RECEIVABLES PURCHASE AGREEMENT

Exhibit 10.3

 

 

RECEIVABLES PURCHASE AGREEMENT

 

DATED AS OF M ARCH 24, 2004

 

AMONG

 

CAREMARK RECEIVABLES LLC, AS S ELLER ,

 

CAREMARK INC. AND

ADVANCEPCS HEALTH, L.P., AS INITIAL S ERVICERS ,

 

CAREMARK RX, INC. AND

CAREMARK INTERNATIONAL, INC. AS P ERFORMANCE G UARANTORS ,

 

BLUE RIDGE ASSET FUNDING CORPORATION,

JUPITER SECURITIZATION CORPORATION AND

ATLANTIC ASSET SECURITIZATION CORP.,

A S C ONDUITS ,

 

WACHOVIA BANK, NATIONAL ASSOCIATION, INDIVIDUALLY AS A C OMMITTED

P URCHASER AND AS B LUE R IDGE A GENT ,

BANK ONE, NA, INDIVIDUALLY AS A C OMMITTED P URCHASER AND AS J UPITER A GENT ,

AND

CREDIT LYONNAIS NEW YORK BRANCH, INDIVIDUALLY AS A C OMMITTED

P URCHASER AND AS A TLANTIC A GENT ,

 

AND

 

WACHOVIA BANK, NATIONAL ASSOCIATION, AS A DMINISTRATIVE A GENT

 

TABLE OF CONTENTS

 

 

i

 

ii

E XHIBITS AND S CHEDULES

 

 

 

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RECEIVABLES PURCHASE AGREEMENT

 

THIS RECEIVABLES PURCHASE AGREEMENT, dated as of March 24, 2004 is entered into by and among:

 

(a) Caremark Receivables LLC, a Delaware limited liability company ( “Seller” ),

 

(b) Caremark Inc., a California corporation ( “Caremark” ), as an initial Servicer, and AdvancePCS Health, L.P. , a Delaware limited partnership ( “AdvancePCS” ) , as an initial Servicer,

 

(c) Caremark Rx, Inc., a Delaware corporation, and Caremark International, Inc., a Delaware corporation, as Performance Guarantors,

 

(d) Blue Ridge Asset Funding Corporation, a Delaware corporation ( “Blue Ridge” or a “Conduit” ), Jupiter Securitization Corporation, a Delaware corporation ( “Jupiter” or a “Conduit” ), and Atlantic Asset Securitization Corporation, a Delaware corporation ( “Atlantic” or a “Conduit” ),

 

(e) Wachovia Bank, National Association, individually ( “Wachovia” ) as a committed purchaser (in such capacity, a “Blue Ridge Committed Purchaser” ), Bank One, NA, individually ( “Bank One” ) as a committed purchaser (in such capacity, a “Jupiter Committed Purchaser” ), and Credit Lyonnais New York Branch, individually ( “CLNY” ) as a committed purchaser (in such capacity, an “Atlantic Committed Purchaser” and each of the Atlantic Committed Purchaser, the Liberty Street Committed Purchase, the Jupiter Committed Purchase, the Blue Ridge Committed Purchaser and their respective successors and assigns, a “Committed Purchaser” ; and together with the Conduits, the “Purchasers” and individually a “Purchaser” ),

 

(f) Wachovia Bank, National Association, as agent (in such capacity, the “Blue Ridge Agent” or a “Co-Agent” ) for Blue Ridge and the Blue Ridge Committed Purchaser(s) (collectively, the “Blue Ridge Group” ), Bank One, NA, as agent (in such capacity, the “Jupiter Agent” or a “Co-Agent” ) for Jupiter and the Jupiter Committed Purchaser(s) (collectively, the “Jupiter Group” ), and Credit Lyonnais New York Branch, as agent (in such capacity, the “Atlantic Agent” or a “Co-Agent” ) for Atlantic and the Atlantic Committed Purchaser(s) (collectively, the “Atlantic Group” and each of the Atlantic Group, the Liberty Street Group, the Jupiter Group and the Blue Ridge Group, a “Group” ), and

 

(g) Wachovia Bank, National Association, as administrative agent for the Co-Agents, the Conduits and the Committed Purchasers and their assigns under the Transaction Documents (together with its successors and assigns in such agency capacity, the “Administrative Agent” and, together with each of the Co-Agents, the “Agents” ).

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

 

PRELIMINARY STATEMENTS

 

Seller desires to sell and assign from time to time Receivable Interests to certain of the Purchasers.

 

Upon a Co-Agent’s receipt of a notice of proposed sale, its Conduit may, in its absolute and sole discretion, acquire the applicable Receivable Interest from Seller, and in the event that a Conduit declines to make any such acquisition, the declining Conduit’s Committed Purchaser(s) shall make such acquisition.

 

Wachovia has been requested and is willing to act as Blue Ridge Agent on behalf of the Blue Ridge Group in accordance with the terms hereof.

 

Bank One has been requested and is willing to act as Jupiter Agent on behalf of the Jupiter Group in accordance with the terms hereof.

 

CLNY has been requested and is willing to act as Atlantic Agent on behalf of the Atlantic Group in accordance with the terms hereof.

 

Wachovia has been requested and is willing to act as Administrative Agent on behalf of the Co-Agents and the Purchasers in accordance with the terms hereof.

 

ARTICLE I.

 

PURCHASE ARRANGEMENTS

 

Section 1.1 Purchase Facility .

 

(a) On the terms and subject to the conditions set forth in this Agreement:

 

(i) Seller may from time to time on and after the Closing Date and prior to the Amortization Date for each applicable Group, sell and assign Receivable Interests to each of the Groups, ratably in accordance with the Groups’ respective Group Limits, by delivering a Purchase Notice to the Administrative Agent in accordance with Section 1.2 ; and

 

(ii) Not later than 12:00 p.m. (New York time) on the proposed date of each Incremental Purchase, each of the Co-Agents shall determine whether its Conduit will acquire its Group’s Receivable Interest, and in the event that any applicable Conduit elects not to make any such acquisition (each such Conduit, a “Declining Conduit” ), its Co-Agent shall promptly notify Seller and the Declining Conduit’s Committed Purchaser(s) of such fact, whereupon, unless Seller notifies each of the Co-Agents that it wishes to cancel the proposed Incremental Purchase as to all Groups, each Declining Purchaser’s Committed

 

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Purchaser(s) severally agrees to acquire on such proposed date of purchase its Ratable Share of such Declining Conduit’s Receivable Interest, on the terms and subject to the conditions hereof, provided that (A) at no time may the Group Invested Amount of any Group at any one time outstanding exceed such Group’s Group Limit, and (B) at no time may the Aggregate Invested Amount outstanding hereunder exceed the lesser of (1) the Facility Limit and (2) the Net Pool Balance less the Required Reserve.

 

(b) Each Conduit’s Committed Purchaser(s)’ Commitments to Seller under this Agreement shall terminate on such Group’s Amortization Date (although their Liquidity Commitments to their respective Conduits may continue beyond such date). Nothing contained in this Agreement shall, or shall be deemed to, constitute a commitment by any Conduit to acquire any Receivable Interest.

 

(c) Seller may upon at least ten (10) days’ irrevocable notice to the applicable Co-Agent, with a copy to the Administrative Agent, terminate in whole or reduce in part the unused portion of any Group’s Group Limit; provided that (i) each partial reduction of a Group Limit shall be in an aggregate amount at least equal to $10,000,000 and any larger integral multiple of $1,000,000, (ii) in no event shall any Group’s Group Limit be reduced to less than $40,000,000 unless it is reduced to $0, (iii) each partial reduction of a Group Limit shall reduce that Group’s Committed Purchaser(s)’ Commitments ratably in accordance with their respective Ratable Shares, and (iv) each reduction of a Group Limit shall reduce the Facility Limit in a like amount.

 

Section 1.2 Increases . Seller shall provide the Administrative Agent with at least one (1) Business Day’s prior written notice in the form set forth as Exhibit II hereto of each Incremental Purchase (each, a “Purchase Notice” ) not later than 1:00 p.m. (New York time) on the Business Day prior to the proposed purchase date. The Administrative Agent shall promptly deliver a copy of each Purchase Notice to the Co-Agents no later than 3:00 p.m. (New York time) on such Business Day. Each Purchase Notice shall be subject to Article VI hereof, shall be irrevocable, and shall specify:

 

(a) the requested ratable Purchase Price for each Group’s Receivable Interest which shall not be less than $3,000,000 for any Group or a larger integral multiple of $1,000,000 unless such Group’s then available Group Limit is less than $3,000,000 or such larger integral multiple thereof,

 

(b) the proposed date of such Incremental Purchase, and

 

(c) in case an Incremental Purchase is ultimately funded by any Conduit’s Committed Purchaser(s), the requested Yield Rate and Interest Period.

 

Following receipt of a copy of a Purchase Notice from the Administrative Agent, each Co-Agent will determine whether its Conduit agrees to acquire the Receivable Interest being offered to it. If any applicable Conduit declines to make a proposed acquisition, then the Incremental Purchase to that Group will be funded by such Conduit’s Committed Purchaser(s). On the date of each Incremental Transfer, subject to prior satisfaction of the applicable conditions precedent set forth

 

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in Article VI, each of the applicable Conduits or its Committed Purchaser(s), as applicable, shall use its best efforts to authorize the release of a wire transfer in immediately available funds to be deposited into the Facility Account, no later than 3:00 p.m. (New York time), in an amount equal to (i) in the case of a Conduit, the Purchase Price for its Group’s Receivable Interest or (ii) in the case of a Committed Purchaser, such Committed Purchaser’s Ratable Share of such Purchase Price.

 

Section 1.3 Decreases . Not later than 1:00 p.m. (New York time) on a Business Day that gives effect to the Required Notice Period, Seller shall provide the Administrative Agent with prior written notice in substantially the form of Exhibit III hereto and in conformity with the Required Notice Period (each, a “Reduction Notice” ) of any proposed reduction in the Groups’ respective Group Invested Amounts. The Administrative Agent shall promptly deliver such notice to the Co-Agents. Each Reduction Notice shall be irrevocable and shall designate (a) the date (the “Proposed Reduction Date” ) upon which any such reduction shall occur, and (b) the amount of each applicable Group’s Group Reduction (which shall be ratable in accordance with their respective Group Limits). Only one (1) Reduction Notice shall be outstanding at any time.

 

Section 1.4 Payment Requirements . All amounts to be paid or deposited by any Seller Party pursuant to any provision of this Agreement or the Fee Letter shall be paid or deposited in accordance with the terms hereof by wire transfer authorized to be released by such Seller Party no later than 2:00 p.m. (New York time) on the day when due in immediately available funds, and if such wire transfer is not authorized to be released by 2:00 p.m. (New York time) the amounts to be paid or deposited shall be deemed to be received on the next succeeding Business Day. If such amounts are payable to the Blue Ridge Agent, the Administrative Agent, or to a member of the Blue Ridge Group, they shall be paid to account #2000010384921 at Wachovia Bank, National Association, in Charlotte, North Carolina, ABA No. 053000219 until otherwise notified by the Blue Ridge Agent or the Administrative Agent (the “Blue Ridge Group Account” ). If such amounts are payable to the Jupiter Agent or to a member of the Jupiter Group, they shall be paid to account no. #59-48118 at Bank One, NA, in Chicago, Illinois, ABA No. 071000013 until otherwise notified by the Jupiter Agent (the “Jupiter Group Account” ). If such amounts are payable to the Atlantic Agent or to a member of the Atlantic Group, they shall be paid to account #01-88485-3701-00-001 at Credit Lyonnais New York Branch, in New York, New York, ABA No. #026008073 until otherwise notified by the Atlantic Agent (the “Atlantic Group Account” ). 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 1.5 Computations . All computations of Yield, per annum fees calculated as part of any Conduit’s CP Costs, and per annum fees hereunder and under the Fee Letters, shall be made on the basis of a year of 360 days for the actual number of days elapsed for the Calculation Period then most recently ended.

