Officer assigned to and
working in the Corporate Trust Office of the Indenture Trustee has actual
knowledge thereof or has received written notice thereof. For purposes of
determining the Indenture Trustee's responsibility and liability hereunder, any
reference to an Event of Default, Servicer Default, Unmatured Amortization Event
or Amortization Event shall be construed to refer only to such event of which
the Indenture Trustee is deemed to have notice as described in this Section
-------
6.01(h).
-------
(i) The Indenture Trustee shall not have any duty (A) to see to
any recording, filing, or depositing of this Indenture or any agreement referred
to herein or any financing statement or continuation statement evidencing a
security interest, or to see to the maintenance of any such recording or filing
or depositing or to any rerecording, refiling or redepositing of any thereof,
(B) to see to any insurance, (C) to see to the payment or discharge of any tax,
assessment, or other governmental charge or any lien or encumbrance of any kind
owing with respect to, assessed or levied against, the Issuer other than from
funds available in the Collection Account or Distribution Account, or (D) to
confirm or verify the contents of any reports or certificates of the Issuer
delivered to the Indenture Trustee pursuant to this Agreement believed by the
Indenture Trustee to be genuine and to have been signed or presented by the
proper party or parties.
Section 6.02 Notice of Event of Default.
--------------------------
Upon the occurrence of any Event of Default of which a Trustee
Officer has actual knowledge or has received notice, the Indenture Trustee shall
transmit by mail to all Noteholders as their names and addresses appear on the
Note Register and to the Rating Agencies, notice of such Event of Default known
to the Indenture Trustee within the later of (i) 30 days after such Event of
Default occurs or (ii) 10 Business Days after the Indenture Trustee receives
such notice or obtains actual notice, if later.
Section 6.03 Rights of Indenture Trustee.
---------------------------
Except as otherwise provided in Section 6.01:
------------
(a) The Indenture Trustee may conclusively rely and shall fully
be protected in acting or refraining from acting on any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction, consent,
order, bond, note or other paper or document reasonably believed by it to be
genuine and to have been signed or presented by the proper party or parties.
(b) Whenever in the administration of this Indenture the
Indenture Trustee shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder, the Indenture
Trustee may (unless other evidence be herein specifically prescribed), in the
absence of bad faith on its part, rely on an Officer's Certificate of the
Issuer.
58
(c) The Indenture Trustee may consult with counsel with respect
to any action to be taken, suffered or omitted by it hereunder and the written
advice of such counsel, obtained in good faith, or any Opinion of Counsel or any
Tax Opinion shall be full and complete authorization and protection in respect
of any action taken, suffered or omitted by it hereunder in good faith reliance
thereon.
(d) The Indenture Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Indenture or to honor
the request or direction of any of the Noteholders pursuant to this Indenture,
or a Series Enhancer if so authorized by an Indenture Supplement unless such
Noteholders or Series Enhancer shall have offered to the Indenture Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that might be incurred by it in compliance with such request or direction.
(e) The Indenture Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction, consent,
order, bond, note or other paper or document, but the Indenture Trustee, in its
discretion, may make such further inquiry or investigation into such facts or
matters as it may see fit and, if the Indenture Trustee shall determine to make
such further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Issuer, personally or by agent or attorney.
(f) Subject to Section 6.13 hereof, the Indenture Trustee may
------------
execute any of the trusts or powers hereunder or perform any duties hereunder
either directly or by or through agents, Affiliates, attorneys, custodians or
nominees, and the Indenture Trustee shall not be liable for any misconduct or
negligence on the part of any agent, Affiliates, attorney, custodians or
nominees appointed by it hereunder with due care.
(g) The Indenture Trustee shall not be liable for any actions
taken, suffered or omitted by it in good faith and believed by it to be
authorized or within the discretion or rights conferred upon the Indenture
Trustee by this Indenture.
(h) If the Indenture Trustee is also acting as Paying Agent,
Authentication Agent and Transfer Agent and Registrar, the rights and
protections afforded to the Indenture Trustee pursuant to this Article VI shall
----------
also be afforded to such Paying Agent, Authentication Agent and Transfer Agent
and Registrar.
(i) Anything in this Agreement to the contrary notwithstanding,
in no event shall the Indenture Trustee be liable for special, indirect or
consequential loss or damage of any kind whatsoever (including but not limited
to lost profits), even if the Indenture Trustee has been advised of the
likelihood of such loss or damage and regardless of the form of action;
provided, however, that upon written notice to the Indenture Trustee by any
Transaction Party, the Indenture Trustee shall use commercially reasonable
efforts to cooperate with such Transaction Party for the purpose of minimizing
or eliminating such losses or damages.
59
Section 6.04 Not Responsible for Recitals or Issuance of Notes.
-------------------------------------------------
The recitals contained herein and in the Notes shall be taken
as the statements of the Issuer, and the Indenture Trustee assumes no
responsibility for their correctness. The Indenture Trustee makes no
representation as to the validity or sufficiency of this Indenture, the other
Transaction Documents, the Pledged Assets, the Notes or any related document.
The Indenture Trustee shall not be accountable for the use or application by the
Issuer of the proceeds from the Notes.
Section 6.05 May Hold Notes.
--------------
The Indenture Trustee and any Affiliates, in its individual or
any other capacity, may become the owner or pledgee of Notes and may otherwise
deal with the Issuer, the Transferor, the Seller, any member of the Parent
Affiliated Group, any Series Enhancer, any underwriter or any of the other
parties to the Transaction Documents with the same rights it would have if it
were not the Indenture Trustee or an Affiliate of the Indenture Trustee;
provided, that if any of the foregoing actions cause the Indenture Trustee to
--------
cease meeting the criteria for a trustee set forth in Section 6.11, the
-------------
Indenture Trustee shall resign in accordance with the provision of such Section
-------
6.11.
----
Section 6.06 Money Held in Trust.
-------------------
Money held by the Indenture Trustee in trust hereunder need
not be segregated from other funds held by the Indenture Trustee in trust
hereunder except to the extent required herein or required by law. The Indenture
Trustee shall be under no liability for interest on any money received by it
hereunder except as otherwise agreed upon in writing by the Indenture Trustee
and the Issuer.
Section 6.07 Compensation, Reimbursement and Indemnification.
-----------------------------------------------
Pursuant to the Receivables Purchase Agreement, the Issuer
shall direct the Servicer to pay to the Indenture Trustee from time to time
reasonable compensation for its services. The Indenture Trustee's compensation
shall not be limited by any law on compensation of a trustee of an express
trust. The Issuer shall cause the Servicer to reimburse the Indenture Trustee
for all reasonable out-of-pocket expenses incurred or made by it, including
reasonable costs of collection, in addition to the compensation for its
services. Such expenses shall include the reasonable compensation and reasonable
expenses, disbursements and advances of the Indenture Trustee's agents, counsel,
accountants and experts. The Issuer shall cause the Servicer to indemnify the
Indenture Trustee against any and all loss, liability or expense reasonably
incurred by the Indenture Trustee (including the reasonable fees of counsel) in
connection with the administration of this trust and the performance of its
duties hereunder and under any other Transaction Document. The Indenture Trustee
shall notify the Issuer and the Servicer promptly of any claim for which it may
seek indemnity. Failure by the Indenture Trustee to so notify the Issuer and the
Servicer shall not relieve the Issuer of its obligations hereunder unless such
loss, liability or expense could have been avoided with such prompt notification
and then only to the extent of such loss, expense or liability which could have
been
60
so avoided. Neither the Issuer nor the Servicer need reimburse any expense or
indemnify against any loss, liability or expense incurred by the Indenture
Trustee through the Indenture Trustee's own willful misconduct, negligence or
bad faith.
When the Indenture Trustee incurs expenses after the occurrence
of an Event of Default specified in Section 5.01(b) with respect to the Issuer,
---------------
the expenses are intended to constitute expenses of administration under Title
11 of the United States Code or any other applicable federal or state
bankruptcy, insolvency or similar law.
Section 6.08 Replacement of Indenture Trustee.
--------------------------------
No resignation or removal of the Indenture Trustee and no
appointment of a successor Indenture Trustee shall become effective until the
acceptance of appointment by the successor Indenture Trustee pursuant to this
Section 6.08. The Indenture Trustee may resign at any time by giving 30 days'
------------
written notice to the Issuer. The Majority Investors may remove the Indenture
Trustee for cause by so notifying the Indenture Trustee. The Issuer shall remove
the Indenture Trustee if:
(a) the Indenture Trustee fails to comply with Section 6.11;
------------
(b) the Indenture Trustee is adjudged a bankrupt or insolvent;
or
(c) the Indenture Trustee otherwise becomes legally unable to
act.
If the Indenture Trustee resigns or is removed or if a vacancy exists in the
office of Indenture Trustee for any reason (the Indenture Trustee in such event
being referred to herein as the retiring Indenture Trustee), the Issuer shall
promptly appoint a successor Indenture Trustee (who satisfies the requirements
of Section 6.11) subject to the consent of the Majority Investors.
-------------
A successor Indenture Trustee shall deliver a written acceptance
of its appointment to the retiring Indenture Trustee, the Issuer and the
Servicer. Thereupon the resignation or removal of the retiring Indenture Trustee
shall become effective, and the successor Indenture Trustee shall have all the
rights, powers and duties of the Indenture Trustee under this Indenture. The
successor Indenture Trustee shall mail a notice of its succession to each Series
Enhancer and all Noteholders. The retiring Indenture Trustee shall promptly
transfer all property held by it as Indenture Trustee to the successor Indenture
Trustee.
If a successor Indenture Trustee does not take office within 60
days after the retiring Indenture Trustee resigns or is removed, the retiring
Indenture Trustee, the Issuer or the Majority Investors may petition any court
of competent jurisdiction for the appointment of a successor Indenture Trustee.
If the Indenture Trustee fails to comply with Section 6.11, any
------------
Noteholder may petition any court of competent jurisdiction for the removal of
the Indenture Trustee and the appointment of a successor Indenture Trustee.
61
Notwithstanding the replacement of the Indenture Trustee
pursuant to this Section 6.08, the Issuer's obligations under Section 6.07 shall
------------ ------------
continue for the benefit of the retiring Indenture Trustee.
Section 6.09 Successor Indenture Trustee by Merger.
-------------------------------------
If the Indenture Trustee consolidates with, merges or converts
into, or transfers all or substantially all its corporate trust business or
assets to, another corporation or banking association, the resulting, surviving
or transferee corporation without any further act shall be the successor
Indenture Trustee, provided that such corporation or banking association is
--------
otherwise qualified and eligible under Section 6.11. The Indenture Trustee shall
------------
provide the Rating Agencies and each Series Enhancer with prompt written notice
of any such transaction.
Section 6.10 Appointment of Co-Indenture Trustee or Separate
--------------------------------------------------------
Indenture Trustee.
-----------------
(a) Notwithstanding any other provisions of this Indenture, for
the purpose of meeting any legal requirement of any jurisdiction in which any
part of the Pledged Assets may at the time be located, the Indenture Trustee
shall have the power and may execute and deliver at any time all instruments to
appoint one or more Persons to act as a co-trustee or co-trustees, or separate
trustee or separate trustees, of all or any part of the Pledged Assets, and to
vest in such Person or Persons, in such capacity and for the benefit of the
Noteholders, such title to the Pledged Assets or any part thereof and, subject
to the other provisions of this Section 6.10, such powers, duties, obligations,
------------
rights and trusts as the Indenture Trustee may consider necessary or desirable.
No co-trustee or separate trustee hereunder shall be required to meet the terms
of eligibility as a successor trustee under Section 6.11, and no notice to
-------------
Noteholders of the appointment of any co-trustee or separate trustee shall be
required under Section 6.08 but notice shall be given to each Series Enhancer.
------------
(b) Each separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:
(i) all rights, powers, duties and obligations conferred or
imposed on the Indenture Trustee shall be conferred or imposed
on, and exercised or performed by, the Indenture Trustee and
such separate trustee or co-trustee jointly (it being
understood that such separate trustee or co-trustee is not
authorized to act separately without the Indenture Trustee
joining in such act), except to the extent that under any law
of any jurisdiction in which any particular act or acts are to
be performed the Indenture Trustee shall be incompetent or
unqualified to perform such act or acts, in which event such
rights, powers, duties and obligations (including the holding
of title to the Pledged Assets or any portion thereof in any
such jurisdiction) shall be exercised and performed singly by
such separate trustee or co-trustee, but solely at the
direction of the Indenture Trustee;
(ii) no trustee hereunder shall be personally liable by
reason of any act or omission of any other trustee hereunder;
and
62
(iii) the Indenture Trustee may at any time accept the
resignation of or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Indenture
Trustee shall be deemed to have been given to each of the then separate trustees
and co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Indenture and
the conditions of this Article VI. Each separate trustee and co-trustee, upon
----------
its acceptance of the trusts conferred, shall be vested with the estates or
property specified in its instrument of appointment, either jointly with the
Indenture Trustee or separately, as may be provided therein, subject to all the
provisions of this Indenture, specifically including every provision of this
Indenture relating to the conduct of, affecting the liability of, or affording
protection to, the Indenture Trustee. Every such instrument shall be filed with
the Indenture Trustee.
(d) Any separate trustee or co-trustee may at any time
constitute the Indenture Trustee, its agent or attorney-in-fact with full power
and authority, to the extent not prohibited by law, to do any lawful act under
or in respect of this Indenture on its behalf and in its name. If any separate
trustee or co-trustee shall die, become incapable of acting, resign or be
removed, all of its estates, properties, rights, remedies and trusts shall vest
in and be exercised by the Indenture Trustee, to the extent permitted by law,
without the appointment of a new or successor trustee.
Section 6.11 Eligibility; Disqualification.
-----------------------------
The Indenture Trustee shall at all times be a corporation
organized and doing business under the laws of the United States of America or
any state thereof authorized under such laws to exercise corporate trust powers,
having a combined capital and surplus of at least $50,000,000 as set forth in
its most recent published annual report of condition and having long-term
unsecured debt with a rating of at least Aa3 by Moody's and AA- by S&P and
subject to supervision or examination by federal or state authority, and shall
satisfy the requirements for a trustee set forth in paragraph (a)(4)(i) of Rule
3a-7 under the Investment Company Act.
If at any time the Indenture Trustee ceases to be eligible in
accordance with the provisions of this Section 6.11, the Indenture Trustee shall
------------
resign immediately in the manner and with the effect specified in Section 6.08.
------------
Section 6.12 Representations and Covenants of the Indenture Trustee.
------------------------------------------------------
The Indenture Trustee represents, warrants and covenants that:
(a) The Indenture Trustee is duly organized and validly existing
under the laws of the jurisdiction of its organization;
(b) The Indenture Trustee has full power and authority to
deliver and perform this Indenture and has taken all necessary action to
authorize the execution, delivery and performance by it of this Indenture and
other Transaction Documents to which it is a party; and
63
(c) Each of this Indenture and other Transaction Documents to
which it is a party has been duly executed and delivered by the Indenture
Trustee and constitutes its legal, valid and binding obligation in accordance
with its terms.
Section 6.13 Custody of Pledged Assets and Other Collateral.
----------------------------------------------
The Indenture Trustee shall hold such of the Pledged Assets
(and any other collateral that may be granted to the Indenture Trustee) as
consists of instruments, deposit accounts, negotiable documents, money, goods,
letters of credit, and advices of credit in the State of New York. The Indenture
Trustee shall hold such of the Pledged Assets as constitute investment property
through a securities intermediary, which securities intermediary shall agree
with the Indenture Trustee that (a) such investment property shall at all times
be credited to a securities account of the Indenture Trustee, (b) such
securities intermediary shall treat the Indenture Trustee as entitled to
exercise the rights that comprise each financial asset credited to such
securities account, (c) all property credited to such securities account shall
be treated as a financial asset, (d) such securities intermediary shall comply
with entitlement orders originated by the Indenture Trustee without the further
consent of any other person or entity, (e) such securities intermediary will not
agree with any person other than the Indenture Trustee to comply with
entitlement orders originated by such other person, (f) such securities accounts
and the property credited thereto shall not be subject to any Lien, security
interest, right of set-off in favor of such securities intermediary or anyone
claiming through it (other than the Indenture Trustee), and (g) such agreement
shall be governed by the internal laws of the State of New York. Terms used in
the preceding sentence that are defined in the UCC and not otherwise defined
herein shall have the meaning set forth in the UCC. Except as permitted by this
Section 6.13, the Indenture Trustee shall not hold Pledged Assets through an
------------
agent or a nominee.
ARTICLE VII
NOTEHOLDERS' LIST AND REPORTS BY INDENTURE TRUSTEE
Section 7.01 Issuer to Furnish Indenture Trustee Names and Addresses
--------------------------------------------------------
of Noteholders.
--------------
The Issuer shall furnish or cause the Transfer Agent and
Registrar to furnish to the Indenture Trustee (a) upon each transfer of a Note,
a list of the names, addresses and taxpayer identification numbers of the
Noteholders as they appear on the Note Register as of such Record Date, in such
form as the Indenture Trustee may reasonably require, and (b) at such other
times as the Indenture Trustee may request in writing, within 10 days after
receipt by the Issuer of any such request, a list of similar form and content as
of a date not more than 10 days prior to the time such list is furnished;
provided, however, that if the Indenture Trustee is the Transfer Agent and
-------- -------
Registrar, the Indenture Trustee shall furnish to the Issuer such list in the
same manner prescribed in clause (b) above.
----------
Section 7.02 Preservation of Information.
---------------------------
If the Indenture Trustee is not the Transfer Agent and
Registrar, the Indenture Trustee shall preserve the names, addresses and
taxpayer identification numbers of the
64
Noteholders contained in the most recent list furnished to the Indenture Trustee
as provided in Section 7.01. The Indenture Trustee may destroy any list
-------------
furnished to it as provided in Section 7.01 upon receipt of a new list so
-------------
furnished.
ARTICLE VIII
ALLOCATION AND APPLICATION OF COLLECTIONS
Section 8.01 Collection of Money.
-------------------
Except as otherwise expressly provided herein and in each
related Indenture Supplement, the Indenture Trustee may demand payment or
delivery of, and shall receive and collect, directly and without intervention or
assistance of any fiscal agent or other intermediary, all money and other
property payable to or receivable by the Indenture Trustee pursuant to this
Indenture. The Indenture Trustee shall hold all such money and property received
by it in trust for the Noteholders and shall apply it as provided in this
Indenture. Except as otherwise expressly provided in this Indenture, if any
default occurs in the making of any payment or performance under the Receivables
Purchase Agreement or any other Transaction Document, the Indenture Trustee may,
and upon the request of the Majority Investors shall, take such action as may be
appropriate to enforce such payment or performance, including the institution
and prosecution of appropriate proceedings. Any such action shall be without
prejudice to any right to claim an Event of Default under this Indenture and to
proceed thereafter as provided in Article V hereof.
---------
Section 8.02 Rights of Noteholders.
---------------------
The Notes shall represent limited recourse obligations of the
Issuer secured by the Pledged Assets, including the benefits of any Series
Enhancement issued with respect to any Series of Notes and the right to receive
Collections and other amounts at the times and in the amounts specified in this
Article VIII or in the applicable Indenture Supplement to be deposited in
------------
Collection Account and any Series Accounts (if so specified in the related
Indenture Supplement). The Notes do not represent obligations of, or interests
in, the Originator, the Seller, the Transferor, the Servicer or the Indenture
Trustee. The Notes are limited in right of payment to Collections on the Pledged
Assets and other assets of the Issuer allocable to the Notes as provided herein
and in the applicable Indenture Supplement.
Section 8.03 Establishment of Accounts.
-------------------------
(a) Establishment of Collection Account. The Collection Account
-----------------------------------
shall be established and maintained in accordance with the provisions of the
Receivables Purchase Agreement. An Indenture Supplement may establish
sub-accounts to the Collection Account as specified in such Indenture Supplement
to effect allocations to a Series in accordance with such Indenture Supplement.
Funds on deposit in any subaccount of the Collection Account shall not be
commingled with (i) funds on deposit in any other subaccount of the Collection
Account or (ii) funds on deposit in the Collection Account which have not been
allocated to any subaccount of the Collection Account.
65
(b) Establishment of Distribution Account. The Paying Agent, for
-------------------------------------
the benefit of the Noteholders, shall cause to be established and maintained
with the Paying Agent, a non-interest bearing segregated trust account that is a
Qualified Account (the "Distribution Account") bearing a designation clearly
---------------------
indicating that the funds deposited therein are held in trust for the benefit of
Noteholders. The Paying Agent shall possess all right, title and interest in all
funds on deposit from time to time in the Distribution Account and in all
proceeds thereof. The Distribution Account shall be under the sole dominion and
control of the Paying Agent for the benefit of Noteholders. If the Distribution
Account ceases at any time to be a Qualified Account, the Paying Agent shall
within 10 Business Days (or such longer period, not to exceed 30 calendar days)
establish a new Distribution Account which is a Qualified Account, transfer any
funds on deposit in the existing Distribution Account to such new Distribution
Account and from the date such new Distribution Account is established, it shall
be the "Distribution Account."
(c) Establishment of Series Accounts. If so provided in the
--------------------------------
related Indenture Supplement, the Issuer, for the benefit of the Noteholders and
other Person as may be identified in such Indenture Supplement, shall establish
and maintain with the Indenture Trustee or its nominee in the name of the
Indenture Trustee one or more Series Accounts, which Series Accounts also shall
be Qualified Accounts (unless such requirement is waived in the related
Indenture Supplement). Each such Series Account shall bear a designation clearly
indicating that the funds deposited therein are held for the benefit of
Noteholders of such Series.
(d) The Indenture Trustee hereby confirms that (i) each of the
Collection Account and each Series Account is, or at inception will be
established as, a "securities account" as such term is defined in Section
8-501(a) of the UCC, (ii) the Indenture Trustee is a "securities intermediary"
(as such term is defined in Section 8-102(a)(14) of the UCC) with respect to
such accounts, and (iii) the Indenture Trustee for the benefit of the
Noteholders is the sole "entitlement holder" (as such term is defined in Section
8-102(a)(7) of the UCC) with respect to such accounts and no other Person shall
have the right to give "entitlement orders" (as such term is defined in Section
8-102(a)(8)) with respect to such accounts. The Indenture Trustee hereby further
agrees that each item of property (whether investment property, financial asset,
security, instrument or cash) credited to the Collection Account or any Series
Account shall be treated by it as a "financial asset" within the meaning of
Section 8-102(a)(9) of the UCC. Notwithstanding anything to the contrary, New
York State shall be deemed to be the location of the Indenture Trustee (in its
capacity as the securities intermediary for the foregoing accounts) for purposes
of Section 8-110 of the UCC, and the Collection Account and each Series Account
(as well as the securities entitlements related thereto) shall be governed by
the laws of the State of New York.
Section 8.04 Collections and Allocations.
---------------------------
(a) The Issuer shall cause the Servicer to deposit Collections
into the Collection Account as promptly as possible after the receipt in a
Lockbox Account of such Collections, but in no event later than the second
Business Day following the receipt in a Lockbox Account of such Collections.
66
(b) The Issuer agrees that if any Collections are received by
the Issuer in an account other than the Collection Account, such monies,
instruments, cash and other proceeds will not be commingled by the Issuer with
any of its other funds or property, if any, but will be held separate and apart
therefrom and will be held in trust by the Issuer for, and immediately remitted
to, the Indenture Trustee, with any necessary endorsement.
(c) On each Deposit Date, the Indenture Trustee, in accordance
with the Daily Receivables Activity Report provided by the Servicer, shall
allocate all Collections and other funds then on deposit in the Collection
Account (other than funds which are required to be returned pursuant to Section
-------
3.12(b) of the Receivables Purchase Agreement) to the following items and in the
------
following order of priority:
(i) First, funds shall be paid to the Indenture Trustee to
-----
reimburse it for any fees, expenses and indemnities not
otherwise paid by the Servicer, provided, that unless an Event
--------
of Default has occurred, the aggregate amounts payable pursuant
to this clause first shall not exceed $100,000 in any
-----
twelve-month period.
(ii) Second, to the extent that the amounts on deposit in
------
the Expense Subaccount for any Series are less than the Required
Amount for such Series, funds shall be transferred from the
Collection Account to each such Expense Subaccount until the
amounts on deposit therein equal the applicable Required Amount
for each such Series. If (A) an Asset Deficiency exists or (B)
the aggregate amount of funds in the Collection Account on such
Deposit Date is less than the aggregate amounts to be
distributed pursuant to this clause (i), then, in either such
----------
case, all funds in the Collection Account shall be distributed
ratably to each Series based on the Series Floating Allocation
Percentages for each Outstanding Series of Notes. The Indenture
Supplement for each Series shall specify how and when amounts
deposited in the Expense Subaccount or otherwise allocated for
such Series will be applied.
(iii) Third, if no Series is in an Amortization Period, the
-----
Indenture Trustee shall allocate all funds on deposit in the
Collection Account to each Series ratably based on the Series
Floating Allocation Percentages of each such Series. The
Indenture Supplement shall specify how and when amounts
allocated to such Series will be applied.
(iv) Fourth, if one or more Series is in an Amortization
------
Period, funds shall be transferred from the Collection
Account to the Principal Subaccount for each such amortizing
Series, ratably based on the respective Series Fixed Allocation
Percentages for each such amortizing Series and the remaining
funds shall be allocated to each Series still in a Revolving
Period based on their respective Series Floating Allocation
Percentages; provided, however, that if on such Deposit Date
an Asset Deficiency has occurred and is continuing and the
aggregate amount of funds available to be distributed pursuant
to this clause fourth is less than the absolute amount of such
-------------
Asset Deficiency, then such funds
67
shall be transferred to the Principal Subaccounts for all
Outstanding Series of Notes based based ratably on the Target
Receivables Amounts for each Series calculated as of the last
day of the Revolving Period for such Series or as of the date
of such Asset Deficiency, whichever is earlier. The Indenture
Supplement shall specify how and when amounts deposited in the
related Principal Subaccount will be applied.
(v) Fifth, any funds not allocated pursuant to the above
-----
clauses first through fourth shall, to the extent necessary, be
------
paid to the Indenture Trustee to reimburse it for any fees,
expenses and indemnities not otherwise paid by the Servicer or
paid pursuant to clause first above.
-----
(vi) Sixth, any remaining funds shall be released to the
-----
Issuer.
(d) Each Indenture Supplement will specify when and in what
manner amounts allocated to a Series or otherwise on deposit in the Expense
Subaccount or the Principal Subaccount or any other Series Account will be
released to the Issuer. The Issuer agrees that, if on any Deposit Date on which
such funds are released to the Issuer, the Indenture Trustee may reimburse
itself for any amounts payable pursuant to clause fifth above before releasing
-----
such funds to the Issuer; provided that if an Asset Deficiency exists at such
--------
time, any funds that would otherwise be released to the Issuer under the terms
of any Indenture Supplement shall instead be treated as Collections to be
distributed in accordance with the foregoing provisions.
(e) On each Deposit Date, except as otherwise provided in an
Indenture Supplement, the Indenture Trustee shall pay to the Issuer the
remaining funds, if any, on deposit in the Collection Account on such Deposit
Date after giving effect to transfers to be made pursuant to Section 8.04(c).
---------------
Section 8.05 Release of Pledged Assets.
-------------------------
(a) Subject to the payment of amounts owing to it pursuant to
Section 6.07, the Indenture Trustee may, and when required by the provisions of
------------
this Indenture or the other Transaction Documents shall, execute instruments to
release property from the Lien of this Indenture, or convey the Indenture
Trustee's interest in the same, in a manner and under circumstances that are not
inconsistent with the provisions of this Indenture or the Transaction Documents.
No party relying on an instrument executed by the Indenture Trustee as provided
in this Article VIII shall be bound to ascertain the Indenture Trustee's
-------------
authority, inquire into the satisfaction of any conditions precedent or see to
the application of any monies.
(b) The Indenture Trustee shall, at such time as there are no
Notes outstanding and all amounts due the Indenture Trustee pursuant to Sections
--------
2.04 and 6.07 have been paid, release and transfer, without recourse,
---- ----
representation or warranty, all of the Pledged Assets that secured the Notes
(other than any cash held for the payment of the Notes pursuant to Section 4.02)
------------
to the Issuer.
68
Section 8.06 Officer's Certificate.
---------------------
The Issuer shall provide the Indenture Trustee with at least 7
days' notice when requesting the Indenture Trustee to take any action pursuant
to Section 8.05(a), which notice shall be accompanied by copies of any
---------------
instruments involved, and the Indenture Trustee shall also require, as a
condition to such action, an Officer's Certificate stating that such action is
authorized hereunder and under the Transaction Documents and will not materially
and adversely impair the security for the Notes or the rights of the Noteholders
under this Indenture. The Indenture Trustee may rely, without independent
investigation, on the accuracy and validity of any certificate or other
instrument delivered to the Indenture Trustee in connection with any such
action.
Section 8.07 Money for Note Payments to Be Held in Trust.
-------------------------------------------
All payments of amounts due and payable with respect to the
Notes that are to be made from amounts withdrawn from the Collection Account
shall be made on behalf of the Issuer by the Indenture Trustee or by the Paying
Agent, and no amounts so withdrawn from the Collection Account shall be paid
over to or at the direction of the Issuer except as provided in Section 8.04(d)
---------------
or in the related Indenture Supplement.
On or before each Payment Date, in accordance with the
instructions of the Servicer, the Indenture Trustee shall deposit or cause to be
deposited in the Distribution Account for each outstanding Series, out of funds
available therefor, an aggregate sum sufficient to pay the amounts then becoming
due under the Notes of such outstanding Series, such sum to be held in trust for
the benefit of the Persons entitled thereto.
ARTICLE IX
DISTRIBUTIONS AND REPORTS TO NOTEHOLDERS
Distributions shall be made to, and reports shall be provided
to, Noteholders as set forth in the applicable Indenture Supplement. The
identity of the Noteholders with respect to distributions and reports shall be
determined according to the immediately preceding Record Date.
ARTICLE x
SUPPLEMENTAL INDENTURES
Section 10.01 Supplemental Indentures Without Consent of Noteholders.
------------------------------------------------------
(a) Without the consent of the Holders of any Notes but with
prior notice to the Rating Agencies and each Series Enhancer and upon
satisfaction of the Rating Agency Condition with respect to the Notes of all
Series, the Issuer, the Indenture Trustee, the Paying Agent, the Authentication
Agent and the Transfer Agent and Registrar, at any time and from
69
time to time, may enter into an indenture or indentures supplemental hereto for
any of the following purposes:
(i) to correct or amplify the description of any property
at any time subject to the Lien of this Indenture, or better to
assure, convey and confirm to the Indenture Trustee any property
subject, or required to be subjected, to the Lien of this
Indenture, or to subject to the Lien of this Indenture
additional property;
(ii) to add to the covenants of the Issuer, for the benefit
of the Holders of the Notes, or to surrender any right or power
herein conferred upon the Issuer;
(iii) to convey, transfer, assign, mortgage or pledge any
property to or with the consent of the Indenture Trustee;
(iv) to cure any ambiguity, to correct or supplement any
provision herein or in any supplemental indenture that may be
inconsistent with any other provision herein or in any
supplemental indenture or to make any other provisions with
respect to matters or questions arising under this Indenture
or in any supplemental indenture;
(v) to evidence and provide for the acceptance of the
appointment hereunder by a successor indenture trustee with
respect to the Notes and to add to or change any of the
provisions of this Indenture as shall be necessary to facilitate
the administration of the Pledged Assets hereunder by more than
one trustee, pursuant to the requirements of Article VI;
----------
(vi) to provide for the issuance of one or more new Series
of Notes, in accordance with the provisions of Section 2.10;
------------
or
(vii) to provide for the termination of any Series
Enhancement in accordance with the provisions of the related
Indenture Supplement; provided, however, that such action shall
-------- -------
not adversely affect in any material respect the interests of
any Noteholder, as evidenced by an Officer's Certificate of an
Authorized Officer delivered to the Indenture Trustee (at the
Issuer's expense).
The Indenture Trustee, the Paying Agent, the Authentication Agent and the
Transfer Agent and Registrar are hereby authorized to join in the execution of
any such supplemental indenture and to make any further appropriate agreements
and stipulations that may be therein contained.
(b) The Issuer, the Indenture Trustee, the Paying Agent, the
Authentication Agent and the Transfer Agent and Registrar also, without the
consent of any Noteholders of any outstanding Series but with prior notice to
the Rating Agencies and each Series Enhancer and upon satisfaction of the Rating
Agency Condition and the written consent of each Series Enhancer with respect to
the Notes of all outstanding Series, may enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to, or changing in
any manner or eliminating any of the provisions of, this Indenture or of
modifying in any manner the rights of the Holders of the Notes under this
Indenture; provided, however, that the Issuer shall
-------- -------
70
have delivered to the Indenture Trustee, the Paying Agent, the Authentication
Agent and the Transfer Agent and Registrar an Officer's Certificate, dated the
date of any such action, stating that the Issuer reasonably believes that such
action will not have a Material Adverse Effect. Additionally, notwithstanding
the preceding sentence, the Issuer, the Indenture Trustee, the Paying Agent, the
Authentication Agent and the Transfer Agent and Registrar also, without the
consent of any Noteholders of any outstanding Series, may enter into an
indenture or indentures supplemental hereto to add, modify or eliminate such
provisions as may be necessary or advisable in order to enable the Issuer (i) to
qualify as, and to permit an election to be made to cause the Issuer to be
treated as, a "financial asset securitization investment trust" as described in
the provisions of Section 860L of the Code, (ii) to avoid the imposition of
state or local income or franchise taxes imposed on the Issuer's property or its
income and (iii) to add, modify or eliminate such provisions as may be necessary
and desirable to implement any revisions to the Uniform Commercial Code as in
force in the applicable jurisdiction; provided, however, that the Issuer, the
-------- -------
Indenture Trustee, the Paying Agent, the Authentication Agent and the Transfer
Agent and Registrar shall not enter into any such indenture or supplement unless
(w) the Issuer delivers to the Indenture Trustee, the Paying Agent, the
Authentication Agent and the Transfer Agent and Registrar and each Series
Enhancer an Officer's Certificate dated the date of such supplemental indenture,
stating that the Issuer reasonably believes that such supplemental indenture
will not have a Material Adverse Effect, (x) each Rating Agency has notified the
Issuer, the Servicer, the Indenture Trustee and each Series Enhancer in writing
that the Rating Agency Condition with respect to each outstanding Series has
been satisfied, (y) such amendment does not (without the consent of the
Indenture Trustee) affect the rights, duties or obligations of the Indenture
Trustee hereunder and (z) such amendment does not (without the consent of the
Paying Agent, the Authentication Agent or the Transfer Agent and Registrar, as
the case may be) affect the rights, duties or obligations of the Paying Agent,
the Authentication Agent or the Transfer Agent and Registrar, as the case may be
hereunder.
Section 10.02 Supplemental Indentures with Consent of Noteholders.
---------------------------------------------------
The Issuer, the Indenture Trustee, the Paying Agent, the
Authentication Agent and the Transfer Agent and Registrar also, with prior
notice to the Rating Agencies and with the consent of the Majority Investors, by
Act of such Holders delivered to the Issuer and the Indenture Trustee, may enter
into an indenture or indentures supplemental hereto for the purpose of adding
any provisions to, changing in any manner or eliminating any of the provisions
of this Indenture or of modifying in any manner the rights of the Noteholders of
all Series under this Indenture. If an indenture or indentures supplemental
hereto affects only the Noteholders of a particular Series of Notes, then the
consent of the Holders of a majority of the Series Outstanding Amount of such
Series shall be required to such supplemental indenture. Notwithstanding the
foregoing, no supplemental indenture shall, without the consent of Holders of
100% of the Series Outstanding Amount of the Outstanding Notes affected thereby:
(a) except as may be expressly permitted by the Indenture
Supplement relating to any Series of Notes, change the due date of any payment
of principal of or interest on any such Note, or reduce the principal amount
thereof, the interest rate specified thereon or the redemption price with
respect thereto or change any place of payment where, or the coin or currency in
which, any such Note or any interest thereon is payable;
71
(b) impair the right to institute suit for the enforcement of
the provisions of this Indenture requiring the application of funds available
therefor to the payment of any such amount due on the Notes on or after the
respective due dates thereof, as provided in Article V (or, in the case of
---------
redemption, on or after the Redemption Date);
(c) reduce the percentage that constitutes a majority of the
Series Outstanding Amount of the Notes of any Series, the consent of the Holders
of which is required for any such supplemental indenture, or the consent of the
Holders of which is required for any waiver of compliance with certain
provisions of this Indenture or certain defaults hereunder and their
consequences as provided for in this Indenture;
(d) reduce the percentage of the Outstanding Amount of the Notes
which is required to direct the Indenture Trustee to sell or liquidate the
Pledged Assets if the proceeds of such sale would be insufficient to pay the
principal amount and accrued but unpaid interest on the Outstanding Notes;
(e) decrease the percentage of the aggregate principal amount of
the Notes required to amend the sections of this Indenture that specify the
applicable percentage of the aggregate principal amount of the Notes of such
Series necessary to amend the Indenture or any Transaction Documents that
require such consent;
(f) modify or alter the provisions of this Indenture regarding
the voting of Notes held by the Issuer, any other obligor on the Notes, the
Seller, the Servicer or any Affiliate of any of the foregoing Persons; or
(g) permit the creation of any Lien ranking prior to or on a
parity with the Lien of this Indenture with respect to any part of the Pledged
Assets for any Notes or, except as otherwise permitted or contemplated herein,
terminate the Lien of this Indenture on any such Pledged Assets at any time
subject hereto or deprive the Holder of any Note of the security provided by the
Lien of this Indenture.
It shall not be necessary for any Act of Noteholders under this
Section 10.02 to approve the particular form of any proposed supplemental
------------
indenture, but it shall be sufficient if such Act shall approve the substance
thereof.
Promptly after the execution by the Issuer, the Indenture
Trustee, the Paying Agent, the Authentication Agent and the Transfer Agent and
Registrar of any supplemental indenture pursuant to this Section 10.02, the
-------------
Paying Agent shall mail to the Holders of the Notes to which such supplemental
indenture relates written notice setting forth in general terms the substance of
such supplement indenture; provided, however, that any failure of the Paying
-------- -------
Agent to mail such notice, or any defect therein, shall not in any way impair or
affect the validity of any such supplemental indenture.
Section 10.03 Execution of Supplemental Indentures.
------------------------------------
In executing, or permitting the additional trusts created by any
supplemental indenture permitted by this Article X or the modification thereby
---------
of the trusts created by this
72
Indenture, the Indenture Trustee, the Paying Agent, the Authentication Agent and
the Transfer Agent and Registrar shall be entitled to receive, and subject to
Section 6.01, shall be fully protected in relying on, an Opinion of Counsel
-------------
stating that the execution of such supplemental indenture is authorized or
permitted by this Indenture and that all conditions precedent, if any, have been
satisfied. The Indenture Trustee may, but shall not be obligated to, enter into
any such supplemental indenture that affects the Indenture Trustee's own rights,
duties, liabilities or immunities under this Indenture or otherwise. The Paying
Agent, the Authentication Agent and the Transfer Agent and Registrar, as the
case may be, may, but shall not be obligated to, enter into any such
supplemental indenture that affects their respective rights, duties, liabilities
or immunities under this Indenture or otherwise.
Section 10.04 Effect of Supplemental Indenture.
--------------------------------
Upon the execution of any supplemental indenture under this
Article X, this Indenture shall be modified in accordance therewith, and such
---------
supplemental indenture shall form a part of this Indenture for all purposes, and
every Holder of Notes theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby.
Section 10.05 Reference in Notes to Supplemental Indentures.
---------------------------------------------
Notes authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article X may, and if required by the
---------
Authentication Agent shall, bear a notation in form approved by the Indenture
Trustee and the Authentication Agent as to any matter provided for in such
supplemental indenture. If the Issuer shall so determine, new Notes modified so
as to conform, in the opinion of the Indenture Trustee and the Authentication
Agent and the Issuer, to any such supplemental indenture may be prepared and
executed by the Issuer and authenticated and delivered by the Authentication
Agent in exchange for the Outstanding Notes.
ARTICLE XI
DEFEASANCE
Section 11.01 Defeasance.
----------
Notwithstanding anything to the contrary in this Indenture or
any Indenture Supplement:
(a) The Issuer may at its option be discharged from its
obligations hereunder with respect to any Series or all outstanding Series
(each, a "Defeased Series") on the date the applicable conditions set forth in
----------------
Section 11.01(c) are satisfied (a "Defeasance"); provided, however, that the
---------------- ---------- -------- -------
following rights, obligations, powers, duties and immunities shall survive with
respect to each Defeased Series until otherwise terminated or discharged
hereunder: (i) the rights of the Holders of Notes of the Defeased Series to
receive payments in respect of principal of and interest on such Notes when such
payments are due; (ii) the Issuer's obligations with respect to such Notes under
Sections 2.05 and 2.06; (iii) the rights, powers, trusts, duties, and immunities
------------- ----
73
of the Indenture Trustee, the Paying Agent and the Transfer Agent and Registrar
hereunder; and (iv) this Section 11.01 and Section 12.14.
------------- -------------
(b) Subject to Section 11.01(c), no Collections shall be
----------------
allocated to any Defeased Series.
(c) The following shall be the conditions precedent to any
Defeasance under Section 11.01(a):
---------------
(i) the Issuer irrevocably shall have deposited or caused
to be deposited with the Indenture Trustee, under the terms of
an irrevocable trust agreement in form and substance
satisfactory to the Indenture Trustee and any Series Enhancer,
as trust funds in trust for making the payments described
below, (A) Dollars in an amount equal to, or (B) Eligible
Investments which through the scheduled payment of principal
and interest in respect thereof will provide, not later than the
due date of payment thereon, money in an amount equal to, or
(C) a combination thereof, in each case sufficient to pay and
discharge, and which shall be applied by the Indenture Trustee
to pay and discharge, all remaining scheduled interest and
principal payments on all Outstanding Notes of each Defeased
Series and all other amounts owing in respect of such Defeased
Series (including all amounts owing under any related
Enhancement Agreement to any Series Enhancer) on the dates
scheduled for such payments in this Indenture and the
applicable Indenture Supplements;
(ii) a statement from a firm of nationally recognized
independent public accountants (who also may render other
services to the Issuer) to the effect that such deposit is
sufficient to pay the amounts specified in clause (i) above;
----------
(iii) prior to its first exercise of its right pursuant to
this Section 11.01 with respect to a Defeased Series to
-------------
substitute money or Eligible Investments for Receivables, the
Issuer shall have delivered to the Indenture Trustee an Opinion
of Counsel to the effect that such deposit and termination of
obligations will not result in the Issuer being required to
register as an "investment company" within the meaning of the
Investment Company Act;
(iv) the Issuer shall have delivered to the Indenture
Trustee and each Series Enhancer an Officer's Certificate of the
Issuer stating that the Issuer reasonably believes that such
deposit and termination of obligations will not, based on the
facts known to such officer at the time of such certification,
then cause an Event of Default or Amortization Event with
respect to any Series or any event that, with the giving of
notice or the lapse of time, would result in the occurrence of
a Event of Default or Amortization Event with respect to any
Series;
74
(v) the Rating Agency Condition shall have been satisfied
and the Issuer shall have delivered copies to the Servicer, the
Indenture Trustee and each Series Enhancer of such written
notification from each Rating Agency; and
(vi) the Issuer shall have delivered to the Indenture
Trustee and each Series Enhancer a Tax Opinion.
ARTICLE XII
MISCELLANEOUS
Section 12.01 Compliance Certificates and Opinions, etc.
------------------------------------------
(a) Upon any application or request by the Issuer to the
Indenture Trustee to take any action under any provision of this Indenture or
any other Transaction Document, the Issuer shall furnish to the Indenture
Trustee (i) an Officer's Certificate stating that all conditions precedent, if
any, provided for in this Indenture relating to the proposed action have been
complied with, (ii) if reasonably requested by the Indenture Trustee, an Opinion
of Counsel stating that in the opinion of such counsel all such conditions
precedent, if any, which require satisfaction of any legal requirement have been
complied with and (iii) an Independent Certificate from a firm of certified
public accountants meeting the applicable requirements of this Section 12.01,
-------------
except that, in the case of any such application or request as to which the
furnishing of specific documents is required by any provision of this Indenture,
no additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(i) a statement that each signatory of such certificate or
opinion has read or has caused to be read such covenant or
condition and the definitions herein relating thereto;
(ii) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or
opinions contained in such certificate or opinion are based;
(iii) a statement that, in the opinion of each such
signatory, such signatory has made such examination or
investigation as is necessary to enable such signatory to
express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(iv) a statement as to whether, in the opinion of each such
signatory, such condition or covenant has been complied with.
(b) (i) Prior to the deposit of any Pledged Assets or other
property or securities with the Indenture Trustee that is to be made the basis
for the release of any property
75
or securities subject to the Lien of this Indenture, the Issuer shall, in
addition to any obligation imposed in Section 12.01(a) or elsewhere in this
-----------------
Indenture, furnish to the Indenture Trustee an Officer's Certificate certifying
or stating the opinion of each person signing such certificate as to the fair
value (within 90 days of such deposit) to the Issuer of the Pledged Assets or
other property or securities to be so deposited.
(ii) Whenever the Issuer is required to furnish to the
Indenture Trustee an Officer's Certificate certifying or
stating the opinion of any signer thereof as to the matters
described in clause (i) above, the Issuer also shall deliver
----------
to the Indenture Trustee an Independent Certificate as to the
same matters, if the fair value to the Issuer of the securities
to be so deposited and of all other such securities made the
basis of any such withdrawal or release since the commencement
of the then-current fiscal year of the Issuer, as set forth
in the certificates delivered pursuant to clause (i) above and
----------
this clause (ii), is 10% or more of the Outstanding Amount of
----------
the Notes, but such a certificate need not be furnished with
respect to any securities so deposited if the fair value
thereof to the Issuer as set forth in the related Officer's
Certificate is less than 10% of the Outstanding Amount of the
Notes.
(iii) Other than as provided in the Granting Clause,
whenever any property or securities are to be released from the
Lien of this Indenture, the Issuer also shall furnish to the
Indenture Trustee an Officer's Certificate certifying or stating
the opinion of each person signing such certificate as to the
fair value (within 90 days of such release) of the property or
securities proposed to be released and stating that in the
opinion of such person the proposed release will not impair the
security under this Indenture in contravention of the provisions
hereof.
(iv) Whenever the Issuer is required to furnish to the
Indenture Trustee an Officer's Certificate certifying or
stating the opinion of any signer thereof as to the matters
described in clause (iii) above, the Issuer also shall furnish
------------
to the Indenture Trustee an Independent Certificate as to the
same matters if the fair value of the property or securities
and of all other property, other than as provided in the
Granting Clause, or securities released from the Lien of this
Indenture since the commencement of the then current calendar
year, as set forth in the certificates required by clause (iii)
------------
above and this clause (iv), equals 10% or more of the
-----------
Outstanding Amount of the Notes, but such certificate need not
be furnished in the case of any release of property or
securities if the fair value thereof as set forth in the related
Officer's Certificate is less than 10% of the then Outstanding
Amount of the Notes.
(v) Notwithstanding any provision of this Section 12.01,
-------------
the Issuer may (A) collect, liquidate, sell or otherwise dispose
of Receivables as and to the extent permitted or required by the
Transaction Documents and (B) make cash payments out of the
Series Accounts as and to the extent permitted or required by
76
the Transaction Documents, and the provisions of the Granting
Clause shall apply.
Section 12.02 Form of Documents Delivered to Indenture Trustee.
------------------------------------------------
In any case where several matters are required to be certified
by, or covered by an opinion of, any specified Person, it is not necessary that
all such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an Authorized Officer of the
Issuer may be based, insofar as it relates to legal matters, upon a certificate
or opinion of, or representations by, counsel, unless such officer knows, or in
the exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which such officer's
certificate or opinion is based are erroneous. Any such certificate of an
Authorized Officer or Opinion of Counsel may be based, insofar as it relates to
factual matters, upon a certificate or opinion of, or representations by, an
officer or officers of the Servicer or the Issuer, stating that the information
with respect to such factual matters is in the possession of the Servicer or the
Issuer, unless such Authorized Officer or counsel knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to such matters are erroneous.
In any case in which any Person is required to make, give or
execute two or more applications, requests, consents, certificates, statements,
opinions or other instruments under this Indenture, they may, but need not, be
consolidated and form one instrument.
Whenever in this Indenture, in connection with any application
or certificate or report to the Indenture Trustee, it is provided that the
Issuer shall deliver any document as a condition of the granting of such
application or as evidence of the Issuer's compliance with any term hereof, it
is intended that the truth and accuracy, at the time of the granting of such
application or at the effective date of such certificate or report (as the case
may be), of the facts and opinions stated in such document shall in such case be
conditions precedent to the right of the Issuer to have such application granted
or to the sufficiency of such certificate or report. The foregoing shall not,
however, be construed to affect the Indenture Trustee's right to rely upon the
truth and accuracy of any statement or opinion contained in any such document as
provided in Article VI.
----------
Section 12.03 Acts of Noteholders.
-------------------
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given or taken
by Noteholders shall be given or taken in accordance with the terms of this
Indenture by Noteholders holding Notes as of the most recent Record Date and may
be embodied in and evidenced by one or more instruments of substantially similar
tenor signed by such Noteholders in person or by an agent duly appointed in
77
writing and satisfying any requisite percentages as to the minimum number or
Dollar value of outstanding principal amount represented by such Noteholders;
and except as herein otherwise expressly provided, such action shall become
effective when such instrument or instruments are delivered to the Indenture
Trustee, and, to the extent hereby expressly required, to the Issuer. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Noteholders
---
signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any
purpose of this Indenture and conclusive in favor of the Indenture Trustee and
the Issuer, if made in the manner provided in this Section 12.03.
-------------
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved in any manner which the Indenture Trustee
deems sufficient.
(c) The ownership of Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice,
consent, waiver or other action by the Holder of any Notes shall bind the Holder
(and any transferee thereof) of every Note issued upon the registration thereof
in exchange therefor or in lieu thereof, in respect of anything done, omitted or
suffered to be done by the Indenture Trustee or the Issuer in reliance thereon,
whether or not notation of such action is made upon such Note.
Section 12.04 Notices to Issuer, Indenture Trustee, Paying Agent,
-------------------------------------------------------
Authentication Agent and Transfer Agent and Registrar.
