Document:

Exhibit 10.1

 

EXECUTION COPY

 

SEPARATION AGREEMENT

 

DATED AS OF JULY 18, 2012

 

BY AND BETWEEN

 

PPG INDUSTRIES, INC.

 

and

 

EAGLE SPINCO INC.

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    
	
ARTICLE I   DEFINITIONS
    	
3
    
	
 
    	
 
    	
 
    
	
ARTICLE II THE   SPINCO REORGANIZATION
    	
15
    
	
 
    	
 
    	
 
    
	
Section 2.1
    	
Transfer of Spinco Assets; Assumption of Spinco Liabilities
    	
15
    
	
 
    	
 
    	
 
    
	
Section 2.2
    	
Transfer of Excluded Assets; Assumption of Excluded   Liabilities
    	
16
    
	
 
    	
 
    	
 
    
	
Section 2.3
    	
Misallocated Transfers
    	
16
    
	
 
    	
 
    	
 
    
	
Section 2.4
    	
Spinco Assets; Excluded Assets
    	
16
    
	
 
    	
 
    	
 
    
	
Section 2.5
    	
Spinco Liabilities
    	
20
    
	
 
    	
 
    	
 
    
	
Section 2.6
    	
Termination of Intercompany Agreements; Settlement of   Intercompany Accounts
    	
24
    
	
 
    	
 
    	
 
    
	
Section 2.7
    	
Governmental Approvals and Third-Party Consents
    	
25
    
	
 
    	
 
    	
 
    
	
Section 2.8
    	
No Representation or Warranty
    	
29
    
	
 
    	
 
    	
 
    
	
Section 2.9
    	
Waiver of Bulk-Sales Laws
    	
30
    
	
 
    	
 
    	
 
    
	
Section 2.10
    	
Guarantees
    	
30
    
	
 
    	
 
    	
 
    
	
Section 2.11
    	
Bank Accounts; Cash Balances
    	
31
    
	
 
    	
 
    	
 
    
	
ARTICLE III   CLOSING OF THE SPINCO REORGANIZATION; POST-CLOSING WORKING CAPITAL ADJUSTMENT
    	
31
    
	
 
    	
 
    	
 
    
	
Section 3.1
    	
Business Transfer Time
    	
31
    
	
 
    	
 
    	
 
    
	
Section 3.2
    	
Conditions to the Spinco Reorganization
    	
32
    
	
 
    	
 
    	
 
    
	
Section 3.3
    	
Recapitalization of Spinco
    	
32
    
	
 
    	
 
    	
 
    
	
Section 3.4
    	
Transfer of the Eagle Business
    	
33
    
	
 
    	
 
    	
 
    
	
Section 3.5
    	
Transfer of Spinco Assets and Assumption of Spinco   Liabilities
    	
35
    
	
 
    	
 
    	
 
    
	
Section 3.6
    	
Transfer of Excluded Assets; Assumption of Excluded   Liabilities
    	
35
    
	
 
    	
 
    	
 
    
	
Section 3.7
    	
Working Capital Adjustment
    	
36
    
	
 
    	
 
    	
 
    
	
ARTICLE IV THE   DISTRIBUTION
    	
38
    
	
 
    	
 
    	
 
    
	
Section 4.1
    	
Form of Distribution
    	
38
    
	
 
    	
 
    	
 
    
	
Section 4.2
    	
Manner of Distribution
    	
38
    
	
 
    	
 
    	
 
    
	
Section 4.3
    	
Conditions to the Distribution
    	
39
    
	
 
    	
 
    	
 
    
	
Section 4.4
    	
Actions Prior to Distribution
    	
40
    
	
 
    	
 
    	
 
    
	
Section 4.5
    	
Additional Matters
    	
41
    

 

i

 

	
ARTICLE V   MUTUAL RELEASES; INDEMNIFICATION
    	
41
    
	
 
    	
 
    	
 
    
	
Section 5.1
    	
Release of Pre-Business Transfer Time Claims
    	
41
    
	
 
    	
 
    	
 
    
	
Section 5.2
    	
Indemnification by the Spinco Group
    	
44
    
	
 
    	
 
    	
 
    
	
Section 5.3
    	
Indemnification by Burgundy
    	
44
    
	
 
    	
 
    	
 
    
	
Section 5.4
    	
Payments; Reductions for Insurance Proceeds and Other   Recoveries
    	
44
    
	
 
    	
 
    	
 
    
	
Section 5.5
    	
Procedures for Defense, Settlement and Indemnification of   Third-Party Claims
    	
46
    
	
 
    	
 
    	
 
    
	
Section 5.6
    	
Additional Matters
    	
47
    
	
 
    	
 
    	
 
    
	
Section 5.7
    	
Exclusive Remedy
    	
49
    
	
 
    	
 
    	
 
    
	
Section 5.8
    	
Survival of Indemnities
    	
50
    
	
 
    	
 
    	
 
    
	
ARTICLE VI   ADDITIONAL AGREEMENTS
    	
50
    
	
 
    	
 
    	
 
    
	
Section 6.1
    	
Further Assurances
    	
50
    
	
 
    	
 
    	
 
    
	
Section 6.2
    	
Agreement for Exchange of Information
    	
50
    
	
 
    	
 
    	
 
    
	
Section 6.3
    	
Privileged Matters
    	
54
    
	
 
    	
 
    	
 
    
	
Section 6.4
    	
Intellectual Property Assignment/Recordation
    	
55
    
	
 
    	
 
    	
 
    
	
Section 6.5
    	
Intellectual Property Matters
    	
55
    
	
 
    	
 
    	
 
    
	
Section 6.6
    	
Assigned Domain Names
    	
56
    
	
 
    	
 
    	
 
    
	
Section 6.7
    	
Unassigned Domain Names
    	
56
    
	
 
    	
 
    	
 
    
	
Section 6.8
    	
Unassigned Domain Name Content
    	
57
    
	
 
    	
 
    	
 
    
	
Section   6.9
    	
Shared IP Licenses
    	
57
    
	
 
    	
 
    	
 
    
	
Section 6.10
    	
Removal of Tangible Assets
    	
58
    
	
 
    	
 
    	
 
    
	
Section 6.11
    	
Insurance
    	
58
    
	
 
    	
 
    	
 
    
	
Section 6.12
    	
Right of First Refusal
    	
59
    
	
 
    	
 
    	
 
    
	
ARTICLE VII   MISCELLANEOUS
    	
60
    
	
 
    	
 
    	
 
    
	
Section 7.1
    	
Expenses
    	
60
    
	
 
    	
 
    	
 
    
	
Section 7.2
    	
Entire Agreement
    	
60
    
	
 
    	
 
    	
 
    
	
Section 7.3
    	
Governing Law
    	
60
    
	
 
    	
 
    	
 
    
	
Section 7.4
    	
Notices
    	
60
    
	
 
    	
 
    	
 
    
	
Section 7.5
    	
Priority of Agreements
    	
61
    
	
 
    	
 
    	
 
    
	
Section 7.6
    	
Amendments and Waivers
    	
62
    
	
 
    	
 
    	
 
    
	
Section 7.7
    	
Termination
    	
62
    
	
 
    	
 
    	
 
    
	
Section 7.8
    	
Parties in Interest
    	
62
    

 

ii

 

	
Section 7.9
    	
Assignability
    	
62
    
	
 
    	
 
    	
 
    
	
Section 7.10
    	
Interpretation
    	
63
    
	
 
    	
 
    	
 
    
	
Section 7.11
    	
Severability
    	
63
    
	
 
    	
 
    	
 
    
	
Section 7.12
    	
Counterparts
    	
64
    
	
 
    	
 
    	
 
    
	
Section 7.13
    	
Survival of Covenants
    	
64
    
	
 
    	
 
    	
 
    
	
Section 7.14
    	
Jurisdiction; Consent to Jurisdiction
    	
64
    
	
 
    	
 
    	
 
    
	
Section 7.15
    	
Specific Performance
    	
65
    
	
 
    	
 
    	
 
    
	
Section 7.16
    	
Limitations of Liability
    	
65
    

 

SCHEDULES

 

	
Schedule 1.16
    	
—
    	
Calcasieu   Estuary
    
	
Schedule 1.41
    	
—
    	
Natrium Excess   Land
    
	
Schedule 1.58
    	
—
    	
Shared Contracts
    
	
Schedule 1.79
    	
—
    	
TCI Value
    
	
Schedule 2.1
    	
—
    	
Plan of   Reorganization
    
	
Schedule   2.4(a)(ii)
    	
—
    	
Schedule of   Spinco Active Sites
    
	
Schedule   2.4(a)(iii)(1)
    	
—
    	
Schedule of   Spinco Entity Interests
    
	
Schedule   2.4(a)(iii)(2)
    	
—
    	
Schedule of   Third-Party Equity Interests
    
	
Schedule   2.4(a)(vi)
    	
—
    	
Schedule of   Registrable IP
    
	
Schedule   2.4(a)(xiii)
    	
—
    	
Schedule of   Actions
    
	
Schedule   2.4(a)(xiv)
    	
—
    	
Schedule of   Tangible Personal Property
    
	
Schedule   2.4(b)(i)
    	
—
    	
Schedule of   Excluded IP Assets
    
	
Schedule   2.4(b)(vi)
    	
—
    	
Schedule of   Excluded Spinco Sites
    
	
Schedule   2.4(b)(ix)
    	
—
    	
Schedule of   Excluded Assets
    
	
Schedule   2.5(a)(xviii)
    	
—
    	
Schedule of   Spinco Liabilities
    
	
Schedule   2.5(b)(ii)
    	
—
    	
Schedule of Ohio   River/Calcasieu Estuary Liabilities
    
	
Schedule 2.5(b)(viii)
    	
—
    	
Schedule of   Obligations relating to Asbestos
    
	
Schedule   2.6(b)(i)
    	
—
    	
Schedule of   Intercompany Agreements Not To Be Terminated
    
	
Schedule 2.6(c)
    	