 

Section 1.6 Extension of Liquidity Termination Date . Seller may request that one or more of the Groups extend their respective Liquidity Termination Dates for one or more periods of 364 days by written notice delivered to each such Group’s Co-Agent no later than the 90 ^th day prior to the existing Liquidity Termination Date. If any such Group fails to approve any extension of its Liquidity Termination Date by the 60th day prior thereto, or if the Seller does not

 

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request that a Group extend its Liquidity Termination Date, the Seller will have until the originally scheduled Liquidity Termination Date for such Group to find another A1/P1 or better rated multi-seller commercial paper conduit and committed purchasers (which may include the members of an existing Group) to accept an assignment of the non-approving Group’s Receivable Interests and Commitments, as applicable. If such replacements cannot be located within such period, the applicable Group’s Receivable Interests will amortize as originally scheduled, but the remaining Groups Liquidity Termination Dates will be extended for another 364 days from the originally scheduled Liquidity Termination Date. If such replacements are located, each non-approving or non-requested Group shall assign its Receivable Interests and Commitments, as applicable, as of the existing Liquidity Termination Date, to such replacements, whereupon its assignees’ Liquidity Termination Date, as well as the Liquidity Termination Date for each remaining Group, shall be extended for 364-days. Seller acknowledges and agrees that Seller will cause the Rebate Contract Opinion to be updated upon the request of any Group in connection with any extension of the Liquidity Termination Date hereunder.

 

ARTICLE II.

 

PAYMENTS AND COLLECTIONS

 

Section 2.1 Payments . Seller shall immediately pay to each of the Co-Agents when due, for the account of the relevant Purchaser or Purchasers in its Group, on a full recourse basis, all of the following (collectively, the “Recourse Obligations” ):

 

(a) such fees as set forth in the Fee Letters,

 

(b) all amounts payable as CP Costs,

 

(c) all amounts payable as Yield,

 

(d) all amounts payable as Deemed Collections (which shall be immediately due and payable by Seller and applied to reduce outstanding Aggregate Invested Amount hereunder in accordance with Sections 2.2 and 2.3 hereof),

 

(e) all amounts required pursuant to Section 2.6 ,

 

(f) all amounts payable pursuant to Article X, if any,

 

(g) all costs and expenses of the Servicers, including their respective shares of the Servicing Fee, in connection with servicing, administering and collecting the Receivables, such amounts to be paid to the Servicers on behalf of the Purchasers,

 

(h) all Broken Funding Costs (which shall be immediately due and payable by Seller upon the occurrence of any Group Reduction giving rise thereto), and

 

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(i) all Default Fees (which shall be immediately due and payable by Seller upon demand).

 

If Seller fails to pay any of the Recourse Obligations when due, Seller agrees to pay, on demand, the Default Fee in respect thereof until paid. Notwithstanding the foregoing, no provision of this Agreement or the Fee Letters shall require the payment or permit the collection of any amounts hereunder in excess of the maximum permitted by applicable law.

 

Section 2.2 Collections and Reinvestments Prior to Amortization .

 

(a) On each day prior to a particular Group’s Amortization Date, such Group’s Outstanding Percentage as of the end of the prior Business Day of (i) all Deemed Collections and (ii) all Collections in each case, received or deemed received by any Seller Party on such day (such Group’s Outstanding Percentage of such Deemed Collections and Collections referred to herein as such Group’s “Group Collections” ) shall be set aside and held in trust by the Servicers either for the payment of any accrued and unpaid Aggregate Unpaids owing to the members of such Group or for a Reinvestment by such Group with such Group’s Group Collections as provided in this Section 2.2 (which obligation to hold in trust shall be satisfied, prior to the applicable Settlement Date, upon the marking by each applicable Servicer on its books and records to reflect the interest of the applicable Group in such Collections and Deemed Collections).

 

(b) If on any day prior to a particular Group’s Amortization Date, provided that no Amortization Event exists and is continuing, any Group Collections are received for the account of such Group pursuant to Section 2.2(a) , Seller hereby requests — and the Purchasers in that Group hereby agree to make, simultaneously with such receipt — a reinvestment (each, a “Reinvestment” ) with all or a portion of such Group Collections such that after giving effect to such receipt and Reinvestment, that Group’s Group Invested Amount will equal its Group Invested Amount immediately prior to such receipt and Reinvestment.

 

(c) On each Settlement Date prior to the occurrence of a particular Group’s Amortization Date, the Servicer shall remit to the applicable Group Account such Group’s Group Collections set aside pursuant to Section 2.2(a) 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 reduce unpaid Recourse Obligations owing to the members of that Group. Once such Group’s Recourse Obligations have been reduced to zero, any of its remaining Group Collections shall (i) if applicable, be remitted to the applicable Group Account by wire transfer authorized to be released by the Servicer no later than 2:00 p.m. (New York time) to the extent required to fund any applicable Group Reduction on such Settlement Date and (ii) thereafter be remitted to Seller on such Settlement Date.

 

Section 2.3 Collections Following Amortization .

 

(a) On each day on or after the occurrence of a particular Group’s Amortization Date and on each date on which an Unmatured Amortization Event is continuing, such Group’s Group Collections shall be set aside in one or more separate segregated Lock-Box Accounts and held in trust therein by the Servicers for the payment on the next Settlement Date

 

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of any accrued and unpaid Aggregate Unpaids owing to the members of such Group as provided in Section 2.3(b) . On each day on or after the occurrence of a particular Group’s Amortization Date, such Group’s Group Collections shall be set aside in a separate segregated Lock-Box Account and held in trust therein by the Servicers for the payment on the next Settlement Date of any accrued and unpaid Aggregate Unpaids owing to the members of such Group as provided in Section 2.3(b) .

 

(b) On each Settlement Date occurring on or after a particular Group’s Amortization Date, the Servicers shall remit to the applicable Group Account such Group’s Group Collections and apply such amounts in the following order of priority:

 

first, to payment of such Group’s Outstanding Percentage as of the end of the prior Business Day of all Servicer costs and expenses, including the Servicing Fee, in connection with servicing, administering and collecting the Receivables,

 

second, to such Group’s Outstanding Percentage as of the end of the prior Business Day of the Administrative Agent’s costs of collection and enforcement of this Agreement,

 

third, ratably to the payment of all accrued and unpaid fees under such Group’s Fee Letter, and to all CP Costs, Default Fees and Yield owing to members of that Group,

 

fourth, ratably to reduction of such Group’s Group Invested Amount,

 

fifth, for the ratable payment of all remaining Recourse Obligations, and

 

sixth, after the Aggregate Unpaids owing to such Group have been reduced to zero, to Seller.

 

Section 2.4 Payment Rescission . No payment of any 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. Seller shall remain obligated, only to the extent it was obligated prior to such rescission, for the amount of any payment or application so rescinded, returned or refunded, and shall promptly pay to the applicable Co-Agent (for application to the Person or Persons who suffered such rescission, return or refund) the full amount thereof, plus the Default Fee from the date of any such rescission, return or refunding.

 

Section 2.5 Maximum Receivable Interests . Seller shall ensure that the percentage computed in the definition of Receivable Interests with respect to all Purchasers at no time exceeds in the aggregate 100%. If such percentage exceeds 100%, Seller shall pay to the Co-Agents ratably an aggregate amount to be applied to reduce such Co-Agents’ Group Invested Amount (as allocated between Group members by such Co-Agent), such that after giving effect to such payment, such percentage does not exceed 100%.

 

Section 2.6 Clean Up Call . In addition to Seller’s rights pursuant to Sections 1.1(c) and 1.3 , Seller shall have the right (after providing written notice to the Co-Agents in accordance

 

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with the Required Notice Period), on any Settlement Date following the reduction of the Aggregate Invested Amount to a level that is less than 10.0% of the highest Facility Limit to repay the Aggregate Unpaids in full and to cancel the Commitments of the Committed Purchasers and this Agreement in its entirety.

 

Section 2.7 Right of Setoff . The Administrative Agent, each Co-Agent, each of the Conduits and each of the Committed Purchasers is hereby authorized (in addition to any other rights it may have) at any time after the occurrence and during the continuation of an Amortization Event, to set-off, appropriate and apply (without presentment, demand, protest or other notice which are hereby expressly waived) any deposits and any other indebtedness held or owing by any such Person to, or for the account of, the Seller against the amount of the Aggregate Unpaids owing by Seller to such Person (even if contingent or unmatured).

 

ARTICLE III.

 

CONDUIT FUNDING

 

Section 3.1 CP Costs . Seller shall pay CP Costs with respect to the Invested Amount associated with each Receivable Interest of a Conduit for each day that any Invested Amount in respect of such Receivable Interest is outstanding. Each Receivable Interest of Blue Ridge or Jupiter that is funded substantially with Pooled Commercial Paper will accrue CP Costs each day on a pro rata basis, based upon the percentage share the Invested Amount in respect of such Receivable Interest represents in relation to all assets held by such Conduit and funded substantially with related Pooled Commercial Paper.

 

Section 3.2 Selection of CP Tranche Periods for Atlantic

 

(a) Except upon the occurrence and during the continuance of an Amortization Event, Seller in its Purchase Notice may request CP Tranche Periods from time to time to apply to Atlantic’s receivable Interests; provided, however, that (i) at least one CP Tranche Period of Atlantic shall mature on each Settlement Date and (ii) no CP Tranche Period of Atlantic may extend beyond Atlantic’s Liquidity Termination Date.

 

(b) While the Atlantic Agent will use reasonable efforts to accommodate Seller’s requests for CP Tranche Periods except during the continuance of an Amortization Event, the Atlantic Agent shall have the right to subdivide any requested Receivable Interest of Atlantic into one or more Receivable Interest of different CP Tranche Periods, or, if the requested period is not feasible, to suggest an alternative CP Tranche Period.

 

(c) Unless the Atlantic Agent shall have received written notice by 12:00 noon (New York City time) on the second Business Day prior to the last day of a CP Tranche Period that Seller intends to reduce the Aggregate Net Investment, the Atlantic Agent and Atlantic shall be entitled to assume that Seller desires to refinance the maturing tranche of Atlantic’s Commercial Paper on the last day of its CP Tranche Period with new tranche having a substantially similar CP Tranche Period; provided, however, (i) that Seller shall remain liable to pay in cash any portion of the Invested Amount or Yield on the maturing tranche of Commercial Paper when due to the extent that Atlantic cannot issue Commercial Paper or obtain funds under

 

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its Liquidity Agreement in the precise amount necessary to refinance the maturing Commercial Paper tranche and pay the accrued and unpaid discount thereon, and (ii) in no event shall Atlantic be required to maintain more than six outstanding CP Tranche Periods at any one time..

