INITIAL PURCHASE AND CONTRIBUTION AGREEMENT

Exhibit 10.20

Execution Version

INITIAL PURCHASE AND CONTRIBUTION AGREEMENT

Dated as of March 31, 2009

Among

TRANE U.S. INC.

as Seller

and

ASI RECEIVABLES FUNDING LLC

as Purchaser

and

INGERSOLL-RAND COMPANY

as Collection Agent

TABLE OF CONTENTS

 

 

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INITIAL PURCHASE AND CONTRIBUTION AGREEMENT

Dated as of March 31, 2009

TRANE U.S. INC., a Delaware corporation, as the seller (the “ Seller ”), ASI RECEIVABLES FUNDING LLC, a Delaware limited liability company, as the purchaser (the “ Purchaser ”), and INGERSOLL-RAND COMPANY, a New Jersey corporation (“ IR Company ”), as the initial Collection Agent (as defined below), agree as follows:

PRELIMINARY STATEMENTS.

(1) Certain terms which are capitalized and used throughout this Agreement (in addition to those defined above) are defined in Article I of this Agreement (as defined below).

(2) The Seller has Receivables that it wishes to sell to the Purchaser, and the Purchaser is prepared to purchase such Receivables on the terms set forth in this Initial Purchase and Contribution Agreement (as amended, supplemented, restated or otherwise modified in accordance with the terms hereof, this “ Agreement ”).

(3) The Seller may also wish to contribute Receivables to the capital of the Purchaser on the terms set forth herein.

NOW, THEREFORE, the parties agree as follows:

ARTICLE I

DEFINITIONS

SECTION 1.01. Certain Defined Terms . As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined):

“ Agreement ” has the meaning specified in the Preliminary Statements.

“ Business Day ” means any day on which banks are not authorized or required to close in New York City or Charlotte, North Carolina.

“ Canadian Receivable ” means any Receivable, the Obligor of which has a billing address in Canada.

“ Collection Agent ” means at any time the Person then authorized pursuant to Section 6.01 to service, administer and collect Transferred Receivables.

“ Collection Agent Default ” means any Event of Termination relating to the Collection Agent set forth in Sections 7.01(a), (c), (g) or (i), or any “Collection Agent Default,” as such term is defined in the Secondary Purchase Agreement or the RIPA.

“ Collection Agent Fee ” has the meaning specified in Section 6.03.

“ Collections ” means, with respect to any Receivable, all cash collections and other cash proceeds of such Receivable, including, without limitation, all cash proceeds of Related Security with respect to such Receivable, and all funds deemed to have been received by the Seller or any other Person as a Collection pursuant to Section 2.04.

“ Contract ” means an agreement between the Seller and an Obligor, in each case substantially in the form of one of the written contracts or (in the case of any open account agreement) one of the invoices approved by the Purchaser, pursuant to or under which such Obligor shall be obligated to pay (i) for merchandise, insurance or services from time to time or (ii) any principal, interest, fees, expenses or other amounts with respect to a Two-Step Dealer Receivable.

“ Contributed Receivable ” has the meaning specified in Section 2.06.

“ Credit and Collection Policy ” means those receivables credit and collection policies and practices of the Seller in effect on the date of this Agreement applicable to the Receivables and described in Exhibit A hereto, as modified in compliance with this Agreement.

“ Defaulted Receivable ” means a Receivable:

(i) as to which any payment, or part thereof, remains unpaid for 61 or more days from the original due date for such payment;

(ii) as to which the Obligor thereof or any other Person obligated thereon or owning any Related Security in respect thereof has taken any action, or suffered any event to occur, of the type described in Section 7.01(g); or

(iii) which, consistent with the Credit and Collection Policy, would be written off as uncollectible.

“ Deferred Purchase Price ” means the portion of the Purchase Price of Purchased Receivables purchased on any Purchase Date exceeding the amount of the Purchase Price under Section 2.02 to be paid in cash, which portion when added to the cumulative amount of all previous Deferred Purchase Prices (after giving effect to any payments made on account thereof) shall not exceed 15% of the Outstanding Balance of the Transferred Receivables. The obligations of the Purchaser in respect of the Deferred Purchase Price shall be evidenced by the Purchaser’s subordinated promissory note in the form of Exhibit C hereto.

“ Diluted Receivable ” means that portion (and only that portion) of any Receivable which is either (a) reduced or canceled as a result of (i) any defective, rejected or returned merchandise or services or any failure by the Seller or the applicable Distributor (in the case of a Two-Step Dealer Receivable) to deliver any merchandise or provide any services or otherwise to perform under the underlying Contract, (ii) any

 

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change in the terms of or cancellation of, a Contract or any cash discount, discount for quick payment or other adjustment by the Seller which reduces the amount payable by the Obligor on the related Receivable (except any such change or cancellation resulting from or relating to the financial inability to pay or insolvency of the Obligor of such Receivable) or (iii) any set-off by an Obligor in respect of any claim by such Obligor as to amounts owed by it on the related Receivable (whether such claim arises out of the same or a related transaction or an unrelated transaction) or (b) subject to any specific dispute, offset, counterclaim or defense whatsoever (except the discharge in bankruptcy of the Obligor thereof); provided that, notwithstanding any of the foregoing, no Receivable or portion of a Receivable shall be considered a Diluted Receivable because of the financial inability to pay or insolvency of the Obligor of such Receivable.