—
    	
Plan for   Intercompany Accounts
    
	
Schedule 2.7(e)
    	
—
    	
Transfer of TCI   Interests
    
	
Schedule   3.4(a)(viii)
    	
—
    	
Schedule of   Resigning Officers and Directors of Spinco
    
	
Schedule   3.4(b)(iii)
    	
—
    	
Schedule of   Resigning Officers and Directors of the Burgundy Group
    
	
Schedule 3.7
    	
—
    	
Working Capital
    
	
Schedule 3.7(a)
    	
—
    	
Accounting   Exhibit
    

 

iii

 

EXHIBITS

 

	
Exhibit A
    	
—
    	
Form of Tax   Matters Agreement
    
	
Exhibit B
    	
—
    	
Form of   Transition Services Agreement
    
	
Exhibit C
    	
—
    	
Form of Electric   Generation, Distribution and Transmission Facilities Lease
    
	
Exhibit D
    	
—
    	
Form of Shared   Facilities, Services and Supply Agreement
    
	
Exhibit E
    	
—
    	
Form of   Servitude Agreement
    
	
Exhibit F
    	
—
    	
Form of Liquid   Caustic Soda Sales Agreement - Fresno
    
	
Exhibit G
    	
—
    	
Form of Liquid   Caustic Soda Sales Agreement - Strongsville
    
	
Exhibit H
    	
—
    	
Form of   Hydrochloric Acid Sales Agreement - Lake Charles (Silica)
    
	
Exhibit I
    	
—
    	
Form of Chlorine   and Liquid Caustic Soda Sales Agreement - Barberton
    
	
Exhibit J
    	
—
    	
Form of Liquid   Caustic Soda Sales Agreement - Wichita Falls
    
	
Exhibit K
    	
—
    	
Form of   Hydrochloric Acid Sales Agreement
    
	
Exhibit L
    	
—
    	
Form of Shared Facilities   Agreement — Monroeville
    
	
Exhibit M
    	
—
    	
Form of Master   Terminal Agreement
    

 

iv

 

SEPARATION AGREEMENT

 

THIS SEPARATION AGREEMENT, dated as of July 18, 2012 (this “Agreement”), is by and between PPG Industries, Inc., a Pennsylvania corporation (“Burgundy”), and Eagle Spinco Inc., a Delaware corporation and presently a wholly owned Subsidiary of Burgundy (“Spinco”).  Capitalized terms used in this Agreement and not otherwise defined have the meanings ascribed to such terms in Article I of this Agreement.

 

WHEREAS, Burgundy is engaged, directly and indirectly, in the Eagle Business;

 

WHEREAS, the Board of Directors of Burgundy has determined that it would be in the best interests of Burgundy and its stockholders to separate the Eagle Business from the other businesses of Burgundy;

 

WHEREAS, Burgundy has caused Spinco, which currently conducts no business operations and has no assets or liabilities other than in connection with its formation, to be formed in order to facilitate such separation;

 

WHEREAS, Burgundy currently owns all of the issued and outstanding shares of common stock, par value $0.001 per share, of Spinco (the “Spinco Common Stock”);

 

WHEREAS, Burgundy and Spinco have each determined that it would be appropriate and desirable for (a) Burgundy and its Subsidiaries to transfer or cause to be transferred, to Spinco, the equity of the Spinco Subsidiaries, and to one or more Spinco Subsidiaries, all of the other Spinco Assets (and, to pay in accordance with Section 6.2(d) of the Employee Matters Agreement, the Underfunding Amount (as defined therein), if any), (b) the transfer of certain Excluded Assets to (or the retention of such Excluded Assets by) Burgundy or one or more of its Subsidiaries, and (c) the assumption by Burgundy or one or more of its Subsidiaries of the Excluded Liabilities in exchange for (w) one or more Spinco Subsidiaries assuming the Spinco Liabilities, (x) Spinco issuing to Burgundy shares of Spinco Common Stock pursuant to the Spinco Stock Issuance, (y) Spinco distributing to Burgundy the Special Below Basis Cash Distribution (and, to pay in accordance with Section 6.2(d) of the Employee Matters Agreement, the Grizzly True Up Amount (as defined therein), if any) and (z) Spinco distributing to Burgundy the Special Above Basis Debt/Cash Distribution, as further described herein and in the Merger Agreement (the “Spinco Reorganization”);

 

WHEREAS, Burgundy and Spinco contemplate that, substantially concurrently with or immediately prior to the Spinco Reorganization as further described herein, Spinco will enter into the definitive debt financing arrangements as contemplated by the Spinco Commitment Letter and the Spinco Related Letter and the Burgundy Commitment Letter and the Burgundy Related Letter, as further described herein and in the Merger Agreement (the “Spinco Financing Arrangements”, together with the Spinco Stock Issuance and the Special Distribution, the “Recapitalization”);

 

WHEREAS, Burgundy and Spinco contemplate that, following the Spinco Reorganization and Recapitalization as further described herein, Burgundy will either (a) distribute all of the shares of Spinco Common Stock to holders of Burgundy Common Stock without consideration on a pro rata basis (the “One-Step Spin-Off”) or (b) consummate an offer to exchange (the “Exchange 

 

 

Offer”) shares of Spinco Common Stock for currently outstanding shares of Burgundy’s common stock, $1.66-2/3 par value per share (“Burgundy Common Stock”) and, in the event that Burgundy’s stockholders subscribe for less than all of the Spinco Common Stock in the Exchange Offer, Burgundy will distribute, pro rata to holders of Burgundy Common Stock, any unsubscribed Spinco Common Stock on the Distribution Date immediately following the consummation of the Exchange Offer so that Burgundy will be treated for U.S. federal income Tax purposes as having distributed all of the Spinco Common Stock to its stockholders (the “Clean-Up Spin-Off”);

 

WHEREAS, the disposition by Burgundy of 100% of the Spinco Common Stock, whether by way of the One-Step Spin-Off or the Exchange Offer (followed by any Clean-Up Spin-Off), is referred to herein as the “Distribution”;

 

WHEREAS, the Parties intend that, for U.S. federal income tax purposes, the contribution (as part of the Spinco Reorganization) by Burgundy to Spinco of all of the Spinco Assets held directly by Burgundy in exchange for (a) the assumption by Spinco Subsidiaries of Spinco Liabilities of Burgundy, (b) the issuance by Spinco to Burgundy of shares of Spinco Common Stock pursuant to the Spinco Stock Issuance, (c) the distribution by Spinco to Burgundy of the Special Below Basis Cash Distribution, and (d) the distribution by Spinco to Burgundy of the Special Above Basis Debt/Cash Distribution (the “Contribution”) and the Distribution, taken together, will qualify as a “reorganization” within the meaning of Section 368(a)(1)(D) of the Code;

 

WHEREAS, Burgundy has requested a private letter ruling (the “Private Letter Ruling”) from the IRS substantially to the effect that, among other things, (i) the Contribution and Distribution, taken together, will qualify as a “reorganization” within the meaning of Section 368(a)(1)(D) of the Code (the “IRS D Reorganization Ruling”), and (ii) Burgundy will not recognize gain or loss for U.S. federal income Tax purposes in connection with the receipt of the Spinco Exchange Debt in the Special Above Basis Debt/Cash Distribution or the consummation of the Debt Exchange (the “IRS Debt Exchange Ruling”);

 

WHEREAS, pursuant to the Agreement and Plan of Merger, dated July 18, 2012 (the “Merger Agreement”), among Burgundy, Spinco, and Georgia Gulf Corporation, a Delaware corporation (“Grizzly”), immediately following the Distribution, a Subsidiary of Grizzly will merge with and into Spinco, subject to Schedule 8.3(e) to the Merger Agreement (the “Merger”) and Spinco Common Stock will be converted into shares of common stock of Grizzly on the terms and subject to the conditions of the Merger Agreement;

 

WHEREAS, it is a condition to the Merger that, prior to the Effective Time, the Spinco Reorganization and the Distribution be completed;

 

WHEREAS, the Distribution will be carried out for the corporate business purpose of tailoring Spinco’s corporate structure to facilitate the Merger (which, for U.S. federal income tax purposes, is intended to qualify as a “reorganization” within the meaning of Section 368(a) of the Code);

 

WHEREAS, Burgundy and Spinco have determined that (a) the Merger will not be undertaken unless the Distribution occurs, (b) the Merger cannot be accomplished by an alternative 

 

2

 

nontaxable transaction that does not involve the Distribution and is neither impractical nor unduly expensive, and (c) Grizzly is not related to Burgundy or Spinco;

 

WHEREAS, the Parties intend this Agreement to be, and hereby adopt as, a “plan of reorganization” within the meaning of Treasury Regulation Section 1.368-2(g); and

 

WHEREAS, the Parties intend in this Agreement to set forth the principal arrangements between them regarding the Spinco Reorganization, the Recapitalization and the Distribution, and certain other agreements that will, following the Distribution, govern certain matters relating to the Spinco Reorganization, the Recapitalization and the Distribution and the relationship of Burgundy, Spinco and their respective Subsidiaries.

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, the Parties agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

For purposes of this Agreement, the following terms, when utilized in a capitalized form, will have the following meanings:

 

Section 1.1                                      “Above Basis Amount” means $900 million, minus the TCI Value to the extent the TCI Interests are not transferred at the Business Transfer Time, minus the Below Basis Amount, and minus, if the Estimated Adjustment Payment is negative, the absolute value of the Estimated Adjustment Payment, and plus, if the Estimated Adjustment Payment is positive, the Estimated Adjustment Payment (as such terms are used and defined in the Separation Agreement), subject to adjustment as set forth in Section 3.1(d) of the Merger Agreement.

 

Section 1.2                                      “Accounting Exhibit” means the exhibits set forth on Schedules 3.7(a), 3.7(b) and 3.7(c) attached hereto and the line items (such line items calculated in accordance with GAAP, consistently applied), methods, practices, categories, estimates, and assumptions reflected therein.