 

Section 3.3 CP Costs Payments . On each Settlement Date, Seller shall pay to each of the Co-Agents (for the benefit of its Conduit) an aggregate amount equal to all accrued and unpaid CP Costs in respect of the Invested Amount associated with all Receivable Interests funded with Commercial Paper of such Conduit for the immediately preceding Settlement Period in accordance with Article II.

 

Section 3.4 Calculation of CP Costs . Not later than the 5 ^th Business Day after the end of each Calculation Period, each Co-Agent shall calculate the aggregate amount of CP Costs allocated to the Invested Amount of its Conduit’s Receivable Interests for the applicable Calculation Period and shall notify Seller of such aggregate amount. Such calculation shall represent actual CP Costs for the Calculation Period then most recently ended in the case of Blue Ridge or Jupiter.

 

ARTICLE IV.

 

COMMITTED PURCHASER FUNDING

 

Section 4.1 Committed Purchaser Funding . Each Receivable Interest of any Group’s Committed Purchaser(s) 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 Seller gives notice to the applicable Co-Agent of another Yield Rate in accordance with Section 4.4 , the initial Yield Rate for any Receivable Interest transferred by a Conduit to its Committed Purchasers pursuant to the terms and conditions of its Liquidity Agreement, or funded by its Committed Purchaser(s) pursuant to this Agreement, shall be the Alternate Base Rate. If any Conduit’s Committed Purchaser(s) acquire(s) by assignment from such Conduit any Receivable Interest pursuant to the applicable Liquidity Agreement, each Receivable Interest so assigned shall each be deemed to have a new Interest Period commencing on the date of any such assignment.

 

Section 4.2 Yield Payments . On the Settlement Date for each Receivable Interest of a Group’s Committed Purchaser(s), Seller shall pay to the applicable Co-Agent (for the ratable benefit of the Committed Purchasers in its Group) an aggregate amount equal to the accrued and unpaid Yield for the entire Interest Period of each such Receivable Interest in accordance with Article II.

 

Section 4.3 Selection and Continuation of Interest Periods .

 

(a) Seller shall from time to time request Interest Periods for the Receivable Interests of the Committed Purchasers in such Co-Agent’s Group, provided that if at any time such Committed Purchasers shall have a Receivable Interest outstanding, 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.

 

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(b) Seller or the applicable Co-Agent, upon notice to and consent by the other received at least three (3) Business Days prior to the end of a Interest Period (a “Terminating Tranche” ) for any Receivable Interest, may, effective on the last day of such Terminating Tranche: (i) divide any such Receivable Interest into multiple Receivable Interests, (ii) combine any such Receivable Interest with one or more other Receivable Interests that have a Terminating Tranche ending on the same day as such Terminating Tranche or (iii) combine any such Receivable Interest with a new Receivable Interest to be acquired by such Co-Agent’s Group on the day such Terminating Tranche ends, provided that in no event may a Receivable Interest of a Conduit be combined with a Receivable Interest of its Committed Purchasers.

 

Section 4.4 Committed Purchaser Yield Rates . Seller may select the LIBO Rate or the Alternate Base Rate for each Receivable Interest of any Conduit’s Committed Purchasers. Seller shall by 12:00 p.m. (New York time): (i) 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 (ii) 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 applicable Co-Agent irrevocable notice of the new Yield Rate and Interest Period for the Receivable Interest associated with such Terminating Tranche. Until Seller gives notice to the applicable Co-Agent of another Yield Rate, the initial Yield Rate for any Receivable Interest transferred to the Committed Purchasers in its Group pursuant to the terms and conditions of the applicable Liquidity Agreement shall be the Alternate Base Rate.

 

Section 4.5 Suspension of the LIBO Rate .

 

(a) If any Committed Purchaser notifies the applicable Co-Agent that it has determined that funding its Ratable Share of the Receivable Interests of the Committed Purchasers in its Group at a LIBO Rate would violate any applicable law, rule, regulation, or directive of any governmental or regulatory authority, due to a Regulatory Change, or that (i) deposits of a type and maturity appropriate to match fund its Receivable Interests at such LIBO Rate are not available or (ii) such LIBO Rate does not accurately reflect the cost of acquiring or maintaining a Receivable Interest at such LIBO Rate, then such Co-Agent shall suspend the availability of such LIBO Rate for its Group and require Seller to select the Alternate Base Rate for any Receivable Interest of its Group funded by its Committed Purchasers.

 

(b) If less than all of the Committed Purchasers in a Group give a notice to their applicable Co-Agent pursuant to Section 4.5(a) , each Committed Purchaser which gave such a notice shall be obliged, at the request of Seller, the applicable Conduit or the applicable Co-Agent, to assign all of its rights and obligations hereunder to (i) another Committed Purchaser or (ii) another funding entity nominated by Seller or such Co-Agent that is acceptable to the applicable Conduit and willing to participate in this Agreement through the Liquidity Termination Date in the place of such notifying Committed Purchaser; provided that (A) the notifying Committed Purchaser receives payment in full, pursuant to an Assignment Agreement, of an amount equal to such notifying Committed Purchaser’s Ratable Share of the Invested Amount owing to all of the Committed Purchasers in its Group and all accrued but unpaid fees and other costs and expenses payable in respect of its Ratable Share of the Receivable Interests of such Committed Purchasers, and (B) the replacement Committed Purchaser otherwise satisfies the requirements of Section 12.1(b) .

 

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ARTICLE V.

 

REPRESENTATIONS AND WARRANTIES

 

Section 5.1 Representations and Warranties of the Seller Parties . Each Seller Party hereby represents and warrants to the Agents and the Purchasers, 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 is a corporation or limited liability company, as the case may be, duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or organization and has all corporate or limited liability company power and all material governmental licenses, authorizations, consents and approvals required to carry on its business in each jurisdiction in which its business is now conducted. Such Seller Party is duly qualified to do business in, and is in good standing in, every other jurisdiction in which the nature of its business requires it to be so qualified, except where the failure to be so qualified or in good standing would not have a Material Adverse Effect.

 

(b) Company and Governmental Authorization; Contravention . The execution, delivery and performance by such Seller Party of this Agreement and the other Transaction Documents to which such Seller Party is a party are within such Seller Party’s corporate or limited liability company powers, as the case may be, have been duly authorized by all necessary corporate or limited liability company action, as applicable, require no action by or in respect of, or filing with, any Official Body or official thereof (other than the filing of financing statements), and do not contravene, or constitute a default under, any provision of applicable law, rule or regulation or of the Organizational Documents of such Seller Party or of any agreement or of any judgment, injunction, order, writ, decree or other instrument binding upon such Seller Party or result in the creation or imposition of any Adverse Claim on the assets of such Seller.

 

(c) Binding Effect . Each of this Agreement and the other Transaction Documents to which such Seller Party is a party constitutes the legal, valid and binding obligation of such Seller Party, enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, moratorium or other similar laws affecting the rights of creditors generally and general equitable principles (whether considered in a proceeding at law or in equity).

 

(d) Good Title . Immediately preceding each Purchase hereunder, Seller shall be the owner of all of the Receivables, free and clear of all Adverse Claims (other than Adverse Claims in favor of the Administrative Agent, as agent for the Groups). On or prior to each Incremental Purchase and Reinvestment, all financing statements and other documents required to be recorded or filed in order to perfect and protect the Receivable Interests against all creditors of, and purchasers from, Seller and the Originators will have been duly filed in each filing office necessary for such purpose, and all filing fees and taxes, if any, payable in connection with such filings shall have been paid in full.

 

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(e) Accuracy of Information . All information heretofore furnished by or on behalf of such Seller Party (including, without limitation, any Monthly Report, Weekly Report or financial statement) to any of the Agents or Purchasers for purposes of, or in connection with, this Agreement and the other Transaction Documents are, and all such information hereafter furnished by or on behalf of such Seller Party to any of the Agents or Purchasers will be, true and correct in all material respects, on the date such information is stated or certified.

 

(f) Tax Status . Such Seller Party has filed all tax returns (Federal, state and local) required to be filed and has paid or made adequate provision for the payment of all taxes, assessments and other governmental charges.

 

(g) Action, Suits . Except as set forth in Exhibit IV hereof (as may be amended by the Seller Parties from time to time), there are no actions, suits or proceedings pending or, to the knowledge of such Seller Party threatened, against or affecting such Seller Party or any Affiliate thereof or their respective properties, in or before any court, arbitrator or other body, which could reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect.

 

(h) Use of Proceeds . No proceeds of any Purchase will be used by Seller (i) for a purpose that violates, or would be inconsistent with, 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 13 or 14 of the Securities Exchange Act of 1934, as amended.

 

(i) Place of Business . The principal place of business and chief executive office of Seller is located at the address indicated on Exhibit V hereto, and the offices where Seller keeps all its Records, are located at the address(es) described on Exhibit V or such other locations notified to the Administrative Agent in accordance with Section 7.2(f) hereof in jurisdictions where all action required by such Section has been taken and completed.

 

(j) Perfection . Upon each Incremental Purchase and Reinvestment, the Administrative Agent, as agent for the Groups, shall acquire (i) a valid and perfected first priority undivided percentage ownership interest to the extent of the Receivable Interests or (ii) a first priority perfected security interest in each Receivable that exists on the date of such Incremental Purchase or Reinvestment and in the Related Security, Collections and Proceeds with respect thereto, in either case free and clear of any Adverse Claim.

 

(k) Tradenames, Etc . As of the date hereof: (i) each of the Seller Parties has only the divisions listed on Exhibit V hereto; and (ii) each of the Seller Parties has, within the last five (5) years, operated only under the tradenames identified on such Exhibit, and, within the last five (5) years, has not changed its name, merged with or into or consolidated with any other Person or been the subject of any proceeding under the Bankruptcy Code, except as disclosed in such Exhibit.

 

(l) Nature of Receivables . Each Receivable (i) represented by any Seller Party to be an Eligible Receivable (including in any Monthly Report or Weekly Report) or (ii) included in the calculation of the Net Pool Balance in fact satisfies at such time the definition of “Eligible Receivable”.

 

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(m) Purchase Limit and Maximum Receivable Interests . Immediately after giving effect to each Incremental Purchase and Aggregate Reduction hereunder, the Aggregate Invested Amount is less than or equal to the Facility Limit and the aggregate of the percentage computed in the definition of Receivable Interests does not exceed 100%.

 

(n) Credit and Collection Policy . Since January 1, 2004, there have been no material changes in the Credit and Collection Policy, other than as permitted hereunder. Since such date, no material adverse change has occurred in the overall rate of collection of the Receivables.

 

(o) Collections and Servicing . Since January 1, 2004, there has been no material adverse change in the ability of the Servicers (to the extent they are Originators, Seller or any Subsidiary or Affiliate of any of the foregoing) to service and collect the Receivables.

 

(p) No Amortization Event or Unmatured Amortization Event . No event has occurred and is continuing and no condition exists which constitutes an Amortization Event or an Unmatured Amortization Event.

 

(q) 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 Act, or any successor statute.

 

(r) ERISA . Each of Seller and its ERISA Affiliates is in compliance in all material respects with ERISA, and no lien exists in favor of the PBGC on any of the Receivables.