-----------------------------------------------------
All demands, notices and communications hereunder shall be in
writing and shall be deemed to have been duly given if personally delivered at,
sent by facsimile to, sent by courier at or mailed by certified or registered
mail, return receipt requested, to (a) in the case of the Issuer, to 3125 Chad
Drive, Eugene, Oregon 97408, Attention: Manager with copies by facsimile to
(541) 242-7577 and to the Treasurer's Department of the Parent at (415)
501-1342, (b) in the case of the Indenture Trustee, to the Corporate Trust
Office, (c) in the case of the Paying Agent, the Authentication Agent or the
Transfer Agent and Registrar, to the Corporate Trust Office and (d) in the case
of the Rating Agency for a particular Series, the address, if any, specified in
the Indenture Supplement relating to such Series; or, as to each party, at such
other address as shall be designated by such party in a written notice to each
other party.
Section 12.05 Notices to Noteholders; Waiver.
------------------------------
In any case in which this Indenture provides for notice to
Noteholders or a Series Enhancer of any event, such notice shall be sufficiently
given (unless otherwise herein expressly provided) if in writing and mailed by
registered or certified mail or first class postage prepaid or national
overnight courier service to each Noteholder or Series Enhancer affected by such
event, at the Noteholder's address as it appears on the Note Register or at the
Series Enhancer's address for notices set forth in the relevant agreement
relating to Series Enhancement, not later than the latest date, and not earlier
than the earliest date, prescribed for the giving of such notice. If notice to
Noteholders or a Series Enhancer is given by mail, neither the failure to mail
such notice nor any defect in any notice so mailed to any particular Person
shall affect the sufficiency
78
of such notice with respect to other Persons, and any notice that is mailed in
the manner herein provided shall conclusively be presumed to have been duly
given.
In any case in which this Indenture provides for notice in any
manner, such notice may be waived in writing by any Person entitled to receive
such notice, either before or after the event, and such waiver shall be the
equivalent of such notice. Waivers of notice by Noteholders shall be filed with
the Indenture Trustee (with a copy to the Paying Agent), but such filing shall
not be a condition precedent to the validity of any action taken in reliance
upon such waiver.
If, by reason of the suspension of regular mail service as a
result of a strike, work stoppage or similar activity, it shall be impractical
to mail notice of any event to Noteholders when such notice is required to be
given pursuant to any provision of this Indenture, then any manner of giving
such notice as shall be satisfactory to the Indenture Trustee or the Paying
Agent, as the case may be, shall be deemed to be a sufficient giving of such
notice.
Section 12.06 Alternate Payment and Notice Provisions.
---------------------------------------
Notwithstanding any provision of this Indenture or any of the
Notes to the contrary, the Issuer, with the consent of the Paying Agent, may
enter into any agreement with any Holder of a Note providing for a method of
payment, or notice by the Indenture Trustee or any Paying Agent to such Holder,
that is different from the methods provided for in this Indenture for such
payments or notices. The Issuer shall furnish to the Indenture Trustee or/and
the Paying Agent a copy of each such agreement and the Paying Agent or the
Indenture Trustee, as the case may be, shall cause payments to be made and
notices to be given in accordance with such agreements.
Section 12.07 Effect of Headings and Table of Contents.
----------------------------------------
The Article and Section headings herein and the Table of
Contents are for convenience only and shall not affect the construction hereof.
Section 12.08 Successors and Assigns.
----------------------
All covenants and agreements in this Indenture by the Issuer
shall bind its successors and assigns, whether so expressed or not.
Section 12.09 Separability.
------------
If any provision in this Indenture or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
Section 12.10 Benefits of Indenture.
---------------------
Nothing in this Indenture or in the Notes, express or implied,
shall give to any Person other than the parties hereto and their successors
hereunder, any Series Enhancer and the Noteholders, any benefit.
79
Section 12.11 Legal Holidays.
--------------
If the date on which any payment is due shall not be a Business
Day, then (notwithstanding any other provision of the Notes or this Indenture)
payment need not be made on such date, but may be made on the next succeeding
Business Day with the same force and effect as if made on the date on which
nominally due, and no interest shall accrue for the period from and after any
such nominal date.
Section 12.12 GOVERNING LAW.
-------------
THE INDENTURE AND EACH NOTE SHALL BE CONSTRUED IN ACCORDANCE
WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, INCLUDING ss.5-1401 OF THE NEW
YORK GENERAL OBLIGATIONS LAW, BUT OTHERWISE WITHOUT REGARD TO CONFLICT OF LAWS
PRINCIPLES.
Section 12.13 Counterparts.
------------
This Indenture may be executed in any number of counterparts,
each of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
Section 12.14 No Petition; Limited Recourse to Issuer.
---------------------------------------
(a) The Indenture Trustee, the Paying Agent, the Authentication
Agent and the Transfer Agent and Registrar, by entering into this Indenture, and
each Noteholder, by accepting a Note, hereby covenant and agree that they will
not at any time institute against the Issuer, the Transferor, the Seller or the
Originator, or join in any institution against the Issuer, the Transferor, the
Seller or the Originator, any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings, or other proceedings under any United
States federal or state bankruptcy or similar law in connection with any
obligations relating to the Notes, this Indenture or any of the Transaction
Documents until the expiration of one year and one day after payment in full of
the latest maturing Note issued by the Issuer under this Indenture.
(b) Notwithstanding anything herein to the contrary, the
Indenture Trustee, the Paying Agent, the Authentication Agent and the Transfer
Agent and Registrar hereby agree that the Notes and other obligations of the
Issuer hereunder and under any Indenture Supplement are limited recourse
obligations of the Issuer and shall be payable solely out of the Pledged Assets
at such time as, and to the extent of funds actually received by, or available
to, the Issuer, and, to the extent funds are not available to pay such Notes and
other obligations, the claims relating thereto shall accrue but shall be
non-recourse against the Issuer and shall not constitute claims under Section
101 of the Bankruptcy Code.
(c) This Section 12.14 shall survive termination of the
-------------
Indenture.
80
Section 12.15 Provision of Information to Rating Agencies.
-------------------------------------------
At the request of a Rating Agency, the Indenture Trustee will
provide such Rating Agency with any reports and other written information it has
received from the Servicer for distribution to Noteholders.
81
IN WITNESS WHEREOF, the Issuer, the Indenture Trustee, the
Paying Agent, the Authentication Agent and the Transfer Agent and Registrar have
caused this Indenture to be duly executed by their respective officers thereunto
duly authorized and attested, all as of the day and year first above written.
LEVI STRAUSS RECEIVABLES FUNDING,
LLC, as Issuer
By: _________________________________
Name: Joseph M. Maurer
Title: Treasurer
CITIBANK, N.A., not in its individual capacity but
solely as Indenture Trustee, Paying Agent
Authentication Agent and Transfer Agent and
Registrar
By: _________________________________
Name:
Title:
Signature Page to Master Indenture
82
EX-10
4
a10qex103.txt
EXHIBIT 10.3 SERIES 2001-A INDENTURE SUPPLEMENT
EXHIBIT 10.3
EXECUTION COPY
--------------------------------------------------------------------------------
INDENTURE SUPPLEMENT
--------------------------------------------------------------------------------
LEVI STRAUSS RECEIVABLES FUNDING, LLC
as Issuer
CITIBANK, N.A.
as Indenture Trustee,
Paying Agent, Authentication Agent and
Transfer Agent and Registrar
SERIES 2001-A INDENTURE SUPPLEMENT
Dated as of July 31, 2001
--------------------------------------------------------------------------------
ARTICLE I
CREATION OF THE SERIES 2001-A NOTES
Section 1.01 Designation............................................................................1
ARTICLE II
DEFINITIONS
Section 2.01 Definitions............................................................................2
ARTICLE III
SERVICING FEE
Section 3.01 Servicing Fee..........................................................................8
ARTICLE IV
RIGHTS OF SERIES 2001-A NOTEHOLDERS AND ALLOCATION AND
APPLICATION OF POOL COLLECTIONS
Section 4.01 Pool Collections and Allocations.......................................................9
Section 4.02 Determination of Monthly Interest.....................................................10
Section 4.03 Determination of Principal Distribution...............................................10
Section 4.04 Application of Collections on Deposit in the Series 2001-A Expense Subaccount and
Principal Subaccount..................................................................11
Section 4.05 [Reserved]............................................................................11
Section 4.06 Series 2001-A Expense Subaccount......................................................11
Section 4.07 Series 2001-A Principal Subaccount....................................................12
Section 4.08 Determination of LIBOR................................................................13
Section 4.09 Investment Instructions...............................................................13
ARTICLE V
DELIVERY OF SERIES 2001-A NOTE DISTRIBUTIONS; REPORTS TO SERIES
2001-A NOTEHOLDERS
Section 5.01 Delivery and Payment for the Series 2001-A Notes; Denominations.......................13
Section 5.02 Registration; Registration of Transfer and Exchange; Transfer Restrictions............14
-i-
Section 5.03 Global Notes..........................................................................18
Section 5.04 Regulation S Global Notes.............................................................18
Section 5.05 Special Transfer Provisions...........................................................20
Section 5.06 CUSIP Numbers.........................................................................21
Section 5.07 Distributions.........................................................................22
Section 5.08 Reports and Statements to Series 2001-A Noteholders...................................22
ARTICLE VI
AMORTIZATION EVENTS
Section 6.01 Series 2001-A Amortization Events.....................................................23
ARTICLE VII
OPTIONAL REDEMPTION OF SERIES 2001-A NOTES
Section 7.01 Optional Redemption of Series 2001-A Notes............................................25
ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section 8.01 Ratification of Agreement.............................................................25
Section 8.02 Counterparts..........................................................................26
Section 8.03 Governing Law.........................................................................26
Section 8.04 No Petition; Limited Recourse.........................................................26
-ii-
EXHIBITS
EXHIBIT A-1 FORM OF RULE 144A GLOBAL NOTE
EXHIBIT A-2 FORM OF TEMPORARY REGULATION S GLOBAL NOTE
EXHIBIT A-3 FORM OF PERMANENT REGULATION S GLOBAL NOTE
EXHIBIT B [RESERVED]
EXHIBIT C FORM OF MONTHLY STATEMENT
EXHIBIT D [RESERVED]
EXHIBIT E-1 FORM OF EUROCLEAR AND CLEARSTREAM BANKING
CERTIFICATE
EXHIBIT E-2 FORM OF CERTIFICATE TO BE GIVEN BY HOLDER OF
BENEFICIAL INTEREST IN A TEMPORARY
REGULATION S GLOBAL NOTE
-iii-
SERIES 2001-A INDENTURE SUPPLEMENT, dated as of July 31, 2001
(as amended, modified, restated or supplemented from time to time, the
"Indenture Supplement"), by and among LEVI STRAUSS RECEIVABLES FUNDING, LLC, a
--------------------
limited liability company organized under the laws of the State of Delaware, as
Issuer (together with its permitted successors and assigns, the "Issuer"), LEVI
------
STRAUSS FINANCIAL CENTER CORPORATION, a California corporation, in its capacity
as servicer (the "Servicer") and Citibank, N.A., a national banking association
--------
("Citibank"), as Indenture Trustee (together with its permitted successors and
assigns, the "Indenture Trustee"), and in its separate capacities as paying
-----------------
agent, authentication agent and transfer agent and registrar.
Pursuant to Section 2.10 of the Master Indenture, dated as of
------------
July 31, 2001 (as amended, modified, restated or supplemented from time to time,
the "Indenture" and together with the Indenture Supplement, the "Agreement"), by
--------- ---------
and between the Issuer and the Indenture Trustee, the Issuer may issue one or
more Series of Notes the Principal Terms of which shall be set forth in an
indenture supplement to the Indenture. In accordance with the terms of the
Indenture, the Issuer hereby creates a Series of Notes and specifies the
Principal Terms of such Series of Notes in this Indenture Supplement.
GRANTING CLAUSES
The Issuer hereby Grants to the Indenture Trustee, for the
benefit of the Series 2001-A Noteholders, all of the Issuer's right, title and
interest, whether now owned or hereafter acquired, in, to and under: (i) the
Series 2001-A Expense Subaccount; (ii) the Series 2001-A Principal Subaccount,
(iii) all accounts, money, chattel paper, investment property, instruments,
documents, deposit accounts, certificates of deposit, letters of credit, advices
of credit, general intangibles and goods consisting of, arising from or relating
to any of the foregoing and (iv) all proceeds of the foregoing.
ARTICLE I
CREATION OF THE SERIES 2001-A NOTES
Section 1.01 Designation.
-----------
(a) There is hereby created a Series of Notes to be issued pursuant to
the Indenture and this Indenture Supplement to be known as the "Levi Strauss
------------
Receivables Funding Secured Term Notes, Series 2001-A" or the "Series 2001-A
--------------------------------------------------------- -------------
Notes."
-----
(b) In the event that any term or provision contained herein shall
conflict with or be inconsistent with any term or provision contained in the
Indenture, the terms and provisions of this Indenture Supplement shall be
controlling.
-1-
ARTICLE II
Definitions
Section 2.01 Definitions.
-----------
(a) Whenever used in this Indenture Supplement, the following words and
phrases shall have the following meanings, and the definitions of such terms are
applicable to the singular as well as the plural forms of such terms and the
masculine as well as the feminine and neuter genders of such terms.
"Additional Interest" shall have the meaning set forth in
-------------------
Section 4.02(b).
--------------
"Adjusted Applicable Payment Terms" shall mean, as of any date
---------------------------------
of determination, the sum of (i) the weighted average of the Applicable Payment
Terms (after giving effect to any extensions of such terms permitted under
clause (i) of the definition of Eligible Receivable) for all Receivables
-----------
outstanding as of the last day of the most recent Monthly Period plus (ii) 60.
"Adjusted Servicing Fee Rate" shall mean, as of any date of
---------------------------
determination, the Servicing Fee Rate times a fraction, the numerator of which
equals the ending Aggregate Receivables Balance for the related Monthly Period
and the denominator of which equals the aggregate principal amount of all Notes
Outstanding as of the end of the related Monthly Period.
"Amortization Event" shall have the meaning set forth in
------------------
Section 6.01.
------------
"Amortization Monthly Principal" shall have the meaning set
------------------------------
forth in Section 4.03.
------------
"Amortization Period" shall mean the period commencing at the
-------------------
earlier to occur of (a) the close of business on August 14, 2004 and (b) the
close of business on the Business Day immediately preceding the day on which an
Amortization Event has been declared or deemed to have automatically occurred
pursuant to Section 6.01, and ending on the date on which the Series Outstanding
------------
Amount shall have been paid in full, together with all accrued interest thereon.
"Applicable Reserve Ratio" shall mean, as of any date of
------------------------
determination, the greater of (i) the Minimum Reserve Ratio and (ii) the sum of
the Loss Reserve Ratio and the Dilution Reserve Ratio.
"Applicable Stress Factor" shall mean, as of any date of
------------------------
determination, 2.5.
"Average Days Outstanding" shall mean, as of the end of any
------------------------
Monthly Period, the average number of days Receivables have been outstanding as
of the end of such Monthly Period, calculated in accordance with the following
formula:
ADO = 91 x (ARB / AOB), where
ADO = Average Days Outstanding;
-2-
ARB = the Aggregate Receivables Balance as of the
end of such Monthly Period; and
AOB = the aggregate original Unpaid Balances of
all Receivables generated during the three
consecutive Monthly Periods then ending.
"Average Dilution Ratio" shall mean, as of any date of
-----------------------
determination, the average of the Dilution Ratios occurring during the twelve
most recent Monthly Periods preceding the date of calculation.
"Custodian" shall mean the entity maintaining possession of
---------
the Global Notes for the Clearing Agency.
"Default Ratio" shall mean, for any Monthly Period, the
-------------
quotient, expressed as a percentage, of (a) the sum of the aggregate Unpaid
Balance of all Receivables less than 91 days past due that have become Defaulted
Receivables during such Monthly Period plus the aggregate Unpaid Balances of all
Receivables which are unpaid in full or in part for at least 91 days but not
more than 120 days after their original due date (which Unpaid Balances shall be
calculated without giving effect to any reduction caused by credit memos not
associated with such Receivables divided by (b) the aggregate Unpaid Balance of
the Receivables generated during the fourth Monthly Period preceding such
Monthly Period (i.e., so that the denominator of the ratio for the month of
March will be the Receivables generated in November).
"Dilution Horizon Factor" shall mean, for any Record Date, a
-----------------------
fraction the numerator of which equals the sum of (i) the aggregate principal
amount of Receivables originated during the most recent Monthly Period and (ii)
fourteen-thirtieths (14/30) times the aggregate principal amount of Receivables
originated during the preceding Monthly Period and the denominator of which
equals the Net Eligible Receivables Balance as of the end of the most recent
Monthly Period.
"Dilution Ratio" shall mean, for any Monthly Period, the
--------------
quotient, expressed as a percentage, of (a) the aggregate amount of reductions
to the Unpaid Balances of the Receivables due to Dilutive Credits occurring
during such Monthly Period divided by (b) the aggregate Unpaid Balance of the
Receivables generated during the immediately preceding Monthly Period.
"Dilution Reserve Ratio" shall mean, as of any date of
-----------------------
determination, a percentage calculated in accordance with the following formula:
DRR = (SF x ADR) + [(HDR-ADR) x (HDR/ADR)]] x DHF,
where
DRR = the Dilution Reserve Ratio;
SF = the Applicable Stress Factor;
ADR = the Average Dilution Ratio;
-3-
HDR = the highest Dilution Ratio occurring during the
twelve most recent Monthly Periods preceding the
date of calculation; and
DHF = the Dilution Horizon Factor for the Monthly
Period preceding the date of calculation.
"Distribution Compliance Period" shall have the meaning set
--------------------------------
forth in Rule 902 of Regulation S.
"DWAC" shall mean Deposit and Withdrawal At Custodian Service.
----
"Exemptions" shall mean Prohibited Transaction Class Exemption
----------
("PTCE") 96-23, regarding transactions effected by "in-house asset managers";
PTCE 90-1, regarding investments by insurance company pooled separate accounts;
PTCE 95-60, regarding investments by insurance company general accounts; PTCE
91-38 regarding investments by bank collective investment funds; PTCE 84-14,
regarding transactions effected by "qualified professional asset managers"; and
PTCE 75-1, regarding purchases between a Plan and certain individuals that are
registered broker-dealers.
"Final Stated Maturity Date" shall mean the Payment Date
-----------------------------
occurring in November, 2005.
"Initial Purchaser" shall mean Banc One Capital Markets, Inc.
-----------------
"Initial Series Outstanding Amount" shall mean, with respect
---------------------------------
to the Series 2001-A Notes, $110,000,000.
"Interest Period" shall mean, with respect to any Payment
---------------
Date, the period beginning on and including the Payment Date immediately
preceding such Payment Date (or, in the case of the first Payment Date,
beginning on and including the Series 2001-A Closing Date) and ending on and
excluding such Payment Date.
"Interest Shortfall" shall have the meaning set forth in
------------------
Section 4.02(b).
---------------
"LIBOR" shall mean, for any Interest Period, as of any LIBOR
-----
Determination Date, the London interbank offered rate for deposits in United
States dollars for a one-month period determined by the Paying Agent for each
Interest Period in accordance with the provisions of Section 4.08.
------------
"LIBOR Determination Date" shall mean the second London
--------------------------
Business Day prior to the commencement of the second and each subsequent
Interest Period.
"London Business Day" shall mean any Business Day on which
-------------------
dealings in deposits in U.S. dollars are transacted in the London interbank
market and banking institutions in London are not authorized or obligated by law
or regulation to close.
"Loss Horizon Factor" shall mean, as of the end of any Monthly
-------------------
Period, (i) the product of (x) the aggregate Unpaid Balance of the Receivables
generated over the 3 Monthly
-4-
Periods then ending times (y) a fraction, the numerator of which equals the
Adjusted Applicable Payment Terms and the denominator of which equals 90 divided
by (ii) the Net Eligible Receivables Balance as of the end of such Monthly
Period.
"Loss Reserve Ratio" shall mean, as of any date of
--------------------
determination, a percentage calculated in accordance with the following formula:
LRR = (LHF x ARR) x SF, where
LRR = the Loss Reserve Ratio;
LHF = the Loss Horizon Factor;
ARR = the highest three-month rolling average of the
Default Ratios occurring during the twelve most
recent calendar months; and
SF = the Applicable Stress Factor.
"Minimum Reserve Ratio" shall mean, as of any date of
-----------------------
determination, the sum of (x) 18% and (y) the product of the Average Dilution
Ratio times the Dilution Horizon Factor.
"Monthly Interest" shall have the meaning set forth in Section
---------------- -------
4.02(a).
-------
"Monthly Period" shall mean the period from and including the
--------------
first day of a calendar month to and including the last day of such calendar
month.
"Monthly Servicing Fee" shall have the meaning set forth in
---------------------
Section 3.01.
------------
"Non-U.S. Certificate" shall have the meaning set forth in
--------------------
Section 5.04(b).
--------------
"Note Interest Rate" shall mean, for each Interest Period
------------------
(other than the first Interest Period), a rate of 0.32% per annum in excess of
LIBOR as determined on the related LIBOR Determination Date. The Note Interest
Rate for the first Interest Period will equal 4.095% per annum.
"Offering Memorandum" shall mean the Offering Memorandum
--------------------
relating to the Series 2001-A Notes dated July 20, 2001.
"Payment Date" shall mean August 15, 2001 and the fifteenth
------------
day of each calendar month thereafter, or if such fifteenth day is not a
Business Day, the next succeeding Business Day.
"Permanent Regulation S Global Notes" shall have the meaning
-----------------------------------
set forth in Section 5.04(a).
--------------
"QIB" shall have the meaning set forth in Section 5.02(b).
--- --------------
"Rating Agency" shall mean each of Standard & Poor's Ratings
-------------
Services and Moody's Investors Service, Inc.
-5-
"Redemption Price" shall mean, with respect to any Payment
----------------
Date, after giving effect to any deposits and distributions otherwise to be made
on such Payment Date, the sum of (i) the Series Outstanding Amount or portion
thereof to be redeemed on such Payment Date plus (ii) Monthly Interest for such
Payment Date and any Monthly Interest previously due but not distributed to the
Series 2001-A Noteholders.
"Reference Banks" shall mean four major banks in the London
---------------
interbank market selected by the Paying Agent.
"Regulation S" shall mean Regulation S under the Securities
------------
Act.
"Regulation S Certificate" shall have the meaning set forth in
------------------------
Section 5.02(e).
--------------
"Regulation S Global Notes" shall mean each of the Temporary
-------------------------
Regulation S Global Notes and the Permanent Regulation S Global Notes.
"Release Date" shall have the meaning set forth in Section
------------ -------
5.02(e).
------
"Required Amount" shall mean, as of any date of determination,
---------------
the sum of (a) (i) the Monthly Interest to be distributed on the next Payment
Date plus (ii) any Interest Shortfall previously accrued and not reimbursed plus
(iii) any Additional Interest previously accrued and not reimbursed plus (b) the
sum of (i) the Monthly Servicing Fee to be distributed on such Payment Date plus
(ii) any Monthly Servicing Fee previously accrued and not paid.
"Revolving Period" shall mean the period beginning on the
----------------
Series 2001-A Closing Date and ending upon the commencement of the Amortization
Period.
"Rule 144A" shall mean Rule 144A under the Securities Act.
---------
"Rule 144A Global Notes" shall have the meaning set forth in
----------------------
Section 5.03.
------------
"Securities Act" shall mean the Securities Act of 1933, as
--------------
amended.
"Series Outstanding Amount" shall mean, as of any date of
-------------------------
determination, an amount equal to the Initial Series Outstanding Amount minus
the amount of Amortization Monthly Principal previously paid to Series 2001-A
Noteholders.
"Series 2001-A" shall mean the Series of Notes the terms of
-------------
which are specified in this Indenture Supplement.
"Series 2001-A Adjusted Principal Amount" shall mean, as of
---------------------------------------
any date of determination, (a) the Series Outstanding Amount as of such date
minus (b) the amounts on deposit in the Series 2001-A Principal Subaccount.
"Series 2001-A Allocated Receivables Amount" shall mean, as of
------------------------------------------
any date of determination, the Series Floating Allocation Percentage for Series
2001-A times the Net Eligible Receivables Balance as of such date.
-6-
"Series 2001-A Asset Amount Deficiency" shall occur if and to
-------------------------------------
the extent the Series 2001-A Allocated Receivables Amount is less than the
Series 2001-A Target Receivables Amount as of such date.
"Series 2001-A Carrying Cost Reserve" shall mean as of any
-----------------------------------
date of calculation an amount equal to (A) the product of (i) the Yield Reserve
Ratio times (ii) the Series Outstanding Amount divided by (B) one minus the
Applicable Reserve Ratio.
"Series 2001-A Closing Date" shall mean July 31, 2001.
--------------------------
"Series 2001-A Collections" shall mean, on any Deposit Date,
-------------------------
all Collections allocable to the Series 2001-A Notes deposited in the Collection
Account on such Deposit Date pursuant to Section 8.04(c) of the Indenture.
--------------
"Series 2001-A Expense Subaccount" shall have the meaning set
--------------------------------
forth in Section 4.06(a).
---------------
"Series 2001-A Noteholder" shall mean the Person in whose name
------------------------
a Series 2001-A Note is registered in the Note Register.
"Series 2001-A Notes" shall mean any one of the Notes executed
-------------------
by the Issuer and authenticated by the Authentication Agent, substantially in
the form of Exhibit A-1 and A-2.
-------------------
"Series 2001-A Principal Subaccount" shall have the meaning
----------------------------------
set forth in Section 4.07(a).
---------------
"Series 2001-A Required Reserves" shall mean, as of any date
-------------------------------
of determination, an amount equal to the product of (i) the Series Outstanding
Amount multiplied by (ii) a fraction equal to (A) the Applicable Reserve Ratio
as of such date divided by (B) one minus the Applicable Reserve Ratio; provided,
however, that during the Amortization Period for Series 2001-A, the Series
2001-A Required Reserves shall equal the Series 2001-A Required Reserves in
effect on the date the Amortization Period commenced.
"Series 2001-A Target Receivables Amount" shall mean, as of
---------------------------------------
any date of determination, the sum of (a) the Series 2001-A Adjusted Principal
Amount as of such date plus (b) the Series 2001-A Required Reserves plus (c) the
Series 2001-A Carrying Cost Reserve.
"Servicing Fee" shall have the meaning set forth in the
-------------
Receivables Purchase Agreement.
"Servicing Fee Rate" shall have the meaning set forth in the
------------------
Receivables Purchase Agreement.
"Telerate Page 3750" shall mean the display page currently so
------------------
designated on the Bridge Telerate Market Report (or such other page as may
replace that page in that service for the purpose of displaying comparable rates
or prices).
-7-
"Temporary Regulation S Global Note" shall have the meaning
----------------------------------
set forth in Section 5.03.
------------
"Yield Reserve Ratio" shall mean, as of any date of
-------------------
determination a percentage calculated in accordance with the following formula:
YRR = [ASFR + (1.5 x NIR)] x [2 x ADO],
--------------------------------
360
where
YRR = the Yield Reserve Ratio;
ASFR = the Adjusted Servicing Fee Rate;
NIR = the Note Interest Rate for the Interest
Period in which the Yield Reserve Ratio is
being determined; and
ADO = the Average Days Outstanding as of the end
of the Monthly Period preceding the first
day of the Interest Period in which the
Yield Reserve Ratio is being determined.
(b) Each capitalized term defined herein shall relate to the
Series 2001-A Notes and no other Series of Notes issued by the Issuer, unless
the context otherwise requires. All capitalized terms used herein and not
otherwise defined herein have the meanings ascribed to them in the Indenture or,
if not defined therein, in the Receivables Purchase Agreement.
(c) The words "hereof," "herein" and "hereunder" and words of
------ ------ ---------
similar import when used in this Indenture Supplement shall refer to this
Indenture Supplement as a whole and not to any particular provision of this
Indenture Supplement; references to any Article, subsection, Section or Exhibit
are references to Articles, subsections, Sections and Exhibits in or to this
Indenture Supplement unless otherwise specified; and the term "including" means
---------
"including without limitation."
----------------------------
ARTICLE III
SERVICING FEE
Section 3.01 Servicing Fee
-------------
The Receivables Purchase Agreement sets forth the full
compensation that the Servicer is entitled to receive for its servicing
activities. The share of the Servicing Fee allocable to the Series 2001-A
Noteholders with respect to any Payment Date to be paid out of the Series 2001-A
Expense Subaccount (the "Monthly Servicing Fee") shall be equal to one-twelfth
---------------------
of the product of (a) 0.50% (the "Servicing Fee Rate") multiplied by (b) the
-------------------
ending aggregate Unpaid Balance of the Receivables for the related Monthly
Period multiplied by (c) the Series Floating Allocation Percentage for Series
2001-A. The remainder of the Servicing Fee shall be paid by the noteholders of
other Series (as provided in the Indenture Supplement related to such other
-8-
Series) or the Issuer and in no event shall the Indenture Trustee or the Series
2001-A Noteholders be liable for the share of the Servicing Fee to be paid by
the Noteholders of such other Series or the Issuer. To the extent that the
Monthly Servicing Fee is not paid in full pursuant to the preceding provisions
of this Section 3.01 and Section 4.04, it shall be paid by the Issuer. The
------------- -------------
Monthly Servicing Fee shall be payable pursuant to, and subject to the priority
of payments set forth in, Section 4.04.
------------
ARTICLE IV
RIGHTS OF SERIES 2001-A NOTEHOLDERS
AND ALLOCATION AND APPLICATION OF POOL COLLECTIONS
Section 4.01 Pool Collections and Allocations.
--------------------------------
(a) Allocation of Pool Collections. Funds on deposit in the
------------------------------
Collection Account in accordance with Section 8.04 of the Indenture shall be
------------
allocated and distributed to Series 2001-A as set forth in the Indenture and
this Article IV.
----------
(b) Deposits into the Series 2001-A Expense Subaccount.
-------------------------------------------------------
Prior to the close of business on each Deposit Date, if the amount of funds on
deposit in the Series 2001-A Expense Subaccount on such Deposit Date is less
than the Required Amount for such Deposit Date, the Indenture Trustee, at the
direction of the Servicer, shall transfer from the Collection Account to the
Series 2001-A Expense Subaccount an amount equal to the lesser of (A) the amount
of such deficiency or (B) the amount of Collections on deposit in the Collection
Account which are allocable to Series 2001-A under Section 8.04(c)(ii) of the
--------------------
Indenture on such Deposit Date.
(c) Withdrawals from the Series 2001-A Expense Subaccount.
-------------------------------------------------------
If the amount of funds on deposit in the Series 2001-A Expense Subaccount on
such Deposit Date exceeds the Required Amount for such Deposit Date, the
Indenture Trustee, at the direction of the Servicer, shall withdraw from the
Series 2001-A Expense Subaccount an amount equal to such excess and such funds
shall be treated as Series 2001-A Collections for distribution in accordance
with the remaining provisions of this Section 4.01.
------------
(d) Deposits into and Withdrawals from the Series 2001-A
--------------------------------------------------------
Principal Subaccount During the Revolving Period. On each Deposit Date during
---------------------------------------------------
the Revolving Period on which a Series 2001-A Asset Amount Deficiency has
occurred and is continuing, the Indenture Trustee, at the direction of the
Servicer, shall deposit into the Series 2001-A Principal Subaccount an amount
equal to the lesser of (x) the amount of such Series 2001-A Asset Amount
Deficiency and (y) the amount of Series 2001-A Collections available after any
required deposits to the Series 2001-A Expense Subaccount. On each Deposit Date
during the Revolving Period during which such Series 2001-A Asset Amount
Deficiency no longer exists, the Indenture Trustee, at the direction of the
Servicer, may withdraw any funds on deposit in the Series 2001-A Principal
Subaccount for further application in accordance with the provisions of this
Section 4.01 so long as, after giving effect to such withdrawal and the
-------------
application of funds, a Series 2001-A Asset Amount Deficiency would not occur
and be continuing.
-9-
(e) Deposits into the Series 2001-A Principal Subaccount
--------------------------------------------------------
During the Amortization Period. On each Deposit Date during the Amortization
--------------------------------
Period, the Indenture Trustee, at the direction of the Servicer, shall deposit
into the Series 2001-A Principal Subaccount all Series 2001-A Collections
available after any required deposits to the Series 2001-A Expense Subaccount;
provided, however, that the aggregate amount deposited into the Series 2001-A
Principal Subaccount pursuant to this clause shall not exceed the Series
Outstanding Amount on the immediately preceding Payment Date.
(f) Remaining Funds to Issuer. All remaining Series 2001-A
-------------------------
Collections and other amounts drawn from the Series 2001-A Expense Subaccount
pursuant to paragraph (c) above not distributed pursuant to the foregoing
--------------
provisions shall be released to the Issuer; provided, that if on such date an
Asset Amount Deficiency is occurring with respect to any other Series of Notes,
the Issuer shall direct the Servicer not to release such funds and the Indenture
Trustee, at the direction of the Servicer, shall transfer such Series 2001-A
Collections and other amounts drawn from the Series 2001-A Expense Subaccount
pursuant to paragraph (c) above to the applicable Series Account with respect to
-------------
such amortizing Series of Notes; provided, further, that if more than one other
Series of Notes is entitled to receive funds pursuant to this Section 4.01(f),
----------------
then the Servicer shall transfer such remaining Series 2001-A Collections pro
rata to the applicable Series Account of each such other Series of Notes in
accordance with Section 8.04(c)(iii) of the Indenture.
--------------------
Section 4.02 Determination of Monthly Interest.
---------------------------------
(a) The amount of interest ("Monthly Interest")distributable
----------------
from the Series 2001-A Expense Subaccount with respect to the Series 2001-A
Notes on any Payment Date shall be equal to the product of (i) a fraction, the
numerator of which is the actual number of days in the related Interest Period
and the denominator of which is 360, multiplied by (ii) the Note Interest Rate
in effect with respect to the related Interest Period and multiplied by (iii)
the Series Outstanding Amount as of the close of business on the last day of the
related Interest Period.
(b) On the Determination Date preceding each Payment Date,
the Servicer shall determine the excess (the "Interest Shortfall"), if any, of
-------------------
(x) the Monthly Interest for such Payment Date over (y) the aggregate amount of
funds allocated and available to pay such Monthly Interest on such Payment Date.
If the Interest Shortfall with respect to any Payment Date is greater than zero,
then on each subsequent Payment Date until such Interest Shortfall is fully
paid, an additional amount ("Additional Interest") equal to the product of (i)
--------------------
(A) a fraction, the numerator of which is the actual number of days in the
Interest Period ending on such Payment Date and the denominator of which is 360,
multiplied by (B) the sum of (x) the Note Interest Rate and (y) 2.0% per annum
and (ii) such Interest Shortfall shall be payable as provided herein with
respect to the Series 2001-A Notes. Notwithstanding anything herein to the
contrary, Additional Interest shall be payable or distributed only to the extent
permitted by applicable law.
Section 4.03 Determination of Principal Distribution. The amount of
-----------------------------------------
principal distributable from the Series 2001-A Principal Subaccount on each
Payment Date (the "Amortization Monthly Principal"), beginning with the Payment
------------------------------
Date in the month following the month in which the Amortization Period begins,
shall equal the lesser of (i) the amount on
-10-
deposit in the Series 2001-A Principal Subaccount that was deposited therein
during the preceding Monthly Period (including amounts deposited in the Series
2001-A Principal Subaccount pursuant to Section 4.01(d) for distribution on
---------------
such Payment Date) and (ii) the Series Outstanding Amount.
Section 4.04 Application of Collections on Deposit in the Series
---------------------------------------------------------
2001-A Expense Subaccount and Principal Subaccount. On each Payment Date or
------------------------------------------------------
Deposit Date, as applicable, the Servicer shall instruct the Indenture Trustee
in writing to apply amounts on deposit in the Series 2001-A Expense Subaccount
and/or the Series 2001-A Principal Subaccount as follows:
(a) On each Payment Date, the Indenture Trustee, at the
direction of the Servicer, shall withdraw the following amounts on deposit in
the Series 2001-A Expense Subaccount of the Collection Account to be distributed
in the following order of priority:
(i) An amount equal to the sum of (A) Monthly Interest for
such Payment Date plus (B) any Interest Shortfall
previously accrued and not reimbursed plus (C) any
Additional Interest previously accrued and not
reimbursed shall be distributed to the Distribution
Account for payment to Series 2001-A Noteholders on
such Payment Date pursuant to Section 5.07; and
------------
(ii) An amount equal to the sum of (A) the Monthly Servicing
Fee for such Payment Date plus (B) any Monthly Servicing
Fee previously accrued and not paid pursuant to this
Section 4.04(a)(ii) shall be distributed to the
------------------
Servicer.
(b) On each Payment Date during the Amortization Period, the
Indenture Trustee, at the direction of the Servicer, shall withdraw from the
Series 2001-A Principal Subaccount an amount equal to the Amortization Monthly
Principal for such Payment Date to be distributed to the Distribution Account
for payment to the Series 2001-A Noteholders on such Payment Date pursuant to
Section 5.07.
------------
Section 4.05 [Reserved].
Section 4.06 Series 2001-A Expense Subaccount.
--------------------------------
(a) The Issuer, for the benefit of the Series 2001-A
Noteholders, shall establish and maintain with the Indenture Trustee or its
nominee in the name of the Indenture Trustee, the Series 2001-A Expense
Subaccount, which shall be a subaccount of the Collection Account (the "Series
------
2001-A Expense Subaccount"). The Indenture Trustee shall possess all right,
---------------------------
title and interest in all monies, instruments, investment property and other
property credited from time to time to the Series 2001-A Expense Subaccount (and
any subaccount thereof) and in all proceeds, earnings, income, revenue,
dividends and distributions thereof for the benefit of the Series 2001-A
Noteholders. The Series 2001-A Expense Subaccount shall be under the sole
dominion and control of the Indenture Trustee for the benefit of the Series
2001-A Noteholders. Pursuant to the authority granted to the Servicer in Article
-------
III of the Receivables Purchase Agreement, the Servicer shall have the power,
---
revocable by the Indenture Trustee if a Servicer Default has occurred, to
instruct the Indenture Trustee to make withdrawals and
-11-
payments from the Series 2001-A Expense Subaccount for the purposes of making
the payments required under Section 4.04.
------------
(b) Funds on deposit in the Series 2001-A Expense Subaccount
shall be invested in accordance with Section 4.02 of the Receivables Purchase
------------
Agreement and held in accordance with Section 6.13 of the Indenture. The
-------------
Indenture Trustee shall bear no responsibility or liability for any losses
resulting from investment or reinvestment of any funds in accordance with such
Sections 4.02 of the Receivables Purchase Agreement nor for the selection of
--------------
Eligible Investments, except as otherwise provided in Section 6.01(f) of the
---------------
Indenture.
Section 4.07 Series 2001-A Principal Subaccount.
----------------------------------
(a) The Issuer, for the benefit of the Noteholders, shall
establish and maintain with the Indenture Trustee or its nominee in the name of
the Indenture Trustee, the Series 2001-A Principal Subaccount, which shall be a
subaccount of the Collection Account (the "Series 2001-A Principal Subaccount").
----------------------------------
The Indenture Trustee shall possess all right, title and interest in all monies,
instruments, investment property and other property credited from time to time
to the Series 2001-A Principal Subaccount (and any subaccount thereof) and in
all proceeds, earnings, income, revenue, dividends and distributions thereof for
the benefit of the Series 2001-A Noteholders. The Series 2001-A Principal
Subaccount shall be under the sole dominion and control of the Indenture Trustee
for the benefit of the Noteholders. Pursuant to the authority granted to the
Servicer in Article III of the Receivables Purchase Agreement, the Servicer
-----------
shall have the power, revocable by the Indenture Trustee if a Servicer Default
has occurred, to instruct the Indenture Trustee to make withdrawals and payments
from the Series 2001-A Principal Subaccount for the purposes of making the
payments required under Section 4.04.
------------
(b) Funds on deposit in the Series 2001-A Principal Subaccount
shall be invested in accordance with Section 4.02 of the Receivables Purchase
------------
Agreement and held in accordance with Section 6.13 of the Indenture. The
-------------
Indenture Trustee shall bear no responsibility or liability for any losses
resulting from investment or reinvestment of any funds in accordance with such
Sections 4.02 of the Receivables Purchase Agreement nor for the selection of
--------------
Eligible Investments, except as otherwise provided in Section 6.01(f) of the
----------------
Indenture.
(c) The Indenture Trustee shall withdraw and transfer funds on
deposit in the Series 2001-A Principal Subaccount on each Business Day during
the Revolving Period to, or at the written direction of, the Servicer if no
Series 2001-A Asset Amount Deficiency has occurred and is continuing and no
event that with the passage of time or the giving of notice could become an
Amortization Event, including a Series 2001-A Asset Amount Deficiency, would
result from such withdrawal. The delivery of a Daily Receivables Activity Report
by the Servicer requesting release of funds to the Issuer shall be deemed a
certification by the Servicer that the foregoing conditions have been satisfied,
and the Indenture Trustee, absent actual knowledge by the Trust Officer
receiving such report that it is inaccurate, shall be entitled to rely on such
certification without further inquiry. Any such transfer to the Issuer shall be
made free and clear of the lien of the Indenture and without compliance with
Section 12.01 of the Indenture.
-------------
-12-
Section 4.08 Determination of LIBOR.
----------------------
On each LIBOR Determination Date, the Paying Agent shall
determine LIBOR on the basis of the rate for deposits in United States dollars
for a one-month period which appears on Telerate Page 3750 as of 11:00 a.m.,
London time, on such date. If such rate does not appear on Telerate Page 3750,
the rate for that LIBOR Determination Date shall be determined on the basis of
the rates quoted by the Reference Banks to the Paying Agent as the rates at
which deposits in United States dollars are offered by the Reference Banks to
the Paying Agent at approximately 11:00 a.m., London time, on that day to prime
banks in the London interbank market for a one-month period. The Paying Agent
shall request the principal London office of each of the Reference Banks to
provide a quotation of its rate. If at least two such quotations are provided,
the rate for that LIBOR Determination Date shall be the arithmetic mean of the
quotations. If fewer than two quotations are provided as requested, the rate for
that LIBOR Determination Date will be the arithmetic mean of the rates quoted by
major banks in New York City, selected by the Paying Agent, at approximately
11:00 a.m., New York City time, on that day for loans in United States dollars
to leading European banks for such relevant one-month period.
Section 4.09 Investment Instructions. Any investment instructions
------------------------
required to be given to the Indenture Trustee pursuant to the terms hereof must
be given to the Indenture Trustee no later than 1:00 p.m. (New York City time)
on the date such investment is to be made. If the Indenture Trustee receives
such investment instruction later than such time, the Indenture Trustee shall
invest such funds in accordance with the most recent investment instruction
previously received. If the Indenture Trustee is unable to make an investment
required in an investment instruction received by the Indenture Trustee after
1:00 p.m. (New York City time) on such day, such investment shall be made by the
Indenture Trustee on the next succeeding Business Day. In no event shall the
Indenture Trustee be liable for any investment not made pursuant to investment
instructions received after 1:00 p.m. (New York City time) on the day such
investment is requested to be made. Each investment instruction delivered
hereunder shall continue in full force and effect until the earlier of (i) the
delivery of a new, valid, instruction and (ii) the date on which the right of
the Person delivering such instruction to so instruct the Indenture Trustee
shall be revoked hereunder.
ARTICLE V
DELIVERY OF SERIES 2001-A NOTE
DISTRIBUTIONS; REPORTS TO SERIES 2001-A NOTEHOLDERS
Section 5.01 Delivery and Payment for the Series 2001-A Notes;
--------------------------------------------------------
Denominations.
-------------
The Issuer shall execute and the Authentication Agent shall
authenticate the Series 2001-A Notes in accordance with Section 2.03 of the
------------
Indenture. The Indenture Trustee shall deliver the Series 2001-A Notes to or
upon the order of the Issuer when so authenticated.
The Series 2001-A Notes shall be issuable in the minimum
denomination of $250,000 and in integral multiples of $1,000 in excess thereof.
-13-
Section 5.02 Registration; Registration of Transfer and Exchange;
--------------------------------------------------------
Transfer Restrictions.
---------------------
(a) The Series 2001-A Notes have not been registered under the
Securities Act or any state securities law. None of the Issuer, the Registrar or
the Indenture Trustee is obligated to register the Series 2001-A Notes under the
Securities Act or any other securities or "Blue Sky" laws or to take any other
action not otherwise required under the Agreement to permit the transfer of any
Series 2001-A Note without registration.
(b) No transfer of any Series 2001-A Note or any interest
therein (including, without limitation, by pledge or hypothecation) shall be
made except in compliance with the restrictions on transfer set forth in this
Section 5.02 (including the applicable legend to be set forth on the face of
------------
each Series 2001-A Note as provided in Exhibits A-1, A-2 and A-3, as applicable)
-------------------------
and in Section 5.04 and Section 5.06 in a transaction exempt from the
------------- -------------
registration requirements of the Securities Act and applicable state securities
or "Blue Sky" laws (i) to a person (A) who the transferor reasonably believes is
a "qualified institutional buyer" within the meaning thereof in Rule 144A (a
"QIB") in the form of a beneficial interest in the Rule 144A Global Notes, and
---
(B) that is aware that the resale or other transfer is being made in reliance on
Rule 144A or (ii) in an offshore transaction in accordance with Rule 903 or Rule
904 of Regulation S, in the form of beneficial interests in the applicable
Regulation S Global Note.
(c) No transfer of a Series 2001-A Note may be made to a Plan
or to any person who is directly or indirectly purchasing a Series 2001-A Note
or interest therein on behalf of, as named fiduciary of, as trustee of, or with
assets of, a Plan unless such purchase and holding of such Series 2001-A Note or
interest therein by the Plan will not constitute a prohibited transaction under
Section 406 of ERISA and Section 4975 of the Code, if necessary by reason of the
applicability of one of the Exemptions. Each Plan, or person who is directly or
indirectly purchasing a Series 2001-A Note or interest therein on behalf of, as
named fiduciary of, as trustee of, or with assets of, a Plan shall be deemed to
have represented and warranted that such purchase and holding will not
constitute a prohibited transaction.
(d) Each Beneficial Owner of a Series 2001-A Note, by its
acceptance thereof, will be deemed to have acknowledged, represented to and
agreed with the Issuer and the Initial Purchaser as follows:
(i) It understands that the Series 2001-A Notes will be
offered and may be resold by the Initial Purchaser
(A) in the United States to QIBs pursuant to Rule
144A in the form of beneficial interests in the Rule
144A Global Notes or (B) outside the United States
pursuant to Regulation S, initially in the form of
beneficial interests in the Temporary Regulation S
Global Notes. As set forth in Section 5.04(a),
---------------
beneficial interests in a Temporary Regulation S
Global Note may be exchanged for beneficial
interests in a Permanent Regulation S Global Note.
(ii) It understands that the Series 2001-A Notes have not
been and will not be registered under the Securities
Act or any state or other applicable securities law
and that the Series 2001-A Notes, or any interest or
-14-
participation therein, may not be offered, sold,
pledged or otherwise transferred unless registered
pursuant to, or exempt from registration under, the
Securities Act and any other applicable securities
law.
(iii) It acknowledges that none of the Issuer or the
Initial Purchaser or any person representing the
Issuer or the Initial Purchaser has made any
representation to it with respect to the Issuer or
the offering or sale of any Series 2001-A Notes,
other than the information contained in the Offering
Memorandum, which has been delivered to it and upon
which it is relying in making its investment
decision with respect to the Series 2001-A Notes.
It has had access to such financial and other
information concerning the Issuer and the Series
2001-A Notes as it has deemed necessary in
connection with its decision to purchase the Series
2001-A Notes.
(iv) It acknowledges that the Series 2001-A Notes will
bear a legend to the following effect unless the
Issuer determines otherwise, consistent with
applicable law:
"THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAW. THE HOLDER
HEREOF, BY PURCHASING THIS NOTE, AGREES THAT THIS NOTE OR ANY
INTEREST OR PARTICIPATION HEREIN, MAY BE REOFFERED, RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE
SECURITIES ACT AND OTHER APPLICABLE LAWS AND ONLY (1) TO THE
ISSUER, (2) PURSUANT TO RULE 144A UNDER THE SECURITIES ACT TO
A PERSON THAT THE HOLDER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE
SECURITIES ACT (A "QIB") PURCHASING FOR ITS OWN ACCOUNT OR A
QIB PURCHASING FOR THE ACCOUNT OF A QIB, WHOM THE HOLDER HAS
INFORMED, IN EACH CASE, THAT THE REOFFER, RESALE, PLEDGE OR
OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A UNDER
THE SECURITIES ACT OR (3) IN AN OFFSHORE TRANSACTION IN
ACCORDANCE WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE
SECURITIES ACT. EACH NOTE OWNER BY ACCEPTING A BENEFICIAL
INTEREST IN THIS NOTE, UNLESS SUCH PERSON ACQUIRED THIS NOTE
IN A TRANSFER DESCRIBED IN CLAUSE (3) ABOVE, IS DEEMED TO
----------
REPRESENT THAT IT IS EITHER A QIB PURCHASING FOR ITS OWN
ACCOUNT OR A QIB PURCHASING FOR THE ACCOUNT OF ANOTHER QIB.
PRIOR TO PURCHASING ANY NOTES, PURCHASERS SHOULD CONSULT
COUNSEL WITH RESPECT TO THE AVAILABILITY AND CONDITIONS OF
EXEMPTION FROM THE RESTRICTION ON RESALE OR TRANSFER. THE
ISSUER HAS NOT AGREED TO REGISTER THE NOTES UNDER THE
-15-
SECURITIES ACT, TO QUALIFY THE NOTES UNDER THE SECURITIES LAWS
OF ANY STATE OR TO PROVIDE REGISTRATION RIGHTS TO ANY
PURCHASER.
AS SET FORTH HEREIN, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS
NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE
HEREOF."
(v) If it is acquiring any Series 2001-A Note, or any
interest or participation therein, as a fiduciary or
agent for one or more investor accounts, it
represents that it has sole investment discretion
with respect to such account and that it has full
power to make the acknowledgements, representations
and agreements contained herein on behalf of each
such account.
(vi) It (A)(1) is a QIB, (2) is aware that the sale to it
is being made in reliance on Rule 144A and if it is
acquiring such Series 2001-A Notes or any interest
or participation therein for the account of another
QIB, such other QIB is aware that the sale is being
made in reliance on Rule 144A and (3) is acquiring
such Series 2001-A Notes or any interest or
participation therein for its own account or for
the account of a QIB, or (B) is not a U.S. person
and is purchasing such Series 2001-A Notes or any
interest or participation therein in an offshore
transaction meeting the requirements of Rule 903
or 904 of Regulation S.
(vii) It is purchasing the Series 2001-A Notes for its own
account, or for one or more investor accounts for
which it is acting as fiduciary or agent, in each
case for investment, and not with a view to, or for
offer or sale in connection with, any distribution
thereof in violation of the Securities Act, subject
to any requirements of law that the disposition of
its property or the property of such investor
account or accounts be at all times within its or
their control and subject to its or their ability
to resell such Series 2001-A Notes, or any interest
or participation therein, as described in the
Offering Memorandum and as provided in the
Agreement.