 

Section 1.3                                      “Action” means any demand, charge, claim, action, suit, counter suit, arbitration, hearing, inquiry, proceeding, audit, review, complaint, litigation or investigation, or proceeding of any nature whether administrative, civil, criminal, regulatory or otherwise, by or before any federal, state, local, foreign or international Governmental Authority or any arbitration or mediation tribunal.

 

Section 1.4                                      “Affiliate” means a Person that, directly or indirectly, through one or more intermediaries, controls or is controlled by, or is under common control with, a specified Person.  The term “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”), as applied to any Person, means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or other ownership interest, by Contract or otherwise; provided, however, that for purposes of this Agreement, from and after the 

 

3

 

Distribution Date, no member of either Group shall be deemed an Affiliate of any member of the other Group.

 

Section 1.5                                      “Agent” has the meaning set forth in the Merger Agreement.

 

Section 1.6                                      “Ancillary Agreements” means the Tax Matters Agreement, the Transition Services Agreement, the Employee Matters Agreement, the Shared Facilities, Services and Supply Agreement, the Electric Generation, Distribution and Transmission Facilities Lease, the Servitude Agreement, the Liquid Caustic Soda Sales Agreement (Fresno), the Liquid Caustic Soda Sales Agreement (Strongsville), the Hydrochloric Acid Sales Agreement - Lake Charles (Silica), the Chlorine and Liquid Caustic Soda Sales Agreement (Barberton), the Liquid Caustic Soda Sales Agreement (Wichita Falls), the Hydrochloric Acid Sales Agreement, the Shared Facilities Agreement (Monroeville) and the Master Terminal Agreement.

 

Section 1.7                                      “Assets” means assets, properties and rights (including goodwill), wherever located (including in the possession of vendors or other third parties or elsewhere), whether real, personal or mixed, tangible, intangible or contingent, in each case whether or not recorded or reflected or required to be recorded or reflected on the books and records or financial statements of any Person.

 

Section 1.8                                      “Below Basis Amount” means $225 million, plus the TCI Basis if the TCI Interests are transferred at the Business Transfer Time, (x) unless pursuant to a written notice delivered to Spinco prior to the commencement of the Marketing Period (as defined in the Merger Agreement) (i) Burgundy elects to reduce the Below Basis Amount by the amount specified in such notice; provided, however, that Burgundy shall under no circumstances reduce the Below Basis Amount to an amount that is less than $200 million (exclusive of the TCI Basis); or (ii) Burgundy elects to increase the Below Basis Amount by the amount specified in such notice after considering in good faith the estimated adjusted Tax bases of the assets to be transferred by Burgundy to Spinco and the estimated amount of liabilities to be assumed by Spinco; provided that in no event shall Burgundy increase the Below Basis Amount to more than $260 million (exclusive of the TCI Basis) without the written consent of Grizzly and (y) (A) if the Estimated Adjustment Payment is negative, minus the absolute value of the Estimated Adjustment Payment and (B) if the Estimated Adjustment Payment is positive, plus the Estimated Adjustment Payment.

 

Section 1.9                                      “Burgundy Benefit Plan” has the meaning set forth in the Merger Agreement.

 

Section 1.10                                “Burgundy Commitment Letter” has the meaning set forth in the Merger Agreement.

 

Section 1.11                                “Burgundy Disqualifying Action” has the meaning set forth in the Tax Matters Agreement.

 

Section 1.12                                “Burgundy Group” means Burgundy and each of its Subsidiaries, but excluding any member of the Spinco Group.

 

4

 

Section 1.13                                “Burgundy Indemnitees” means Burgundy, each member of the Burgundy Group, and all Persons who are or have been stockholders, directors, partners, managers, managing members, officers, agents or employees of any member of the Burgundy Group (in each case, in their respective capacities as such) or, in the event the TCI Interests are transferred to Spinco at or prior to the Business Transfer Time, TCI, in each case, together with their respective heirs, executors, administrators, successors and assigns.

 

Section 1.14                                “Burgundy Related Letter” has the meaning set forth in the Merger Agreement.

 

Section 1.15                                “Business Day” means any day, other than a Saturday, Sunday or another day on which commercial banking institutions in New York State are authorized or required by Law to be closed.

 

Section 1.16                                “Calcasieu Estuary” means the entire area set forth in the map attached as Schedule 1.16.

 

Section 1.17                                “Claims-Made Policies” means policies issued to Burgundy or its Affiliates by insurers on or after July 1, 1986, on a “claims made” or “occurrence reported” basis, that actually or potentially cover claims, lawsuits, or liabilities for which Burgundy seeks indemnification under this Agreement.

 

Section 1.18                                “Code” means the Internal Revenue Code of 1986, as amended.

 

Section 1.19                                “Consent” and “Consents” means any consents, waivers or approvals from, or notification requirements to, or authorizations by, any third parties.

 

Section 1.20                                “Contract” or “agreement” means any loan or credit agreement, note, bond, indenture, mortgage, deed of trust, lease, sublease, franchise, permit, authorization, license, contract, instrument or other commitment, obligation or arrangement, whether written or oral, that is binding on any Person or any part of its property under applicable Law, other than any Burgundy Benefit Plan or Grizzly Benefit Plan, and the term “Contractual” shall have the correlative meaning.

 

Section 1.21                                “Debt Exchange” has the meaning set forth in the Merger Agreement.

 

Section 1.22                                “Distribution Date” means the date selected by the Board of Directors of Burgundy or its designee for the Distribution, through a One-Step Spin-Off or an Exchange Offer followed by the Clean-Up Spin-Off (if necessary).

 

Section 1.23                                “Eagle Business” means the chlor-alkali, derivatives and other commodity or other chemicals business, as operated at, or at any time prior to, the Business Transfer Time, at or in respect of the Spinco Active Sites which business currently produces chlorine, caustic soda and related chemicals for use in chemical manufacturing, pulp and paper production, water treatment, plastics production, agricultural products, pharmaceuticals and other applications; provided that, notwithstanding the foregoing, the “Eagle Business” shall include any discontinued chlor-alkali, derivatives and other commodity or other chemical products

 

5

 

manufactured by Burgundy or its Affiliates at any Spinco Active Site at any time prior to the Business Transfer Time.  For the avoidance of doubt, the Eagle Business includes the production of any products manufactured at  a Spinco Active Site and also at a Spinco Inactive Site, including the production of perchlorethylene or trichlorethylene by Burgundy and its Affiliates.

 

Section 1.24           “Effective Time” has the meaning set forth in the Merger Agreement.

 

Section 1.25           “Employee Matters Agreement” means the Employee Matters Agreement entered into on the date of this Agreement, by and among Burgundy, Grizzly and Spinco.

 

Section 1.26           “Environmental Conditions” means the presence in the environment, including the land surface or subsurface strata, groundwater, sediment, surface water or indoor and ambient air, of any Hazardous Materials.

 

Section 1.27           “Environmental Laws” means all Laws of any Governmental Authority that relate to pollution or the protection, clean up or restoration of the environment (including indoor and ambient air, surface water, ground water, sediment, land surface or subsurface strata) including the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. § 9601 et seq.) (“CERCLA”), the Federal Water Pollution Control Act (33 U.S.C. § 1251 et seq.) (“CWA”), the Resource Conservation and Recovery Act (42 U.S.C. § 6901 et seq., as amended) (“RCRA”), the Safe Drinking Water Act (21 U.S.C. § 349, 42 U.S.C. §§ 201, 300f) (“SDWA”), the Toxic Substances Control Act (15 U.S.C. § 2601 et seq.) (“TSCA”), the Clean Air Act (42 U.S.C. § 7401 et seq.) (“CAA”), the Oil Pollution Act of 1990 (“OPA”), and any similar state or local Laws or any other binding legal obligation in effect now or in the future relating to the release of Hazardous Materials, or otherwise relating to the treatment, storage, disposal, transport or handling of Hazardous Materials, or to the exposure of any individual to a release of Hazardous Materials.

 

Section 1.28           “Exchange Act” has the meaning set forth in the Merger Agreement.

 

Section 1.29           “Final Determination” has the meaning set forth in the Tax Matters Agreement.

 

Section 1.30           “Governmental Approvals” means any notices, reports or other filings to be made to, or any Consents, registrations, permits or authorizations to be obtained from, any Governmental Authority.

 

Section 1.31           “Governmental Authority” means any federal, state, local or foreign court, administrative agency, official board, bureau, governmental or quasi-governmental entities having competent jurisdiction over Burgundy or Spinco, any of their respective Subsidiaries and any other tribunal or commission or other governmental department, authority or instrumentality or any subdivision, agency, mediator, commission or authority of competent jurisdiction.

 

6

 

Section 1.32           “Grizzly Benefit Plan” has the meaning set forth in the Merger Agreement.

 

Section 1.33           “Grizzly Group” means Grizzly and each of its Subsidiaries, including, after the Effective Time, the Spinco Group.

 

Section 1.34           “Group” means the Burgundy Group, the Spinco Group or the Grizzly Group, as the context requires.

 

Section 1.35           “Hazardous Material” means any substance that is listed, defined, designated or classified as, or otherwise determined to be, hazardous, radioactive, infectious, reactive, corrosive, ignitable, flammable or toxic or a pollutant or a contaminant or is otherwise subject to regulation, control or Remediation under any Environmental Law.

 

Section 1.36           “Indemnifying Party” means any Party that may be obligated to provide indemnification to an Indemnitee pursuant to Article V hereof or any other section of this Agreement or any Ancillary Agreement.

 

Section 1.37           “Indemnitee” means any Person that may be entitled to indemnification from an Indemnifying Party pursuant to Article V hereof or any other section of this Agreement or any Ancillary Agreement.

