TABLE OF CONTENTS

 

		Page
ARTICLE I DEFINITIONS AND INTERPRETATION		1
	Section 1.01. Definitions	1
	Section 1.02. Rules of Construction	1
ARTICLE II TRANSFERS OF RECEIVABLES		2
	Section 2.01. Agreement to Transfer	2
	Section 2.02. Grant of Security Interest	3
	Section 2.03. Originator Support Agreement	3
	Section 2.04. Originators Remain Liable	4
ARTICLE III CONDITIONS PRECEDENT		4
	Section 3.01. Conditions Precedent to Initial Transfer	4
	Section 3.02. Termination of Transfers	5
ARTICLE IV REPRESENTATIONS, WARRANTIES AND COVENANTS		5
	Section 4.01. Representations and Warranties of the Transaction Parties	5
	Section 4.02. Affirmative Covenants of the Originators	13
	Section 4.03. Negative Covenants of the Originators	19
	Section 4.04. Breach of Representations, Warranties or Covenants	22
ARTICLE V INDEMNIFICATION		22
	Section 5.01. Indemnification	22
	Section 5.02. Indemnities by the Servicer	24
ARTICLE VI MISCELLANEOUS		25
	Section 6.01. Notices	25
	Section 6.02. No Waiver; Remedies	26
	Section 6.03. Successors and Assigns	27
	Section 6.04. Termination; Survival of Obligations.	27
	Section 6.05. Complete Agreement; Modification of Agreement	28
	Section 6.06. Amendments and Waivers	28
	Section 6.07. Governing Law; Consent to Jurisdiction; Waiver of Jury Trial	28
	Section 6.08. Counterparts	29
	Section 6.09. Severability	29
	Section 6.10. Section Titles	30
	Section 6.11. No Setoff	30
	Section 6.12. Confidentiality	30
	Section 6.13. Further Assurances	31

 

 

	Section 6.14. Fees and Expenses	32
	Section 6.15. Nonrecourse Obligations	32
ARTICLE VII SERVICER PROVISIONS		32
	Section 7.01. Appointment of the Servicer	32
	Section 7.02. Duties and Responsibilities of the Servicer	32
	Section 7.03. Collections on Receivables	33
	Section 7.04. Covenants of the Servicer	35
	Section 7.05. Reporting Requirements of the Servicer	39
ARTICLE VIII EVENTS OF SERVICER TERMINATION		39
	Section 8.01. Events of Servicer Termination	39
ARTICLE IX SUCCESSOR SERVICER PROVISIONS		42
	Section 9.01. Servicer Not to Resign	42
	Section 9.02. Appointment of the Successor Servicer	43
	Section 9.03. Duties of the Servicer	43
	Section 9.04. Effect of Termination or Resignation	44
	Section 9.05. Power of Attorney	44

 

INDEX OF APPENDICES

 

Exhibit 2.01(a)	Form of Receivables Assignment
Exhibit 2.01(c)(ii)	Form of Subordinated Note
Exhibit 2.03	Form of Originator Support Agreement
Exhibit 9.05	Form of Power of Attorney
Schedule 4.01(b)	Jurisdiction of Organization; Executive Offices; Collateral Locations; Corporate, Legal and Other Names; Identification Numbers
Schedule 4.01(j)	Intellectual Property
Schedule 4.01(k)	Investigations, Audits, Etc.
Schedule 4.01(l)	Litigation
Schedule 4.01(n)	ERISA
Schedule 4.01(o)	Deposit and Disbursement Accounts
Schedule 4.01(z)	Supplementary Representations
Schedule 4.02(g)	Conduct of Business
Annex X	Definitions and Interpretations
Annex Y	Schedule of Documents
Annex Z	Financial Test

 

 

THIS RECEIVABLES SALE AND SERVICING AGREEMENT (as amended, restated, supplemented or otherwise modified and in effect from time to time, this “ Agreement ”) is entered into as of November 25, 2005 by and among each of the persons signatory hereto from time to time as Originators, each an “ Originator ” and, collectively, the “ Originators ”), VERTIS, INC. (“ Parent ”), a Delaware corporation, in its capacity as servicer hereunder (in such capacity, the “ Servicer ”) and VERTIS RECEIVABLES II, LLC, a Delaware limited liability company (“ Buyer ”).

 

RECITALS

 

A.                                    Buyer is a special purpose limited liability company the sole member of which is the Parent.

 

B.                                      Buyer has been formed for the sole purpose of purchasing all Receivables originated by each Originator and to finance such Receivables under the Funding Agreement.

 

C.                                      Each Originator intends to sell, and Buyer intends to purchase, such Receivables, from time to time, as described herein.

 

D.                                     In addition, the Member may, from time to time, contribute capital to Buyer in the form of Contributed Receivables or cash.

 

E.                                       In order to effectuate the purposes of this Agreement and the Funding Agreement, Buyer desires to appoint Parent to service, administer and collect the Receivables securing the Advances pursuant to this Agreement and Parent is willing to act in such capacity as Servicer hereunder on the terms and conditions set forth herein.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

ARTICLE I
DEFINITIONS AND INTERPRETATION

 

Section 1.01.  Definitions .  Capitalized terms used and not otherwise defined herein shall have the meanings ascribed to them in Annex X .

 

Section 1.02.  Rules of Construction .  For purposes of this Agreement, the rules of construction set forth in Annex X shall govern.  All Appendices hereto, or expressly identified to this Agreement, are incorporated herein by reference and, taken together with this Agreement, shall constitute but a single agreement.

 

 

ARTICLE II
TRANSFERS OF RECEIVABLES

 

Section 2.01.  Agreement to Transfer .

 

(a)                                   Receivables Transfers .  Subject to the terms and conditions hereof, each Originator agrees to sell (without recourse except to the limited extent specifically provided herein) or, in the case of the Member, sell or contribute, to Buyer on the Effective Date and on each Business Day thereafter until the Commitment Termination Date (each such date, a “ Transfer Date ”) all Receivables owned by it on each such Transfer Date, and Buyer agrees to purchase or acquire as a capital contribution all such Receivables on each such Transfer Date.  All such Transfers by an Originator to Buyer shall collectively be evidenced by a certificate of assignment substantially in the form of Exhibit 2.01(a)  (each, a “ Receivables Assignment ,” and collectively, the “ Receivables Assignments ”), and each Originator and Buyer shall execute and deliver a Receivables Assignment on or before the Effective Date.

 

(b)                                  Determination of Sold Receivables .  On and as of each Transfer Date, (i) all Receivables then owned by each Originator (other than the Member) and not previously acquired by Buyer shall be sold immediately upon its creation, and (ii) to the extent Receivables then owned by the Member have not been contributed to Buyer in accordance with Section 2.01(d), such Receivables shall be sold to Buyer (each such Receivable sold immediately upon its creation pursuant to clauses (i)  and (ii)  above, individually, a “ Sold Receivable ” and, collectively, the “ Sold Receivables ”).

 

(c)                                   Payment of Sale Price .  (i)  In consideration for each Sale of Sold Receivables hereunder, Buyer shall pay to the Originator thereof on the Transfer Date therefor the applicable Sale Price therefor in Dollars in immediately available funds.  All cash payments by Buyer under this Section 2.01(c)(i)  shall be effected by means of a wire transfer on the day when due to such account or accounts as the Originators may designate from time to time.

 

(ii)                                   To the extent that the Sale Price of Sold Receivables exceeds the amount of cash then available to Buyer, the applicable Originator hereby agrees to make a subordinated loan (each, a “ Subordinated Loan ”) to Buyer in an amount not to exceed the lesser of (i) the amount of such excess in satisfaction of the equivalent portion of the Sale Price not paid in cash and (ii) the maximum Subordinated Loan that could be borrowed without rendering Buyer’s Net Worth less than the Required Capital Amount.  The Subordinated Loans of an Originator shall be evidenced by a subordinated promissory note substantially in the form of Exhibit 2.01(c)(ii)  hereto (a “ Subordinated Note ”) executed by Buyer and payable to such Originator.  The Subordinated Loans shall bear interest and be payable as provided in the Subordinated Note.