“ Discount ” means, in respect of each Purchase, seven percent (7.00%) per annum on the Outstanding Balance of the Receivables that are the subject of such Purchase adjusted for the average maturity of such Receivables; provided , however , the foregoing Discount will be revised prospectively by request of either of the parties hereto to reflect changes in recent experience with respect to write-offs, timing and cost of Collections and cost of funds; provided that such revision is consented to by both of the parties (it being understood that each party agrees to duly consider such request but shall have no obligation to give such consent).

“ Distributor ” means a distributor of the Seller.

“ Division ” means each Division of the Seller’s business listed on Exhibit E hereto, as such Exhibit may be amended from time to time with the consent of the Purchaser.

“ Eligible Receivable ” means a Receivable:

(i) the Obligor of which has a billing address in the United States or Canada, is not an Affiliate of any of the parties hereto, and is not a government or a governmental subdivision or agency, or, in the case of a Canadian Receivable, a federal or provincial Crown corporation;

(ii) which, at the time of the transfer thereof to the Purchaser under this Agreement, is not a Defaulted Receivable;

(iii) the Obligor of which is not the Obligor of any Defaulted Receivables which in the aggregate constitute 15% or more of the aggregate Outstanding Balance of all Receivables of such Obligor;

(iv) which, according to the Contract related thereto, is required to be paid in full (A) except in the case of a Seasonal Receivable, within 90 days of the original billing date therefor or, in the case of a Two-Step Dealer Receivable, of the date of creation thereof or (B) in the case of a Seasonal Receivable, within 120 days of the original billing date therefor or, in the case of a Seasonal Receivable constituting a Two-Step Dealer Receivable, of the date of creation thereof;

 

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(v) which is an obligation 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 of 1940, as amended (except in the case of Two-Step Dealer Receivables constituting “payment intangibles”, as such term is defined in clause (vi) below), and the nature of which is such that its purchase with the proceeds of notes would constitute a “current transaction” within the meaning of Section 3(a)(3) of the Securities Act of 1933, as amended;

(vi) which is an “account” or “chattel paper” (other than “electronic chattel paper”) or, in the case of a Two-Step Dealer Receivable, a “payment intangible” within the meaning of Article 9 of the UCC of the applicable jurisdictions;

(vii) which is denominated and payable only in United States dollars in the United States;

(viii) which arises under a Contract governed by the laws of the United States which, together with such Receivable, is in full force and effect and constitutes the legal, valid and binding obligation of the Obligor of such Receivable and is not subject to any Adverse Claim or any dispute, offset, right of rescission, counterclaim or defense whatsoever (except the potential discharge in bankruptcy of such Obligor);

(ix) which, together with the Contract related thereto, does not contravene in any material respect any laws, rules or regulations applicable thereto (including, without limitation, laws, rules and regulations relating to usury, consumer protection, truth in lending, fair credit billing, fair credit reporting, equal credit opportunity, fair debt collection practices and privacy) and with respect to which no party to the Contract related thereto is in violation of any such law, rule or regulation in any material respect;

(x) which arises under a Contract which (A) does not require the Obligor under such Contract to consent to the transfer, sale or assignment of the rights and duties of the Seller under such Contract and (B) does not contain a confidentiality provision that purports to restrict the ability of the Purchaser and its assignees to exercise their rights under this Agreement, including, without limitation, their right to review the Contract;

(xi) which was generated by the sale of products or services of the Seller (or, in the case of a Two-Step Dealer Receivable, by a loan by the Seller to the Obligor to finance the purchase by the Obligor from a Distributor of products of the Seller and/or related products or services) in the ordinary course of the Seller’s business;

 

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(xii) which, at the time of the transfer of such Receivable under this Agreement, has not been compromised, adjusted, extended, rewritten or otherwise modified from the original terms thereof;

(xiii) the transfer, sale or assignment of which does not contravene any applicable law, rule or regulation;

(xiv) which (A) satisfies all applicable requirements of the Credit and Collection Policy and (B) complies with such other criteria and requirements as the Purchaser or its assignees may from time to time specify to the Seller upon 30 days’ notice;

(xv) which arises under a Contract which is not an executory contract;