 

Section 1.38           “Information” means information in written, oral, electronic or other tangible or intangible form, stored in any medium, including studies, reports, records, books, Contracts, instruments, surveys, discoveries, ideas, concepts, know-how, techniques, designs, specifications, drawings, blueprints, diagrams, models, prototypes, samples, flow charts, data, computer data, disks, diskettes, tapes, computer programs or other software, marketing plans, customer names, communications by or to attorneys (including attorney-client privileged communications), memos and other materials prepared by attorneys or under their direction (including attorney work product), and other technical, financial, employee or business information or data, but in any case excluding back-up tapes.

 

Section 1.39           “Insurance Proceeds” means those monies:  (i) received by an insured from an insurance carrier; or (ii) paid by an insurance carrier on behalf of the insured.

 

Section 1.40           “Intellectual Property Rights” means, in any and all jurisdictions throughout the world, all (i) inventions and discoveries (whether or not patentable or reduced to practice), patents, patent applications, invention disclosures, and statutory invention registrations, including reissues, divisionals, provisionals, continuations, continuations-in-part, extensions, utility models, design patents and reexaminations thereof, (ii) trademarks, service marks, domain names, uniform resource locators, trade dress, slogans, logos, symbols, trade names, brand names and other identifiers of source or goodwill, including registrations and applications for registration thereof and including the goodwill symbolized thereby or associated therewith (the items in this clause (ii) being referred to collectively herein as “Trademarks”), (iii) published and unpublished works of authorship, whether copyrightable or not, copyrights therein and thereto, registrations, applications, renewals and extensions therefor, industrial designs, mask works, and any and all rights associated therewith, (iv) computer data, computer programs or other software, and databases, in each case whether in source code, object code or other form, and all related

 

7

 

documentation, (v) all information to the extent not included in clauses (i)-(iv), such as data, trade secrets, processes, procedures, methods, techniques, compositions, formulas, ingredients, product specifications, mold specifications, drawings, sketches, designs, structural shaping, manufacturing techniques, material specifications, process specifications, engineering specifications, and the like, and all rights to limit the use or disclosure thereof, (vi) rights of privacy and publicity, (vii) any and all other proprietary rights or property similar to any of the foregoing in any jurisdiction, whether registered or not registered, together with the right to apply for the registration of any such rights, and all rights or forms of protection having equivalent or similar effect, in any jurisdiction, and (viii) any and all other intellectual property under the Laws of any country throughout the world.

 

Section 1.41           “IRS” means the U.S. Internal Revenue Service.

 

Section 1.42           “Law” means any federal, state, local or foreign law, statute, code, ordinance, rule, regulation, judgment, order, injunction, decree, arbitration award, agency requirement, license or permit of any Governmental Authority.

 

Section 1.43           “Liabilities” means all debts, liabilities, guarantees, assurances, commitments and obligations, whether fixed, contingent or absolute, asserted or unasserted, matured or unmatured, liquidated or unliquidated, accrued or not accrued, known or unknown, due or to become due, whenever or however arising (including whether arising out of any Contract or tort based on negligence or strict liability) and whether or not the same would be required by U.S. Generally Accepted Accounting Principles to be reflected in financial statements or disclosed in the notes thereto.

 

Section 1.44           “Losses” means liabilities, damages, penalties, judgments, assessments, losses, costs and expenses in any case, whether arising under strict liability or otherwise (including reasonable attorneys’ fees); provided, however, that (a) with respect to claims made hereunder by (i) any member of the Burgundy Group, on the one hand, against any member of the Spinco Group, on the other hand, or (ii) by any member of the Spinco Group, on the one hand, against any member of the Burgundy Group, on the other hand (collectively, “Direct Claims”), “Losses” will not include attorneys’ fees or other arbitration or litigation expenses (including without limitation experts’ fees and administrative costs) incurred in connection with the prosecution of such Direct Claim under the provisions set forth in Section 7.14 and (b) “Losses” will not include any punitive, exemplary, special, or similar damages in excess of compensatory damages, except to the extent awarded by a court of competent jurisdiction in connection with a Third-Party Claim.

 

Section 1.45           “Natrium Excess Land” means the area described in the map attached hereto as Schedule 1.45.

 

Section 1.46           “Natural Resource Damages” means damages for injury to, destruction of, loss of, or loss of use of, natural resources, including the reasonable costs of assessing the damage, which are recoverable by a United States Trustee, a State Trustee, an Indian tribe trustee, or a foreign trustee pursuant to CERCLA, CWA, OPA or a counterpart state statute.

 

8

 

Section 1.47           “Necessary Licenses” means those Intellectual Property Rights that are (i) licensed to the Burgundy Group pursuant to a Shared Contract; (ii) used to conduct the Spinco Business prior to the Business Transfer Time; and (iii) necessary to conduct the Spinco Business in substantially the same manner as conducted immediately prior to the Business Transfer Time.  .

 

Section 1.48           “Non-Spinco Business” means all businesses and operations (whether or not such businesses or operations are or have been terminated, divested or discontinued) conducted prior to the Business Transfer Time by Burgundy, the Burgundy Subsidiaries, Spinco or the Spinco Subsidiaries, in each case, that are not included in the Eagle Business.

 

Section 1.49           “Ohio River” means the river, riverbottom and riverbank of the Ohio River to the normal high water mark depicted on the maps attached to Schedule 2.5(b)(ii).  For the avoidance of doubt, the maps attached to Schedule 2.5(b)(ii) are only for the purpose of delineating the normal high water mark for the portion of the Ohio River delineated thereon.

 

Section 1.50           “Order” means any order, judgment, injunction, award, decree, writ or other legally enforceable requirement handed down, adopted or imposed by, including any consent decree, settlement agreement or similar written agreement with, any Governmental Authority.

 

Section 1.51           “Parties” means Burgundy and Spinco and, for purposes of the obligations in Section 5.2, the Spinco Group.

 

Section 1.52           “Person” means a natural person, corporation, company, joint venture, individual business trust, trust association, partnership, limited partnership, limited liability company or other entity, including a Governmental Authority.

 

Section 1.53           “Policies” means all insurance policies, insurance Contracts and claim administration Contracts of any kind of Burgundy and its Subsidiaries (including members of the Spinco Group) and their predecessors which were or are in effect at any time at or prior to the Business Transfer Time, including commercial general liability, automobile liability, workers’ compensation and employer’s liability, excess and umbrella liability, aircraft hull and liability, commercial crime (including ERISA bond), property and business interruption, directors’ and officers’ liability, fiduciary liability, errors and omissions, special accident, environmental, inland and marine, and captive insurance company arrangements, together with all rights, benefits and privileges thereunder.

 

Section 1.54           “Real Estate Approvals” means all Governmental Approvals associated with the subdivision of any Real Property that is a Spinco Asset from Real Property that is an Excluded Asset and the Conveyance of such Real Property that is a Spinco Asset to Spinco as contemplated by this Agreement, including without limitation any zoning variances, approvals or other relief from the strict requirements of any applicable zoning, subdivision or land development ordinance associated therewith.

 

Section 1.55           “Real Property” means land together with all easements, rights and interests arising out of the ownership thereof or appurtenant thereto and improvements thereon.

 

9

 

Section 1.56           “Record Date” means the close of business on the date to be determined by Burgundy’s Board of Directors as the record date for determining stockholders of Burgundy entitled to receive shares of Spinco Common Stock in the Distribution, to the extent the Distribution is effected through a One-Step Spin-Off, or in connection with any Clean-Up Spin-Off.

 

Section 1.57           “Record Holders” means the holders of record of Burgundy Common Stock as of the close of business on the Record Date.

 

Section 1.58           “Release” means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, or disposing into the environment, including the abandonment or discarding of barrels, containers, and other closed receptacles containing Hazardous Materials.

 

Section 1.59           “Remediation” means Actions required by a Governmental Authority to clean up, abate, remove, or control Releases of Hazardous Materials into the environment in order to protect public health or the environment pursuant to applicable Environmental Laws, including Actions to study, investigate, monitor and assess such Releases but, for the avoidance of doubt, shall not include any Actions which may be required to address Natural Resource Damages with respect to the Calcasieu Estuary.

 

Section 1.60           “Securities Act” has the meaning set forth in the Merger Agreement.

 

Section 1.61           “Security Interest” means any mortgage, security interest, pledge, lien, charge, claim, option, indenture, right to acquire, right of first refusal, deed of trust, licenses to third parties, leases to third parties, security agreements, voting or other restriction, right-of-way, covenant, condition, easement, encroachment, restriction on transfer, or other encumbrance and other restrictions or limitations on use of real or personal property of any nature whatsoever.

 

Section 1.62           “Shared Burgundy IP” means all Intellectual Property Rights which are (i) owned or controlled by the Burgundy Group as of the Business Transfer Time and not included in the Spinco Assets; (ii) used to conduct the Spinco Business prior to the Business Transfer Time; and (iii) necessary to conduct the Spinco Business in substantially the same manner as conducted immediately prior to the Business Transfer Time; provided, however, that the Shared Burgundy IP will exclude any Trademarks, including the trademarks and domain names listed on Schedule 2.4(b)(i).

 

Section 1.63           “Shared Contracts” means the Contracts listed on Schedule 1.58 and any other Contract that relates to both (a) the Eagle Business and (b) the Non-Spinco Business.

 

Section 1.64           “Shared Information” means (a) all Information provided by any member of the Spinco Group to a member of the Burgundy Group prior to the Business Transfer Time, and (b) any Information in the possession or under the control of such respective Group that relates to the operation of the Eagle Business prior to the Business Transfer Time and that the requesting Party reasonably needs (i) to comply with reporting, disclosure, filing or other requirements imposed on the requesting Party (including under applicable securities and tax

 

10

 

Laws) by a Governmental Authority having jurisdiction over the requesting Party, (ii) for use in any other judicial, regulatory, administrative or other proceeding or in order to satisfy audit, accounting, claims, regulatory, litigation or other similar requirements, in each case other than claims or allegations that one Party to this Agreement has against the other, (iii) subject to the foregoing clause (ii) above, to comply with its obligations under this Agreement, the Merger Agreement or any Ancillary Agreement, or (iv) to the extent such Information and cooperation is necessary to comply with such reporting, filing and disclosure obligations, for the preparation of financial statements or completing an audit, and as reasonably necessary to conduct the ongoing businesses of Burgundy or Spinco, as the case may be.