(viii) It agrees that if in the future it should offer,
sell or otherwise transfer such Series 2001-A Note
or any interest or participation therein, it will
do so only (A) to the Issuer, (B) pursuant to Rule
144A to a person who it reasonably believes is a
QIB in a transaction meeting the requirements of
Rule 144A, purchasing for its own account or for
the account of a QIB, whom it has informed that
such offer, sale or other transfer is being made in
reliance on Rule 144A or (C) in an offshore
transaction meeting the requirements of Rule 903
or Rule 904 of Regulation S.
(ix) If it is acquiring such Series 2001-A Note or any
interest or participation therein in an "offshore
transaction" (as defined in Regulation S), it
acknowledges that the Series 2001-A Notes initially
will be represented by the Temporary Regulation S
Global Notes and that transfers thereof or any
interest or participation therein are restricted as
described in the Offering Memorandum and as provided
in the Agreement. If it is a QIB, it acknowledges
that the Series 2001-A Notes offered in reliance on
Rule 144A will be represented by the Rule 144A
Global Notes and that transfers thereof or any
-16-
interest or participation therein are restricted as
described in the Offering Memorandum and as provided
in the Agreement.
(x) It understands that the Temporary Regulation S
Global Note will bear a legend to the following
effect unless the Issuer determines otherwise,
consistent with applicable law:
"THIS GLOBAL NOTE IS A TEMPORARY GLOBAL NOTE FOR PURPOSES OF
REGULATION S UNDER THE UNITED STATES SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"). NEITHER THIS TEMPORARY
GLOBAL NOTE NOR ANY INTEREST HEREIN MAY BE OFFERED, SOLD OR
DELIVERED, EXCEPT AS PERMITTED UNDER THE INDENTURE REFERRED TO
BELOW.
NO BENEFICIAL OWNERS OF THIS TEMPORARY GLOBAL NOTE SHALL BE
ENTITLED TO RECEIVE PAYMENT OF PRINCIPAL OR INTEREST HEREON
UNLESS THE REQUIRED CERTIFICATIONS HAVE BEEN DELIVERED
PURSUANT TO THE TERMS OF THE INDENTURE."
(xi) It acknowledges that the Issuer, the Initial
Purchaser and others will rely on the truth and
accuracy of the foregoing acknowledgments,
representations and agreements, and agrees that if
any of the foregoing acknowledgments,
representations and agreements deemed to have been
made by it are no longer accurate, it shall promptly
notify the Issuer and the Initial Purchaser.
(xii) With respect to any foreign purchaser claiming an
exemption from United States income or withholding
tax, that it has delivered to the Paying Agent a
true and complete Form W-8BEN or W-8ECI indicating
such exemption.
(xiii) It acknowledges that transfers of the Series 2001-A
Notes or any interest or participation therein shall
otherwise be subject in all respects to the
restrictions applicable thereto contained in the
Agreement.
Any transfer, resale, pledge or other transfer of the Series 2001-A Notes
contrary to the restrictions set forth above and in the Indenture shall be
deemed void ab initio by the Transfer Agent and Registrar. As used in this
Section 5.02, the terms "United States" and "U.S. persons" have the meaning
------------
given them in Regulation S.
(e) Notwithstanding anything to the contrary contained herein,
each Series 2001-A Note and the Agreement may, be amended or supplemented to
modify the restrictions on and procedures for resale and other transfers of the
Series 2001-A Notes to reflect any change in applicable law or regulation (or
the interpretation thereof) or in practices relating to the resale or
-17-
transfer of restricted securities generally. Each Noteholder shall by its
acceptance of a Series 2001-A Note have agreed to any such amendment or
supplement.
(f) Holders of a beneficial interest in Series 2001-A Notes
sold in reliance on Regulation S as Temporary Regulation S Global Notes are
prohibited from receiving distributions or from exchanging beneficial interests
in such Temporary Regulation S Global Notes for a beneficial interest in a
Permanent Regulation S Global Note until the later of (i) the expiration of the
Distribution Compliance Period (the "Release Date") and (ii) the furnishing of a
------------
certificate, substantially in the form of Exhibit E-2 attached hereto,
------------
certifying that the beneficial owner of the Temporary Regulation S Global Note
is not a United States Person (a "Regulation S Certificate") as provided in
--------------------------
Section 5.04.
------------
Section 5.03 Global Notes. The Series 2001-A Notes, upon original
------------
issuance, will be issued (i) in fully registered global form without interest
coupons to QIBs in transactions exempt from the registration requirements of the
Securities Act in reliance on Rule 144A, as a single note in fully registered
form, without interest coupons (the "Rule 144A Global Note"), authenticated and
---------------------
delivered in the form of Exhibit A-1, and/or (ii) as a single note in "offshore
-----------
transactions" (within the meaning of Regulation S), in fully registered form,
without interest coupons (the "Temporary Regulation S Global Note"),
---------------------------------------
authenticated and delivered in the form of Exhibit A-2. All such Notes shall be
-----------
delivered to The Depository Trust Company, the initial Clearing Agency by or on
behalf of the Issuer and initially shall be registered on the Note Register in
the name of Cede & Co., the nominee of the initial Clearing Agency, and no
Beneficial Owner will receive a Definitive Note representing such Beneficial
Owner's interest in such Note, except as provided in Section 2.13 of the
-------------
Indenture.
Section 5.04 Regulation S Global Notes.
-------------------------
(a) Series 2001-A Notes issued in reliance on Regulation S initially
will be in the form of a Temporary Regulation S Global Note. Any interest in a
Series 2001-A Note evidenced by a Temporary Regulation S Global Note is
exchangeable for an interest in a Series 2001-A Note in fully registered, global
form, without interest coupons, authenticated and delivered in substantially the
form attached hereto as Exhibit A-3 (the "Permanent Regulation S Global Note")
----------- -----------------------------------
upon the later of (i) the Release Date and (ii) the furnishing of a Regulation S
Certificate.
(b) (i) On or prior to the Release Date, each Beneficial Owner of a
Temporary Regulation S Global Note shall deliver to Euroclear or Clearstream
Banking (as applicable) a Regulation S Certificate; provided, however, that any
Beneficial Owner of a Temporary Regulation S Global Note on the Release Date or
on any payment date that has previously delivered a Regulation S Certificate
hereunder shall not be required to deliver any subsequent Regulation S
Certificate (unless the certificate previously delivered is no longer true as of
such subsequent date, in which case such Beneficial Owner shall promptly notify
Euroclear or Clearstream Banking, as applicable, thereof and shall deliver an
updated Regulation S Certificate). Euroclear and/or Clearstream Banking, as
applicable, shall deliver to the Paying Agent a certificate substantially in the
form of Exhibit E-1 (a "Non-U.S. Certificate") attached hereto promptly upon the
----------- --------------------
receipt of each such Regulation S Certificate, and no such Beneficial Owner (or
transferee from such Beneficial Owner) shall be entitled to receive an interest
in a
-18-
Permanent Regulation S Global Note or any payment of principal of or interest on
or any other payment with respect to its beneficial interest in a Temporary
Regulation S Global Note prior to the Paying Agent receiving such Non-U.S.
Certificate from Euroclear or Clearstream Banking with respect to the portion of
the Temporary Regulation S Global Note owned by such Beneficial Owner (and, with
respect to an interest in the Permanent Regulation S Global Note, prior to the
Release Date).
(c) Any payments of principal of, interest on or any other payment on a
Temporary Regulation S Global Note received by Euroclear or Clearstream Banking
with respect to any portion of such Regulation S Global Note owned by a
Beneficial Owner that has not delivered the Regulation S Certificate required by
this Section 5.04 shall be held by Euroclear and Clearstream Banking solely as
------------
agents for the Paying Agent. Euroclear and Clearstream Banking shall remit such
payments to the applicable Beneficial Owner (or to a Euroclear or Clearstream
Banking member on behalf of such Beneficial Owner) only after Euroclear or
Clearstream Banking has received the requisite Regulation S Certificate. Until
the Paying Agent has received a Non-U.S. Certificate from Euroclear or
Clearstream Banking, as applicable, stating that it has received the requisite
Regulation S Certificate with respect to the beneficial ownership of any portion
of a Temporary Regulation S Global Note, the Paying Agent may revoke the right
of Euroclear or Clearstream Banking, as applicable, to hold any payments made
with respect to such portion of such Temporary Regulation S Global Note. If the
Paying Agent exercises its right of revocation pursuant to the immediately
preceding sentence, Euroclear or Clearstream Banking, as applicable, shall
return such payments to the Paying Agent and the Paying Agent shall hold such
payments in the Distribution Account until Euroclear or Clearstream Banking, as
applicable, has provided the necessary Non-U.S. Certificates to the Paying Agent
(at which time the Paying Agent shall forward such payments to Euroclear or
Clearstream Banking, as applicable, to be remitted to the Beneficial Owner that
is entitled thereto on the records of Euroclear or Clearstream Banking (or on
the records of their respective members)).
(d) Each Beneficial Owner with respect to a Temporary Regulation S
Global Note shall exchange its interest therein for an interest in a Permanent
Regulation S Global Note on or after the Release Date upon furnishing to
Euroclear or Clearstream Banking (as applicable) the Regulation S Certificate
and upon receipt by the Paying Agent of the Non-U.S. Certificate thereof from
Euroclear or Clearstream Banking, as applicable, in each case pursuant to the
terms of this Section 5.04. On and after the Release Date, upon receipt by the
------------
Paying Agent of any Non-U.S. Certificate from Euroclear or Clearstream Banking
described in the immediately preceding sentence (i) with respect to the first
such certification, the Issuer shall execute and, upon receipt of an order to
authenticate, the Authentication Agent shall authenticate and deliver to the
Custodian the applicable Permanent Regulation S Global Note and (ii) with
respect to the first and all subsequent certifications, the Custodian shall
exchange on behalf of the applicable Beneficial Owners the portion of the
applicable Temporary Regulation S Global Note covered by such certification for
a comparable portion of the applicable Permanent Regulation S Global Note. Upon
any exchange of a portion of a Temporary Regulation S Global Note for a
comparable portion of a Permanent Regulation S Global Note, the Custodian shall
endorse on the schedules affixed to each of such Regulation S Global Notes (or
on continuations of such schedules affixed to each of such Regulation S Global
Notes and made parts thereof) appropriate notations evidencing the date of
transfer and (x) with respect to the Temporary Regulation S
-19-
Global Note, a decrease in the principal amount thereof equal to the amount
covered by the applicable certification and (y) with respect to the Permanent
Regulation S Global Note, an increase in the principal amount thereof equal to
the principal amount of the decrease in the Temporary Regulation S Global Note
pursuant to clause (x) above.
---------
Section 5.05 Special Transfer Provisions.
---------------------------
(a) If a holder of a beneficial interest in the Rule 144A Global Note
wishes at any time to exchange its interest in the Rule 144A Global Note for an
interest in the Regulation S Global Note, or to transfer its interest in the
Rule 144A Global Note to a person who wishes to take delivery thereof in the
form of an interest in the Regulation S Global Note, such holder may, subject to
the rules and procedures of the Clearing Agency and to the requirements set
forth in the following sentence, exchange or cause the exchange or transfer or
cause the transfer of such interest for an equivalent beneficial interest in the
Regulation S Global Note. Upon receipt by Transfer Agent and Registrar of (1)
instructions given in accordance with the Clearing Agency's procedures from or
on behalf of a Beneficial Owner of the Rule 144A Global Note, directing the
Transfer Agent and Registrar (via DWAC) to credit or cause to be credited a
beneficial interest in the Regulation S Global Note in an amount equal to the
beneficial interest in the Rule 144A Global Note to be exchanged or transferred,
(2) a written order in accordance with the Clearing Agency's procedures
containing information regarding the Euroclear or Clearstream Banking account to
be credited with such increase and the name of such account and (3) a
certificate given by such holder stating that the exchange or transfer of such
interest has been made pursuant to and in accordance with Rule 903 or Rule 904
of Regulation S under the Securities Act, the Transfer Agent and Registrar shall
promptly deliver appropriate instructions to the Clearing Agency (via DWAC), its
nominee or the Custodian, as the case may be, to reduce or reflect on its
records a reduction of the Rule 144A Global Note by the aggregate principal
amount of the beneficial interest in the Rule 144A Global Note to be so
exchanged or transferred from the relevant participant, and the Transfer Agent
and Registrar shall promptly deliver appropriate instructions (via DWAC) to the
Clearing Agency, its nominee, or the Custodian, as the case may be, concurrently
with such reduction, to increase or reflect on its records an increase of the
principal amount of such Regulation S Global Note by the aggregate principal
amount of the beneficial interest in the Rule 144A Global Note to be so
exchanged or transferred, and to credit or cause to be credited to the account
of the person specified in such instructions (who may be Euroclear Bank S.A.,
N.V., as operator of Euroclear or Clearstream Banking or another agent member of
Euroclear or Clearstream Banking, or both, as the case may be, acting for and on
behalf of them) a beneficial interest in such Regulation S Global Note equal to
the reduction in the principal amount of the Rule 144A Global Note.
Notwithstanding anything to the contrary, the Transfer Agent and Registrar may
conclusively rely upon the completed schedule set forth in the certificate
evidencing the Notes.
(b) If a holder of a beneficial interest in the Regulation S Global Note
wishes at any time to exchange its interest in the Regulation S Global Note for
an interest in the Rule 144A Global Note, or to transfer its interest in the
Regulation S Global Note to a person who wishes to take delivery thereof in the
form of an interest in the Rule 144A Global Note, such holder may, subject to
the rules and procedures of Euroclear or Clearstream Banking and the Clearing
Agency, as the case may be, and to the requirements set forth in the following
sentence, exchange or cause the exchange or transfer or cause the transfer of
such interest for an equivalent
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beneficial interest in the Rule 144A Global Note. Upon receipt by the Transfer
Agent and Registrar of (1) instructions given in accordance with the procedures
of Euroclear or Clearstream Banking and the Clearing Agency, as the case may be,
from or on behalf of a Beneficial Owner of the Regulation S Global Note
directing the Transfer Agent and Registrar to credit or cause to be credited a
beneficial interest in the Rule 144A Global Note in an amount equal to the
beneficial interest in the Regulation S Global Note to be exchanged or
transferred, (2) a written order given in accordance with the procedures of
Euroclear or Clearstream Banking and the Clearing Agency, as the case may be,
containing information regarding the account with the Clearing Agency to be
credited with such increase and the name of such account and (3) prior to the
expiration of the Distribution Compliance Period, a certificate given by such
Beneficial Owner stating that the person transferring such interest in such
Regulation S Global Note reasonably believes that the person acquiring such
interest in the Rule 144A Global Note is a QIB and is obtaining such beneficial
interest for its own account or the account of a QIB in a transaction meeting
the requirements of Rule 144A and any applicable securities laws of any state of
the United States or any other jurisdiction, the Transfer Agent and Registrar
shall promptly deliver (via DWAC) appropriate instructions to the Clearing
Agency, its nominee or the Custodian, as the case may be, to reduce or reflect
on its records a reduction of the Regulation S Global Note by the aggregate
principal amount of the beneficial interest in such Regulation S Global Note to
be exchanged or transferred, and the Transfer Agent and Registrar shall promptly
deliver (via DWAC) appropriate instructions to the Clearing Agency, its nominee,
or the Custodian, as the case may be, concurrently with such reduction, to
increase or reflect on its records an increase of the principal amount of the
Rule 144A Global Note by the aggregate principal amount of the beneficial
interest in the Regulation S Global Note to be so exchanged or transferred, and
to credit or cause to be credited to the account of the person specified in such
instructions a beneficial interest in the Rule 144A Global Note equal to the
reduction in the principal amount of the Regulation S Global Note. After the
expiration of the Distribution Compliance Period, the certification requirement
set forth in clause (3) of the second sentence of this Section 5.05 shall no
--------- -------------
longer apply to such exchanges and transfers. Notwithstanding anything to the
contrary, the Transfer Agent and Registrar may conclusively rely upon the
completed schedule set forth in the certificate evidencing the Notes.
(c) Any beneficial interest in one of the Global Notes that is
transferred to a person who takes delivery in the form of an interest in the
other Global Note will, upon transfer, cease to be an interest in such Global
Note and become an interest in the other Global Note and, accordingly, will
thereafter be subject to all transfer restrictions and other procedures
applicable to beneficial interests in such other Global Note for as long as it
remains such an interest.
(d) Until the later of the Release Date and the provision of the
certifications required by Section 5.04, beneficial interests in a Regulation S
------------
Global Note may only be held through Morgan Guaranty Trust Company of New York,
Brussels office, as operator of Euroclear or Clearstream Banking or another
agent member of Euroclear and Clearstream Banking acting for and on behalf of
them. During the Distribution Compliance Period, interests in the Regulation S
Global Note may be exchanged for interests in the Rule 144A Global Note only in
accordance with the certification requirements described in Section 5.05(b)
----------------
above.
Section 5.06 CUSIP Numbers. The Issuer in issuing the Series 2001-A
-------------
Notes may use "CUSIP" numbers and, if so, the Paying Agent may use "CUSIP"
numbers in notices of
-21-
redemption as a convenience to Series 2001-A Noteholders; provided that any such
notice may state that no representation is made as to the correctness of such
numbers either as printed on the Series 2001-A Notes or as contained in any
notice of a redemption and that reliance may be placed only on the other
identification numbers printed on the Series 2001-A Notes, and any such
redemption shall not be affected by any defect in or omission of such numbers.
The Issuer shall promptly notify the Paying Agent of any change in the "CUSIP"
numbers.
Section 5.07 Distributions.
-------------
(a) On each Payment Date, the Paying Agent, in accordance with the
Monthly Receivables Activity Report provided by the Servicer, shall distribute
to each Series 2001-A Noteholder of record on the related Record Date such
Series 2001-A Noteholder's pro rata share (determined in accordance with the
relative outstanding principal amount on such Series 2001-A Noteholders' Series
2001-A Notes) of amounts on deposit in the Distribution Account as are payable
to the Series 2001-A Noteholders pursuant to Section 4.04.
------------
(b) Distributions to Series 2001-A Noteholders hereunder shall be made
by (i) check mailed to each Series 2001-A Noteholder (at such Series 2001-A
Noteholder's address as it appears in the Note Register), except that with
respect to any Series 2001-A Notes registered in the name of the nominee of a
Clearing Agency, such distribution shall be made in immediately available funds
and (ii) except with respect to payments made on the Final Stated Maturity Date,
without presentation or surrender of any Series 2001-A Note or the making of any
notation thereon.
Section 5.08 Reports and Statements to Series 2001-A Noteholders.
---------------------------------------------------
(a) On each Payment Date, the Paying Agent shall forward to each Series
2001-A Noteholder a statement substantially in the form of Exhibit C prepared by
---------
the Servicer and delivered to the Paying Agent. The Paying Agent shall have no
liability for the Servicer's failure to provide such statement to it. The Paying
Agent may make such statement (and, at its option, any additional files
containing the same information in an alternative format) available to the
applicable Noteholders via www.sf.citidirect.com. Parties that are unable to use
www.sf.citidirect.com are entitled to have a paper copy mailed to them via first
class mail by calling the Trustee at (212) 657-2709 and indicating such. The
Paying Agent shall have the right to change the way such statements are
distributed in order to make such distribution more convenient and/or more
accessible to the above parties and the Paying Agent shall provide timely and
adequate notification to all above parties regarding any such changes.
(b) On or before January 31 of each calendar year, beginning with
calendar year 2002, the Paying Agent shall furnish or cause to be furnished to
each Person who at any time during the preceding calendar year was a Series
2001-A Noteholder, a statement prepared by the Servicer containing the
information required to be contained in the statement to Series 2001-A
Noteholders, as set forth in paragraph (a) above, aggregated for such calendar
year or the applicable portion thereof during which such Person was a Series
2001-A Noteholder, together with such other information provided by the Issuer,
as is required to be provided by an issuer of indebtedness under the Code. Such
obligation of the Paying Agent shall be deemed to have been satisfied to the
extent that substantially comparable information shall be provided by the Paying
-22-
Agent pursuant to any requirements of the Code as from time to time in effect.
The Paying Agent shall have no liability for the Servicer's or Issuer's failure
to provide such statement or information to it. The Paying Agent may make such
statement (and, at its option, any additional files containing the same
information in an alternative format) available to the applicable Noteholders
via www.sf.citidirect.com. Parties that are unable to use www.sf.citidirect.com
are entitled to have a paper copy mailed to them via first class mail by calling
the Trustee at (212) 657-2709 and indicating such. The Paying Agent shall have
the right to change the way such statements are distributed in order to make
such distribution more convenient and/or more accessible to the above parties
and the Paying Agent shall provide timely and adequate notification to all above
parties regarding any such changes.
ARTICLE VI
AMORTIZATION EVENTS
Section 6.01 Series 2001-A Amortization Events. If any of the
------------------------------------
following events shall have occurred and be continuing:
(a) failure on the part of the Servicer to direct payments to be made in
respect of interest on the Series 2001-A Notes on any Payment Date, or failure
on the part of the Issuer to pay accrued interest on the Series 2001-A Notes in
full on any Payment Date, which failure remains unremedied for three Business
Days;
(b) failure on the part of the Servicer to direct any other payments to
be made by the Issuer to or for the benefit of the Series 2001-A Noteholders, or
failure on the part of the Issuer to pay such amounts, which failure remains
unremedied for five Business Days;
(c) failure on the part of the Issuer to maintain its separate legal
existence or duly to perform or observe any covenant set forth in Sections
--------
3.03(d), (e), (f), (g) or (j) or 3.02(b) or (h) of the Indenture, which failure
---------------------- --- ------- ---
continues unremedied for a period of ten Business Days;
(d) failure on the part of the Issuer duly to perform or observe any
other covenants or agreements of the Issuer set forth in the Indenture or this
Indenture Supplement and not otherwise described above, which failure has a
Material Adverse Effect with respect to the Issuer or a material adverse effect
on the interests of the Series 2001-A Noteholders and which continues unremedied
for a period of 30 days, in each case, after the date on which written notice of
such failure, requiring the same to be remedied, has been given to the Issuer by
the Indenture Trustee, or to the Issuer and the Indenture Trustee by the Holders
of not less than a majority of the Series Outstanding Amount;
(e) any representation or warranty made by the Issuer in the Receivables
Purchase Agreement, this Indenture Supplement or the Indenture proves to have
been incorrect in any material respect when made or when delivered, and
continues to be incorrect in any material respect for a period of 30 days after
the date on which written notice of such failure, requiring the same to be
remedied, shall have been given to the Issuer by the Indenture Trustee, or to
the Issuer and the Indenture Trustee by the Holders of not less than a majority
of the Series
-23-
Outstanding Amount, and as a result of which the interests of the Series 2001-A
Noteholders are materially and adversely affected;
(f) an Event of Bankruptcy with respect to the Originator, the Seller,
the Transferor or the Servicer;
(g) a Servicer Default;
(h) a Purchase Termination Event under the Receivables Purchase
Agreement;
(i) a Series 2001-A Asset Amount Deficiency which occurs and continues
for any five consecutive Business Days;
(j) any of the Indenture, this Indenture Supplement, the Receivables
Sale Agreements, the Consent and Release Agreement or the Master Amendment and
Consent cease, for any reason, to be valid and in full force and effect, other
than in accordance with its terms;
(k) failure to vest and maintain in the Issuer an ownership interest in
the Purchased Assets, free and clear of all Liens (other than Permitted Liens);
(l) failure to vest and maintain in the Indenture Trustee a perfected
first priority security interest in the Pledged Assets;
(m) either (i) the Internal Revenue Service files notice of a Lien
pursuant to Section 6323 of the Code with respect to any of the Purchased Assets
or (ii) the PBGC files, or indicates its intention to file a notice of a Lien
pursuant to Section 4068 of ERISA with respect to any of the Purchased Assets
and, in either such case, such Lien has not been released within 30 days; or
(n) any Event of Default not described above;
then, in any such event, the Holders of not less than a majority of the Series
Outstanding Amount by notice then given in writing to the Issuer, the Servicer,
the Rating Agencies and the Indenture Trustee may declare that an Amortization
Event (an "Amortization Event") has occurred as of the date of such notice so as
------------------
to cause the Amortization Period to commence; provided, that, (x) in the case of
--------
any event described in clauses (f), (m) or (n), an Amortization Event shall be
-----------------------
deemed to have occurred immediately upon the occurrence of such event and the
Amortization Period shall thereupon commence without any notice or other action
on the part of the Indenture Trustee or the Series 2001-A Noteholders and (y) in
the case of any event described in clause (i) which has continued unremedied for
a total of ten consecutive Business Days, an Amortization Event shall be deemed
to have occurred and the Amortization Period shall thereupon commence without
any notice or other action on the part of the Indenture Trustee or the Series
2001-A Noteholders; unless the Series 2001-A Asset Amount Deficiency no longer
exists and the occurrence of such event has been waived by Series 2001-A
Noteholders holding Notes evidencing at least 66 2/3% of the Series Outstanding
Amount.
-24-
ARTICLE VII
OPTIONAL REDEMPTION OF SERIES 2001-A NOTES
Section 7.01 Optional Redemption of Series 2001-A Notes.
------------------------------------------
(a) On any Business Day during the Amortization Period and occurring on
or after the date on which the Series Outstanding Amount is reduced to an amount
equal to or less than 10% of the Initial Series Outstanding Amount, the Issuer
shall have the option to redeem the Series 2001-A Notes, at a redemption price
equal to (i) if such day is a Payment Date, the Redemption Price for such
Payment Date or (ii) if such day is not a Payment Date, the Redemption Price for
the immediately succeeding Payment Date.
(b) If, on any Business Day, the average aggregate outstanding principal
balance of the Series 2001-A Notes for the preceding 90-day period has exceeded
the average Net Eligible Receivables Balance for such period by more than
$25,000,000, the Issuer shall have the option to redeem the Series 2001-A Notes
in part up to the amount of such excess at a redemption price equal to (i) if
such day is a Payment Date, the Redemption Price for such Payment Date or (ii)
if such day is not a Payment Date, the Redemption Price for the immediately
succeeding Payment Date; provided, that each such redemption of Notes must be in
--------
a principal amount of $25,000,000 or an integral multiple thereof.
(c) The Issuer shall give the Servicer and the Indenture Trustee at
least 30 days prior written notice of the date on which the Issuer intends to
exercise any optional redemption pursuant to this Section 7.01. Not later than
------------
1:00 p.m., New York City time, on such day the Issuer shall deposit into (i) the
Series 2001-A Principal Subaccount in immediately available funds the excess of
the principal portion of the Redemption Price over the amount, if any, on
deposit in the Series 2001-A Principal Subaccount and (ii) the Series 2001-A
Expense Subaccount in immediately available funds the excess of the interest
portion of the Redemption Price over the amount, if any, of the Monthly Interest
on deposit in the Series 2001-A Expense Subaccount. Such redemption option is
subject to payment in full of the Redemption Price. Following such deposits into
the Series 2001-A Principal Subaccount and the Series 2001-A Expense Subaccount,
the Redemption Price shall be distributed in accordance with Section 4.04. Upon
------------
payment and distribution of the Redemption Price and the reduction in the Series
Outstanding Amount to zero, the Series 2001-A Noteholders shall have no further
interest in the Pledged Assets.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section 8.01 Ratification of Agreement. As supplemented by this
---------------------------
Indenture Supplement, the Indenture is in all respects ratified and confirmed
and the Indenture as so supplemented by this Indenture Supplement shall be read,
taken and construed as one and the same instrument.
-25-
Section 8.02 Counterparts. This Indenture Supplement may be executed
------------
in two or more counterparts, and by different parties on separate counterparts,
each of which shall be an original, but all of which shall constitute one and
the same instrument.
Section 8.03 Governing Law. THIS INDENTURE SUPPLEMENT SHALL BE
--------------
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
INCLUDING ss.5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW, BUT OTHERWISE
WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES.
Section 8.04 No Petition; Limited Recourse.
-----------------------------
(a) Each party hereto hereby covenants and agrees that it will not at
any time institute against the Issuer, the Transferor, the Seller or the
Originator, or join in any institution against the Issuer, the Transferor, the
Seller or the Originator, any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings, or other proceedings under any United
States federal or state bankruptcy or similar law in connection with any
obligations relating to the Notes, this Indenture or any of the Transaction
Documents until the expiration of one year and one day after payment in full of
the latest maturing Note issued by the Issuer under the Indenture and this
Indenture Supplement.
(b) Notwithstanding anything herein to the contrary, each party hereto
hereby agrees that the Notes and other payment obligations of the Issuer
hereunder are limited recourse obligations of the Issuer and shall be payable
solely out of the Series 2001-A Noteholders' allocable share of the Pledged
Assets at such time as and to the extent of any such funds actually received by,
or available to, the Issuer in accordance with Article IV hereof and, to the
----------
extent funds are not available to pay such Notes and other obligations, the
claims relating thereto shall accrue but shall be non-recourse against the
Issuer and shall not constitute claims under Section 101 of the Bankruptcy Code.
(c) This Section 8.04 shall survive termination of the Indenture and
------------
this Indenture Supplement.
-26-
IN WITNESS WHEREOF, the undersigned have caused this Indenture
Supplement to be duly executed and delivered by their respective duly authorized
officers on the day and year first above written.
LEVI STRAUSS RECEIVABLES FUNDING,
LLC, as Issuer
By: ___________________________________
Name: Joseph M. Maurer
Title: Treasurer
CITIBANK, N.A., not in its individual capacity
but solely as Indenture Trustee, Paying Agent,
Authentication Agent and Transfer Agent and
Registrar
By: ___________________________________
Name:
Title:
RULE 144A GLOBAL NOTE
THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAW. THE HOLDER HEREOF, BY PURCHASING THIS NOTE, AGREES THAT THIS
NOTE OR ANY INTEREST OR PARTICIPATION HEREIN, MAY BE REOFFERED, RESOLD, PLEDGED
OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER
APPLICABLE LAWS AND ONLY (1) TO THE ISSUER, (2) PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT TO A PERSON THAT THE HOLDER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT (A
"QIB") PURCHASING FOR ITS OWN ACCOUNT OR A QIB PURCHASING FOR THE ACCOUNT OF A
QIB, WHOM THE HOLDER HAS INFORMED, IN EACH CASE, THAT THE REOFFER, RESALE,
PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A UNDER THE
SECURITIES ACT OR (3) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR
RULE 904 OF REGULATION S UNDER THE SECURITIES ACT. EACH NOTE OWNER BY ACCEPTING
A BENEFICIAL INTEREST IN THIS NOTE, UNLESS SUCH PERSON ACQUIRED THIS NOTE IN A
TRANSFER DESCRIBED IN CLAUSE (3) ABOVE, IS DEEMED TO REPRESENT THAT IT IS EITHER
A QIB PURCHASING FOR ITS OWN ACCOUNT OR A QIB PURCHASING FOR THE ACCOUNT OF
ANOTHER QIB.
PRIOR TO PURCHASING ANY NOTES, PURCHASERS SHOULD CONSULT COUNSEL WITH
RESPECT TO THE AVAILABILITY AND CONDITIONS OF EXEMPTION FROM THE RESTRICTION ON
RESALE OR TRANSFER. THE ISSUER HAS NOT AGREED TO REGISTER THE NOTES UNDER THE
SECURITIES ACT, TO QUALIFY THE NOTES UNDER THE SECURITIES LAWS OF ANY STATE OR
TO PROVIDE REGISTRATION RIGHTS TO ANY PURCHASER.
AS SET FORTH HEREIN, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT
ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
REGISTERED up to $110,000,000(1)
No. ________
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP NO. 52736WAA9
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
THE HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF, AND EACH HOLDER OF A
BENEFICIAL INTEREST IN THIS NOTE, COVENANTS AND AGREES THAT IT WILL NOT AT ANY
TIME INSTITUTE AGAINST THE ISSUER, THE TRANSFEROR, THE SELLER OR THE ORIGINATOR
OR JOIN IN ANY INSTITUTION AGAINST THE ISSUER, THE TRANSFEROR, THE SELLER OR THE
ORIGINATOR, OF, ANY BANKRUPTCY PROCEEDINGS UNDER ANY UNITED STATES FEDERAL OR
STATE BANKRUPTCY OR SIMILAR LAW IN CONNECTION WITH ANY OBLIGATIONS RELATING TO
THE NOTES OR THE INDENTURE.
THE HOLDER OF THIS NOTE, BY ACCEPTANCE OF THIS NOTE, AND EACH HOLDER OF
A BENEFICIAL INTEREST IN THIS NOTE, BY THE ACQUISITION OF A BENEFICIAL INTEREST
THEREIN, AGREE TO TREAT THE NOTES AS INDEBTEDNESS OF LEVI STRAUSS RECEIVABLES
FUNDING, LLC FOR APPLICABLE FEDERAL, STATE, AND LOCAL INCOME AND FRANCHISE TAX
LAW AND FOR PURPOSES OF ANY OTHER TAX IMPOSED ON OR MEASURED BY INCOME.
------------------------------------
(1) Denominations of $250,000 and in integral multiples of $1,000 in excess
thereof.
LEVI STRAUSS RECEIVABLES FUNDING
SECURED TERM NOTES, SERIES 2001-A
Levi Strauss Receivables Funding, LLC, a Delaware limited liability
company (herein referred to as the "Issuer"), for value received, hereby
promises to pay to CEDE & CO., or registered assigns, subject to the following
provisions, a principal sum of ONE HUNDRED TEN MILLION AND ZERO HUNDREDTHS
DOLLARS ($110,000,000.00) payable in an amount equal to the aggregate amount, if
any, payable from the Collection Account in respect of principal on the Notes
pursuant to Section 4.04 of the Supplement. The entire unpaid principal amount
of this Note shall be due and payable at the earlier of the Final Stated
Maturity Date and the Date of an optional redemption under Section 7.01 of the
Supplement. The principal amount of this Rule 144A Global Note and the
Regulation S Global Notes shall not exceed $110,000,000. The Issuer will pay
interest on the Notes with respect to each Interest Period in accordance with
Sections 4.02 and 4.04 of the Supplement. Such principal of and interest on this
Note shall be paid in the manner specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts.
Reference is made to the further provisions of this Note set forth on
the reverse hereof, which shall have the same effect as though fully set forth
on the face of this Note.
Unless the certificate of authentication hereon has been executed by
the Authentication Agent whose name appears below by manual signature, this Note
shall not be entitled to any benefit under the Indenture referred to on the
reverse hereof, or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Issuer has caused this instrument to
be signed, manually or in facsimile, by its Authorized Officer.
LEVI STRAUSS RECEIVABLES FUNDING, LLC,
as Issuer
By: Name: ________________________________
Title: ______________________________
Date: July 31, 2001
AUTHENTICATION AGENT'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in
the within-mentioned Indenture.
CITIBANK, N.A., not in its individual
capacity but solely as Authentication
Agent
By:
-------------------------------------------
Name:
Title:
Date: July 31, 2001
[REVERSE OF NOTE]
This Note is one of a duly authorized issue of Levi Strauss Receivables
Funding Secured Notes, Series 2001-A (the "Notes") issued and to be issued under
the Master Indenture dated as of July 31, 2001 (as supplemented by the Series
2001-A Supplement dated as of July 31, 2001 (as such Series 2001-A Supplement
may be amended, restated, supplemented or otherwise modified from time to time,
the "Supplement") and as it may be amended, restated, supplemented or otherwise
modified from time to time in accordance with its terms, the "Indenture") among
the Issuer and Citibank, N.A., a national banking association, as Indenture
Trustee (the "Indenture Trustee", which term includes any successor trustee as
permitted under the Indenture), as Paying Agent, Authentication Agent and
Registrar. Reference is hereby made to the Indenture for a statement of the
respective rights, limitations of rights, duties and immunities thereunder of
the Issuer, the Indenture Trustee and the Holders of the Notes and the terms
upon which the Notes are, and are to be, authenticated and delivered.
Capitalized terms used herein and not otherwise defined shall have the meanings
set forth in the Indenture or the Supplement as the case may be.
The Notes are and will be equally and ratably entitled to the benefits
of the Indenture without preference, priority or distinction, all in accordance
with the terms and provisions of the Indenture.
Payments of interest on and principal of this Note due and payable on
any Payment Date to the extent not in full payment of this Note, shall be made
by check mailed to the Person whose name appears as the registered Holder of
this Note (or one or more predecessor Notes) on whose Note Register as of the
close of business on each Record Date (the "Registered Holder"), except that
with respect to Notes registered on the Record Date in the name of the nominee
of the Clearing Agency (initially, such nominee to be Cede & Co.), payments will
be made by wire transfer in immediately available funds to the account
designated by such nominee. Such checks shall be mailed to the Person entitled
thereto at the address of such Person as it appears on the Note Register as of
the applicable Record Date without requiring that this Note be submitted for
notation of payment. Any reduction in the principal amount of this Note (or any
one or more predecessor Notes) effected by any payments made on any Payment Date
shall be binding upon all future Holders of this Note and of any Note issued
upon the registration of transfer thereof or in exchange hereof or in lieu
hereof, whether or not noted hereon.
As provided in the Indenture and subject to certain limitations set
forth therein, the transfer of this Note may be registered on the Note Register
upon surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer, in form satisfactory to the
Transfer Agent and Registrar, duly executed by, the Holder hereof or his
attorney-in-fact duly authorized in writing, and such other documents as the
Transfer Agent and Registrar may reasonably require, and thereupon one or more
new Notes of the same Series of authorized denominations and in the same
aggregate principal amount will be issued to the designated transferee or
transferees. No service charge will be charged for any registration of transfer
or exchange of this Note, but the Issuer or the Transfer Agent and Registrar may
require payment of
a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any such registration of transfer or exchange.
On any redemption, purchase, exchange or cancellation of any of the
Notes represented by this Rule 144A Global Note, details of such redemption,
purchase, exchange or cancellation shall be entered by the Paying Agent in
Schedule A hereto recording any such redemption, purchase, exchange or
cancellation. Upon any such redemption, purchase, exchange or cancellation, the
principal amount of this Rule 144A Global Note and the Notes represented by this
Rule 144A Global Note shall be reduced or increased, as appropriate, by the
principal amount so redeemed, purchased, exchanged or cancelled.
Each Noteholder or Beneficial Owner, by acceptance of a Note or, in the
case of a Beneficial Owner, a beneficial interest in a Note, covenants and
agrees that no recourse may be taken, directly or indirectly, with respect to
the obligations of the Issuer or the Indenture Trustee on the Notes or under the
Indenture or any certificate or other writing delivered in connection therewith,
against (i) the Indenture Trustee in its individual capacity, (ii) any owner of
a beneficial interest in the Issuer or (iii) any partner, owner, beneficiary,
agent, officer, director or employee of the Indenture Trustee in its individual
capacity, any holder of a beneficial interest in the Indenture Trustee or of any
successor or assign of the Indenture Trustee in its individual capacity, except
as any such Person may have expressly agreed and except that any such partner,
owner or beneficiary shall be fully liable, to the extent provided by applicable
law, for any unpaid consideration for stock, unpaid capital contribution or
failure to pay any installment or call owing to such entity.
Prior to the due presentment for registration of transfer of this Note,
the Issuer, the Indenture Trustee, the Paying Agent, the Authentication Agent,
the Transfer Agent and Registrar and any agent of the foregoing shall treat the
Person in whose name this Note (as of the day of determination or as of such
other date as may be specified in the Indenture) is registered as the owner
hereof for all purposes, whether or not this Note be overdue, and neither the
Issuer, the Indenture Trustee, the Paying Agent, the Authentication Agent, the
Transfer Agent and Registrar nor any such agent of the foregoing shall be
affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer and the Indenture Trustee with the consent of the Majority
Investors. Any such amendment or modification by the Holder of this Note (or any
one of more predecessor Notes) shall be conclusive and binding upon the Holders
of this Note and of any Note issued upon the registration of transfer hereof or
in exchange hereof or in lieu hereof whether or not notation of such amendment
or modification is made upon this Note. The Indenture also permits, subject to
the conditions set forth in the Indenture, the Indenture Trustee to amend or
waive certain terms an conditions set forth in the Indenture without the consent
of Holders of the Notes issued thereunder or without the consent of holders of
Series of Notes not affected thereby.
The term "Issuer" as used in this Note includes any successor to the
Issuer under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
AS PROVIDED IN THE INDENTURE, THE INDENTURE AND THE NOTES SHALL BE
CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE INTERNAL LAWS OF THE STATE OF
NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATION LAW OF THE STATE OF
NEW YORK, BUT OTHERWISE WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES).
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of an interest on this Note at
the times, place, and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Transaction Documents, neither any owner of a beneficial
interest in the Issuer, nor any of its partners, beneficiaries, agents,
officers, directors, employees or successors or assigns shall be personally
liable for, nor shall recourse be had to any of them for, the payment of
principal of or interest on, or performance of, or omission to perform, any of
the covenants, obligations or indemnifications contained in this Note or the
Indenture. The Holder of this Note by the acceptance hereof agrees that, except
as expressly provided in the Transaction Documents, the Holder shall have no
claim against any of the foregoing for any deficiency, loss or claim therefrom;
provided, however, that nothing contained herein shall be taken to prevent
recourse to, and enforcement against, the assets of the Issuer for any and all
liabilities, obligations and undertakings contained in the Indenture or in this
Note.
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee
----------------
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
-----------------------------------
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints attorney, to transfer said Note on the books kept for registration
thereof, with full power of substitution in the premises.
2
Dated:
------------------------ -----------------------------------------
Signature Guaranteed:
--------------------------
2 NOTE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatsoever.
SCHEDULE A
SCHEDULE OF EXCHANGES BETWEEN THE REGULATION S GLOBAL NOTE
AND THIS RULE 144A GLOBAL NOTE,
OR REDEMPTIONS OR PURCHASES AND CANCELLATIONS
The initial principal amount of this Rule 144A Global Note is
$110,000,000. The following increases or decreases in principal amount of this
Rule 144A Global Note, or redemptions, purchases or cancellations of this Rule
144A Global Note have been made:
Date of exchange, or Increase or decrease in Remaining principal amount Notation made by or
redemption or purchase or principal amount of this of this Rule 144A Global on behalf of the
cancellation Rule 144A Global Note due Note following such exchange, Issuer
to exchanges between the or redemption or purchase
Regulation S Global Note or cancellation
and this Rule 144A Global
Note
-------------------------- -------------------------- ------------------------------ --------------------
-------------------------- -------------------------- ------------------------------ --------------------
-------------------------- -------------------------- ------------------------------ --------------------
TEMPORARY REGULATION S GLOBAL NOTE
THIS GLOBAL NOTE IS A TEMPORARY GLOBAL NOTE FOR PURPOSES OF REGULATION
S UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"). NEITHER THIS TEMPORARY GLOBAL NOTE NOR ANY INTEREST HEREIN MAY BE
OFFERED, SOLD OR DELIVERED, EXCEPT AS PERMITTED UNDER THE INDENTURE REFERRED TO
BELOW.
NO BENEFICIAL OWNERS OF THIS TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO
RECEIVE PAYMENT OF PRINCIPAL OR INTEREST HEREON UNLESS THE REQUIRED
CERTIFICATIONS HAVE BEEN DELIVERED PURSUANT TO THE TERMS OF THE INDENTURE.
THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAW. THE HOLDER HEREOF, BY PURCHASING THIS NOTE, AGREES THAT THIS
NOTE OR ANY INTEREST OR PARTICIPATION HEREIN, MAY BE REOFFERED, RESOLD, PLEDGED
OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER
APPLICABLE LAWS AND ONLY (1) TO THE ISSUER, (2) PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT TO A PERSON THAT THE HOLDER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT (A
"QIB") PURCHASING FOR ITS OWN ACCOUNT OR A QIB PURCHASING FOR THE ACCOUNT OF A
QIB, WHOM THE HOLDER HAS INFORMED, IN EACH CASE, THAT THE REOFFER, RESALE,
PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A UNDER THE
SECURITIES ACT OR (3) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR
RULE 904 OF REGULATION S UNDER THE SECURITIES ACT. EACH NOTE OWNER BY ACCEPTING
A BENEFICIAL INTEREST IN THIS NOTE, UNLESS SUCH PERSON ACQUIRED THIS NOTE IN A
TRANSFER DESCRIBED IN CLAUSE (3) ABOVE, IS DEEMED TO REPRESENT THAT IT IS EITHER
A QIB PURCHASING FOR ITS OWN ACCOUNT OR A QIB PURCHASING FOR THE ACCOUNT OF
ANOTHER QIB.
PRIOR TO PURCHASING ANY NOTES, PURCHASERS SHOULD CONSULT COUNSEL WITH
RESPECT TO THE AVAILABILITY AND CONDITIONS OF EXEMPTION FROM THE RESTRICTION ON
RESALE OR TRANSFER. THE ISSUER HAS NOT AGREED TO REGISTER THE NOTES UNDER THE
SECURITIES ACT, TO QUALIFY THE NOTES UNDER THE SECURITIES LAWS OF ANY STATE OR
TO PROVIDE REGISTRATION RIGHTS TO ANY PURCHASER.
AS SET FORTH HEREIN, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT
ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
REGISTERED up to $110,000,000(1)
No.________
SEE REVERSE FOR CERTAIN DEFINITIONS
Common Code: 013304670
ISIN: USU52810AA36
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
THE HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF, AND EACH HOLDER OF A
BENEFICIAL INTEREST IN THIS NOTE, COVENANTS AND AGREES THAT IT WILL NOT AT ANY
TIME INSTITUTE AGAINST THE ISSUER, THE TRANSFEROR, THE SELLER OR THE ORIGINATOR
OR JOIN IN ANY INSTITUTION AGAINST THE ISSUER, THE TRANSFEROR, THE SELLER OR THE
ORIGINATOR, OF, ANY BANKRUPTCY PROCEEDINGS UNDER ANY UNITED STATES FEDERAL OR
STATE BANKRUPTCY OR SIMILAR LAW IN CONNECTION WITH ANY OBLIGATIONS RELATING TO
THE NOTES OR THE INDENTURE.
THE HOLDER OF THIS NOTE, BY ACCEPTANCE OF THIS NOTE, AND EACH HOLDER OF
A BENEFICIAL INTEREST IN THIS NOTE, BY THE ACQUISITION OF A BENEFICIAL INTEREST
THEREIN, AGREE TO TREAT THE NOTES AS INDEBTEDNESS OF LEVI STRAUSS RECEIVABLES
FUNDING, LLC FOR APPLICABLE FEDERAL, STATE, AND LOCAL INCOME AND FRANCHISE TAX
LAW AND FOR PURPOSES OF ANY OTHER TAX IMPOSED ON OR MEASURED BY INCOME.
--------
1 Denominations of $250,000 and in integral multiples of $1,000 in excess
thereof.
LEVI STRAUSS RECEIVABLES FUNDING
SECURED TERM NOTES, SERIES 2001-A
Levi Strauss Receivables Funding, LLC, a Delaware limited liability
company (herein referred to as the "Issuer"), for value received, hereby
promises to pay to CEDE & CO., or registered assigns, subject to the following
provisions, a principal sum of ONE HUNDRED TEN MILLION AND ZERO HUNDREDTHS
DOLLARS ($110,000,000.00) payable in an amount equal to the aggregate amount, if
any, payable from the Collection Account in respect of principal on the Notes
pursuant to Section 4.04 of the Supplement. The entire unpaid principal amount
of this Note shall be due and payable at the earlier of the Final Stated
Maturity Date and the Date of an optional redemption under Section 7.01 of the
Supplement. The principal amount of this Temporary Regulation S Global Note and
the Rule 144A Global Note shall not exceed $110,000,000. The Issuer will pay
interest on the Notes with respect to each Interest Period in accordance with
Sections 4.02 and 4.04 of the Supplement. Such principal of and interest on this
Note shall be paid in the manner specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts.
Reference is made to the further provisions of this Note set forth on
the reverse hereof, which shall have the same effect as though fully set forth
on the face of this Note.
Unless the certificate of authentication hereon has been executed by
the Authentication Agent whose name appears below by manual signature, this Note
shall not be entitled to any benefit under the Indenture referred to on the
reverse hereof, or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Issuer has caused this instrument to
be signed, manually or in facsimile, by its Authorized Officer.
LEVI STRAUSS RECEIVABLES FUNDING, LLC,
as Issuer
By: Name: __________________________________
Title: ________________________________
Date: July 31, 2001
AUTHENTICATION AGENT'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in
the within-mentioned Indenture.
CITIBANK, N.A., not in its individual
capacity but solely as Authentication
Agent
By:
-------------------------------------------
Name:
Title:
Date: July 31, 2001
[REVERSE OF NOTE]
This Note is one of a duly authorized issue of Levi Strauss Receivables
Funding Secured Notes, Series 2001-A (the "Notes") issued and to be issued under
the Master Indenture dated as of July 31, 2001 (as supplemented by the Series
2001-A Supplement dated as of July 31, 2001 (as such Series 2001-A Supplement
may be amended, restated, supplemented or otherwise modified from time to time,
the "Supplement") and as it may be amended, restated, supplemented or otherwise
modified from time to time in accordance with its terms, the "Indenture") among
the Issuer and Citibank, N.A., a national banking association, as Indenture
Trustee (the "Indenture Trustee", which term includes any successor trustee as
permitted under the Indenture), as Paying Agent, Authentication Agent and
Registrar. Reference is hereby made to the Indenture for a statement of the
respective rights, limitations of rights, duties and immunities thereunder of
the Issuer, the Indenture Trustee and the Holders of the Notes and the terms
upon which the Notes are, and are to be, authenticated and delivered.
Capitalized terms used herein and not otherwise defined shall have the meanings
set forth in the Indenture or the Supplement as the case may be.
The Notes are and will be equally and ratably entitled to the benefits
of the Indenture without preference, priority or distinction, all in accordance
with the terms and provisions of the Indenture.
Payments of interest on and principal of this Note due and payable on
any Payment Date to the extent not in full payment of this Note, shall be made
by check mailed to the Person whose name appears as the registered Holder of
this Note (or one or more predecessor Notes) on whose Note Register as of the
close of business on each Record Date (the "Registered Holder"), except that
with respect to Notes registered on the Record Date in the name of the nominee
of the Clearing Agency (initially, such nominee to be Cede & Co.), payments will
be made by wire transfer in immediately available funds to the account
designated by such nominee. Such checks shall be mailed to the Person entitled
thereto at the address of such Person as it appears on the Note Register as of
the applicable Record Date without requiring that this Note be submitted for
notation of payment. Any reduction in the principal amount of this Note (or any
one or more predecessor Notes) effected by any payments made on any Payment Date
shall be binding upon all future Holders of this Note and of any Note issued
upon the registration of transfer thereof or in exchange hereof or in lieu
hereof, whether or not noted hereon.