 

(d)                                  Determination of Contributed Receivables .  Prior to the delivery of an Election Notice pursuant to this Section 2.01(d) on any Transfer Date the Member (i) may, by written notice to the Buyer, elect to treat the Receivables transferred by it on such date as a capital contribution to the Buyer, and (ii) hereby elects, on any Transfer Date on which the Buyer cannot pay the Sale Price therefore in cash or with Subordinated Loans, to treat the Receivables transferred by it on such date as a capital contribution to the Buyer (each Receivable that is the

 

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subject of an election under clause (i) or (ii) hereof shall be a “ Contributed Receivable ”).  Notwithstanding the foregoing, the Member shall not be obligated or required at any time to make any capital contributions to Buyer and may by written notice to the Buyer, revoke its election under clause (ii) above.  On any Transfer Date on which the Buyer cannot pay the Sale Price for Receivables in cash or with Subordinated Loans to an Originator, and if such Originator is the Member, Member does not elect to make a capital contribution of such Receivable Originator shall elect to terminate sales and transfers of Receivables hereunder by sending a written notice to Buyer and, at any time the Funding Agreement remains outstanding, to the Administrative Agent (any such notice an “ Election Notice ”).

 

(e)                                   Ownership of Transferred Receivables .  On and after each Transfer Date and after giving effect to the Transfers to be made on each such date, Buyer shall own the Transferred Receivables and no Originator shall take any action inconsistent with such ownership nor shall any Originator claim any ownership interest in such Transferred Receivables.

 

(f)                                     Servicing of Receivables .  So long as no Event of Servicer Termination shall have occurred and be continuing and no Successor Servicer has assumed the responsibilities and obligations of the Servicer pursuant to Section 9.02 , the Servicer shall (i) conduct the servicing, administration and collection of the Transferred Receivables and shall take, or cause to be taken, all such actions as may be necessary or advisable to service, administer and collect the Transferred Receivables, all in accordance with (A) the terms of this Agreement, (B) customary and prudent servicing procedures for trade receivables of a similar type and (C) all applicable laws, rules and regulations, and (ii) hold all Contracts and other documents and incidents relating to the Transferred Receivables in trust for the benefit of Buyer, as the owner thereof, and for the sole purpose of facilitating the servicing of the Transferred Receivables in accordance with the terms of this Agreement.  Buyer hereby instructs the Servicer, and the Servicer hereby acknowledges, that the Servicer shall hold all Contracts and other documents relating to such Transferred Receivables in trust for the benefit of the Buyer and the Servicer’s retention and possession of such Contracts and documents shall at all times be solely in a custodial capacity for the benefit of the Buyer and its assigns and pledgees.

 

Section 2.02.  Grant of Security Interest .  The parties hereto intend that each Transfer shall be absolute and shall constitute a purchase and sale or capital contribution, as applicable, and not a loan.  Notwithstanding the foregoing, in addition to and not in derogation of any rights now or hereafter acquired by Buyer under Section 2.01 hereof, the parties hereto intend that this Agreement shall constitute a security agreement under applicable law and if a court of competent jurisdiction determines that any transaction provided for herein constitutes a loan and not a sale or capital contribution, as applicable, that each Originator shall be deemed to have granted, and each Originator does hereby grant, to Buyer a continuing security interest in all of such Originator’s right, title and interest in, to and under the Receivables whether now owned or hereafter acquired by such Originator to secure the obligations of such Originator to Buyer hereunder (including, if and to the extent that any Transfer is recharacterized as a transfer for security under applicable law, the obligation to transfer ownership of the Receivables hereunder).

 

Section 2.03.  Originator Support Agreement .  The Parent hereby agrees that in the event that any of its Affiliates become parties to this Agreement as Originators, the Parent shall undertake and agree, to and for the benefit of Buyer, to cause the due and punctual performance

 

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and observance by each such Originator of all of the terms, conditions, agreements and undertakings on the part of such Originator to be performed or observed by it hereunder or under any other Related Document and, in connection therewith, shall execute and deliver to Buyer an Originator Support Agreement in the form attached hereto as Exhibit 2.03 , to more fully evidence such undertaking.

 

Section 2.04.  Originators Remain Liable .  It is expressly agreed by the Originators that, anything herein to the contrary notwithstanding, each Originator shall remain liable to the Obligor (and any other party to the related Contract) under any and all of the Receivables originated by it and under the Contracts therefor to observe and perform all the conditions and obligations to be observed and performed by it thereunder.  Buyer shall not have any obligation or liability to the Obligor or any other party to the related Contract under any such Receivables or Contracts by reason of or arising out of this Agreement or the granting herein of a Lien thereon or the receipt by Buyer of any payment relating thereto pursuant hereto.  The exercise by Buyer of any of its rights under this Agreement shall not release any Originator from any of its respective duties or obligations under any such Receivables or Contracts.  Buyer shall not be required or obligated in any manner to perform or fulfill any of the obligations of any Originator under or pursuant to any such Receivable or Contract, or to make any payment, or to make any inquiry as to the nature or the sufficiency of any payment received by it or the sufficiency of any performance by any party under any such Receivable or Contract, or to present or file any claims, or to take any action to collect or enforce any performance or the payment of any amounts that may have been assigned to it or to which it may be entitled at any time or times.

 

ARTICLE III
CONDITIONS PRECEDENT

 

Section 3.01.  Conditions Precedent to Initial Transfer .  The initial Transfer hereunder shall be subject to satisfaction of each of the following conditions precedent:

 

(a)                                   Sale Agreement; Other Documents .  This Agreement or counterparts hereof shall have been duly executed by, and delivered to, each Originator, the Servicer and Buyer, and Buyer shall have received such information, documents, instruments, agreements and legal opinions as Buyer shall request in connection with the transactions contemplated by this Agreement, including all those identified in the Schedule of Documents, each in form and substance satisfactory to Buyer.

 

(b)                                  Governmental Approvals .  Buyer shall have received (i) satisfactory evidence that the Originators and the Servicer have obtained all required consents and approvals of all Persons, including all requisite Governmental Authorities, to the execution, delivery and performance of this Agreement and the other Related Documents and the consummation of the transactions contemplated hereby and thereby or (ii) an Officer’s Certificate from each Originator and the Servicer in form and substance satisfactory to Buyer affirming that no such consents or approvals are required.

 

(c)                                   Compliance with Laws .  Each Originator shall be in compliance with all applicable foreign, federal, state, provincial and local laws and regulations, including, without limitation, those specifically referenced in Section 4.02(f) .

 

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(d)                                  Funding Agreement Conditions .  Each of those conditions precedent set forth in Section 3.01 of the Funding Agreement shall have been satisfied or waived in writing as provided therein.

 

The acceptance by any Originator of the Sale Price for any Sold Receivables and the contribution to Buyer by the Member of any Contributed Receivables on any Transfer Date shall be deemed to constitute, as of any such Transfer Date, a representation and warranty by such Originator that the conditions precedent set forth in this Section 3.01 have been satisfied.  Upon any such acceptance or contribution, title to the Transferred Receivables sold or contributed on such Transfer Date shall be vested absolutely in Buyer, whether or not such conditions were in fact so satisfied.

 

Section 3.02.  Termination of Transfers .  Transfers of Receivables hereunder shall terminate on the Commitment Termination Date.

 

ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS

 

Section 4.01.  Representations and Warranties of the Transaction Parties .  To induce Buyer to purchase the Sold Receivables and to acquire the Contributed Receivables, each Transaction Party, as applicable, makes the following representations and warranties to Buyer as to itself only as of the Closing Date and, except to the extent otherwise expressly provided below, as of each Transfer Date, each of which shall survive the execution and delivery of this Agreement.

 

(a)                                   Organization, Powers and Good Standing .