(xvi) as to which (A) the Seller has satisfied and fully performed all obligations with respect to such Receivable required to be fulfilled by it other than customary warranty obligations, and (B) no further action is required to be performed by any Person other than the issuance of an invoice (except in the case of a Two-Step Dealer Receivable, for which no invoice needs be issued) to, and payment thereon by, the applicable Obligor;

(xvii) as to which, at or prior to the later of the date of this Agreement and the date 30 days prior to the date such Receivable is created, the Purchaser or its assignee has not notified the Seller that such Receivable (or the Obligor of such Receivable) is, in the good faith judgment of the Purchaser or such assignee, no longer acceptable for transfer hereunder (including, without limitation, for bona fide credit reasons as determined by the Purchaser or its assignee);

(xviii) as to which, in the case of a Two-Step Dealer Receivable, the proceeds of the related loan have been paid directly by the Seller to the applicable Distributor (and not to the Obligor of such Receivable) in payment of the purchase price for the goods and/or services sold by such Distributor to such Obligor and/or credited against amounts owed by such Distributor to the Seller; and

(xix) as to which, if such Receivable is a Canadian Receivable, (1) none of the services (if any) giving rise to such Receivable were rendered to the Obligor thereof in Canada, (2) if the Obligor has a billing address in the Province of Quebec, (A) the Contract with respect to such Canadian Receivable is governed by the laws of one of the States of the United States, (B) pursuant to the express terms of such Contract, all Collections with respect thereto are payable only to locations outside of Canada, and (C) the Seller has entered into and filed with the appropriate government authority in the Province of Quebec, an assignment, in form

 

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and substance satisfactory to the Purchaser or its assignees, governed by the laws of the Province of Quebec, pursuant to which the Canadian Receivable is assigned from the Seller to the Purchaser, and with respect to which evidence of the filing of such assignment has been delivered to the Purchaser, (3) such Canadian Receivable satisfies the requirement of Section 4.01(aa), and (4) a UCC financing statement has been filed (and an acknowledgment copy of such financing statement has been delivered to the Purchaser) naming the Seller as “debtor/seller” and naming the Purchaser or an assignee as “buyer/secured party” at the appropriate filing location within the State in which the chief executive office of the Seller for such Canadian Receivable is located, satisfactory in form and substance to the Purchaser or its assignees;

provided , that, from the occurrence of any Level 1 Downgrade Event, no Receivable which is (A) a Seasonal Receivable which, according to the Contract related thereto, is not required to be paid in full within 90 days of the original billing date therefor or (B) a Two-Step Dealer Receivable, shall be an Eligible Receivable.

“ Event of Termination ” has the meaning specified in Section 7.01.

“ Facility ” means the willingness of the Purchaser to consider making Purchases of Receivables from the Seller from time to time pursuant to the terms of this Agreement.

“ Facility Termination Date ” means the earliest of (i) the “Facility Termination Date”, as such term is defined in the RIPA, (ii) the date of termination of the Facility pursuant to Section 7.01 and (iii) the date which the Seller designates by at least two Business Days’ notice to the Purchaser and, prior to the RIPA Final Payment Date, the Program Agent.

“ General Trial Balance ” of the Seller on any date means the Seller’s accounts receivable trial balance (whether in the form of a computer printout, magnetic tape or diskette) on such date, listing Obligors and the Receivables respectively owed by such Obligors on such date together with the aged Outstanding Balances of such Receivables, in form and substance reasonably satisfactory to the Purchaser.

“ Incipient Event of Termination ” means an event that but for notice or lapse of time or both would constitute an Event of Termination.

“ Indemnified Amounts ” has the meaning specified in Section 8.01.

“ Indemnified Party ” has the meaning specified in Section 8.01.

“ Lock-Box Account ” means a post office box administered by a Lock-Box Bank or an account maintained at a Lock-Box Bank, in each case under the exclusive ownership and control of the Purchaser (or its assignees or designees), and maintained for the purpose of receiving Collections and shall include accounts maintained at a Lock-Box Bank into which (i) Collections in the form of checks and other items are deposited that have been sent to one or more post office boxes by Obligors and/or (ii) Collections in the form of electronic funds transfers and other items are paid directly by Obligors.

 

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“ Lock-Box Agreement ” means an agreement among the Seller, the Purchaser (or its assignees or designees) and any Lock-Box Bank in form and substance satisfactory to the Purchaser (or its assignees or designees).

“ Lock-Box Bank ” means any of the banks holding one or more Lock-Box Accounts.

“ Master SPV ” means IR Receivables Funding Trust, a Delaware statutory trust.

“ Material Adverse Effect ” means any event or circumstance that has a material adverse effect on (i) the ability of the Seller to perform its obligations under this Agreement or any other Transaction Document, (ii) the legality, validity or enforceability of this Agreement or any other Transaction Document or (iii) the collectibility of the Receivables taken as a whole.

“ Obligor ” means a Person obligated to make payments pursuant to a Contract.