 

Section 1.65           “Shared Spinco IP” means all Intellectual Property Rights which are (i) included in the Spinco Assets; (ii) used to conduct the Burgundy Group’s business prior to the Business Transfer Time; and (iii) necessary to conduct the Burgundy Group’s business in substantially the same manner as conducted immediately prior to the Business Transfer Time; provided, however, that the Shared Spinco IP will exclude any Trademarks, including the trademarks and domain names listed on Schedule 2.4(b)(i).

 

Section 1.66           “Spinco Business” means the Eagle Business and also, with respect to events that take place after the Business Transfer Time, the Eagle Business as it is operated by the Spinco Group or the Grizzly Group after the Business Transfer Time, including any new activities, expansions, or other modifications made to the Spinco Assets acquired at the Business Transfer Time.

 

Section 1.67           “Spinco Commitment Letter” has the meaning set forth in the Merger Agreement.

 

Section 1.68           “Spinco Exchange Debt” has the meaning set forth in the Merger Agreement.

 

Section 1.69           “Spinco Employees” has the meaning set forth in the Employee Matters Agreement

 

Section 1.70           “Spinco Facility” means any facility located on a Spinco Active Site.

 

Section 1.71           “Spinco Group” means Spinco and each of its Subsidiaries.  The Grizzly Group will be deemed to be members of the Spinco Group as of the Effective Time.

 

Section 1.72           “Spinco Inactive Sites” means any and all Real Property owned, leased or operated prior to the Business Transfer Time by Burgundy or its Affiliates (including the Spinco Group) relating to the Eagle Business, other than (i) the Spinco Active Sites and (ii) other Real Property expressly identified in this Agreement or any Ancillary Agreement as Assets to be acquired by any member of the Spinco Group.

 

Section 1.73           “Spinco Indemnitees” means Spinco, each member of the Spinco Group, and all Persons who are or have been stockholders, directors, partners, managers, managing members, officers, agents or employees of any member of the Spinco Group (in each

 

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case, in their respective capacities as such), in each case, together with their respective heirs, executors, administrators, successors and assigns.

 

Section 1.74           “Spinco Related Letter” has the meaning set forth in the Merger Agreement.

 

Section 1.75           “Spinco Securities” has the meaning set forth in the Merger Agreement.

 

Section 1.76           “Subsidiary” means, with respect to any Person, a corporation, partnership, association, limited liability company, trust or other form of legal entity in which such Person, a Subsidiary of such Person or such Person and one or more Subsidiaries of such Person, directly or indirectly, has either (i) a majority ownership in the equity thereof, (ii) the power, under ordinary circumstances, to elect, or to direct the election of, a majority of the board of directors or other analogous governing body of such entity, or (iii) the title or function of general partner or manager, or the right to designate the Person having such title or function; provided, however, that TCI shall not be deemed a Subsidiary of Burgundy.

 

Section 1.77           “Target Working Capital Amount” means the sum of the Target Working Capital Amount Excluding TCI plus, in the event the TCI Interests are Conveyed to Spinco at or prior to the Business Transfer Time, the TCI Target Working Capital Amount multiplied by 60%.

 

Section 1.78           “Target Working Capital Amount Excluding TCI” means 9.18% (as adjusted pursuant to Schedule 3.7(a)) of the annualized quarterly sales of the Eagle Business for the latest quarter ending on or before the Effective Time, excluding TCI, as calculated in accordance with Schedule 3.7(a).

 

Section 1.79           “Tax” or “Taxes” has the meaning set forth in the Tax Matters Agreement.

 

Section 1.80           “Tax Return” has the meaning set forth in the Tax Matters Agreement.

 

Section 1.81           “Taxing Authority” has the meaning set forth in the Merger Agreement.

 

Section 1.82           “TCI” means Taiwan Chlorine Industries, Ltd., a Taiwanese corporation.

 

Section 1.83           “TCI Agreement” means that certain Agreement, dated December 12, 1986 by and between Burgundy and China Petrochemical Development Corporation.

 

Section 1.84           “TCI Basis” means $12 million.

 

Section 1.85           “TCI Interests”  means all shares of TCI owned by Burgundy as of immediately prior to the Business Transfer Time.

 

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Section 1.86           “TCI Target Working Capital Amount” means $4.5 million.

 

Section 1.87           “TCI Value” has the meaning set forth in Schedule 1.81.

 

Section 1.88           “Transactions” has the meaning set forth in the Tax Matters Agreement.

 

Section 1.89           “Working Capital” means the sum of the “Adjusted Working Capital Before Normalization Adjustments” of the Eagle Business as set forth on and calculated in accordance with, Schedule 3.7(b) plus, in the event the TCI Interests are Conveyed to Spinco at or prior to the Business Transfer Time, 60% of the (a) sum of (i) the “Adjusted Working Capital” of TCI as set forth on and calculated in accordance with, Schedule 3.7(c) plus (ii) any cash or cash equivalents at TCI, less (b) any debt at TCI.  Working capital will be comprised of the components set forth on and calculated in accordance with the Accounting Exhibit.

 

TERMS DEFINED IN THIS AGREEMENT

 

	
Defined Term
    	
 
    	
Section
    
	
 
    	
 
    	
 
    
	
Accounting Firm
    	
 
    	
Section 3.7(c)
    
	
Adjustment Payment
    	
 
    	
Section 3.7(e)
    
	
Agreement
    	
 
    	
Preamble
    
	
Asbestos Exposure Claim
    	
 
    	
Section 2.5(b)(ix)
    
	
Assigned Domains
    	
 
    	
Section 6.6
    
	
Burgundy
    	
 
    	
Preamble
    
	
Burgundy Accounts
    	
 
    	
Section 2.11
    
	
Burgundy Common Stock
    	
 
    	
Recitals
    
	
Burgundy Objection
    	
 
    	
Section 3.7(b)
    
	
Burgundy Transfer Documents
    	
 
    	
Section 3.5
    
	
Business Transfer Date
    	
 
    	
Section 3.1
    
	
Business Transfer Time
    	
 
    	
Section 3.1
    
	
CAA
    	
 
    	
Section 1.27
    
	
CERCLA
    	
 
    	
Section 1.27
    
	
Chlorine and Liquid Caustic Soda Sales Agreement   (Barberton)
    	
 
    	
Section 3.4(a)(ix)
    
	
Claims Notice
    	
 
    	
Section 5.5(b)(i)
    
	
Clean-Up Spin-Off
    	
 
    	
Recitals
    
	
Closing Adjustment Statement
    	
 
    	
Section 3.7(a)
    
	
Contribution
    	
 
    	
Recitals
    
	
Convey
    	
 
    	
Section 2.1(a)
    
	
Covered Claim
    	
 
    	
Section 7.14(a)
    
	
CWA
    	
 
    	
Section 1.27
    
	
Direct Claims
    	
 
    	
Section 1.44
    
	
Distribution
    	
 
    	
Recitals
    
	
Distribution Tax Opinion
    	
 
    	
Section 3.2(c)
    
	
Election Notice
    	
 
    	
Section 6.12(a)
    
	
Electric Generation, Distribution and Transmission   Facilities Lease
    	
 
    	
Section 3.4(a)(iii)
    
	
Estimated Adjustment Payment
    	
 
    	
Section 3.7(a)
    

 

13

 

	
Estimated Closing Adjustment Statement
    	
 
    	
Section 3.7(a)
    
	
Exchange Offer
    	
 
    	
Recitals
    
	
Excluded Assets
    	
 
    	
Section 2.4(b)
    
	
Excluded Environmental Liabilities
    	
 
    	
Section 2.5(b)(iii)
    
	
Excluded IP Assets
    	
 
    	
Section 2.4(b)(i)
    
	
Excluded Liabilities
    	
 
    	
Section 2.5(b)
    
	
Excluded Spinco Sites
    	
 
    	
Section 2.4(b)(iv)
    
	
Final Closing Adjustment Statement
    	
 
    	
Section 3.7(d)
    
	
First Refusal Right
    	
 
    	
Section 6.12(a)
    
	
Grizzly
    	
 
    	
Recitals
    
	
Guarantee Release
    	
 
    	
Section 2.10(b)
    
	
Hydrochloric Acid Sales Agreement
    	
 
    	
Section 3.4(a)(xi)
    
	
Hydrochloric Acid Sales Agreement - Lake Charles (Silica)
    	
 
    	
Section 3.4(a)(viii)
    
	
Intercompany Accounts
    	
 
    	
Section 2.6(c)
    
	
IRS D Reorganization Ruling
    	
 
    	
Recitals
    
	
IRS Debt Exchange Ruling
    	
 
    	
Recitals
    
	
Liquid Caustic Soda Sales Agreement (Fresno)
    	
 
    	
Section 3.4(a)(vi)
    
	
Liquid Caustic Soda Sales Agreement (Strongsville)
    	
 
    	
Section 3.4(a)(vii)
    
	
Liquid Caustic Soda Sales Agreement (Wichita Falls)
    	
 
    	
Section 3.4(a)(x)
    
	
Litigation Conditions
    	
 
    	
Section 5.5(b)(ii)
    
	
Master Terminal Agreement
    	
 
    	
Section 3.4(a)(xi)
    
	
Merger
    	
 
    	
Recitals
    
	
Merger Agreement
    	
 
    	
Recitals
    
	
Natrium Excess Land Agreement
    	
 
    	
Section 6.12(b)
    
	
Offer Notice
    	
 
    	
Section 6.12(a)
    
	
Ohio River/Calcasieu Estuary Liabilities
    	
 
    	
Section 2.5(b)(ii)
    
	
One-Step Spin-Off
    	
 
    	
Recitals
    
	
OPA
    	
 
    	