 

(i)                                      Organization .  Each of the Transaction Parties is (i) duly organized, validly existing and in good standing under the laws of its jurisdiction of organization; (ii) is duly qualified to do business in all states where such qualification is required except where failure to be so qualified would not reasonably be expected to have a Material Adverse Effect within the meaning of clauses (b) through (e) of the definition thereof; (iii) has the requisite corporate or company power and authority and the legal right to own, pledge, mortgage or otherwise encumber and operate its properties, to lease the property it operates under lease, and to conduct its business, in each case, as now, heretofore and proposed to be conducted; (iv) has all licenses, permits, consents or approvals from or by, and has made all filings with, and has given all notices to, all Governmental Authorities having jurisdiction, to the extent required for such ownership, operation and conduct, except where the failure to do any of the foregoing could not reasonably be expected to result in a Material Adverse Effect within the meaning of clauses (b) through (e) of the definition thereof; (v) is in compliance with its articles or certificate of incorporation and by-laws or operating agreement, as applicable; and (vi) subject to specific representations set forth herein regarding ERISA, Environmental Laws, tax laws and other laws, is in compliance with all applicable provisions of law,

 

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except where the failure to so comply, individually or in the  aggregate, could not reasonably be expected to result in a Material Adverse Effect.

 

(ii)                                   Corporate Powers .  The execution, delivery and performance by each Transaction Party of this Agreement and the other Related Documents to which it is a party and the creation and perfection of all Transfers and Liens provided for herein and therein and, solely with respect to clause (iv)  below, the exercise by Buyer, or its assigns of any of its rights and remedies under any Related Document to which it is a party: (i) are within such Person’s corporate or company power; (ii) have been duly authorized by all necessary or proper corporate and shareholder or company and member action; (iii) do not result in the creation or imposition of any Adverse Claim upon any of the property of such Person; and (iv) do not require the consent or approval of any Governmental Authority or any other Person, except those referred to in Section 3.01(b) , all of which have been duly obtained, made or complied with prior to the Effective Date.  On or prior to the Effective Date, each of the Related Documents has been duly executed and delivered by each Transaction Party that is a party thereto and on the Closing Date each such Related Document shall then constitute a legal, valid and binding obligation of such Transaction Party, enforceable against it in accordance with its terms.

 

(iii)                                Binding Obligation .  This Agreement is, and the other Related Documents are the legally valid and binding obligations of the applicable parties thereto, each enforceable against each of such parties, as applicable, in accordance with their respective terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or other laws affecting, creditors’ rights generally and the effects of general principles of equity.

 

(b)                                  Jurisdiction of Organization; Executive Offices; Collateral Locations; Corporate or Other Names; FEIN .  As of the Effective Date, each Originator is a registered organization of the type set forth on Schedule 4.01(b)  and is organized under the laws of the State of Delaware (which is its only jurisdiction of organization) and each such Originator’s organizational identification number (if any), the current location of such Originator’s chief executive office, principal place of business, other offices, the warehouses and premises within which any records relating to the Receivables is stored or located, and the locations of its records concerning the Receivables are set forth in Schedule 4.01(b)  or such other locations identified by such Originator in writing to the Borrower from and after the Closing Date.  During the five years prior to the Closing Date, except as set forth in Schedule 4.01(b) , no Originator has been known as or used any corporate, legal, fictitious or trade name.  In addition, Schedule 4.01(b)  lists the federal employer identification number of each Originator.

 

(c)                                   Disclosure .  No representation or warranty of any Transaction Party contained in this Agreement, any of the other Related Documents or any other document, certificate or written statement furnished by on behalf of any Transaction Party to Buyer (or, in the case of the Servicer, to the Administrative Agent or any Lender) relating to this Agreement, the Transferred Receivables or any of the other Related Documents contains any untrue statement of a material fact or omitted, omits or will omit to state a material fact necessary in order to make the statements contained herein or therein not misleading in any material respect in light of the circumstances in which the same were made.

 

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(d)                                  No Material Adverse Effect .  Since December 31, 2004 there have been no events or changes in facts or circumstances affecting any Transaction Party which have had or would reasonably be expected within the next twelve (12) months to have a Material Adverse Effect.

 

(e)                                   No Conflict .  The execution, delivery and performance by each Transaction Party of this Agreement and the other Related Documents to which it is a party and the creation and perfection of all Transfers and Liens provided for herein and therein (i) does not and will not violate or conflict in any material respect with any laws, rules, regulations or orders of any Governmental Authority or violate, conflict with, result in a breach of, or constitute a default (with due notice or lapse of time or both) under any Contractual Obligation or organizational documents of any Transaction Party and (ii) does not result in the creation or imposition of any Adverse Claim upon any of the property of any Transaction Party other than the Adverse Claims created pursuant hereto.

 

(f)                                     Solvency .  After giving effect to (i) the transactions contemplated by this Agreement and the other Related Documents and (ii) the payment and accrual of all transaction costs in connection with the foregoing, each Transaction Party is and will be Solvent.  After giving effect to the sale and contribution of Receivables and other payments and transactions contemplated on such Transfer Date, each Transaction Party is and will be Solvent. Notwithstanding the foregoing, the Buyer and its assigns agree that no Transaction Party shall be in breach of the representation and warranty set forth in this Section 4.01(f)  solely because of the fact that the balance sheet of Holdings and its consolidated Subsidiaries, calculated in accordance with GAAP, reflects a negative net worth.

 

(g)                                  Margin Regulations .

 

(i)                                      No part of the proceeds of any Sale will be used for “buying” or “carrying” “margin stock” within the respective meanings of such terms under Regulation U of the Board of Governors of the Federal Reserve System as now and from time to time hereafter in effect or for any other purpose that violates the provisions of the regulations of the Board of Governors of the Federal Reserve System.  If requested by Buyer, each Transaction Party will furnish to Buyer a statement to the foregoing effect in conformity with the requirements of FR Form G-3 or FR Form 0-1, as applicable, referred to in Regulation U.

 

(ii)                                   None of the Transaction Parties is required to register as (i) an “investment company” as defined in, or subject to regulation under, the Investment Company Act of 1940 or (ii) a “holding company” as defined in, or subject to regulation under, the Public Utility Holding Company Act of 1935.

 

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

 

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(i)                                      Compliance with Laws .  Each Transaction Party represents and warrants that it (i) is in compliance with the requirements of all applicable laws, rules, regulations and orders of any Governmental Authority (including, without limitation, Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001, and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56) and the obligations, covenants and conditions contained in all Contractual Obligations other than those laws, rules, regulations, orders and provisions of such Contractual Obligations the noncompliance with which could not be reasonably expected to have, either individually or in the aggregate, a Material Adverse Effect, and (ii) maintains all licenses, qualifications and permits referred to above.

 

(j)                                      Intellectual Property .  As of the Effective Date, each Originator owns, is licensed to use or otherwise has the right to use, all material Intellectual Property used in or necessary for the conduct of its business as currently conducted that is material to (i) the ability of such Originator to perform its obligations under the Related Documents, (ii) the validity or enforceability of any Related Document or the rights and remedies of the Borrower, the Lenders or the Administrative Agent under any Related Document, (iii) the federal income tax attributes of the sale, contribution or pledge of the Transferred Receivables pursuant to any Related Document or (iv) the Transferred Receivables (or the collectibility thereof), the Contracts therefore, the Borrower Collateral (in each case, taken as a whole) or the ownership interests or Liens of the Borrower or the Lenders or the Administrative Agent thereon or the priority of such interests or Liens, and all such material Intellectual Property is identified on Schedule 4.01(j) . As of the Effective Date, except as disclosed in Schedule 4.01(j) , the use of such Intellectual Property by the Originators and the conduct of their businesses does not and has not been alleged by any Person to infringe on the rights of any Person.

 

(k)                                   Investigations, Audits, Etc .  As of the Effective Date, except as set forth on Schedule 4.01(k) , no Transaction Party or any of their Subsidiaries is the subject of any review or audit by the IRS or any governmental investigation concerning the violation or possible violation of any law that would reasonably be expected to result in any Material Adverse Effect within the meaning of clauses (b) through (e) of the definition thereof.

 

(l)                                      Litigation; Adverse Facts .  Except as set forth on Schedule 4.01(l) , there are no judgments outstanding against any Transaction Party or affecting any property of any Transaction Party as of the Effective Date, nor is there any Litigation pending, or to the best knowledge of any Transaction Party threatened, against any Transaction Party that would reasonably be expected to result in any Material Adverse Effect within the meaning of clauses (b) through (e) of the definition thereof.

 

(m)                                Taxes .