 

(s) Lock-Box Accounts . The names and addresses of all the Lock-Box Banks, together with the account numbers of the Lock-Box Accounts at such Lock-Box Banks, are specified in Exhibit VI hereto (or at such other Lock-Box Banks and/or with such other Lock-Box Accounts as have been notified to the Administrative Agent and for which Lock-Box Agreements have been executed and delivered to the Servicers and the Administrative Agent). All Obligors have been instructed to make payment to a Lock-Box Account, and only Collections are deposited into a Lock-Box Account.

 

(t) Bulk Sales . No transaction contemplated hereby or by the Receivables Sale Agreement requires compliance with any “bulk sales” act or similar law.

 

(u) Transfers Under Receivables Sale Agreement . Each Receivable which has been transferred to Seller by an Originator has been purchased by Seller from such Originator pursuant to, and in accordance with, the terms of the Receivables Sale Agreement.

 

(v) Preference; Voidability . Seller shall have given reasonably equivalent value to the applicable Originator in consideration for the transfer to Seller of the Receivables

 

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and Related Security, Collections and Proceeds with respect thereto from such Originator, and each such transfer shall not have been made for or on account of an antecedent debt owed by such Originator to Seller, and no such transfer is or may be voidable under the Bankruptcy Code.

 

(w) Subsidiaries . Seller has no Subsidiaries and is not engaged in any joint venture with any other Person.

 

(x) Ownership . All of Seller’s issued and outstanding Stock is owned by Caremark free and clear of any Adverse Claim. There are no outstanding rights to purchase, options, warrants or similar rights or agreements pursuant to which Seller may be required to issue, sell, repurchase or redeem any of its Stock.

 

(y) Separateness . Seller is operated in such a manner that the separate legal existence of Seller will not be disregarded in the event of a bankruptcy or insolvency of any Originator.

 

(z) Brokers . No broker or finder acting on behalf of Seller was employed or utilized in connection with this Agreement or the other Transaction Documents or the transactions contemplated hereby or thereby and the Seller has no obligation to any Person in respect of any finder’s or brokerage fees in connection therewith.

 

Section 5.2 Reaffirmation of Representations and Warranties by Seller . On each day that a Purchase is made hereunder, Seller, by accepting the proceeds of such Purchase, shall be deemed to have certified that all representations and warranties described in Section 5.1 hereof are true and correct on and as of such day as though made on and as of such day.

 

ARTICLE VI.

 

CONDITIONS OF PURCHASES

 

Section 6.1 Conditions Precedent to Initial Incremental Purchase . The initial Incremental Purchase of a Receivable Interest under this Agreement is subject to the conditions precedent that:

 

(a) the Administrative Agent shall have received on or before the date of such Incremental Purchase those documents listed on Schedule A, and

 

(b) each of the Agents shall have received all fees and expenses required to be paid on such date pursuant to the terms of this Agreement and the Fee Letters.

 

Section 6.2 Conditions Precedent to All Incremental Purchases and Reinvestments . Each Incremental Purchase and each Reinvestment shall be subject to the further conditions precedent that:

 

(a) as of the date on which the applicable Purchase Notice was delivered in the case of each such Incremental Purchase or Reinvestment, the

 

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Servicers shall have delivered to the Co-Agents, in form and substance reasonably satisfactory to each of the Co-Agents, all Monthly Reports and Weekly Reports as and when due under Section 8.7 , taking into account any applicable cure periods,

 

(b) the Amortization Date shall not have occurred and an Unmatured Amortization Event shall not have occurred and be continuing,

 

(c) the Agents shall have received such other approvals, opinions or documents as any of them may reasonably request, and

 

(d) on the date of each such Incremental Purchase or Reinvestment and after giving effect thereto, the following statements shall be true (and acceptance of the proceeds of such Incremental Purchase or Reinvestment shall be deemed a representation and warranty by Seller that such statements are then true):

 

(i) the representations and warranties set forth in Section 5.1 are true and correct in all material respects on and as of the date of such Incremental Purchase or Reinvestment as though made on and as of such date;

 

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

 

(iii) the Aggregate Invested Amount does not exceed the lesser of (A) the Facility Limit, and (B) the Net Pool Balance less the Required Reserves; and

 

(iv) the percentage computed in the definition of Receivable Interests does not exceed in the aggregate 100%.

 

It is expressly understood that each Reinvestment shall, unless otherwise directed by the Administrative Agent, occur automatically on each day that either of the Servicers shall receive any Collections without the requirement that any further action be taken on the part of any Person and notwithstanding the failure of Seller to satisfy any of the foregoing conditions precedent in respect of such Reinvestment. The failure of Seller to satisfy any of the foregoing conditions precedent in respect of any Reinvestment shall give rise to a right of the Administrative Agent, which right may be exercised at any time on demand of the Administrative Agent, to rescind the related Purchase and direct Seller to pay to the Administrative Agent’s Account, for the benefit of the Co-Agents, an amount equal to the Collections prior to the Facility Termination Date that shall have been applied to the affected Reinvestment.

 

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ARTICLE VII.

 

COVENANTS

 

Section 7.1 Affirmative Covenants . 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 . Each of the Seller Parties will furnish to the Agents:

 

(i) Annual Reporting . Within ninety-five (95) days after the close of Seller’s and Parent’s fiscal years, unaudited annual financial statements (in the case of Seller) and audited financial statements (in the case of Parent), prepared in accordance with GAAP on a consolidated basis (in the case of Parent) for (A) Seller and (B) Parent, including balance sheets as of the end of such period, related statements of operations, shareholder’s equity and cash flows, accompanied by an unqualified audit report certified by KPMG LLP or other independent certified public accountants of nationally recognized standing, prepared in accordance with generally accepted auditing standards and any management letter prepared by said accountants and by a certificate of said accountants that, in the course of their regular audit, such accountants have not obtained any knowledge of any Amortization Event or Unmatured Amortization Event that has occurred, or if, in the opinion of such accountants, any Amortization Event or Unmatured Amortization Event shall exist, stating the nature and status thereof (it being agreed that the requirements of this subsection with respect to Parent may be satisfied by the delivery of the applicable annual report on Form 10-K of Parent to the Securities and Exchange Commission).

 

(ii) Quarterly Reporting . Within fifty (50) days after the close of the first three (3) quarterly periods of Seller’s and Parent’s fiscal years, unaudited financial statements for Parent and Seller, consolidated (in the case of Parent) unaudited balance sheets as of the close of each such period and consolidated (in the case of Parent) related statements of operations, shareholder’s equity and cash flows for the period from the beginning of such fiscal year to the end of such quarter, all certified by each of its senior financial officer (it being agreed that the requirements of this subsection with respect to Parent may be satisfied by the delivery of the applicable quarterly report on Form 10-Q of Parent to the Securities and Exchange Commission.

 

(iii) [Intentionally Omitted] .

 

(iv) Notice of Amortization Events, Unmatured Amortization Events and other Material Adverse Events . Promptly, but in any event no later than two (2) Business Days, after a Responsible Officer of Seller knows of the occurrence of (A) an Amortization Event, (B) an Unmatured Amortization Event, or (C) any other event which has had, or could reasonably be expected to have a Material Adverse Effect, a statement of the chief financial officer or chief accounting officer of Seller setting forth details of such event and, in the case of an Amortization Event or Unmatured Amortization Event, the action which the applicable Seller Party proposes to take with respect thereto.

 

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(v) Change in Credit and Collection Policy . Within ten (10) days after the date of any material change or amendment in the Credit and Collection Policy, a copy of the Credit and Collection Policy then in effect marked to indicate such change or amendment).

 

(vi) Credit and Collection Policy . If requested by the Administrative Agent, within ninety-five (95) days after the close of each of the Servicers’ and Seller’s fiscal years, if the Credit and Collection Policy is in written form, a complete copy of the Credit and Collection Policy then in effect.

 

(vii) ERISA . Promptly after the filing or receiving thereof, copies of all reports and notices with respect to any Reportable Event (as defined in Article IV of ERISA) which any Seller Party or any ERISA Affiliate of any Seller Party files under ERISA with the Internal Revenue Service, the PBGC or the U.S. Department of Labor or which any Seller Party or any or its ERISA Affiliates receives from the Internal Revenue Service, the PBGC or the U.S. Department of Labor.

 

(viii) [Intentionally Omitted] .

 

(ix) [Intentionally Omitted] .

 

(x) Other Information . Such other information (including non-financial information) as any of the Agents may from time to time reasonably request with respect to any Seller Party or any Subsidiary of any Seller Party.

 

(b) Conduct of Business . Each of the Seller Parties will, and will cause each of its Subsidiaries to, carry on and conduct its business in substantially the same manner and in substantially the same fields of enterprise as it is presently conducted and do all things necessary to remain duly incorporated or organized, as the case may be, validly existing and in good standing as a domestic corporation or limited liability company in its jurisdiction of incorporation or organization and maintain all requisite authority to conduct its business in each jurisdiction in which its business is conducted, except in each case where the failure to do so is not likely to have a Material Adverse Effect.

 

(c) Compliance with Laws . Each of the Seller Parties will and will cause its Subsidiaries to, comply with all laws, rules, regulations, orders, writs, judgments, injunctions, decrees or awards to which it or its respective properties may be subject, except where the failure to be in compliance is not likely to have a Material Adverse Effect.

 

(d) Furnishing of Information and Inspection of Records . Each of the Seller Parties will furnish to the Agents from time to time such information with respect to the Receivables as any of the Agents may reasonably request, including, without limitation, listings identifying the Obligor and the Outstanding Balance for each Receivable, together with an aging of Receivables. Each of the Seller Parties will at any time and from time to time during regular business hours and upon reasonable notice and at the expense of the Seller Parties permit the Administrative Agent or any Co-Agent, or any of their respective agents or representatives, (i) to examine and make copies of and abstracts from all Records and (ii) to visit the offices and properties of the Seller Parties, as applicable, for the purpose of examining such Records, and to discuss matters relating to the Receivables or such Seller Party’s performance hereunder and

 

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under the other Transaction Documents to which such Person is a party with any of the officers, directors, employees or independent public accountants of any Seller Party having knowledge of such matters.

 

(e) Keeping of Records and Books of Account . Each of Seller and the Originators will 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 reasonably necessary or advisable for the collection of all Receivables (including, without limitation, records adequate to permit the daily identification of each new Receivable and all Collections of and adjustments to each existing Receivable). Each of Seller and the Originators will give the Administrative Agent notice of any material change in the administrative and operating procedures of Seller or the Originators, as applicable, referred to in the previous sentence.

 

(f) Performance and Compliance with Receivables and Contracts . Seller will require each of the Originators to timely and fully perform and comply with all material provisions, covenants and other promises required to be observed by such Originator under the Contracts related to the Receivables.

 

(g) Credit and Collection Policies . Each of the Seller Parties will comply in all material respects with the Credit and Collection Policy in regard to each Receivable and the related Contract.

 

(h) Collections . Each of the Seller Parties shall instruct all Obligors to remit Collections directly to a Lock-Box Account.

 

(i) Collections Received . Each of Seller and the Servicers shall hold in trust, and remit immediately (but in any event no later than one (1) Business Day following its receipt thereof) to a Lock-Box Account all Collections received from time to time by Seller or such Servicer, as the case may be.