Section 1.27
    
	
Plan of Reorganization
    	
 
    	
Section 2.1
    
	
Private Letter Ruling
    	
 
    	
Recitals
    
	
Privileged Information
    	
 
    	
Section 6.3(a)
    
	
Privileges
    	
 
    	
Section 6.3(a)
    
	
RCRA
    	
 
    	
Section 1.27
    
	
Recapitalization
    	
 
    	
Recitals
    
	
Registrable IP
    	
 
    	
Section 2.4(a)(vi)
    
	
Response Period
    	
 
    	
Section 6.12(a)
    
	
SDWA
    	
 
    	
Section 1.27
    
	
Servitude Agreement
    	
 
    	
Section 3.4(a)(v)
    
	
Shared Burgundy IP License
    	
 
    	
Section 6.9(b)
    
	
Shared Facilities Agreement (Monroeville)
    	
 
    	
Section 3.4(a)(xi)
    
	
Shared Facilities, Services and Supply Agreement
    	
 
    	
Section 3.4(a)(iv)
    
	
Shared Spinco IP License
    	
 
    	
Section 6.9(a)
    
	
Special Above Basis Debt/Cash Distribution
    	
 
    	
Section 3.3(a)(ii)
    
	
Special Below Basis Cash Distribution
    	
 
    	
Section 3.3(a)(ii)
    
	
Special Distribution
    	
 
    	
Section 3.3(a)(ii)
    
	
Spinco
    	
 
    	
Preamble
    

 

14

 

	
Spinco Accounts
    	
 
    	
Section 2.11(a)
    
	
Spinco Active Sites
    	
 
    	
Section 2.4(a)(ii)
    
	
Spinco Assets
    	
 
    	
Section 2.4(a)
    
	
Spinco Books and Records
    	
 
    	
Section 2.4(a)(vii)
    
	
Spinco Common Stock
    	
 
    	
Recitals
    
	
Spinco Contracts
    	
 
    	
Section 2.4(a)(iv)
    
	
Spinco Entities
    	
 
    	
Section 2.4(a)(iii)
    
	
Spinco Entity Interests,
    	
 
    	
Section 2.4(a)(iii)
    
	
Spinco Financing Arrangements
    	
 
    	
Recitals
    
	
Spinco Information
    	
 
    	
Section 6.3(b)
    
	
Spinco Inventory
    	
 
    	
Section 2.5(a)
    
	
Spinco Liabilities
    	
 
    	
Section 2.5(a)
    
	
Spinco Registration Statement
    	
 
    	
Section 4.4(a)
    
	
Spinco Reorganization
    	
 
    	
Recitals
    
	
Spinco Stock Issuance
    	
 
    	
Section 3.3(a)(i)
    
	
Spinco Transfer Documents
    	
 
    	
Section 3.6
    
	
Tax Matters Agreement
    	
 
    	
Section 3.4(a)(i)
    
	
Temporary Lease Agreement
    	
 
    	
Section 2.7(f)
    
	
Third-Party Claim
    	
 
    	
Section 5.5(b)(i)
    
	
Trademarks
    	
 
    	
Section 1.40
    
	
Transfer Documents
    	
 
    	
Section 3.6
    
	
Transition Services Agreement
    	
 
    	
Section 3.4(a)(ii)
    
	
TSCA
    	
 
    	
Section 1.27
    
	
Unassigned Domains
    	
 
    	
Section 6.7
    

 

ARTICLE II

 

THE SPINCO REORGANIZATION

 

Section 2.1             Transfer of Spinco Assets; Assumption of Spinco Liabilities.  Except as provided in Section 2.7(b), subject to the terms of this Agreement and effective as of the Business Transfer Time, in accordance with the plan and structure set forth on Schedule 2.1 (such plan and structure being referred to herein as the “Plan of Reorganization”) and to the extent not previously effected pursuant to the steps of the Plan of Reorganization:

 

(a)           Burgundy will assign, transfer, convey and deliver (“Convey”) (or will cause any applicable Subsidiary to Convey) to Spinco the equity interests in the Spinco Entities that are to be held directly by Spinco and, as set forth in the Plan of Reorganization, to the applicable Spinco Entity, the other Spinco Assets, and Spinco will accept from Burgundy (or the applicable Subsidiary of Burgundy) (or will cause any applicable Spinco Entity to accept) all of Burgundy’s and its applicable Subsidiaries’ respective direct or indirect right, title and interest in and to all Spinco Assets (other than any Spinco Assets that are already held as of the Business Transfer Time by a Spinco Entity, which Spinco Assets will continue to be held by such Spinco Entity); and

 

(b)           Burgundy will Convey (or will cause any applicable Subsidiary to Convey) to a Spinco Entity other than Spinco, and such Spinco Entity will assume, perform, discharge and

 

15

 

fulfill when due and, to the extent applicable, comply with all of the Spinco Liabilities, in accordance with their respective terms (other than any Spinco Liabilities that as of the Business Transfer Time are already Liabilities of a Spinco Entity, which Spinco Liabilities will continue to be Liabilities of such Spinco Entity).

 

Section 2.2             Transfer of Excluded Assets; Assumption of Excluded Liabilities.  Except as provided in Section 2.7(b), subject to the terms of this Agreement and prior to the Business Transfer Time, in accordance with the Plan of Reorganization and to the extent not previously effected pursuant to the steps of the Plan of Reorganization:

 

(a)           Burgundy will cause any applicable member or members of the Spinco Group to Convey to Burgundy or, to the extent set forth in the Plan of Reorganization, a Subsidiary of Burgundy, and Burgundy will accept from such applicable member or members of the Spinco Group (or will cause any applicable Subsidiary of Burgundy to accept) all of such member’s or members’ direct or indirect right, title and interest in and to all Excluded Assets; and

 

(b)           Burgundy will cause any applicable member or members of the Spinco Group to Convey to Burgundy or, to the extent set forth in the Plan of Reorganization, a Subsidiary of Burgundy, and Burgundy will assume, perform, discharge and fulfill when due, and to the extent applicable, comply with (or will cause the applicable Subsidiary of Burgundy to assume, satisfy, perform, discharge and fulfill when due, and to the extent applicable, comply with) all of the Excluded Liabilities (including any Liabilities of a Spinco Subsidiary that are Excluded Liabilities), in accordance with their respective terms.

 

Section 2.3             Misallocated Transfers.  Other than the TCI Interests, the treatment of which shall be governed by Section 2.7(e), in the event that at any time or from time to time (whether prior to, at or after the Business Transfer Time), either Party (or any member of the Burgundy Group or the Spinco Group, as applicable) is the owner of, receives or otherwise comes to possess any Asset (including the receipt of payments made pursuant to Contracts and proceeds from accounts receivable) or Liability that is allocated to any Person that is a member of the other Group pursuant to this Agreement or any Ancillary Agreement (except in the case of any acquisition of Assets from the other Party for value subsequent to the Business Transfer Time), such Party will promptly transfer, or cause to be transferred, such Asset or Liability to the Person so entitled thereto or responsible therefor.  Prior to any such transfer, such Asset or Liability will be held in accordance with Section 2.7(d).

 

Section 2.4             Spinco Assets; Excluded Assets.

 

(a)  For purposes of this Agreement, “Spinco Assets” means in each case all of Burgundy’s and its Affiliates’ rights, title and interests in and to the following Assets except as otherwise set forth below and in each case subject to Section 2.4(b):

 

(i)            all inventories of materials, parts, raw materials, packaging materials, stores, supplies, work-in-process, goods in transit, and finished goods and products that are, in each case, used or held for use primarily in the Eagle Business (the “Spinco Inventory”);

 

16

 

(ii)           all Real Property listed or described on Schedule 2.4(a)(ii) (the “Spinco Active Sites”);

 

(iii)          all issued and outstanding capital stock of, or other equity interests in, the Subsidiaries of Burgundy listed or described on Schedule 2.4(a)(iii)(1) (such stock or other equity interests, the “Spinco Entity Interests,” and such Subsidiaries, the “Spinco Entities”) and, subject to Section 2.7(e) with respect to the TCI Interests, all capital stock or other equity interests owned by Burgundy that are listed on Schedule 2.4(a)(iii)(2);

 

(iv)          (A) all Contracts that are related primarily to the Eagle Business (including Shared Contracts that are related primarily to the Eagle Business, subject to Section 2.7(c)) and all interests, rights, claims and benefits of Burgundy and any of its Subsidiaries pursuant to and associated therewith and (B) to the extent provided in Section 2.7(c), the Contracts for the sole benefit of Spinco into which the Shared Contracts are separated (collectively, the “Spinco Contracts”);

 

(v)           Subject to Section 2.7, all approvals, consents, franchises, licenses, permits, registrations, authorizations and certificates or other rights issued or granted by any Governmental Authority and all pending applications therefor that are, in each case, used primarily in, or held primarily for the benefit of, the Eagle Business;

 

(vi)          (A) all patents, patent applications, statutory invention registrations, registered trademarks, registered service marks, registered Internet domain names and copyright registrations (collectively, “Registrable IP”) that are, in each case, used or held for use primarily in the Eagle Business, including the Registrable IP listed or described on Schedule 2.4(a)(vi), and (B) all Intellectual Property Rights, other than Registrable IP, that is used or held for use primarily in the Eagle Business;

 

(vii)         (A) all business records related primarily to the Eagle Business, including the minute and other record books and related stock and equity interests records of the Spinco Entities and all employment records related primarily to the Spinco Employees, and (B) all other books, records, ledgers, files, documents, correspondence, lists, plats, drawings, photographs, product literature (including historical), advertising and promotional materials, distribution lists, customer lists, supplier lists, studies, market and product share data (including historical), reports, operating, production and other manuals, manufacturing and quality control records and procedures, research and development files, and accounting and business books, records, files, documentation and materials, in all cases whether in paper, microfilm, microfiche, computer tape or disc, magnetic tape or any other form, in each case that are related primarily to the Eagle Business (collectively, the “Spinco Books and Records”); provided, that (1) Burgundy will be entitled to retain a copy of the Spinco Books and Records, which will be subject to the provisions of Section 6.2(f); (2) neither clause (A) nor (B) will be deemed to include any books, records or other items with respect to which it is not