“ Outstanding Balance ” of any Receivable (or portion thereof) at any time means the then outstanding principal balance thereof.

“ Program Agent ” means the program agent under the RIPA, which as of the date of this Agreement is Citicorp North America, Inc.

“ Purchase ” means a purchase by the Purchaser of Receivables from the Seller pursuant to Article II.

“ Purchase Date ” means each day on which a Purchase or contribution is made pursuant to Article II.

“ Purchase Price ” for any Purchase means an amount equal to the Outstanding Balance of the Receivables that are the subject of such Purchase as set forth in the Seller’s General Trial Balance, minus the Discount for such Purchase.

“ Purchased Receivable ” means any Receivable which is purchased by the Purchaser pursuant to Section 2.02.

“ Receivable ” means (a) the indebtedness of any Obligor under a Contract (whether constituting an account, instrument, chattel paper, payment intangible or general intangible), which has been originated by the Seller in connection with its activities conducted through any of the Divisions (and for which such Obligor has a billing address in the United States or Canada) or (b) a Two-Step Dealer Receivable, and in each case includes the right to payment of any interest or finance charges and other obligations of such Obligor with respect thereto; provided that if the Two-Step Dealer Receivable Transfer Termination Date shall occur as provided in Section 2.07, then no Two-Step Dealer Receivables created by the Seller on or after such date shall constitute Receivables hereunder.

 

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“ Related Security ” means with respect to any Receivable:

(i) all of the Seller’s interest in any merchandise (including returned merchandise) relating to any sale giving rise to such Receivable;

(ii) 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 or other registrations filed against an Obligor describing any collateral securing such Receivable;

(iii) all guaranties, insurance and other agreements or arrangements of whatever character from time to time supporting or securing payment of such Receivable whether pursuant to the Contract related to such Receivable or otherwise; and

(iv) the Contract and all other books, records and other information (including, without limitation, computer programs, tapes, discs, punch cards, data processing software and related property and rights) relating to such Receivable and the related Obligor.

“ RIPA ” means that certain Receivable Interest Purchase Agreement, dated as of the date hereof, among IR Receivables Funding Trust, as seller, CAFCO, LLC, Enterprise Funding Company LLC and JS Siloed Trust, each as an investor, Citibank, N.A., Bank of America, N.A. and JPMorgan Chase Bank, N.A., each as a bank, Citicorp North America, Inc., as program agent, Citicorp North America, Inc., Bank of America, N.A. and JPMorgan Chase Bank, N.A., each as an investor agent, IR Company, as collection agent, and the parties thereto named as “Originators”, “Designated Entities” and/or “Intermediate SPVs”, as amended, restated or otherwise modified from time to time.

“ RIPA Final Payment Date ” means the later of the “Facility Termination Date” (as such term is defined in the RIPA) and the date on which all Capital, Yield, fees and other obligations under the RIPA are paid in full.

“ Seasonal Receivables ” means Receivables created by the Seller in any of January, February, March or April of any calendar year.

“ SEC ” means the Securities and Exchange Commission.

“ Secondary Purchase Agreement ” means that certain Secondary Purchase Agreement, dated as of the date hereof, among the Purchaser, as seller, the Master SPV, as purchaser, and IR Company, as collection agent, as amended, restated or otherwise modified from time to time.

 

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“ Seller Report ” means a report in substantially the form of Exhibit F hereto and containing such additional information as the Purchaser may reasonably request from time to time, furnished by the Collection Agent to the Purchaser pursuant to Section 6.02(b).

“ Settlement Date ” means the Business Day immediately following the due date of each Seller Report; provided , however , that following the occurrence of an Event of Termination, Settlement Dates shall occur on such days as are selected from time to time by the Purchaser or its assignee in a written notice to the Collection Agent.

“ Tax Act ” means the Income Tax Act (Canada) and the Regulations thereunder, as amended, modified or replaced from time to time.

“ Tax Convention ” means a convention for the avoidance of double income taxation between Canada and another country.

“ Transaction Document ” means any of this Agreement, the Secondary Purchase Agreement, the RIPA, the Undertaking, the Lock-Box Agreements and any other agreements and documents delivered and/or related hereto or thereto.

“ Transferred Receivable ” means a Purchased Receivable or a Contributed Receivable.

“ Two-Step Dealer Receivable ” means the indebtedness of any Obligor under a Contract (whether constituting an account, instrument, chattel paper, payment intangible or general intangible) resulting from a loan by the Seller to such Obligor to finance the purchase by such Obligor from a Distributor of (i) merchandise sold by the Trane Residential Systems Division of the Seller to such Distributor or (ii) other merchandise or services incidental to the sale of Trane Residential Systems merchandise to such Obligor; provided that the Obligor, at the time of creation of such indebtedness, is a dealer of such Distributor.

“ Two-Step Dealer Receivable Termination Date ” has the meaning specified in Section 2.07.