As provided in the Indenture and subject to certain limitations set
forth therein, the transfer of this Note may be registered on the Note Register
upon surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer, in form satisfactory to the
Transfer Agent and Registrar, duly executed by, the Holder hereof or his
attorney-in-fact duly authorized in writing, and such other documents as the
Transfer Agent and Registrar may reasonably require, and thereupon one or more
new Notes of the same Series of authorized denominations and in the same
aggregate principal amount will be issued to the designated transferee or
transferees. No service charge will be charged for any registration of transfer
or exchange of this Note, but the Issuer or the Transfer Agent and Registrar may
require payment of
a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection with any such registration of transfer or exchange.
On any redemption, purchase, exchange or cancellation of any of the
Notes represented by this Temporary Regulation S Global Note, details of such
redemption, purchase, exchange or cancellation shall be entered by the Paying
Agent in Schedule A hereto recording any such redemption, purchase, exchange or
cancellation. Upon any such redemption, purchase, exchange or cancellation, the
principal amount of this Temporary Regulation S Global Note and the Notes
represented by this Temporary Regulation S Global Note shall be reduced or
increased, as appropriate, by the principal amount so redeemed, purchased,
exchanged or cancelled.
On or after the Release Date, this Temporary Regulation S Global Note
may be exchanged, in whole or in part (free of charge), for the Permanent
Regulation S Global Note in the form set out in Exhibit A-3 of the Supplement
upon certification of non-U.S. beneficial ownership substantially in the form
set out in Exhibit E-2 of the Supplement. The Permanent Regulation S Global Note
shall be so issued and delivered in exchange for only that portion of this
Temporary Regulation S Global Note in respect of which there shall have been
presented to the Paying Agent by Euroclear or Clearstream Banking, as
applicable, a certificate substantially in the form set out in Exhibit E-1 to
the Supplement. The Permanent Regulation S Global Note shall be delivered only
outside the United States.
Each Noteholder or Beneficial Owner, by acceptance of a Note or, in the
case of a Beneficial Owner, a beneficial interest in a Note, covenants and
agrees that no recourse may be taken, directly or indirectly, with respect to
the obligations of the Issuer or the Indenture Trustee on the Notes or under the
Indenture or any certificate or other writing delivered in connection therewith,
against (i) the Indenture Trustee in its individual capacity, (ii) any owner of
a beneficial interest in the Issuer or (iii) any partner, owner, beneficiary,
agent, officer, director or employee of the Indenture Trustee in its individual
capacity, any holder of a beneficial interest in the Indenture Trustee or of any
successor or assign of the Indenture Trustee in its individual capacity, except
as any such Person may have expressly agreed and except that any such partner,
owner or beneficiary shall be fully liable, to the extent provided by applicable
law, for any unpaid consideration for stock, unpaid capital contribution or
failure to pay any installment or call owing to such entity.
Prior to the due presentment for registration of transfer of this Note,
the Issuer, the Indenture Trustee, the Paying Agent, the Authentication Agent,
the Transfer Agent and Registrar and any agent of the foregoing shall treat the
Person in whose name this Note (as of the day of determination or as of such
other date as may be specified in the Indenture) is registered as the owner
hereof for all purposes, whether or not this Note be overdue, and neither the
Issuer, the Indenture Trustee, the Paying Agent, the Authentication Agent, the
Transfer Agent and Registrar nor any such agent of the foregoing shall be
affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer and the Indenture Trustee with the consent of the Majority
Investors. Any such amendment or modification by the Holder of this Note (or any
one of more predecessor Notes) shall be conclusive and binding upon the
Holders of this Note and of any Note issued upon the registration of transfer
hereof or in exchange hereof or in lieu hereof whether or not notation of such
amendment or modification is made upon this Note. The Indenture also permits,
subject to the conditions set forth in the Indenture, the Indenture Trustee to
amend or waive certain terms an conditions set forth in the Indenture without
the consent of Holders of the Notes issued thereunder or without the consent of
holders of Series of Notes not affected thereby.
The term "Issuer" as used in this Note includes any successor to the
Issuer under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
AS PROVIDED IN THE INDENTURE, THE INDENTURE AND THE NOTES SHALL BE
CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE INTERNAL LAWS OF THE STATE OF
NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATION LAW OF THE STATE OF
NEW YORK, BUT OTHERWISE WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES).
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of an interest on this Note at
the times, place, and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Transaction Documents, neither any owner of a beneficial
interest in the Issuer, nor any of its partners, beneficiaries, agents,
officers, directors, employees or successors or assigns shall be personally
liable for, nor shall recourse be had to any of them for, the payment of
principal of or interest on, or performance of, or omission to perform, any of
the covenants, obligations or indemnifications contained in this Note or the
Indenture. The Holder of this Note by the acceptance hereof agrees that, except
as expressly provided in the Transaction Documents, the Holder shall have no
claim against any of the foregoing for any deficiency, loss or claim therefrom;
provided, however, that nothing contained herein shall be taken to prevent
recourse to, and enforcement against, the assets of the Issuer for any and all
liabilities, obligations and undertakings contained in the Indenture or in this
Note.
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee
----------------
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
-----------------------------------
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints attorney, to transfer said Note on the books kept for registration
thereof, with full power of substitution in the premises.
2
Dated:
----------------------------- ---------------------------------------
Signature Guaranteed:
--------------------------
2 NOTE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatsoever.
SCHEDULE A
SCHEDULE OF EXCHANGES BETWEEN THIS TEMPORARY REGULATION S GLOBAL NOTE
AND THE RULE 144A GLOBAL NOTE,
OR REDEMPTIONS OR PURCHASES AND CANCELLATIONS
The initial principal amount of this Temporary Regulation S Global Note
is $0.00 The following increases or decreases in principal amount of this
Temporary Regulation S Global Note, or redemptions, purchases or cancellations
of this Temporary Regulation S Global Note have been made:
Date of exchange, or Increase or decrease in Remaining principal amount of Notation made by or
redemption or purchase or principal amount of this this Temporary Regulation S on behalf of the
cancellation Temporary Regulation S Global Note following such Issuer
Global Note due to exchange, or redemption or
exchanges between this purchase or cancellation
Temporary Regulation S
Global Note
and the Rule 144A Global
Note
------------------------- ------------------------- ---------------------------- ------------------------
------------------------- ------------------------- ---------------------------- ------------------------
------------------------- ------------------------- ---------------------------- ------------------------
EX-10
5
a10qex104.txt
EXHIBIT 10.4 RECEIVABLES PURCHASE AGREEMENT
EXHIBIT 10.4
EXECUTION COPY
================================================================================
RECEIVABLES PURCHASE AGREEMENT
Dated as of July 31, 2001
by and among
LEVI STRAUSS RECEIVABLES FUNDING, LLC
as Issuer,
LEVI STRAUSS FUNDING, LLC
as Transferor
LEVI STRAUSS FINANCIAL CENTER CORPORATION
as Seller and Servicer and
LEVI STRAUSS SECURITIZATION CORP.
as SPC Member
================================================================================
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
Section 1.01 Definitions..........................................................................................1
Section 1.02 Other Definitional Provisions........................................................................6
ARTICLE II
CONVEYANCE OF ASSETS
Section 2.01 Sale and Purchase....................................................................................7
Section 2.02 Purchases............................................................................................8
Section 2.03 Conditions Precedent to Purchases....................................................................8
Section 2.04 Calculation of the Purchase Price....................................................................8
Section 2.05 Purchase Price Payments..............................................................................9
Section 2.06 The Subordinated Note................................................................................9
Section 2.07 Conditions Precedent to Subordinated Loans..........................................................10
Section 2.08 Adjustments.........................................................................................10
Section 2.09 Payments and Computations, Etc......................................................................11
Section 2.10 No Assumption.......................................................................................11
Section 2.11 No Recourse.........................................................................................12
Section 2.12 True Sales; Back-Up Security Interest...............................................................12
Section 2.13 Servicing and Further Transfer of Purchased Assets..................................................13
Section 2.14 Financing Statements; Further Assurances............................................................13
Section 2.15 Marking of Records..................................................................................14
Section 2.16 Representations and Warranties of the Seller and Transferor.........................................14
Section 2.17 Affirmative Covenants of the Seller and the Transferor..............................................20
Section 2.18 Negative Covenants of the Seller and the Transferor.................................................23
Section 2.19 Representations and Warranties of the Issuer........................................................26
Section 2.20 Separate Existence of the Issuer....................................................................26
Section 2.21 Transferor's Right to Dissolve or Terminate.........................................................27
-ii-
ARTICLE III
ADMINISTRATION AND SERVICING OF RECEIVABLES
Section 3.01 Acceptance of Appointment and Other Matters Relating to the Servicer................................28
Section 3.02 Duties of the Servicer and the Issuer...............................................................29
Section 3.03 Servicing Compensation..............................................................................31
Section 3.04 Representations and Warranties of the Servicer......................................................31
Section 3.05 Affirmative Covenants of Servicer...................................................................34
Section 3.06 Negative Covenants of Servicer......................................................................36
Section 3.07 Records of the Servicer and Reports to be Prepared by the Servicer..................................37
Section 3.08 Annual Certificate of Servicer......................................................................38
Section 3.09 Annual Servicing Report of Independent Public Accountants;
Copies of Reports Available.................................................................38
Section 3.10 Adjustments; Modifications..........................................................................38
Section 3.11 Calculations........................................................................................39
Section 3.12 Application of Collections..........................................................................39
ARTICLE IV
ACCOUNTS AND COLLECTIONS
Section 4.01 Lockboxes; Rights after Replacement of Servicer....................................................40
Section 4.02 Establishment of Collection Account.................................................................40
Section 4.03 Collections and Allocations.........................................................................41
ARTICLE V
OTHER MATTERS RELATING TO THE SELLER AND THE TRANSFEROR
Section 5.01 Liability of the Seller and the Transferor..........................................................41
Section 5.02 Indemnification by the Seller.......................................................................42
ARTICLE VI
OTHER MATTERS RELATING TO THE SERVICER
Section 6.01 Liability of the Servicer...........................................................................44
Section 6.02 Merger or Consolidation of, or Assumption of the Obligations of, the Servicer.......................44
-iii-
Section 6.03 Limitation on Liability of the Servicer and Others..................................................45
Section 6.04 Indemnification by the Servicer.....................................................................46
Section 6.05 Resignation of the Servicer.........................................................................46
ARTICLE VII
PURCHASE TERMINATION EVENTS
Section 7.01 Purchase Termination Events.........................................................................47
Section 7.02 Purchase Termination................................................................................48
ARTICLE VIII
SERVICER DEFAULTS
Section 8.01 Servicer Defaults...................................................................................48
Section 8.02 Performance by Indenture Trustee....................................................................50
Section 8.03 Appointment of Successor Servicer...................................................................50
Section 8.04 Notification to Holders.............................................................................52
ARTICLE IX
TERMINATION
Section 9.01 Termination.........................................................................................52
ARTICLE X
MISCELLANEOUS PROVISIONS
Section 10.01 Amendment..........................................................................................52
Section 10.02 Governing Law......................................................................................53
Section 10.03 Notices; Payments..................................................................................53
Section 10.04 Severability of Provisions.........................................................................53
Section 10.05 Further Assurances.................................................................................53
Section 10.06 Nonpetition Covenant...............................................................................54
Section 10.07 No Waiver; Cumulative Remedies.....................................................................54
Section 10.08 Counterparts.......................................................................................54
Section 10.09 Third-Party Beneficiaries..........................................................................54
Section 10.10 Merger and Integration.............................................................................54
Section 10.11 Headings...........................................................................................55
-iv-
Section 10.12 Costs, Expenses and Taxes..........................................................................55
Section 10.13 Submission to Jurisdiction.........................................................................55
Section 10.14 Waiver of Jury Trial...............................................................................56
Section 10.15 Acknowledgment and Consent.........................................................................56
Section 10.16 No Partnership or Joint Venture....................................................................57
Section 10.17 Binding Effect; Assignability; Survival of Provisions..............................................57
Section 10.18 Recourse to the Seller or Transferor...............................................................57
Section 10.19 Limited Recourse to the Issuer.....................................................................58
-v-
SCHEDULES
SCHEDULE 2.16(m) List of Offices
SCHEDULE 2.16(o) List of Lockbox Banks
SCHEDULE 2.16(q) List of Legal Names
EXHIBITS
EXHIBIT A Form of Annual Servicer's Certificate
EXHIBIT B Forms of Lockbox Agreements
EXHIBIT C List of Servicing Officers
EXHIBIT D Form of Daily Receivables Activity Report
EXHIBIT E Form of Subordinated Note
EXHIBIT F Credit and Collection Policy
-vi-
THIS RECEIVABLES PURCHASE AGREEMENT (this "Agreement") dated
---------
as of July 31, 2001 is made by and among LEVI STRAUSS RECEIVABLES FUNDING, LLC,
a Delaware limited liability company, as issuer (the "Issuer"), LEVI STRAUSS
------
FUNDING, LLC, a Delaware limited liability company, as transferor (the
"Transferor"), LEVI STRAUSS FINANCIAL CENTER CORPORATION, a California
----------
corporation, in its separate capacities as seller (the "Seller") and as servicer
------
(the "Servicer"), and Levi Strauss Securitization Corp., a Delaware corporation,
--------
as special purpose member of the Issuer (the "SPC Member").
----------
In consideration of the mutual agreements herein contained,
each party agrees as follows for the benefit of the other parties and their
successors and assigns:
ARTICLE I
DEFINITIONS
Section 1.01 Definitions. Capitalized terms used in this Agreement
-------
but not defined herein shall have the meanings assigned to them in the
Indenture. Whenever used in this Agreement, the following words and phrases
shall have the following meanings, and the definitions of such terms are
applicable to the singular as well as the plural forms of such terms and to the
masculine as well as to the feminine and neuter genders of such terms.
"Adjusted Loss Reserve" as of any date equals the product of
---------------------
(i) the Net Eligible Receivables Balance times (ii) the "Loss Reserve Ratio" for
------------------
the Series 2001-A Notes times (iii) sixty percent (60%).
"Adjustment" shall have the meaning set forth in Section
---------- -------
2.08(c).
-------
"Agreement" shall mean this Receivables Purchase Agreement and
---------
all amendments hereof and supplements hereto.
"Allocated Receivables Amount" shall mean, on any date of
------------------------------
determination with respect to any Series, the Series Allocation Percentage then
in effect times the Net Eligible Receivables Balance.
"Authorized Officer" shall have the meaning set forth in the
------------------
Indenture, and, with respect to the Seller or the Transferor, shall mean any
president, vice president, treasurer, assistant treasurer, secretary, assistant
secretary, chief financial officer, controller or any other officer of such
Person charged with responsibility for the administration of this Agreement.
"Average Days Outstanding" shall have the meaning set forth in
------------------------
the Series 2001-A Indenture Supplement.
"Bank of America" shall mean Bank of America, N.A.
---------------
"Base Rate" shall mean for any day, a fluctuating rate per
---------
annum equal to the higher of (a) the Federal Funds Rate plus 1/2 of 1% and (b)
the rate of interest in effect for such day as publicly announced from time to
time by Bank of America as its "reference rate." Such
--------------
1
rate is set by Bank of America based upon various factors including Bank of
America's costs and desired return, general economic conditions and other
factors, and is used as a reference point for pricing some loans, which may be
priced at, above, or below such announced rate. Any change in the Base Rate
resulting from a change in the reference rate established by Bank of America
shall become effective on the Business Day on which such change in the reference
rate is announced by Bank of America.
"Collection Account" shall have the meaning set forth in
------------------
Section 4.02.
------------
"Collections" shall have the meaning assigned to such term in
-----------
the Indenture; provided, however, that any proceeds of Receivables that gave
-----------------
rise to Noncomplying Asset Adjustments that have been paid as provided in
Section 2.08(c) hereof and any Related Security with respect to such Receivable
--------------
shall not constitute Collections and shall be promptly returned to the Seller as
provided in Section 2.08(c) hereof.
--------------
"Credit and Collection Policy" shall mean the Originator's,
----------------------------
the Servicer's, the Seller's and the Transferor's credit and collection policies
and practices relating to the Receivables and the Contracts existing on the date
hereof and summarized in Exhibit F hereto, as modified from time to time in
---------
accordance with this Agreement.
"Daily Receivables Activity Report" shall have the meaning set
---------------------------------
forth in Section 3.07(d).
---------------
"Dilution Adjustment" shall have the meaning set forth in
-------------------
Section 2.08(b).
--------------
"Dilutive Credit" shall mean, with respect to any Receivable,
---------------
any reduction to the Unpaid Balance thereof on account of discount, expense,
rebates, refunds, billing error expense, credits, set-off, counterclaim,
defense, advertising allowances and other adjustments or allowances in respect
of Receivables made by the Originator or the Servicer (excluding any adjustments
on account of an Obligor's insolvency or inability to pay).
"Eligible Servicer" shall mean the Originator or, if the
-----------------
Originator is not acting as Servicer, an entity that, at the time of its
appointment as Servicer, (a) is acceptable to the Indenture Trustee and the
Rating Agencies, (b) is legally qualified and has the capacity to service the
Receivables, (c) in the determination of the Majority Investors, has
demonstrated the ability to service professionally and competently a portfolio
of similar accounts in accordance with high standards of skill and care, and (d)
is qualified to use the software that is then being used to service the
Receivables or obtains the right to use or has its own software that is adequate
to perform its duties under this Agreement.
"Enhancement Agreement" shall mean any agreement, instrument
---------------------
or document governing the terms of any Series Enhancement or pursuant to which
any Series Enhancement is issued or outstanding.
"ERISA" shall mean the Employee Retirement Income Security Act
-----
of 1974 and the rules and regulations thereunder, each as amended from time to
time.
2
"ERISA Event" means (a)(i) the occurrence of a reportable
-----------
event, within the meaning of Section 4043 of ERISA, with respect to any Plan
unless the 30-day notice requirement with respect to such event has been waived
by the PBGC or (ii) the requirements of paragraph (1) of Section 4043(b) of
ERISA (without regard to paragraph (2) of such Section) are met with respect to
a contributing sponsor, as defined in Section 4001(a)(13) of ERISA, of a Plan,
and an event described in paragraph (9), (10), (11), (12) or (13) of Section
4043(c) of ERISA occurs with respect to such Plan within the following 30 days;
(b) the application for a minimum funding waiver with respect to a Plan; (c) the
provision by the administrator of any Plan of a notice of intent to terminate
such Plan pursuant to Section 4041(a)(2) of ERISA (including any such notice
with respect to a plan amendment referred to in Section 4041(e) of ERISA); (d)
the cessation of operation at a facility of the Seller or any ERISA Affiliate in
the circumstances described in Section 4062(e) of ERISA; (e) the partial or
complete withdrawal by the Seller or any ERISA Affiliate from a Multiple
Employer Plan during a plan year for which it was a substantial employer, as
defined in Section 4001(a)(2) of ERISA which would reasonably be expected to
result in liability to the Seller or any of its Subsidiaries of more than
$10,000,000; (f) the imposition of a Lien under Section 302(f) of ERISA with
respect to any Plan; (g) the adoption of an amendment to a Plan requiring the
provision of security to such Plan pursuant to Section 307 of ERISA; or (h) the
institution by the PBGC of proceedings to terminate a Plan pursuant to Section
4042 of ERISA, or the occurrence of any event or condition described in Section
4042 of ERISA, which would reasonably be expected to constitute grounds for the
termination of, or the appointment of a trustee to administer, such Plan.
"Federal Funds Rate" shall mean, for any day, the rate per
------------------
annum (rounded upward to the nearest 1/100 of 1%) equal to the weighted average
of the rates on overnight Federal funds transaction with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as published by
the Federal Reserve Bank on the Business Day next succeeding such day; provided
that (a) if such day is not a Business Day, the Federal Funds Rate for such day
shall be such rate on such transactions on the next preceding Business Day as so
published on the next succeeding Business Day, and (b) if no such rate is so
published on such next succeeding Business Day, the Federal Funds Rate for such
day shall be the average rate charged to Bank of America on such day on such
transaction as determined by Bank of America.
"Final Payout Date" shall mean the earlier of the date after
-----------------
the satisfaction and discharge of the Indenture pursuant to Article IV thereof
----------
on which either (i) all of the Notes have been paid in full or (ii) the Unpaid
Balance of all outstanding Receivables included in the Purchased Assets have
been paid or written off as uncollectible.
"Funded Current Liability Percentage" means "funded current
-----------------------------------
liability percentage" within the meaning of Section 412(1)(8)(B) of the Code.
"Government Receivable" means, at any time, a Receivable the
---------------------
Obligor of which is a federal, state or local government or governmental
subdivision or agency.
"Indemnified Losses" shall have the meaning set forth in
------------------
Section 5.02.
------------
"Indemnified Party" shall have the meaning set forth in
-----------------
Section 5.02.
------------
3
"Lockbox" shall mean any post office box to which the Obligors
-------
remit Collections.
"Lockbox Agreement" shall mean each lockbox agreement attached
-----------------
as Exhibit B and any other lockbox agreement pursuant to which the Servicer
---------
establishes a Lockbox Account in the name of the Indenture Trustee.
"Lockbox Bank" shall mean any institution at which a Lockbox
------------
or Lockbox Account is maintained.
"LSFCC" shall mean Levi Strauss Financial Center Corporation,
-----
a California corporation.
"Monthly Receivables Activity Report" shall have the meaning
-----------------------------------
provided in Section 3.07(c).
---------------
"Multiemployer Plan" means a multiemployer plan (as defined in
------------------
Section 4001(a)(3) of ERISA) to which the Originator or any ERISA Affiliate is
making or accruing an obligation to make contributions, or has within any of the
preceding five plan years made or accrued an obligation to make contributions.
"Noncomplying Receivable" shall have the meaning set forth in
-----------------------
Section 2.08(a).
---------------
"Noncomplying Receivables Adjustment" shall have the meaning
-----------------------------------
set forth in Section 2.08(a).
---------------
"Officer's Certificate" shall mean, unless otherwise specified
---------------------
in this Agreement, a certificate delivered as provided herein, signed:
(a) by the President, any Vice President, Treasurer or any
Assistant Treasurer or the chief financial officer of the Seller, the Transferor
or the Servicer, as the case may be, or
(b) by the President, any Vice President or the financial
controller of any Successor Servicer (or by an officer holding an office with
equivalent or more senior responsibilities or, in the case of the Servicer or
Successor Servicer, a Servicing Officer, and, in the case of the Transferor, any
executive of the Transferor designated in writing by a Vice President or more
senior officer of the Transferor for this purpose).
"Opinion of Counsel" shall mean a written opinion of counsel,
------------------
who may be counsel for, or an employee of, the Person providing the opinion and
who shall be reasonably acceptable to the Issuer and the Indenture Trustee.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or
----
any successor thereto.
"Plan" shall mean each employee benefit plan (as defined in
----
Section 3(3) of ERISA) currently sponsored, maintained or contributed to by the
Originator and any ERISA Affiliate or with respect to which the Originator or
any ERISA Affiliate has any liability.
4
"Purchase" shall mean each purchase of Receivables and Related
--------
Assets by the Issuer from the Seller and/or the Transferor hereunder.
"Purchase Price" shall have the meaning set forth in
---------------
Section 2.04(b).
---------------
"Purchase Price Percentage" shall have the meaning set forth
-------------------------
in Section 2.04(b).
---------------
"Purchase Termination Date" shall mean the date specified by
-------------------------
the Indenture Trustee at the direction of the Majority Investors following the
occurrence of a Purchase Termination Event; provided, however, that if an Event
-----------------
of Bankruptcy has occurred with respect to either the Seller or the Issuer, or a
Purchase Termination Event described in Section 7.01(f) shall have occurred,
then, in any such event, the Purchase Termination Date shall be deemed to have
occurred automatically without any such notice.
"Purchase Termination Event" shall have the meaning set forth
--------------------------
in Section 7.01.
------------
"Purchased Assets" shall have the meaning set forth in Section
---------------- -------
2.01(a).
-------
"Related Assets" shall have the meaning set forth in Section
-------------- -------
2.01(a).
-------
"Seller" shall mean LSFCC, in its capacity as the Seller under
------
this Agreement, and any successor to LSFCC permitted under Section 6.02.
------------
"Service Transfer" shall have the meaning specified in Section
---------------- -------
8.01.
----
"Servicer" shall mean LSFCC, in its capacity as the Servicer
--------
under this Agreement, and any successor thereto in such capacity appointed
pursuant to Article IX of this Agreement.
----------
"Servicer Default" shall have the meaning specified in Section
---------------- -------
8.01.
-----
"Servicing Fee Rate" shall mean 0.50%.
------------------
"Servicing Officer" shall mean any officer of the Servicer or
-----------------
an attorney-in-fact of the Servicer who in either case is involved in, or
responsible for, the administration and servicing of the Receivables and whose
name appears on a list of servicing officers furnished to the Issuer and the
Indenture Trustee by the Servicer, as such list may from time to time be
amended. The initial list of Servicing Officers is set forth in Exhibit C.
---------
"Subordinated Loan" shall have the meaning set forth in
-----------------
Section 2.06.
------------
"Subordinated Note" shall mean the Subordinated Note dated the
-----------------
Closing Date made by Issuer and payable to the order of the Seller substantially
in the form of Exhibit E, as such note may be amended, supplemented, otherwise
---------
modified or replaced from time to time.
"Subordinated Note Cap" shall have the meaning set forth in
---------------------
Section 2.06.
------------
"Sub-Servicer" shall have the meaning set forth in Section
------------
3.01(b).
-------
5
"Surviving Entity" shall have the meaning set forth in Section
---------------- -------
2.18(c).
-------
"Termination Notice" shall have the meaning set forth in
------------------
Section 8.01.
------------
"Unmatured Purchase Termination Event" shall mean any event
------------------------------------
that, with the giving of notice or lapse of time, or both, would become a
Purchase Termination Event.
"Unmatured Servicer Default" shall mean any event that, with
--------------------------
the giving of notice or lapse of time, or both, would become a Servicer Default.
Section 1.02 Other Definitional Provisions.
-----------------------------
(a) All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein.
(b) Other Terms. All accounting terms not specifically defined herein
-----------
shall be construed in accordance with GAAP or with United States generally
accepted regulatory accounting principles, as applicable. To the extent that the
definitions of accounting terms in this Agreement are inconsistent with the
meanings of such terms under GAAP or regulatory accounting principles, the
definitions contained in this Agreement shall control. All terms used in Article
9 of the UCC 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 with respect to computation of a period of time from a specified date
to a later specified date, the word "from" means "from and including" and each
of the words "to" and "until" means "to but excluding".
(d) References to Amounts. Unless otherwise specified, references to any
---------------------
amount as on deposit or outstanding on any particular date shall mean such
amount at the close of business on such day.
(e) Reference. The word "hereof", "herein" and "hereunder" and words of
---------
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement; and references to
"Section", "subsection", "Appendix", "Schedule" and "Exhibit" in this Agreement
------- ---------- -------- -------- -------
are references to Sections, subsections, Appendices, Schedules and Exhibits in
or to this Agreement unless otherwise specified in this Agreement.
6
ARTICLE II
CONVEYANCE OF ASSETS
Section 2.01 Sale and Purchase.
-----------------
(a) Agreement. Upon the terms and subject to the condition
---------
hereof, Issuer agrees to buy, and each of the Seller and the Transferor agrees
to transfer, assign, set over and otherwise convey to the Issuer, all of the
Seller's and the Transferor's right, title and interest in and to the following:
(i) all Receivables now existing and hereafter arising
from time to time;
(ii) all Related Security with respect to such
Receivables;
(iii) all Collections;
(iv) all rights of the Seller and the Transferor
(directly or as assignee) under the Receivables Purchase and Sale
Agreement and all rights of the Transferor under the Receivables Sale
Agreement; and
(v) all proceeds of and earnings on any of the foregoing.
The items listed above in clauses (ii), (iii), (iv) and (v),
whenever and wherever arising, are collectively referred to herein as the
"Related Assets." The Receivables and the Related Assets are collectively
--------------
referred to herein as the "Purchased Assets." It is expressly understood that
----------------
each Receivable conveyed to the Issuer hereunder, together with all other
Purchased Assets then existing or thereafter created and arising with respect
thereto, will thereafter be the property of the Issuer (or its assignees),
without the necessity of any further action by the Issuer (other than
satisfaction of the conditions set forth herein).
(b) Rights of the Issuer. Each of the Seller and the Transferor
--------------------
hereby authorizes the Issuer and its assignees and designees to take any and all
steps in its name and on its behalf that the Issuer, the Servicer and/or their
respective designees determine are reasonably necessary or appropriate to
collect all amounts due under any and all Purchased Assets, including without
limitation endorsing the name of the Seller or the Transferor on checks and
other instruments representing Collections and enforcing such Purchased Assets.
The Issuer shall have no obligation to account for, to replace, to substitute or
to return any Purchased Asset to the Transferor or, except as provided in
Section 2.08(c), to the Seller. The Issuer shall have the unrestricted right to
further assign, transfer, deliver, hypothecate, subdivide or otherwise deal with
the Purchased Assets and all of the Issuer's right, title and interest in, to
and under this Agreement on whatever terms the Issuer determines. As between the
Seller, the Transferor and the Issuer, the Issuer shall have the sole right to
retain any gains or profits created by buying, selling or holding the Purchased
Assets.
(c) Responsibilities of the Seller and the Transferor. Each of
-------------------------------------------------
the Seller and the Transferor agrees to deliver directly to the Servicer (for
the Issuer's account), within one (1)
7
Business Day after receipt thereof, any Collections that it receives, in the
form so received, and agrees that all such Collections shall be deemed to be
received in trust for the Issuer and its assignees and shall be maintained and
segregated separate and apart from all other funds and moneys of the Transferor
and the Seller until delivery of such Collections to the Servicer. Each of the
Seller and the Transferor hereby grants to the Issuer an irrevocable power of
attorney, with full power of substitution, coupled with an interest, to take in
its name all steps necessary or advisable to endorse, negotiate or otherwise
realize on any writing or other right of any kind held or transmitted by it or
transmitted or received by the Issuer (whether or not from the Seller or the
Transferor) in connection with any Purchased Asset (which power of attorney may
be exercised by the Issuer's successors and assigns in accordance with Section
-------
10.15). Each of the Seller and the Transferor shall perform, or cause to be
-----
performed, all of its obligations hereunder and under the Contracts related to
the Purchased Assets to which it is a party to the same extent as if such
Purchased Assets had not been sold hereunder, and the exercise by the Issuer or
its designee or assignee of the Issuer's rights hereunder or in connection
herewith shall not relieve the Seller or the Transferor from any of their
respective obligations under any such Contracts related to the Purchased Assets.
Notwithstanding the foregoing, each of the Seller and the Transferor
acknowledges that the Issuer or its designees are entitled to perform such
obligations to the extent permitted under the Transaction Documents.
Section 2.02 Purchases. On the Closing Date, the purchase
---------
all of the Transferor's right, title and interest in and to all Receivables
outstanding as of the close of business on the immediately preceding Business
Day, together with all other Purchased Assets related thereto. The Transferor
shall thereafter cease immediately to purchase any further Receivables or other
Purchased Assets from the Seller under the Receivables Sale Agreement or
otherwise, and the Transferor shall not sell any further Receivables or other
Purchased Assets hereunder. On the Closing Date and on each Business Day
thereafter until the Purchase Termination Date, the Issuer shall purchase all of
the Seller's right, title and interest in and to all Receivables existing as of
the close of business on the immediately preceding Business Day and all
Purchased Assets related thereto that were not previously purchased by the
Issuer hereunder. Notwithstanding the foregoing, if (i) an Insolvency Proceeding
is pending with respect to the Seller prior to the Purchase Termination Date,
the Seller shall not sell and the Issuer shall not buy any Purchased Assets
hereunder unless and until such Insolvency Proceeding is dismissed or otherwise
terminated, and (ii) if either the Internal Revenue Service or the PBGC has
filed a notice of Lien with respect to any Purchased Assets the Seller shall not
sell and the Issuer shall not buy any Purchased Assets hereunder unless and
until such Lien has been released.
Section 2.03 Conditions Precedent to Purchases. No Purchase
---------------------------------
of Purchased Assets shall be made hereunder on any date on which the Issuer does
not have sufficient funds available to pay the Purchase Price in cash (including
cash made available to the Issuer under the Subordinated Loan).
Section 2.04 Calculation of the Purchase Price.
---------------------------------
(a) On each Business Day from and including the Closing Date to
but excluding the Purchase Termination Date, the Seller shall deliver, or cause
the Servicer to deliver, to the Issuer an accounting with respect to (i) the
Purchases of Purchased Assets to be made on such Business Day and (ii) the
Purchase Price to be paid on account of the foregoing as
8
calculated in accordance with this Section 2.04. Such accounting, so long as
------------
LSFCC or an Affiliate of LSFCC acts as Servicer, will be included in the Daily
Receivables Activity Report generated by the Servicer.
(b) With respect to the Purchase of any Purchased Assets by the
Issuer pursuant to this Article II, (i) on the Closing Date, the Issuer shall
pay to the Transferor a purchase price equal to 97.7% times the Unpaid Balance
of all Receivables to be Purchased from the Seller and the Transferor on the
Closing Date, $190,000,000 of which shall be funded through a capital
contribution made by NF Industries, Inc. and the SPC Member to the Issuer and
(ii) on each day after the Closing Date the Issuer shall pay to the Seller a
purchase price equal to 97.7% (the "Purchase Price Percentage") times the Unpaid
-------------------------
Balance of the Receivables to be Purchased from the Seller on such day (each
such purchase price, the "Purchase Price"). To the extent that the Purchase
--------------
Price otherwise to be paid on the Closing Date shall exceed the sum of the
capital contribution described above plus the net proceeds from the sale of the
Series of Notes then being issued, the parties hereto acknowledge that such
Purchase Price shall be funded through, or otherwise by, a capital contribution
made by NF Industries, Inc. and the SPC Member to the Issuer in the amount of
such excess, the precise amount of which will be determined by the close of
business on the Closing Date. Conversely, to the extent that the sum of such
capital contributions plus net proceeds exceeds the Purchase Price owed on the
Closing Date, the amount overpaid shall be credited to the Issuer's members as a
return of capital. The Purchase Price Percentage may be recalculated no more
frequently than monthly using a discount rate and expected collection period
based on the Issuer's weighted cost of funds and Average Days Outstanding for
the prior month and assuming a reasonable return on Issuer's equity and adjusted
to reflect such factors as the Seller and the Issuer mutually agree will result
in a Purchase Price determined to be the fair market value of such Purchased
Assets. No change in the Purchase Price Percentage will affect the Purchase
Price paid or owed for Receivables sold prior to the effective date of such
change.
Section 2.05 Purchase Price Payments. On the terms and
-------------------------
subject to the conditions of this Agreement, the Issuer shall pay to the
Transferor on the Closing Date the Purchase Price for the Purchased Assets sold
on such date, by paying such Purchase Price to the Transferor in cash. On the
terms and subject to the conditions of this Agreement, the Issuer shall pay to
the Seller, on the Closing Date and on each other Business Day on which any
Purchased Assets are purchased from the Seller by the Issuer pursuant to this
Article II, the Purchase Price for such Purchased Assets by paying such Purchase
----------
Price to the Seller in cash (including funds borrowed under the Subordinated
Note as provided in the Subordinated Note and in Sections 2.06 and 2.07 of this
------------- ----
Agreement).
Section 2.06 The Subordinated Note. On the Closing Date, the
---------------------
Issuer shall deliver to the Seller the Subordinated Note in the form set forth
as Exhibit E. Pursuant to the terms of, and subject to the limitations set forth
---------
in, the Subordinated Note, the Issuer will request from the Seller an advance
(each, a "Subordinated Loan") on or prior to the Purchase Termination Date for
------------------
the purpose of purchasing Purchased Assets from the Seller hereunder. Pursuant
to the terms of the Subordinated Note, the Issuer shall not request or receive
any advance thereunder on any date if after giving effect to such advance, the
sum of the Subordinated Loans then outstanding and the aggregate Outstanding
Amount of all Notes would exceed the Net Eligible Receivables Balance minus the
Adjusted Loss Reserve, (such maximum
9
amount required to be advanced at any time, the "Subordinated Note Cap"). The
----------------------
Subordinated Loans shall be evidenced by, and shall be payable in accordance
with the terms and provisions of, the Subordinated Note. Notwithstanding any
other provision of this Agreement, the Issuer shall not use funds borrowed under
the Subordinated Note for any purpose other than paying the Purchase Price for
the Purchased Assets.
Section 2.07 Conditions Precedent to Subordinated Loans. The
-------------------------------------------
Issuer shall not request any Subordinated Loan under the Subordinated Note and
the Seller shall have no obligation to make a Subordinated Loan under this
Agreement unless the following conditions precedent have been satisfied on the
date of such Subordinated Loan:
(a) the Subordinated Note shall have been duly executed and
delivered by the Issuer and shall be in full force and effect;
(b) no Event of Bankruptcy shall have occurred and be continuing
with respect to the Issuer; and
(c) after giving effect to such Subordinated Loan, the aggregate
outstanding principal amount of the Subordinated Note shall not exceed the
Subordinated Note Cap.
Section 2.08 Adjustments.
-----------
(a) With respect to any Receivable, if on any day the Issuer
(or the Indenture Trustee on its behalf), the Servicer, the Seller or the
transferor determines that (i) any Receivable that (A) was not identified by the
Seller for inclusion in the Daily Receivables Activity Report as other than an
Eligible Receivable on the Business Day such Receivable was sold hereunder or
(B) was otherwise treated as or represented to be an Eligible Receivable in any
Daily Receivables Activity Report, was not in fact an Eligible Receivable on
such date or (ii) any of the representations or warranties set forth in Section
-------
2.16(d) or 2.16(k) was not true when made with respect to such Receivable or the
------- -------
Related Assets with respect to such Receivable (each such Receivable described
in clause (i) or clause (ii), a "Noncomplying Receivable"), then the Seller
-----------------------
shall pay the aggregate Unpaid Balance of such Receivables (such payment, the
"Noncomplying Receivables Adjustment") to the Issuer in accordance with Section
----------------------------------- -------
2.08(c).
-------
(b) If on any day the Unpaid Balance of any Receivable (i) is
reduced as a result of any cash discount or any adjustment by the Seller, the
Transferor or any Affiliate (other than the Issuer), (ii) is subject to
reduction on account of any offsetting account payable of the Seller or the
Transferor or any Affiliate (other than the Issuer) to an Obligor or is reduced
or cancelled as a result of a set-off in respect of any claim by, or defense or
credit of, the related Obligor against the Seller, the Transferor or any
Affiliate (other than the Issuer) (whether such claim, defense or credit arises
out of the same or a related or an unrelated transaction) or (iii) is reduced on
account of the obligation of the Originator to pay to the related Obligor any
rebate or refund (each of the reductions and cancellations described above in
clauses (i) through (iii), a "Dilution Adjustment"), then the Seller shall pay
--------------------
such Dilution Adjustment to the Issuer in accordance with Section 2.08(c).
--------------
(c) On each Business Day, the Seller shall pay to the Issuer
in accordance with Section 2.09, an amount (an "Adjustment") equal to the sum of
------------ ---------- ---
(A) the aggregate Dilution
10
Adjustment, if any, for each day from and including the immediately preceding
Business Day plus (B) the Noncomplying Receivables Adjustment, if any, for each
----
day from and including the immediately preceding Business Day. Such Adjustments
shall be paid (i) during the Revolving Period, either (x) in cash, (y) as an
offset of such Adjustment against the Purchase Price otherwise payable hereunder
for the Purchased Assets being purchased on the next Business Day or (z) as an
adjustment to the outstanding amount of the Subordinated Note and (ii) following
the Purchase Termination Date, in cash. The Receivables that gave rise to any
Dilution Adjustment or any Noncomplying Receivables Adjustment shall remain the
property of the Issuer. From and after the day on which any Noncomplying
Receivables Adjustment is made, any collections received by the Issuer that are
identified as proceeds of the Receivables that gave rise to such Noncomplying
Receivables Adjustment and any Related Security with respect to such Receivable
shall be promptly returned to the Seller.
(d) In addition to the foregoing Section 2.08(c), if on any
---------------
day a required consent is not obtained to an assignment of a Government
Receivable, then the Seller shall repurchase such Government Receivable by
paying the Unpaid Balance of such Receivable to the Issuer and the Issuer shall
convey such Receivable to Seller without any representations or warranties other
than that there are no Liens with respect to such Receivable arising by or
through the Issuer. Upon payment of the foregoing amount with respect to a
Receivable, such Receivable thereafter shall no longer be deemed to be a
"Receivable" for purposes of this Agreement.
----------
Section 2.09 Payments and Computations, Etc. All amounts to
------------------------------
be paid by the Seller to the Issuer hereunder shall be paid in accordance with
the terms hereof no later than [1:00 p.m.] (New York time) on the day when due
in United States dollars in immediately available funds to an account specified
in writing from time to time by the Issuer or its designee. Payments received by
the Issuer after such time shall be deemed to have been received on the next
Business Day. If any payment becomes due on a day that is not a Business Day,
then such payment shall be made on the next succeeding Business Day. The Seller
shall pay to the Issuer, on demand, interest on all amounts not paid when due
hereunder at a rate equal to the Base Rate plus 2% per annum; provided, however,
-------- -------
that such interest rate shall not at any time exceed the maximum rate permitted
by applicable law. All computations of interest payable hereunder shall be made
on the basis of a year of 360 days for the actual number of days elapsed
(including the first day but excluding the last day). All payments made under
this Agreement shall be made without set-off or counterclaim.
Section 2.10 No Assumption. The sales and Purchases of
--------------
Purchased Assets do not constitute and are not intended to result in a creation
or an assumption by the Issuer or its successors and assigns of any obligation
of the Seller or the Transferor or any other Person in connection with the
Purchased Assets (other than such obligations as may arise from the ownership of
the Receivables) or under the related Contracts or any other agreement or
instrument relating thereto, including without limitation any obligation to any
Obligors. None of the Servicer, the Issuer or the Issuer's assignees shall have
any obligation or liability to any Obligor or other customer or client of the
Originator, the Seller or the Transferor, except such obligations as may arise
from the ownership of the Receivables. No such obligation or liability to any
Obligor or other customer or client of the Originator, the Seller or the
Transferor (including, without limitation, any obligation under any Contract) is
intended to be assumed by
11
the Servicer or its successors and assigns hereunder and any such assumption is
expressly disclaimed.
Section 2.11 No Recourse. Except as specifically provided in
-----------
this Agreement, the sale and conveyance of the Purchased Assets under this
Agreement shall be without recourse to the Seller and the Transferor or any
predecessor- in-interest to either of them; provided, however, that each of the
-------- -------
Seller and the Transferor shall be liable to the Issuer and its successors and
assigns for all representations, warranties, covenants and indemnities made by
it pursuant to the terms of this Agreement (it being understood that no such
obligations of the Seller or the Transferor will arise solely on account of the
inability of an Obligor to pay a Receivable).
Section 2.12 True Sales; Back-Up Security Interest. Each of
----------------------------------------
the Seller and the Transferor and the Issuer intends the transfers of Purchased
Assets hereunder to be true sales by each of the Seller and the Transferor to
the Issuer that are absolute and irrevocable and to provide the Issuer with the
full benefits of ownership of the Purchased Assets, and none of the parties
hereto intends the transactions contemplated hereunder to be, or for any purpose
to be characterized as, loans from the Issuer to the Seller or the Transferor
which are secured by the Purchased Assets. The parties agree that the foregoing
sales constitute sales of "accounts" as described in the UCC, and that this
Agreement shall create a security interest in favor of the Issuer as the
purchaser of the Receivables. Notwithstanding such intent, if the arrangements
with respect to the Receivables hereunder are deemed for any purpose to
constitute a loan and not a purchase and sale of such Receivables, it is the
intention of the parties hereto that this Agreement shall still constitute a
security agreement under applicable law, and each of the Seller and the
Transferor hereby grants to the Issuer a first priority perfected security
interest in all of their respective right, title and interest, whether now owned
or hereafter acquired, in, to and under the Purchased Assets, and all money,
accounts, general intangibles, chattel paper, instruments, documents, goods,
investment property, deposit accounts, certificates of deposit, letters of
credit, and advices of credit consisting of, arising from or related to the
Purchased Assets, and all proceeds thereof, to secure their respective
obligations hereunder, including their obligations to remit to the Issuer, for
application in accordance the Indenture, all Collections of the Receivables and
other proceeds of the Purchased Assets. Other than the security interest granted
to the Issuer pursuant to this Agreement or such other security interests as
have been released pursuant to the Consent and Release Agreement, neither the
Seller nor the Transferor has pledged, granted, sold, conveyed or otherwise
assigned any interests or security interests in the Purchased Assets, and no
security agreement, financing statement or equivalent security or lien
instrument listing the Seller or Transferor as debtor covering all or any part
of the Purchased Assets is on file or of record in any jurisdiction, except (i)
such as may have been filed, recorded or made in favor of the Issuer or the
Indenture Trustee in connection with the Transaction Documents or (ii) such
financing statements as have been released pursuant to the Consent and Release
Agreement. This Agreement constitutes a valid and continuing security interest
(as defined in the UCC) in the Purchased Assets in favor of the Issuer and its
assigns, which security interest is prior to all other Liens (other than
Permitted Liens) and is enforceable as such as against creditors of and
purchasers from the Transferor, the Seller and the Originator in accordance with
its terms, except as such enforceability may be limited by bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws affecting creditors' rights generally or by general equitable principles,
whether considered in a proceeding at law or in equity and by an implied
covenant of good faith and fair dealing. Each of the Transferor and the Seller
owns good
12
and marketable title to the Purchased Assets which it purports to sell
hereunder, free and clear of any Lien, claim or encumbrance of any Person other
than Permitted Liens. All of the Receivables constitute accounts as such term is
defined in the UCC and all of the Purchased Assets constitute either accounts or
general intangibles (as each such term is defined in the UCC) except that
proceeds of the Purchased Assets may also take the form of instruments. Each of
the Transferor and the Seller has taken all action reasonably necessary to
perfect the security interest granted in this Agreement. The Servicer has filed,
on behalf of the Transferor and the Seller, all appropriate financing statements
in the proper filing offices in the appropriate jurisdictions under applicable
law in order to perfect the security interest in the Purchased Assets granted
hereunder. Neither the Transferor nor the Seller has authorized the filing of
and is not aware of any financing statements against either of them that
includes a description of collateral covering the Purchased Assets other than
(i) such financing statements as may have been filed, recorded or made in favor
of the Issuer or the Indenture Trustee in connection with the Transaction
Documents or (ii) such financing statements as have been released pursuant to
the Consent and Release Agreement. Neither the Transferor nor the Seller is
aware of any judgment or tax lien filings against either of them. The
representations and warranties set forth in this Section 2.12 shall survive the
------------
execution and delivery of this Agreement, shall be deemed re-made on each date
on which any Purchased Assets are sold hereunder and may not be waived by any
party hereto except pursuant to a written agreement executed in accordance with
Section 10.01 and as to which the Rating Agency Condition has been satisfied.
-------------
Section 2.13 Servicing and Further Transfer of Purchased
------------------------------------------------
Assets. Consistent with the Issuer's ownership of all Purchased Assets, as among
the Seller, the Transferor and the Issuer, the Issuer shall have the sole right
to service, administer and collect all Purchased Assets, to assign such right
and to delegate such right to others. Each of the Seller and the Transferor
hereby acknowledges and agrees that the Issuer has assigned and delegated the
servicing, administration and collection of the Purchased Assets to the Servicer
pursuant to Article III of this Agreement. In consideration of the Issuer's
-----------
purchase of the Purchased Assets and as more fully set forth in Section 10.15,
--------------
each of the Seller and the Transferor hereby acknowledges and agrees that the
Issuer intends to assign for the benefit of the Issuer and its successors and
assigns the rights and interests granted by the Seller and/or the Transferor to
the Issuer hereunder, and agrees to cooperate fully with the Issuer and its
successors and assigns in the exercise of such rights.
Section 2.14 Financing Statements; Further Assurances.
----------------------------------------
(a) In connection with the Purchase described above, the Seller
agrees at its expense, to record and file financing statements (and continuation
statements when applicable) with respect to the Purchased Assets conveyed by it
or by the Transferor meeting the requirements of applicable law in such manner
and in such jurisdictions as are necessary or desirable to perfect and maintain
the perfection of the transfer and assignment of its interest in the Purchased
Assets to the Issuer, and to deliver a file stamped copy of each such financing
statement or other evidence of such filing to the Issuer as soon as practicable
after the Closing Date.
(b) Each of the Seller and the Transferor further agrees to
promptly execute and deliver (or cause the Servicer or the related Sub-Servicer
to execute and deliver) all further
13
instruments and documents, and take all further action, that the Issuer or the
Indenture Trustee may reasonably request in order to (i) perfect, protect or
more fully evidence the Purchases of the Purchased Assets hereunder, (ii) to
enable the Issuer and its successors and assigns to exercise or enforce any of
its rights hereunder or under any other Transaction Document to which it is a
party or (iii) to enable the Indenture Trustee to exercise or enforce any of its
rights under the Indenture.
(c) Each of the Seller and the Transferor hereby authorizes the
Issuer and its successors and assignees to execute and file one or more
financing or continuation statements and amendments thereto and assignments
thereof with respect to all or any of the Purchased Assets, in each case whether
now existing or hereafter purchased or generated. If (i) either the Seller or
the Transferor fails to perform any of its agreements or obligations under this
Agreement and does not remedy such failure within the applicable cure period, if
any, and (ii) the Issuer or its successors or assignees in good faith reasonably
believes that the performance of such agreements and obligations is necessary or
appropriate to protect the interests of the Issuer or its successors or
assignees under this Agreement, then the Issuer or its successors or assignees
May (but shall not be required to) perform or cause performance of such
agreement or obligation, and the reasonable expenses of the Issuer or its
assignees incurred in connection with such performance shall be payable by the
Seller as provided in Section 5.02. The Servicer shall, on the Seller's and the
------------
Transferor's behalf, be responsible for the recording and filing of financing
statements, and delivering such other instruments and documents as may be
required to be recorded or delivered pursuant to this Section 2.14, and to
------------
ensure the taking of such other action as may be required hereunder or under the
Indenture to maintain the perfection and priority of the Issuer's security
interest in the Purchased Assets and of the Indenture Trustee's security
interest in the Pledged Assets.
