AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT

E XHIBIT 10.3

AMENDED AND RESTATED

RECEIVABLES PURCHASE AGREEMENT

Dated as of October 6, 2009

Among

ARCH CHEMICALS RECEIVABLES CORP., as Seller,

ARCH CHEMICALS, INC., as initial Servicer,

MARKET STREET FUNDING LLC

and

PNC BANK, NATIONAL ASSOCIATION, as Administrator and as LC Bank

TABLE OF CONTENTS

 

 

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AMENDED AND RESTATED

RECEIVABLES PURCHASE AGREEMENT

THIS AMENDED AND RESTATED RECEIVABLES PURCHASE AGREEMENT, dated as of October 6, 2009, is entered into by and among:

(a) Arch Chemicals Receivables Corp., a Delaware corporation (the “ Seller ”),

(b) Arch Chemicals, Inc., a Virginia corporation (“ Arch ” or the “ Servicer ”), as initial Servicer (the Servicer together with the Seller, the “ Seller Parties ” and each, a “ Seller Party ”),

(c) Market Street Funding LLC, a Delaware limited liability company (“ Market Street ”), and

(d) PNC Bank, National Association, a national banking association ( “ PNC ” ), as agent and administrator for Market Street and its assigns under the Transaction Documents (together with its successors and assigns in such capacity, the “ Administrator ”) and as issuer of Letters of Credit (in such capacity, together with its successors and assigns in such capacity, the “ LC Bank ”).

Unless defined elsewhere herein, capitalized terms used in this Agreement shall have the meanings assigned to such terms in Exhibit I .

PRELIMINARY STATEMENTS

The Seller, the Servicer, Three Pillars Funding LLC ( “TPF” ) and SunTrust Robinson Humphrey, Inc (f/k/a SunTrust Capital Markets, as administrator “STRH” ) are parties to that certain Receivables Purchase Agreement dated as of June 27, 2005, as amended, supplemented or otherwise modified through the date hereof (the “Existing Agreement”).

The Seller has transferred and assigned Receivables Interest to TPF and TPF has purchased Receivables Interest from the Seller pursuant to and in accordance with the Existing Agreement.

In connection with the Agreement TPF assigned all of its right, title and interest and obligations in the Receivables Interest, the Existing Agreement and all other Transaction Documents as defined in the Existing Agreement) to Market Street as of the Closing Date, pursuant to the Assignment and Assumption Agreement, dated as of the date hereof among the Seller, the Servicer, TPF, STRH, Market Street, the Administrator and the Originators.

The parties hereto wish to amend and restate the Exiting Agreement on the terms set forth herein.

The Seller (a) desires to transfer and assign Receivables from time to time and (b) may, subject to the terms and conditions hereof, request that the LC Bank issue or cause the issuance of Letters of Credit.

Market Street shall purchase Receivable from the Seller from time to time either by issuing its Commercial Paper or by availing itself of a Liquidity Funding to the extent available and the LC Bank shall issue Letters of Credit to the extent available.

PNC has been requested and is willing to act as agent and administrator on behalf of Market Street and the LC bank and their respective assigns in accordance with the terms hereof.

Article I

Purchase Arrangements

Section 1.1 Purchase Facility .

(a) Upon the terms and subject to the conditions of this Agreement (including, without limitation, Article VI ), from time to time prior to the Facility Termination Date, the Seller may request that (i) Market Street purchase from the Seller all of the Seller’s right, title and interest in the Purchased Assets, and Market Street shall make such Purchase and/or (ii) the LC Bank issue Letters of Credit; provided that no Purchase (including without limitation, any deemed Purchase by Market Street pursuant to the terms of Section 1.1(d) ) or issuance of Letters of Credit, as applicable shall be made by Market Street or the LC Bank, respectively, if, after giving effect thereto, the (i) aggregate outstanding Invested Amount funded by Market Street or the LC Bank, as applicable, shall exceed (A) the Commitment of Market Street or the LC Bank, as applicable, as the same may be reduced from time to time pursuant to Section 1.1(b) , minus (B) in the case of the LC Bank, the face amount of any outstanding Letters of Credit or (ii) the Aggregate Invested Amount would exceed the Purchase Limit or (iii) the Asset Coverage Ratio would be less than 1.0. It is the intent of Market Street to fund the Purchases by the issuance of Commercial Paper. If for any reason Market Street is unable, or determines that it is undesirable, to issue Commercial Paper to fund or maintain its investment in the Purchase Assets, or is unable for any reason to repay such Commercial Paper upon the maturity thereof, Market Street will avail itself of a Liquidity Funding to the extent available. If Market Street funds or refinances its investment in a Purchased Asset through a Liquidity Funding, in lieu of paying CP Costs on the Invested Amount pursuant to Article III hereof, the Seller will pay Yield thereon at the Alternate Base Rate or the LIBO Rate, selected in accordance with Article IV hereof. Nothing herein shall be deemed to constitute a commitment of Market Street to issue Commercial Paper.

(b) The Seller may, upon at least ten (10) Business Days’ notice to the Administrator, terminate in whole or reduce in part, the unused portion of the Purchase Limit; provided that each partial reduction of the Purchase Limit shall be in an amount equal to $5,000,000 (or a larger integral multiple of $1,000,000 if in excess thereof). Each such partial reduction shall automatically and ratably reduce the Commitments of Market Street and the LC Bank to make Purchases or issuances, as applicable. The Administrator shall promptly advise Market Street and the LC Bank of any notice received by it pursuant to this Section 1.1(b) ; it being understood that (in addition to and without limiting any other requirements for termination, prepayment and/or the funding

 

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of the LC Collateral Account hereunder) no such termination or reduction shall be effective unless and until (i) in the case of a termination, the amount on deposit in the LC Collateral Account is at least equal to the then outstanding LC Amount and (ii) in the case of a partial reduction, the amount on deposit in the LC Collateral Account is at least equal to the difference between the then outstanding LC Amount and the Commitment of the LC Bank as so reduced by such partial reduction.

(c) The Administrator hereby represents that (i) pursuant to the Liquidity Agreement, Market Street has obtained a Liquidity Commitment from PNC and its assigns for an initial period of 364 days in an amount equal to 102% of the greater of (A) the Purchase Limit from time to time in effect hereunder, and (B) the Aggregate Invested Amount outstanding from time to time hereunder, and (ii) while PNC may not be obligated to pay par for a Purchased Asset that is transferred to it pursuant to the Liquidity Agreement, the only condition precedent to its obligation to pay the agreed-upon price thereunder is the absence of an Event of Bankruptcy with respect to Market Street.

(d) The Seller may, subject to this Section 1.1 and the other requirements and conditions herein, use the proceeds of any Purchase by Market Street hereunder to satisfy its Reimbursement Obligations to the LC Bank (based on the outstanding amounts funded by the LC Bank) pursuant to Section 1.9 below. In addition, in the event the Seller fails to reimburse the LC Bank for the full amount of any drawing under any Letter of Credit on the applicable Drawing Date (out of its own funds available therefor, or otherwise, at such time), pursuant to Section 1.9 below, then the Seller shall, automatically (and without the requirement of any further action on the part of any Person hereunder), be deemed to have requested a new Incremental Purchase from Market Street on such date, pursuant to the terms hereof, in an amount equal to the amount of such Reimbursement Obligation at such time. Subject to the limitations on funding set forth in paragraph (a) above (and the other requirements and conditions herein), Market Street shall fund such deemed Incremental Purchase request and deliver the proceeds thereof directly to the Administrator to be immediately distributed to the LC Bank in satisfaction of the Seller’s Reimbursement Obligation pursuant to Section 1.9 . below, to the extent of the amounts permitted to be funded by Market Street, at such time, hereunder.

(e) In consideration for the payment by Market Street of the Cash Purchase Price set forth in the Purchase Notice on the date of the initial Purchase hereunder and Market Street’s agreement to make payments to the Seller from time to time in accordance with Sections 2.2 and 2.3 effective upon the Seller’s receipt of such Cash Purchase Price on the date of the initial Purchase hereunder, the Seller hereby sells, conveys and assigns to Market Street all of the Seller’s right, title and interest in and to the Purchased Assets existing on the date hereof or thereafter arising or acquired by the Seller from time to time prior to the Facility Termination Date. Subject to the terms and conditions hereof, Market Street hereby purchases and accepts from the Seller the Purchased Assets sold, conveyed and assigned pursuant to Section 1.1(e) . The Purchase Price shall consist of the sum of (a) the Cash Purchase Price and (b) the Deferred Purchase Price. The Cash Purchase Price shall be paid pursuant to the terms of Section 1.2 and the Deferred Purchase Price shall be paid pursuant to the terms of clause seventh

 

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of Sections 2.2(b) and 2.3 . The foregoing sale, conveyance and assignment does not constitute and is not intended to result in the creation or an assumption by Market Street, any Liquidity Bank or the LC Bank of any obligation of the Seller, any Originator, the Servicer or any other Person under or in connection with the Purchased Assets, all of which shall remain the obligations and liabilities of the Seller, such Originator, the Servicer and/or such Person. For the avoidance of doubt there shall be no recourse to Market Street, a Liquidity Bank or the LC Bank for payment of the Deferred Purchase Price other than pursuant to the terms of clause seventh of Sections 2.2(b) and 2.3 and the obligation to pay such Deferred Purchase Price shall be subject to the terms of Section 13.8 .