 

(j) Sale Treatment . Seller will not, and no Seller Party will authorize any Originator to, account for or otherwise treat the transactions contemplated by the Receivables Sale Agreement in any manner other than as a sale or capital contribution of Receivables by the Originators to Seller. In addition, the Seller shall (and each Seller Party shall require each of the Originators to) disclose (in a footnote or otherwise) in all of its respective financial statements (including any such financial statements consolidated with any other Person’s financial statements) the existence and nature of the transactions contemplated by the Receivables Sale Agreement and the interest of Seller (and security interest of the Administrative Agent) in the Receivables and Related Security, Collections and Proceeds with respect thereto.

 

(k) Separate Business . Seller shall not engage in any business not permitted by its Organizational Documents as in effect on the Effective Date.

 

(l) Organizational Documents . Seller shall only amend, alter, change or repeal its Organizational Documents with the prior written consent of the Administrative Agent (acting at the direction of the Co-Agents).

 

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(m) Net Worth . Seller shall at all times have a net worth (as defined in accordance with GAAP) of at least $60,000,000.

 

(n) Enforcement of Receivables Sale Agreement . Seller shall use its best efforts to enforce all rights held by it under the Receivables Sale Agreement and shall not waive any breach of any covenant contained in Section 5.1 thereunder without the prior written consent of the Required Co-Agents.

 

(o) Separate Existence . Seller shall at all times:

 

(i) maintain its own deposit account or accounts, separate from those of any Affiliate, with commercial banking institutions and ensure that the funds of Seller will not be diverted to any other Person or for other than limited liability company uses of Seller, nor will such funds be commingled with the funds of any Originator or any subsidiary or Affiliate of any Originator (other than funds deposited to a Lock-Box Account, which funds may be commingled for a period not exceeding two (2) Business Days);

 

(ii) to the extent that it shares the same officers or other employees as any of its Affiliates, the salaries of and the expenses related to providing benefits to such officers and other employees shall be fairly allocated among such entities, and each such entity shall bear its fair share of the salary and benefit costs associated with all such common officers and employees;

 

(iii) to the extent that it jointly contracts with any of its Affiliates to do business with vendors or service providers or to share overhead expenses, the costs incurred in so doing shall be allocated fairly among such entities, and each such entity shall bear its fair share of such costs. To the extent that Seller contracts or does business with venders or service providers where the goods and services provided are partially for the benefit of any other Person, the costs incurred in so doing shall be fairly allocated to or among such entities for whose benefit the goods or services are provided, and each such entity shall bear its fair share of such costs;

 

(iv) enter into all material transactions between Seller and any of its Affiliates, whether currently existing or hereafter entered into, only on an arm’s length basis, it being understood and agreed that the transactions contemplated in the Transaction Documents meet the requirements of this clause (iv) ;

 

(v) maintain office space that is physically segregated from the office space of each of the Originators and its respective Affiliates and, to the extent that Seller and any of its Affiliates have offices in the same location, there shall be a fair and appropriate allocation of overhead costs among them, and each such entity shall bear its fair share of such expenses;

 

(vi) conduct its affairs strictly in accordance with its Organizational Documents and observe all necessary, appropriate and customary corporate formalities, including, but not limited to, holding all regular and special members’

 

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and board of managers’ meetings appropriate to authorize all limited liability company action, keeping separate and accurate minutes of its meetings, passing all resolutions or consents necessary to authorize actions taken or to be taken, and maintaining accurate and separate books, records and accounts, including, but not limited to, payroll and intercompany transaction accounts;

 

(vii) not assume or guarantee any of the liabilities of any Originator or any Affiliate thereof;

 

(viii) have at least one (1) Independent Director who has been engaged through Global Securitization Services, Lord Securities Corporation, AMACAR Group LLC, CT Corporation or any other provider acceptable to the Co-Agents; and

 

(ix) take, or refrain from taking, as the case may be, all other actions that are necessary to be taken or not to be taken in order to comply with this Section 7.1(o) .

 

(p) Use of Proceeds . Seller shall utilize the proceeds of the Purchases made hereunder solely for (i) the purchase of Receivables from the Originators pursuant to the Receivables Sale Agreement, (ii) the payment of dividends to Caremark, (iii) the repayment of Advances under the Subordinated Notes, (iv) the payment of administrative fees or Servicing Fees or expenses to the Servicers or routine administrative or operating expenses, and (v) other general business purposes in each case to the extent any such use would not be in violation of any of the terms of this Agreement and/or the other Transaction Documents.

 

Section 7.2 Negative Covenants . 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, that:

 

(a) No Sales, Liens, Etc. Except as otherwise provided herein and in the Receivables Purchase Agreement, Seller will not and will not authorize any Originator to, sell, assign (by operation of law or otherwise) or otherwise dispose of, or create or suffer to exist any Adverse Claim upon (or the filing of any financing statement) or with respect to (i) any of the Receivables or Related Security, (ii) any inventory or goods, the sale of which may give rise to a Receivable ( provided that the Originators may sell inventory and goods in the ordinary course of their respective businesses), or (iii) any account which concentrates in a Lock-Box Bank to which any Collections of any Receivable are sent, or assign any right to receive income in respect thereof.

 

(b) No Extension or Amendment of Receivables . None of the Seller Parties will extend, amend or otherwise modify the terms of any Receivable, or amend, modify or waive any term or condition of any Contract related thereto, except that if no Amortization Event shall have occurred and be continuing, the applicable Seller Party may, in accordance with the Credit and Collection Policy, extend the maturity or adjust the Outstanding Balance of any Receivable as such Seller Party deems appropriate to maximize Collections thereof or otherwise amend or modify the terms of any Receivable; provided , that the classification of any such Receivable as a

 

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Defaulted Receivable or a Delinquent Receivable shall not be affected by such extension ; provided , further , that no such amendment, modification or waiver shall cause or result in the affected Receivable becoming an Eligible Receivable if, prior to amendment, modification or waiver, the affected Receivable was not an Eligible Receivable or prevent such affected Receivable from being excluded as an Eligible Receivable if such affected Receivable would have been excluded as an Eligible Receivable if such amendment, modification or waiver had not been made or granted.

 

(c) No Change in Business or Credit and Collection Policy . Without, in each case, the consent of the Required Co-Agents, none of the Seller Parties will, or will authorize or any Originator to, make any change in the character of its business or in the Credit and Collection Policy, which change would, in either case, be reasonably likely to impair the collectibility of a material portion of the Receivables or otherwise result in a Material Adverse Effect.

 

(d) No Mergers, Etc . Seller will not (i) consolidate or merge with or into any other Person, or (ii) pledge, sell, lease or transfer any of the Receivables, the Related Security or any other of its material assets to any other Person (except pursuant to the Transaction Documents).

 

(e) Change in Payment Instructions to Obligors; Deposits to Lock-Box Accounts . The Seller Parties will not, and will not authorize any Originator to, add or terminate any bank as a Lock-Box Bank or any account as a Lock-Box Account to or from those listed in Exhibit VI hereto or make any change in its instructions to Obligors regarding payments to be made to any Lock-Box Account, unless (i) such instructions are to deposit such payments to another existing Lock-Box Account or (ii) the Administrative Agent shall have received written notice of such addition, termination or change at least thirty (30) days prior thereto, the Administrative Agent shall have received prior to such termination or change a Lock-Box Agreement executed by each new Lock-Box Bank or an existing Lock-Box Bank with respect to each new Lock-Box Account, as applicable, and the Required Co-Agents shall have consented to such addition or termination, as applicable.

 

(f) Change of Name, Etc . Seller will not, and will not authorize any Originator to, change its name, structure or jurisdiction of organization, unless at least ten (10) days prior to the effective date of any such change, one of the Seller Parties delivers to the Administrative Agent (i) such documents, instruments or agreements, executed by Seller or such Originator, as applicable and if required, as are necessary to reflect such change and to continue the perfection of the Administrative Agent’s ownership interests or security interests in the Receivables and Related Security, Collections and Proceeds with respect thereto and (ii) new or revised Lock-Box Agreements executed by the Lock-Box Banks which reflect such change and enable the Administrative Agent to continue to exercise its rights contained in Section 9.2 hereof.

 

(g) Amendment to Receivables Sale Agreement . Seller will not amend, modify, or supplement the Receivables Sale Agreement, except with the prior written consent of the Administrative Agent (acting at the direction of the Required Co-Agents); nor shall Seller take any other action under the Receivables Sale Agreement that shall have a Material Adverse Effect or which is inconsistent with the terms of this Agreement.

 

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(h) Other Debt . Except as provided for herein, Seller will not create, incur, assume or suffer to exist any indebtedness whether current or funded, or any other liability other than (i) indebtedness of Seller representing fees, expenses and indemnities arising hereunder or under the Receivables Sale Agreement, (ii) Advances representing a portion of the purchase price of certain Receivables under the Receivables Sale Agreement and (iii) other indebtedness incurred in the ordinary course of its business in an amount not to exceed $11,600 at any one time outstanding.

 

(i) ERISA Matters . None of the Seller Parties will (i) engage or permit any of its respective ERISA Affiliates to engage in any prohibited transaction (as defined in Section 4975 of the Code and Section 406 of ERISA) for which an exemption is not available or has not previously been obtained from the U.S. Department of Labor; (ii) permit to exist any accumulated funding deficiency (as defined in Section 302(a) of ERISA and Section 412(a) of the Code) with respect to any Benefit Plan other than a Multiemployer Plan; (iii) fail to make any payments to any Multiemployer Plan that any Seller Party or any ERISA Affiliate of a Seller Party is required to make under the agreement relating to such Multiemployer Plan or any law pertaining thereto; (iv) terminate any Benefit Plan so as to result in any liability (other than obligations or liabilities existing as of the date of termination of such Benefit Plan); or (v) permit to exist any occurrence of any reportable event described in Section 4043 of ERISA which represents a material risk of a liability to such Seller Party or any of its ERISA Affiliates under ERISA or the Code, if such prohibited transactions, accumulated funding deficiencies, payments, terminations and reportable events occurring within any fiscal year of Seller and the Originators, in the aggregate, involve a payment of money or an incurrence of liability by any Seller Party or any ERISA Affiliate of any Seller Party.

 

(j) Payment to the Originators . With respect to each Receivable sold by an Originator to Seller, Seller shall effect such sale under, and pursuant to the terms of, the Receivables Sale Agreement, including, without limitation, the payment by Seller either in cash, by a capital contribution or by increase in the amount of the Subordinated Notes to the applicable Originator of an amount equal to the purchase price for such Receivable as required by the terms of the Receivables Sale Agreement.

 

(k) Payments on Subordinated Notes . Seller will not make any payment on the Subordinated Note if Seller’s net worth is less than the amount required by Section 7.1(l) or any Unmatured Amortization Event under Section 9.1(a) or 9.1(d) exists and is continuing hereunder or any Amortization Event exists and is continuing hereunder.

 

(l) Prohibition on Pledging Subordinated Notes . No Seller Party will enter into or assume any agreement creating any Adverse Claim upon the Subordinated Notes.

 

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ARTICLE VIII.