Section 2.15 Marking of Records. In connection with the
-------------------
transfer described herein, (i) each of the Seller and the Transferor agrees to
indicate clearly and unambiguously in its computer files, books and records on
or prior to the Closing Date that the Receivables and other Purchased Assets
have been conveyed to the Issuer pursuant to this Agreement by so marking such
computer files, books and records, and (ii) the Servicer agrees to indicate
clearly and unambiguously in its computer files, books and records on or prior
to the Closing Date that the Receivables and other Purchased Assets have been
conveyed to the Issuer pursuant to this Agreement by so marking such computer
files, books and records, including the master data processing records
evidencing the Purchased Assets.
Section 2.16 Representations and Warranties of the Seller and
------------------------------------------------
Transferor. In order to induce the Issuer to enter into this Agreement and to
----------
make Purchases hereunder, each of the Seller and the Transferor hereby makes the
representations and warranties set forth in this Section 2.16, in each case as
of the date hereof, as of the Closing Date and, in the case of the Seller, as of
the date of each transfer by the Seller of the Purchased Assets hereunder and as
of any other date specified in such representation or warranty.
(a) Organization and Good Standing. It is a limited liability
------------------------------
company or corporation duly organized and validly existing in good standing
under the laws of its state of organization as noted on the first page hereof
and has full power and authority to conduct its
14
business as such business is presently conducted. It had at all relevant times,
and now has, all necessary power, authority and legal right to own and sell the
Purchased Assets.
(b) Due Qualification. It is duly qualified to do business, is
-----------------
in good standing as a foreign limited liability company or corporation, and has
obtained all necessary licenses and approvals in all jurisdictions in which the
conduct of its business requires such qualification, licenses or approvals and
in which the failure so to qualify or to obtain such licenses and approvals or
to preserve and maintain such qualification, licenses or approvals could
reasonably be expected to give rise to a Material Adverse Effect.
(c) Power and Authority: Due Authorization. It (i) has all
--------------------------------------
necessary power and authority (A) to execute and deliver this Agreement, the
Contracts and the other Transaction Documents to which it is a party, (B) to
perform its obligations under this Agreement, the Contracts and the other
Transaction Documents to which it is a party and (C) to sell and assign the
Purchased Assets transferred hereunder on the terms and subject to the
conditions herein and therein provided and (ii) has duly authorized by all
necessary action such sale and assignment and the execution, delivery and
performance of, and the consummation of the transactions provided for in, this
Agreement, the Contracts and the other Transaction Documents to which it is a
party.
(d) Valid Sale; Binding Obligations. This Agreement constitutes
-------------------------------
a valid sale, transfer, set-over and conveyance to the Issuer of all of its
right, title and interest in, to and under the Purchased Assets, which is
perfected and of first priority (subject to Permitted Liens) under the UCC and
other applicable law, enforceable against its creditors and purchasers from it,
free and clear of any Lien (other than Permitted Liens); and this Agreement
constitutes, and each other Transaction Document to which it is a party when
duly executed and delivered will constitute, a legal, valid and binding
obligation of such Person, enforceable against it in accordance with its terms,
except (i) as such enforceability may be limited by applicable bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium or other similar
laws affecting the enforcement of creditors' rights generally and (ii) as such
enforceability may be limited by general principles of equity, regardless of
whether such enforceability is considered in a proceeding in equity or at law.
(e) No Conflict or Violation. The execution, delivery and
---------------------------
performance by it of, and the consummation of the transactions contemplated by,
this Agreement and the other Transaction Documents to be signed by it, 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 material default under (A) its
certificate of incorporation, certificate of formation, limited liability
company agreement or by-laws (or other similar internal instrument) or (B) any
material indenture, loan agreement, mortgage, deed of trust or other material
agreement or instrument to which it is a party or by which it is bound, (ii)
result in the creation or imposition of any Lien on any of the Purchased Assets
pursuant to the terms of any such material indenture, loan agreement, mortgage,
deed of trust or other material agreement or instrument other than this
Agreement and the other Transaction Documents or (iii) conflict with or violate
any federal, state, local or foreign law or any decision, decree, order, rule or
regulation applicable to it or of any federal, state, local or foreign
regulatory body, administrative agency or other governmental instrumentality
having jurisdiction over it, which
15
conflict or violation described in this clause (iii), individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect. No
transaction contemplated hereby requires compliance with any bulk sales or
similar law, rule or regulation.
(f) Litigation and Other Proceedings. (i) There is no action,
--------------------------------
suit, proceeding or investigation pending, or to the best of its knowledge,
threatened, against it before any court, arbitrator, regulatory body,
administrative agency or other tribunal or governmental instrumentality and (ii)
it is not subject to any order, judgment, decree, injunction, stipulation or
consent order of or with any court or other Government Authority that, in the
case of either of the foregoing clauses (i) or (ii), (A) asserts the invalidity
of this Agreement or any other Transaction Document, (B) seeks to prevent the
sale of any Purchased Asset to the Issuer or the consummation of any of the
transactions contemplated by this Agreement or any other Transaction Document,
(C) seeks any determination or ruling that, in its reasonable judgment, would
materially and adversely affect the performance by it of its obligations under
this Agreement or any other Transaction Document to which it is a party or the
validity or enforceability of this Agreement or any other Transaction Document
to which it is a party or (D) individually or in the aggregate for all such
actions, suits, proceedings and investigations could reasonably be expected to
have a Material Adverse Effect.
(g) Governmental Approvals. Except where the failure to obtain
----------------------
or make such authorization, consent, order, approval or action could not
reasonably be expected to have a Material Adverse Effect, (i) all
authorizations, consents, orders and approvals of, or other actions by, any
Governmental Authority that are required to be obtained by it in connection with
the conveyance of the Purchased Assets or the due execution, delivery and
performance by it of this Agreement or any other Transaction Document to which
it is a party and the consummation of the transactions contemplated by this
Agreement or any other Transaction Document to which it is a party have been
obtained or made and are in full force and effect and (ii) all filings with any
Governmental Authority that are required to be obtained in connection with such
conveyances and the execution and delivery by it of this Agreement have been
made.
(h) Margin Regulations. It is not engaged, principally or as one
------------------
of its important activities, in the business of extending credit for the purpose
of purchasing or carrying margin stock (within the meanings of Regulations T, U
and X of the Board of Governors of the Federal Reserve System). It has not taken
and will not take any action to cause the use of proceeds of the sales hereunder
to violate said Regulations T, U or X.
(i) Taxes. It has filed (or there have been filed on its behalf
-----
as a member of a consolidated group) all tax returns and reports required by law
to have been filed by it and has paid all taxes, assessments and governmental
charges thereby shown to be owing by it, other than any such taxes, assessments
or charges (i) that are being diligently contested in good faith by appropriate
proceedings, for which adequate reserves in accordance with GAAP have been set
aside on its books and that have not given rise to any Liens (other than
Permitted Liens) or (ii) the amount of which, either singly or in the aggregate,
would not have a Material Adverse Effect.
(j) Solvency. After giving effect to each conveyance of
--------
Purchased Assets by it hereunder, it is solvent and able to pay its debts as
they come due and has adequate capital to conduct its business as presently
conducted.
16
(k) Quality of Title/Valid Transfers.
--------------------------------
(i) Immediately before each Purchase to be made by the
Issuer hereunder, each Purchased Asset to be sold to the Issuer by the
Seller or the Transferor shall be owned by such party free and clear of
any Lien (other than any Permitted Lien), and each of the Seller and
the Transferor shall have made all filings and shall have taken all
other action under applicable law in each relevant jurisdiction in
order to protect and perfect the ownership or security interest of the
Issuer and its successors and assignees in such Purchased Assets
against all creditors of, and purchasers from, the Seller and the
Transferor (subject to Permitted Liens).
(ii) With respect to each Receivable transferred hereunder
on such date, the Issuer shall acquire a valid and perfected ownership
or security interest in such Receivable and any identifiable proceeds
thereof, free and clear of any Lien (other than any Permitted Liens).
(iii) As of the date of transfer of a Purchased Asset to
the Issuer, no effective financing statement or other instrument
similar in effect that covers all or part of such Purchased Asset or
any interest therein is on file in any recording office except such as
may be filed (A) in favor of the Seller pursuant to the Receivables
Purchase and Sale Agreement, (B) in favor of the Transferor pursuant to
the Receivables Sale Agreement, (C) in favor of the Issuer pursuant to
this Agreement or otherwise filed by or at the direction of the Issuer,
(D) in favor of the Indenture Trustee under the Indenture and (E)
subject to the terms of the Consent and Release Agreement.
(iv) The Purchase Price owed to it constitutes reasonably
equivalent value for the Purchased Assets conveyed by it in
consideration therefor on such date, and no purchase of an interest in
such Purchased Assets by Issuer constitutes a fraudulent transfer or
fraudulent conveyance under the United States Bankruptcy Code or
applicable state bankruptcy or insolvency laws or subject to
subordination under similar laws or principles or for any other reason.
(l) Accuracy of Information. All written information furnished
------------------------
by the Seller or the Transferor to the Issuer or its successors and assigns
pursuant to or in connection with any Transaction Documents or any transaction
contemplated herein or therein with respect to the Purchased Assets transferred
hereunder on such date is true and correct in all material respects on such
date.
(m) Offices. Its principal place of business and chief executive
-------
office is located, and the offices where the Servicer keeps all Records related
to the Purchased Assets (and all original documents relating thereto) are
located, at the addresses specified in Schedule 2.16(m).
---------------
(n) Eligible Receivables. Each Receivable included in the
---------------------
Purchased Assets transferred hereunder, unless otherwise identified to the
Servicer by the Seller to be excluded from the Aggregate Receivables Balance in
the related Daily Receivables Activity Report, is an Eligible Receivable on such
date.
17
(o) Payment Instructions to Obligors. All Obligors have been
-----------------------------------
instructed by the Servicer to remit all payments on the Purchased Assets
directly to one of the Lockboxes or Lockbox Accounts and (ii) all Lockbox Banks
have been instructed by the Servicer to deposit all Collections remitted to a
Lockbox directly to the related Lockbox Account and neither the Seller nor the
Transferor has given any contrary instructions. The names and addresses of all
Lockbox Banks, together with the account numbers of the Lockbox Accounts at such
Lockbox Banks into which the Collections are put, are accurately set forth in
Schedule 2.16(o). The Seller has good title to the Lockbox Accounts free and
---------------
clear of any Lien, claim or encumbrance of any Person other than Permitted
Liens.
(p) Investment Company Act. Neither the Seller nor the
------------------------
Transferor is, or is controlled by, an "investment company" registered or
required to be registered under the Investment Company Act.
(q) Legal Names. Except as otherwise set forth in Schedule
----------- --------
2.16(q), neither the Seller nor the Transferor has, within the past five (5)
-------
years, (i) been known by any legal name other than its corporate name as of the
date hereof, (ii) been the subject of any merger or other corporate
reorganization that resulted in a change of name, identity or corporate
structure or (iii) used any trade names other than its actual corporate name.
(r) Compliance with Applicable Laws. Each of the Seller and the
-------------------------------
Transferor is in compliance with the requirements of all applicable laws, rules,
regulations and orders of all Governmental Authorities (federal, state, local or
foreign), a violation of any of which, individually or in the aggregate for all
such violations, is reasonably likely to have a Material Adverse Effect.
(s) Business and Indebtedness of Transferor. The Transferor has
---------------------------------------
no Indebtedness except as contemplated by this Agreement, by the Credit
Agreement and certain intercompany debt not prohibited under the terms of the
Credit Agreement. The Transferor has not engaged in any business other than the
Purchase of Receivables and other Purchased Assets under the Receivables Sale
Agreement, the transfer of Receivables and other Purchased Assets under this
Agreement, and its guarantee of the Originator's obligations under the Credit
Agreement.
(t) Credit and Collection Policy. The copy of the current Credit
----------------------------
and Collection Policy attached as Exhibit F to this Agreement is a true and
---------
complete copy. As of the date each Receivable is transferred hereunder, each of
the Servicer, the Originator, the Seller and the Transferor has complied in all
applicable material respects with the Credit and Collection Policy with respect
to such Receivable transferred on such date and the related Contract.
(u) ERISA Compliance.
----------------
(i) Except as would not have a Material Adverse Effect,
each Plan is in compliance in all material respects with the applicable
provisions of ERISA, the Code and other federal or state law. Each
Plan which is intended to qualify under Section 401(a) of the Code has
received a favorable determination letter from the Internal Revenue
Service and to the best knowledge of each of the Seller and the
Transferor,
18
nothing has occurred which would cause the loss of such qualification.
The Seller and each ERISA Affiliate have made all required
contributions to any Plan subject to Section 412 of the Code, and no
application for a funding waiver or an extension of any amortization
period pursuant to Section 412 of the Code has been made with respect
to any Plan.
(ii) There are no pending or, to the best knowledge of each
of the Seller or the Transferor, threatened, claims, actions or
lawsuits, or action by any Governmental Authority, with respect to any
Plan which has resulted or could reasonably be expected to result in a
Material Adverse Effect. There has been no prohibited transaction or
violation of the fiduciary responsibility rules with respect to any
Plan which has resulted or could reasonably be expected to result in a
Material Adverse Effect.
(iii) (a) No ERISA Event that requires notice to be given to
the PBGC has occurred or is reasonably expected to occur; (b) no Plan
has a Funded Current Liability Percentage of less than 90% as of the
most recent valuation date; (c) neither the Seller nor any ERISA
Affiliate has incurred, or reasonably expects to incur, any liability
under Title IV of ERISA with respect to any Plan (other than premiums
due and not delinquent under Section 4007 of ERISA); and (d) neither
the Seller nor any ERISA Affiliate has incurred, or reasonably expects
to incur, any liability (and no event has occurred which, with the
giving of notice under Section 4219 of ERISA, would result in such
liability) under Section 4201 or 4243 of ERISA with respect to a
Multiemployer Plan.
(v) Enforceability of Contracts. Each Contract with respect to
---------------------------
each Receivable is effective to create, and has created, a legal, valid and
binding obligation of the related Obligor to pay the Unpaid Balance of the
Receivable created thereunder and any accrued interest thereon, enforceable
against the Obligor in accordance with its terms, except as such enforcement may
be limited by applicable bankruptcy, insolvency, reorganization or other similar
laws relating to or limiting creditors' rights generally and by general
principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).
(w) Accounting. The manner in which the Seller and the
----------
Transferor account for the transactions contemplated by this Agreement does not
materially affect the determination that the sale of the Purchased Assets
thereunder to the Issuer is a "true sale."
(x) Compliance with Representations. On and as of the date of
-------------------------------
each Purchase, the Seller hereby represents and warrants that all of the other
representations and warranties of it set forth in this Article II are true and
----------
correct on and as of each such date (and after giving effect to all Receivables
in existence on each such date) as though made on and as of each such date.
The representations and warranties set forth in this Section
------
2.16 shall survive the transfers and assignments of the Receivables and other
----
Purchased Assets to the Issuer and the issuance of the Notes under the
Indenture. Upon discovery by the Seller, the Transferor, the Servicer or the
Issuer of a breach of any of the representations and warranties set forth in
this Section 2.16, the party discovering such breach shall give notice to the
------------
other parties within 3
19
Business Days following such discovery, provided that the failure to give notice
within 3 Business Days shall not preclude subsequent notice.
Section 2.17 Affirmative Covenants of the Seller and the
------------------------------------------------
Transferor. Except as otherwise provided with respect to the Transferor in
----------
Section 2.21, from the Closing Date until the termination of this Agreement in
------------
accordance with Section 9.01, each of the Seller and the Transferor hereby
-------------
agrees that it will perform the covenants and agreements set forth in this
Section 2.17.
------------
(a) Compliance with Laws, Etc. It will comply in all material
-------------------------
respects with all applicable laws, rules, regulations, judgments, decrees and
orders (including without limitation those relating to the Receivables), in each
case to the extent that any such failure to comply, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
Notwithstanding the foregoing, neither the Seller nor the Transferor has any
contractual duty to comply with the Federal Assignment of Claims Act to the
extent that Eligible Receivables owed by the United States federal government or
any subdivision thereof, or any agency, department or instrumentality thereof,
exceeds 2.5% of the Aggregate Receivables Balance.
(b) Preservation of Existence. It (i) will preserve and maintain
-------------------------
its existence, rights, franchises and privileges and good standing in the
jurisdiction of its organization and (ii) will qualify and remain qualified in
good standing in each other jurisdiction in which the failure to preserve and
maintain such qualification as a foreign corporation could reasonably be
expected to have a Material Adverse Effect.
(c) Location of Records and Offices. It will keep its principal
-------------------------------
place of business and chief executive office and the offices where it keeps all
Records (and all original documents relating thereto) at the addresses specified
in Schedule 2.16(m) or, upon not less than 30 days' prior written notice given
----------------
by the Seller to the Issuer, at such other locations in jurisdictions in the
United States of America where all action required by Section 2.14 has been
------------
taken and completed.
(d) Separate Existence of the Issuer. Each of the Seller and the
--------------------------------
Transferor acknowledges that the Indenture Trustee and the Noteholders are
entering into the transactions contemplated by the Transaction Documents in
reliance upon the Issuer's identity as a legal entity that is separate from the
Seller, the Transferor, the Originator and any other members of the Parent
Affiliated Group. Therefore, from and after the date of execution and delivery
of this Agreement, each of the Seller and the Transferor will take all
reasonable steps including, without limitation, all steps that Issuer or any
assignee of Issuer may from time to time reasonably request to maintain Issuer's
identity as a separate legal entity and to make it manifest to third parties
that Issuer is an entity with assets and liabilities distinct from those of the
Seller, the Transferor, the Originator and any other members of the Parent
Affiliated Group. Without limiting the generality of the foregoing and in
addition to the other covenants set forth herein, each of the Seller and the
Transferor (i) will not hold itself out to third parties as liable for the debts
of Issuer nor purport to own the Receivables and other assets acquired by
Issuer, (ii) will take all other actions necessary on its part to ensure that
Issuer is at all times in compliance with the covenants set forth in Section
-------
2.20 of this Agreement and Sections 3.07 of the Indenture and
---- -------------
20
(iii) will cause all tax liabilities arising in connection with the transactions
contemplated herein or otherwise to be allocated between Seller or Transferor on
the one hand and the Issuer on the other, to be allocated on an arm's-length
basis and in a manner consistent with the procedures set forth in U.S. Treasury
Regulations ss.ss.1.1502-33(d) and 1.1552-1.
(e) Turnover of Collections. Each of the Seller and the
--------------------------
Transferor has designated the Servicer as the party solely responsible for
receiving Collections on the Receivables and Related Assets to be sold
hereunder, and will not undertake any collection activities on its own behalf.
If the Seller, the Transferor or any of their respective agents or
representatives at any time receives any cash, checks or other instruments
constituting Collections, such recipient will segregate and hold such payments
in trust for, and in a manner acceptable to, the Servicer and will, promptly
upon receipt (and in any event within one (1) Business Day following receipt)
remit all such cash, checks and instruments, duly endorsed or with duly executed
instruments of transfer, to a Lockbox Account.
(f) Performance of Obligations. Each of the Seller and the
--------------------------
Transferor will timely and fully perform and comply with all provisions,
covenants and other promises required to be observed by it under the Transaction
Documents to which it is a party.
(g) Filing of Tax Returns and Payment of Taxes and Other
------------------------------------------------------------
Liabilities. Each of the Seller and the Transferor will file (or will cause to
-----------
be filed on its behalf as a member of a consolidated group) all tax returns and
reports required by law to be filed by it and will pay all taxes, assessments
and governmental charges shown to be owing by it, except for any such taxes,
assessments or charges (i) that are being diligently contested in good faith by
appropriate proceedings, for which adequate reserves in accordance with GAAP
have been set aside on its books and that not have given rise to any Liens
(other than Permitted Liens) or (ii) the amount of which, either singly or in
the aggregate, would not have a Material Adverse Effect.
(h) Payment Instruction to Obligors. Neither the Seller nor the
-------------------------------
Transferor will give any instructions to any Obligors contrary to those given to
such Obligors by the Servicer with respect to submission of payments on the
Purchased Assets or receivables and related assets that are not included in the
Purchased Assets.
(i) Identification of Eligible Receivables. The Seller will (or
---------------------------------------
will cause the Servicer to) (i) establish and maintain necessary procedures for
determining, no less frequently than each date on which a Daily Receivables
Activity Report is required to be delivered pursuant to Section 3.07(d), whether
--------------
each Receivable qualifies as an Eligible Receivable, and for identifying on any
such date all Receivables to be sold to the Issuer on that date that are not
Eligible Receivables and (ii) provide to the Servicer in a timely manner
information that shows whether, and to what extent, the Receivables described in
such Daily Receivables Activity Report are Eligible Receivables.
(j) Receivables Reviews. Upon reasonable prior notice, each of
-------------------
the Seller and the Transferor will permit the Issuer or its assignees (or other
Persons designated by the Issuer from time to time) or their agents or
representatives (including without limitation certified public accountants or
other auditors), at the expense of the Seller and during regular business hours,
(i) to examine and make copies of and abstracts from, and to conduct accounting
reviews
21
of, all Records in the possession or under the control of the Seller or the
Transferor, including without limitation the related Contracts, invoices and
other documents related thereto and (ii) to visit the offices of the Seller
and/or the Transferor for the purpose of examining any materials described in
the preceding clause (i) and to discuss matters relating to the Receivables or
the other Purchased Assets or the performance by the Seller or the Transferor of
their respective obligations under any Transaction Document to which either is a
party with any officers of the Seller or the Transferor having knowledge of such
matters or with the Seller's and the Transferor's certified public accountants
or other auditors; provided, however, that all such reviews will occur no more
-------- -------
frequently than once per year unless (i) LSFCC is the Servicer and a Servicer
Default has occurred and is continuing or (ii) the Issuer or its successor or
assignee has given advance written notice to the Seller that it believes the
composition and/or performance of the Purchased Assets have deteriorated in a
manner materially adverse to the interests of the Issuer or its assignees.
(k) Compliance with Credit and Collection Policy. Each of the
--------------------------------------------
Seller and the Transferor will comply in all material respects with the Credit
and Collection Policy with respect to each Receivable and the Contract related
to such Receivable.
(l) Accounting for Certain Assets. To the extent permitted by
-------------------------------
applicable law and GAAP, each of the Seller and the Transferor will (i) prepare
all financial statements that account for the transactions contemplated hereby
as a sale of the Purchased Assets by it to the Issuer and, in all other
respects, will account for and treat the transactions contemplated hereby
(including but not limited to accounting and (to the extent taxes are not
consolidated) for tax reporting purposes) as a sale of the Purchased Assets by
it to the Issuer and (ii) maintain and prepare its financial statements and
records in accordance with GAAP (unless otherwise permitted hereunder) applied
in accordance with the representation contained in Section 2.16(w).
---------------
(m) Reporting Requirements. From the Closing Date until the
----------------------
termination of this Agreement in accordance with Section 9.3, the Seller agrees
-----------
that it will furnish to the Issuer or its assignees:
(i) Annual Financial Statements. As soon as available and
---------------------------
in any event within 120 days after the end of each fiscal year of the
Originator copies of (i) the audited consolidated balance sheet of the
Originator and its consolidated Affiliates as at the end of such fiscal
year and the related statements of earnings and cash flows and
stockholders' equity of the Originator and its consolidated Affiliates
for such fiscal year, setting forth in each case in comparative form
the corresponding figures for the preceding fiscal year and prepared in
accordance with GAAP applied consistently throughout the periods
reflected therein, certified by independent certified public
accountants of nationally recognized standing in the United States (it
being understood and agreed that copies of such statements need not be
physically delivered to the extent that they are publicly available
through filing with the Securities and Exchange Commission);
(ii) Material Adverse Effect. Promptly and in any event
-----------------------
within 5 Business Days after any Authorized Officer has actual
knowledge thereof, written notice that describes in reasonable detail
any event or occurrence that, individually or in the aggregate for all
such events or occurrences, has had, or that such Authorized Officer in
22
its reasonable good faith judgment determines could reasonably be
expected to have, a Material Adverse Effect;
(iii) Proceedings. Promptly and in any event within 5
-----------
Business Days after an Authorized Officer has knowledge thereof,
written notice of (i) any litigation, investigation or proceeding of
the type described in Section 2.16(f) not previously disclosed to the
--------------
Issuer, (ii) any material adverse development that has occurred with
respect to any such previously disclosed litigation, investigation or
proceeding or (iii) any Unmatured Purchase Termination Event;
(iv) ERISA Event. Promptly (but in no event more than 10
-----------
Business Days after any event listed below) upon any Authorized Officer
becoming aware of the occurrence of any of the following events
affecting the Seller or any ERISA Affiliate: (x) an ERISA Event; (y) a
decrease in the Funded Current Liability Percentage for any Plan at the
end of any fiscal quarter to less than 90%; or (z) any significant
change in the status of any time disclosed pursuant to Section 2.16(u)
hereto, notice of such event and a copy of any notice with respect to
such event that is filed with a Governmental Authority and any notice
delivered by a Governmental Authority to the Seller or any ERISA
Affiliate with respect to such event.
(v) Purchase Termination Event. Promptly and in any event
---------------------------
within 5 Business Days after an Authorized Officer has knowledge
thereof, written notice of any Purchase Termination Event, Servicer
Default, Amortization Event or Event of Default or any event which,
with the giving of notice or passage of time or both, would constitute
such an event.
(vi) Other. Promptly, from time to time, such other
-----
information, documents, records or reports with respect to the
Purchased Assets or the condition or operations, financial or
otherwise, of the Seller or the Transferor as Issuer or its assignees
may from time to time reasonably request in order to protect the
interests of Issuer or such assignees under or as contemplated by this
Agreement and the other Transaction Documents.
Section 2.18 Negative Covenants of the Seller and the
------------------------------------------------
Transferor. Except as otherwise provided with respect to the Transferor in
----------
Section 2.21, from the Closing Date until the termination of this Agreement in
------------
accordance with Section 9.01, each of the Seller and the Transferor agrees that
------------
it will perform the covenants and agreements set forth in this Section 2.18.
------------
(a) Indebtedness. The Transferor will not create, incur or
------------
permit to exist any Indebtedness or other liabilities or give any guarantee or
indemnity in respect of any Indebtedness, except for (i) liabilities created or
incurred by the Transferor pursuant to the Transaction Documents to which it is
a party or contemplated by such Transaction Documents, (ii) other reasonable and
customary operating expenses; (iii) such Indebtedness, guarantees or indemnities
as are contemplated by the Credit Agreement and (iv) certain intercompany debt
not prohibited under the terms of such Credit Agreement.
23
(b) Sales, Liens, Etc. Neither the Seller nor the Transferor
-----------------
will sell, assign (by operation of law or otherwise) or otherwise dispose of, or
create or suffer to exist any Lien (other than Permitted Liens) of anyone
claiming by or through it on or with respect to, any Purchased Asset or any
interest therein, any Lockbox or Lockbox Account, other than sales of Purchased
Assets pursuant to this Agreement and neither will suffer to exist any Lien
(other than any Permitted Lien) on inventory the sale of which may give rise to
a Receivable unless the holder of such Lien has agreed not to claim any Lien or
interest with respect to any Purchased Asset.
(c) No Mergers, Etc. The Transferor will not consolidate with or
---------------
merge with or into any other Person or convey, transfer or sell all or
substantially all of its properties and assets to any Person except as otherwise
provided in Section 2.21. The Seller will not consolidate with or merge with or
------------
into any other Person or convey, transfer or sell all or substantially all of
its properties and assets to any Person, unless:
(i) (A) the Seller is the surviving entity thereof or, if
the Seller is not the surviving entity thereof, (x) the Person formed
by such consolidation or into which the Seller is merged or the entity
that acquires by conveyance, transfer or sale all or substantially all
of the properties and assets of the Seller (any such Person, the
"Surviving Entity") is an entity organized and existing under the laws
----------------
of the United States of America or any state thereof, (y) such
Surviving Entity expressly assumes, by an agreement supplemental hereto
in form and substance satisfactory to the Issuer and its assignees,
performance of every covenant and obligation of the Seller hereunder
and under the other Transaction Documents to which the Seller is a
party and (z) such Surviving Entity delivers to the Issuer and its
assignees an opinion of counsel that such Surviving Entity is duly
organized and validly existing under the laws of its organization, has
duly executed and delivered such supplemental agreement, and such
supplemental agreement is a valid and binding obligation of such
Surviving Entity, enforceable against such Surviving Entity in
accordance with its terms (subject to customary exceptions relating to
bankruptcy and equitable principles) and covering such other matters as
the Issuer or its assignees may reasonably request;
(ii) all actions necessary to maintain the perfection of
the security interests or ownership interests of the Issuer in the
Purchased Assets in connection with such consolidation, merger,
conveyance or transfer have been taken, as evidenced by an opinion of
counsel reasonably satisfactory to Issuer and its assignees;
(iii) so long as the Seller is th Servicer, no Servicer
Default or Purchase Termination Event or event which with the passage
of time or the giving of notice or both would become a Servicer Default
or a Purchase Termination Event is then occurring or would result from
such merger, consolidation, conveyance or transfer;
(iv) if such Surviving Entity is the Originator, counsel
for the Seller shall issue an opinion reasonably satisfactory to the
Issuer and its assignees reaffirming the opinions as to
non-consolidation and the status of the Purchase as a "true sale" by
the Seller to the Issuer of the Receivables issued in connection with
the original issuance of Notes under the Indenture; and
24
(v) each Rating Agency then rating any outstanding Series
of Notes has delivered to the Issuer and the Seller written
confirmation that such consolidation, merger, conveyance, transfer or
sale will not result in a downgrade or withdrawal of such Rating
Agency's then current rating of any Series of Notes.
(d) Limitations on Agreements. Neither the Seller nor the
---------------------------
Transferor will permit the validity or effectiveness of any Transaction Document
to which it is a party or the rights and obligations created thereby or pursuant
thereto to be amended, terminated, postponed or discharged, or permit any
amendment to any Transaction Document to which it is a party without the consent
of the Issuer and the Indenture Trustee, or permit any Person whose obligations
form part of the Purchased Assets to be released from such obligations, except
in the ordinary course of business or in accordance with the terms of such
Transaction Document.
(e) Change in Name. Neither the Seller nor the Transferor will
--------------
change its corporate name or the name under or by which it does business or the
jurisdiction in which it is incorporated unless it has given the Issuer and its
successors at least 30 days' prior written notice thereof and unless, prior to
any such change, the Seller has taken and completed all action required by
Section 2.14.
------------
(f) Charter Amendments. The Transferor will not amend any other
------------------
provision of its limited liability company agreement or by-laws (or other
similar internal instrument, if any), unless the Issuer shall have received not
less than 5 Business Days' prior written notice thereof, together with an
Officer's Certificate that such amendment will have no Material Adverse Effect.
(g) No Other Business or Agreements. The Transferor shall not
-------------------------------
engage in any business other than as contemplated by this Agreement, the other
Transaction Documents and the Credit Agreement and all activities incidental
thereto, or enter into or be a party to any agreement or instrument other than
any Transaction Document, the Credit Agreement or documents and agreements
incidental thereto.
(h) Guarantees, Loans, Advances and other Liabilities. Except as
-------------------------------------------------
contemplated by this Agreement or the other Transaction Documents and as
required under the Credit Agreement, the Transferor will not incur any
Indebtedness or make any loan or advance or credit to, or guarantee (directly or
indirectly or by an instrument having the effect of assuring another's payment
or performance on any obligation or capability of so doing or otherwise),
endorse or otherwise become contingently liable, directly or indirectly, in
connection with the obligations, stocks or dividends of, or own, purchase,
repurchase or acquire (or agree contingently to do so) any stock, obligations,
assets or securities of, or any other interest in, or make any capital
contribution to, any other Person.
(i) Change in Lockbox Accounts; Payment Instruction to Obligors.
-----------------------------------------------------------
Except through the Servicer as contemplated by Section 3.05(f), neither the
---------------
Seller nor the Transferor will make any changes to the Lockbox Accounts or
establish any new Lockbox Accounts or give instructions to Obligors or other
Persons contrary to those given by the Servicer regarding payments to be made to
the Issuer or payments to be made to any Lockbox Account, unless (i) the
Indenture Trustee has received copies of a Lockbox Agreement with each new
Lockbox
25
Bank duly executed by the Seller, the Issuer, the Indenture Trustee and such
Lockbox Bank and (ii) in the case of any termination, the Issuer or its
successors and assigns have received evidence to their satisfaction that the
Obligors that were making payments into a terminated Lockbox Account have been
instructed in writing to make payments into another Lockbox Account then in use.
(j) Extension or Amendment of Purchased Assets. Neither the
-----------------------------------------------
Seller nor the Transferor will extend, amend or otherwise modify the terms of
any Receivable included in the Purchased Assets, or amend, modify or waive any
material term or condition related thereto, except through the Servicer in
accordance with Section 3.10.
------------
(k) Change in Credit and Collection Policy. Neither the Seller
----------------------------------------
nor the Transferor will make any material change in the Credit and Collection
Policy that would be reasonably likely to adversely affect the collection of any
material portion of the Receivables or other Purchased Assets or to decrease in
any material respect the credit quality of any newly created Receivables or
other Purchased Assets.
Section 2.19 Representations and Warranties of the Issuer.
--------------------------------------------
The Issuer hereby represents and warrants, on and as of the date hereof and on
and as of the Closing Date, that (a) this Agreement has been duly authorized,
executed and delivered by the Issuer and constitutes the Issuer's valid, binding
and legally enforceable obligation, except (i) as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditors' rights generally and (ii) as such
enforceability may be limited by general principles of equity, regardless of
whether such enforceability is considered in a proceeding in equity or at law
and (b) the execution, delivery and performance of this Agreement by Issuer does
not violate any federal, state, local or foreign law applicable to the Issuer or
any agreement to which the Issuer is a party.
Section 2.20 Separate Existence of the Issuer. Each of the
-----------------------------------
Issuer and the SPC Member hereby acknowledges that the parties to the
Transaction Documents are entering into the transactions contemplated by the
Transaction Documents in reliance on the Issuer's identity as a legal entity
separate from the Originator, the Seller, the Transferor and the other members
of the Parent Affiliated Group. From and after the date hereof until one year
and one day after the Final Payout Date, the Issuer (and, with respect to clause
(vi) below, the SPC Member) shall take such actions as shall be required in
order that:
(i) The Issuer will conduct its business in office space
allocated to it and for which it pays an appropriate rent and overhead
allocation;
(ii) The Issuer will maintain records and books of account
separate from those of each of its Affiliates and telephone numbers and
stationery that are separate and distinct from those of each of its
Affiliates;
(iii) The Issuer's assets will be maintained in a manner
that facilitates their identification and segregation from those of any
of its Affiliates;
(iv) The Issuer will strictly observe all formalities
relating to its separate existence in its dealings with the public and
with each of its Affiliates, and funds
26
or other assets of the Issuer will not be commingled with those of any
of its Affiliates, except as may be permitted by the Transaction
Documents. The Issuer will at all times, in its dealings with the
public and with each of its Affiliates, hold itself out and conduct
itself as a legal entity separate and distinct from each of its
Affiliates. The Issuer will not maintain joint bank accounts or other
depository accounts to which any of its Affiliates (other than the
Servicer) has independent access;
(v) The duly admitted members of the Issuer and duly
appointed managers or officers of the Issuer will at all times have
sole authority to control decisions and actions with respect to the
daily business affairs of the Issuer;
(vi) Not less than two directors of the SPC Member will be
Independent Directors. The Issuer will observe those provisions in its
limited liability company agreement that provide that the Issuer will
not approve, or take any other action to cause the filing of, a
voluntary bankruptcy petition with respect to the Issuer unless the
board of directors of the SPC Member (including the Independent
Directors) and all managers of the Issuer unanimously approve the
taking of such action in writing prior to the taking of such action;
(vii) The Issuer will compensate each of its employees,
consultants and agents from the Issuer's own funds for services
provided to the Issuer;
(viii) The Issuer will not hold itself out to be responsible
for the debts of any of its Affiliates; and
(ix) The Issuer will take all actions necessary on its
part to be taken in order to ensure that the facts and assumptions
relating to the Issuer set forth in the opinion of Bingham Dana LLP of
even date herewith relating to substantive consolidation matters with
respect to the Seller, the Transferor, the Originator and the Issuer
will be true and correct at all times.
Section 2.21 Transferor's Right to Dissolve or Terminate.
------------------------------------------------
Notwithstanding the preceding provisions of this Article II, from and after the
----------
date on which all of the Receivables sold by the Transferor hereunder have been
collected and/or ceased to be Eligible Receivables, the Transferor shall be
allowed, by reason of merger, consolidation, dissolution or liquidation, to
terminate its existence and cease to maintain its rights and privileges as a
Delaware limited liability company and shall cease to be a party hereto. The
Seller hereby agrees that, upon any such dissolution or termination, it shall
remain responsible for observing any further covenants on the part of the
Transferor to be observed from and after such date. Notwithstanding the
foregoing, the Transferor shall not consolidate with or merge with or into any
other Person or convey, transfer or sell all or substantially all of its assets
to any other Person, unless the Person formed by such consolidation or into
which the Transferor is merged or the entity that acquires by conveyance,
transfer or sale all or substantially all of the properties and assets of the
Seller expressly assumes, by an agreement supplemental hereto in form and
substance satisfactory to the Issuer and its assignees, all obligations of the
Transferor under Sections 2.17(d), 2.17(e), 2.17(h) and 2.18(b), together with
---------------------------------- -------
any affirmative covenants of the Transferor which expressly survive the
termination of this Agreement.
27
ARTICLE III
ADMINISTRATION AND SERVICING OF RECEIVABLES
Section 3.01 Acceptance of Appointment and Other Matters
------------------------------------------------
Relating to the Servicer.
------------------------
(a) The servicing, administration and collection of the
Receivables and the other Purchased Assets shall be conducted by the Person
designated as the Servicer hereunder from time to time in accordance with this
Section 3.01. Until the Indenture Trustee gives a Termination Notice to Levi
-------------
Strauss Financial Center Corporation pursuant to Section 8.01, Levi Strauss
------------
Financial Center Corporation is hereby designated, and Levi Strauss Financial
Center Corporation, hereby agrees to act, as the Servicer under this Agreement
and the other Transaction Documents with respect to the Receivables and the
other Purchased Assets, and each of the Transferor and the Issuer consents to
Levi Strauss Financial Center Corporation, acting as the Servicer.
(b) In the ordinary course of business, the Servicer, with prior
written notice to the Indenture Trustee, may at any time delegate part or all of
its duties hereunder with respect to the Receivables and the other Purchased
Assets to any of its Affiliates that agree to conduct such duties in accordance
with the Credit and Collection Policy and this Agreement. Each such Affiliate to
whom any such duties are delegated in accordance with this Section 3.01(b) is
----------------
referred to herein as a "Sub-Servicer." Notwithstanding any such delegation by
------------
the Servicer, the Servicer shall remain liable for the performance of all duties
and obligations of the Servicer pursuant to the terms of this Agreement and the
other Transaction Documents, and such delegation shall not relieve the Servicer
of its liability and responsibility with respect to such duties. The fees and
expenses of any such Sub-Servicers shall be as agreed between the Servicer and
such Sub-Servicers from time to time, and none of the Issuer, the Indenture
Trustee or the holders of any Notes issued by the Issuer under the Indenture
shall have any responsibility therefor. Upon any termination of a Servicer
pursuant to Section 8.01, all Sub-Servicers designated pursuant to this Section
------------ -------
3.01(b) by such Servicer also shall be automatically terminated without the
------
payment of any termination fees from the Issuer, the Indenture Trustee or the
holders of any Notes.
(c) The designation of the Servicer (and each Sub-Servicer)
under this Agreement (and, in the case of any Sub-Servicer, under the agreement
or other document pursuant to which the Servicer makes a delegation of servicing
duties to such Sub-Servicer) shall automatically cease and terminate on the
Final Payout Date.
(d) Notwithstanding any term to the contrary in this Agreement
or in any of the other Transaction Documents, each of the parties hereto
acknowledges and agrees that the Servicer may perform any or all of its duties
and obligations hereunder through the use of Levi Strauss & Co. or any
"Applicable Party" (as defined in the Parent Undertaking), as Sub-Servicers
hereunder, each such delegation being expressly agreed to by the parties hereto.
28
Section 3.02 Duties of the Servicer and the Issuer.
-------------------------------------
(a) Each of the Seller, the Transferor, the Issuer and the
Indenture Trustee hereby appoints the Servicer from time to time designated
pursuant to Section 3.01(a) as Servicer hereunder to take all actions authorized
--------------
below or elsewhere in this Agreement and to enforce its respective rights and
interests in and under the Receivables and the other Purchased Assets.
(b) As Servicer hereunder, the Servicer shall service and
administer the Receivables and the other Purchased Assets, shall collect and
deposit into the Collection Account payments due under the Receivables and shall
charge-off as uncollectible Receivables, all in accordance with its customary
and usual servicing procedures and the Credit and Collection Policy. As Servicer
hereunder, the Servicer shall have full power and authority, acting alone or
through any party properly designated by it hereunder, to do any and all things
it may deem necessary or appropriate in connection with such servicing and
administration. The Issuer, the Seller, the Transferor and the Indenture Trustee
shall furnish the Servicer with any documents necessary or appropriate to enable
the Servicer to carry out its servicing and administrative duties hereunder. The
Servicer shall exercise the same care and apply the same policies with respect
to the collection, administration and servicing of the Receivables and other
Purchased Assets that it would exercise and apply if it owned such Receivables
and other Purchased Assets, all in substantial compliance with applicable law
and in accordance with the Credit and Collection Policy. The Servicer shall take
or cause to be taken all such actions as it deems necessary or appropriate to
collect each Receivable and other Purchased Asset (and shall cause each
Sub-Servicer, if any, to take or cause to be taken all such actions as the
Servicer deems necessary or appropriate to collect each Receivable and other
Purchased Asset for which such Sub-Servicer is responsible in its capacity as
Sub-Servicer) from time to time, all in accordance with applicable law and in
accordance with the Credit and Collection Policy.
(c) Without limiting the generality of the foregoing and subject
to Section 3.02(e) and Section 8.01, each of the Seller, the Transferor, the
---------------- ------------
Issuer and the Indenture Trustee hereby authorizes and empowers the Servicer or
its designee as follows, except to the extent any such power and authority is
revoked or limited by the Indenture Trustee on account of the occurrence of an
Unmatured Servicer Default or a Servicer Default or otherwise pursuant to
Section 8.01:
------------
(i) to give instructions to the Indenture Trustee for
withdrawals and payments from the Collection Account and to take any
other action necessary or appropriate to service the Pledged Assets as
set forth in the Indenture;
(ii) to the extent permitted under and in compliance with
the Credit and Collection Policy, extend the maturity of any past due
Receivable as it deems appropriate to maximize Collections thereof;
provided that such extension or adjustment shall not alter the status
of such Receivable as a Defaulted Receivable;
(iii) to execute and deliver any and all instruments of
satisfaction or cancellation, or of partial or full release or
discharge, and all other comparable instruments, with respect to the
Receivables and the other Purchased Assets on the Issuer's behalf;
29
(iv) to adjust the Unpaid Balance of any Receivable as
necessary to reflect any Dilutive Credits;
(v) after the delinquency of any Receivable or any default
in connection with any other Purchased Asset and to the extent
permitted under and in compliance with the Credit and Collection Policy
and with all applicable laws, rules, regulations, judgments, orders and
decrees of courts and other Governmental Authorities and all other
tribunals, to commence or settle collection proceedings with respect to
such Receivable or other Purchased Asset and otherwise to enforce the
rights and interests of the Issuer in, to and under such Receivable or
other Purchased Asset (as applicable), (which enforcement may include,
to the extent consistent with the Credit and Collections Policy and in
accordance with ordinary business practice, sales of Defaulted
Receivables to a third-party) unless the Indenture Trustee otherwise
revokes such authority in writing;
(vi) to make all filings and take all and other actions
necessary for the Issuer to maintain a first priority perfected
security and/or ownership interest in the Receivables (subject to
Permitted Liens); and
(vii) to determine on each day whether each Receivable being
conveyed to the Issuer on such day is an Eligible Receivable and to
identify on such day all Receivables sold to the Issuer on such date
that are not Eligible Receivables;
provided, however, that:
(A) following the appointment of a Servicer other than
Levi Strauss Financial Center Corporation, or when a Servicer
Default has occurred and is continuing, the Indenture Trustee
on behalf of the Issuer shall have the absolute and unlimited
right to direct the Servicer to commence or settle any legal
action to enforce collection of, or otherwise exercise rights
with respect to, any Receivable transferred to the Issuer or
to foreclose upon or repossess or otherwise exercise rights
with respect to, any other Purchased Assets transferred to the
Issuer; and
(B) the Servicer shall not, under any circumstances, be
entitled to make the Issuer or any assignee thereof a party to
any litigation without the prior written consent of the Issuer
or such assignee, as applicable.
(d) The Servicer shall pay out of its own funds, without
reimbursement, all expenses incurred in connection with its servicing activities
hereunder, including expenses related to enforcement of the Receivables, fees
and disbursements of its outside counsel and independent accountants and all
other fees and expenses, including the costs of filing UCC continuation
statements.
(e) In addition to its other obligations provided for hereunder,
the Servicer shall hold and maintain all Records in trust, for the benefit of
the Issuer, the Indenture Trustee and the holders of the Notes, which Records
shall be held separate and apart from the other property of the Servicer and
maintained in files marked to show that such Records are property of the Issuer
and have been pledged to the Indenture Trustee pursuant to the Indenture.
30
Section 3.03 Servicing Compensation. The Issuer hereby agrees
----------------------
to pay to the Servicer, as full compensation for its servicing activities
hereunder and under the other Transaction Documents and as reimbursement for any
expense incurred by it in connection therewith, a servicing fee (the "Servicing
---------
Fee") with respect to each Monthly Period, payable in arrears on the related
---
Payment Date, in an amount equal to one-twelfth of the product of the Servicing
Fee Rate multiplied by the ending Aggregate Receivables Balance for the related
Monthly Period subject to adjustment at the direction of the Indenture Trustee
(upon satisfaction of the Rating Agency Condition) to provide additional
servicing compensation to any Successor Servicer if necessary to reflect
then-current market rates for servicing of comparable receivables at any time
that Levi Strauss Financial Center Corporation is replaced as Servicer
hereunder. The share of the Servicing Fee allocable to the holders of the Notes
issued from time to time by the Issuer under the Indenture with respect to any
Monthly Period shall be set forth in the Indenture. The Servicing Fee shall be
payable solely out of Collections available for such purpose pursuant to, and
subject to the priority of payments set forth in, the Indenture. Notwithstanding
the preceding sentence, the portion of the Servicing Fee with respect to any
Monthly Period not payable out of the Collections allocated to the holders of
the Notes shall be payable out of the Collections allocable to the Issuer on the
related Payment Date as set forth in the Indenture or by the Issuer, and in no
event shall the holders of the Notes be liable for the share of the Servicing
Fee with respect to any Payment Period to be payable out of the Collections
allocable to the Issuer or by the Issuer. In consideration of the Servicing Fee,
the Servicer shall pay the fees and expenses of, and agrees to indemnify, the
Indenture Trustee, the Paying Agent, the Authentication Agent and the Transfer
Agent and Registrar in accordance with the terms of Section 6.04 hereof, it
-------------
being understood, however, that the Servicer's obligations under Section 6.04
------------
shall not be limited by the amount of the Servicing Fee. Such payment
obligations shall survive the termination of this Agreement, the resignation or
removal of the Indenture Trustee and the resignation or removal of the Servicer.
Section 3.04 Representations and Warranties of the Servicer.
------------------------------------------------
Levi Strauss Financial Center Corporation, as initial Servicer, hereby makes,
and any Successor Servicer by its appointment hereunder shall make with respect
to itself, on the Closing Date (and on the date of any such appointment), on the
date of each issuance of Notes by the Issuer and on the date of any increases in
Outstanding Amount of any Series of Notes, the following representations,
warranties and covenants, on which the Issuer and its assignees shall be deemed
to have relied:
(a) Organization and Good Standing. The Servicer is a
------------------------------------
corporation duly organized and validly existing in good standing under the laws
of the State of its incorporation and has full power and authority to own its
properties and to conduct its business as such properties are presently owned
and such business is presently conducted.
(b) Due Qualification. The Servicer is duly qualified to do
-----------------
business, is in good standing as a foreign corporation, and has obtained all
necessary licenses and approvals in all jurisdictions in which the conduct of
its business requires such qualification, licenses or approvals and in which the
failure so to qualify or to obtain such licenses and approvals or to preserve
and maintain such qualification, licenses or approvals could reasonably be
expected to give rise to a Material Adverse Effect with respect to the Servicer.
31
(c) Power and Authority; Due Authorization. The Servicer (i) has
--------------------------------------
all necessary corporate power and authority (A) to execute and deliver this
Agreement and the other Transaction Documents to which it is a party and (B) to
perform its obligations under this Agreement and the other Transaction Documents
to which it is a party and (ii) has duly authorized by all necessary corporate
action the execution, delivery and performance of, and the consummation of the
transactions provided for in, this Agreement and the other Transaction Documents
to which it is a party.
(d) Binding Obligations. This Agreement constitutes, and each
-------------------
other Transaction Document to which the Servicer is a party when duly executed
and delivered will constitute, a legal, valid and binding obligation of the
Servicer, enforceable against the Servicer in accordance with its terms, except
(i) as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and (ii) as such enforceability may be limited by
general principles of equity, regardless of whether such enforceability is
considered in a proceeding in equity or at law.
(e) No Conflict or Violation. The execution, delivery and
----------------------------
performance of, and the consummation of the transactions contemplated by, this
Agreement and the other Transaction Documents to which the Servicer 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 material default under (A) the
certificate of incorporation or the by-laws of the Servicer or (B) any material
indenture, loan agreement, mortgage, deed of trust or other material agreement
or instrument to which the Servicer is a party or by which it or any of its
respective properties is bound, (ii) result in the creation or imposition of any
Lien on any of the Purchased Assets pursuant to the terms of any such material
indenture, loan agreement, mortgage, deed of trust or other material agreement
or instrument, other than this Agreement and the other Transaction Documents to
which the Servicer is a party or (iii) conflict with or violate any federal,
state, local or foreign law or any decision, decree, order, rule or regulation
applicable to the Servicer or of any federal, state, local or foreign regulatory
body, administrative agency or other governmental instrumentality having
jurisdiction over the Servicer, which conflict or violation described in this
clause (iii), individually or in the aggregate, could reasonably be expected to
have a Material Adverse Effect with respect to the Servicer.