 

(i)                                      As of the Effective Date, (i) all Tax Returns required to be filed by any Transaction Party or any other member of the Parent Group have been timely and properly filed and (ii) all taxes that are due (other than taxes being or about to be contested in good faith by appropriate proceedings and for which adequate reserves have been provided for in accordance with GAAP) have been paid, except where the failure to file Tax Returns or pay Taxes would not have a Material Adverse Effect.  No

 

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Governmental Authority has asserted any claim for taxes, or to any Transaction Party’s knowledge, has threatened to assert any claim for taxes that would, if not paid by a Transaction Party, have a Material Adverse Effect.  All taxes required by law to be withheld or collected and remitted (including, without limitation, income tax, unemployment insurance and workmen’s compensation premiums) with respect to the Transaction Parties have been withheld or collected and paid to the appropriate Governmental Authorities (or are properly being held for such payment), except for amounts the nonpayment of which would not be reasonably likely to have a Material Adverse Effect.

 

(ii)                                   None of the Transaction Parties has been notified that either the IRS, or any other Governmental Authority, has raised, or intends to raise, any adjustments with respect to Taxes of the Transaction Parties, which adjustments would be reasonably likely to have a Material Adverse Effect.

 

(iii)                                It is not necessary that this Agreement or any other Related Document be filed, registered, recorded or enrolled in connection with any Taxes with any court, public office or other authority in any jurisdiction or that any ad valorem stamp duty, stamp duty, documentary, registration or similar tax or duty be paid on the execution or delivery of this Agreement or any other Related Document.

 

(n)                                  ERISA .

 

(i)                                      Schedule 4.01(n) lists all Plans and separately identifies all Pension Plans, including Title IV Plans, Multiemployer Plans, ESOPs and Welfare Plans, including all Retiree Welfare Plans as of the Effective Date.  As of the Effective Date, copies of all such listed Plans other than Multiemployer Plans as defined in ERISA Section 3(37)(A), together with a copy of the latest form IRS/DOL 5500-series for each such Plan (other than such Multiemployer Plans) have been provided or made available to Buyer.  Except with respect to Multiemployer Plans, each Qualified Plan has been determined by the IRS to qualify under Section 401 of the IRC, and the trusts created thereunder have been determined to be exempt from tax under the provisions of Section 501 of the IRC, and nothing has occurred that would cause the loss of such qualification or tax-exempt status.  Each Plan (other than any Multiemployer Plan) is in material compliance with the applicable provisions of ERISA and the IRC, including the timely filing of all reports required under the IRC or ERISA.  With respect to each Multiemployer Plan, no Originator is aware of any material noncompliance with the applicable provisions of ERISA and the IRC, including the timely filing of all reports required under the IRC or ERISA.  Neither any Transaction Party nor ERISA Affiliate has failed to make any material contribution or pay any amount due as required by either Section 412 of the IRC or Section 302 of ERISA or the terms of any such Plan.  Neither any Transaction Party nor ERISA Affiliate has engaged in a “prohibited transaction,” as defined in Section 406 of ERISA and Section 4975 of the IRC,

in connection with any Plan, that would subject any Transaction Party to a material tax on prohibited transactions imposed by Section 502(i) of ERISA or Section 4975 of the IRC.

 

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(ii)                                   As of the Effective Date, except as set forth in Schedule 4.01(n) : (i) no Title IV Plan has any Unfunded Pension Liability; (ii) no ERISA Event or event described in Section 4062(e) of ERISA with respect to any Title IV Plan has occurred within the last five years or is reasonably expected to occur; (iii) there are no pending, or to the knowledge of any Borrower, threatened claims (other than claims for benefits in the normal course), sanctions, actions or lawsuits, asserted or instituted against any Plan or any Person as fiduciary or sponsor of any Plan that would reasonably be expected to result in liabilities to the Transaction Parties and their ERISA Affiliates in excess of $500,000; (iv) no Transaction Party or ERISA Affiliate has incurred or reasonably expects to incur any liability in excess of $500,000 as a result of a complete or partial withdrawal from a Multiemployer Plan; (v) within the last five years no Title IV Plan of any Transaction Party or ERISA Affiliate has been terminated, except in a “standard termination” as that term is used in Section 4041(b)(1) of ERISA, nor has any Title IV Plan of any Transaction Party or ERISA Affiliate (determined at any time within the past five years) with Unfunded Pension Liabilities been transferred outside of the “controlled group” (within the meaning of Section 4001(a)(14) of ERISA) of any Transaction Party or ERISA Affiliate; (vi) except in the case of any ESOP, Stock of all Transaction Parties and their ERISA Affiliates makes up, in the aggregate, no more than 10% of fair market value of the assets of any Plan measured on the basis of fair market value as of the latest valuation date of any Plan; and (vii) no liability under any Title IV Plan has been satisfied with the purchase of a contract from an insurance company that is not rated AAA by S&P or an equivalent rating by another nationally recognized rating agency.

 

(o)                                  Deposit and Disbursement Accounts .  Schedule 4.01(o) lists all banks and other financial institutions at which any Originator or the Servicer maintains deposit accounts established for the receipt of collections on Receivables, including any Collection Accounts, and such Schedule correctly identifies the name, address and telephone number of each depository, the name in which the account is held, a description of the purpose of the account, and the complete account number therefor.

 

(p)                                  Nonapplicability of Bulk Sales Laws .  No transaction contemplated by this Agreement or any of the other Related Documents requires compliance with any bulk sales act or similar law.

 

(q)                                  Investment Company Act Exemptions .  Each purchase of Transferred Receivables under this Agreement constitutes a purchase or other acquisition of notes, drafts, acceptances, open accounts receivable or other obligations representing part or all of the sales price of merchandise, insurance or services within the meaning of Section 3(c)(5) of the Investment Company Act.

 

(r)                                     Government Regulation .  No Transaction Party is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, or any other federal or state statute that restricts or limits its ability to incur Debt or to perform its obligations hereunder or under any other Related Document.  The purchase or acquisition of the Transferred Receivables by Buyer hereunder, the application of the Sale Price therefor and the consummation of the transactions contemplated by this Agreement and the other Related Documents will not

 

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violate any provision of any such statute or any rule, regulation or order issued by the Securities and Exchange Commission.

 

(s)                                   Notices to Obligors .  Each Transaction Party has directed all Obligors of Transferred Receivables originated by it to remit all payments with respect to such Receivables for deposit in a Lockbox or Collection Account.

 

(t)                                     Books and Records; Minutes .  The by-laws or the certificate or articles of incorporation of each Originator require it to maintain (i) books and records of account and (ii) minutes of the meetings and other proceedings of its Stockholders and board of directors (or an analogous governing body).

 

(u)                                  Ownership of Receivables; Liens .  Immediately prior to its transfer hereunder, each Originator owned each Receivable originated or acquired by it free and clear of any Adverse Claim and, from and pursuant to such transfer, Buyer will acquire valid and properly perfected title to and the sole record and beneficial ownership interest in each Transferred Receivable, free and clear of any Adverse Claim or restrictions on transferability.  Each Originator has received all assignments, bills of sale and other documents, and has duly effected all recordings, filings and other actions necessary to establish, protect and perfect such Originator’s right, title and interest in and to the Receivables originated or acquired by it and its other properties and assets.  Each Originator has rights in and full power to transfer its Receivables hereunder.  No effective financing statements or other similar instruments are of record in any filing office listing any Originator as debtor and purporting to cover the Transferred Receivables except those terminated on the Closing Date and financing statements filed in accordance with the Related Documents.

 

(v)                                  [RESERVED].

 

(w)                                Representations and Warranties in Other Related Documents .  Each of the representations and warranties of each Transaction Party contained in the Related Documents (other than this Agreement) is true and correct and such Transaction Party hereby makes each such representation and warranty to, and for the benefit of, the Buyer as if the same were set forth in full herein.  Each Transaction Party consents to the assignment of Buyer’s rights with respect to all such representations and warranties to the Administrative Agent and the Lenders (and their respective successors and assigns) pursuant to the Funding Agreement as more fully described in Section 6.03 below.