 

ADMINISTRATION AND COLLECTION

 

Section 8.1 Designation of Servicers . The servicing, administering and collection of the Receivables shall be conducted by such Person(s) (each, a “Servicer” “) so designated from time to time in accordance with this Section 8.1 . Until the Administrative Agent (acting at the direction of the Required Co-Agents) gives notice to Caremark and AdvancePCS of the designation of a new Servicers pursuant to the next sentence, each of Caremark and AdvancePCS is hereby designated as, and hereby agrees to perform the duties and obligations of, a Servicer pursuant to the terms hereof. The Administrative Agent (acting at the direction of the Required Co-Agents) may, after the occurrence of a Servicer Default or any other Amortization Event and before, in each case, the same has been waived in writing, designate as a Servicer any Person (including itself) to succeed Caremark and/or AdvancePCS or any successor Servicer to either of them, on the condition in each case that any such Person so designated shall (a) agree to perform the duties and obligations of a Servicer pursuant to the terms hereof, and (b) execute a Business Associate Agreement. Following the occurrence of a Servicer Default or an other Amortization Event and before, in each case, the same has been waived in writing, the Administrative Agent may notify any Obligor of the designation of a successor Servicer or successor Servicers. No Servicer may delegate any of its rights, duties or obligations hereunder, or designate a substitute Servicer, without the prior written consent of the Administrative Agent (acting at the direction of the Required Co-Agents); provided that each of Caremark and AdvancePCS shall be permitted (x) to outsource certain billing, accounting and collection duties to the extent outsourced on the date of this Agreement, and (y) upon notice to the Administrative Agent (copies of which shall be promptly delivered by the Administrative Agent to the Co-Agents) to delegate its duties hereunder, as a Servicer, to any of its Affiliates or their agents, but, in each of the foregoing cases, no such delegation shall relieve Caremark or AdvancePCS of its duties and obligations hereunder (or the Performance Guarantor of its duties and obligations under the Performance Undertaking).

 

Section 8.2 Duties of Servicers .

 

(a) The Servicers shall take or cause to be taken all such actions as may be necessary or advisable to bill and collect each Receivable from time to time, all in accordance with applicable laws, rules and regulations, with reasonable care and diligence as if the Servicers owned such Receivable, and in accordance with the Credit and Collection Policy.

 

(b) The Servicers shall instruct all Obligors to cause all Collections to be deposited directly into a Lock-Box Account. Any Lock-Box Account maintained by a Lock-Box Bank pursuant to the related Lock-Box Agreement shall be under the exclusive control of the Administrative Agent as agent for the Purchasers, which control is hereby granted to the Administrative Agent as agent for the Purchasers by Seller (as assignee of the Originators). The Servicers shall be permitted to give instructions to the Lock-Box Banks for so long as the notice described in the next sentence has not been delivered. Upon the occurrence of a Servicer Default or any other Amortization Event or Unmatured Amortization Event and before, in each case, the same has been waived in writing, the Administrative Agent (acting at the direction of the Required Co-Agents) may, pursuant to the Lock-Box Agreements, deliver notices to the Lock-Box

 

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Banks and terminate the Servicers’ ability to provide instructions to the Lock-Box Banks. The Servicers shall not add any bank as a Lock-Box Bank to those listed on Exhibit VI attached hereto unless such bank has entered into a Lock-Box Agreement and the Administrative Agent has received a Lock-Box Agreement executed by such Lock-Box Bank with respect to each new Lock-Box Account. The Servicers shall not terminate any bank as a Lock-Box Bank unless the Administrative Agent shall have received thirty (30) days’ prior notice of such termination and, prior to such termination, arrangements satisfactory to the Co-Agents have been made to assure that all Collections that were directed to be sent to such Lock-Box Bank have been or will be directed to be sent to an alternate Lock-Box Bank. If any Seller Party receives any Collections, then the applicable Seller Party shall immediately, but in no event later than one (1) Business Day after receipt thereof, remit such Collections to a Lock-Box Account.

 

Section 8.3 Rights After Designation of any Successor Servicer . At any time following the designation of a successor Servicer pursuant to Section 8.1 :

 

(a) The Administrative Agent (at the direction of the Required Co-Agents) may, direct that payment of all amounts payable under any Receivable be made directly to the Administrative Agent or its designee, for the benefit of the Purchasers.

 

(b) Seller shall, at the Administrative Agent’s request (at the direction of the Required Co-Agents) and at Seller’s expense, give notice of the ownership of Receivables by the Administrative Agent, as agent for the Purchasers, to each Obligor and direct that payments be made directly to the Administrative Agent or its designee.

 

(c) Seller shall, at the Administrative Agent’s request (at the direction of the Required Co-Agents), (i) assemble all of the Records, and shall make the same available to the Administrative Agent or its designee at a place selected by the Administrative Agent or its designee, and (ii) segregate all cash, checks and other instruments received by it from time to time constituting Collections of Receivables in a manner acceptable to the Administrative Agent and shall, promptly upon receipt, remit all such cash, checks and instruments, duly endorsed or with duly executed instruments of transfer, to the Administrative Agent or its designee.

 

(d) Seller and the Originator hereby authorize the Administrative Agent to take any and all steps in Seller’s or the Originator’s name and on behalf of Seller and the Originator necessary or desirable, in the determination of the Administrative Agent (at the direction of the Required Co-Agents), to collect all amounts due under any and all Receivables, including, without limitation, endorsing Seller’s or the Originator’s name on checks and other instruments representing Collections and enforcing such Receivables and the related Contracts.

 

(e) Each Seller Party hereby agrees to cooperate with and assist any successor Servicer with such Servicer’s duties as Servicer, including, without limitation, (i) granting access to Records and (ii) the transfer of any software or related licenses to the extent permitted and, in each case, at the cost of the Seller Parties.

 

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Section 8.4 Servicer Default . The occurrence of any one or more of the following events shall constitute a default by the Servicers (each, a “Servicer Default” ):

 

(a) (i) any Seller Party shall fail to observe or perform any term, covenant or agreement hereunder (other than as referred to in clause (ii) of this Section 8.4(a) ) or under any of the other Transaction Documents to which such Person is a party or by which such Person is bound, and such failure shall remain unremedied for ten (10) days, or (ii) any Seller Party shall fail to make any payment or deposit required to be made by it hereunder and such failure remains uncured for two (2) Business Days from the due date therefor or any Servicer shall fail to observe or perform in any material respect any term, covenant or agreement on any Servicer’s part to be performed under Section 8.2(b) hereof; or

 

(b) any representation, warranty, certification or statement made by any Seller Party in this Agreement, the Receivables Sale Agreement or in any of the other Transaction Documents or in any certificate or report delivered by it pursuant to any of the foregoing shall prove to have been incorrect in any material respect when made or deemed made; or

 

(c) (i) failure of any Servicer or any of its Affiliates to pay any principal of, premium or interest on, or any other amount payable in respect of, one or more items of Indebtedness of any Servicer or its Affiliates that is outstanding (or under which one or more Persons have a commitment to extend credit) in an aggregate principal amount of at least $25,000,000 at the time of such failure, when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreements or instruments relating to all such Indebtedness; or (ii) any other event shall occur or condition shall exist under the agreements or instruments relating to one or more items of Indebtedness of any Servicer or any of its Affiliates that is outstanding (or under which one or more Persons have a commitment to extend credit) in an aggregate principal amount of at least $25,000,000 at the time of such other event or condition, and shall continue after the applicable grace period, if any, specified in all such agreements or instruments, if the effect of such event or condition is to accelerate, or to permit the acceleration of, the maturity of such Indebtedness or otherwise to cause, or to permit the holder thereof to cause, such Indebtedness to mature; or (iii) one or more items of Indebtedness of any Servicer or its Affiliates that is outstanding (or under which one or more Persons have a commitment to extend credit) in an aggregate principal amount of at least $25,000,000 shall be declared to be due and payable or required to be prepaid or redeemed (other than by a regularly scheduled or required prepayment or redemption), purchased or defeased, or an offer to prepay, redeem, purchase or defease such Indebtedness shall be required to be made, in each case prior to the stated maturity thereof ( provided that, in the case of a default or failure in respect of an Affiliate of any Servicer (other than Seller) provided in this clause (c), such default or failure shall constitute a Servicer Default hereunder solely to the extent such default or failure is reasonably likely to result in a Material Adverse Effect); or

 

(d) any Event of Bankruptcy shall occur with respect to any Seller Party.

 

Section 8.5 Indemnities by the Servicers . Without limiting any other rights that the Agents, the Purchasers or any other Indemnified Party may have hereunder or under applicable law and in consideration of its appointment as a Servicer, each of Caremark and AdvancePCS,

 

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jointly and severally, hereby agrees to indemnify each Indemnified Party from and against any and all Indemnified Amounts arising out of or resulting from (whether directly or indirectly): (i) the failure of any information provided to the any of the Agents or Purchasers by the Servicers to be true and correct in all material respects, (ii) the failure of any representation, warranty or statement made or deemed made by or on behalf of any Servicer under or in connection with this Agreement to have been true and correct in all respects as of the date made or deemed made, (iii) the failure by any Servicer to comply with any applicable law, rule or regulation with respect to any Receivable or the related Contract, or (iv) any failure of any Servicer to perform its covenants, duties or obligations in accordance with the provisions hereof.

 

Section 8.6 Responsibilities of the Originators . Anything herein to the contrary notwithstanding, the applicable Originator shall remain liable for (a) performing all of such Originator’s obligations under the Contracts related to the Receivables to the same extent as if the Receivables had not been sold under the Receivables Sale Agreement and interests in such Receivables had not been sold hereunder and the exercise by any of the Agents or Purchasers of their rights hereunder and under the Receivables Sale Agreement shall not relieve such Originator from such obligations and (b) paying when due any taxes, including without limitation, any sales taxes payable in connection with the Receivables and their creation and satisfaction. None of Seller, the Agents or the Purchasers shall have any obligation or liability with respect to any Receivable or related Contracts, nor shall it be obligated to perform any of the obligations of the applicable Originator thereunder.

 

Section 8.7 Receivables Reports . The Servicers shall prepare and forward to the Agents:

 

(a) (i) no later than 1:00 P.M. (New York time) on each Monthly Reporting Date, a Monthly Report and an electronic file of the data contained therein and (ii) at such times as any Agent shall request, a listing by Obligor of all Receivables together with an aging of such Receivables; provided, however, that if a Servicer Default or other Amortization Event or an Unmatured Amortization Event shall exist and be continuing, the Administrative Agent may request that the Servicers deliver a Monthly Report more frequently than monthly; and

 

(b) no later than 1:00 P.M. (New York time) on each Weekly Reporting Date (or, after the occurrence and continuation of an Amortization Event or Unmatured Amortization Termination Event, on each Business Day), a Weekly Report setting forth total Collections deposited in the Lock-Box Account and, if applicable, the Lock-Box Account, Receivables and Eligible Receivables created during the immediately preceding calendar week (or immediately preceding day, if such report is being delivered on each Business Day), and such other information as any of the Agents may reasonably request. The Weekly Report may be delivered in an electronic format mutually agreed upon by the Servicers and each of the Agents or, pending such agreement, by facsimile. By delivery of a Weekly Report, the Servicers shall be deemed to have made a representation and warranty that the information set forth therein is true and correct in all material respects.