(f) Litigation and Other Proceedings. (i) There is no action,
-----------------------------------
suit, proceeding or investigation pending, or to the best knowledge of the
Servicer, threatened, against the Servicer before any court, regulatory body,
administrative agency or other tribunal or governmental instrumentality and (ii)
the Servicer is not subject to any order, judgment, decree, injunction,
stipulation or consent order of or with any court or other Governmental
Authority that, in the case of either of the foregoing clauses (i) and (ii), (A)
asserts the invalidity of this Agreement or any other Transaction Document to
which the Servicer is a party, (B) seeks any determination or ruling that, in
the reasonable judgment of the Servicer, would materially and adversely affect
the performance by the Servicer of its obligations under this Agreement or any
other Transaction Document to which the Servicer is a party or the validity or
enforceability of this Agreement or any other Transaction Document to which the
Servicer is a party or (C)
32
individually or in the aggregate for all such actions, suits, proceedings and
investigations could reasonably be expected to have a Material Adverse Effect
with respect to the Servicer.
(g) Governmental Approvals. Except where the failure to obtain
----------------------
or make such authorization, consent, order, approval or action could not
reasonably be expected to have a Material Adverse Effect with respect to the
Servicer, all authorizations, consents, orders and approvals of, or other
actions by, any Governmental Authority that are required to be obtained by the
Servicer in connection with the due execution, delivery and performance by the
Servicer of this Agreement or any other Transaction Document to which it is a
party and the consummation of the transactions contemplated by this Agreement
have been obtained or made and are in full force and effect.
(h) Taxes. The Servicer has filed (or there have been filed on
-----
its behalf as a member of a consolidated group) all tax returns and reports
required by law to have been filed by it and has paid all taxes, assessments and
governmental charges thereby shown to be owing by it, except for any such taxes,
assessments or charges (i) that are being diligently contested in good faith by
appropriate proceedings, for which adequate reserves in accordance with GAAP
have been set aside on its books and that have not given rise to any Liens
(other than Permitted Liens) or (ii) the amount of which, either singly or in
the aggregate, would not have a Material Adverse Effect with respect to the
Servicer.
(i) Accuracy of Information. All written information furnished
-----------------------
by the Servicer to the Originator or the Issuer pursuant to or in connection
with any Transaction Document or any transaction contemplated herein or therein
with respect to the Servicer is true and correct in all material respects on
such date.
(j) Offices. The principal place of business and chief
-------
executive office of the Servicer is located at the address specified in Schedule
--------
2.16(m).
-------
(k) Compliance with Applicable Laws. The Servicer is in
---------------------------------
compliance with the requirements of all applicable laws, rules, regulations and
orders of all Governmental Authorities (federal, state, local or foreign), a
violation of any of which, individually or in the aggregate for all such
violations, could reasonably be expected to have a Material Adverse Effect with
respect to the Servicer.
(l) Lockbox Banks. The names and addresses of all Lockbox Banks,
-------------
together with the account numbers of the Lockbox Accounts at such Lockbox Banks
into which the Collections are paid, are accurately set forth in Schedule
--------
3.04(l). Each Lockbox and each Lockbox Account is subject to a Lockbox Agreement
------
duly executed and delivered by the parties thereto. Each Lockbox Account
constitutes a "deposit account" within the meaning of the UCC. Pursuant to each
Lockbox Agreement, each Lockbox Bank has agreed to comply with instructions
originated by the Indenture Trustee directing disposition of the funds in the
Lockbox Accounts without further consent by any of the Transaction Parties and
such Lockbox Agreement is sufficient for the Indenture Trustee to have a
perfected security interest in such Lockbox Accounts. None of the Lockbox
Accounts are in the name of any person other than Issuer or the Indenture
Trustee, and none of the Transaction Parties has consented to the banks
maintaining any such Lockbox Accounts to comply with instructions of any person
other than
33
the Indenture Trustee. The representations and warranties set forth in this
Section 3.04(l) shall survive the execution and delivery of this Agreement and
----------------
may not be waived by any party hereto except pursuant to an amendment executed
in accordance with Section 10.01 and as to which the Rating
-------------
Agency Condition has been satisfied.
(m) Eligible Receivables. Each Receivable included in the
----------------------
Aggregate Receivables Balance reported in any Daily Receivables Activity Report
is an Eligible Receivable on such date.
(n) Payment Instructions to Obligors. The Servicer has
-------------------------------------
instructed (i) all Obligors to remit all payments on the Purchased Assets
directly to one of the Lockboxes or Lockbox Accounts and (ii) all Lockbox Banks
to deposit all Collections remitted to a Lockbox directly to the related Lockbox
Account. The names and addresses of all Lockbox Banks, together with the account
numbers of the Lockbox Accounts at such Lockbox Banks into which the Collections
are put, are accurately set forth in Schedule 2.16(o).
----------------
Section 3.05 Affirmative Covenants of Servicer. As long as it
---------------------------------
is the Servicer hereunder, the Servicer hereby agrees that it will perform the
covenants and agreements set forth in this Section 3.05. Notwithstanding the
------------
foregoing, the Servicer has no contractual duty to comply with the Federal
Assignment of Claims Act to the extent that Eligible Receivables owed by the
United States federal government or any subdivision thereof, or any agency,
department or instrumentality thereof, exceeds 2.5% of the Aggregate Receivables
Balance.
(a) Compliance with Laws, Etc. The Servicer will comply in all
-------------------------
material respects with all applicable laws, rules, regulations, judgments,
decrees and orders (including without limitation those relating to the
Receivables), in each case to the extent that the failure to comply,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect with respect to the Servicer.
(b) Preservation of Corporate Existence. The Servicer (i) will
-----------------------------------
preserve and maintain its corporate existence, rights, franchises and privileges
in the jurisdiction of its incorporation, other than any change in corporate
status by reason of a merger or consolidation permitted by Section 6.02 and (ii)
------------
will qualify and remain qualified in good standing as a foreign corporation in
each jurisdiction in which the failure to preserve and maintain such
qualification as a foreign corporation could reasonably be expected to have a
Material Adverse Effect with respect to the Servicer.
(c) Keeping of Records and Books of Account. The Servicer will
---------------------------------------
maintain and implement administrative and operating procedures (including
without limitation an ability to recreate records evidencing the Purchased
Assets in the event of the destruction of the originals thereof), and will keep
and maintain all documents, books, records and other information that are
necessary or advisable, in the reasonable determination of the Originator, the
Seller, the Issuer or the Indenture Trustee, for the collection of all amounts
due under any or all Purchased Assets. Upon the reasonable request of the Issuer
or the Indenture Trustee made at any time after the occurrence and continuance
of a Servicer Default, the Servicer will deliver copies of all Records in its
possession or under its control to the Issuer or its designee. The Servicer
34
will maintain at all times accurate and complete books, records and accounts
relating to the Purchased Assets and all Collections thereon in which timely
entries will be made.
(d) Location of Records and Offices. The Servicer will keep its
-------------------------------
principal place of business and chief executive office at the address specified
in Section 2.16(m) or, upon not less than 30 days' prior written notice given by
---------------
the Servicer to the Issuer and the Indenture Trustee, at other locations in
jurisdictions in the United States of America.
(e) Separate Existence of the Issuer. The Servicer hereby
------------------------------------
acknowledges that the parties to the Transaction Documents are entering into the
transactions contemplated by the Transaction Documents in reliance upon the
Issuer's identity as a legal entity separate from the Servicer. As long as it is
the Servicer hereunder, the Servicer will take such actions as shall be required
in order that:
(i) The Issuer's operating expenses will not be paid by
the Servicer, except that certain organizational expenses of the Issuer
and expenses relating to creation and initial implementation of the
Transaction Documents have been or will be paid by Levi Strauss
Financial Center Corporation;
(ii) Any financial statements of the Servicer that are
consolidated to include the Issuer will contain appropriate footnotes
clearly stating that (A) all of the Issuer's assets are owned by the
Issuer and (B) the Issuer is a separate corporate entity with its own
separate creditors that will be entitled to be satisfied out of the
Issuer's assets prior to any value in the Issuer becoming available to
the Issuer's equity holders;
(iii) Any transaction between the Issuer on the one hand and
the Servicer on the other hand will be fair and equitable, will be the
type of transaction that would be entered into by a prudent Person in
the position of the Issuer with the Servicer, and will be on terms that
are at least as favorable as may be obtained from a Person that is not
a member of the Parent Affiliated Group; and
(iv) The Servicer will not be, or will not hold itself out
to be, responsible for the debts of the Issuer.
(f) Payment Instruction to Obligors. The Servicer will instruct
-------------------------------
all Obligors to submit all payments on the Purchased Assets either (A) to one of
the Lockboxes maintained at the Lockbox Banks for deposit in a Lockbox Account
or (B) directly to one of the Lockbox Accounts. The Servicer will direct all
Obligors with respect to any receivables and related assets that are not
included in the Purchased Assets to deposit all collections in respect of such
receivables and related assets to an account that is not a Lockbox or Lockbox
Account and will take such other steps as the Issuer may reasonably request to
ensure that all collections on such receivables and related assets will be
segregated from Collections on Purchased Assets.
(g) Segregation of Collections. The Servicer will use reasonable
--------------------------
efforts to minimize the deposit of any funds other than Collections into any of
the Lockbox Accounts and, to the extent that any such funds nevertheless are
deposited into any of such Lockbox Accounts, will promptly identify any such
funds.
35
(h) Computer Software, Hardware and Services. The Seller, in its
----------------------------------------
capacity as the initial Servicer, will use commercially reasonable efforts to
provide the Issuer and any Successor Servicer with such licenses, sublicenses
and/or assignments of contracts as the Issuer or the Successor Servicer requires
with regard to all services and computer hardware or software that relate to the
servicing of the Receivables or the other Purchased Assets (to the extent such
licenses and contracts are assignable).
(i) Turnover of Collections. If the Servicer or any of its
-------------------------
agents or representatives at any time receives any cash, checks or other
instruments constituting Collections, such recipient will segregate and hold
such payments in trust for, and in a manner acceptable to, the Issuer and will,
promptly upon receipt (and in any event within one (1) Business Day following
receipt) remit all such cash, checks and instruments, duly endorsed or with duly
executed instruments of transfer, to a Lockbox Account or the Collection
Account.
(j) Filing of Tax Returns and Payment of Taxes and Other
------------------------------------------------------------
Liabilities. The Servicer will file (or will cause to be filed on its behalf as
-----------
a member of a consolidated group) all tax returns and reports required by law to
be filed by it and will pay all taxes, assessments and governmental charges
shown to be owing by it, except for any such taxes, assessments or charges (i)
that are being diligently contested in good faith by appropriate proceedings,
for which adequate reserves in accordance with GAAP shall have been set aside on
its books and that shall not have given rise to any Liens (other than Permitted
Liens) or (ii) the amount of which, either singly or in the aggregate, shall not
have a Material Adverse Effect with respect to the Servicer.
Section 3.06 Negative Covenants of Servicer. As long as it is
------------------------------
the Servicer hereunder, the Servicer hereby covenants that the Servicer shall
not:
(a) Change in Credit and Collection Policy. (i) Make any change
--------------------------------------
in the Credit and Collection Policy that would be reasonably likely to adversely
affect the collection of any material portion of the Receivables or other
Purchased Assets or to decrease in any material respect the overall credit
quality of any newly created Receivables or other Purchased Assets or (ii) make
any material change in the character of its business or engage in any business
unrelated to such business as currently conducted that, in either case,
individually or in the aggregate with all other such changes, would be
reasonably likely to have a material adverse effect on the performance of the
Purchased Assets;
(b) Change in Name. Change its corporate name or the name under
--------------
or by which it does business unless the Servicer has given each of the Seller,
the Issuer and the Indenture Trustee at least 30 days' prior written notice
thereof;
(c) Change in Payment Instruction to Obligors. Make any change
-----------------------------------------
in the instructions to Obligors or other Persons regarding payments to be made
to it or payments to be made to any Lockbox Account, which payments relate to
the Purchased Assets, unless the Servicer has given the Issuer and its
successors and assigns prior written notice thereof, and then only in compliance
with Section 3.05(f), or add or terminate any bank as a Lockbox Bank from those
---------------
listed in Schedule 2.16(o) unless (i) the Indenture Trustee has received copies
----------------
of a Lockbox Agreement with each new Lockbox Bank duly executed by the parties
thereto and (ii) in the case of any termination, the Issuer or its successors
and assigns have received evidence to their
36
satisfaction that the Obligors that were making payments into a terminated
Lockbox Account have been instructed in writing to make payments into another
Lockbox Account then in use;
(d) Establishment of Lockbox Accounts. Enter into a Lockbox
------------------------------------
Agreement (other than as set forth in Exhibit B) without the prior written
consent of the Issuer and the Indenture Trustee; or
(e) Instructions to Indenture Trustee. Instruct the Indenture
---------------------------------
Trustee to release any Collections to the Issuer pursuant to Section 8.04 of the
------------
Indenture or pursuant to any related Indenture Supplement on any day on which an
Asset Deficiency exists and would be continuing after such release.
Section 3.07 Records of the Servicer and Reports to be
------------------------------------------------
Prepared by the Servicer.
------------------------
(a) The Servicer shall maintain at all times accurate and
complete books, records and accounts relating to the Receivables, the other
Purchased Assets and the Contracts and all Collections thereon, in which timely
entries shall be made. The Servicer shall maintain and implement administrative
and operating procedures (including without limitation an ability to recreate
Records evidencing Receivables and the other Purchased Assets in the event of
the destruction of the originals thereof), and shall keep and maintain all
documents, books, records and other information that the Servicer deems
reasonably necessary for the identification of Eligible Receivables and for the
collection of all Receivables and other Purchased Assets. Upon the reasonable
request of the Indenture Trustee or the Issuer after the occurrence and
continuance of an Unmatured Servicer Default or a Servicer Default or other
termination under Section 8.01, the Servicer will deliver copies of all books
------------
and records maintained pursuant to this Section 3.07(a) to the Indenture
----------------
Trustee.
(b) During regular business hours upon reasonable prior notice,
the Servicer shall permit the Originator, the Issuer, the Indenture Trustee (or
such other Person whom the Indenture Trustee or the Issuer may designate from
time to time), or their agents or representatives (including without limitation
certified public accountants or other auditors), in each case, only after
executing and delivering to the Servicer a confidentiality agreement in form and
substance reasonably satisfactory to the Servicer, at the expense of the
Servicer and to the extent reasonably necessary to protect the interests of the
holders of the Notes, (i) to examine and make copies of and abstracts from, and
to conduct accounting reviews of, all Records and other documentation regarding
the Receivables and the Lockbox Accounts which are in the possession or under
the control of the Servicer, including without limitation the related Contracts,
invoices and other documents related thereto, and (ii) to visit the offices and
properties of the Servicer for the purpose of examining the materials described
in clause (i) above, and to discuss matters relating to the Receivables or the
other Purchased Assets or the performance by the Servicer of its obligations
under any Transaction Document to which it is a party with any Authorized
Officer of the Servicer having knowledge of such matters and with its certified
public accountants or other auditors. The Indenture Trustee may conduct, or
cause its agents or representatives to conduct, reviews of the types described
in this Section 3.07(b) whenever the Indenture Trustee reasonably deems any such
---------------
review appropriate, and the Indenture Trustee shall
37
conduct, or cause its agents or representatives to conduct, such a review if
requested by the Issuer.
(c) No later than 3 Business Days prior to the Payment Date with
respect to any Outstanding Series, the Servicer shall prepare and deliver to the
Issuer, the Indenture Trustee and each Rating Agency a report with respect to
the Monthly Period then most recently ended and such Outstanding Series of
Notes, substantially in the form provided in the related Supplement or in such
other form as is reasonably acceptable to the Issuer (each such report, a
"Monthly Receivables Activity Report"). Such Monthly Receivables Activity Report
-----------------------------------
shall include a certification that, to the best of the Servicer's knowledge, no
Unmatured Servicer Default or Servicer Default has occurred and is continuing.
(d) No later than 3:00 p.m. New York time on each Deposit Date,
the Servicer shall prepare and deliver to the Issuer and the Indenture Trustee a
report, substantially on the form attached hereto as Exhibit D (each such
report, a "Daily Receivables Activity Report"), setting forth, among other
------------------------------------
things, the calculations of the Allocated Receivables Amounts and Target
Receivables Amounts for all Series as of the close of business on the preceding
Business Day and the allocations of Collections among all Outstanding Series to
be made on such Deposit Date.
Section 3.08 Annual Certificate of Servicer. The Servicer
---------------------------------
shall deliver to the Issuer, the Indenture Trustee and each Rating Agency on or
before June 30 of each calendar year, beginning with June 30, 2002, an Officer's
Certificate substantially in the form of Exhibit A.
Section 3.09 Annual Servicing Report of Independent Public
------------------------------------------------
Accountants; Copies of Reports Available. On or before June 30 of each calendar
-----------------------------------------
year, beginning with June 30, 2002, the Servicer shall cause a firm of
nationally recognized independent public accountants (who also may render other
services to the Servicer, the Issuer, the Originator, the Seller or the
Transferor) to furnish a report (addressed to the Issuer and the Indenture
Trustee) to the Issuer and the Indenture Trustee to the effect that they have
applied certain procedures agreed upon with the Servicer and have examined
certain documents and records relating to the servicing of the Receivables and
other Purchased Assets under this Agreement and that, on the basis of such
agreed-upon procedures, nothing has come to the attention of such accountants
that caused them to believe that the servicing (including the allocation of
Collections) has not been conducted in material compliance with the terms and
conditions as set forth in Articles III and IV of this Agreement, other than
--------------------
such exceptions as shall be set forth in such statement. Such report shall set
forth the agreed-upon procedures performed.
Section 3.10 Adjustments; Modifications.
--------------------------
(a) If on any day the Unpaid Balance of any Receivable is
reduced by the Servicer as a result of any Dilutive Credits, then the Servicer
shall cause such Dilution Adjustments to be applied in accordance with Section
-------
2.08(c) and, if such Dilutive Credit results from the acts or omissions of the
-------
Originator, to ensure that such Dilution Adjustment is credited against the
amounts otherwise owed by the Seller to the Originator in accordance with the
terms and provisions of the Receivables Purchase and Sale Agreement.
38
(b) So long as no Unmatured Servicer Default or Servicer Default
shall have occurred and be continuing, the Servicer may adjust, and may permit
each Sub-Servicer appointed by it pursuant to Section 3.01(b) to adjust, the
----------------
outstanding unpaid balance of any Receivable in accordance with the Credit and
Collection Policy and the terms of this Agreement, provided that (i) such
--------
adjustment would not cause or result in an Eligible Receivable becoming
ineligible and (ii) either the Servicer or the Originator pays any related
Dilution Adjustment pursuant to Section 3.10(a) above (including by offsetting
--------------
such Adjustment against the "Purchase Price" or Subordinated Note pursuant to
---------------
Section 2.08(c)) of the Receivables Sale Agreement. The Servicer shall, or shall
---------------
cause the applicable Sub-Servicer to, write off Receivables from time to time in
accordance with the terms of this Agreement and the terms of the Credit and
Collection Policy, and such a write-off shall not give rise to any obligation to
make a Dilution Adjustment.
(c) If (i) the Servicer makes a deposit into the Collection
Account in respect of a Collection of a Receivable and such Collection was
received by the Servicer in the form of a check that is not honored for any
reason or (ii) the Servicer makes an error with respect to the amount of any
Collection and deposits an amount that is less than or more than the actual
amount of such Collection, the Servicer shall appropriately adjust the amount
subsequently deposited into the Collection Account to reflect such dishonored
check or error. Any Receivable in respect of which a dishonored check is
received shall be deemed not to have been paid. Notwithstanding the first two
sentences of this paragraph, adjustments made pursuant to this Section 3.10(c)
---------------
shall not require any change in any report previously delivered pursuant to
Section 3.07(c) or (d).
---------------------
(d) The Servicer shall not extend, amend or otherwise modify the
terms of any Receivable, or amend, modify or waive any material term or
condition related thereto, except as provided in this Section 3.10.
------------
Section 3.11 Calculations. Without limiting the generality
------------
of the foregoing provisions of this Article III, the Servicer shall perform all
-----------
calculations necessary in order to determine payments to be made to holders of
Notes and deposits to be made to reserves and other Series Accounts in
accordance with the Indenture and any Indenture Supplement and shall provide
written instructions to the Indenture Trustee with respect to the foregoing upon
which the Indenture Trustee may conclusively rely in making allocations and
distributions under the Indenture and any Indenture Supplement.
Section 3.12 Application of Collections. (a) In accordance
----------------------------
with the Credit and Collection Policy, the Servicer shall apply all monies
received by or on behalf of any Obligor in accordance with the directions of
such Obligor. The Servicer shall contact the Obligor if necessary to obtain such
directions, or if such directions cannot be obtained, the Servicer shall apply
Collections of such Obligor in the order that such Receivables were originated,
with the oldest Receivable being paid first.
(b) If at any time the Servicer shall determine that any amount
on deposit in the Collection Account does not constitute Collections or the
proceeds thereof, the Servicer shall instruct the Indenture Trustee to withdraw
such amounts from the Collection Account and to pay such amounts to the Person
that the Servicer determines is the Person entitled thereto, as provided in
Section 8.04 of the Indenture.
------------
39
ARTICLE IV
ACCOUNTS AND COLLECTIONS
Section 4.01 Lockboxes; Rights after Replacement of Servicer.
------------------------------------------------
(a) Each of the Seller and the Transferor hereby transfers to
the Issuer the ownership of, and the exclusive dominion and control over, each
of the Lockboxes and Lockbox Accounts owned by either of them and each of the
Seller and the Transferor hereby agrees to take any further action that the
Issuer or its assignees may reasonably request in order to effect or complete
such transfer. Each of the Seller and the Transferor hereby acknowledges and
agrees that it has no claim to or interest in any of the Lockbox Accounts
(except for the rights of withdrawal otherwise provided in this Agreement with
respect to the Seller in its capacity as Servicer).
(b) At any time following a Servicer Default and the replacement
of the Servicer as a result thereof:
(i) The Issuer or its assignees may direct the Obligors of
Receivables, or any of them, to pay all amounts payable under any
Receivable directly to the Issuer or its assignees;
(ii) At the request of the Issuer or its assignees and at
the Seller's expense, the Seller shall give notice of such ownership to
each said Obligor and direct that payments be made directly to the
Issuer or its assignees;
(iii) At the request of the Issuer or its assignees and at
the Seller's expense, the Seller shall (A) assemble all of the Records,
to the extent such Records are in its possession, or instruct any escrow
agents holding any such documents, instruments and other records on its
behalf to make the same available and (B) segregate all cash, checks
and other instruments received by it from time to time constituting
Collections in a manner reasonably acceptable to the Issuer or its
assignees and, promptly upon receipt, remit all such cash, checks and
instruments, duly endorsed or with duly executed instruments of
transfer, to the Issuer or its assignees; and
(iv) Each of the Seller and the Transferor hereby
authorizes the Issuer or its assignees to take any and all steps in its
name and on its behalf that are necessary or desirable, in the
reasonable determination of the Issuer or its assignees, to collect all
amounts due under any and all Purchased Assets, including without
limitation endorsing its name on checks and other instruments
representing Collections and enforcing the Purchased Assets.
Section 4.02 Establishment of Collection Account. The
-----------------------------------------
Servicer, for the benefit of the Indenture Trustee and the holders of the Notes,
shall establish and maintain with the Indenture Trustee a Qualified Account
(including any subaccount thereof) in the name of the Indenture Trustee, bearing
a designation clearly indicating that the funds and other property credited
thereto are held for the benefit of the Issuer and the holders of the Notes (the
"Collection Account").
------------------
40
The Collection Account shall be under the sole dominion and
control of the Indenture Trustee. Except as expressly provided in this Agreement
or the Indenture, the Servicer agrees that it shall have no right of setoff or
banker's lien against, and no right to otherwise deduct from, any funds held in
the Collection Account for any amount owed to it by the Issuer, the Originator,
the Seller, the Transferor, the Indenture Trustee or any holder of the Notes. If
the Collection Account at any time ceases to be an Qualified Account then,
within 10 Business Days of the Issuer's or Servicer's knowledge thereof, the
Issuer or the Servicer shall establish a new Collection Account meeting the
conditions specified above, transfer any monies, documents, instruments,
investment property, certificates of deposit and other property to such new
Collection Account and from the date such new Collection Account is established,
it shall be the Collection Account. Pursuant to the authority granted to the
Servicer in Section 3.02, the Servicer shall have the power, revocable by the
------------
Indenture Trustee at the direction of the Majority Noteholders, to instruct the
Indenture Trustee to make withdrawals and payments from the Collection Account
for the purposes of carrying out the Servicer's duties hereunder.
At the written direction of the Servicer, funds on deposit in
the Collection Account shall be invested in Eligible Investments selected by the
Servicer. All such Eligible Investments shall be held by the Indenture Trustee
for the benefit of the Issuer and the holders of the Notes. Investments of funds
representing Collections collected during any Monthly Period shall be invested
in Eligible Investments that will mature so that such funds will be available no
later than the close of business on the day preceding the monthly Payment Date
following such Monthly Period, in amounts sufficient to the extent of such funds
to make the required distributions on such Payment Date. On each Payment Date,
all interest and other investment earnings (net of losses and investment
expenses) on funds on deposit in the Collection Account shall be paid to the
Servicer as additional servicing compensation. The Servicer shall bear no
responsibility or liability for any losses resulting from investment or
reinvestment of any funds in accordance with this Section 4.02 or for the
------------
selection of Eligible Investments in accordance with the provisions of this
Agreement.
Section 4.03 Collections and Allocations. The Servicer shall
---------------------------
instruct the Indenture Trustee in writing to apply all funds on deposit in the
Collection Account as described in the Indenture and each Supplement. Except as
otherwise provided below, the Servicer shall transfer all Collections and other
Purchased Assets consisting of cash or cash equivalents from the Lockbox
Accounts into the Collection Account as promptly as possible after the date of
receipt of such Collections, but in no event later than 2 Business Days
following the date of receipt.
ARTICLE V
OTHER MATTERS RELATING TO THE SELLER AND THE TRANSFEROR
Section 5.01 Liability of the Seller and the Transferor. Each
------------------------------------------
of the Seller and the Transferor shall be liable for all obligations, covenants,
representations and warranties arising under or related to this Agreement
including, in the case of the Seller, all obligations, covenants,
representations and warranties made by it in its capacity as Servicer.
41
Section 5.02 Indemnification by the Seller. Without limiting
-----------------------------
the foregoing and any other rights that any Indemnified Party may have hereunder
or under applicable law, the Seller hereby agrees to indemnify the Issuer, the
Indenture Trustee and each of the successors, permitted transferees and assigns
of the foregoing, and all officers, directors, shareholders, controlling
Persons, employees and agents of any of the foregoing (each of the foregoing
Persons, an "Indemnified Party"), from and against any and all damages, losses,
-----------------
claims (whether on account of settlements or otherwise, and whether or not the
applicable Indemnified Party is a party to any action or proceeding that gives
rise to any Indemnified Losses), actions, suits, demands, judgments, liabilities
(including penalties), obligations or disbursements of any kind or nature and
related costs and expenses (including reasonable attorneys' fees and
disbursements) awarded against or incurred by any of them arising out of or as a
result of any of the following (all of the foregoing, collectively, "Indemnified
-----------
Losses"):
------
(a) (i) any representation or warranty made or deemed made by
the Seller, the Transferor (or any of their respective Authorized Officers)
(whether or not made or delivered to the Indemnified Party) under any of the
Transaction Documents, (ii) any information provided by it for inclusion in the
Daily Receivables Activity Report or (iii) any other information or report
delivered by the Seller or the Transferor with respect to the Seller, the
Transferor or the Purchased Assets having been untrue or incorrect in any
respect when made or deemed made;
(b) the failure by the Seller or the Transferor to comply with
any law, rule or regulation applicable to it with respect to any Purchased Asset
or failure of any Purchased Asset to comply with such law, rule or regulation as
of the date of the sale of such Purchased Asset hereunder;
(c) the failure to vest and maintain vested in the Issuer a
first priority perfected ownership or security interest in the Purchased Assets,
free and clear of any Lien (other than any Permitted Lien), whether existing at
the time of the sale of such Purchased Asset or at any time thereafter;
(d) any failure of the Seller or the Transferor to perform its
duties or obligations in accordance with the provisions of the Transaction
Documents to which it is a party or any Contract;
(e) the failure to file, or any delay in filing, financing
statements or other similar instruments or documents under the Uniform
Commercial Code of any applicable jurisdiction or other applicable laws with
respect to the transfer of any Purchased Asset to the Issuer, whether at the
time of any sale or at any subsequent time;
(f) the failure by the Seller or the Transferor to pay any tax
or governmental fee or charge (other than franchise taxes and taxes on or
measured by the net income of any Indemnified Party), all interest and penalties
thereon or with respect thereto, and all out-of-pocket costs and expenses
(including the reasonable fees and expenses of counsel in defending against the
same) that arise by reason of the purchase or ownership of the Purchased Assets;
42
(g) any products liability, personal injury or damage suit, or
other similar claim arising out of or in connection with merchandise, insurance
or services that are the subject of any Contract or any Receivable;
(h) any reduction in the Unpaid Balance of any Receivable
included in the Purchased Assets as a result of (i) any cash discount or any
adjustment by the Seller, the Transferor or any Affiliate (other than the
Issuer), (ii) any offsetting account payable of the Seller, the Transferor or
any Affiliate (other than the Issuer) to an Obligor, (iii) a set-off in respect
of any claim by, or defense or credit of, the related Obligor against the
Seller, the Transferor or any Affiliate (other than the Issuer) (whether such
claim, defense or credit arises out of the same or a related or an unrelated
transaction) or (iv) the obligation of the Seller, the Transferor or any
Affiliate (other than the Issuer) to pay to the related Obligor any rebate or
refund;
(i) any dispute, claim, offset or defense (other than any
applicable statute of limitations relating to the enforcement and collection
rights and discharge in bankruptcy of the Obligor) of the Obligor to the payment
of any Receivable (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 service related
to such Receivable or the furnishing or failure to furnish such merchandise or
services;
(j) the commingling of Collections of Receivables at any time
with other funds;
(k) any failure of the Seller or the Transferor to have legal
and equitable title to, and ownership of any Receivable and the other Purchased
Assets to be sold by it to the Issuer, free and clear of any Lien (other than
Permitted Liens); or any failure of Transferor to have given reasonably
equivalent value to the Seller under the Receivables Sale Agreement in
consideration of the transfer by the Seller of any Receivable, or any failure of
Seller to give or have given reasonably equivalent value to the Originator under
the Receivables Purchase and Sale Agreement in consideration of the transfer by
the Originator of any Receivable to the Seller, or any attempt by any Person to
void any such transfer under statutory provisions or common law or equitable
action;
(l) any investigation, litigation or proceeding related to any
use of the proceeds of any purchase made hereunder;
(m) any investigation or defense of, or participation in, any
Legal proceeding relating to the execution, delivery, enforcement, performance
or administration of the Transaction Documents or any other document related
thereto (whether or not such Indemnified Party is a party thereto); and
(n) any inability to litigate any claim against any Obligor in
respect of any Receivable as a result of such Obligor being immune from civil
and commercial law and suit on the grounds of sovereignty or otherwise from any
legal action, suit or proceeding.
43
Notwithstanding anything to the contrary in this Agreement, any
representations, warranties and covenants made by the Seller or the Transferor
in this Agreement or the other Transaction Documents that are qualified by or
limited to events or circumstances that have, or are reasonably likely to have,
given rise to a Material Adverse Effect (or words of like import) shall (solely
for purposes of the indemnification obligations set forth in this Section 5.02)
------------
be deemed not to be so qualified or limited.
If, by its terms, the indemnification provided by this Section
-------
5.02 should be applicable to any loss, claim, damage or liability of an
----
Indemnified Party but, for any reason, such indemnification is unavailable to
such Indemnified Party or is insufficient to hold such Indemnified Party
harmless, then the Seller shall contribute to the amount paid by such
Indemnified Party as a result of such loss, claim, damage or liability in such
proportion as is appropriate to reflect not only the relative benefits received
by such Indemnified Party on the one hand, and the Seller on the other hand, but
also the relative fault (if any) of such Indemnified Party and the Seller and
any other relevant equitable considerations.
Notwithstanding the foregoing, and without prejudice to the
rights that the Issuer may have pursuant to the other provisions of this
Agreement or the provisions of any of the other Transaction Documents, in no
event shall any Indemnified Party be indemnified for any Indemnified Losses (i)
resulting from the gross negligence or willful misconduct on the part of such
Indemnified Party (or the gross negligence or willful misconduct on the part of
any of such Indemnified Party's officers, directors, employees or agents), (ii)
to the extent the same includes Indemnified Losses in respect of Purchased
Assets and reimbursement therefor that would constitute credit recourse to the
Seller, the Transferor or the Originator for the amount of any Receivable or
other Purchased Asset not paid by the related Obligor; (iii) to the extent the
same constitute Dilutive Credits or other items requiring Adjustments and such
Adjustments have been paid or satisfied under Section 2.08(c); or (iv) to the
--------------
extent that the remedy for such Indemnified Losses are otherwise provided for
specifically in this Agreement.
ARTICLE VI
OTHER MATTERS RELATING TO THE SERVICER
Section 6.01 Liability of the Servicer. The Servicer shall be
-------------------------
liable under this Article VII only to the extent of the obligations specifically
undertaken by the Servicer in its capacity as Servicer.
Section 6.02 Merger or Consolidation of, or Assumption of the
------------------------------------------------
Obligations of, the Servicer. The Servicer shall not consolidate with or merge
----------------------------
into any other Person or convey, transfer or sell its properties and assets
substantially as an entirety to any Person, unless:
(a) (i) the corporation formed by such consolidation or into
which the Servicer is merged or the Person that acquires by conveyance,
transfer or sale the properties and assets of the Servicer
substantially as an entirety is, if the Servicer is not the surviving
entity, a corporation organized and existing under the laws of the
United States of America or any state or the District of Columbia, and,
if the Servicer is not the
44
surviving entity, such corporation expressly assumes, by an agreement
supplemental hereto, executed and delivered to the Issuer and the
Indenture Trustee, in form satisfactory to the Issuer, the performance
of every covenant and obligation of the Servicer hereunder;
(ii) the Servicer has delivered to the Issuer and the
Indenture Trustee an Officer's Certificate stating that such
consolidation, merger, conveyance, transfer or sale complies with this
Section 6.02 and that all conditions precedent herein provided for
------------
relating to such transaction have been complied with;
(iii) the Servicer has given the Issuer, the Originator and
the Indenture Trustee notice of such consolidation, merger or transfer
of assets;
(iv) immediately after giving effect to such transaction,
no representation or warranty made pursuant to Section 3.04 has been
------------
breached in any material respect;
(v) no Unmatured Servicer Default or Servicer Default has
occurred and is continuing or would result from the contemplated
transaction; and
(vi) each Rating Agency then rating any outstanding Series
of Notes has delivered to the Issuer and the Transferor written
confirmation that such consolidation, merger, conveyance, transfer or
sale will not result in a downgrade or withdrawal of such Rating
Agency's then current rating of any Series of Notes.
(b) the corporation formed by such consolidation or into which
the Servicer is merged or the Person that acquires by conveyance or transfer the
assets of the Servicer substantially as an entirety is an Eligible Servicer.
Section 6.03 Limitation on Liability of the Servicer and
------------------------------------------------
Others. Except as provided in Section 6.04, neither the Servicer nor any of the
------ ------------
directors, officers, employees or agents of the Servicer in its capacity as
Servicer shall be under any liability to the Seller, the Transferor, the Issuer,
the Indenture Trustee, the holders of the Notes or any other Person for any
action taken or for refraining from the taking of any action in good faith in
its capacity as Servicer pursuant to this Agreement; provided, however, that
-------- -------
this provision shall not protect the Servicer or any such Person against any
liability that otherwise would be imposed by reason of willful misfeasance, bad
faith or gross negligence in the performance of duties or by reason of reckless
disregard of obligations and duties hereunder. The Servicer and any director,
officer, employee or agent of the Servicer may rely in good faith on any
document of any kind prima facie properly executed and submitted by any Person
(other than the Servicer) with respect to any matters arising hereunder. The
Servicer shall not be under any obligation to appear in, prosecute or defend any
legal action that is not incidental to its duties as Servicer in accordance with
this Agreement and that in its reasonable judgment may involve it in any expense
or liability. Subject to the terms of the Transaction Documents, the Servicer
may, in its sole discretion, undertake any such legal action that it may deem
necessary or desirable for the benefit of the holders of the Notes with respect
to this Agreement and the rights and duties of the parties hereto and the
interests of the holders of the Notes issued by the Issuer under the Indenture.
45
Section 6.04 Indemnification by the Servicer. The Servicer
---------------------------------
shall indemnify and hold harmless each of the Seller, the Transferor, the
Issuer, the Indenture Trustee and its directors, officers, employees and agents
from and against any and all loss, liability, claim, expense, actions, suits,
demands, damage or injury suffered or sustained by reason of (i) any
representation or warranty made by the Servicer under any of the Transaction
Documents, any Monthly Receivables Activity Report, Daily Receivables Activity
Report, or any other information or report delivered by the Servicer with
respect to the Servicer or the Purchased Assets having been untrue or incorrect
in any material respect when made or deemed to have been made, (ii) any acts or
omissions of the Servicer pursuant to this Agreement (other than such as may
arise from the negligence or willful misconduct of the indemnified party or its
directors, officers, employees and agents), including any judgment, award,
settlement, reasonable attorneys' fees and other costs or expenses incurred in
connection with the defense of any action, proceeding or claim, that in each
case arises from or relates to a breach by the Servicer of its representations,
warranties, covenants or agreements hereunder or (iii) any failure of the
Servicer to comply with any material applicable law, rule or regulation
applicable to it and which relates to the servicing or administration of the
Purchased Assets. The Servicer shall further indemnify the Indenture Trustee,
the Paying Agent, the Authentication Agent and the Transfer Agent and Registrar
against all losses, liabilities, claims, expenses, actions, suits, demands, or
other reasonable out-of-pocket losses incurred by any of them in connection with
performing their respective obligations under the Transaction Documents, (other
than such as may arise from the gross negligence or willful misconduct of such
Person or its directors, officers, employees and agents). Indemnification
pursuant to this Section 6.04 shall not be payable from the Purchased Assets.
-------------
The Servicer's obligations under this Section 6.04 shall survive the termination
------------
of this Agreement, the resignation or removal of the Indenture Trustee and the
resignation or removal of the Servicer.
Section 6.05 Resignation of the Servicer. The Servicer shall
---------------------------
not resign from the obligations and duties hereby imposed on it except (a) upon
determination that (i) the performance of its duties hereunder is no longer
permissible under applicable law and (ii) there is no reasonable action that the
Servicer could take to make the performance of its duties hereunder permissible
under applicable law or (b) upon the assumption, by an agreement supplemental
hereto, executed and delivered to the Issuer and the Indenture Trustee, in form
satisfactory to the Issuer and the Majority Investors and with the consent of
the Majority Investors of the obligations and duties of the Servicer hereunder
by an Eligible Servicer. Any determination permitting the resignation of the
Servicer shall be evidenced as to clause (a) above by an Opinion of Counsel to
such effect delivered to the Issuer and the Indenture Trustee. No resignation
shall become effective until a Successor Servicer shall have assumed the
responsibilities and obligations of the Servicer in accordance with Section
-------
8.02. If, as of the date of the determination that the Servicer may no longer
----
act as Servicer under clause (a) above and the Issuer is unable to appoint a
Successor Servicer, the Indenture Trustee shall serve as Successor Servicer.
Notwithstanding the foregoing, if, at any time following the Indenture Trustee's
receipt of the Servicer's resignation as servicer, the Indenture Trustee is
unwilling or legally unable to act as servicer, it may petition a court of
competent jurisdiction to appoint any Eligible Servicer as the Successor
Servicer; provided, however that in the event that notwithstanding such
--------
petition, such court has not appointed any Eligible Servicer as Successor
Servicer as of the date when the Servicer's resignation as servicer becomes
effective, the Indenture Trustee shall act as Successor
46
Servicer for so long as it is legally able to do so or until such court appoints
an Eligible Servicer as Successor Servicer.
ARTICLE VII
PURCHASE TERMINATION EVENTS
Section 7.01 Purchase Termination Events. The following
----------=--------------------
events shall be "Purchase Termination Events":
---------------------------
(a) The occurrence of an Event of Default or an Amortization
Event or the commencement of the Amortization Period with respect to all
Outstanding Series of Notes;
(b) The Seller shall fail to pay (i) an Adjustment or repurchase
Receivables affected by an Adjustment within 5 Business Days, (ii) any payment
in respect of interest then due within 3 Business Days or (iii) any other amount
within 5 Business Days of the due date for such amount; or
(c) (i) Any representation or warranty made by the Seller or the
Transferor under any of the Transaction Documents, (ii) any information provided
by it for inclusion in the Daily Receivables Activity Report or (iii) any other
information or report delivered by the Seller or the Transferor with respect to
this Agreement or the Purchased Assets, shall prove to have been untrue or
incorrect in any material respect when made or deemed to have been made, such
failure could reasonably be expected to have a Material Adverse Effect or a
material adverse effect on the interest of the Issuer or its assigns in the
Purchased Assets and such failure remains unremedied for 30 days; or
(d) Either the Seller or the Transferor shall fail to perform or
observe, as and when required, (i) any term, covenant or agreement contained in
this Agreement or any of the other Transaction Documents to which it is a party,
and such failure shall remain unremedied for: in the case of the covenant to
segregate Collections pursuant to Section 2.17(e), the covenant to file
---------------
financing or continuation statements pursuant to Section 2.14 or the negative
------------
covenants set forth in Section 2.18, 10 days, or (ii) any other term, covenant
-------------
or agreement contained in this Agreement or any of the other Transaction
Documents to which it is a party, which failure could reasonably be expected to
have a Material Adverse Effect or a material adverse effect on the interest of
the Issuer or its assigns in the Purchased Assets, 30 days; or
(e) An Event of Bankruptcy shall have occurred with respect to
the Seller or the Transferor; or
(f) Either (i) the Internal Revenue Service shall file notice of
a Lien pursuant to Section 6323 of the Code with respect to any of the Purchased
Assets or (ii) the PBGC shall, or shall indicate its intention to, file notice
of a Lien pursuant to Section 4068 of ERISA with respect to any of the Purchased
Assets, and, in either such case, such Lien shall not have been released within
30 days; or
47
(g) A Servicer Default shall have occurred and be continuing and
the Indenture Trustee shall not have appointed a Successor Servicer within 60
days of such Servicer Default; or
(h) This Agreement shall cease to be in full force and effect
for any reason other than in accordance with its terms.
If a Purchase Termination Event occurs, the Seller shall promptly give notice to
the Issuer and the Indenture Trustee of such Purchase Termination Event.
Section 7.02 Purchase Termination. (a) On the Purchase
----------------------
Termination Date, the Seller shall cease transferring Purchased Assets to the
Issuer. Notwithstanding any cessation of the transfer to the Issuer of Purchased
Assets, any Purchased Assets transferred to the Issuer prior to the Purchase
Termination Date and any Collections in respect of such Purchased Assets,
whenever accrued in respect of such Purchased Assets, shall continue to be
property of the Issuer available for pledge by the Issuer under the Indenture.
(b) Upon the occurrence of a Purchase Termination Event, the
Issuer and its assignees shall have, in addition to all other rights and
remedies under this Agreement or otherwise, all other rights and remedies
provided under the Uniform Commercial Code of each applicable jurisdiction and
other applicable laws, which rights shall be cumulative. Without limiting the
foregoing, the occurrence of a Purchase Termination Event shall not deny to the
Issuer or its assignees any remedy in addition to termination of its obligation
to make Purchases hereunder to which the Issuer or its assignees may be
otherwise appropriately entitled, whether by statute or applicable law, at law
or in equity.
ARTICLE VIII
SERVICER DEFAULTS
Section 8.01 Servicer Defaults. If any one of the following
-----------------
events (a "Servicer Default") shall occur and be continuing:
----------------
(a) any failure on the part of the Servicer to deliver (i) the
Monthly Receivables Activity Reports required under Section 3.07(c) within 5
---------------
Business Days after such Monthly Receivables Activity Report is due or (ii) the
Daily Receivables Activity Report required under Section 3.07(d) within 3
----------------
Business Days after such Daily Receivables Activity Report is due;
(b) any failure on the part of the Servicer, to make any
payment, transfer or deposit, or to give instructions or to give notice to the
Issuer or the Indenture Trustee to make such payment, transfer or deposit within
(i) in the case of payments of interest, 3 Business Days and (ii) otherwise, 5
Business Days of the due date for such payment, transfer or deposit or such
instruction or notice is required to be made or given, as the case may be, under
the terms of this Agreement;
48
(c) (i) failure on the part of the Servicer duly to observe and
perform in any material respect any covenants or agreements of the Servicer set
forth in this Agreement and such failure continues unremedied for a period of 30
days after the date on which written notice of such failure was delivered to the
Servicer;
(d) any representation, warranty or certification made by the
Servicer in this Agreement or in any other Transaction Document or in any
certificate delivered pursuant to this Agreement proves to have been incorrect
in any material respect when made, which failure has a Material Adverse Effect
on the rights of the holders of any Series of Notes;
(e) an Event of Bankruptcy occurs with respect to the Servicer;
or
(f) a "Termination Event" under the Receivables Sale Agreement
-----------------
shall have occurred and be continuing with respect to the Seller or a
"Termination Event" under the Receivables Purchase and Sale Agreement shall have
-----------------
occurred and be continuing with respect to the Originator;
then, in the event of any such Servicer Default, so long as the Servicer Default
shall not have been remedied the Indenture Trustee may, or at the direction of
the Majority Investors, the Indenture Trustee shall, by written notice then
given to the Servicer (and to the Indenture Trustee if given by the Majority
Investors) (a "Termination Notice"), terminate all or any part of the rights and
------------------
obligations of the Servicer as Servicer under this Agreement.
After receipt by the Servicer of a Termination Notice, and on
the date that a Successor Servicer is appointed by the Indenture Trustee
pursuant to Section 8.03, all authority and power of the Servicer under this
------------
Agreement (or, in the case of a partial transfer, such authority and power and a
proportional portion of the Servicing Fee as is described in the Termination
Notice) shall pass to and be vested in the Successor Servicer (a "Service
-------
Transfer"); and the Indenture Trustee is hereby authorized and empowered, upon
--------
the failure of the Servicer to cooperate, to execute and deliver, on behalf of
the Servicer, as attorney-in-fact or otherwise, all documents and other
instruments and to do and accomplish all other acts or things necessary or
appropriate to effect the purposes of such Service Transfer. The Servicer agrees
to cooperate with the Indenture Trustee and such Successor Servicer in effecting
the termination of the responsibilities and rights of the Servicer to conduct
servicing hereunder, including the transfer to such Successor Servicer of
authority of the Servicer to service the Receivables provided for under this
Agreement, including (to the extent transferred) all authority over all
Collections that on the date of transfer are held by the Servicer for deposit,
or which have been deposited by the Servicer in the Collection Account, or which
thereafter are received with respect to the Receivables, and in assisting the
Successor Servicer. The Servicer shall within 20 Business Days of such
Termination Notice transfer its electronic records relating to the Receivables
to the Successor Servicer in such electronic form as the Successor Servicer may
reasonably request and shall promptly transfer to the Successor Servicer all
other records, correspondence, computer programs, software (to the extent such
computer programs and software are assignable) and documents necessary for the
continued servicing of the Receivables in the manner and at such times as the
Successor Servicer shall reasonably request. In addition, the Servicer shall
provide the Successor Servicer with reasonable access to the Servicer's
personnel responsible for the servicing of Receivables. To the extent that
compliance with this
49
Section 8.01 requires the Servicer to disclose to the Successor Servicer
-------------
information of any kind that the Servicer deems to be confidential, the
Successor Servicer shall be required to enter into such customary licensing and
confidentiality agreements as the Servicer deems reasonably necessary to protect
its interests. The Servicer being terminated (or replaced in part) shall bear
all out-of-pocket costs of the appointment of a Successor Servicer hereunder,
including but not limited to those of the Indenture Trustee reasonably allocable
to specific employees and overhead, legal fees and expenses, accounting and
financial consulting fees and expenses, and costs of amending the Transaction
Documents, if necessary.
Section 8.02 Performance by Indenture Trustee. If (i) the
-----------------------------------
Seller, the Transferor or the Servicer fails to perform any of its agreements or
obligations under any Transaction Document to which it is a party and does not
remedy such failure within the applicable cure period, if any, and (ii) the
Indenture Trustee in good faith reasonably believes that the performance of such
agreements and obligations is necessary or appropriate to protect the interests
of the holders of the Notes issued by the Indenture Trustee under the Indenture,
then the Indenture Trustee or its designee may, but shall have no obligation to,
perform, or cause performance of, such agreement or obligation, and the
reasonable expenses of the Indenture Trustee or its designee incurred in
connection therewith shall be payable by the Servicer as provided in Section
-------
6.04 (if the Servicer has failed to perform its obligations) or by the Seller as
----
provided in Section 5.02 (if the Seller or the Transferor has failed to perform
------------
its obligations). If the Seller, the Transferor or the Servicer fails to file at
any time any financing statement or continuation statement or amendment thereto
or assignment thereof that it is required to file pursuant to this Agreement or
any of the other Transaction Documents to which it is a party, the Indenture
Trustee or its assigns shall have the right to file, and each of the Seller, the
Transferor and the Servicer hereby authorize the Indenture Trustee or its
assigns to file, at the expense of the Seller, such financing or continuation
statements and amendments thereto and assignments thereof with respect to all or
any of the Receivables or the other Purchased Assets now existing or hereafter
arising.
Section 8.03 Appointment of Successor Servicer.
---------------------------------
(a) On and after the receipt by the Servicer of a Termination
Notice pursuant to Section 8.01, the Servicer shall continue to perform all
-------------
servicing functions under this Agreement until the date specified in the
Termination Notice or otherwise specified by the Indenture Trustee or until a
Successor Servicer has accepted its appointment hereunder as described below.
The Issuer shall select, as promptly as possible after the giving of a
Termination Notice, and the Indenture Trustee shall appoint, an Eligible
Servicer as a successor servicer (the "Successor Servicer"), and such Successor
------------------
Servicer shall accept its appointment by a written assumption in a form
acceptable to the Issuer. If a Successor Servicer has not been appointed or has
not accepted its appointment at the time specified in a Termination Notice for
the Servicer's resignation, the Indenture Trustee without further action
automatically shall be appointed the Successor Servicer. Notwithstanding the
foregoing, if, at any time following the Indenture Trustee's receipt of the
Servicer's resignation as servicer, the Indenture Trustee is unwilling or
legally unable to act as servicer, it may petition a court of competent
jurisdiction to appoint any Eligible Servicer as the Successor Servicer;
provided, however that in the event that notwithstanding such petition, such
court has not appointed any Eligible Servicer as Successor Servicer as of the
date when the Servicer's resignation as servicer becomes effective, the
50
Indenture Trustee shall act as Successor Servicer for so long as it is legally
able to do so or until such court appoints an Eligible Servicer as Successor
Servicer.