 

(x)                                    Receivables .  With respect to each Transferred Receivable acquired by the Buyer hereunder:

 

(i)                                      Each Receivable included in any Borrower Base Certificate as an Eligible Receivable, as of the applicable Transfer Date therefor, satisfied the criteria for an Eligible Receivable on such Transfer Date;

 

(ii)                                   immediately prior to its transfer to Buyer, such Receivable was owned by the Originator thereof free and clear of any Adverse Claim, and such Originator had the full right, power and authority to sell, contribute, assign, transfer and pledge its interest therein as contemplated under this Agreement and the other Related Documents and,

 

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upon such Transfer, Buyer will acquire valid and properly perfected title to and the sole record and beneficial ownership interest in such Receivable, free and clear of any Adverse Claim and, following such Transfer, such Receivable will not be subject to any Adverse Claim as a result of any action or inaction on the part of such Originator;

 

(iii)                                the Transfer of each such Receivable pursuant to this Agreement and the Receivables Assignment executed by the Originator thereof constitutes, as applicable, a valid sale, contribution, transfer, assignment, setover and conveyance to Buyer of all right, title and interest of such Originator in and to such Receivable; and

 

(iv)                               such Transferred Receivable was originated in compliance with the Credit and Collection Policies.

 

(y)                                  Fair Value .  With respect to each Transferred Receivable acquired by the Buyer hereunder, (i) the consideration (taking into account any increase in the outstanding balance of the Subordinated Note) received from the Buyer in respect of such Transferred Receivable represents adequate consideration and fair and reasonably equivalent value for such Transferred Receivable as of the applicable Transfer Date and (ii) such consideration is not less than the fair market value of such Transferred Receivables, in each case, as of the applicable Transfer Date.

 

(z)                                    Supplementary Representations .  Each of the representations and warranties of the Borrower set forth on Schedule 4.01(z) is true and correct in all respects.

 

(aa)                             Access to the Accounts .  None of the Transaction Parties has access to any of the Accounts.

 

(bb)                           Intent .  None of the Transaction Parties has entered into this Agreement or any of the other Related Documents with the intent of hindering, delaying or defrauding present or future creditors of any Transaction Party.  None of the Transaction Parties has removed or concealed any assets from its creditors or participated in the removal or concealing of assets of any Transaction Party or any Person entity, nor will any of them do so in the future.   The transfers contemplated by this Agreement are being undertaken in good faith by each Transaction Party for bona fide business purposes.

 

(cc)                             Conditions .  Upon any acceptance or contribution, title to the Transferred Receivables sold or contributed hereunder, the following are statements are true:

 

(i)                                      the representations and warranties of each Originator contained herein or in any other Related Document are true and correct in all material respects unless previously cured pursuant to Section 4.04 hereof (without duplication of any materiality qualifier contained therein) as of such Transfer Date, both before and after giving effect to such Transfer and to the application of the Sale Price therefor, except to the extent that any such representation or warranty expressly relates to an earlier date and except for changes therein expressly permitted by this Agreement;

 

(ii)                                   each Originator is in compliance with each of its covenants and other agreements set forth herein or in any other Related Document; and

 

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(iii)                                each Originator has such other action, including delivery of approvals, consents, opinions, documents and instruments to Buyer as Buyer has reasonably requested.

 

The representations and warranties described in this Section 4.01 shall survive the Transfer of the Transferred Receivables to Buyer, any subsequent assignment of the Transferred Receivables by Buyer, and the termination of this Agreement and the other Related Documents and shall continue until the indefeasible payment in full of all Transferred Receivables.

 

Section 4.02.  Affirmative Covenants of the Originators .  Each Originator covenants and agrees that, unless otherwise consented to by Buyer and the Administrative Agent, from and after the Effective Date and until the Termination Date:

 

(a)                                   Offices and Records .  Each Originator shall maintain its jurisdiction of organization, principal place of business and chief executive office and the office at which it keeps its Records at the respective locations specified in Schedule 4.01(b)  or, upon 30 days’ prior written notice to Buyer and the Administrative Agent, at such other location in a jurisdiction where all action requested by Buyer, any Lender or the Administrative Agent pursuant to Section 6.13 shall have been taken with respect to the Transferred Receivables.  Each Originator shall at its own cost and expense, for not less than three years from the date on which each Transferred Receivable was originated, or for such longer period as may be required by law, maintain adequate Records with respect to such Transferred Receivable, including records of all payments received, credits granted and merchandise returned with respect thereto.  Upon the request of Buyer, each Originator shall (i) mark each Contract (other than invoices) which constitutes “chattel paper” under the UCC and evidences a Transferred Receivable with a legend, acceptable to Buyer, evidencing that Buyer has purchased such Transferred Receivable and that the Administrative Agent, for the benefit of the Lenders, has a security interest in and lien thereon, and (ii) mark its computer records pertaining to the Transferred Receivables with such a legend.

 

(b)                                  Access .  Each Originator shall, at its own expense, during normal business hours, from time to time upon ten (10) Business Days’ prior notice (or, if a Termination Event has occurred and in continuing, one (1) Business Day’s prior notice) and as frequently as Buyer or the Servicer determines to be appropriate: (i) provide Buyer, the Servicer and any of their respective officers, employees, agents and representatives access to its properties (including properties of such Originator utilized in connection with the collection, processing or servicing of the Transferred Receivables), facilities, advisors and employees (including officers) of each Originator, (ii) permit Buyer and the Servicer and any of their respective officers, employees, agents and representatives to inspect, audit and make extracts from such Originator’s books and records, including all Records maintained by such Originator, (iii) permit Buyer, the Servicer and their respective officers, employees, agents and representatives, to inspect, review and evaluate the Transferred Receivables of such Originator, and (iv) permit Buyer, the Servicer and their respective officers, employees, agents and representatives to discuss matters relating to the Transferred Receivables or such Originator’s performance under this Agreement or the affairs, finances and accounts of such Originator with any of its officers, directors, employees, representatives or agents (in each case, with those Persons having knowledge of such matters) and with its independent certified public accountants as specified in Section 4.02(c)  below;

 

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provided , however , that, so long as no Termination Event or Incipient Termination Event has occurred and is continuing, (i) the Buyer shall be limited to two (2) audits pursuant to this Section 4.02(b)  during each calendar year  and (ii) Originators’ obligation to reimburse out-of-pocket expenses in respect of each such audit shall not exceed $50,000.  If an Incipient Termination Event or a Termination Event shall have occurred and be continuing, or the Buyer, in good faith, notifies any Originator that an Incipient Termination Event or a Termination Event may have occurred, is imminent or deems its rights or interests in the Transferred Receivables insecure, each such Originator shall provide such access at all times and without advance notice and shall provide Buyer and the Servicer with access to its suppliers and customers; provided , that, such Originator shall have the opportunity to be present at the time of any such access to its such Originator’s suppliers or customers.  Each Originator shall make available to Buyer and the Servicer and their respective counsel, as quickly as is possible under the circumstances, originals or copies of all books and records, including Records maintained by such Originator, as Buyer or the Servicer may request.  Each Originator shall deliver any document or instrument necessary for Buyer or the Servicer, as they may from time to time request, to obtain records from any service bureau or other Person that maintains records for such Originator, and shall maintain duplicate records or supporting documentation on media, including computer tapes and discs owned by such Originator.

 

(c)                                   Communication with Accountants .  Each Originator authorizes Buyer and the Servicer and their designated representatives to communicate directly with its independent certified public accountants, and authorizes and, if requested by Buyer or Servicer, shall instruct those accountants to disclose and make available to Buyer, the Servicer and their designated representatives, any and all financial statements and other supporting financial documents, schedules and information relating to such Originator (including copies of any issued management letters) with respect to the business, financial condition and other affairs of such Originator; provided , that the Buyer or Servicer shall notify such Originator prior to any contact with such accountants and advisors and shall give such Originator the opportunity to participate in such discussions.  Each Originator agrees to render to Buyer and the Servicer at such Originator’s own cost and expense, such clerical and other assistance as may be reasonably requested with regard to the foregoing.  If any Termination Event shall have occurred and be continuing, each Originator shall, promptly upon request therefor, deliver to Buyer or its designee all Records reflecting activity through the close of business on the Business Day immediately preceding the date of such request.