 

Section 8.8 Servicing Fee . As compensation for the Servicers’ servicing activities on their behalf, the Servicers shall be paid the Servicing Fee in arrears on each Settlement Date out of Collections. Such Servicing Fee shall be shared by the Servicers ratably in accordance with the Receivables serviced by them in the Calculation Period then most recently ended.

 

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ARTICLE IX.

 

AMORTIZATION EVENTS

 

Section 9.1 Amortization Events . The occurrence of any one or more of the following events shall constitute an Amortization Event:

 

(a) any Seller Party shall fail to make any payment or deposit: (i) of Invested Amount when required to be made by it under the Transaction Documents (except any such payment required by Section 2.5); or (ii) of any other Recourse Obligation or amount not covered by clause (i) when required to be made by it under the Transaction Documents and such failure continues for three (3) consecutive Business Days; or

 

(b) any representation, warranty, certification or statement made by any Seller Party in this Agreement or any other Transaction Document to which it is a party or in any other document delivered pursuant hereto or thereto shall prove to have been incorrect in any material respect when made or deemed made; or

 

(c) any Seller Party shall default in the performance of any covenant or indemnity (other than those covered by clause (a) above) under any Transaction Document and, (i) except in the case of each clause of Section 7.1(a)(iv) , Section 7.2 (other than Section 7.2(b) ) and Section 8.7 , such default shall continue uncured for a period of ten (10) days after a Responsible Officer has notice thereof or (ii) with respect to Section 8.7 , such default shall continue uncured for a period of one (1) Business Day; or

 

(d) any Event of Bankruptcy shall occur with respect to any Seller Party or any Material Subsidiary of such Seller Party; or

 

(e) the Administrative Agent, as agent for the Purchasers, shall, for any reason (other than as a result of the gross negligence or willful misconduct of one of the Agents or Purchasers), fail or cease to have a valid and perfected first priority ownership or security interest in the Receivables and Related Security, Collections and Proceeds with respect thereto, free and clear of any Adverse Claims; or

 

(f) a Servicer Default shall have occurred; or

 

(g) the Purchase Termination Date shall have occurred under the Receivables Sale Agreement; or

 

(h) any Seller Party shall enter into any transaction or merger which is reasonably likely to have a Material Adverse Effect; or

 

(i) (i) the aggregate percentage computed in the definition of Receivable Interests exceeds 100% unless Seller reduces the Aggregate Net Investment or increases the

 

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balance of the Eligible Receivables on or before three (3) Business Days after the earlier of (A) the date on which a Responsible Officer of Seller or any Servicer knew, or should have known, of such condition and (B) the date of delivery of the most recent Weekly Report or Monthly Report to the Agents, so as to reduce such percentage to less than or equal to 100%; or (ii) the Aggregate Net Investment shall exceed the Facility Limit;

 

(j) As at the end of any calendar month:

 

(i) the average of the Dilution Ratios for the three months then most recently ended shall exceed 3.60%;

 

(ii) the average of the Delinquency Ratios for the three months then most recently ended shall exceed 1.25%; or

 

(iii) the average of the Default Ratios for the three months then most recently ended shall exceed 0.80%; or

 

(k) an Event of Default (as such term is defined in the Credit Agreement) shall have occurred and be continuing under the Credit Agreement; or

 

(l) a notice of Lien has been filed against Seller, any Originator or any Servicer under Section 412(n) of the Code or Section 302(f) of ERISA for a failure to make a required installment or other payment to a plan to which such provisions apply; or

 

(m) a judgment or order for the payment of money shall be rendered against Seller; or

 

(n) any Originator or Seller Party shall challenge the enforceability of any Transaction Document or shall assert in writing, or engage in any action or inaction based on any such assertion, that any provision of any of the Transaction Documents has ceased to be or otherwise is not valid, binding and enforceable in accordance with its terms.

 

Section 9.2 Remedies . Upon the occurrence and during the continuation of an Amortization Event, the Administrative Agent may, or upon the direction of the Required Co-Agents shall, take any of the following actions: (i) replace the Person(s) then acting as Servicer(s), (ii) declare the Facility Termination Date to have occurred, whereupon Reinvestments shall immediately terminate and the Facility Termination Date shall forthwith occur, all without demand, protest or further notice of any kind, all of which are hereby expressly waived by each Seller Party; provided, however, that upon the occurrence of an Event of Bankruptcy with respect to any Seller Party, the Facility Termination Date shall automatically occur, without demand, protest or any notice of any kind, all of which are hereby expressly waived by each Seller Party, (iii) exercise all rights and remedies of a secured party upon default under the Relevant UCC and other applicable laws, (iv) to the fullest extent permitted by applicable law, declare that the Default Fee shall accrue with respect to any of the Aggregate Unpaids outstanding at such time, and (v) notify Obligors of the Administrative Agent’s security interest in the Receivables, Related Security, Collections and Proceeds. The aforementioned rights and remedies shall be without limitation, and shall be in addition to all other rights and remedies of any of the Agents or Purchasers otherwise available under any other provision of

 

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this Agreement, by operation of law, at equity or otherwise, all of which are hereby expressly preserved, including, without limitation, all rights and remedies provided under the Relevant UCC, all of which rights shall be cumulative.

 

ARTICLE X.

 

INDEMNIFICATION

 

Section 10.1 Indemnities by the Seller Parties . Without limiting any other rights that any of the Agents or Purchasers may have hereunder or under applicable law, Seller hereby agrees to indemnify (and pay upon demand to) the Agents, the Purchasers, and each of the respective assigns, officers, directors, agents and employees of the foregoing (each, an “Indemnified Party” ) from and against any and all damages, losses, claims, taxes, liabilities, costs, expenses and for all other amounts payable, including reasonable attorneys’ fees and disbursements (all of the foregoing being collectively referred to as “Indemnified Amounts” ) awarded against or incurred by any of them arising out of or as a result of this Agreement or the acquisition, either directly or indirectly, by any of the Purchasers of an interest in the Purchased Assets, excluding, however, in all of the foregoing instances:

 

(a) Indemnified Amounts to the extent resulting from gross negligence or willful misconduct on the part of the Indemnified Party seeking indemnification;

 

(b) Excluded Taxes to the extent that the computation of such taxes is consistent with the characterization for income tax purposes of the acquisition by the Purchasers of Receivable Interests as a loan or loans by the Purchasers to Seller secured by the Receivables, the Related Security, the Collections and the Proceeds;

 

provided, however, that nothing contained in this sentence shall limit the liability of Seller or limit the recourse of any Agent or Purchaser to Seller for amounts otherwise specifically provided to be paid by Seller under the terms of this Agreement. Without limiting the generality of the foregoing indemnification, Seller shall indemnify the Indemnified Parties for Indemnified Amounts relating to or resulting from:

 

(i) any representation or warranty made by any Seller Party or any Originator (or any officers of any such Person) under or in connection with this Agreement, any other Transaction Document or any other information or report delivered by any such Person pursuant hereto or thereto, which shall have been false or incorrect in any material respect when made or deemed made; provided , that the materiality qualifier contained in this clause shall not apply to any representation or warranty which itself contains a materiality qualifier;

 

(ii) the failure by Seller, any Servicer or any Originator to comply with any applicable law, rule or regulation with respect to any Receivable or Contract related thereto, or the nonconformity of any Receivable or Contract included therein with any such applicable law, rule or regulation or any failure of any Originator to keep or perform any of its obligations, express or implied, with respect to any Contract;

 

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(iii) any failure of Seller, any Servicer or any Originator to perform its duties, covenants or other obligations in accordance with the provisions of this Agreement or any other Transaction Document;

 

(iv) any products liability, personal injury or property damage suit, or other similar claim arising out of or in connection with merchandise, insurance or services that are the subject of any Contract or any Receivable;

 

(v) any dispute, claim, offset or defense of the Obligor to the payment of any Receivable (including, without limitation, a defense based on such Receivable or the related Contract not being a legal, valid and binding obligation of such Obligor enforceable against it in accordance with its terms), or any other claim resulting from the sale of the merchandise or service related to such Receivable or the furnishing or failure to furnish such merchandise or services;

 

(vi) the commingling of Collections of Receivables at any time with other funds;

 

(vii) any investigation, litigation or proceeding related to or arising from this Agreement or any other Transaction Document, the use of the proceeds of any Purchase, or any other investigation, litigation or proceeding relating to Seller, any Servicer or any Originator in which any Indemnified Party becomes involved as a result of any of the transactions contemplated hereby;

 

(viii) any inability to obtain judgment in or utilize the court or other adjudication system of, any jurisdiction in which an Obligor may be located as a result of the failure to qualify to do business or file any notice of business activity report or any similar report;

 

(ix) any failure to vest and maintain vested in the Administrative Agent for the benefit of the Purchasers, or to transfer to the Administrative Agent for the benefit of the Secured Parties, a valid first priority perfected security interests in the Purchased Assets, free and clear of any Adverse Claim (except as created by the Transaction Documents); and

 

(x) the failure to have filed, or any delay in filing, financing statements or other similar instruments or documents under the Relevant UCC of any applicable jurisdiction or other applicable laws with respect to any Purchased Assets, and the proceeds thereof, whether at the time of any Purchase or at any subsequent time.

 

Section 10.2 Increased Cost and Reduced Return .

 

(a) If after the date hereof (or, in the case of a Person that becomes a Funding Source after the date hereof, after the date such Person becomes a Funding Source), any Funding Source shall be charged any fee, expense or increased cost, or such Funding Source’s return shall be reduced, on account of the adoption of any Regulatory Change: (i) that subjects any Funding Source to any charge or withholding on or with respect to any Funding Agreement or a Funding Source’s obligations under a Funding Agreement, or on or with respect to the Receivables, or changes the basis of taxation of payments to any Funding Source of any amounts payable under

 

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any Funding Agreement (except for changes in the rate of tax on the overall net income of a Funding Source or taxes excluded by Section 10.1(b) ) or (ii) that imposes, modifies or deems applicable any reserve, assessment, insurance charge, special deposit or similar requirement against assets of, deposits with or for the account of a Funding Source, or credit extended by a Funding Source, pursuant to a Funding Agreement or (iii) that imposes or results in any other condition (other than with respect to taxes) the result of which is to increase the cost to a Funding Source of performing its obligations under a Funding Agreement, or to reduce the rate of return on a Funding Source’s capital as a consequence of its obligations under a Funding Agreement, or to reduce the amount of any sum received or receivable by a Funding Source under a Funding Agreement or to require any payment calculated by reference to the amount of interests or loans held or interest received by it, then, such Funding Source shall notify the Agents and Seller of the Regulatory Change giving rise to any such fee, expense, increased cost or reduced return and, upon written demand by the applicable Co-Agent setting forth in reasonable detail the basis for and computation of the amount of such claim, Seller shall pay to such Co-Agent, for the benefit of the relevant Funding Source, such amounts charged to such Funding Source or such amounts to otherwise compensate such Funding Source for such increased cost or such reduction.

 

(b) In the event that a Funding Source becomes entitled to receive payment pursuant to this Section 10.2 , the applicable Agent shall request such Funding Source to take such actions (including, without limitation, providing Seller and the Administrative Agent with any forms, certificates or other documents) as may be reasonably necessary to reduce or eliminate the imposition of such fee, expense, increased cost or reduced return unless such actions would impose on the Funding Source costs, additional costs or legal burdens deemed by the Funding Source to be material.