Section 1.2 Incremental Purchases .

(a) The Seller shall provide the Administrator with at least two (2) Business Days’ prior written notice in a form set forth as Exhibit II hereto of each Incremental Purchase (each, a “ Purchase Notice ”). Each Purchase Notice shall be subject to Section 6.2 hereof and, except as set forth below, shall be irrevocable and shall specify the requested Cash Purchase Price (which shall not be less than $1,000,000 or a larger integral multiple of $100,000) and the Purchase Date. Following receipt of a Purchase Notice, the Administrator will determine whether Market Street will fund the requested Incremental Purchase through the issuance of Commercial Paper or through a Liquidity Funding. If Market Street determines to fund an Incremental Purchase through a Liquidity Funding, the Seller may cancel the Purchase Notice or, in the absence of such a cancellation, the Incremental Purchase will be funded through a Liquidity Funding. On each Purchase Date, upon satisfaction of the applicable conditions precedent set forth in Article VI , Market Street shall deposit to the Facility Account, in immediately available funds, no later than 2:00 p.m. (New York City time), an amount equal to the requested Cash Purchase Price.

(b) Whenever the LC Bank issues a Letter of Credit pursuant to Section 1.7 hereof, it shall, automatically and without further action of any kind upon the effective date of issuance of such Letter of Credit, have irrevocably deemed to have agreed to make an Incremental Purchase as provided in Section 1.9 hereof in the event that such Letter of Credit is subsequently drawn and such drawn amount shall not have been reimbursed pursuant to Section 1.9 upon such draw. All such Incremental Purchases shall accrue Yield at the LIBO Rate or Alternate Base Rate in the sole discretion of the LC Bank from the date of such draw; provided , however , from and after the occurrence of an Amortization Event such Incremental Purchase shall accrue Yield at the Default Rate. In the event that any Letter of Credit expires or is surrendered without being drawn (in whole or in part) then, in such event, the foregoing commitment to make Incremental Purchases shall expire with respect to such Letter of Credit and the LC Amount shall automatically decrease by the amount of the Letter of Credit which is no longer outstanding.

 

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Section 1.3 Decreases .

The Seller shall provide the Administrator with prior written notice in conformity with the Required Notice Period in the form of Exhibit X hereto (a “ Reduction Notice ”) of any proposed reduction of Aggregate Invested Amount. Such Reduction Notice shall designate (a) the date (the “ Proposed Reduction Date ”) upon which any such reduction of Aggregate Invested Amount shall occur (which date shall give effect to the applicable Required Notice Period), and (b) the amount of Aggregate Invested Amount to be reduced which shall be applied ratably to all Purchased Assets in accordance with the respective Invested Amounts thereof (the “ Aggregate Reduction ”). Only one (1) Reduction Notice shall be outstanding at any time.

Section 1.4 Deemed Collections .

If on any day:

(i) the Outstanding Balance of any Receivable is reduced or cancelled as a result of any defective or rejected goods or services, any cash discount or any other adjustment by any Originator or any Affiliate thereof, or as a result of any governmental or regulatory action, or

(ii) the Outstanding Balance of any Receivable is reduced or canceled as a result of a setoff in respect of any claim by the Obligor thereof (whether such claim arises out of the same or a related or an unrelated transaction), or

(iii) the Outstanding Balance of any Receivable is reduced on account of the obligation of any Originator or any Affiliate thereof to pay to the related Obligor any rebate or refund, or

(iv) the Outstanding Balance of any Receivable is less than the amount included in calculating the Net Pool Balance for purposes of any Monthly Report or Collateral Certificate (for any reason other than receipt of Collections or such Receivable becoming a Defaulted Receivable), or

(v) any of the representations or warranties of the Seller set forth in Section 5.1(g) , Section 5.1(i) , Section 5.1(j) , Section 5.1(r) , Section 5.1(s) , Section 5.1(t) or Section 5.1(u) were not true when made with respect to any Receivable,

then, on such day, the Seller shall be deemed to have received a Collection of such Receivable (A) in the case of clauses (i)-(iv) above, in the amount of such reduction or cancellation or the difference between the actual Outstanding Balance and the amount included in calculating such Net Pool Balance, as applicable; and (B) in the case of clause (v) above, in the amount of the Outstanding Balance of such Receivable and (in either case), not later than two (2) Business Days thereafter shall pay to the Administrator’s Account the amount of any such Collection deemed to have been received in the same manner as actual cash collections are distributed under the terms of this Agreement.

 

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Section 1.5 Payment Requirements and Computations .

All amounts to be paid or deposited by a Seller Party pursuant to any provision of this Agreement shall be paid or deposited in accordance with the terms hereof no later than 12:00 noon (New York City time) on the day when due in immediately available funds, and if not received before 12:00 noon (New York City time) shall be deemed to be received on the next succeeding Business Day. If such amounts are payable to the Administrator for the account of Market Street, they shall be paid to the Administrator’s Account, for the account of Market Street until otherwise notified by the Administrator. Upon notice to the Seller, the Administrator may debit the Facility Account for all amounts due and payable hereunder. All computations of Yield which accrues at the Alternate Base Rate shall be made on the basis of a year of 365 or 366 days, as applicable, for the actual number of days elapsed. All computations of CP Costs, Yield (other than Yield which accrues at the Alternate Base Rate), per annum fees calculated as part of any CP Costs, per annum fees hereunder and per annum fees under the Fee Letter shall be made on the basis of a year of 360 days for the actual number of days elapsed. If any amount hereunder shall be payable on a day which is not a Business Day, such amount shall be payable on the next succeeding Business Day.

Section 1.6 Letters of Credit .

Subject to the terms and conditions hereof, the LC Bank shall issue or cause the issuance of Letters of Credit (“ Letters of Credit ”) on behalf of Seller (and, if applicable, on behalf of, or for the account of, the Originators); provided , however , that the LC Bank will not be required to issue or cause to be issued any Letters of Credit to the extent that the issuance of such Letters of Credit would then cause the Aggregate Invested Amount to exceed the Purchase Limit. The LC Amount shall not exceed in the aggregate, at any time, the Commitment of the LC Bank. All amounts drawn upon Letters of Credit shall accrue Yield at the LIBO Rate or in the sole discretion of the LC Bank at the Alternate Base Rate; provided , however , that from and after the occurrence of an Amortization Event, all such drawn amounts shall accrue Yield at the Default Rate. Letters of Credit that have not been drawn upon shall not accrue Yield.

Section 1.7 Issuance of Letters of Credit .

(a) The Seller may request the LC Bank, upon two (2) Business Days’ prior written notice pursuant to the Purchase Notice substantially in the form of Exhibit II attached hereto submitted on or before 11:00 a.m., New York time, to issue a Letter of Credit by delivering to the Administrator, the LC Bank’s form of Letter of Credit Application (the “ Letter of Credit Application ”), substantially in the form of Exhibit VI attached hereto completed to the satisfaction of the Administrator and the LC Bank; and, such other certificates, documents and other papers and information as the Administrator may reasonably request. The Seller also has the right to give instructions and make agreements with respect to any Letter of Credit Application and the disposition of documents, and to agree with the Administrator upon any amendment, extension or renewal of any Letter of Credit.

(b) Each Letter of Credit shall, among other things, (i) provide for the payment of sight drafts or other written demands for payment when presented for honor thereunder in accordance with the terms thereof and when accompanied by the documents described therein and (ii) have an expiry date not later than twelve (12)

 

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months after such Letter of Credit’s date of issuance, extension or renewal, as the case may be, and in no event later than twelve (12) months after the Facility Termination Date. Each Letter of Credit shall be subject either to the Uniform Customs and Practice for Documentary Credits (2007 Revision), International Chamber of Commerce Publication No. 600, and any amendments or revisions thereof adhered to by the LC Bank (“UCP600”), or the International Standby Practices (ISP98), International Chamber of Commerce Publication Number 590, and any amendments or revisions thereof adhered to by the LC Bank (the “ ISP98 Rules ”), as determined by the LC Bank.

(c) The Administrator shall promptly notify the LC Bank, at its address for notices hereunder, of the request by the Seller for a Letter of Credit hereunder, and shall provide the LC Bank with the Letter of Credit Application delivered to the Administrator by the Seller pursuant to paragraph (a), above, by the close of business on the day received or if received on a day that is not a Business Day or on any Business Day after 11:00 a.m., New York time, on such day, on the next Business Day.