“ Underlying Inventory Security Interest ” means, with respect to a Receivable, any security interest in inventory granted by the Obligor of such Receivable to secure the repayment of such Receivable.

“ Undertaking ” means either (i) the agreement executed by Parent substantially in the form of Exhibit D hereto, or (ii) if IR Parent has executed and delivered such agreement pursuant to Section 7.01(p) of the RIPA, the agreement executed by IR Parent in substantially the form of Exhibit D hereto, in each case as the same may be amended, modified or restated from time to time.

SECTION 1.02. Other Terms . All accounting terms not specifically defined herein shall be construed in accordance with generally accepted U.S. accounting principles. All terms used in Article 9 of the UCC in the State of New York, and not specifically defined herein,

 

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are used herein as defined in such Article 9. The following terms used herein shall have the respective meanings set forth in the RIPA: “ Adverse Claim ”; “ Affiliate ”; “ Capital ”; “ Debt ”; “ ERISA ”; “ ERISA Group ”; “ IR Parent ”; “ Level 1 Downgrade Event ”; “ Material Debt ”; “ Moody’s ”; “ Multiemployer Plan ”; “ Original PCA ”; “ Original RIPA ”; “ Out-of-Program Collections ”; “ Parent ”; “ PBGC ”; “ Person ”; “ Plan ”; “ S&P ”; “ Subsidiary ”; “ UCC ”; “ Undertaking Party ”; and “ Yield ”.

ARTICLE II

AMOUNTS AND TERMS OF PURCHASES AND CONTRIBUTIONS

SECTION 2.01. Facility . On the terms and conditions hereinafter set forth and without recourse to the Seller (except to the extent specifically provided herein), the Seller will at its option either sell or contribute to the Purchaser all Receivables originated by it from time to time and the Purchaser will (as determined by the Purchaser) purchase or accept as a contribution from the Seller all such Receivables of the Seller from time to time, in each case during the period from the date hereof to the Facility Termination Date.

SECTION 2.02. Making Purchases .

(a) Initial Purchase . The Seller shall give the Purchaser at least one Business Day’s notice of its request for the initial Purchase hereunder, which request shall specify the date of such Purchase (which shall be a Business Day) and the proposed Purchase Price for such Purchase. On the date of such Purchase, the Purchaser shall, upon satisfaction of the applicable conditions set forth in Article III, pay the Purchase Price for such Purchase in the manner provided in Section 2.02(c).

(b) Subsequent Purchases . On each Business Day following the initial Purchase, the Seller shall sell to the Purchaser and the Purchaser shall purchase from the Seller, upon satisfaction of the applicable conditions set forth in Article III, all Receivables originated by the Seller which have not previously been sold or contributed to the Purchaser; provided , however , that the Seller may, at its option on any Purchase Date, contribute all or any of such Receivables to the Purchaser pursuant to Section 2.06, instead of selling such Receivables to the Purchaser pursuant to this Section 2.02(b). On or within five Business Days after the date of each such Purchase, the Purchaser shall pay the Purchase Price for such Purchase in the manner provided in Section 2.02(c).

(c) Payment of Purchase Price . The Purchase Price for each Purchase shall be paid on or within five Business Days after the Purchase Date therefor by means of any one or a combination of the following: (i) a deposit in same day funds to the Seller’s account designated by the Seller, or (ii) an increase in the Deferred Purchase Price (subject at all times to the limitations contained in the definition thereof). Unless otherwise mutually agreed by the Seller and the Purchaser, if on any date set for payment of Purchase Price, the Purchaser does not pay the entire Purchase Price in cash, the amount of the Purchase Price in excess of the amount paid in cash by the Purchaser shall be paid first by an increase in the Deferred Purchase Price (subject to the limitations contained in the definition thereof), and any portion of the Purchase Price which cannot be paid by means of an increase in the Deferred Purchase Price (by reason of the

 

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limitations contained in the definition thereof) shall constitute a contribution to the capital of the Purchaser by the Seller. The Seller and the Purchaser will make the appropriate accounting entries in their books and records to reflect the allocation of the Purchase Price as among cash payment, Deferred Purchase Price and capital contribution.

(d) Ownership of Receivables and Related Security . On each Purchase Date, after giving effect to the Purchase (and any contribution of Receivables) on such date, the Purchaser shall own all Receivables originated by the Seller as of such date (including Receivables which have been previously sold or contributed to the Purchaser hereunder). The Purchase or contribution of any Receivable shall include all Related Security with respect to such Receivable.

SECTION 2.03. Collections . (a) Unless otherwise agreed, the Collection Agent shall, on each Settlement Date, deposit into an account of the Purchaser or the Purchaser’s assignee all Collections of Transferred Receivables then held by the Collection Agent.