 

Section 10.3 Other Costs and Expenses . Seller shall pay to the Agents and Conduits, within 10 Business Days after written demand all reasonable out-of-pocket expenses (including, without limitation, any stamp, documentary or similar taxes but not including any Excluded Taxes or any other taxes covered by Section 10.1 or Section 10.2 ) in connection with the preparation, execution, delivery and administration of the Transaction Documents and any amendment, supplement, restatement or other modification or waiver with respect to such Transaction Documents, the transactions contemplated hereby and thereby and the other documents to be delivered hereunder or thereunder, including without limitation, rating agency fees, the cost of the Agents’ due diligence firm reviewing the books, records and procedures of the Seller Parties and Originators, reasonable fees and out-of-pocket expenses of legal counsel for the Agents with respect thereto and with respect to advising the Agents and the Purchasers as to their respective rights and remedies under this Agreement and the other Transaction Documents. Prior to the occurrence of (i) an Unmatured Amortization Event arising from an Event of Bankruptcy or (ii) any Amortization Event, the Agents and Conduits agree that Latham & Watkins LLP shall act as counsel to all of them and that only one due diligence firm shall act for all of them. Seller shall pay to the Agents within 10 Business Days after written demand any and all costs and expenses of the Agents and the Purchasers, if any, including reasonable counsel fees and expenses in connection with the enforcement of this Agreement and the other documents delivered hereunder and in connection with any restructuring or workout of this Agreement or such documents, or the administration of this Agreement following the occurrence of an Amortization Event.

 

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ARTICLE XI.

 

THE AGENTS

 

Section 11.1 Authorization and Action. (a) Each Purchaser and Co-Agent hereby irrevocably designates and appoints Wachovia Bank, National Association as Administrative Agent hereunder and under the other Transaction Documents, and authorizes the Administrative Agent to take such action on its behalf under the provisions of the Transaction Documents and to exercise such powers and perform such duties as are expressly delegated to the Administrative Agent by the terms of the Transaction Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Purchaser or Co-Agent, and no implied covenants, functions, responsibilities, duties, obligations or liabilities on the part of the Administrative Agent shall be read into this Agreement or otherwise exist against the Administrative Agent.

 

(b) Each of Blue Ridge and the Blue Ridge Committed Purchasers hereby irrevocably designates and appoints Wachovia Bank, National Association as its Co-Agent hereunder, and authorizes such Co-Agent to take such action on its behalf under the provisions of this Agreement, the Blue Ridge Fee Letter and the Blue Ridge Liquidity Agreement and to exercise such powers and perform such duties as are expressly delegated to such Co-Agent by the terms of this Agreement, if any, together with such other powers as are reasonably incidental thereto. Each of Jupiter and the Jupiter Committed Purchasers hereby irrevocably designates and appoints Bank One as its Co-Agent hereunder, and authorizes such Co-Agent to take such action on its behalf under the provisions of this Agreement, the Jupiter Fee Letter and the Jupiter Liquidity Agreement and to exercise such powers and perform such duties as are expressly delegated to such Co-Agent by the terms of this Agreement, if any, together with such other powers as are reasonably incidental thereto. Each of Atlantic and the Atlantic Committed Purchasers hereby irrevocably designates and appoints CLNY as its Co-Agent hereunder, and authorizes such Co-Agent to take such action on its behalf under the provisions of this Agreement, the Atlantic Fee Letter and the Atlantic Liquidity Agreement and to exercise such powers and perform such duties as are expressly delegated to such Co-Agent by the terms of this Agreement, if any, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, the Fee Letters or the Liquidity Agreements, no Co-Agent shall have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Purchaser, Committed Purchaser or other Agent, and no implied covenants, functions, responsibilities, duties, obligations or liabilities on the part of such Co-Agent shall be read into this Agreement, the Fee Letters or the Liquidity Agreements or otherwise exist against such Co-Agent.

 

(c) The provisions of this Article XI are solely for the benefit of the Agents and the Purchasers, and none of the Seller Parties shall have any rights as a third-party beneficiary or otherwise under any of the provisions of this Article XI, except that this Article XI shall not affect any obligations which any Agent or any Purchaser may have to any of the Seller Parties. Furthermore, no Purchaser shall have any rights as a third-party beneficiary or otherwise under any of the provisions hereof in respect of a Co-Agent which is not the Co-Agent for such Person.

 

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(d) In performing its functions and duties hereunder, the Administrative Agent shall act solely as the agent of the Purchasers and the Co-Agents and does not assume nor shall be deemed to have assumed any obligation or relationship of trust or agency with or for either of the Seller Parties or any of their respective successors and assigns. In performing its functions and duties hereunder, each Co-Agent shall act solely as the agent of its respective Conduit and its respective Committed Purchaser(s), and does not assume nor shall be deemed to have assumed any obligation or relationship of trust or agency with or for any of the Seller Parties, any other Purchaser, Committed Purchaser or Agent, or any of their respective successors and assigns.

 

Section 11.2 Delegation of Duties . Each Agent may execute any of its duties under the applicable Transaction Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. No Agent shall be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care.

 

Section 11.3 Exculpatory Provisions . No Agent nor any of its directors, officers, agents or employees shall be (i) liable for any action lawfully taken or omitted to be taken by it or them or any Person described in Section 11.2 under or in connection with the Transaction Documents (except for its, their or such Person’s own bad faith, gross negligence or willful misconduct), or (ii) responsible in any manner to any of the Purchasers or other agents for any recitals, statements, representations or warranties made by Seller contained in this Agreement or in any certificate, report, statement or other document referred to or provided for in, or received under or in connection with, this Agreement or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other document furnished in connection herewith, or for any failure of either of the Seller Parties to perform its respective obligations hereunder, or for the satisfaction of any condition specified in Article V, except receipt of items required to be delivered to such Agent. No Agent shall be under any obligation to any Purchaser, Committed Purchaser or other Agent to ascertain or to inquire as to the observance or performance of any of the agreements or covenants contained in, or conditions of, this Agreement, or to inspect the properties, books or records of the Seller Parties. This Section 11.3 is intended solely to govern the relationship between each Agent, on the one hand, and the Purchasers and their respective Committed Purchasers, on the other.

 

Section 11.4 Reliance by Agents .

 

(a) Each Agent shall in all cases be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Seller Parties), independent accountants and other experts selected by such Agent. Each Agent shall in all cases be fully justified in failing or refusing to take any action under this Agreement or any other document furnished in connection herewith unless it shall first receive such advice or concurrence of (i) in the case of the

 

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Administrative Agent, each of the Co-Agents (except where another provision of this Agreement specifically authorizes the Administrative Agent to take action based on the instructions of any of the Co-Agents) or (ii) in the case of a Co-Agent, such of its Purchasers and Committed Purchasers, as it shall determine to be appropriate under the relevant circumstances, or it shall first be indemnified to its satisfaction by its Constituent Committed Purchasers against any and all liability, cost and expense which may be incurred by it by reason of taking or continuing to take any such action.

 

(b) Any action taken by the Administrative Agent in accordance with Section 11.4(a) shall be binding upon all Purchasers and Agents.

 

(c) Each Co-Agent shall determine with its Conduit and, as applicable, its Committed Purchasers, the number of such Persons which shall be required to request or direct such Co-Agent to take action, or refrain from taking action, under this Agreement on behalf of such Persons and whether any consent of the rating agencies who rate such Conduit’s Commercial Paper is required (such Persons and, if applicable, rating agencies, a “Voting Block” ). Such Co-Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement in accordance with a request of its appropriate Voting Block, and such request and any action taken or failure to act pursuant thereto shall be binding upon all of such Co-Agent’s Constituents.

 

(d) Unless otherwise advised in writing by a Co-Agent or by any Purchaser or Committed Purchaser on whose behalf such Co-Agent is purportedly acting, each party to this Agreement may assume that (i) such Co-Agent is acting for the benefit of each of its Constituent Purchasers and, as applicable, Committed Purchasers, as well as for the benefit of each permitted assignee from any such Person, and (ii) each action taken by such Co-Agent has been duly authorized and approved by all necessary action on the part of its Voting Block. Each Conduit (or its Committed Purchasers) shall have the right to designate a new Co-Agent (which may be itself) to act on its behalf and on behalf of its assignees and transferees for purposes of this Agreement by giving to the Agents and the Seller Parties written notice thereof signed by such Purchaser(s) and the newly designated Co-Agent. Such notice shall be effective when receipt thereof is acknowledged by the retiring Co-Agent and the Seller Parties, which acknowledgments shall not be withheld or unreasonably delayed, and thereafter the party named as such therein shall be Co-Agent for such Purchasers under this Agreement. Each Co-Agent and its Purchasers and Committed Purchasers shall agree amongst themselves as to the circumstances and procedures for removal and resignation of such Co-Agent.

 

Section 11.5 Notice of Amortization Events . No Agent shall be deemed to have knowledge or notice of the occurrence of any Amortization Event or Unmatured Amortization Event unless such Agent has received notice from another Agent, a Purchaser, a Committed Purchaser or a Seller Party referring to this Agreement, stating that an Amortization Event or Unmatured Amortization Event has occurred hereunder and describing such Amortization Event or Unmatured Amortization Event. In the event that any of the Agents receives such a notice, it shall promptly give notice thereof to the other Agents for distribution, in the case of a Co-Agent, to the members of its Group. The Administrative Agent shall take such action with respect to such Amortization Event or Unmatured Amortization Event as shall be directed by any of the Co-Agents.

 

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Section 11.6 Non-Reliance on Agents and Other Purchasers . Each of the Purchasers expressly acknowledges that no Agent, nor any of such Agent’s officers, directors, employees, agents, attorneys-in-fact or affiliates has made any representations or warranties to it and that no act by any Agent hereafter taken, including, without limitation, any review of the affairs of the Seller Parties, shall be deemed to constitute any representation or warranty by such Agent. Each of the Purchasers also represents and warrants to the Agents and the other Purchasers that it has, independently and without reliance upon any such Person (or any of their Affiliates) and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, prospects, financial and other conditions and creditworthiness of the Seller Parties and made its own decision to enter into this Agreement. Each of the Purchasers also represents that it will, independently and without reliance upon any Agent or any other Committed Purchaser or Purchaser, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, prospects, financial and other condition and creditworthiness of the Seller Parties. None of the Agents or the Purchasers, nor any of their respective Affiliates, shall have any duty or responsibility to provide any party to this Agreement with any credit or other information concerning the business, operations, property, prospects, financial and other condition or creditworthiness of the Seller Parties which may come into the possession of such Person or any of its respective officers, directors, employees, agents, attorneys-in-fact or affiliates, except that each of the Co-Agents shall promptly distribute to its related Conduit (and, as applicable, its Committed Purchasers), copies of financial and other information expressly provided to such Co-Agent by either of the Seller Parties pursuant to this Agreement for distribution to the Agents and/or Purchasers.

 

Section 11.7 Indemnification of Agents .

 

(a) Each Committed Purchaser agrees to indemnify the Administrative Agent and its officers, directors, employees, representatives and agents (to the extent not reimbursed by the Seller Parties and without limiting the obligation of the Seller Parties to do so), ratably in accordance with their respective Percentages or Invested Amount, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever (including, without limitation, the reasonable fees and disbursements of counsel for the Administrative Agent or such Person in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not the Administrative Agent