Section 1.8 Requirements For Issuance of Letters of Credit .

The Seller shall authorize and direct the LC Bank to name the Seller or the Seller, on behalf of, or “for the benefit of” any Originator as the “Applicant” or “Account Party” of each Letter of Credit, provided , in no event shall any Person (including any Originator) other than the Seller have any obligation to reimburse the LC Bank under the terms of any Letter of Credit.

Section 1.9 Disbursements, Reimbursement .

In the event of any request for a drawing under a Letter of Credit by the beneficiary or transferee thereof, the LC Bank will promptly notify the Administrator and the Seller of such request. Provided that it shall have received such notice, the Seller shall reimburse (such obligation to reimburse the LC Bank shall sometimes be referred to as a “ Reimbursement Obligation ”) the LC Bank prior to 12:00 p.m., New York time, on each date that an amount is paid by the LC Bank under any Letter of Credit (each such date, a “ Drawing Date ”) in an amount equal to the amount so paid by the LC Bank. In the event the Seller fails to reimburse the LC Bank for the full amount of any drawing under any Letter of Credit by 12:00 p.m., New York time, on the Drawing Date, the Seller shall be deemed to have requested that an Incremental Purchase be made by the LC Bank to be disbursed on the Drawing Date under such Letter of Credit, subject to the limitations set forth herein, including but not limited to Section 1.1(a) . Any notice given by the LC Bank pursuant to this Section may be oral if immediately confirmed in writing; provided , however , that the lack of any such written confirmation shall not affect the conclusiveness or binding effect of such notice.

Section 1.10 Documentation .

The Seller and the Originators agree to be bound by (a) the terms of the Letter of Credit Application, (b) the LC Bank’s interpretations of any Letter of Credit issued on behalf of Seller or an Originator and (c) the LC Bank’s written regulations and customary practices relating to letters of credit, though the LC Bank’s interpretation of such regulations and practices may be different from the Seller’s own. In the event of a conflict between the Letter of Credit

 

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Application and this Agreement, this Agreement shall govern. It is understood and agreed that, except in the case of gross negligence or willful misconduct by the LC Bank, the LC Bank shall not be liable for any error, negligence and/or mistakes, whether of omission or commission, in following the Seller’s instructions or those contained in the Letters of Credit or any modifications, amendments or supplements thereto.

Section 1.11 Determination to Honor Drawing Request .

In determining whether to honor any request for drawing under any Letter of Credit by the beneficiary thereof, the LC Bank shall be responsible only to determine that the documents and certificates required to be delivered under such Letter of Credit have been delivered and that they comply on their face with the requirements of such Letter of Credit and that any other drawing condition appearing on the face of such Letter of Credit has been satisfied in the manner so set forth.

Section 1.12 Nature of Reimbursement Obligations .

The obligations of the Seller to reimburse the LC Bank upon a draw under a Letter of Credit which has been honored by the LC Bank, shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement under all circumstances, including under the following circumstances:

(i) any set-off, counterclaim, recoupment, defense or other right which the Seller may have against Administrator, Market Street or any other Person for any reason whatsoever or any claim of breach of warranty that might be made by the Seller or the LC Bank against the beneficiary of a Letter of Credit, or the existence of any claim, set-off, defense or other right which the Seller or the LC Bank may have at any time against a beneficiary, any successor beneficiary or any transferee of any Letter of Credit or the proceeds thereof (or any Persons for whom any such transferee may be acting), the Administrator, Market Street, the Seller or any other Person, whether in connection with this Agreement, the transactions contemplated herein or any unrelated transaction (including any underlying transaction between the Seller or any Subsidiaries of the Seller or any Affiliates of the Seller and the beneficiary for which any Letter of Credit was procured);

(ii) the failure of the Seller or any other Person to comply with the conditions set forth in this Agreement for the making of an Incremental Purchase, Reinvestments, requests for Letters of Credit or otherwise;

(iii) any lack of validity or enforceability of any Letter of Credit;

(iv) the lack of power or authority of any signer of, or lack of validity, sufficiency, accuracy, enforceability or genuineness of, any draft, demand, instrument, certificate or other document presented under any Letter of Credit, or any such draft, demand, instrument, certificate or other document proving to be forged, fraudulent, invalid, defective or insufficient in any respect or any statement therein being untrue or inaccurate in any respect, even if the Administrator or the LC Bank has been notified thereof;

 

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(v) payment by the LC Bank under any Letter of Credit against presentation of a demand, draft or certificate or other document which does not comply with the terms of such Letter of Credit other than as a result of the gross negligence or willful misconduct of the LC Bank;

(vi) the solvency of, or any acts or omissions by, any beneficiary of any Letter of Credit, or any other Person having a role in any transaction or obligation relating to a Letter of Credit, or the existence, nature, quality, quantity, condition, value or other characteristic of any property or services relating to a Letter of Credit;

(vii) any failure by the LC Bank or any of the LC Bank’s Affiliates to issue any Letter of Credit in the form requested by the Seller, unless the LC Bank has received written notice from the Seller of such failure within three Business Days after the LC Bank shall have furnished the Seller a copy of such Letter of Credit and such error is material and no drawing has been made thereon prior to receipt of such notice;

(viii) any Material Adverse Effect on the Seller, any Originator or any Affiliates thereof;

(ix) any breach of this Agreement or any Transaction Document by any party thereto;

(x) the occurrence or continuance of an Event of Bankruptcy with respect to the Seller, any Originator or any Affiliate thereof;

(xi) the fact that an Amortization Event or an Unmatured Amortization Event shall have occurred and be continuing;

(xii) the fact that this Agreement or the obligations of Seller or Servicer hereunder shall have been terminated; and

(xiii) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing.

Section 1.13 Indemnity .

In addition to other amounts payable hereunder, the Seller hereby agrees to protect, indemnify, pay and save harmless the Administrator, the LC Bank and any of the LC Bank’s Affiliates that have issued a Letter of Credit from and against any and all claims, demands, liabilities, damages, taxes, penalties, interest, judgments, losses, costs, charges and expenses (including reasonable fees and expenses of legal counsel to the LC Bank) which the Administrator, the LC Bank or any of their respective Affiliates may incur or be subject to as a consequence, direct or indirect, of the issuance of any Letter of Credit, except to the extent

 

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resulting from (a) the gross negligence or willful misconduct of the party to be indemnified as determined by a final judgment of a court of competent jurisdiction or (b) the wrongful dishonor by the LC Bank of a proper demand for payment made under any Letter of Credit, except if such dishonor resulted from any act or omission, whether rightful or wrongful, of any present or future de jure or de facto Governmental Authority (all such acts or omissions herein called “ Governmental Acts ”).

Section 1.14 Liability for Acts and Omissions .

As between the Seller, on the one hand, and the Administrator, the LC Bank and Market Street, on the other, the Seller assumes all risks of the acts and omissions of, or misuse of the Letters of Credit by, the respective beneficiaries of such Letters of Credit. In furtherance and not in limitation of the respective foregoing, none of the Administrator, the LC Bank or Market Street shall be responsible for: (a) the form, validity, sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in connection with the application for an issuance of any such Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged (even if the LC Bank shall have been notified thereof); (b) the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any such Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason; (c) the failure of the beneficiary of any such Letter of Credit, or any other party to which such Letter of Credit may be transferred, to comply fully with any conditions required in order to draw upon such Letter of Credit or any other claim of the Seller against any beneficiary of such Letter of Credit, or any such transferee, or any dispute between or among the Seller and any beneficiary of any Letter of Credit or any such transferee; (d) errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether or not they be in cipher; (e) errors in interpretation of technical terms; (f) any loss or delay in the transmission or otherwise of any document required in order to make a drawing under any such Letter of Credit or of the proceeds thereof; (g) the misapplication by the beneficiary of any such Letter of Credit of the proceeds of any drawing under such Letter of Credit; or (h) any consequences arising from causes beyond the control of the Administrator, the LC Bank and Market Street, including any Governmental Acts, and none of the above shall affect or impair, or prevent the vesting of, any of the LC Bank’s rights or powers hereunder. Nothing in the preceding sentence shall relieve the LC Bank from liability for its gross negligence or willful misconduct, as determined by a final non-appealable judgment of a court of competent jurisdiction, in connection with actions or omissions described in such clauses (a) through (h) of such sentence. In no event shall the Administrator, the LC Bank, Market Street or their respective Affiliates, be liable to the Seller or any other Person for any indirect, consequential, incidental, punitive, exemplary or special damages or expenses (including without limitation reasonable fees and expenses of legal counsel to the LC Bank), or for any damages resulting from any change in the value of any property relating to a Letter of Credit.