(b) Upon its appointment, the Successor Servicer shall be the
successor in all respects to the Servicer with respect to servicing functions
under this Agreement and shall be subject to all the responsibilities, duties
and liabilities relating thereto placed on the Servicer by the terms and
provisions hereof, and all references in this Agreement to the Servicer shall be
deemed to refer to the Successor Servicer. Notwithstanding the foregoing, or
anything in this Section 8.03 to the contrary, the Successor Servicer shall have
------------
no responsibility or obligation (i) for any representation or warranty of the
predecessor Servicer or any other Successor Servicer hereunder or (ii) for any
act or omission of either a predecessor or any other Successor Servicer. The
Indenture Trustee may conduct any activity required of it as Servicer hereunder
through an Affiliate or through an agent. Neither the Indenture Trustee nor any
other Successor Servicer shall be deemed to be in default hereunder due to any
act or omission of a predecessor Servicer, including but not limited to failure
to timely deliver to the Indenture Trustee any instructions pursuant to Section
-------
4.03, any funds required to be deposited with or transferred to the Indenture
----
Trustee, or any breach of its duty to cooperate with a Service Transfer.
(c) All authority and power granted to the Servicer under this
Agreement shall automatically cease and terminate upon termination of this
Agreement pursuant to Section 9.01, and shall pass to and be vested in the
-------------
Issuer, and the Issuer is hereby authorized and empowered to execute and
deliver, on behalf of the Servicer, as attorney-in-fact or otherwise, all
documents and other instruments, and to do and accomplish all other acts or
things necessary or appropriate to effect the purposes of such transfer of
servicing rights. The Servicer agrees to cooperate with the Seller and the
Issuer in effecting the termination of the responsibilities and rights of the
Servicer to conduct servicing of the Receivables and the other Purchased Assets.
The Servicer shall transfer its electronic records relating to the Receivables
and the other Purchased Assets to the Issuer and the Seller or their respective
designees in such electronic form as they may reasonably request and shall
transfer all other records, correspondence and documents to the Issuer or the
Seller, as applicable, in the manner and at such times as it shall reasonably
request.
(d) Power of Attorney. Each of the Seller and the Transferor
-----------------
hereby irrevocably appoints the Issuer to act as its attorney-in-fact, with full
authority in the place and stead of the Transferor and in its name or otherwise,
from time to time after the occurrence and during the continuance of an
Unmatured Servicer Default or a Servicer Default or other termination of the
Servicer under Section 8.01 or a Purchase Termination Event, to take at the
------------
direction of the Issuer any action and to execute any instrument or document
that the Issuer may deem necessary to accomplish the purposes of this Agreement
including without limitation:
(i) to ask, demand, collect, sue for, recover, compromise,
receive and give acquittance and receipts for moneys due and to become
due under or in respect of any Receivable or any other Purchased Asset;
(ii) to receive, endorse, and collect any drafts or other
instruments, documents and chattel paper, in connection with clause (i)
above;
51
(iii) to file any claims or take any action or institute any
proceedings that the Issuer in its reasonable determination deems
necessary or appropriate for the collection of any of the Receivables
or any other Purchased Asset or otherwise to enforce the rights of the
Issuer and the holders of the Notes issued by the Issuer under the
Indenture with respect to any of the Receivables or any other Purchased
Asset;
(iv) to perform affirmative obligations of the Seller or
the Transferor under any Transaction Document; and
(v) to enforce the rights and remedies of the Seller or
the Transferor under any Transaction Document.
Each of the Seller and the Transferor hereby acknowledges, consents and agrees
that the power of attorney granted pursuant to this Section 8.03(d) is
---------------
irrevocable and coupled with an interest. Each of the Seller and the Transferor
further acknowledges that the Issuer has, pursuant to the Indenture, assigned to
the Indenture Trustee all of the above-referenced powers and that the Indenture
Trustee shall, except as otherwise provided in the Indenture, be entitled to
exercise the powers herein granted to the Issuer.
Section 8.04 Notification to Holders. Within 5 Business Days
-----------------------
after the Servicer becomes aware of any Servicer Default, the Servicer shall
give notice thereof to the Issuer and the Indenture Trustee. Upon any
termination or appointment of a Successor Servicer pursuant to this Article IX,
----------
the Indenture Trustee shall give prompt notice thereof to the holders of the
Notes, the Seller and the Issuer.
ARTICLE IX
TERMINATION
Section 9.01 Termination. This Agreement and the respective
-----------
obligations and responsibilities of the Transferor, the Seller, Servicer, the
Issuer and the Indenture Trustee created hereby shall terminate on the Final
Payout Date, except with respect to the duties described in Section 5.02,
-------------
Section 6.04, Section 10.06 and the last two sentences of Section 3.03, all of
------------ ------------- ------------
which shall survive such termination, and except with respect to such other
obligations of the Transferor which terminate earlier in accordance with Section
-------
2.21.
----
ARTICLE X
MISCELLANEOUS PROVISIONS
Section 10.01 Amendment.
---------
(a) The provisions of this Agreement may be amended, modified or
waived from time to time by the parties hereto, by a written instrument signed
by each of them. Notwithstanding the preceding sentence, this Agreement shall be
amended by the parties hereto at the direction of the Seller without the consent
of any of the holders of the Notes issued by the
52
Issuer under the Indenture to add, modify or eliminate such provisions as may be
necessary or advisable in order (i) to enable all or a portion of the Purchased
Assets to qualify as, and to permit an election to be made to cause the Issuer
to be treated as, a "financial asset securitization investment trust" as
described in the provisions of Section 860L of the Code, and (ii) to avoid the
imposition of state or local income or franchise taxes imposed on the Issuer's
property or its income, provided that (i) the Seller delivers to the Issuer an
--------
Officer's Certificate to the effect that the proposed amendments meet the
requirements set forth in this Section 10.01(a) and (ii) such amendment does not
----------------
affect the rights, duties or obligations of the Issuer hereunder.
(b) Notwithstanding the foregoing clause (a), no amendment to
---------
this Agreement shall be effective unless the Issuer shall have first received
written confirmation from each Rating Agency then rating any outstanding Series
of Notes that such amendment will not result in a downgrade of such Rating
Agency's then current rating of any Series of Notes. In addition to the
foregoing, promptly after the execution of any such amendment or consent, the
Issuer shall furnish notification of the substance of such amendment or consent
to the Indenture Trustee.
Section 10.02 Governing Law. THIS AGREEMENT SHALL BE GOVERNED
-------------
BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK,
INCLUDING ss. 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW, BUT OTHERWISE
WITHOUT REGARD TO ITS CONFLICT OF LAW PRINCIPLES.
Section 10.03 Notices; Payments. All demands, notices,
-------------------
instructions, directions and communications under this Agreement shall be in
writing and shall be deemed to have been duly given if personally delivered at,
mailed by certified mail, return receipt requested, or sent by facsimile
transmission (i) in the case of the Originator, to the address provided in the
Receivables Purchase and Sale Agreement, (ii) in the case of the Seller, to the
address provided in the Receivables Sale Agreement, (iii) in the case of the
Transferor, 1155 Battery Street, San Francisco, California 94111, Attention:
Treasurer, Telecopy: (415) 501-1342, (iv) in the case of the Seller or the
Servicer, 3125 Chad Drive, Eugene, Oregon 97408, Attention: Director, Telecopy:
(541) 242-7577, (v) in the case of the Issuer, 3125 Chad Drive, Eugene Oregon
97408, Attention: Manager, Telecopy: (541) 242-7577 and (vi) in the case of the
Indenture Trustee, the Corporate Trust Office, or, as to each party, at such
other address or facsimile number as shall be designated by such party in a
written notice to each other party.
Section 10.04 Severability of Provisions. If any one or more
--------------------------
of the covenants, agreements, provisions or terms of this Agreement shall for
any reason whatsoever be held invalid, then such provisions shall be deemed
severable from the remaining provisions of this Agreement and shall in no way
affect the validity or enforceability of the remaining provisions or of the
rights of the parties to the Transaction Documents.
Section 10.05 Further Assurances. The parties hereto agree to
------------------
do and perform, from time to time, any and all acts and to execute any and all
further instruments required or reasonably requested by the Issuer or any other
party hereto more fully to effect the purposes of this Agreement, including the
execution of any financing statements or continuation statements
53
relating to the Receivables and the other Purchased Assets for filing under the
provisions of the UCC or other applicable law of any applicable jurisdiction.
Section 10.06 Nonpetition Covenant. (a) Notwithstanding any
---------------------
prior termination of this Agreement, the Originator, the Indenture Trustee, the
Servicer, the Seller, the Transferor and any assignee of the Issuer shall not,
prior to the date that is one year and one day after the termination of this
Agreement with respect to the Issuer, acquiesce, petition or otherwise invoke or
cause the Issuer to invoke the process of any Governmental Authority for the
purpose of commencing or sustaining a case against the Issuer under any federal
or state bankruptcy, insolvency or similar law or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar official
of the Issuer or any substantial part of its property or ordering the winding-up
or liquidation of the affairs of the Issuer.
(b) Notwithstanding any prior termination of this Agreement, the
Originator, the Servicer, the Indenture Trustee, the Issuer and any assignee of
the Issuer shall not, prior to the date that is one year and one day after the
termination of this Agreement with respect to the Transferor, acquiesce,
petition or otherwise invoke or cause the Transferor to invoke the process of
any Governmental Authority for the purpose of commencing or sustaining a case
against the Transferor under any federal or state bankruptcy, insolvency or
similar law or appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Transferor or any substantial part
of its property or ordering the winding-up or liquidation of the affairs of the
Transferor.
Section 10.07 No Waiver; Cumulative Remedies. No failure to
--------------------------------
exercise, and no delay in exercising, any right, remedy, power or privilege on
the part of any party under this Agreement or any third party beneficiary of
this Agreement shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power or privilege under this Agreement,
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege. The rights, remedies, powers and privileges
provided under this Agreement are cumulative and not exhaustive of any rights,
remedies, powers and privileges provided by law.
Section 10.08 Counterparts. This Agreement may be executed in
------------
two or more counterparts (and by different parties on separate counterparts),
each of which shall be an original, but all of which together shall constitute
one and the same instrument.
Section 10.09 Third-Party Beneficiaries. This Agreement will
-------------------------
inure to the benefit of and be binding upon the parties hereto, the holders of
the Notes and their respective successors and permitted assigns and each such
Person may rely on the Seller's and the Transferor's representations and
warranties made herein as if made directly to them. Except as otherwise
expressly provided in this Agreement, no other Person will have any right or
obligation hereunder.
Section 10.10 Merger and Integration. Except as specifically
----------------------
stated otherwise herein, this Agreement sets forth the entire understanding of
the parties relating to the subject matter hereof, and all prior understandings,
written or oral, are superseded by this Agreement.
54
This Agreement may not be modified, amended, waived or supplemented except as
provided herein.
Section 10.11 Headings. The headings herein are for purposes
--------
of reference only and shall not otherwise affect the meaning or interpretation
of any provision hereof.
Section 10.12 Costs, Expenses and Taxes. In addition to the
-------------------------
obligations of the Seller under Article V, the Seller agrees to pay on demand:
---------
(a) all reasonable costs and expenses incurred by the Issuer and
its assignees in connection with the negotiation, preparation, execution and
delivery of, the administration (including periodic auditing), the preservation
of any rights under, or the enforcement of, or any breach of, this Agreement
(including any amendment, supplement or modification hereto), including without
limitation (i) the reasonable fees, expenses and disbursements of counsel to any
such Persons incurred in connection with any of the foregoing or in advising
such Persons as to their respective rights and remedies under this Agreement and
(ii) all reasonable out-of-pocket expenses (including reasonable fees and
expenses of independent accountants) incurred in connection with any review of
the Seller's and the Transferor's books and records prior to the execution and
delivery hereof; 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 any amendment, supplement or modification thereto, 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 10.13 Submission to Jurisdiction. EACH PARTY HERETO
--------------------------
HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY NEW YORK
STATE OR FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW
YORK, NEW YORK, OVER ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT, AND HEREBY (A) IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH
ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE OR
FEDERAL COURT; (B) IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY
DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR
PROCEEDING; AND (C) IRREVOCABLY APPOINTS CORPORATION SERVICE COMPANY (THE
"PROCESS AGENT"), WITH AN OFFICE ON THE DATE HEREOF AT 80 STATE STREET, ALBANY,
-------------
NEW YORK 12207-2543, UNITED STATES OF AMERICA, AS ITS AGENT TO RECEIVE ON BEHALF
OF IT SERVICE OF COPIES OF THE SUMMONS AND COMPLAINT AND ANY OTHER PROCESS THAT
MAY BE SERVED IN ANY SUCH ACTION OR PROCEEDING. SUCH SERVICE MAY BE MADE BY
MAILING OR DELIVERING A COPY OF SUCH PROCESS IN CARE OF THE PROCESS AGENT AT THE
PROCESS AGENT'S ABOVE ADDRESS, AND EACH PARTY HERETO HEREBY IRREVOCABLY
AUTHORIZES AND DIRECTS THE PROCESS AGENT TO ACCEPT SUCH SERVICE ON ITS BEHALF.
EACH PARTY HERETO AGREES TO ENTER INTO ANY AGREEMENT RELATING TO SUCH
APPOINTMENT THAT THE PROCESS AGENT MAY CUSTOMARILY REQUIRE AND
55
TO PAY THE PROCESS AGENT'S CUSTOMARY FEES UPON DEMAND. AS AN ALTERNATIVE METHOD
OF SERVICE, EACH PARTY HERETO ALSO IRREVOCABLY 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 PARTY AT ITS ADDRESS SPECIFIED PURSUANT TO SECTION 10.03.
-------------
NOTHING IN THIS SECTION 10.13 SHALL AFFECT THE RIGHT OF EITHER PARTY HERETO TO
--------------
SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF
EITHER PARTY HERETO TO BRING ANY ACTION OR PROCEEDING AGAINST THE OTHER PARTY
HERETO OR ANY OF ITS PROPERTIES IN THE COURTS OF ANY OTHER JURISDICTION.
Section 10.14 Waiver of Jury Trial. EACH PARTY HERETO WAIVES
--------------------
ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND
ANY RIGHTS UNDER OR RELATING TO THIS AGREEMENT OR ANY AMENDMENT, INSTRUMENT,
DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY IN THE FUTURE BE DELIVERED IN
CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY COURSE OF CONDUCT, COURSE
OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), ACTIONS OF EITHER OF THE
PARTIES HERETO OR ANY OTHER RELATIONSHIP EXISTING IN CONNECTION WITH THIS
AGREEMENT, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A
COURT AND NOT BEFORE A JURY.
Section 10.15 Acknowledgment and Consent.
--------------------------
(a) Each of the Seller and the Transferor acknowledges that, the
Issuer has pledged all of its right, title and interest in the Purchased Assets
to the Indenture Trustee pursuant to the Indenture. Each of the Seller and the
Transferor acknowledges and agrees to such pledge by the Issuer and consents to
the assignment by the Issuer of all or any portion of its right, title and
interest in, to and under the Purchased Assets, this Agreement and the other
Transaction Documents and all of the Issuer's rights, remedies, powers and
privileges and all claims of the Issuer against the Seller or the Transferor
under or with respect to this Agreement and the other Transaction Documents
(whether arising pursuant to the terms of this Agreement or otherwise available
at law or in equity), including without limitation (whether or not any of an
Unmatured Servicer Default, a Servicer Default, or a Purchase Termination Event
has occurred and is continuing) (i) the right of the Issuer at any time to
enforce this Agreement against the Seller or the Transferor and the obligations
of the Seller and the Transferor hereunder and (ii) the right at any time to
give or withhold any and all consents, requests, notices, directions, approvals,
demands, extensions or waivers under or with respect to this Agreement, any
other Transaction Document or the obligations in respect of the Seller or the
Transferor thereunder, all of which rights, remedies, powers, privileges and
claims may be exercised and/or enforced by the Issuer's successors and assigns
to the same extent as the Issuer may do.
(b) Each of the Seller and the Transferor hereby agrees to
execute all agreements, instruments and documents and to take all other actions
that the Issuer or its assignees determines are necessary or appropriate to
evidence its consent described in Section 10.15(a). Each of the Seller and the
----------------
Transferor hereby acknowledges and agrees that the Issuer may assign to the
Issuer's successors and assigns such powers of attorney and other rights and
56
interests granted by the Seller or the Transferor to the Issuer hereunder and
agrees to cooperate fully with the Issuer and the Indenture Trustee in the
exercise of such rights.
Section 10.16 No Partnership or Joint Venture. Nothing
--------------------------------------
contained in this Agreement shall be deemed or construed by the parties hereto
or by any third Person to create the relationship of principal and agent or of
partnership or of joint venture.
Section 10.17 Binding Effect; Assignability; Survival of
------------------------------------------------
Provisions.
----------
(a) This Agreement shall be binding upon, and inure to the
benefit of, the Issuer, the Seller, the Transferor, the Servicer and their
respective successors and assigns. Each of the Seller, the Transferor and the
Servicer further (i) acknowledges that as of the date hereof the Issuer has
pledged to the Indenture Trustee all of its right, title and interest in this
Agreement and in the Purchased Assets purchased hereunder to the Indenture
Trustee and (ii) agrees that the Indenture Trustee, as assignee of the Issuer,
shall have the right to enforce the terms and provisions hereof (including,
without limitation, the right, at any time, to give or withhold any and all
consents, requests, notices, directions, approvals, demands, extensions or
waivers under or with respect to this Agreement or the obligations in respect of
the Seller, the Transferor or the Servicer hereunder to the same extent as the
Issuer may do) directly against each such Person to the same extent as if the
Indenture Trustee were a party hereto, but agrees that the Indenture Trustee and
its Affiliates will have no obligation to perform any of the obligations of the
Issuer hereunder. Each of the Seller, the Transferor and the Servicer also
agrees that upon its receipt of a notice of assignment by the Issuer or an
assignee of the Issuer, each of the Seller, Transferor and the Servicer shall
send the assignee identified in such notice a copy of all notices required or
desired to be given by such party to the Issuer hereunder.
(b) Except as otherwise expressly permitted in this Agreement
and except for the grants of collateral contemplated under the Credit Agreement,
neither the Seller, the Issuer or nor the Servicer may assign any of its rights
hereunder or any interest herein without the prior written consent of the Issuer
and its assignees.
(c) 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 terminated pursuant hereto. Such termination
shall not occur prior to the Final Payout Date.
(d) The rights and remedies with respect to any breach of any
representation and warranty made by the Seller pursuant to Section 2.16 and the
------------
indemnification and payment provisions of Section 5.02, 6.04 and 10.12 and the
------------------ -----
provisions of Section 10.06, Section 10.18 and Section 10.19 shall be continuing
---------------------------- -------------
and shall survive any termination of this Agreement.
Section 10.18 Recourse to the Seller or Transferor. Except
--------------------------------------
to the extent expressly provided otherwise in the Transaction Documents, the
obligations of the Seller and the Transferor under the Transaction Documents to
which it is a party are solely the corporate or limited liability company
obligations of such party, and no recourse shall be had for payment of any fee
payable by or other obligation of or claim against such party that arises out of
any Transaction Document against any director, officer or employee of such
party. The provisions of this Section 10.18 shall survive the termination of
-------------
this Agreement.
57
Section 10.19 Limited Recourse to the Issuer.
------------------------------
(a) Except to the extent expressly provided otherwise in the
Transaction Documents, the obligations of the Issuer under the Transaction
Documents to which it is a party are solely the obligations of the Issuer, and
no recourse shall be had for payment of any fee payable by or other obligation
of or claim against the Issuer that arises out of any Transaction Document to
which the Issuer is a party against any director, officer or employee of the
Issuer.
(b) Notwithstanding anything herein to the contrary, the
obligations of the Issuer under the Transaction Documents to which it is a party
are limited recourse obligations of the Issuer and shall be payable solely out
of the Purchased Assets at such time as, and to the extent of funds actually
received by, or available to, the Issuer and, to the extent funds are not
available to pay such obligations, the claims relating thereto shall accrue but
shall be non-recourse against the Issuer and shall not constitute claims under
Section 101 of the Bankruptcy Code.
(c) The provisions of this Section 10.19 shall survive the
-------------
termination of this Agreement.
58
IN WITNESS WHEREOF, the Issuer, the Seller, the Transferor,
the Servicer and the Indenture Trustee have caused this Receivables Purchase
Agreement to be duly executed by their respective officers as of the day and
year first above written.
LEVI STRAUSS RECEIVABLES FUNDING,
LLC, as Issuer
By: _________________________________
Name: Joseph M. Maurer
Title: Treasurer
LEVI STRAUSS FUNDING, LLC, as Transferor
By: _________________________________
Name: Joseph M. Maurer
Title: Treasurer
LEVI STRAUSS FINANCIAL CENTER
CORPORATION, as Seller and as Servicer
By: _________________________________
Name: Joseph M. Maurer
Title: Treasurer
LEVI STRAUSS SECURITIZATION CORP., as
SPC Member
By: _________________________________
Name: Joseph M. Maurer
Title: Treasurer
SCHEDULE 2.16(m)
to
RECEIVABLES PURCHASE AGREEMENT
Dated as of July 31, 2001
List of Offices
1155 Battery Street
San Francisco, California 94111
3125 Chad Drive
Eugene, Oregon 97408
SCHEDULE 2.16(o)
to
RECEIVABLES PURCHASE AGREEMENT
Dated as of July 31, 2001
List of Lockbox Banks
------------------------------- -------------------------------------- -------------------------
1850 Gateway Blvd. 1233618321
Bank of America NA Concord, CA 94520
------------------------------- -------------------------------------- -------------------------
Bank of America NA 231 South LaSalle Street 81880-11375
14th Floor
Chicago, IL 60697
------------------------------- -------------------------------------- -------------------------
Bank of America NA 901 Main Street 3750250246
TX1-492-10-01
Dallas, TX 75202-2911
-------------------------------- -------------------------------------- ------------------------
Bank One Bank One Plaza 5707560
(f/k/a The First National Chicago, IL 60670
Bank of Chicago)
-------------------------------- -------------------------------------- ------------------------
SCHEDULE 2.16(q)
to
RECEIVABLES PURCHASE AGREEMENT
Dated as of July 31, 2001
List of Legal Names
Levi Strauss Financial Center Corporation (f/k/a Levi Strauss Credit Corp.)
EX-10
6
a10qex105.txt
EXHIBIT 10.5 PARENT UNDERTAKING
EXHIBIT 10.5
EXECUTION COPY
PARENT UNDERTAKING
PARENT UNDERTAKING (this "Agreement"), dated as of July 31,
---------
2001, made by Levi Strauss & Co., a Delaware corporation (the "Parent"), in
------
favor of Levi Strauss Receivables Funding, LLC (the "Issuer").
------
PRELIMINARY STATEMENTS
1. The Parent is (a) the direct owner of all of the issued and
outstanding shares of common stock of Levi Strauss Financial Center Corporation,
a California corporation (the "Seller") and (b) the indirect owner of all of the
issued and outstanding membership interests of Levi Strauss Funding LLC, a
Delaware limited liability company (the "Transferor").
----------
2. The Parent and the Seller have entered into that certain
Third Amended and Fully Restated Receivables Purchase and Sale Agreement dated
as of January 28, 2000 (as amended, restated, supplemented or otherwise modified
from time to time, the "Receivables Purchase and Sale Agreement") pursuant to
----------------------------------------
which the Parent transfers certain accounts receivable and related assets to the
Seller. The Parent, the Seller, Levi Strauss Funding Corp., a Delaware
corporation ("Funding") and the Transferor have entered into that certain
-------
Receivables Purchase and Sale Agreement dated as of January 28, 2000 (as
amended, restated, supplemented or otherwise modified from time to time, the
"Receivables Sale Agreement") pursuant to which the Parent, the Seller and
--------------------------
Funding transfer certain accounts receivable and related assets to the
Transferor. The Parent, Seller, Funding and Transferor have entered into that
certain Master Amendment and Consent to the Receivables Purchase and Sale
Agreement and the Receivables Sale Agreement dated as of July 31, 2001 (as
amended, restated, supplemented or otherwise modified from time to time, the
"Master Amendment") to consent to the Transferor's assignment of certain
----------------
accounts receivable and related assets to the Issuer and make conforming changes
to such agreements. The Issuer, the Transferor and Levi Strauss Financial Center
Corporation, in its dual capacities as the Seller and as servicer (the
"Servicer") have entered into that certain Receivables Purchase Agreement dated
--------
as of July 31, 2001 (as amended, restated, supplemented or otherwise modified
from time to time, the "Receivables Purchase Agreement") pursuant to which the
------------------------------
Seller and the Transferor will transfer certain accounts receivable and related
assets to the Issuer and the Servicer will agree to service such assets.
Collectively, the Receivables Purchase and Sale Agreement and the Receivables
Sale Agreement, as amended by the Master Amendment, are referred to as the
"Parent Transfer Agreements". Collectively, the Parent Transfer Agreements and
--------------------------
the Receivables Purchase Agreement are referred to as the "Transfer Agreements".
-------------------
3. Capitalized terms used herein and not herein defined are
used herein as defined in the Receivables Purchase Agreement and, if not defined
therein, in that certain Master Indenture dated as of July 31, 2001 (the "Master
------
Indenture") among the Issuer and Citibank, N.A., as the indenture trustee (the
---------
"Indenture Trustee") and "Paying Agent," "Authentication Agent" and "Transfer
------------------
Agent and Registrar."
4. It is a condition precedent to the effectiveness of the
Receivables Purchase Agreement that the Parent shall have executed and delivered
this Agreement.
NOW, THEREFORE, in consideration of the premises, and the
substantial direct and indirect benefits to the Parent from the financing
arrangements contemplated by the Transaction Documents and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parent hereby agrees as follows:
SECTION 1. Unconditional Undertaking. The Parent hereby
---------------------------
unconditionally and irrevocably (a) undertakes and agrees with and for the
benefit of the Issuer and its successors and assigns (collectively the
"Indemnified Parties"), to cause the due and punctual performance and observance
-------------------
by each of the Transferor, the Seller (in both its individual capacity and in
its separate capacity as Servicer) and any of the Seller's successors and
assigns acting as Servicer (each such person, an "Applicable Party") of all of
-----------------
the terms, covenants, conditions, agreements and undertakings on the part of any
such Applicable Party, as applicable, to be performed or observed under any of
the Transfer Agreements and the other Transaction Documents and the other
documents delivered in connection therewith in accordance with the terms
thereof, including, without limitation, the punctual payment when due of all
obligations of each such Applicable Party now or hereafter existing under any of
the Transfer Agreements and the Transaction Documents and the other documents
delivered in connection therewith, including (without limitation) any
Adjustments, deemed Collections, interest, obligations to pay Indemnified
Losses, fees, costs, expenses or otherwise (such terms, covenants, conditions,
agreements, undertakings and other obligations being the "Obligations") and (b)
-----------
undertakes and agrees to pay any and all expenses (including reasonable counsel
fees and expenses) incurred by the Indemnified Parties, or any of them, in
enforcing any rights under this Agreement. In the event that any Applicable
Party shall fail in any manner whatsoever to perform or observe any of its
Obligations when the same shall be required to be performed or observed, then
the Parent shall itself duly and punctually perform or observe, or cause to be
duly and punctually performed and observed, such Obligation, and it shall not be
a condition to the accrual of the obligation of the Parent hereunder to perform
or observe any Obligation (or to cause the same to be performed or observed)
that any Indemnified Party shall have first made any request of or demand upon
or given any notice to any Applicable Party, or have instituted any action or
proceeding against any such Applicable Party or its successors or assigns in
respect thereof. For purposes of clarity only, the Obligations which the Parent
undertakes and agrees to cause the performance of hereunder are solely those
Obligations of the Applicable Parties under the Transfer Agreements and the
Transaction Documents and nothing herein shall impose on the Parent any
obligation under clause (a) of this Section 1 in excess of or greater in scope
than such Obligations of the Applicable Parties
SECTION 2. Obligations Absolute. The Parent undertakes and
--------------------
agrees that the Obligations will be paid and performed strictly in accordance
with the terms of the Transaction Documents and each other document delivered in
connection therewith, regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such terms or the
rights of any Indemnified Party with respect thereto. The obligations of the
Parent under this Agreement are independent of the Obligations, and a separate
action or actions may be brought and prosecuted against the Parent to enforce
this Agreement, irrespective of whether any action is brought against any
Applicable Party or whether any such Person is joined in any such action
2
or actions. The liability of the Parent under this Agreement shall be
irrevocable, absolute and unconditional irrespective of, and the Parent hereby
irrevocably waives any defenses it may now or hereafter have in any way relating
to, any or all of the following:
(i) any lack of validity or enforceability of any Transaction
Document or any other document relating
thereof;
(ii) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Obligations under the
Transaction Documents or any other document relating thereto, or any
other amendment or waiver of or any consent to departure from any
Transaction Document or any other document relating thereto;
(iii) any taking, exchange, release or nonperfection of or
failure to transfer title to any asset or collateral, or any taking,
release, amendment or waiver of or consent to departure from any
guaranty, for all or any of the Obligations;
(iv) any manner of application of any asset or collateral, or
proceeds thereof, to all or any of the Obligations, or any manner of
sale or other disposition of any asset or collateral for all or any of
the Obligations or any other obligations of any Applicable Party under
the Transaction Documents or any other document relating thereto;
(v) any change, restructuring or termination of the corporate
structure or existence of the Parent, or any Applicable Party;
(vi) any failure of any Indemnified Party to disclose to the
Parent any information relating to the financial condition, operations,
properties or prospects of any Applicable Party now or in the future
known to such Indemnified Party (the Parent hereby waiving any duty on
the part of such Indemnified Party to disclose such information);
(vii) any impossibility or impracticality of performance,
illegality, force majeure, any act of any government, or any other
circumstance (including, without limitation, any statute of
limitations) or any existence of or reliance on any representation by
an Indemnified Party that might constitute a defense available to, or a
discharge of, any Applicable Party or a guarantor of the Obligations;
or
(viii) any other circumstance, event or happening whatsoever,
whether foreseen or unforeseen and whether similar or dissimilar to
anything referred to above in this Section 2;
---------
provided, however, notwithstanding the foregoing, the Parent reserves the right
to assert defenses which the Transferor, the Seller or any other Applicable
Party may have to the performance or observance of the terms, covenants,
conditions, agreements and undertakings under the Transfer Agreements and the
other Transaction Documents.
This Agreement shall continue to be effective or be reinstated, as the case may
be, if at any time (x) any payment in connection with any of the Obligations is
rescinded or must otherwise be returned by any Indemnified Party, or (y) any
performance or observance of any Obligation is rescinded or otherwise
invalidated, upon the insolvency, bankruptcy or reorganization of any
3
Applicable Party, all as though payment had not been made or as though such
Obligation had not been performed or observed.
SECTION 3. Waivers and Acknowledgments.
---------------------------
(a) The Parent hereby waives promptness, diligence, notice of
acceptance and any other notice with respect to any of the Obligations and this
Agreement and any other document related thereto, and any requirement that any
Indemnified Party protest, secure, perfect or insure any lien or any property
subject thereto or exhaust any right or take any action against any Applicable
Party or any other Person or any asset or collateral.
(b) The Parent hereby waives any right to revoke this Agreement,
and acknowledges that this Agreement is continuing in nature and applies to all
Obligations, whether existing now or in the future.
SECTION 4. Subrogation. The Parent shall not exercise or
-----------
assert any rights that it may now have or hereafter acquire against any
Applicable Party that arise from the existence, payment, performance or
enforcement of the Parent's obligations under this Agreement or any other
Transaction Document, including, without limitation, any right of subrogation,
reimbursement, exoneration, contribution or indemnification and any right to
participate in any claim or remedy of any Indemnified Party against any
Applicable Party or any asset or collateral, whether or not such claim, remedy
or right arises in equity or under contract, statute or common law, including,
without limitation, the right to take or receive from any Applicable Party,
directly or indirectly, in cash or other property or by setoff or in any other
manner, payment or security on account of such claim, remedy or right, unless
and until all amounts in connection with the Obligations and all amounts payable
under this Agreement shall have been paid in full and all other amounts payable
by each Applicable Party to the Indemnified Parties under the Transaction
Documents shall have been paid in full. If any amount shall be paid to the
Parent in violation of the preceding sentence at any time prior to the later of
(i) the payment in full of the Obligations and all other amounts payable under
this Agreement and all amounts payable to the Indemnified Parties under the
Transaction Documents and (ii) the Final Payout Date, such amount shall be held
in trust for the benefit of the Indemnified Parties and shall forthwith be paid
to the Issuer or its successors and assigns to be credited and applied to the
Obligations, whether matured or unmatured, in accordance with the terms of the
Transaction Documents or to be held by the Issuer or its successors and assigns
as collateral security for any Obligations payable under this Agreement
thereafter arising. Nothing in this Section 4 shall be construed as affecting or
---------
prohibiting any intercompany transactions between the Parent and any Applicable
Party, such as the incurrence of debt by any Applicable Party to the Parent for
the purchase of goods on credit, the repayment of any intercompany loan or the
performance of the transactions contemplated by the Receivables Purchase and
Sale Agreement or the Receivables Sale Agreement, unless and until the Purchase
Termination Date shall have occurred.
SECTION 5. Representations and Warranties. The Parent hereby
------------------------------
represents and warrants as follows:
(a) The Parent is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and has full power
and authority to conduct its
4
business as such business is currently conducted. The Parent had all relevant
times, and now has, all necessary power, authority and legal right to enter into
the transactions contemplated by the Transfer Agreements. All of the issued and
outstanding shares of common stock of the Seller and all of the issued and
outstanding membership interests of the Transferor, are owned, directly or
indirectly, by the Parent, free and clear of any Lien except for Liens granted
to secure the Indebtedness under the Credit Agreement.
(b) The Parent is duly qualified to do business, is in good
standing as a foreign corporation, and has obtained all necessary licenses and
approvals in all jurisdiction in which the conduct of its business requires such
qualification, licenses or approvals and in which the failure to so qualify or
to obtain such licenses and approvals or to preserve and maintain such
qualification, licenses or approvals could reasonably be expected to give rise
to a Material Adverse Effect.
(c) The execution, delivery and performance by the Parent of
this Agreement and the Parent Transfer Agreements, the transactions contemplated
hereby and thereby, are within the Parent's corporate powers, have been duly
authorized by all necessary corporate action, do not contravene (i) the Parent's
Certificate of Incorporation or other constitutive documents, (ii) any law
applicable to the Parent or any of its Affiliates, (iii) any contractual
restriction binding on or affecting the Parent or the Parent's properties or
(iv) any order, writ, judgment, award, injunction or decree binding on or
affecting the Parent or the Parent's properties, and do not result in or require
the creation of any Lien (other than pursuant hereto and to the Transaction
Documents) upon or with respect to any of the Parent's properties except to the
extent that any of the foregoing would not have a Material Adverse Effect on any
Transaction Party. This Agreement and each of the Parent Transfer Agreements has
been duly executed and delivered by the Parent.
(d) No authorization or approval (including, without limitation,
any exchange control agreement) or other action by, and no notice to or filing
with, any governmental authority or regulatory body or other Person is required
for the due execution, delivery and performance by the Parent of this Agreement
or any Parent Transfer Agreement.
(e) Each of this Agreement and the Parent Transfer Agreements
are the legal, valid and binding obligation of the Parent, enforceable against
the Parent in accordance with its terms.
(f) The consolidated balance sheet of the Parent and its
subsidiaries as of May 27, 2001, and the related consolidated statement of
income and cash flows of the Parent and its subsidiaries for the fiscal quarter
then ended, fairly present the consolidated financial condition of the Parent
and its subsidiaries as at such date and the consolidated results of the
operations of the Parent and its subsidiaries for the period ended on such date,
all in accordance with GAAP, and, as of the date hereof, since the fiscal
quarter ended May 27, 2001, there has been no material adverse change in such
condition or operations, except as disclosed in writing prior to the date hereto
to the Issuer and its successors and assigns.
(g) There is no pending or threatened action, suit or proceeding
affecting the Parent or any of its subsidiaries, or its property or the property
of any of its subsidiaries, before
5
any court, governmental agency or arbitrator that materially adversely affect
the ability of the Parent to perform its obligations under this Agreement or any
Parent Transfer Agreement, or that purports to affect the legality, validity or
enforceability of this Agreement or any Parent Transfer Agreement.
(h) There are no conditions precedent to the effectiveness of
this Agreement that have not been satisfied or waived.
(i) The obligations of the Parent under this Agreement do rank
and will rank at least pari passu in priority of payment and in all other
respects with all other unsecured Indebtedness of the Parent.
(j) There is no federal, state or local tax, levy, impost,
deduction, charge or withholding incurred by virtue of the execution or delivery
of this Agreement or the Parent Transfer Agreements.
(k) The purchase price paid by the Seller under the Receivables
Purchase and Sale Agreement and the purchase price paid by the Transferor under
the Receivables Sale Agreement each constitutes reasonably equivalent value in
consideration for the transfer thereunder to the Seller or the Transferor, as
applicable of the Receivables and Related Security transferred thereunder and no
such transfer has been made and shall not hereafter have been made for or on
account of an antecedent Indebtedness owed by the Parent to either the Seller or
the Transferor and no such transfer is or may be voidable under any section of
the Bankruptcy Code.
(l) As of the date hereof, the Parent (i) is not "insolvent"
(as such term is defined in ss.101(32)(A) of the Bankruptcy Code), (ii) is
Solvent (it being understood that, notwithstanding the foregoing representations
in this clause (l), the Parent's financial statements described under clause (f)
--------- ---------
above disclose a negative net worth and no representation is made herein that
Parent has a positive net worth in accordance with GAAP). For purposes of this
paragraph, "Solvent" shall mean, with respect to the Parent on the date of
determination, that on such date (A) the fair value of the property of the
Parent is greater than the total amount of liabilities, including without
limitation, contingent liabilities of the Parent, (b) the present, fair, salable
value of the assets of the Parent is not less than the amount that will be
required to pay the probable liability of the Parent in its debts as they become
absolute and matured, (c) the Parent does not intend to, and does not believe
that it will, incur debts or liabilities beyond the Parent's ability to pay such
debts and liabilities as they mature, and (d) the Parent is not engaged in a
business or transaction, and is not about to engage in a business or
transaction, for which its property would constitute unreasonably small capital.
The amount of contingent liabilities at any time shall be computed as the amount
that, in light of all the facts and circumstances existing at that time,
represents the amount that can reasonably be expected to become as actual or
matured liability.
(m) (i) Except as would not have a Material Adverse Effect on
the Parent, each Plan is in compliance in all material respects with
the applicable provisions of ERISA, the Code and other federal or state
law. Each Plan which is intended to qualify under Section 401(a) of
the Code has received a favorable determination letter from the
6
IRS and to the best knowledge of the Parent, nothing has occurred which
would cause the loss of such qualification. The Parent and each ERISA
Affiliate have made all required contributions to any Plan subject to
Section 412 of the Code, and no application for a funding waiver or
an extension of any amortization period pursuant to Section 412 of the
Code has been made with respect to any Plan.
(ii) There are no pending or, to the best knowledge of the
Parent, threatened claims, actions or lawsuits, or action by any
Governmental Authority, with respect to any Plan which has resulted or
could reasonably result in a Material Adverse Effect on the Parent.
There has been no prohibited transaction or violation of the fiduciary
responsibility rules with respect to any Plan which has resulted or
could reasonably be expected to result in a Material Adverse Effect on
the Parent.
(iii) (A) No ERISA Event that requires notice to be given to the
PBGC has occurred or is reasonably expected to occur; (B) no Plan has a
Funded Current Liability Percentage of less than 90% as of the most
recent valuation date; (C) neither the Parent nor any ERISA Affiliate
has incurred or reasonably expects to incur, any liability under Title
IV of ERISA with respect to any Plan (other than premiums due and not
delinquent under Section 4007 of ERISA); and (D) neither the Parent nor
any ERISA Affiliate has incurred, or reasonably expects to incur, any
liability (and no event has occurred which, with the giving of notice
under Section 4219 of ERISA, would result in such liability) under
Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan.
(n) The Parent is neither (i) an "investment company" within the
meaning of the Investment Company Act of 1940, as amended from time to time, or
any successor statute, nor (ii) a "holding company," or a "subsidiary company"
or an "affiliate" of a "holding company," within the meaning of the Public
Utility Holding Company Act of 1935, as amended from time to time, or any
successor statute.
(o) No proceeds of any purchase under the Receivables Purchase
and Sale Agreements will be used by the Parent to acquire any security in any
transaction which is subject to Section 13 or 14 of the Securities Exchange Act
of 1934, as amended.
(p) None of the Parent's inventory, the sale of which would give
rise to a Receivable, is subject to any Lien other than (i) Permitted Liens and
(ii) the Lien of Bank of America, N.A., as administrative agent under the Credit
Agreement, to the extent set forth in that certain Consent and Release Agreement
dated as of July 31, 2001 between the Transferor, the Seller, the Parent, the
Issuer, the Indenture Trustee and Bank of America, N.A., as administrative
agent.
(q) The Parent has advised its independent certified public
accountants that the Issuer, together with its successors and assigns, has been
authorized to review and discuss with such accountants, upon the written request
of the Issuer or its successors and assigns, as it may reasonably request to
protect its interests under the Receivables Purchase Agreement, any and all
financial statements and other information of any kind that such accountants may
have which directly relate to the Receivables, Related Security and Collections
with respect thereto,
7
and the Parent has directed such accountants to comply with any reasonable
request of the Issuer and its successors and assigns for such information.
It is expressly understood that, except for representations and warranties
expressly made as of the date hereof, the foregoing representations and
warranties shall be deemed re-made on each date that the Parent sells
Receivables to the Seller under the Receivables Purchase and Sale Agreement.
SECTION 6. Covenants. The Parent covenants and agrees that,
---------
until the latest of (i) the Final Payout Date, (ii) the date on which no
Obligations or other amounts shall be payable under this Agreement, and (iii) no
amounts shall be payable to the Indemnified Parties under any Transaction
Document, the Parent will, unless the Issuer and its successors and assigns
shall otherwise consent in writing:
(a) Compliance with Laws, Etc. Comply in all material respects
-------------------------
with all applicable laws, rules, regulations, judgments, decrees and orders
(including, without limitation, those relating to the Receivables) with respect
to it, its business and properties in each case to the extent that any such
failure to comply, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect.
(b) Preservation of Corporate Existence. Other than as permitted
-----------------------------------
pursuant to clause (f) below, (i) preserve and maintain its corporate existence,
---------
rights, franchises and privileges in the jurisdiction of its incorporation, and
(ii) qualify and remain qualified in good standing as a foreign corporation in
each jurisdiction in which the failure to preserve and maintain such
qualification as a foreign corporation could reasonably be expected to have a
Material Adverse Effect.
(c) Reporting Requirements. Furnish to the Issuer and its
----------------------
successors and assigns:
(i) as soon as available, and in any event within ninety (90)
days after the end of each fiscal year of the Parent, copies of the
audited consolidated financial statements of the Parent and its
Subsidiaries, certified in a manner reasonably acceptable to the Issuer
and its successors and assigns by a nationally recognized independent
public accounting firm acceptable to the Issuer and its successors and
assigns (it being agreed that any such audited financial statements,
if accompanied by the Parent's annual audit report and otherwise in
compliance with Section 5.03(b) of the Credit Agreement, shall be
--------------
deemed to be reasonably acceptable hereunder), and (B) within forty-
five (45) days after the end of the first, second and third quarterly
accounting periods in each fiscal year of the Parent, copies of the
unaudited consolidated financial statements of the Parent and its
Subsidiaries, including an unaudited consolidated balance sheet of the
Parent and its Subsidiaries as of the end of such quarterly accounting
period, all in reasonable detail; provided, however, that at any time
-------- -------
that the financial statements described in this Section 6(c)(i) are
---------------
otherwise available to the Issuer and its successors and assigns, the
Parent shall have no obligation to provide such financial statements to
the Issuer and its successors and assigns pursuant to this Agreement;
8
(ii) as soon as possible and in any event within two (2)
Business Days after the Parent has Actual Knowledge of the occurrence
of each Purchase Termination Event, Unmatured Purchase Termination
Event, Servicer Default, Unmatured Servicer Default, Amortization
Event, Unmatured Amortization Event, Event of Default or event that
with the passage of time or the giving of notice, or both, would become
an Event of Default, a statement of the treasurer (or equivalent
officer) of the Parent setting forth details of such event and the
action that the Parent has taken and proposes to take with respect
thereto;
(iii) promptly upon the Parent's first having Actual Knowledge
of the occurrence thereof, notice of any of the following events
affecting the Parent or any ERISA Affiliate (but in no event more than
10 Business Days after such event), and the Parent shall also furnish
to the Issuer and its successors and assigns a copy of any notice with
respect to such event that is filed with a Governmental Authority and
any notice delivered by a Governmental Authority to the Parent or any
ERISA Affiliate with respect to such event:
(A) an ERISA Event;
(B) a decrease in the Funded Current Liability
Percentage for any Plan at the end of any fiscal quarter to
less than 90%; or
(C) any occurrence that is required to be disclosed by
the Parent to the lenders under Section 4.01(n) of the Credit
--------------
Agreement; and
(iv) such other information, documents, records, or reports
respecting the condition or operations, financial or otherwise, of the
Parent or any of its subsidiaries as the Issuer or its successors and
assigns may from time to time reasonably request.
(d) Affiliate Ownership. (i) Continue to own, directly or
--------------------
indirectly, all of the issued and outstanding shares of the capital stock of the
Seller and (ii) continue to own, directly or indirectly all of the issued and
outstanding membership interests of the Transferor; provided, however, that
-------- -------
notwithstanding any term to the contrary contained herein, the Parent and each
of its Affiliates shall be entitled to pledge its shares and membership
interests of the Seller and Transferor, respectively, in accordance with the
terms of the Credit Agreement.
(e) Separate Existence of the Issuer. The Parent hereby
--------------------------------------
acknowledges that the Indenture Trustee and the Noteholders are entering into
the transactions contemplated by the Transaction Documents in reliance upon the
Issuer's identity as a legal entity that is separate from the Transferor, the
Seller, the Parent and the other members of the Parent Affiliated Group.
Therefore, from and after the date of execution and delivery of this Agreement,
Parent will take all reasonable steps including, without limitation, all steps
that Issuer or any assignee of Issuer may from time to time reasonably request
to maintain Issuer's identity as a separate legal entity and to make it manifest
to third-parties that Issuer is an entity with assets and liabilities distinct
from those of Transferor, the Parent and any other members of the Parent
Affiliated Group. Without limiting the generality of the foregoing and in
addition to the other covenants set forth herein, Parent (i) will not hold
itself out to third-parties as liable for the debts of the Issuer nor purport to
own the Receivables and other assets acquired by the Issuer, (ii) will take all
other actions necessary on its part to ensure that Issuer is at all times in
compliance with the covenants
9
set forth in Section 3.07 of the Indenture and Section 2.20 of the Receivables
------------ ------------
Purchase Agreement and (iii) will cause any and all tax liabilities arising in
connection with the transactions contemplated herein or otherwise to be
allocated between Parent or other members of the Parent Affiliated Group on the
one hand and the Issuer on the other on an arm's-length basis in proportion to
their respective items of income and deduction and other tax attributes based on
the "separate return tax liability" method and the "immediate payment" method.
In addition to the foregoing, the Parent will cause any financial statements
Consolidated with those of the Issuer to state that the Issuer's business
consists of the direct and indirect purchase of Receivables from the Parent and
the Applicable Parties and that the Issuer is a separate corporate entity with
its own separate creditors who, in any liquidation of the Parent or any
Applicable Party, will be entitled to be satisfied out of the Issuer's assets
prior to any value in any Applicable Party becoming available to the Issuer's
equity holders.
(f) Merger, Consolidation, Etc. Consolidate with or merge with
--------------------------
or into any other Person or convey, transfer or sell all or substantially all of
its properties and assets to any Person, unless:
(i) the Parent is the surviving entity thereof or, if Parent is
not the surviving entity thereof, (x) the Person formed by such
consolidation or into which Parent is merged or the entity that
acquires by conveyance, transfer or sale all or substantially all of
the properties and assets of Parent (any such Person, the "Surviving
---------
Entity") is an entity organized and existing under the laws of the
------
United States of America or any state thereof and (y) such Surviving
Entity expressly assumes, by an agreement supplemental hereto in form
and substance satisfactory to the Issuer and its assignees, performance
of every covenant and obligation of Parent hereunder and under the
other Transaction Documents to which Parent is a party and (z) such
Surviving Entity delivers to the Issuer and its assignees an opinion of
counsel that such Surviving Entity is duly organized and validly
existing under the laws of its organization, has duly executed and
delivered such supplemental agreement, and such supplemental agreement
is a valid and binding obligation of such Surviving Entity, enforceable
against such Surviving Entity in accordance with its terms (subject to
customary exceptions relating to bankruptcy and equitable principles)
and covering such other matters as the Issuer or its assignees may
reasonably request;
(ii) all actions necessary to maintain the perfection of the
security interests or ownership interests of the Issuer in the
Purchased Assets in connection with such consolidation, merger,
conveyance or transfer as may be reasonably requested by the Issuer
and its assignees have been taken, as evidenced by an opinion of
counsel reasonably satisfactory to Issuer and its assignees; and
(iii) no Purchase Termination Event, Unmatured Purchase
Termination Event, Servicer Default, Unmatured Servicer Default,
Amortization Event, Unmatured Amortization Event, Event of Default or
event that with the passage of time or the giving of notice, or both,
would become an Event of Default, would result from such merger,
consolidation, conveyance or transfer.