(b) In the event that the Seller believes that Collections which are not Collections of Transferred Receivables have been deposited into an account of the Purchaser or the Purchaser’s assignee, the Seller shall so advise the Purchaser and, on the Business Day following such identification, the Purchaser shall remit, or shall cause to be remitted, all Collections so deposited which are identified, to the Purchaser’s satisfaction, to be Collections of Receivables which are not Transferred Receivables to the Seller.

(c) On each Settlement Date, the Purchaser shall pay to the Seller accrued interest on the Deferred Purchase Price and the Purchaser may, at its option, prepay in whole or in part the principal amount of the Deferred Purchase Price; provided that each such payment shall be made solely from (i) Collections of Transferred Receivables after all other amounts then due from the Purchaser under the Secondary Purchase Agreement and from Master SPV under the RIPA have been paid in full and all amounts then required to be set aside or held by the Purchaser under the Secondary Purchase Agreement and by Master SPV or the Collection Agent under the RIPA have been so set aside and held or (ii) excess cash flow from operations of the Purchaser which is not required to be applied to the payment of other obligations of the Purchaser; and provided further , that no such payment shall be made at any time when an Event of Termination or Incipient Event of Termination shall have occurred and be continuing. Following the RIPA Final Payment Date, the Purchaser shall apply, on each Settlement Date, all Collections of Transferred Receivables received by the Purchaser pursuant to Section 2.03(a) (and not previously distributed) first to the payment of accrued interest on the Deferred Purchase Price, and then to the reduction of the principal amount of the Deferred Purchase Price.

SECTION 2.04. Settlement Procedures . (a) If on any day any Transferred Receivable becomes (in whole or in part) a Diluted Receivable, the Seller shall be deemed to have received on such day a Collection of such Transferred Receivable in the amount of such Diluted Receivable. If the Seller is not the Collection Agent, the Seller shall pay to the Collection Agent on or prior to the next Settlement Date all amounts deemed to have been received pursuant to this subsection.

 

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(b) Upon discovery by the Seller or the Purchaser of a breach of any of the representations and warranties made by the Seller in Section 4.01(j) with respect to any Transferred Receivable, such party shall give prompt written notice thereof to the other party, as soon as practicable and in any event within three Business Days following such discovery. The Seller shall, upon not less than two Business Days’ notice from the Purchaser or its assignee or designee, repurchase (or purchase, in the case of a Contributed Receivable) such Transferred Receivable on the next succeeding Settlement Date for a repurchase (or purchase, in the case of a Contributed Receivable) price equal to the Outstanding Balance of such Transferred Receivable. Each repurchase or purchase of a Transferred Receivable shall include the Related Security with respect to such Transferred Receivable. The proceeds of any such repurchase or purchase, as the case may be, shall be deemed to be a Collection in respect of such Transferred Receivable. If the Seller is not the Collection Agent, the Seller shall pay to the Collection Agent on or prior to the next Settlement Date the repurchase (or purchase, in the case of a Contributed Receivable) price required to be paid pursuant to this subsection.

(c) Except as stated in subsection (a) or (b) of this Section 2.04 or as otherwise required by law or the underlying Contract, all Collections from an Obligor of any Transferred Receivable shall be applied to the Transferred Receivables of such Obligor in the order of the age of such Receivables, starting with the oldest such Receivable, unless such Obligor designates its payment for application to specific Receivables.

SECTION 2.05. Payments and Computations, Etc . (a) All amounts to be paid or deposited by the Seller or the Collection Agent hereunder shall be paid or deposited no later than 11:00 A.M. (New York City time) on the day when due in same day funds to an account or accounts designated by the Purchaser from time to time, which accounts, prior to the RIPA Final Payment Date, shall be those set forth in the RIPA.

(b) All computations of interest and all computations of fees hereunder shall be made on the basis of a year of 360 days for the actual number of days (including the first but excluding the last day) elapsed. Whenever any payment or deposit to be made hereunder shall be due on a day other than a Business Day, such payment or deposit shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of such payment or deposit.

SECTION 2.06. Contributions . In addition to contributions pursuant to Section 2.02(c), the Seller may from time to time at its option, by notice to the Purchaser on or prior to the date of the proposed contribution, identify Receivables which it proposes to contribute to the Purchaser as a capital contribution. On the date of each such contribution and after giving effect thereto, the Purchaser shall own the Receivables so identified and contributed (collectively, together with any Receivables contributed pursuant to Section 2.02(c), the “ Contributed Receivables ”) and all Related Security with respect thereto. The foregoing notwithstanding, on the date of the initial Purchase hereunder the Seller agrees to contribute to the Purchaser all Receivables which are not included in such initial Purchase.