Without limiting the generality of the foregoing, the Administrator, the LC Bank, and Market Street and each of their respective Affiliates (a) may rely on any written communication believed in good faith by such Person to have been authorized or given by or on behalf of the applicant for a Letter of Credit; (b) may honor any presentation if the documents presented appear on their face to comply with the terms and conditions of the relevant Letter of Credit;

 

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(c) may honor a previously dishonored presentation under a Letter of Credit, whether such dishonor was pursuant to a court order, to settle or compromise any claim of wrongful dishonor, or otherwise, and shall be entitled to reimbursement to the same extent as if such presentation had initially been honored, together with any interest paid by the LC Bank or its Affiliates; (d) may honor any drawing that is payable upon presentation of a statement advising negotiation or payment, upon receipt of such statement (even if such statement indicates that a draft or other document is being delivered separately), and shall not be liable for any failure of any such draft or other document to arrive, or to conform in any way with the relevant Letter of Credit; (e) may pay any paying or negotiating bank claiming that it rightfully honored under the laws or practices of the place where such bank is located; and (f) may settle or adjust any claim or demand made on the Administrator, the LC Bank, Market Street or their respective Affiliates, in any way related to any order issued at the applicant’s request to an air carrier, a letter of guarantee or of indemnity issued to a carrier or any similar document (each an “ Order ”) and honor any drawing in connection with any Letter of Credit that is the subject of such Order, notwithstanding that any drafts or other documents presented in connection with such Letter of Credit fail to conform in any way with such Letter of Credit.

In furtherance and extension and not in limitation of the specific provisions set forth above, any action taken or omitted by the LC Bank under or in connection with the Letters of Credit issued by it or any documents and certificates delivered thereunder, if taken or omitted in good faith and without gross negligence or willful misconduct, as determined by a final nonappealable judgment of a court of competent jurisdiction, shall not put the LC Bank under any resulting liability to the Seller or any other Person.

Article II

Payments and Collections

Section 2.1 Payments of Recourse Obligations .

The Seller hereby promises to pay the following (collectively, the “ Recourse Obligations ”):

(a) all amounts due and owing under Section 1.3 or Section 1.4 or in order to avoid an Amortization Event under Section 9.1(m) or 9.1(q) on the dates specified therein;

(b) the fees set forth in the Fee Letter on the dates specified therein;

(c) all accrued and unpaid Yield on the Aggregate Invested Amount and drawings under a Letter of Credit accruing Yield at the Alternate Base Rate or the Default Rate on each Settlement Date applicable thereto;

(d) all accrued and unpaid Yield on the Aggregate Invested Amount and drawings under a Letter of Credit accruing Yield at the LIBO Rate on the last day of each Interest Period applicable thereto;

 

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(e) all accrued and unpaid CP Costs on the Aggregated Invested Amount funded with Commercial Paper on each Settlement Date; and

(f) all Broken Funding Costs, Reimbursement Obligations and Indemnified Amounts upon demand.

Section 2.2 Collections Prior to the Facility Termination Date .

(a) Prior to the Facility Termination Date, any Deemed Collections received by the Servicer and any Collections received by the Servicer shall be set aside and held in trust by the Servicer for the payment of any accrued and unpaid Aggregate Unpaids or for a Reinvestment as provided in this Section 2.2 . If at any time any Collections are received by the Servicer prior to the Facility Termination Date, the Seller hereby requests and Market Street hereby agrees to make, simultaneously with such receipt, a reinvestment by payment of the Purchase Price under the Receivables Sale Agreement (each, a “ Reinvestment ”) with the balance of each and every Collection received by the Servicer such that after giving effect to such Reinvestment, the Invested Amount of each Purchased Asset immediately after such receipt and corresponding Reinvestment shall be equal to the amount of Invested Amount immediately prior to such receipt.

(b) On each day on which any of the conditions precedent set forth in Section 6.2 are not satisfied and on each Settlement Date prior to the Facility Termination Date, the Servicer shall remit to the Administrator’s Account the amounts set aside during the preceding Settlement Period that have not been subject to a Reinvestment and apply such amounts (if not previously paid in accordance with Section 2.1 ) to the Aggregate Unpaids in the order specified:

first, ratably to the payment of all accrued and unpaid CP Costs, Yield and Broken Funding Costs (if any) that are then due and owing,

second , to the accrued and unpaid Servicing Fee,

third, ratably to the payment of all accrued and unpaid fees under the Fee Letter (if any) that are then due and owing,

fourth, if required under Section 1.3 or Section 1.4 or in order to avoid an Amortization Event or Unmatured Amortization Event under Section 9.1(m) or Section 9.1(q) , to the ratable reduction of Aggregate Invested Amount,

fifth, if the Asset Coverage Ratio is less than 1.0 and any Letters of Credit are outstanding, an amount necessary to cash collateralize the LC Amount until the amount of cash collateral held in the LC Collateral Account equals an amount necessary to make the Asset Coverage Ratio not less than 1.0,

sixth, for the ratable payment of all other unpaid Recourse Obligations, if any, that are then due and owing, and

seventh, the balance, if any, to the Seller in payment of the Deferred Purchase Price.

 

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(c) Prior to the Facility Termination Date, any Deemed Collections or Collections received by the Servicer in excess of items first through seventh of Section 2.2(b) above shall be paid to the Seller.

(d) In the event that a Collection Notice has been delivered pursuant to any Collection Account Agreement, all amounts received in any Collection Account shall at the sole discretion of the Administrator, either (i) be retained in such Collection Account or other account of the Administrator for such day, Settlement Period or part thereof and applied on the Settlement Date in accordance with the terms of this Agreement or (ii) be released to the Seller and applied in accordance with the terms of this Agreement.

Section 2.3 Application of Collections After the Facility Termination Date .

On the Facility Termination Date and on each day thereafter, the Servicer shall set aside and hold in trust, for the benefit of the Secured Parties, all Collections received on each such day. On and after the Facility Termination Date, the Servicer shall, on each Settlement Date and on each other Business Day specified by the Administrator: (a) remit to the Administrator’s Account the amounts set aside pursuant to the preceding sentence, and (b) apply such amounts to reduce the Aggregate Unpaids as follows:

first, to the reimbursement of the Administrator’s costs of collection and enforcement of this Agreement,

second, ratably to the payment of all accrued and unpaid CP Costs, Yield and Broken Funding Costs,

third , to the accrued and unpaid Servicing Fee,

fourth, ratably to the payment of all accrued and unpaid fees under the Fee Letter,

fifth, to the ratable reduction of Aggregate Invested Amount (with respect to the LC Amount, an amount necessary to cash collateralize the LC Amount until the amount of cash collateral held in the LC Collateral Account equals the LC Amount),

sixth, for the ratable payment of all other Aggregate Unpaids, and

seventh, to the Seller in payment of the Deferred Purchase Price.

Section 2.4 Payment Rescission .

No payment of any of the Aggregate Unpaids shall be considered paid or applied hereunder to the extent that, at any time, all or any portion of such payment or application is rescinded by application of law or judicial authority, or must otherwise be returned or refunded for any reason. The Seller shall remain obligated for the amount of any payment or application so rescinded, returned or refunded, and shall promptly pay to the Administrator (for application to the Person or Persons who suffered such rescission, return or refund) the full amount thereof, plus interest thereon at the Default Rate from the date of any such rescission, return or refunding.

 

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Section 2.5 Clean Up Call; Reconveyance of Purchased Assets .

(a) The Servicer (so long as the Servicer is an Affiliate of the Seller) shall have the right (after providing written notice to the Administrator in accordance with the Required Notice Period), at any time following the reduction of the Aggregate Invested Amount to a level that is less than 10.0% of the highest Aggregate Invested Amount outstanding during the term of this Agreement, to repurchase all, but not less than all, of the then outstanding Purchased Assets. The purchase price in respect thereof shall be an amount equal to the Aggregate Unpaids through the date of such repurchase, payable in immediately available funds to the Administrator’s Account. Such repurchase shall be made free and clear of any Adverse Claim created by the Administrator but otherwise shall be without representation, warranty or recourse of any kind by, on the part of, or against Market Street, the LC Bank or the Administrator.

(b) On the Final Payout Date, the Administrator on behalf of the Secured Parties shall be considered to have reconveyed free and clear of any Adverse Claim created by the Administrator (but otherwise shall be without representation, warranty or recourse of any kind by, on the part of, or against the Secured Parties or the Administrator) to the Seller all of the Administrator’s (on behalf of the Secured Parties) right, title and interest in, to and under the Receivables, Related Security and Collections with respect thereto and shall at the request, and sole cost and expense, of the Seller, execute and deliver to the Seller, all such documents or instruments as are necessary to terminate the Administrator’s interest on behalf of Market Street, the Liquidity Bank and the LC Bank in the Receivables, Related Security and Collections with respect thereto.

Article III

Commercial Paper Funding

Section 3.1 CP Costs .