 

(d)                                  Compliance With Credit and Collection Policies .  Each Originator shall comply with the Credit and Collection Policies applicable to each Transferred Receivable and the Contracts therefor, and with the terms of such Receivables and Contracts.

 

(e)                                   Assignment .  Each Originator hereby acknowledges that on the date hereof Buyer has collaterally assigned for security purposes all of its right, title and interest in, to and under this Agreement to the Administrative Agent for the benefit of the Administrative Agent, the Lenders, the Indemnified Persons and the Affected Parties and that the Administrative Agent, the Lenders, the Indemnified Persons and the Affected Parties are third party beneficiaries hereof.  Each Originator hereby further acknowledges that after the occurrence and during the continuation of a Termination Event all provisions of this Agreement shall inure to the benefit of the Administrative Agent and the Lenders, including the enforcement of any provision hereof,

 

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but that the Administrative Agent, the Lenders, the Indemnified Person and the Affected Parties shall have no obligations or duties under this Agreement. Each Originator hereby further acknowledges that the execution and performance of this Agreement are conditions precedent for the Administrative Agent and the Lenders to enter into the Funding Agreement and that the agreement of the Administrative Agent and Lenders to enter into the Funding Agreement will directly or indirectly benefit such Originator and constitutes good and valuable consideration for the rights and remedies of the Administrative Agent and each Lender with respect hereto.

 

(f)                                     Compliance with Agreements and Applicable Laws .  Each Originator shall perform each of its obligations under this Agreement and the other Related Documents and comply with all federal, state, provincial and local laws and regulations applicable to it and the Receivables, including those relating to truth in lending, retail installment sales, fair credit billing, fair credit reporting, equal credit opportunity, fair debt collection practices, privacy, licensing, securities laws, margin regulations, taxation, ERISA and labor matters and environmental laws and environmental permits, except where the failure to so comply could not reasonably be expected to result in a Material Adverse Effect.  Each Originator shall pay all Charges, including any stamp duties, which may be imposed as a result of the transactions contemplated by this Agreement and the other Related Documents, except to the extent such Charges are being contested in accordance with Section 4.01(m) or constitute an obligation solely of the Borrower.

 

(g)                                  Maintenance of Existence and Conduct of Business .  Each Originator shall:  (i) do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence and its rights and franchises; (ii) only engage in business of the types described on Schedule 4.02(g)  and reasonable extensions thereof and in accordance with the terms of its certificate or articles of incorporation and by-laws; (iii) at all times maintain, preserve and protect all of its assets and properties which are necessary in the conduct of its business, including all licenses, permits, charters and registrations, and keep the same in good repair, working order and condition in all material respects (taking into consideration ordinary wear and tear) and from time to time make, or cause to be made, all necessary or appropriate repairs, replacements and improvements thereto consistent with industry practices in each case, to the extent the failure to do so could reasonably be expected to (i) materially impair the ability of such Originator to perform its obligations under the Related Documents, (ii) adversely affect the validity or enforceability of any Related Document or the rights and remedies of the Borrower, the Lenders or the Administrative Agent under any Related Document, (iii) adversely affect the federal income tax attributes of the sale, contribution or pledge of the Transferred Receivables pursuant to any Related Document or (iv) affect the enforceability or value of the Transferred Receivables (or the collectibility thereof), the Contracts therefore, the Borrower Collateral (in each case, taken as a whole) or the ownership interests or Liens of the Borrower or the Lenders or the Administrative Agent thereon or the priority of such interests or Liens; and (iv) transact business only in trade names and its legal name as of the Effective Date or, upon 30 days’ prior written notice to Buyer, in any other legal name with respect to which all action requested by Buyer pursuant to Section 6.13 shall have been taken with respect to the Transferred Receivables.

 

(h)                                  Notice of Material Events .  Each Originator shall promptly inform Buyer in writing of the occurrence of any of the following, in each case setting forth the details thereof,

 

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any notices or other correspondence relating thereto, and what action, if any, such Originator proposes to take with respect thereto:

 

(i)                                      (A) any Litigation commenced or threatened against Holdings, any Originator or any other Subsidiary of Holdings that (1) is asserted or instituted against any Plan, its fiduciaries (in their capacity as a fiduciary of any such Plan) or its assets or against Holdings, any Originator or any other Subsidiary of Holdings or any of their respective ERISA Affiliates in connection with any Plan that individually or in the aggregate could reasonably be expected to result in liabilities of any Originator or its ERISA Affiliates in excess of $500,000, (2) alleges criminal misconduct by Holdings, any Originator or any other Subsidiary of Holdings, or (3) if determined adversely, could reasonably be expected to have a Material Adverse Effect or  (B) any Litigation commenced or threatened against Holdings, any Originator or any other Subsidiary of Holdings with respect to or in connection with all or any portion of the Transferred Receivables that (A) seeks damages or penalties in an uninsured amount in excess of $250,000 in the aggregate or (B) seeks injunctive relief;

 

(ii)                                   the commencement of a case or proceeding by or against Holdings, any Originator or any other Subsidiary of Holdings seeking a decree or order in respect of Holdings, any Originator or such Subsidiary (A) under the Bankruptcy Code or any other applicable federal, state, provincial or foreign bankruptcy or other similar law, (B) appointing a custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar official) for Holdings, any Originator or such Subsidiary or for any substantial part of such Person’s assets, or (C) ordering the winding-up or liquidation of the affairs of Holdings, any Originator or any other Subsidiary of Holdings;

 

(iii)                                (A) any Adverse Claim made or asserted against any of the Transferred Receivables of which it becomes aware or (B) any determination that a Transferred Receivable was not an Eligible Receivable at the time sale to Buyer or has ceased to be an Eligible Receivable on account of any matter giving rise to indemnification under Section 5.01 ;

 

(iv)                               the execution or filing with the IRS or any other Governmental Authority of any agreement or other document extending, or having the effect of extending, the period for assessment or collection of any Charges that could reasonably be expected to become a Lien on the Receivables; or

 

(v)                                  any other event, circumstance or condition that has had or could reasonably be expected to have a Material Adverse Effect.

 

(i)                                      Separate Identity .

 

(i)                                      Each Originator shall, and shall cause each other member of the Parent Group to, maintain records and books of account separate from those of Buyer.

 

(ii)                                   The financial statements of Holdings and its consolidated Subsidiaries shall disclose the effects of each Originator’s transactions in accordance with GAAP and, in addition, disclose that (A) Buyer’s sole business consists of the purchase or acceptance

 

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through capital contribution (in the case of the Member) and ownership of the Receivables from the Originators and the subsequent financing of such Receivables pursuant to the Funding Agreement, (B) Buyer is a separate legal entity with its own separate creditors who will be entitled, upon its liquidation, to be satisfied out of Buyer’s assets prior to any value in Buyer becoming available to Buyer’s equity holders and (C) the assets of Buyer are not available to pay creditors of any Originator or any other Affiliate of such Originator.

 

(iii)                                The resolutions, agreements and other instruments underlying the transactions described in this Agreement shall be continuously maintained by each Originator as official records.

 

(iv)                               Each Originator shall, and shall cause each other member of the Parent Group to, maintain an arm’s-length relationship with Buyer and shall not hold itself out as being liable for the Debts or liabilities of Buyer.

 

(v)                                  Each Originator shall, and shall cause each other member of the Parent Group to, keep its assets and its liabilities wholly separate from those of Buyer and shall not commingle the Buyer’s assets with the assets of any other Person.

 

(vi)                               No Originator shall or shall permit any other member of the Parent Group to, conduct its business in the name of the Buyer or in a manner designed to mislead third parties as to the separate identity of Buyer.

 

(vii)                            No Originator shall (and each Originator shall cause each other member of the Parent Group not to) mislead third parties by conducting or appearing to conduct business on behalf of Buyer or expressly or impliedly representing or suggesting that such Originator or any other member of the Parent Group is liable or responsible for the Debts of Buyer or that the assets of such Originator or any other member of the Parent Group are available to pay the creditors of Buyer.

 

(viii)                         The operating expenses and liabilities of Buyer shall be paid from Buyer’s own funds and not from any funds of any Originator or other member of the Parent Group.