 

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reasonably practicable to identify and extract the portion thereof related primarily to the Eagle Business from the portions thereof that relate primarily to businesses of Burgundy other than the Eagle Business provided, however, that the portion of such books, records and other items that are retained by the Burgundy Group that are related primarily to the Eagle Business will be deemed to be Shared Information; (3) neither clause (A) nor (B) will be deemed to include any tangible copies of books, records or other items unless they are being kept at either a Spinco Facility or a third party storage facility covered by a Spinco Contract; provided, however, that such tangible books, records and other items related primarily to the Eagle Business that are retained by the Burgundy Group will be deemed to be Shared Information; (4) to the extent required to satisfy Burgundy’s legal or other obligations, Burgundy will be entitled to retain original copies of the Spinco Books and Records, which will be subject to the provisions of Section 6.2(f), and will provide Spinco with a copy of all such retained Spinco Books and Records; and (5) the Transition Services Agreement will govern the delivery to Spinco of any such books, records or other items that are maintained in electronic form;

 

(viii)        all rights in all telephone, mobile telephone and fax numbers and post office boxes, in each case, used or held for use primarily in the Eagle Business; all websites maintained primarily for the Eagle Business and the content, information and databases contained therein (other than any Excluded IP Assets contained therein); and all uniform product codes and other similar data identifiers used or held for use primarily in the Eagle Business;

 

(ix)           all cash and cash equivalents in the Spinco Accounts not withdrawn prior to the Business Transfer Time;

 

(x)            all trade accounts, notes receivable and other receivables arising from the sale or other disposition of goods, or the performance of services, by the Eagle Business;

 

(xi)           all prepaid expenses, prepaid property taxes, security deposits, credits, deferred charges, advanced payments that are, in each case, related primarily to the Eagle Business (other than prepaid insurance premiums, deposits, security or other prepaid amounts in connection with workers’ compensation and other Policies related to Excluded Liabilities);

 

(xii)          all rights with respect to third party warranties and guaranties that are, in each case, related primarily to the Eagle Business and all related claims, credits, rights of recovery and other similar rights as to such third parties;

 

(xiii)         all rights to causes of Action, lawsuits, judgments, claims and demands that are, in each case, related primarily to the Eagle Business, including those listed or described on Schedule 2.4(a)(xiii) but, for the avoidance of doubt, not including any counter-claims in connection with an underlying claim that is not related primarily to the Eagle Business;

 

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(xiv)        all computers and other electronic data processing equipment, fixtures, machinery, equipment, furniture, office equipment, motor vehicles and other transportation equipment, special and general tangible tools, prototypes, models, and other tangible personal property that are, in each case, used or held for use primarily in the Eagle Business, including those listed or described in Schedule 2.4(a)(xiv);

 

(xv)         Burgundy’s  fee and/or leasehold interest, as applicable, in and to the Starks and Sulphur Mines Salt Dome Facilities in Calcasieu Parish, Louisiana which service the Eagle Business at the Lake Charles site (including any and all personal property, pipelines and other equipment owned by Burgundy in connection therewith);

 

(xvi)        Burgundy’s  fee and/or leasehold interest, as applicable, in and to the Orange Line ethylene pipeline which services the Eagle Business at the Lake Charles site (including the Real Property and equipment (including any and all personal property, pipelines and other equipment owned by Burgundy in connection therewith); the licenses retained by each member of the Spinco Group pursuant to Section 6.9(b); and

 

(xvii)       all assets expressly identified in this Agreement or any Ancillary Agreement as assets to be acquired by any member of the Spinco Group hereunder or thereunder; and any and all other Assets (other than Excluded Assets) owned by Burgundy or any of its Subsidiaries that are used or held for use primarily in, or related primarily to, the Eagle Business.  The intention of this clause (xvii) is only to rectify any inadvertent omission of Conveyance of any Assets that, had the Parties given specific consideration to such Asset as of the date of this Agreement, would have otherwise been classified as a Spinco Asset.  No Asset will be deemed a Spinco Asset solely as a result of this clause (xvii) unless a claim with respect thereto is made by Spinco on or prior to the two-year anniversary of the Distribution Date.

 

A single Asset may fall within more than one of clauses (i) through (xviii) in this Section 2.4(a); such fact does not imply that (x) such Asset must be Conveyed more than once or (y) any duplication of such Asset is required.  The fact that an Asset may be excluded under one clause does not imply that it is not intended to be included under another.

 

(b)           Notwithstanding the foregoing clause (a), the Spinco Assets will not in any event include any of the following Assets (the “Excluded Assets”):

 

(i)            any Intellectual Property Rights in which the Burgundy Group or the Spinco Group has any right, title or interest, other than Intellectual Property used or held for use primarily in the Eagle Business (the “Excluded IP Assets”).  For the avoidance of doubt, the Excluded IP Assets include, but are not limited to, the registered and unregistered rights in the name(s), trademarks, and domain names listed on Schedule 2.4(b)(i) and any Intellectual Property Rights related to

 

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titanium dioxide or to the development, production, manufacture or finishing of titanium dioxide products;

 

(ii)           any cash or cash equivalents withdrawn from any Spinco Accounts prior to the Business Transfer Time;

 

(iii)          any dividends declared by TCI, PHH Monomers, LLC and RS Cogen, LLC prior to the Business Transfer Time but not yet paid as of the Business Transfer Time, except to the extent included as assets in Working Capital;

 

(iv)          except to the extent provided in Section 6.11, all insurance policies, binders and claims and rights thereunder and all prepaid insurance premiums;

 

(v)           all Spinco Inactive Sites;

 

(vi)          the Real Property designated as being retained by Burgundy in the sites listed or described on Schedule 2.4(b)(vi) (the “Excluded Spinco Sites”);

 

(vii)         all Assets of any member of the Burgundy Group not included in any clauses of Section 2.4(a) above;

 

(viii)        all Assets that are expressly contemplated by this Agreement or any Ancillary Agreement as Assets to be retained by any member of the Burgundy Group; and

 

(ix)           the Assets listed or described on Schedule 2.4(b)(ix).

 

The Parties acknowledge and agree that neither Spinco nor any of its Subsidiaries will acquire or be permitted to retain any direct or indirect right, title and interest in any Excluded Assets through the Conveyance of the Spinco Entity Interests, and that if any of the Spinco Entities owns, leases or has the right to use any such Excluded Assets, such Excluded Assets must be Conveyed to Burgundy as contemplated by this Agreement.

 

Section 2.5             Spinco Liabilities.  (a)  For the purposes of this Agreement, “Spinco Liabilities” means (except as expressly set forth herein, regardless of (1) whether the facts on which such Liabilities are based occurred prior to, at or subsequent to the Business Transfer Time, (2) whether or not such Liabilities are asserted or determined prior to, at or subsequent to the Business Transfer Time, (3) where or against whom such Liabilities are asserted or determined (including any such Liabilities arising out of claims made by Burgundy’s or Spinco respective directors, officers, employees, agents, Subsidiaries or Affiliates against any member of the Burgundy Group or the Spinco Group), and (4) whether or not such Liabilities arise from or are alleged to arise from negligence, recklessness, violation of Law, fraud or misrepresentation by any member of the Burgundy Group or the Spinco Group (including any of their respective directors, officers, employees, agents, Subsidiaries or Affiliates)) the following Liabilities except as otherwise set forth below and in each case subject to Section 2.5(b):

 

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(i)            all Liabilities to the extent relating primarily to the Spinco Assets or the Eagle Business:

 

(ii)           all trade and other accounts payable related primarily to the Eagle Business;

 

(iii)          all operating expenses and other current Liabilities (including Liabilities for services and goods for which an invoice has not been received prior to the Business Transfer Time) related primarily to the Eagle Business;

 

(iv)          all Liabilities under the Spinco Contracts including, to the extent provided in Section 2.7(c), the Contracts for the sole benefit of Spinco into which the Shared Contracts are separated;

 

(v)           all Liabilities arising from commitments (in the form of issued purchase orders or otherwise), quotations, proposals and bids to purchase or acquire raw materials, components, supplies or services related primarily to the Eagle Business;

 

(vi)          all Liabilities arising from commitments (in the form of accepted purchase orders or otherwise), quotations, proposals and bids to sell products or provide services related primarily to the Eagle Business;

 

(vii)         all Liabilities with respect to any return, rebate, discount, credit, recall warranty, customer program, or similar Liabilities relating primarily to products of the Eagle Business;

 

(viii)        all Liabilities for death, personal injury, advertising injury, other injury to persons or property damage relating to past, current or future use of or exposure to any of the products (or any part or component) designed, manufactured, serviced or sold, or services performed, by, or on behalf of, the Eagle Business, including any such Liabilities for negligence, strict liability, design or manufacturing defect, failure to warn, or breach of express or implied warranties of merchantability or fitness for any purpose or use;

 

(ix)           all Liabilities relating primarily to the Eagle Business or any Spinco Assets to the extent that the same constitutes a past, current or future tort, breach of Contract or violation of, or non-compliance with, any Law or any approval, consent, franchise, license, permit, registration, authorization or certificate or other right issued or granted by any Governmental Authority;

 

(x)            all Liabilities relating to workers’ compensation, or claims for occupational health and safety, occupational disease, or occupational injury, or other claim relating to health, safety, disease or injury, with respect to any Spinco Employee or any other Person who is or was employed, hired or engaged by or to provide services to the Eagle Business;

 

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(xi)           all Liabilities relating to any Action related primarily to the Eagle Business;

 

(xii)          all Liabilities under the Spinco Financing Arrangements and all other indebtedness for borrowed money of Spinco as of the Distribution Date;

 