The Seller shall pay CP Costs with respect to the Invested Amount of all Purchased Assets funded through the issuance of Commercial Paper. Each Purchased Asset that is funded substantially with Pooled Commercial Paper will accrue CP Costs each day on a pro rata basis, based upon the percentage share that the Invested Amount in respect of such Purchased Asset represents in relation to all assets held by Market Street and funded substantially with related Pooled Commercial Paper.

Section 3.2 Calculation of CP Costs .

Not later than the second Business Day immediately following each Calculation Period, Market Street shall calculate the aggregate amount of CP Costs applicable to its Purchased Assets for the Calculation Period then most recently ended and shall notify the Seller of such aggregate amount.

 

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Section 3.3 CP Costs Payments .

On each Settlement Date, the Seller shall pay to the Administrator (for the benefit of Market Street) an aggregate amount equal to all accrued and unpaid CP Costs in respect of the Invested Amount of all Purchased Assets funded with Commercial Paper for the Calculation Period then most recently ended in accordance with Article II .

Section 3.4 Default Rate .

From and after the occurrence of an Amortization Event, all Purchased Assets funded through the issuance of Commercial Paper shall accrue CP Costs at the Default Rate.

Article IV

Liquidity Fundings

Section 4.1 Liquidity Fundings .

Prior to the occurrence of an Amortization Event, the outstanding Invested Amount of each Purchased Asset funded with a Liquidity Funding shall accrue Yield for each day during its Interest Period at either the LIBO Rate or the Alternate Base Rate in accordance with the terms and conditions hereof. Until the Administrator gives notice to the Seller of another Yield Rate in accordance with Section 4.4 , the initial Yield Rate for any Purchased Asset funded with a Liquidity Funding shall be the LIBO Rate (unless the Default Rate is then applicable). If any Purchased Asset initially funded with Commercial Paper is sold to the Liquidity Banks pursuant to the Liquidity Agreement, such Purchased Asset shall be deemed to have an Interest Period commencing on the date of such sale.

Section 4.2 Yield Payments .

On the Settlement Date for each Purchased Asset that is funded with a Liquidity Funding, the Seller shall pay to the Administrator (for the benefit of the Liquidity Banks) an aggregate amount equal to the accrued and unpaid Yield thereon for the entire Interest Period of each such Liquidity Funding in accordance with Article II .

Section 4.3 Selection and Continuation of Interest Periods .

(a) With consultation from (and approval by) the Administrator, the Seller shall from time to time request Interest Periods for the Purchased Assets funded with Liquidity Fundings, provided that if at any time any Liquidity Funding is outstanding, the Seller shall always request Interest Periods such that at least one Interest Period shall end on the date specified in clause (a)  of the definition of Settlement Date.

(b) The Seller or the Administrator, upon notice to and consent by the other received at least three (3) Business Days prior to the end of an Interest Period (the “ Terminating Tranche ”) for any Liquidity Funding, may, effective on the last day of the Terminating Tranche: (i) divide any such Liquidity Funding into multiple Liquidity Fundings, (ii) combine any such Liquidity Funding with one or more other Liquidity Fundings that have a Terminating Tranche ending on the same day as such Terminating Tranche or (iii) combine any such Liquidity Funding with a new Liquidity Funding to be made by the Liquidity Banks on the day such Terminating Tranche ends.

 

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Section 4.4 Liquidity Funding Yield Rates .

The Seller may request the LIBO Rate (subject to Section 4.5 below) or the Alternate Base Rate for each Liquidity Funding. The Seller shall by 12:00 noon (New York City time): (a) at least three (3) Business Days prior to the expiration of any Terminating Tranche with respect to which the LIBO Rate is being requested as a new Yield Rate and (b) at least one (1) Business Day prior to the expiration of any Terminating Tranche with respect to which the Alternate Base Rate is being requested as a new Yield Rate, give the Administrator irrevocable notice of the requested new Yield Rate for the Liquidity Funding associated with such Terminating Tranche. The Administrator in its sole discretion shall select the Yield Rate for each Liquidity Funding. The Administrator will give notice to the Seller of the Yield Rate selected by the Administrator for each Liquidity Funding by 12:00 noon (New York City time) at least one (1) Business Day prior to the expiration of any Terminating Tranche. Until the Administrator gives notice to the Seller of another Yield Rate, the initial Yield Rate for any Purchased Asset assigned or participated to the Liquidity Banks pursuant to the Liquidity Agreement shall be the LIBO Rate (unless the Default Rate is then applicable).

Section 4.5 Suspension of the LIBO Rate .

(a) If any Liquidity Bank notifies the Administrator that it has determined that funding its ratable share of the Liquidity Fundings at a LIBO Rate would violate any applicable law, rule, regulation, or directive of any governmental or regulatory authority, whether or not having the force of law, or that (i) deposits of a type and maturity appropriate to match fund its Liquidity Funding at such LIBO Rate are not available or (ii) such LIBO Rate does not accurately reflect the cost of acquiring or maintaining a Liquidity Funding at such LIBO Rate, then the Administrator will promptly notify the Seller Parties and the Administrator shall suspend the availability of such LIBO Rate and require the Seller to select the Alternate Base Rate for any Liquidity Funding accruing Yield at such LIBO Rate; provided , however , the failure to so notify any Seller Party shall not result in the non-suspension of the availability of such LIBO Rate.

(b) If less than all of the Liquidity Banks give a notice to the Administrator pursuant to Section 4.5(a) , each Liquidity Bank which gave such a notice shall be obliged, at the request of the Seller, Market Street or the Administrator, to assign all of its rights and obligations hereunder to (i) another Liquidity Bank or (ii) another funding entity nominated by the Seller or the Administrator that is an Eligible Assignee willing to participate in the Liquidity Agreement through the Liquidity Termination Date in the place of such notifying Liquidity Bank; provided that (A) the notifying Liquidity Bank receives payment in full of all Aggregate Unpaids owing to it (whether due or accrued), and (B) the replacement Liquidity Bank otherwise satisfies the requirements of the Liquidity Agreement.

 

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(c) Upon the occurrence of any event giving rise to the operation of Section 4.5(a) with respect to any Liquidity Bank, it will, if requested by the Seller, to the extent permissible under applicable law, endeavor in good faith to change the funding office at which it books its ratable share of any Liquidity Funding accruing Yield at a LIBO Rate hereunder if such change would make it lawful for such Liquidity Bank to fund such Liquidity Funding at a LIBO Rate; provided , however, that such change may be made in such manner that such Liquidity Bank, in its sole determination, suffers no unreimbursed cost or expense or any disadvantage whatsoever.

Section 4.6 Default Rate .

From and after the occurrence of an Amortization Event, all Liquidity Fundings shall accrue Yield at the Default Rate.

Article V

Representations and Warranties

Section 5.1 Representations and Warranties of the Seller Parties .

Each Seller Party hereby represents and warrants to the Administrator, Market Street and the LC Bank, as to itself, as of the date hereof and as of the date of each Incremental Purchase and the date of each Reinvestment that:

(a) Existence and Power . Such Seller Party’s jurisdiction of organization is correctly set forth in the preamble to this Agreement and such jurisdiction is its sole jurisdiction of organization. Such Seller Party is duly organized under the laws of its jurisdiction of organization and is a “registered organization” as defined in the UCC in effect in such jurisdiction. Such Seller Party is validly existing and in good standing under the laws of its jurisdiction of organization and no other state or jurisdiction, and such jurisdiction must maintain a public record showing the organization to have been organized. Such Seller Party is duly qualified to do business and is in good standing as a foreign entity, and has and holds all organizational power and all governmental licenses, authorizations, consents and approvals required to carry on its business in each jurisdiction in which its business is conducted except where the failure to so qualify or so hold could not reasonably be expected to have a Material Adverse Effect.

(b) Power and Authority; Due Authorization, Execution and Delivery . The execution and delivery by such Seller Party of this Agreement and each other Transaction Document to which it is a party, and the performance of its obligations hereunder and thereunder and, in the case of the Seller, the Seller’s use of the proceeds of Purchases made hereunder, are within its corporate powers and authority and have been duly authorized by all necessary corporate action on its part. This Agreement and each other Transaction Document to which such Seller Party is a party has been duly executed and delivered by such Seller Party.

(c) No Conflict . The execution and delivery by such Seller Party of this Agreement and each other Transaction Document to which it is a party, and the performance of its obligations hereunder and thereunder do not contravene or violate (i) its Organizational Documents, (ii) any law, rule or regulation applicable to it, (iii) any

 

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restrictions under any agreement, contract or instrument to which it is a party or by which it or any of its property is bound, or (iv) any order, writ, judgment, award, injunction or decree binding on or affecting it or its property, and do not result in the creation or imposition of any Adverse Claim on assets of such Seller Party or its Subsidiaries (except as created hereunder) except, in any case, where such contravention or violation could not reasonably be expected to have a Material Adverse Effect; and no transaction contemplated hereby requires compliance with any bulk sales act or similar law.