10
(g) Separate Existence of the Transaction Parties. The Parent
----------------------------------------------
hereby acknowledges that the Indenture Trustee and the Noteholders are entering
into the transactions contemplated by the Transaction Documents in reliance not
only upon the Issuer's identity as a legal entity that is separate from the
Transferor, the Seller, the Parent and the other members of the Parent
Affiliated Group, but also on the understanding that the members of the Parent
Affiliated Group associated with the Issuer will seek to maintain their separate
existence from each other in order to ensure that the Purchased Assets sold by
any Transaction Party are sold in a true sale such that the Issuer's right,
title and interest in and to such Purchased Assets is free from the claim of any
creditors of the Originator, the Seller and/or the Transferor, as described in
that certain legal opinion (the "Bankruptcy Opinion") from Bingham, Dana LLP
------------------
dated July 31, 2001 with respect to certain bankruptcy issues. Parent hereby
represents and warrants that, as of the date hereof, the factual assumptions set
forth in the Bankruptcy Opinion are true and accurate in all material respects
and further covenants that, from and after the date of execution and delivery of
this Agreement, Parent will take all reasonable steps including, without
limitation, all steps that Issuer or any assignee of Issuer may from time to
time reasonably request, to operate, and to cause each of its Subsidiaries and
Affiliates to operate, in a manner consistent with the assumptions set forth in
the Bankruptcy Opinion. Without limiting the foregoing, Parent shall, so long as
the Transaction Documents remain in effect, cause each of itself, the Seller,
the Transferor, NF Industries, Inc, the SPC Member and the Issuer (each an
"Entity"): (1) to continue to be, duly incorporated or formed, in legal
------
existence and in good standing under the laws of its state of incorporation or
formation; (2) to observe all requisite corporate or limited liability company
formalities and procedures, where relevant and applicable thereto, including the
retention of minutes of meetings and other proceedings of its stockholder(s) and
Board of Directors or members and Board of Managers, as the case may be; (3) to
maintain separate and accurate accounts, books, records and financial
statements; (4) not to commingle its bank accounts, money and other assets with
that of another Entity or, where relevant, of any of its equity holders, except
that the members of the Parent Affiliated Group may maintain concentration
accounts and other accounts with financial institutions in respect of which they
will maintain accurate records of all inter-company debits and credits and from
which funds will be transferred to the separate bank accounts of the members of
the Parent Affiliated Group as their needs require; (5) to act solely in its own
name, through its own officials or representatives where relevant, and not hold
itself as a "division" or "part" of another Entity; (6) to conduct its business
and daily operations independently, free from the dictates of another Entity,
except to the extent that any Entity, holding the equity of another Entity, acts
solely in that capacity or in the capacity as a managing member of any Entity
which is a limited liability company, sensitive to any fiduciary duties to the
other Entity and, where and when relevant, its creditors; (7) to allocate fairly
any overhead for shared office space or business facilities or equipment shared
with another Entity; (8) not to make any loans, gifts or fraudulent conveyances
to any other Entity, except that any Entity, unless otherwise prohibited by the
Transaction Documents, may make loans to one another and may make capital
contributions and/or declare dividends and/or returns of equity and which will
be properly evidenced in their respective corporate or limited liability company
records and which will otherwise comply with all necessary corporate or other
organizational formalities regarding such contributions, dividends or other
returns of equity and (9) so long as the Transaction Documents remain in effect
(except, in the case of the Transferor, to the extent contemplated therein),
cause or seek the dissolution or winding up, in whole or in part, of any other
Entity.
11
(h) Limitation on Transactions with the Issuer. Enter into, or
------------------------------------------
be a party to any transaction with the Issuer, except for:
(i) the transactions contemplated by this Agreement, the
Transfer Agreements and the other Transaction Documents (including any
intercompany notes contemplated thereunder);
(ii) to the extent not otherwise prohibited under the
Receivables Purchase Agreement, other transactions in the nature of
employment contracts and directors' fees, upon fair and reasonable
terms materially no less favorable to the Issuer than would be obtained
in a comparable arm's-length transaction with a Person not an
Affiliate; and
(iii) transactions between the Issuer and the Parent, which
transactions consist of ordinary course of business transactions
between a parent corporation and its Subsidiary.
SECTION 7. Payments Free and Clear of Taxes, Etc. (a) Any and
-------------------------------------
all payments made by the Parent hereunder shall be made free and clear of and
without deduction for any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto,
excluding, in the case of each Indemnified Party, taxes imposed on its income
and franchise taxes imposed on it by the jurisdiction under the laws of which
such Indemnified Party is organized (all such non-excluded taxes, levies,
imposts, deductions, charges, withholdings and liabilities being hereinafter
referred to as "Taxes"). If the Parent shall be required by law to deduct any
-----
Taxes from or in respect of any sum payable hereunder to any Indemnified Party,
(i) the sum payable shall be increased as may be necessary so that after making
all required deductions (including deductions applicable to additional sums
payable under this Section 7) such Indemnified Party receives an amount equal to
---------
the sum it would have received had no such deductions been made, (ii) the Parent
shall make such deductions and (iii) the Parent shall pay the full amount
deducted to the relevant taxation authority or other authority in accordance
with applicable law.
(b) In addition, the Parent agrees to pay any present or future
stamp or documentary taxes or any other excise or property taxes, charges or
similar levies that arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement
(hereinafter referred to as "Other Taxes").
-----------
(c) Without prejudice to the survival of any other agreement of
the Parent hereunder, the agreements and obligations of the Parent contained in
this Section 7 shall survive any termination of the Receivables Purchase
--------
Agreement.
SECTION 8. Consent to Jurisdiction. THE PARENT HEREBY
------------------------
IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY NEW YORK STATE OR
FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK, NEW
YORK, OVER ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT, AND HEREBY (A) IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH
ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE OR
FEDERAL COURT; (B) IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY
12
EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF
SUCH ACTION OR PROCEEDING; AND (C) IRREVOCABLY APPOINTS CORPORATION SERVICE
COMPANY (THE "PROCESS AGENT"), WITH AN OFFICE ON THE DATE HEREOF AT 80 STATE
--------------
STREET, ALBANY, NEW YORK 12207-2543, UNITED STATES OF AMERICA, AS ITS AGENT TO
RECEIVE ON BEHALF OF IT SERVICE OF COPIES OF THE SUMMONS AND COMPLAINT AND ANY
OTHER PROCESS THAT MAY BE SERVED IN ANY SUCH ACTION OR PROCEEDING. SUCH SERVICE
MAY BE MADE BY MAILING OR DELIVERING A COPY OF SUCH PROCESS IN CARE OF THE
PROCESS AGENT AT THE PROCESS AGENT'S ABOVE ADDRESS, AND THE PARENT HEREBY
IRREVOCABLY AUTHORIZES AND DIRECTS THE PROCESS AGENT TO ACCEPT SUCH SERVICE ON
ITS BEHALF. THE PARENT AGREES TO ENTER INTO ANY AGREEMENT RELATING TO SUCH
APPOINTMENT THAT THE PROCESS AGENT MAY CUSTOMARILY REQUIRE AND TO PAY THE
PROCESS AGENT'S CUSTOMARY FEES UPON DEMAND. AS AN ALTERNATIVE METHOD OF SERVICE,
THE PARENT ALSO IRREVOCABLY CONSENTS TO THE SERVICE OF ANY AND ALL PROCESS IN
ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES OF SUCH PROCESS TO THE
PARENT AT THE ADDRESS SPECIFIED ON THE SIGNATURE PAGE HEREOF. NOTHING IN THIS
SECTION 8 SHALL AFFECT THE RIGHT OF EITHER THE PARENT OR ANY BENEFICIARY OF THIS
---------
AGREEMENT TO SERVE LEGAL PROCESS IN ANY MANNER PERMITTED BY LAW OR AFFECT THE
RIGHT OF EITHER THE PARENT OR ANY BENEFICIARY OF THIS AGREEMENT TO BRING ANY
ACTION OR PROCEEDING IN THE COURTS OF ANY OTHER JURISDICTION.
SECTION 9. Amendments, Etc. No amendment or waiver of any
----------------
provision of this Agreement or consent to any departure by the Parent herefrom
shall be effective unless in a writing signed by the Issuer and its successors
and assigns (and, in the case of any amendment, also signed by the Parent), and
then such amendment, waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
SECTION 10. Address for Notices. All notices and other
-----------------------
communications hereunder shall be in writing (which shall include facsimile or
electronic mail communication) and faxed, delivered or sent electronically, if
to the Parent, at its address set forth below its name on the signature page
hereto, and if to any Indemnified Party, at its address set forth in the
Receivables Purchase Agreement, or if sent electronically to the Parent, the
Issuer or the Indenture Trustee, to such e-mail addresses as such parties
provide for such purpose, or, as to any party, at such other address as shall be
designated by such party in a written notice to each other party. Notices and
communications by facsimile shall be effective when sent, and notices and
communications sent by other means shall be effective when received.
SECTION 11. No Waiver; Remedies. No failure on the part of any
-------------------
Indemnified Party 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.
13
SECTION 12. Continuing Agreement; Assignments under Receivables
----------------------------------------------------
Purchase Agreement. This Agreement is a continuing agreement and shall (i)
-------------------
remain in full force and effect until the latest of (x) the payment and
performance in full of the Obligations and the payment of all other amounts
payable under this Agreement (y) the payment in full of all amounts payable to
the Indemnified Parties under each Transaction Document and (z) the Final Payout
Date, (ii) be binding upon the Parent, its successors and permitted assigns, and
(iii) inure to the benefit of, and be enforceable by, the Indemnified Parties
and each of their respective successors, transferees and assigns.
SECTION 13. Acknowledgement and Consent.
---------------------------
(a) The Parent acknowledges that, the Issuer has pledged all of
its right, title and interest in the Purchased Assets to the Indenture Trustee
pursuant to the Indenture. The Parent acknowledges and agrees to such pledge by
the Issuer and consents to the assignment by the Issuer of all or any portion of
its right, title and interest in, to and under this Agreement and the other
Transaction Documents and all of the Issuer's rights, remedies, powers and
privileges and all claims of the Issuer against the Parent under or with respect
to this Agreement and the other Transaction Documents (whether arising pursuant
to the terms of this Agreement or otherwise available at law or in equity),
including without limitation (whether or not any Purchase Termination Event,
Unmatured Purchase Termination Event, Servicer Default, Unmatured Servicer
Default, Amortization Event, Unmatured Amortization Event, Event of Default or
event that with the passage of time or the giving of notice, or both, would
become an Event of Default, has occurred and is continuing) (i) the right of the
Issuer at any time to enforce this Agreement against the Parent and the
obligations of the Parent hereunder and (ii) the right at any time to give or
withhold any and all consents, requests, notices, directions, approvals,
demands, extensions or waivers under or with respect to this Agreement, any
other Transaction Document or the obligations in respect of the Parent
thereunder, all of which rights, remedies, powers, privileges and claims may be
exercised and/or enforced by the Issuer's successors and assigns to the same
extent as the Issuer may do.
(b) The Parent hereby agrees to execute all agreements,
instruments and documents and to take all other actions that the Issuer or its
assignees reasonably determines are necessary or appropriate to evidence its
consent described in Section 13(a). The Parent hereby acknowledges and agrees
------------
that the Issuer may assign to the Issuer's successors and assigns such rights
and interests granted by the Parent to the Issuer hereunder and agrees to
cooperate fully with the Issuer and the Indenture Trustee in the exercise of
such rights.
SECTION 14. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY,
-------------
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (INCLUDING
SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW BUT OTHERWISE WITHOUT REGARD TO
CONFLICTS OF LAW PRINCIPLES).
SECTION 15. Waiver of Jury Trial. Each of the Parent and the
--------------------
Indemnified Parties (in accepting this Agreement) irrevocably waives all right
to trial by jury in any action, proceeding or counterclaim (whether based on
contract, tort or otherwise) arising out of or relating to any of the
Transaction Documents, the Purchased Interests or the actions of the
14
Issuer, its successors and assigns or any other Indemnified Party in the
negotiation, administration or enforcement thereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
15
IN WITNESS WHEREOF, the Parent has cause this Agreement to be
duly executed and delivered by its officer thereunto duly authorized as of the
date first above written.
LEVI STRAUSS & CO.
By_______________________________
Name:
Title:
Address: 1155 Battery Street
San Francisco, California 94120
Attention: Treasurer's Department LS/4
Telephone: (415) 501-6955
Telecopy: (415) 501-1342
EX-10
7
a10qex106.txt
EXHIBIT 10.6 CONSENT AND RELEASE AGREEMENT
EXHIBIT 10.6
EXECUTION COPY
------------------------------------------------------------------------------
CONSENT AND RELEASE AGREEMENT
dated July 31, 2001
among
LEVI STRAUSS FUNDING, LLC
as Transferor,
-------------
LEVI STRAUSS FINANCIAL CENTER CORPORATION,
as Seller and Servicer,
----------------------
LEVI STRAUSS & CO.,
as Borrower and Originator,
--------------------------
LEVI STRAUSS RECEIVABLES FUNDING, LLC
as Issuer,
---------
CITIBANK, N.A.,
as Indenture Trustee,
--------------------
and
BANK OF AMERICA, N.A.,
as Agent
--------
---------------------------------------------------------------------------
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
SECTION 1.01. Defined Terms................................................................ ............2
SECTION 1.02. References to Terms Defined in the Purchaser Documents and
the Bank Loan Documents...................................................................6
ARTICLE II
INTERCREDITOR PROVISIONS
SECTION 2.01. Priorities of Purchased Property..........................................................6
SECTION 2.02. Respective Interests in Purchased Property and Collateral.................................7
SECTION 2.03. Distribution of Proceeds..................................................................8
SECTION 2.04. Lockbox Accounts; Application of Collections..............................................8
SECTION 2.05. Enforcement Actions.......................................................................9
SECTION 2.06. Access to and Use of Collateral..........................................................10
SECTION 2.07. Agency for Perfection and Control........................................................10
SECTION 2.08. UCC Notices..............................................................................11
SECTION 2.09. Independent Credit Investigations........................................................11
SECTION 2.10. Limitation on Liability of Parties to Each Other.........................................11
SECTION 2.11. Marshalling of Assets....................................................................11
SECTION 2.12. Effect upon Bank Loan Documents and Purchaser Documents..................................11
SECTION 2.13. Further Assurances.......................................................................12
ARTICLE III
MISCELLANEOUS
SECTION 3.01. Notices..................................................................................12
SECTION 3.02. Agreement Absolute.......................................................................13
SECTION 3.03. Successors and Assigns...................................................................13
SECTION 3.04. Third-Party Beneficiaries................................................................13
SECTION 3.05. Amendments, Etc..........................................................................13
SECTION 3.06. Section Titles...........................................................................13
SECTION 3.07. Severability.............................................................................13
SECTION 3.08. Execution in Counterparts................................................................13
SECTION 3.09. Governing Law............................................................................14
SECTION 3.10. Submission to Jurisdiction...............................................................14
SECTION 3.11. Consent to Service of Process............................................................14
SECTION 3.12. Waiver of Jury Trial.....................................................................14
CONSENT AND RELEASE AGREEMENT
This CONSENT AND RELEASE AGREEMENT dated as of July 31, 2001,
is entered into by and among LEVI STRAUSS FUNDING, LLC (the "Transferor"), LEVI
----------
STRAUSS FINANCIAL CENTER CORPORATION, ("LS Financial" or the "Seller"), LEVI
------------ ------
STRAUSS & CO., ("LS&Co." or the "Originator"), LEVI STRAUSS RECEIVABLES FUNDING,
----- ----------
LLC (the "Issuer"), CITIBANK, N.A., not individually but as Indenture Trustee
------
(the "Indenture Trustee") and BANK OF AMERICA, N.A. ("Bank of America") in its
------------------ ---------------
capacity as administrative agent and collateral agent (the "Agent") for the
-----
financial institutions (the "Lenders") party to the Credit Agreement referred to
-------
below.
PRELIMINARY STATEMENTS
1. The Originator has agreed to sell, transfer and assign to
the Seller and the Seller has agreed to purchase from the Originator, all of the
right, title and interest of the Originator in and to certain receivables,
including the Purchased Receivables (as hereinafter defined) pursuant to a Third
Amended and Fully Restated Receivables Purchase and Sale Agreement dated as of
January 28, 2000 (as heretofore and hereafter amended, supplemented or otherwise
modified from time to time, the "Receivables Purchase and Sale Agreement")
------------------------------------------
between the Originator and the Seller, and the Seller has further agreed to
sell, transfer and assign to the Transferor, and the Transferor has agreed to
purchase from the Seller, all of the right, title and interest of the Seller in
and to certain receivables, including the Purchased Receivables, pursuant to a
Receivables Purchase and Sale Agreement dated as of January 28, 2000, among the
Originator, the Seller, Levi Strauss Funding Corp. and the Transferor (as
heretofore and hereafter amended, supplemented or otherwise modified from time
to time, the "Receivables Sale Agreement").
--------------------------
2. The Issuer, the Transferor, the Seller (including in its
capacity as servicer (the "Servicer"), and Levi Strauss Securitization Corp., as
--------
SPC Member, are parties to a Receivables Purchase Agreement dated as of July 31,
2001 (as amended, supplemented or otherwise modified from time to time, the
"Receivables Purchase Agreement"), pursuant to which each of the Seller and the
------------------------------
Transferor has agreed to sell to the Issuer all its respective right, title and
interest in and to the Purchased Receivables and the Servicer has agreed to
service the Purchased Receivables on behalf of the Issuer and the Issuer's
assignees, including the Indenture Trustee. The Receivables Purchase and Sale
Agreement and the Receivables Sale Agreement are sometimes hereinafter referred
to collectively as the "Receivables Sale Agreements" and the Receivables Sale
-----------------------------
Agreements and the Receivables Purchase Agreement are sometimes hereinafter
referred to collectively as the "Purchase Agreements"). From and after the date
-------------------
of the initial purchase under the Receivables Purchase Agreement, the
Receivables Sale Agreement shall terminate, the Transferor shall cease to
purchase Receivables from the Seller and the Seller shall sell to the Issuer
directly all of the Purchased Receivables.
3. The Issuer is party to a certain Indenture (the "Indenture")
---------
dated as of July 31, 2001 whereby it has pledged to the Indenture Trustee all of
its right, title and interest in and to, among other things, the Purchased
Receivables.
4. LS&Co., the Lenders and the Agent are parties to that certain
credit agreement (as amended, supplemented, modified, restated, replaced or
refinanced from time to time, with the same or a different group of lenders,
issuing banks or bank agents, the "Credit Agreement") dated as of February 1,
-----------------
2001 among the Originator, as borrower, the initial lenders, initial issuing
banks and swing line lenders party thereto, Bank of America, as administrative
agent and collateral agent, Bank of America Securities LLC and Salomon Smith
Barney Inc., as co-lead arrangers and joint book managers, Citicorp USA, Inc.,
as syndication agent, and The Bank of Nova Scotia, as documentation agent.
5. Each of the Seller and the Transferor are guarantors of
LS&Co.'s obligations under the Credit Agreement.
6. To secure their respective obligations to the Agent and the
Lenders under the Credit Agreement and the guaranties executed in connection
therewith, each of the Originator, the Seller and the Transferor have granted to
the Agent, for the benefit of the Lenders, a security interest in certain
collateral, including but not limited to the Receivables (as hereinafter
defined) and proceeds thereof.
7. It is a condition precedent to the making of the initial
purchase under the Receivables Purchase Agreement and to the issuance of the
Notes pursuant to the Indenture that the parties hereto enter into this
Agreement.
8. The parties hereto have agreed to enter into this Agreement
to set forth provisions regarding the allocation of priorities in, and the
enforcement of remedies with respect to, the Purchased Property (as hereinafter
defined) and with respect to the Collateral (as hereinafter defined);
NOW, THEREFORE, in consideration of the foregoing premises and
the mutual covenants contained herein, and for other good and valuable
consideration, receipt of which is hereby acknowledged, it is hereby agreed as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Defined Terms. As used in this Agreement, the
-------------
following capitalized terms shall have the following meanings (such meanings to
be equally applicable to both the singular and plural forms of the terms
defined). The term "Agreement" shall mean this Consent and Release Agreement, as
the same may be amended, supplemented or otherwise modified from time to time.
"Bank Claim" means all "Obligations" (as such term is defined in
----------
the Credit Agreement) of the Loan Parties under the Bank Loan Documents.
"Bank Collateral" means all property and interests in property
---------------
now owned or hereafter acquired by Originator or any subsidiary of Originator
(other than Issuer) in or upon which a security interest, lien or mortgage is
granted by Originator or such subsidiary to the Agent under any of the Bank Loan
Documents.
2
"Bank Collateral Documents" means all "Collateral Documents" (as
-------------------------
such term is defined in the Credit Agreement).
"Bank Loan Documents" has the meaning specified for the term
-------------------
"Loan Documents" in the Credit Agreement.
"Borrower" has the meaning specified in the Credit Agreement.
--------
"Business Day" means any day excluding Saturday, Sunday and any
------------
day which is a legal holiday under the laws of the State of California, Oregon
or the State of New York or is a day on which banking institutions located in
any of such states are closed.
"Claim" means the Bank Claim or the Purchaser Claim, as
-----
applicable.
"Collateral" means all Bank Collateral which does not
----------
constitute Purchased Property.
"Collection Account" has the meaning specified in the
------------------
Indenture.
"Collections" means, with respect to any Receivable, all cash
-----------
collections and other proceeds of such Receivable, including without limitation,
all proceeds of Related Security (including late charges, fees and interest
arising thereon, and all recoveries with respect thereto that have been written
off as uncollectible).
"Companies" means, collectively, the Originator, the Seller and
---------
the Transferor, and "Company" means any one of such Companies.
-------
"Company Claim" means all of the indebtedness, obligations and
-------------
other liabilities of the Issuer to the Transferor or the Seller, including, but
not limited to, obligations evidenced by any Subordinated Note, and all costs of
collection or enforcement thereof.
"Contract" means any agreement or invoice pursuant to, or
--------
under which, an Obligor shall be obligated to make payments with respect to any
Receivable.
"Enforcement Period" means, collectively or individually, (i)
-------------------
any period from and after an acceleration of the Notes during which the
Indenture Trustee is exercising any remedies under the Indenture to sell or
foreclose on the Purchased Property or (ii) any period from and after a default
under the Bank Loan Documents during which the Bank Agent is exercising any
remedies under the Bank Loan Documents against or with respect to the
Collateral.
"Indenture Supplement" means each supplement to the Indenture
--------------------
evidencing the terms applicable to a particular Series of Notes.
"Lenders" means the financial institutions party to the Credit
-------
Agreement, including any such institutions in their capacity as lenders,
swing-line lenders, issuing banks, co-lead arrangers, joint book managers,
syndication agent or documentation agent.
3
"Loan Parties" means, collectively, the Borrower, the Seller and
------------
the Transferor and each other subsidiary of the Borrower which has guaranteed
the Bank Claim or executed a Bank Collateral Document.
"Lockbox Account" means any lockbox account, concentration
----------------
account, depository account or similar account (including any associated demand
deposit account) established by the Originator, the Seller, the Servicer, the
Transferor or the Issuer and into which any Collections are deposited.
"Noteholders" has the meaning specified in the Indenture.
-----------
"Notes" has the meaning specified in the Indenture.
-----
"Obligor" means, with respect to any Receivable, the Person or
-------
Persons obligated to make payments in respect thereof.
"Person" means an individual, corporation, trust (including a
------
business trust), joint-stock company, limited liability company, unincorporated
organization, association, partnership, joint venture, governmental authority or
any other entity.
"Purchase Termination Date" means the date on which the Issuer
-------------------------
ceases to purchase, and the Seller ceases to sell, Receivables under the
Receivables Purchase Agreement.
"Purchased Property" means (i) the Purchased Receivables, (ii)
-------------------
the Related Security related to such Purchased Receivables, (iii) Collections of
such Purchased Receivables, (iv) all rights of the Transferor (directly or as
assignee) under the Receivables Sale Agreements, (v) all rights of the Seller
under the Receivables Purchase and Sale Agreement, (vi) the Lockbox Accounts,
the Collection Account and each other account established pursuant to the
Indenture for the benefit of the Issuer or any Noteholders and (vii) all
proceeds of the foregoing.
"Purchased Receivables" means all Receivables now owned or
---------------------
hereafter existing and arising through the Purchase Termination Date which are
sold or purported to be sold, contributed or otherwise transferred to the Issuer
under and pursuant to the terms of the Receivables Purchase Agreement. It is
expressly understood that the term Purchased Receivables shall not include
Receivables arising after the Purchase Termination Date.
"Purchaser Claim" means all obligations of any Company
----------------
(including in its capacity as Servicer or otherwise) to, or which have been
assigned to or entered into in favor of, the Indenture Trustee or any Noteholder
arising under any Purchaser Document and all obligations of any Obligor arising
under any Purchased Receivable, including, but not limited to, all sums or
increases now or hereafter advanced or made to or for the benefit of the Issuer
thereunder, any interest thereon, any repayment obligations, indemnity payments,
fees or expenses due thereunder, and any costs of collection or enforcement.
"Purchaser Claim Termination Date" means any date on which (i)
--------------------------------
the Purchaser Claim has been paid and satisfied in full in cash or (ii) the
Indenture shall have been completely terminated, and the Indenture Trustee shall
have released its lien on the Purchased Property in accordance with the
Indenture.
4
"Purchaser Documents" means the Receivables Purchase Agreement,
-------------------
the Subordinated Note, the Indenture, and each Indenture Supplement.
"Receivable" means, the indebtedness of an Obligor arising under
----------
a Contract with the Originator from the sale of merchandise or services by or on
behalf of the Originator, whether constituting an account, chattel paper,
instrument or general intangible and shall include the right of payment of any
interest, finance charges, returned check or late charges and other obligations
of such Obligor with respect thereto.
"Records" shall mean all Contracts, purchase orders, invoices,
-------
customer lists, credit files and other agreements, documents, books, records and
other media for the storage of information (including without limitation tapes,
disks, punch cards, computer software and databases and related property) with
respect to the Receivables, the Related Security and/or the related Obligors;
provided, that Records shall not include any software licenses to the extent
--------
that the assignment thereof to the Issuer would breach the terms of such
licenses.
"Related Security" shall mean, with respect to each Receivable:
----------------
(i) all security interests or Liens and property subject
thereto from time to time purporting to secure payment of such
Receivable, whether pursuant to the Contract related to such Receivable
or otherwise, together with all financing statements and security
agreements describing any collateral securing such Receivable;
(ii) all guaranties, letters of credit, insurance, warranties,
indemnities and other agreements or arrangements of whatever character
from time to time supporting or securing the payment obligation of the
Obligor with respect to such Receivable whether pursuant to the
Contract related to such Receivable or otherwise;
(iii) all of the Originator's, the Seller's, the Transferor's
and the Issuer's interest in the specific items of goods (including
Returned Goods), if any, the sale, financing, lease or licensing of
which gave rise to such Receivable;
(iv) all Records related to such Receivable;
(v) all service contracts and other contracts and agreements
associated with such Receivable; and
(vi) all proceeds of any of the foregoing.
"Repurchased Receivables" means any Purchased Receivables which
-----------------------
are re-assigned from the Issuer to the Seller, the Transferor or the Originator
under and in accordance with the terms of the Receivables Purchase Agreement.
"Returned Goods" means all right, title and interest of any
--------------
Originator, the Seller or the Transferor, as applicable, in and to returned,
repossessed or foreclosed goods and/or merchandise the sale of which gave rise
to a Purchased Receivable.
5
"Returned Goods Lien" has the meaning specified in Section
--------------------
2.01(a).
"Series" has the meaning specified in the Indenture.
------
"Subordinated Note" has the meaning specified in the Receivables
-----------------
Purchase Agreement.
"UCC" means the Uniform Commercial Code as from time to time in
---
effect in the applicable jurisdictions.
"Unsold Receivables" means any Receivables other than Purchased
------------------
Receivables.
SECTION 1.02. References to Terms Defined in the Purchaser
-------------------------------------------------
Documents and the Bank Loan Documents. Whenever in Section 1.01 a term is
--------------------------------------
defined by reference to the meaning specified in any of the Purchaser Documents
or Bank Loan Documents, then, unless otherwise specified herein, such term shall
have the meaning specified in such Purchaser Documents or Bank Loan Documents,
as the case may be, as in existence on the date hereof, without giving effect to
any amendments of such term as may hereafter be agreed to by the parties to such
documents, unless such amendments have been consented to in writing by all of
the parties hereto.
ARTICLE II
INTERCREDITOR PROVISIONS
SECTION 2.01. Priorities of Purchased Property. (a) Notwith-
---------------------------------
standing any provision of the UCC, any applicable law or decision or any of the
Bank Loan Documents or Purchaser Documents, the Agent hereby agrees that, upon
the sale or other transfer of an interest in each Purchased Receivable to the
Issuer, any lien, claim, encumbrance, security interest or other interest
acquired by the Agent or any Lender in such Purchased Receivable and proceeds
thereof (other than the proceeds payable to the Transferor or the Seller by the
Issuer in consideration for such sale or transfer) and any other Purchased
Property relating thereto shall automatically and without further action cease
and be released, and the Agent and the Lenders shall have no lien, claim,
encumbrance, security interest or other interest or right therein; provided,
however, that nothing in this Section 2.01 shall be deemed to constitute a
release by the Agent of:
(i) its lien on and security interest in the proceeds
received by any Company from the sale or other transfer of the
Purchased Receivables (including, without limitation, cash
payments made by the Issuer and any Subordinated Note issued by
the Issuer in favor of, or endorsed to, any Company, each in
connection with such sales);
(ii) any lien on, security interest in or assignment of any
Company Claim;
(iii) any lien, claim, encumbrance, security interest or
other Interest or right the Agent has in any Unsold Receivables
and the proceeds thereof, including
6
without limitation, Collections of Unsold Receivables which are
at any time deposited in any Lockbox Accounts or the Collection
Account;
(iv) any lien, claim, encumbrance, security interest or
other interest or right the Agent may have in any Subordinated
Note or in any capital or equity interests of the Issuer which
are owned by any Company or other affiliate or in any other
right of any Company or any affiliate other than the Issuer to
receive any residual value in the Purchased Property from and
after the time that all of the Notes have been paid in full and
the lien of the Indenture has been terminated;
(v) any lien, claim, encumbrance, security interest or
other interest or right the Agent may have in any property of a
Company (including any capital or equity interests of any
Company) which does not constitute Purchased Property; and
(vi) any lien, claim, encumbrance, security interest or
other interest or right the Agent may have in any interest of a
Company in Returned Goods (collectively, a "Returned Goods
--------------
Lien")or in any Repurchased Receivables.
----
(b) For purposes of the foregoing, it is expressly understood
that (i) the security interest of the Agent in Returned Goods or Repurchased
Receivables shall not attach while such items are property of the Issuer; (ii)
from and after the payment of all adjustments owed by any Company under the
Receivables Purchase Agreement in respect of such Repurchased Receivables or in
respect of the Receivables relating to such Returned Goods (including by way of
adjustments to the Subordinated Note), the Issuer shall have no further
interests in such Repurchased Receivables and/or Returned Goods and such
Repurchased Receivables and/or Returned Goods shall automatically be deemed to
have been transferred from the Issuer to the Seller without the need for further
action on the part of such parties; and (iii) upon any such transfer to any
Company, the security interest of the Agent shall reattach to such Repurchased
Receivables and/or Returned Goods. It is further expressly understood and agreed
that the interest in goods included in clause (iii) of the definition of Related
Security extends only to rights in respect of the specific items the sale,
financing, lease or licensing of which has given rise to a Receivable and does
not include an interest in goods owned by any Company the subsequent sale,
financing, lease or licensing of which may create a Receivable.
(c) The Agent hereby acknowledges that the Subordinated Note is
subordinated to the payment of the Notes and agrees that its rights against the
Issuer as obligor under the Subordinated Note are subject to the terms thereof.
SECTION 2.02. Respective Interests in Purchased Property and
--------------------------------------------------
Collateral. Each of the Indenture Trustee and the Issuer agrees that it does
----------
not have and shall not have any property interest, security interest in, lien
upon or interest in any Collateral. Except for all rights of access to and use
of Records and except as otherwise provided in Section 2.01(a), the Agent agrees
that it does not have and shall not have any security interest in, lien upon or
interest in the Purchased Property.
7
SECTION 2.03. Distribution of Proceeds. At all times, all
--------------------------
proceeds of Collateral and Purchased Property (including proceeds received in
the Collection Account) shall be distributed in accordance with the following
procedure:
(a) All collections an d other proceeds of the Collateral shall
be paid or delivered to the Borrower (or its designee) or as otherwise
required by applicable law.
(b) All Collections and other proceeds of the Purchased Property
shall be paid or delivered to the Indenture Trustee for application in
accordance with the terms of the Indenture until the Purchaser Claim
Termination Date, at which time any remaining Collections and proceeds
shall be paid to the Issuer (or its designee) in accordance with the
terms of the Indenture or as otherwise required by applicable law.
SECTION 2.04. Lockbox Accounts; Application of Collections.
-------------------------------------------------
(a) The Indenture Trustee and the Issuer each hereby acknowledge
(i) that the Companies will deliver to the Agent the Subordinated Note
issued by the Issuer, as security for the Bank Claim and (ii) that the
Borrower (or its designee) shall be entitled to Collections of Unsold
Receivables which may be deposited in the Lockbox Accounts or the
Collection Account. From and after the date on which the Issuer ceases
to purchase Receivables from the Seller, the Servicer shall promptly
notify the Indenture Trustee and the Agent of any Collections of Unsold
Receivables which are deposited in any Lockbox Account or the Collection
Account and shall promptly identify such funds to the Indenture Trustee
with instructions to deliver such funds to the Borrower (or its
designee).
(b) For purposes of determining whether specific Collections
have been received on account of Purchased Property or on account of
Unsold Receivables, the parties hereto agree as follows:
(i) All payments made by an Obligor which is obligated to
make payments on Purchased Receivables but is not obligated to
make any payments on Unsold Receivables shall be conclusively
presumed to be payments on account of Purchased Receivables, and
all payments made by an Obligor which is obligated to make
payments on Unsold Receivables but is not obligated to make any
payments on Purchased Receivables shall be conclusively presumed
to be payments on account of Unsold Receivables.
(ii) All payments made by an Obligor which is obligated to
make payments with respect to both Purchased Receivables and
Unsold Receivables shall be applied against the specific
Receivables, if any, which are designated by such Obligor by
reference to the applicable invoice as the Receivables with
respect to which such payments are to be applied, and, absent
such designation, such payments shall be applied against the
oldest outstanding Receivables or portion thereof owed by such
Obligor to the extent such oldest Receivable or portion thereof
is not in dispute.
(c) Subject to the terms and conditions of this Section 2.04(c),
he Indenture Trustee agrees that, unless the Agent has notified the
Indenture Trustee that the Bank Claim has been satisfied in full in
cash, (i) it shall not release its control over the Lockbox Accounts to
the
8
Issuer without the prior written consent of the Agent, and (ii) it
shall, from and after the date that the Indenture has been terminated
in accordance with its terms and all obligations of the Issuer
thereunder have been satisfied, transfer to the Agent the Indenture
Trustee's control over the Lockbox Accounts upon receipt by the
Indenture Trustee of a certificate of the Servicer to the effect that
either (x) the Purchaser Claim Termination Date has occurred or (y)
that all outstanding Purchased Receivables have been paid in full in
cash or written-off as uncollectible. If the Agent has so notified the
Indenture Trustee of satisfaction of the Bank Claim, the Indenture
Trustee shall release control of the Lockbox Accounts without any such
consent of, or transfer of control to, the Agent. Any such transfer
shall be without representation, recourse or warranty of any kind on
the part of the Indenture Trustee. Notwithstanding any such transfer,
all Collections and other proceeds subsequently deposited into the
Lockbox Accounts or the Collection Account on account of the
Purchased Property shall be delivered to the Issuer as provided in
Section 2.03(b) above.
(d) In order to effect more fully the provisions of this
Agreement, the parties hereto agree that: (i)in the event that the Agent
shall foreclose or otherwise dispose of any inventory with which
Returned Goods have been commingled, the Indenture Trustee shall be
allowed to have a representative observe such foreclosure or disposition
and the Agent's application of proceeds received therefrom; (ii) in the
event that the Indenture Trustee shall foreclose or otherwise dispose of
any Returned Goods which have been commingled with other inventory, the
Agent shall be allowed to have a representative observe such foreclosure
or disposition and the Indenture Trustee's application of proceeds
therefrom; and (iii) neither the Agent, the Indenture Trustee, the
Issuer nor any Company, shall, before the Purchaser Claim Termination
Date, send any notices to any Obligor of any Receivable directing such
Obligor to remit Collections of any Receivables other than to the
Lockbox Accounts.
(e) The Servicer and the Indenture Trustee each further agree
that they will not cause the Servicer to be replaced by a successor
servicer except (i) in accordance with the terms of the Receivables
Purchase Agreement and (ii) unless such successor servicer has
acknowledged the terms of this agreement and agreed to be bound hereby.
SECTION 2.05. Enforcement Actions. The parties hereto agree
-------------------
that during an Enforcement Period:
(a) Subject to any applicable restrictions in the Purchaser
Documents, the Indenture Trustee may take any action to liquidate the
Purchased Property or to foreclose or realize upon or enforce any of
the rights of the Issuer with respect to the Purchased Property without
the prior written consent of the Agent or any Lender or any other party
hereto; provided, however, that with respect to Returned Goods, the
-------- -------
Indenture Trustee shall not take any action to foreclose or realize
upon or to enforce any rights it may have with respect to any Purchased
Property constituting Returned Goods without the prior written consent
of the Agent, unless either (i) such Returned Goods have been segregated
from, and are separately identifiable from, the Collateral or (ii)
the Bank Claim shall have been first paid and satisfied in full in cash.
The Indenture Trustee shall not have any rights to liquidate or
foreclose on any Unsold Receivables.
9
(b) Subject to any applicable restrictions in the Bank Loan
Documents, the Agent may, at its option and without the prior written
consent of the other parties hereto, take any action to accelerate
payment of the Bank Claim and to foreclose or realize upon or enforce
any of its rights with respect to (i) the Collateral and (ii) any
Purchased Property constituting Returned Goods which has been
redelivered to LS&Co. and become commingled with other inventory of
LS&Co.; provided, however, that the Agent shall apply proceeds of any
Purchased Property consisting of Returned Goods as provided in Section
2.03 above.
SECTION 2.06. Access to and Use of Collateral. The Indenture
---------------------------------
Trustee and the Agent hereby agree that, notwithstanding the priorities set
forth in this Agreement, the Indenture Trustee and the Agent shall have the
following rights of access to and use of the Purchased Property and the
Collateral, respectively:
(a) Subject to any applicable restrictions in the Purchaser
Documents, the Indenture Trustee may enter one or more premises of any
Company, whether leased or owned, at any time during reasonable business
hours, without force or process of law and without obligation to pay
rent or compensation to any Company or the Issuer, whether before,
during or after an Enforcement Period, in order to have access to and
use of all Records located thereon and may have access to and use of
any other property to which such access and use are granted under the
Purchaser Documents, in each case provided that such use is for any
purpose permitted under the Purchaser Documents or for the purposes of
enforcing the rights of the Indenture Trustee with respect to the
Purchased Property.
(b) Subject to any applicable restrictions in the Bank Loan
Documents, the Agent may enter one or more premises of any Company,
whether leased or owned, at any time during reasonable business hours,
without force or process of law and without obligation to pay rent
or compensation to any Company, the Issuer or the Indenture Trustee,
whether before, during or after an Enforcement Period, and may have
access to and use of all Records located thereon, provided that such
use is for any purpose permitted under the Bank Loan Documents or for
the purposes of enforcing the Agent's rights (i) with respect to the
Collateral and (ii) subject to the limits provided in Section 2.01
above, with respect to Purchased Property consisting of Returned Goods.
SECTION 2.07. Agency for Perfection and Control. The Indenture
---------------------------------
Trustee and the Agent hereby appoint each other as agent for purposes of
perfecting by possession or by control their respective security interests and
ownership interests and liens on any Collateral (which may include any
Subordinated Note)and Purchased Property to the extent that such security or
ownership interests cannot be perfected by the filing of a financing statement.
In the event the Indenture Trustee, to the actual knowledge of an officer
responsible for overseeing compliance with this Agreement, obtains possession of
any of the Collateral, the Indenture Trustee shall hold such Collateral in trust
and, at the request of the Servicer or the Agent, shall deliver such Collateral
to the Agent. In the event that the Agent, to the actual knowledge of an officer
responsible for overseeing compliance with this Agreement, obtains possession of
any of the Purchased Property, the Agent shall hold such Purchased Property in
trust and, at the request
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of the Servicer or the Indenture Trustee, shall deliver such Purchased Property
to the Indenture Trustee.
SECTION 2.08. UCC Notices. In the event that any party hereto
-----------
shall be required by the UCC or any other applicable law to give notice to the
other of intended disposition of Purchased Property or Collateral, respectively,
such notice shall be given in accordance with Section 3.01 hereof and ten (10)
days' notice shall be deemed to be commercially reasonable.
SECTION 2.09. Independent Credit Investigations. None of the
----------------------------------
Indenture Trustee or the Agent or any of their respective directors, officers,
agents or employees shall be responsible to the other or to any other Person for
the solvency, financial condition or ability of the Issuer or the Companies to
repay the Notes, the Purchaser Claim or the Bank Claim, as applicable, or for
the value of the Purchased Property or the Collateral, or for statements of any
Company or the Issuer oral or written, or for the validity, sufficiency or
enforceability of the Purchaser Claim, the Bank Claim, the Purchaser Documents,
the Bank Loan Documents, the Indenture Trustee's lien on the Purchased Property
or the Agent's security interest in the Collateral or any other collateral. The
Agent and the Indenture Trustee have entered into their respective agreements
with the Companies and the Issuer, as applicable, based upon their own
independent investigations. None of the Agent or the Indenture Trustee makes any
warranty or representation to the other nor does it rely upon any representation
of the other with respect to matters identified or referred to in this Section
2.09.
SECTION 2.10. Limitation on Liability of Parties to Each Other.
-------------------------------------------------
The Indenture Trustee and the Agent each undertakes to perform such duties and
only such duties as are specifically set forth in this Agreement, and no implied
covenants or obligations shall be read into this Agreement against the Indenture
Trustee or the Agent. Except as expressly provided in this Agreement, the Agent
shall have no liability to the Indenture Trustee and the Indenture Trustee shall
have no liability to the Agent, except in each case for liability arising from
the gross negligence or willful misconduct of such party or its representatives.
In no event shall the Indenture Trustee or the Agent be liable to any other
party hereto for special, indirect or consequential loss or damage of any kind
whatsoever (including but not limited to lost profits).
SECTION 2.11. Marshalling of Assets. Nothing in this Agreement
---------------------
will be deemed to require either the Indenture Trustee or the Agent (a) to
proceed against certain property securing any or all of the Bank Claim or the
Purchaser Claim prior to proceeding against other property securing any such
Claim or (b) to marshal the Collateral or the Purchased Property (as applicable)
upon the enforcement of the Agent's or the Indenture Trustee's rights or
remedies under the Bank Loan Documents or Purchaser Documents, as applicable.
SECTION 2.12. Effect upon Bank Loan Documents and Purchaser
--------------------------------------------------
Documents. By executing this Agreement, the Companies and the Issuer agree to be
---------
bound by the provisions hereof as they relate to the relative rights of the
Agent and the Indenture Trustee with respect to the Collateral and the Purchased
Property. Each of the Companies, the Issuer, the Indenture Trustee and the Agent
acknowledge that the provisions of this Agreement shall not give the Companies
or the Issuer any substantive rights as against any other Person and that
nothing in this Agreement shall amend, modify, change or supersede the terms of
(x) the Bank Loan
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Documents as between the Borrower, the other Companies, the Agent and the
Lenders or (y) the Purchaser Documents as among the Companies, the Issuer and
the Indenture Trustee. The Agent, individually and on behalf of the Lenders,
hereby confirms that the Purchaser Documents in existence as of the date hereof
have been furnished to it and that the Bank Loan Documents expressly permit the
transactions contemplated thereby and hereby consents to the execution, delivery
and performance by each Company of such Purchaser Documents. Notwithstanding the
foregoing, the Agent, on the one hand, and the Indenture Trustee, on the other
hand, agree that, as between themselves, to the extent the terms and provisions
of the Bank Loan Documents or the Purchaser Documents are inconsistent with the
terms and provisions of this Agreement, the terms and provisions of this
Agreement shall control.
SECTION 2.13. Further Assurances. Concurrently with the
--------------------
execution hereof, the Agent shall execute or otherwise authorize the filing of
UCC-3 partial releases in the form of Exhibit A hereto to evidence the release
---------
of Collateral described in Section 2.01 hereof to be filed in the jurisdictions
noted in Exhibit A. Each of the parties hereto agrees to take such actions as
---------
may be reasonably requested by any other party, whether before, during or after
an Enforcement Period, in order to effect the rules of distribution and
allocation set forth above in this Article II.
ARTICLE III
MISCELLANEOUS
SECTION 3.01. Notices. All notices and other communications
-------
provided for hereunder shall, unless otherwise stated herein, be in writing
(including telex and facsimile communication) and shall be personally delivered
or sent by certified mail, postage prepaid, or overnight courier or facsimile,
to the intended party at the address or facsimile number of such party set forth
below 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, when received,
(b) if sent by certified mail, four Business Days after having been deposited in
the mail, postage prepaid, (c) if sent by overnight courier, two Business Days
after having been given to such courier, unless sooner received by the addressee
and (d) if transmitted by facsimile, when sent, upon receipt confirmed by
telephone or electronic means. Notices and communications sent hereunder on a
day that is not a Business Day shall be deemed to have been sent on the
following Business Day.
If to LS&Co. or the Transferor: 1155 Battery Street, San
Francisco, California 94111, Attention: Treasurer,
Telecopy: (415) 501-1342;
If to LS Financial: 3125 Chad Drive, Eugene, Oregon 97408,
Attention: Director, Telecopy: (541) 242-7577;
If to the Indenture Trustee: 111 Wall Street, 14th Floor,
NY, NY 10043, Attn: Structured Finance, Levi Strauss Series
2001-A, Telecopy (212) 657-4009; and
If to the Agent: 1455 Market Street, San Francisco, CA 94103,
Attn: Kathleen Carry (Fax)(415) 503-5001;
or, as to any such party, at such other address as shall be designated by such
party in a written
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notice to each of the other parties hereto.
SECTION 3.02. Agreement Absolute. This Agreement shall be and
------------------
remain absolute and unconditional under any and all circumstances, and no acts
or omissions on the part of any other party to this Agreement shall affect or
impair the agreement of any party to this Agreement, unless otherwise agreed to
in writing by all of the parties hereto. This Agreement shall be applicable both
before and after the filing of any petition by or against any Company or the
Issuer under the Bankruptcy Code and all references herein to any Company or the
Issuer shall be deemed to apply to a debtor-in-possession or trustee for such
party and all allocations of payments among the parties hereto shall, subject to
any court order to the contrary, continue to be made after the filing of such
petition on the same basis that the payments were to be applied prior to the
date of the petition.
SECTION 3.03. Successors and Assigns. This Agreement shall be
----------------------
binding upon and inure to the benefit of each of the parties hereto and their
respective successors and assigns. The successors and assigns for the Companies
and the Issuer shall include a debtor-in-possession or trustee of or for such
party. The successors and assigns for the Agent, the Servicer and the Indenture
Trustee, as the case may be, shall include any successor Agent, Indenture
Trustee or Servicer, as the case may be, appointed under the terms of the Bank
Loan Documents or the Purchaser Documents, as applicable. Each of the Agent and
the Indenture Trustee, as the case may be, agrees to not transfer any interest
it may have in the Bank Loan Documents or the Purchaser Documents, as the case
may be, or to delegate its role as agent or trustee, as applicable, unless such
transferee or delegate has been notified of the existence of this Agreement and
has agreed to be bound hereby.
SECTION 3.04. Third-Party Beneficiaries. The terms and
-------------------------
provisions of this Agreement shall be for the sole benefit of the parties hereto
and their respective successors and assigns and no other Person shall have any
right, benefit or priority by reason of this Agreement.
SECTION 3.05. Amendments, Etc. No amendment or waiver of any
---------------
provision of this Agreement shall in any event be effective unless the same
shall be in writing and signed by all the parties hereto, and any such amendment
or waiver shall be effective only in the specific instance and or the specific
purpose for which given.
SECTION 3.06. Section Titles. The article and section headings
--------------
contained in this Agreement are and shall be without substantive meaning or
content of any kind whatsoever and are not a part of the agreement between the
parties hereto.
SECTION 3.07. Severability. Any provision of this Agreement that
------------
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or thereof
or affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION 3.08. Execution in Counterparts. This Agreement may be
-------------------------
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which when taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature
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page of this Agreement by telecopier shall be effective as delivery of a
manually executed counterpart of this Agreement.
SECTION 3.09. 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, INCLUDING 5-1401 OF THE
GENERAL OBLIGATIONS LAW BUT OTHERWISE WITHOUT REGARD TO CONFLICT OF LAW
PRINCIPLES.
SECTION 3.10. Submission to Jurisdiction. (i) Each of the
----------------------------
parties hereto hereby irrevocably and unconditionally submits, for itself and
its property, to the nonexclusive jurisdiction of any New York State court or
federal court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or any of the Bank Loan Documents or Purchaser
Documents to which it is a party, or for recognition or enforcement of any
judgment, and each of the parties hereto hereby irrevocably and unconditionally
agrees that all claims in respect of any such action or proceeding may be heard
and determined in any such New York State court or, to the extent permitted by
law, in such federal court. Each of the parties hereto 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 Agreement or any of the Bank Loan Documents or
Purchaser Documents shall affect any right that any party may otherwise have to
bring any action or proceeding relating to this Agreement or any Bank Loan
Documents or Purchaser Documents to which it is a party in the courts of any
jurisdiction.
(ii) Each of the parties hereto irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection that it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement or any of the
Bank Loan Documents or Purchaser Documents to which it is a party in any New
York State or federal court. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.
SECTION 3.11. Consent to Service of Process. Each party to this
-----------------------------
Agreement irrevocably consents to service or process by personal delivery,
certified mail, postage prepaid or overnight courier. Nothing in this Agreement
will affect the right of any party to this Agreement to serve process in any
other manner permitted by law.
SECTION 3.12. Waiver of Jury Trial. EACH PARTY TO THIS AGREEMENT
--------------------
WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR
DEFEND ANY RIGHTS UNDER OR RELATING TO THIS AGREEMENT OR ANY AMENDMENT,
INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE
DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY COURSE OR
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), ACTIONS OF ANY
OF THE PARTIES HERETO OR ANY OTHER RELATIONSHIP EXISTING IN CONNECTION WITH THIS
AGREEMENT, AND
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AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT
BEFORE A JURY.
15
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
LEVI STRAUSS FUNDING, LLC, as Transferor
By: _________________________________
Name: Joseph M. Maurer
Title: Treasurer
LEVI STRAUSS FINANCIAL CENTER
CORPORATION, as Seller and Servicer
By: _________________________________
Name: Joseph M. Maurer
Title: Treasurer
LEVI STRAUSS & CO., as Borrower and
Originator
By: _________________________________
Name: Joseph M. Maurer
Title: Treasurer
LEVI STRAUSS RECEIVABLES FUNDING,
LLC, as Issuer
By: _________________________________
Name: Joseph M. Maurer
Title: Treasurer
CITIBANK, N.A., not in its individual capacity but
solely as Indenture Trustee
By: _________________________________
Name:
Title:
BANK OF AMERICA, N.A., as Agent
By: _________________________________
Name:
Title:
Exhibit A to Consent and Release Agreement
------------------------------------------
See Attached.