SECTION 2.07. Termination of Transfers of Two-Step Dealer Receivables . The Purchaser and the Seller may elect at some time in the future that no further Two-Step Dealer Receivables created by the Seller shall be transferred by the Seller to the Purchaser. Each

 

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of the Seller and the Purchaser hereby agrees that they shall deliver to the Program Agent a joint written notice notifying the Program Agent that the Seller and the Purchaser have so elected that no further Two-Step Dealer Receivables created by the Seller shall be transferred by the Seller to the Purchaser. Such joint written notice shall specify the effective date of the termination of transfers of Two-Step Dealer Receivables by the Seller to the Purchaser (such effective date in such notice, the “ Two-Step Dealer Receivable Transfer Termination Date ”), which Two-Step Dealer Receivable Transfer Termination Date shall be no earlier than 10 Business Days after the date of delivery to the Program Agent of such written notice. Upon and after the Two-Step Dealer Receivable Transfer Termination Date, no Two-Step Dealer Receivables created by the Seller on or after such date shall be transferred by the Seller to the Purchaser (and such Two-Step Dealer Receivables shall not constitute Receivables hereunder). The Seller and the Purchaser agree that once such written notice is delivered to the Program Agent such election shall be irrevocable and permanent. Neither the delivery of such written notice to the Program Agent nor the effectiveness of the termination of such transfers shall affect the transfer by the Seller to the Purchaser of Two-Step Dealer Receivables created by the Seller prior to the Two-Step Dealer Receivable Transfer Termination Date. Without limiting any other provisions of this Agreement, the Seller agrees that no collections of Two-Step Dealer Receivables created by the Seller after the Two-Step Dealer Receivable Transfer Termination Date shall be deposited or otherwise credited to any Lock-Box Account.

ARTICLE III

CONDITIONS OF PURCHASES

SECTION 3.01. Conditions Precedent to Initial Purchase from the Seller . The initial Purchase of Receivables from the Seller hereunder is subject to the conditions precedent that the Purchaser shall have received on or before the date of such Purchase the following, each (unless otherwise indicated) dated such date, in form and substance satisfactory to the Purchaser:

(a) Certified copies of the resolutions (or similar authorization) of the Board of Directors of the Seller approving this Agreement and the other applicable Transaction Documents to be delivered by it hereunder and certified copies of all documents evidencing other necessary corporate action and governmental approvals, if any, with respect to this Agreement and the other applicable Transaction Documents to be delivered by it hereunder.

(b) A certificate of the Secretary or Assistant Secretary of the Seller certifying the names and true signatures of the officers of the Seller authorized to sign this Agreement and the other applicable Transaction Documents to be delivered by it hereunder.

(c) Acknowledgment copies or time stamped receipt copies of proper financing statements or other similar instruments or documents, duly filed on or before the date of the initial Purchase, naming the Seller as the seller/debtor and the Purchaser as the purchaser/secured party, or other similar instruments or documents, as the Purchaser may deem necessary or desirable under the UCC or other applicable law of all appropriate jurisdictions to perfect the Purchaser’s ownership of and security interest in the Transferred Receivables and Related Security and Collections with respect thereto.

 

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(d) Acknowledgment copies or time stamped receipt copies of proper financing statements, if any, necessary to release all security interests and other rights of any Person in the Transferred Receivables, Contracts or Related Security previously granted by the Seller, other than the interests to be released pursuant to Section 2.02(e) of the RIPA.

(e) Completed requests for information, dated on or before the date of such initial Purchase, listing the financing statements referred to in subsection (c) above and all other effective financing statements filed in the jurisdictions referred to in subsection (c) above that name the Seller as debtor, together with copies of such other financing statements (none of which shall cover any Transferred Receivables, Contracts or Related Security, other than financing statements evidencing interests to be released pursuant to Section 2.02(e) of the RIPA)

(f) Favorable opinions of McDermott, Will & Emery LLP, counsel for the Seller, and of Patricia Nachtigal, internal counsel for the Seller, in each case, in form and substance satisfactory to the Purchaser, as to such matters as the Purchaser may reasonably request.

(g) Executed copies of the Lock-Box Agreements in respect of each Lock-Box Account (or an amendment and restatement of any existing Lock-Box Agreement with Bank of America, N.A.), duly executed by the Seller and the Lock-Box Bank holding such Lock-Box Account.

(h) An executed copy of the Undertaking.

(i) A copy of the bylaws of the Seller certified by the Secretary or Assistant Secretary of the Seller.

(j) A copy of the certificate of incorporation of the Seller, certified as of a recent date by the Secretary of State or other appropriate official of the state of its incorporation, and a certificate as to the good standing of the Seller from such Secretary of State or other official, dated as of a recent date.

The initial Purchase of Receivables from the Seller hereunder is additionally subject to the condition precedent that on the date of such initial Purchase, the following statement shall be true (and acceptance of the proceeds of such Purchase shall be deemed a representation and warranty by the Seller that such statement is true): there shall have been no material adverse change in the financial condition of the Seller since December 31, 2008.