 

(ix)                                 Each Originator shall, and shall cause each other member of the Parent Group to, at all times have stationery and other business forms and a mailing address and telephone number separate from those of Buyer.

 

(x)                                    Each Originator shall, and shall cause each other member of the Parent Group to, at all times limit its transactions with Buyer only to those expressly permitted hereunder or under any other Related Document.

 

(j)                                      ERISA .  Each Originator shall give Buyer prompt written notice of (i) any event that could reasonably be expected to result in the imposition of a Lien under Section 412 of the IRC or Section 302 or 4068 of ERISA and (ii) any event that could reasonably be expected to result in the incurrence by any Originator of any liabilities under Title IV of ERISA (other than premium payments arising in the ordinary course of business) in excess of $500,000.

 

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(k)                                   Payment, Performance and Discharge of Obligations .

 

(i)                                      Subject to Section 4.02(k)(ii) , each Originator shall (and shall cause each other member of the Parent Group to) pay, perform and discharge or cause to be paid, performed and discharged all of its obligations and liabilities, including all Charges upon its income and properties and all lawful claims for labor, materials, supplies and services, promptly when due in each case, to the extent the failure to do so could reasonably be expected to (i) materially impair the ability of such Originator to perform its obligations under the Related Documents, (ii) adversely affect the validity or enforceability of any Related Document or the rights and remedies of the Borrower, the Lenders or the Administrative Agent under any Related Document, (iii) adversely affect the federal income tax attributes of the sale, contribution or pledge of the Transferred Receivables pursuant to any Related Document or (iv) affect the enforceability or value of the Transferred Receivables (or the collectibility thereof), the Contracts therefore, the Borrower Collateral (in each case, taken as a whole) or the ownership interests or Liens of the Borrower or the Lenders or the Administrative Agent thereon or the priority of such interests or Liens..

 

(ii)                                   Each Originator and each other member of the Parent Group may in good faith contest, by appropriate proceedings, the validity or amount of any Charges or claims described in Section 4.02(k)(i) ; provided , that (A) adequate reserves with respect to such contest are maintained on the books of such Originator or such member, as applicable, in accordance with GAAP, (B) such contest is maintained and prosecuted continuously and with diligence, (C) none of the Receivables may become subject to forfeiture or loss as a result of such contest, (D) no Lien may be imposed to secure payment of such Charges or claims (excepting only Liens as to which foreclosure is not imminent and the use and value of the property to which the Lien attaches is not impaired during the pendency of such proceeding), and (E) Buyer has advised such Originator in writing that Buyer reasonably believes that nonpayment or nondischarge thereof could not reasonably be expected to have or result in a Material Adverse Effect within the meaning of clauses (b) through (e) thereof.

 

(l)                                      Deposit of Collections .  Each Originator shall (and shall cause each of its Affiliates to) (i) instruct all Obligors to remit all payments with respect to any Receivables directly into a Collection Account, and (ii) deposit or cause to be deposited promptly into a Collection Account, and in any event no later than the first Business Day after receipt thereof, all Collections it may receive in respect of Transferred Receivables (and until so deposited, all such Collections shall be held in trust for the benefit of Buyer and its assigns (including the Administrative Agent and the Lenders)).  No Originator shall make or permit to be made deposits into a Lockbox or a Collection Account other than in accordance with this Agreement and the other Related Documents.  Without limiting the generality of the foregoing, each Originator shall take reasonable steps to assure that no Collections or other proceeds with respect to a Receivable reconveyed to it pursuant to Section 4.04 hereof are paid or deposited into any Lockbox or Collection Account.

 

(m)                                Accounting Changes .  If any Accounting Changes occur and such changes result in a change in the standards or terms used herein, then the parties hereto agree to enter into good

 

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faith negotiations in order to amend such provisions so as to equitably reflect such Accounting Changes with the desired result that the criteria for evaluating the financial condition of such Persons and their Subsidiaries shall be the same after such Accounting Changes as if such Accounting Changes had not been made.  If the parties hereto agree upon the required amendments to this Agreement, then after appropriate amendments have been executed and the underlying Accounting Change with respect thereto has been implemented, any reference to GAAP contained herein shall, only to the extent of such Accounting Change, refer to GAAP consistently applied after giving effect to the implementation of such Accounting Change.  If such parties cannot agree upon the required amendments within 30 days following the date of implementation of any Accounting Change, then all financial statements delivered and all standards and terms used herein shall be prepared, delivered and used without regard to the underlying Accounting Change.

 

(n)                                  General Trial Balance .  Each Originator shall generate its General Trial Balance on each day that such Originator transfers Receivables pursuant to this Agreement.  If at any time any Originator fails to generate its General Trial Balance, Buyer shall have the right to reconstruct such General Trial Balance so that a determination of the Sold Receivables and Contributed Receivables can be made.  Each Originator agrees to cooperate with such reconstruction, including by delivery to Buyer, upon Buyer’s request, of copies of all Records.

 

Section 4.03.  Negative Covenants of the Originators .  Each Originator covenants and agrees that, without the prior written consent of Buyer, from and after the Closing Date and until the Termination Date:

 

(a)                                   Sale of Receivables and Related Assets .  No Originator shall sell, transfer, convey, assign (by operation of law or otherwise) or otherwise dispose of, or assign any right to receive income in respect of, any of its Receivables or Contracts therefor, or any of its rights with respect to any Lockbox or Collection Account, except for the sales, transfers, conveyances, assignments or dispositions expressly contemplated hereunder.

 

(b)                                  Liens .  No Originator shall create, incur, assume or permit to exist any Adverse Claim on or with respect to its Receivables (whether now owned or hereafter acquired) except for Permitted Encumbrances that do not attach to Transferred Receivables.

 

(c)                                   Modifications of Receivables or Contracts .  Except to the extent the Servicer is permitted to do so by the Credit and Collection Policies, no Originator shall extend, amend, forgive, discharge, compromise, cancel or otherwise modify the terms of any Transferred Receivable, or amend, modify or waive any term or condition of any Contract therefor in a manner that would have the effect of creating such a modification of a Receivable.

 

(d)                                  Sale Characterization .  No Originator shall (and each Originator shall cause each other member of the Parent Group not to) make statements or disclosures or prepare any financial statements for any purpose, including for federal income tax, reporting or accounting purposes, that shall account for the transactions contemplated by this Agreement in any manner other than with respect to the Sale of each Sold Receivable originated or acquired by it, as a true sale or absolute assignment of its full right, title and ownership interest in such Transferred

 

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Receivable to Buyer and with respect to the Transfer of each Contributed Receivable originated or acquired by it, as a contribution to the capital of Buyer.

 

(e)                                   Capital Structure and Business .  No Originator shall (and each Originator shall cause each other member of the Parent Group not to) (i) make any changes in any of its business objectives, purposes or operations that could reasonably be expected to have or result in a Material Adverse Effect or (ii) amend, supplement or otherwise modify its certificate or articles of incorporation, bylaws, limited liability company agreement and other organizational documents except where such amendment, supplement or other modification could not reasonably be expect to have or result in a Material Adverse Effect within the meaning of clause (b) through (e) of the definition thereof.  No Originator shall change the type of entity it is, its jurisdiction of organization or its organizational identification number, if any, issued by its state of organization, except upon 30 days’ prior written notice to Buyer and with respect to which jurisdiction all action requested by Buyer pursuant to Section 6.13 shall have been taken with respect to the Transferred Receivables.

 

(f)                                     Actions Affecting Rights .  No Originator shall (i) take any action, or fail to take any action, if such action or failure to take action may interfere with the enforcement of any rights given to the Buyer or its assignees hereunder or under the other Related Documents, including rights with respect to the Transferred Receivables; or (ii) fail to pay any Charge, fee or other obligation of such Originator with respect to the Transferred Receivables, or fail to defend any action, if such failure to pay or defend may adversely affect the priority or enforceability of the perfected title of Buyer to and the sole record and beneficial ownership interest of Buyer in the Transferred Receivables or, prior to their Transfer hereunder, such Originator’s right, title or interest therein.