(d) Governmental Authorization . Other than the filing of the financing statements required hereunder, 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 and delivery by such Seller Party of this Agreement and each other Transaction Document to which it is a party and the performance of its obligations hereunder and thereunder.

(e) Actions, Suits . There are no actions, suits or proceedings pending, or to the best of such Seller Party’s knowledge, threatened, against it, or any of its properties, in or before any court, arbitrator or other body, that could reasonably be expected to have a Material Adverse Effect. Such Seller Party is not in default with respect to any order of any court, arbitrator or governmental body which default could reasonably be expected to have a Material Adverse Effect.

(f) Binding Effect . This Agreement and each other Transaction Document to which such Seller Party is a party constitute the legal, valid and binding obligations of such Seller Party enforceable against such Seller Party in accordance with their respective 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).

(g) Accuracy of Information . All information (other than any projection or other forward-looking information) heretofore furnished by such Seller Party or any of its Affiliates to the Administrator, Market Street or LC Bank for purposes of or in connection with this Agreement, any of the other Transaction Documents or any transaction contemplated hereby or thereby is, and all such information (other than any projection or other forward-looking information) hereafter furnished by such Seller Party or any of its Affiliates to the Administrator, Market Street or the LC Bank will be, true and accurate in every material respect on the date such information is stated or certified and does not and will not contain any material misstatement of fact.

(h) Use of Proceeds . No proceeds of any Purchase hereunder will be used by such Seller Party (i) for a purpose that violates, or would be inconsistent with, (A)  Section 7.2(e) of this Agreement or (B) Regulation T, U or X promulgated by the Board of Governors of the Federal Reserve System from time to time or (ii) to acquire any security in any transaction which is subject to Section 12, 13 or 14 of the Securities Exchange Act of 1934, as amended other than the repurchase of equity securities of Arch so long as such repurchase does not violate Sections 12, 13 or 14 of the Securities Exchange Act of 1934, as amended.

 

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(i) Good Title . The Seller is (i) the legal and beneficial owner of the Receivables and (ii) is the legal and beneficial owner of the Related Security with respect thereto, free and clear of any Adverse Claim, except as created by the Transaction Documents. There have been duly filed all financing statements or other similar instruments or documents necessary under the UCC (or any comparable law) of all appropriate jurisdictions to perfect the Seller’s ownership interest in each Receivable, its Collections, “Supporting Obligations” (as defined in Article 9 of the UCC in effect in each relevant jurisdiction), the Seller’s right, title and interest in, to and under each of the Transaction Documents to which it is a party, returned goods the sale of which gave rise to any Receivable, security interests in favor of the Seller that secures payment of such Receivable and all other items of Related Security in which an interest therein may be perfected by the filing of a financing statement under Article 9 of the UCC and proceeds of the foregoing.

(j) Perfection . This Agreement is effective to create a valid security interest in favor of the Administrator for the benefit of the Secured Parties in the Purchased Assets to secure payment of the Aggregate Unpaids, free and clear of any Adverse Claim except as created by the Transactions Documents. There have been duly filed all financing statements or other similar instruments or documents necessary under the UCC (or any comparable law) of all appropriate jurisdictions to perfect the Administrator’s (on behalf of the Secured Parties) security interest in the Receivables, its Collections, “Supporting Obligations” (as defined in Article 9 of the UCC in effect in each relevant jurisdiction), the Seller’s right, title and interest in, to and under each of the Transaction Documents to which it is a party, returned goods the sale of which gave rise to any Receivable, security interests in favor of the Seller that secures payment of such Receivable and all other items of Related Security in which an interest therein may be perfected by the filing of a financing statement under Article 9 of the UCC and proceeds of the foregoing. Such Seller Party’s jurisdiction of organization is a jurisdiction whose law generally requires information concerning the existence of a nonpossessory security interest to be made generally available in a filing, record or registration system as a condition or result of such a security interest’s obtaining priority over the rights of a lien creditor which respect to collateral.

(k) Places of Business and Locations of Records . The jurisdiction of organization and principal places of business of such Seller Party and the offices where it keeps all of its Records are located at the address(es) listed on Exhibit III or such other locations of which the Administrator has been notified in accordance with Section 7.2(a) in jurisdictions where all action required by Section 13.3(a) has been taken and completed. The Seller’s Federal Employer Identification Number is correctly set forth on Exhibit III .

(l) Collections . The conditions and requirements set forth in subclause (i) of Section 7.1(j) and Section 8.2 have at all times since the Closing Date, been satisfied and duly performed. The conditions and requirements set forth in subclause (ii) of Section 7.1(j)

 

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have been satisfied from and after the Closing Date. The names, addresses and jurisdictions of organization of all Collection Banks, together with the account numbers of the Collection Accounts of the Seller at each Collection Bank and the post office box number of each Lock-Box, are listed on Exhibit IV . The Seller has not granted any Person, other than the Administrator as contemplated by this Agreement, dominion and control of any Lock-Box or Collection Account, or the right to take dominion and control of any such Lock-Box or Collection Account at a future time or upon the occurrence of a future event.

(m) Material Adverse Effect . (i) The initial Servicer represents and warrants that since June 30, 2009, no event has occurred that would have a material adverse effect on the financial condition or operations of the initial Servicer and its Subsidiaries taken as a whole or the ability of the initial Servicer to perform its obligations under this Agreement, and (ii) the Seller represents and warrants that since June 30, 2009, no event has occurred that would have a material adverse effect on (A) the financial condition or operations of the Seller, (B) the ability of the Seller to perform its obligations under the Transaction Documents, or (C) the collectability of the Receivables generally or any material portion of the Receivables.

(n) Names . The name in which the Seller has executed this Agreement is identical to the name of the Seller as indicated on the public record of its state of organization which shows the Seller to have been organized. In the past five (5) years, the Seller has not used any corporate names, trade names or assumed names other than the name in which it has executed this Agreement.

(o) Ownership of the Seller . Arch owns, directly or indirectly, 100% of the issued and outstanding capital stock of the Seller, free and clear of any Adverse Claim. Such capital stock is validly issued, fully paid and nonassessable, and there are no options, warrants or other rights to acquire securities of the Seller.

(p) Not a Holding Company or an Investment Company . Such Seller Party is not a “holding company” or a “subsidiary holding company” of a “holding company” within the meaning of the Public Utility Holding Company Act of 1935, as amended, or any successor statute. Such Seller Party is not an “investment company” within the meaning of the Investment Company Act of 1940, as amended, or any successor statute.

(q) Compliance with Law . Such Seller Party has complied in all respects with all applicable laws, rules, regulations, orders, writs, judgments, injunctions, decrees or awards to which it may be subject, except where the failure to so comply could not reasonably be expected to have a Material Adverse Effect. Each Receivable, together with the Contract related thereto, does not contravene any laws, rules or regulations applicable thereto (including, without limitation, laws, rules and regulations relating to truth in lending, fair credit billing, fair credit reporting, equal credit opportunity, fair debt collection practices and privacy), and no part of such Contract is in violation of any such law, rule or regulation, except where such contravention or violation could not reasonably be expected to have a Material Adverse Effect.

 

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(r) Compliance with Credit and Collection Policy . Such Seller Party has complied in all material respects with the Credit and Collection Policy with regard to each Receivable and the related Contract, and has not made any material change to such Credit and Collection Policy, except such material change as to which the Administrator has been notified in accordance with Section 7.1(a)(vii) .

(s) Payments to Originators . With respect to each Receivable transferred to the Seller under the Receivables Sale Agreement, the Seller has given reasonably equivalent value to each of the Originators in consideration therefor and such transfer was not made for or on account of an antecedent debt. No transfer by any Originator of any Receivable under the Receivables Sale Agreement is or may be voidable under any section of the Bankruptcy Reform Act of 1978 (11 U.S.C. §§ 101 et seq. ), as amended.

(t) 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 Outstanding 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).

(u) Eligible Receivables . Each Receivable included in the Net Pool Balance as an Eligible Receivable on the date of any Monthly Report was an Eligible Receivable on such date.

(v) Purchase Limit and Maximum Aggregate Investment Amount . Immediately after giving effect to each Incremental Purchase hereunder, the Aggregate Invested Amount is less than or equal to the Purchase Limit and the Asset Coverage Ratio is not less than 1.0.

(w) Accounting . The manner in which such Seller Party accounts for the transactions contemplated by this Agreement and the Receivables Sale Agreement does not jeopardize the characterization of the transactions contemplated herein and therein as being true sales.

(x) Separateness . From the date of the formation of the Seller, the Seller has complied with all provisions of Section 7.1(i) applicable to it.

(y) Contract Provisions . Except for customary adjustments in the ordinary course of business, no Contract with respect to any Receivable contains provisions that either (i) permit or provide for any reduction in the Outstanding Balance of the Receivable created thereunder and any accrued interest thereon or (ii) could otherwise hinder the ability to receive Collections with respect to such Receivable.

 

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Article VI

Conditions of Purchases

Section 6.1 Conditions Precedent to Initial Incremental Purchase .