SECTION 3.02. Conditions Precedent to All Purchases . Each Purchase (including the initial Purchase) hereunder shall be subject to the further conditions precedent that:

(a) with respect to any such Purchase, on or prior to the date of such Purchase, the Seller shall have delivered to the Purchaser, (i) if requested by the Purchaser, the Seller’s General Trial Balance (which if in magnetic tape or diskette format shall be compatible with the Purchaser’s computer equipment) as of a date not more than 31 days prior to the date of such Purchase, and (ii) a written report identifying, among other things, the Receivables to be included in such Purchase and such additional information concerning such Receivables as may reasonably be requested by the Purchaser;

 

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(b) with respect to any such Purchase, on or prior to the date of such Purchase, the Collection Agent shall have delivered to the Purchaser, in form and substance satisfactory to the Purchaser, a completed Seller Report for the most recently ended reporting period for which information is required pursuant to Section 6.02(b), and containing such additional information as may reasonably be requested by the Purchaser;

(c) [intentionally omitted];

(d) the Seller shall have marked its master data processing records evidencing the Receivables which are the subject of such Purchase with a legend, acceptable to the Purchaser, stating that such Receivables, the Related Security and Collections with respect thereto, have been sold in accordance with this Agreement;

(e) on the date of such Purchase the following statements shall be true (and the Seller, by accepting the Purchase Price for such Purchase, shall be deemed to have certified that):

(i) The representations and warranties contained in Section 4.01 are correct on and as of the date of such Purchase as though made on and as of such date,

(ii) No event has occurred and is continuing, or would result from such Purchase, that constitutes an Event of Termination or an Incipient Event of Termination,

(iii) The Purchaser shall not have delivered to the Seller a notice that the Purchaser shall not make any further Purchases hereunder, and

(iv) There shall have been no material adverse change in the collectibility of the Receivables taken as a whole since the date hereof; and

(f) the Purchaser shall have received such other approvals, opinions or documents as the Purchaser may reasonably request in response to any change in law or factual circumstances after the date of this Agreement.

Notwithstanding the foregoing conditions precedent in the last paragraph of Section 3.01 and in clauses (i), (ii) and (iv) of Section 3.02(e), upon payment of the Purchase Price for any Receivable (whether by payment of cash, through an increase in the Deferred Purchase Price or by capital contribution), title to such Receivable and the Related Security with respect thereto shall vest in the Purchaser, whether or not such conditions precedent to the Purchase were in fact satisfied. If any of the foregoing conditions precedent is not satisfied, the Purchaser shall have available to it (and shall not be deemed to have waived by reason of completing such Purchase) all applicable rights and remedies under Sections 2.04, 7.01 and 8.01 and otherwise.

 

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ARTICLE IV

REPRESENTATIONS AND WARRANTIES

SECTION 4.01. Representations and Warranties of the Seller . The Seller represents and warrants as follows:

(a) The Seller is a corporation duly incorporated, validly existing and in good standing under the laws of Delaware, and is duly qualified to do business, and is in good standing, in every jurisdiction where the nature of its business requires it to be so qualified, unless the failure to so qualify would not have a material adverse effect on (i) the interests of the Purchaser hereunder, (ii) the collectibility of the Transferred Receivables, or (iii) the ability of the Seller or the Collection Agent to perform their respective obligations hereunder.

(b) The execution, delivery and performance by the Seller of this Agreement and the other documents to be delivered by it hereunder, including the Seller’s sale and contribution of Receivables hereunder and the Seller’s use of the proceeds of Purchases, (i) are within the Seller’s corporate powers, (ii) have been duly authorized by all necessary corporate action, (iii) do not contravene (1) the Seller’s organizational documents, (2) any law, rule or regulation applicable to the Seller, (3) any contractual restriction binding on or affecting the Seller or its property or (4) any order, writ, judgment, award, injunction or decree binding on or affecting the Seller or its property, and (iv) do not result in or require the creation of any lien, security interest or other charge or encumbrance upon or with respect to any of its properties (except for the transfer of the Seller’s interest in the Transferred Receivables pursuant to this Agreement). This Agreement and each of the other Transaction Documents to be delivered by the Seller pursuant hereto has been duly executed and delivered by the Seller.

(c) No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution, delivery and performance by the Seller of the Transaction Documents to which it is a party or any other document to be delivered by it thereunder except for the filing of financing statements which are referred to therein.

(d) This Agreement and each of the other Transaction Documents to be delivered by the Seller pursuant hereto constitutes the legal, valid and binding obligation of the Seller enforceable against the Seller in accordance with its terms (except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization or similar laws affecting the enforcement of creditors’ rights generally and general principles of equity, whether considered in an action at law or equity).

(e) Sales and contributions made pursuant to this Agreement will constitute a valid sale, transfer, and assignment of the Transferred Receivables to the Purchaser, enforceable against credito