 

(g)                                  ERISA .  No Originator shall, or shall cause or permit any ERISA Affiliate to, cause or permit to occur an event that could reasonably be expected to result in the imposition of a Lien under Section 412 of the IRC or Section 302 or 4068 of ERISA or cause or permit to occur an ERISA Event.

 

(h)                                  Change to Credit and Collection Policies .  No Originator shall fail to comply in any material respect with, and no material change, amendment, modification or waiver shall be made to, the Credit and Collection Policies without the prior written consent of Buyer.

 

(i)                                      Adverse Tax Consequences .  No Originator shall take or permit to be taken any action (other than with respect to actions taken or to be taken solely by a Governmental Authority), or fail or neglect to perform, keep or observe any of its obligations hereunder or under the other Related Documents, that would have the effect directly or indirectly of subjecting any payment to Buyer, or to any assignee who is a resident of the United States of America, to withholding taxation.

 

(j)                                      No Proceedings .  From and after the Effective Date and until the date one year plus one day following the Termination Date, no Originator shall, directly or indirectly, institute or cause to be instituted against Buyer any proceeding of the type referred to in Sections 8.01(d)  and 8.01(e)  of the Funding Agreement.

 

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(k)                                   Mergers, Acquisitions, Sales, etc .  Other than as permitted pursuant to Section 5.6 of the Existing Credit Agreement, no Transaction Party shall (i) be a party to any merger or consolidation, or directly or indirectly purchase or otherwise acquire all or substantially all of the assets or any stock of any class of, or any partnership or joint venture interest in, any other Person, or (ii) directly or indirectly sell, transfer, assign, convey or lease whether in one or a series of transactions, all or substantially all of its assets other than pursuant hereto, except for any such merger or consolidation, sale, transfer, conveyance, lease or assignment of or by any majority-owned Subsidiary into such Person or into, with or to any other majority-owned Subsidiary and any such purchase or other acquisition by such Person or any majority-owned Subsidiary of the assets or stock of any majority-owned Subsidiary. Notwithstanding the foregoing, other than the Parent in its capacity as the sole member of the Buyer, no member of the Parent Group shall be a party to any merger or consolidation, or directly or indirectly purchase or otherwise acquire all or substantially all of the assets or any Stock of the Buyer. In connection with any merger or consolidation that is permitted pursuant to Section 5.6 of the Existing Credit Agreement, each Originator will (i) provide written notice thereof to the Buyer, and (ii) take all such actions and deliver, or cause to be delivered, such opinion letters of counsel, certificates and other agreements that the Buyer deems reasonably necessary or desirable under the UCC to maintain the perfection and priority of the Buyer’s ownership interest in the Receivables.

 

(l)                                      [RESERVED].

 

(m)                                Modification to the Credit Agreement .  Without the prior written consent of the Administrative Agent, the Parent will not agree to any amendment, modification or waiver to any provision of the Credit Agreement (other than the Existing Credit Agreement so long as the administrative agent thereunder is GE Capital or an Affiliate thereof) which impairs the rights of the Buyer, the Administrative Agent, the Indemnified Persons or the Affected Parties under any Related Document or with respect to the Transferred Receivables, the Collections thereon or the Borrower Collateral.

 

(n)                                  Commingling .  No Originator shall (and each Originator shall cause each other member of the Parent Group not to) deposit or permit the deposit of any funds that do not constitute Collections of Transferred Receivables into any Lockbox or Collection Account, provided that after the Commitment Termination Date, so long as any Transferred Receivables of an Obligor remain unpaid, no Originator shall instruct such Obligor to remit Collections of any Receivables to any Person or account other than to a Lockbox or Collection Account.  If any funds not constituting collections of Transferred Receivables are nonetheless deposited into a Lockbox or Collection Account and such Originator so notifies Buyer, Buyer shall notify the Administrative Agent to promptly remit any such amounts to the applicable Originator.

 

(o)                                  Excluded Receivables .  The definition of “Excluded Receivable” in Annex X makes specific reference to (i) response management facility located in Rochester, New York, (ii) sheet fed printing facility located in Chicago, Illinois and (iii) media placement business formerly known as The Newspaper Network located in Atlanta, Georgia, Greenville, South Carolina and Sacramento, California (each an “ Excluded Unit ”).  In the event any Originator elects to combine the operations of any other divisions or joint ventures of such Originator with an Excluded Unit or rename any such division or joint venture with the name of an Excluded

 

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Unit, the Originator will provide the Buyer not less than thirty (30) days written notice prior to the date of implementation of such action.  After giving such notice, such Originator shall (i) provide such information to the Buyer relating to such action as the Buyer may reasonably request and (ii) execute and deliver such amendments to this Agreement and other agreements and documents related hereto as the Buyer may reasonably request to maintain perfected in the Receivables intended to be conveyed hereunder.

 

Section 4.04.  Breach of Representations, Warranties or Covenants .  Upon discovery by any Originator or Buyer of any breach with respect to any Receivable of any (a) representation, warranty or covenant relating to the absence of Dilution Factors, or (b) representation, warranty or covenant described in Sections 4.01(s) , 4.01(u) , 4.01(x) , 4.01(y) , 4.02(l) , 4.03(a) , 4.03(b) , 4.03(c) , 4.03(n) or 4.03(o) , the party discovering the same shall give prompt written notice thereof to the other parties hereto.  The Originator that breached such representation, warranty or covenant shall, if requested by notice from Buyer, on the first Business Day following receipt of such notice, either (a) repurchase the affected Transferred Receivable from Buyer for cash remitted to the applicable Collection Account or (b) transfer ownership of a new Eligible Receivable or new Eligible Receivables to Buyer on such Business Day without payment of the Sale Price therefor, in each case in an amount (the “ Rejected Amount ”) equal to the Billed Amount of such Transferred Receivable minus the sum of (i) Collections received in respect thereof plus (ii) the amount of any Dilution Factors taken into account in the calculation of the Original Sale Price thereof.  Each Originator shall take reasonable steps to assure that no Collections or other proceeds with respect to a Transferred Receivable so reconveyed to it are paid or deposited into any Collection Account.

 

ARTICLE V
INDEMNIFICATION

 

Section 5.01.  Indemnification .  Without limiting any other rights that Buyer or any of its Stockholders, any of its assignees including the Lenders and the Administrative Agent, or any of their respective officers, directors, employees, attorneys, agents or representatives and transferees, successors and assigns (each, a “ Buyer Indemnified Person ”) may have hereunder or under applicable law, each Originator hereby agrees to indemnify and hold harmless each Buyer Indemnified Person from and against any and all Indemnified Amounts that may be claimed or asserted against or incurred by any such Buyer Indemnified Person in connection with or arising out of the transactions contemplated under this Agreement or with respect to such Originator’s obligations under any other Related Document, any actions or failures to act in connection therewith, including any and all legal costs and expenses arising out of or incurred in connection with disputes between or among any parties to any of the Related Documents, or in respect of any Transferred Receivable or any Contract therefor or the use by such Originator of the Sale Price therefor; provided , that no Originator shall be liable for any indemnification to a Buyer Indemnified Person to the extent that any such Indemnified Amounts (x) result from such Buyer Indemnified Person’s gross negligence or willful misconduct, as determined by a court of competent jurisdiction, (y) constitute  recourse for uncollectible or uncollected Transferred Receivables due to the credit risk, financial inability to pay or other failure (without cause or justification) or inability on the part of the related Obligor to perform its obligations thereunder or the occurrence of any event of bankruptcy with respect to such Obligor or (z) includes any tax imposed on or measured by the net income or profits or any franchise or other tax in lieu thereof

 

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(including branch profits or similar taxes) of any Indemnified Person by (i) the jurisdiction under the laws of which such Indemnified Person is organized or any political subdivision thereof or (ii) the jurisdiction of such Indemnified Person’s applicable lending office or any political subdivision thereof.  Subject to clauses (x), (y) and (z) of the proviso in the immediately preceding sentence, but otherwise without limiting the generality of the foregoing, each Originator shall pay on demand to each Buyer Indemnified Person any and all Indemnified Amounts relating to or resulting from:

 

(i)                                      reliance on any representation or warranty made or deemed made by such Originator (or any of its officers) under or in con