The initial Incremental Purchase of a Purchased Asset under this Agreement is subject to the conditions precedent that (a) the Administrator shall have received on or before the Closing Date those documents listed on Schedule A and (b) the Administrator shall have received all fees and expenses required to be paid on such date pursuant to the terms of this Agreement and the Fee Letter.

Section 6.2 Conditions Precedent to All Purchases and Reinvestments .

Each Incremental Purchase, each Reinvestment and each issuance of any Letter of Credit shall be subject to the further conditions precedent that (a) in the case of each such Purchase and each such issuance of any Letter of Credit: (i) the Servicer shall have delivered to the Administrator on or prior to the date of such Purchase, in form and substance satisfactory to the Administrator, all Monthly Reports and Collateral Certificates as and when due under Section 8.5 and (ii) upon the Administrator’s request, the Servicer shall have delivered to the Administrator at least three (3) days prior to such Purchase an interim Monthly Report showing the amount of Eligible Receivables; (b) the Administrator shall have received such other approvals, opinions or documents as it may reasonably request and (c) on each Purchase Date, the following statements shall be true (and acceptance of the proceeds of such Incremental Purchase, Reinvestment or issuance shall be deemed a representation and warranty by the Seller that such statements are then true):

(i) the representations and warranties set forth in Section 5.1 are true and correct on and as of the date of such Incremental Purchase, Reinvestment or issuance as though made on and as of such Purchase Date, except to the extent such representations and warranties are expressly limited to an earlier date;

(ii) no event has occurred and is continuing, or would result from such Incremental Purchase, Reinvestment or issuance, that will constitute an Amortization Event, and no event has occurred and is continuing, or would result from such Incremental Purchase, Reinvestment or issuance, that would constitute an Unmatured Amortization Event;

(iii) the Aggregate Invested Amount does not exceed the Purchase Limit in effect on such Purchase Date; and

(iv) the Asset Coverage Ratio is not less than 1.0.

It is expressly understood that each Reinvestment shall, unless otherwise directed by the Administrator, Market Street or LC Bank, occur automatically on each day that the Servicer shall receive any Collections without the requirement that any further action be taken on the part of any Person and notwithstanding the failure of the Seller to satisfy any of the foregoing conditions precedent in respect of such Reinvestment. The failure of the Seller to satisfy any of the

 

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foregoing conditions precedent in respect of any Reinvestment shall give rise to a right of the Administrator, which right may be exercised at any time on demand of the Administrator, to rescind the related purchase and direct the Seller to pay to the Administrator’s Account, for the ratable benefit of Market Street and/or the LC Bank, an amount equal to the Collections prior to the Facility Termination Date that shall have been applied to the affected Reinvestment.

Article VII

Covenants

Section 7.1 Affirmative Covenants of the Seller Parties .

Until the date on which the Aggregate Unpaids have been indefeasibly paid in full and this Agreement terminates in accordance with its terms, each Seller Party hereby covenants, as to itself, as set forth below:

(a) Financial Reporting . Such Seller Party will maintain, for itself and each of its Subsidiaries, a system of accounting established and administered in accordance with GAAP, and furnish or cause to be furnished to the Administrator:

(i) Annual Reporting . Within 90 days after the close of each of its fiscal years, audited, unqualified consolidated financial statements (which shall include balance sheets, statements of income and retained earnings and a statement of cash flows) for Arch and its consolidated subsidiaries for such fiscal year certified in a manner acceptable to the Administrator by KPMG LLP, independent public accountants or any other independent public accountants of recognized national standing.

(ii) Quarterly Reporting . Within 45 days after the close of the first three (3) quarterly periods of each of its respective fiscal years, balance sheets of each of the Seller Parties as at the close of each such period and consolidated statements of income and a statement of cash flows for Arch and its consolidated subsidiaries for the period from the beginning of such fiscal year to the end of such quarter, all certified by its respective chief financial officer, principal accounting officer, treasurer or corporate controller.

(iii) Compliance Certificate . Together with the financial statements required hereunder, a compliance certificate in substantially the form of Exhibit V signed by such Seller Party’s Authorized Officer, and dated the date of such annual financial statement or such quarterly financial statement, as the case may be.

(iv) Shareholders Statements and Reports . Promptly after being mailed to the shareholders of such Seller Party copies of all financial statements, reports and proxy statements so furnished to them.

(v) S.E.C. Filings . Promptly after becoming publicly available, copies of all registration statements and annual, quarterly, monthly or other regular reports which such Seller Party or any of its Subsidiaries files with the Securities and Exchange Commission.

 

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(vi) Copies of Notices . Promptly upon its receipt of any notice, request for consent, financial statements, certification, report or other communication under or in connection with any Transaction Document from any Person other than the Administrator, Market Street or LC Bank, copies of the same if such notice, request, consent, financial statements, certification, report or other communication can reasonably be expected to have an adverse effect on the Receivables, the Related Security or the Administrator’s rights therein.

(vii) Change in Credit and Collection Policy . At least thirty (30) days prior to the effectiveness of any material change in or material amendment to the Credit and Collection Policy, a copy of the Credit and Collection Policy then in effect and a notice (A) indicating such change or amendment, and (B) if such proposed change or amendment would be reasonably likely to adversely affect the collectability of the Receivables or decrease the credit quality of any newly created Receivables, requesting the Administrator’s consent thereto.

(viii) Other Information . Promptly, from time to time, such other information, documents, records or reports relating to (A) the financial condition or operations of such Seller Party as the Administrator may from time to time reasonably request in order to protect the interests of the Administrator, for the benefit of Market Street and the LC Bank, under or as contemplated by this Agreement or (B) the Receivables as the Administrator may reasonably request.

Information required to be delivered pursuant to paragraphs (i) , (ii) , (iv)  and (v)  of this Section 7.1(a) shall be deemed to have been delivered by the date indicated therein, provided that such information has been filed with the Securities and Exchange Commission by such date; provided further that such Seller Party shall deliver paper copies of the statements, reports, financial statements and other information referred to in paragraphs (i) , (ii) , (iv)  and (v)  of this Section 7.1(a) to the Administrator promptly upon request following such filing.

(b) Notices . Such Seller Party will notify the Administrator in writing of any of the following promptly upon learning of the occurrence thereof, describing the same and, if applicable, the steps being taken with respect thereto:

(i) Amortization Events or Unmatured Amortization Events . The occurrence of each Amortization Event and each Unmatured Amortization Event, by a statement of an Authorized Officer of such Seller Party.

(ii) Judgments and Proceedings . (A) The entry of any judgment or decree against the Servicer or its Subsidiaries if the amount of such judgment or decree then outstanding against the Servicer and its Subsidiaries exceeds $10,000,000 after deducting (1) the amount with respect to which the Servicer or any such Subsidiary, as the case may be, is insured and with respect to which the

 

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insurer has not disclaimed responsibility in writing, and (2) the amount for which the Servicer or any such Subsidiary is otherwise indemnified if the terms of such indemnification are satisfactory to the Administrator, and (B) the institution of any litigation, arbitration proceeding or governmental proceeding against the Servicer which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect; and (C) the entry of any judgment or decree or the institution of any litigation, arbitration proceeding or governmental proceeding against the Seller.

(iii) Material Adverse Effect . The occurrence of any event or condition that has had, or could reasonably be expected to have, a Material Adverse Effect.

(iv) Termination Date . The occurrence of the “Termination Date” under and as defined in the Receivables Sale Agreement.

(v) Defaults Under Other Agreements . The occurrence of a default or an event of default under any other financing arrangement pursuant to which the Seller is a debtor or an obligor; or the occurrence of a default that could lead to an event of default or an event of default under any other financing arrangement in a principal amount greater than or equal to $10,000,000 pursuant to which the Servicer is a debtor or an obligor.

(vi) Notices under Receivables Sale Agreement . Copies of all notices delivered under the Receivables Sale Agreement.

(c) Compliance with Laws and Preservation of Corporate Existence . Such Seller Party will comply in all respects with all applicable laws, rules, regulations, orders, writs, judgments, injunctions, decrees or awards to which it may be subject, except where the failure to so comply could not reasonably be expected to have a Material Adverse Effect. Such Seller Party will preserve and maintain its corporate existence, rights, franchises and privileges in the jurisdiction of its organization, and qualify and remain qualified in good standing as a foreign corporation in each jurisdiction where its business is conducted, except where the failure to so preserve and maintain or qualify could not reasonably be expected to have a Material Adverse Effect.

(d) Audits . In addition to information that may be required pursuant to Section 7.1(a)(viii) , each Seller Party will furnish to the Administrator from time to time such information with respect to it and the Receivables as the Administrator may reasonably request. Such Seller Party will, from time to time during regular business hours as requested by the Administrator upon reasonable notice and at the sole cost of such Seller Party, permit the Administrator, or its agents or representatives (and shall cause each Originator to permit the Administrator or its agents or representatives): (i) to examine and make copies of and abstracts from all Records in the possession or under the control of such Person relating to the Purchased Assets, including, without limitation, the related Contracts (other than any Confidential Contract (except for Confidential Contracts as to which the related Obligor has consented to such disclosure or which may be disclosed to others who are subject to a confidentiality agreement) as to which disclosure

 

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thereof cannot be satisfied by the execution and delivery of a confidentiality agreement), and (ii) to visit the offices and properties of such Person for the purpose of examining such materials described in clause (i)  above, and to discuss matters relating to such Person’s financial condition or the Purchased Assets or any Person’s performance under any of the Transaction Documents or any Person’s performance under the Contracts and, in each case, with any of the officers or employees of the Seller or the Servicer having knowledge of such matters (each of the foregoing examinations and visits, a “ Review ”); provided , however , that, so long as no Amortization Event has occurred and is continuing, (A) the Seller Parties shall only be responsible for the costs and expenses of one (1) Review by Administrator and one (1) Review by an independent auditor selected by Administrator in any one calendar year, and (B) the Administrator will not request more than two (2) Reviews in any one calendar year.

(e) Keeping and Marking of Records and Books .

(i) The Servicer will (and will cause each Originator to) maintain and implement administrative and operating procedures (including, without limitation, an ability to recreate records evidencing Receivables in the event of the destruction of the originals thereof), and keep and maintain all documents, books, records and other information, in each such case as reasonably necessary or advisable for the collection of all Receivables (including, without limitation, records adequate to permit the immediate identification of each new Receivable and all Collections of and adjustments to each existing Receivable). The Servicer will (and will cause each Originator to) give the Administrator notice of any material change in the administrative and operating procedures referred to in the previous sentence.

(ii) Such Seller Party will (and will cause each Originator to) on or prior to the date hereof, mark its master data processing system and all accounts receivable reports generated thereby with a legend, reasonably acceptable to the Administrator, describing the Administrator’s security interest in the Purchased Assets.

(f) Compliance with Contracts and Credit and Collection Policy . Such Seller Party will (and will cause each Originator to) timely and fully (i) perform and comply in all material respects with all provisions, covenants and other promises required to be observed by it under the Contracts related to the Receivables, in each case to the same extent as though such Contracts had not been transferred to the Administrator, but only to the extent there would not be an adverse effect upon the Receivables and (ii) comply in all material respects with the Credit and Collection Policy in regard to each Receivable and the related Contract.

(g) Performance and Enforcement of Receivables Sale Agreement . The Seller will, and will require each Originator to, perform each of their respective obligations and undertakings under and pursuant to the Receivables Sale Agreement, will purchase Receivables thereunder in strict compliance with the terms thereof and will vigorously enforce the rights and remedies accorded to the Seller under the Receivables Sale

 

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Agreement. The Seller will take all actions to perfect and enforce its rights and interests (and the rights and interests of the Administrator, as the Seller’s assignee) under the Receivables Sale Agreement as the Administrator may from time to time reasonably request, including, without limitation, making claims to which it may be entitled under any indemnity, reimbursement or similar provision contained in the Receivables Sale Agreement.

(h) Ownership . The Seller will (or will cause each Originator to) take all necessary action to establish and maintain, irrevocably in Seller (i) legal and equitable title to the Receivables and the Collections and (ii) all of each Originator’s right, title and interest in the Related Security associated with the Receivables, in each case, free and clear of any Adverse Claims, other than Adverse Claims in favor of the Administrator, for the benefit of the Secured Parties (including, without limitation, the filing of all financing statements or other similar instruments or documents necessary under the UCC (or any comparable law) of all appropriate jurisdictions to perfect the Administrator’s (for the benefit of the Secured Parties) security interest in the Purchased Assets and such other action to perfect, protect or more fully evidence the interest of the Administrator for the benefit of the Secured Parties as the Administrator may reasonably request); provided , however , that unless and until an Amortization Event or an Unmatured Amortization Event has occurred, no Seller Party shall be required to take any actions to establish, maintain or perfect the Administrator’s ownership interest in the Related Security other than the filing of financing statements under the UCC of all appropriate jurisdictions.

(i) Reliance . The Seller acknowledges that the Administrator, Market Street and the LC Bank are entering into the transactions contemplated by this Agreement in reliance upon the Seller’s identity as a legal entity that is separate from each Originator. Therefore, from and after the date of execution and delivery of this Agreement, the Seller shall take all reasonable steps, including, without limitation, all steps that the Administrator, Market Street or the LC Bank may from time to time reasonably request, to maintain the Seller’s identity as a separate legal entity and to make it manifest to third parties that the Seller is an entity with assets and liabilities distinct from those of each Originator and any Affiliates thereof (other than the Seller) and not just a division of such Originator or any such Affiliate. Without limiting the generality of the foregoing and in addition to the other covenants set forth herein, the Seller will:

(i) Hold itself out to the public and conduct its own business in its own name and require that all full-time employees of the Seller, if any, identify themselves as such and not as employees of any Originator (including, without limitation, by means of providing appropriate employees with business or identification cards identifying such employees as the Seller’s employees);

(ii) compensate all employees, consultants and agents directly, from the Seller’s own funds, for services provided to the Seller by such employees, consultants and agents and, to the extent any employee, consultant or agent of the Seller is also an employee, consultant or agent of any Originator or any Affiliate thereof, allocate the compensation of such employee, consultant or agent between the Seller and such Originator or such Affiliate, as applicable, on a basis that reflects the services rendered to the Seller and such Originator or such Affiliate, as applicable;

 

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(iii) separate stationery, invoices, checks and other business forms in its own name;

(iv) conduct all transactions with each Originator and the Servicer (including, without limitation, any delegation of its obligations hereunder as Servicer) strictly on an arm’s-length basis, allocate fairly and reasonably all overhead expenses (including, without limitation, telephone and other utility charges) for items shared between the Seller and such Originator on the basis of actual use to the extent practicable and, to the extent such allocation is not practicable, on a basis reasonably related to actual use;

(v) at all times have a Board of Directors and not less than one member of Seller’s Board of Directors shall be an individual who (A) has (1) prior experience as an Independent Director for a corporation or limited liability company whose charter documents required the unanimous consent of all Independent Directors thereof before such corporation or limited liability company could consent to the institution of bankruptcy or insolvency proceedings against it or could file a petition seeking relief under any applicable federal or state law relating to bankruptcy and (2) at least three years of employment experience with one or more entities that provide, in the ordinary course of their respective businesses, advisory, management or placement services to issuers of securitization or structured finance instruments, agreements or securities, (B) is reasonably acceptable to the Administrator as evidenced in a writing executed by the Administrator (it being understood and agreed that any equity owner, manager or employee of Global Securitization Services, LLC or Lord Securities Corporation is hereby consented to by the Administrator), (C) is not, and has not been for a period of five years prior to his or her appointment as an Independent Director of the Seller: (1) a stockholder (whether direct, indirect or beneficial), customer, advisor or supplier of Arch or any of its respective Affiliates, (2) a director, officer, employee, partner, attorney or consultant of Arch or any of its Affiliates (Arch and its Affiliates other than the Seller being hereinafter referred to as the “Parent Group”), (3) a person related to any person referred to in clauses (1) or (2) above, (4) a person or other entity controlling or under common control with any such stockholder, partner, customer, supplier, employee, officer or director or (5) a trustee, conservator or receiver for any member of the Parent Group and (D) shall not at any time serve as a trustee in bankruptcy for the Seller, Arch or any Affiliate thereof (such an individual meeting the requirements set forth above, the “Independent Director”), and causing its certificate of incorporation to provide that (w) at least one member of the Seller’s Board of Directors shall be an Independent Director, (x) the Seller’s Board of Directors shall not approve, or take any other action to cause the filing of, a voluntary bankruptcy petition with respect to the Seller unless a unanimous vote of the Seller’s Board of Directors (which vote shall include the affirmative vote of all Independent Directors) shall approve the taking of such action in

 

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writing prior to the taking of such action, (y) the Seller’s Board of Directors shall not vote on any matter requiring the vote of its Independent Directors under its certificate of incorporation unless and until at least one Independent Director is then serving on the Seller’s Board of Directors and (z) the provisions requiring an Independent Director and the provision described in clauses (x) and (y) of this paragraph (v) cannot be amended without the prior written consent of each Independent Director (it being understood that, as used in this clause (v), “control” means the possession directly or indirectly of the power to direct or cause the direction of management policies or activities of a person or entity whether through ownership of voting securities, by contract or otherwise);

(vi) observe all organizational formalities as a distinct entity, and ensure that all corporate actions relating to (A) the selection, maintenance or replacement of the Independent Director, (B) the dissolution or liquidation of the Seller or (C) the initiation of, participation in, acquiescence in or consent to any bankruptcy, insolvency, reorganization