(xiii)         all indebtedness to which Burgundy is subject by virtue of its ownership interests in RS Cogen, LLC, PHH Monomers, LLC and, subject to Section 2.7(e), TCI;

 

(xiv)        (A) all Liabilities, known or unknown, for Environmental Conditions relating primarily to activities or operations at any of the Spinco Active Sites, or otherwise existing on or under any of the Spinco Active Sites (including any Release of Hazardous Materials occurring before, at or after the Business Transfer Time that has migrated, is migrating or in the future migrates from any of the Spinco Active Sites) or any violation of Environmental Law arising out of the Eagle Business at any of the Spinco Active Sites; and (B) all Liabilities for Environmental Conditions at any third-party site relating primarily to Hazardous Materials generated by the Spinco Active Sites;

 

(xv)         all Liabilities to the extent arising out of (A) the activities or operations of the Spinco Business or the ownership or use of the Spinco Assets after the Business Transfer Time by any member of the Spinco Group; (B) the activities or operations of any other business conducted by any member of the Spinco Group or the Grizzly Group at any time after the Business Transfer Time (including any Liability relating to, arising out of or resulting from any act or failure to act by any director, officer, employee, agent or representative of any member of the Spinco Group (whether or not such act or failure to act is or was within such Person’s authority)) or (C) any of the terminated or discontinued businesses that were operated on Spinco Active Sites;

 

(xvi)        all Liabilities that are expressly provided by this Agreement or any Ancillary Agreement as Liabilities to be assumed or retained by, or allocated to, any member of the Spinco Group;

 

(xvii)       all Liabilities of any member of the Spinco Group or the Grizzly Group under this Agreement or any of the Ancillary Agreements;

 

(xviii)      all Liabilities (including Shareholder Liabilities) relating to, arising out of or resulting from any Grizzly Disqualifying Action; and

 

(xix)         all Liabilities listed or described on Schedule 2.5(a)(xix).

 

A single Liability may fall within more than one of clauses (i) through (xvii) in this Section 2.5(a); such fact does not imply that (x) such Liability must be Conveyed more than once or (y) any duplication of such Liability is required.  The fact that a Liability may be excluded under one clause does not imply that it is not intended to be included under another.

 

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(b)           Notwithstanding the foregoing clause (a), the Spinco Liabilities will not in any event include any of the following Liabilities (the “Excluded Liabilities”):

 

(i)            all Liabilities to the extent relating to, arising out of, or resulting from any Excluded Assets;

 

(ii)           (A) all Liabilities relating to, arising out of or resulting from the contamination in the Ohio River which was the subject of or related to, directly or indirectly, sediment sampling conducted or to be conducted by or on behalf of Burgundy (along with any associated follow-up sampling or testing), as and to the extent set forth on Schedule 2.5(b)(ii), and (B) all Liabilities relating to, arising out of or resulting from Natural Resource Damages and other third party tort (only) damage claims related to the Calcasieu Estuary, other than (i) Liabilities in the Calcasieu Estuary related to  Remediation, including contribution or similar claims for costs of Remediation and (ii) Liabilities arising out of any Release by the Spinco Group to the Ohio River or the Calcasieu Estuary after the Business Transfer Time (subparts (A) and (B), the “Ohio River/Calcasieu Estuary Liabilities”);

 

(iii)          all Liabilities relating to, arising out of, or resulting from any Spinco Inactive Site, Excluded Spinco Site or Non-Spinco Business, including (A) all Liabilities relating to, arising out of, or resulting from any Environmental Conditions or any violation of Environmental Law at any such locations, and (B) all Liabilities relating to, arising out of or resulting from any Environmental Conditions at any third-party site arising from, related to or resulting from Hazardous Materials from any Spinco Inactive Sites, Non-Spinco Business or Excluded Spinco Sites (collectively subpart (A) and (B) and, together with the Excluded Liabilities in Section 2.5(b)(ii), the “Excluded Environmental Liabilities”);

 

(iv)          all Liabilities that are expressly provided by this Agreement, the Merger Agreement or any Ancillary Agreement as Liabilities to be retained or assumed by Burgundy or any other member of the Burgundy Group;

 

(v)           all Liabilities (including Shareholder Liabilities) relating to, arising out of or resulting from any Burgundy Disqualifying Action;

 

(vi)          all Liabilities of the Burgundy Group constituting an obligation to defend, indemnify or hold harmless any third-party insurers that issued insurance policies to Burgundy (including without limitation any indemnity obligations that Burgundy has assumed or may assume in connection with the Chapter 11 bankruptcy reorganization of Pittsburgh Corning Corporation);

 

(vii)         all Liabilities of the Spinco Entities that are unrelated to the Eagle Business (including Liabilities related to titanium dioxide or to the development, production, manufacture or finishing of titanium dioxide products);

 

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(viii)        all Liabilities relating to, arising out of or resulting from the indemnification of any director, officer, agent or employee of Burgundy or any of its Affiliates who was a director, officer, agent or employee of Burgundy or any of its Affiliates on or prior to the Effective Time to the extent such director, officer, agent or employee is or becomes a named defendant in (A) any shareholder derivative suit against Burgundy arising from the transactions contemplated by this Agreement or the Merger Agreement, including the One-Step Spin-Off, the Exchange Offer or the Clean-Up Spin-Off, with respect to which he or she was entitled to such indemnification pursuant to the then existing obligations or (B) any Action related to an Excluded Liability;

 

(ix)           all Liabilities relating to, arising out of or resulting from claims for or relating to exposure to asbestos at any Real Property that is a Spinco Asset on or prior to the Business Transfer Time, whether such claim is made before or after the Business Transfer Time (“Asbestos Exposure Claim”), subject to the further terms and conditions provided in Schedule 2.5(b)(ix); and

 

(x)            all Liabilities described on Schedule 2.5(b)(x).

 

The Parties acknowledge and agree that neither Spinco nor any other member of the Spinco Group will be required to assume or retain any Excluded Liabilities as a result of the Conveyance of the Spinco Entity Interests, and that if any of the Spinco Entities is liable for any Excluded Liabilities, such Excluded Liabilities will be assumed and satisfied by Burgundy as contemplated by this Agreement.

 

Section 2.6             Termination of Intercompany Agreements; Settlement of Intercompany Accounts.

 

(a)           Termination of Intercompany Agreements.  Except as set forth in Section 2.6(b) and Section 2.6(c), Spinco, on behalf of itself and each other member of the Spinco Group, on the one hand, and Burgundy, on behalf of itself and each other member of the Burgundy Group, on the other hand, will terminate, effective as of the Business Transfer Time, any and all Contracts between or among Spinco or any member of the Spinco Group, on the one hand, and Burgundy or any member of the Burgundy Group, on the other hand.  No such Contract (including any provision thereof which purports to survive termination) will be of any further force or effect after the Business Transfer Time and all parties will be released from all Liabilities thereunder.  Each Party will, at the reasonable request of any other Party, take, or cause to be taken, such other actions as may be necessary to effect the foregoing.

 

(b)           Exceptions to Termination of Intercompany Agreements.  Notwithstanding Section 2.6(a), the provisions of Section 2.6(a) will not apply to any of the following Contracts (or to any of the provisions thereof):

 

(i)            any Contracts listed or described on Schedule 2.6(b)(i);

 

(ii)           this Agreement, the Merger Agreement and the Ancillary Agreements (and each other Contract expressly contemplated by this Agreement,

 

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the Merger Agreement or any Ancillary Agreement to be entered into or continued by any of the Parties or any of the members of their respective Groups);

 

(iii)          any Contracts to which any Person other than the Parties and their respective Affiliates is a party (it being understood that to the extent that the rights and Liabilities of the Parties and the members of their respective Groups under any such Contracts constitute Spinco Assets or Spinco Liabilities, they will be Conveyed pursuant to Section 2.1(a) or Section 2.1(b), or allocated pursuant to Section 2.7(d)); and

 

(iv)          any Contracts to which any non-wholly owned Subsidiary of Burgundy or Spinco, as the case may be, is a party (it being understood that directors’ qualifying shares or similar interests will be disregarded for purposes of determining whether a Subsidiary is wholly owned) (it being understood that to the extent that the rights and Liabilities of the Parties and the members of their respective Groups under any such Contracts constitute Spinco Assets or Spinco Liabilities, they will be Conveyed pursuant to Section 2.1(a) or Section 2.1(b), or allocated pursuant to Section 2.7(d)).

 

(c)           Settlement of Intercompany Accounts.  All of the intercompany receivables, payables, loans and other accounts between Spinco or any member of the Spinco Group, on the one hand, and Burgundy or any member of the Burgundy Group, on the other hand, in existence as of immediately prior to the Business Transfer Time set forth on Schedule 2.6(c) (collectively, the “Intercompany Accounts”) will be satisfied and/or settled at the Business Transfer Time.

 

Section 2.7             Governmental Approvals and Third-Party Consents.

 

(a)           Obtaining Consents.  To the extent that the consummation of the Spinco Reorganization or the Distribution requires any third-party Consents or Governmental Approvals (including Real Estate Approvals), the Parties will use their respective commercially reasonable efforts to obtain such Consents or Governmental Approvals, as soon as reasonably practicable; provided, however, except with respect to the Necessary Licenses, that neither party will under any circumstance be required to or shall be required to cause any member of its Group to, make any payments or offer or grant any accommodation (financial or otherwise, regardless of any provision to the contrary in the underlying Contract, including any requirements for the securing or posting of any bonds, letters of credit or similar instruments, or the furnishing of any guarantees) to any third party to obtain any Consent or Governmental Approvals unless and to the extent that the member of the other Group agrees to reimburse and make whole, to such person’s reasonable satisfaction, for any payment or other accommodation made by its request.  Except with respect to the Necessary Licenses, Spinco agrees that in the event that any third party or Governmental Authority requests that Burgundy make a payment or offer or grant an accommodation to obtain any third-party Consents or Governmental Approvals and Spinco or Grizzly does not agree to reimburse or make whole Burgundy in connection therewith, Spinco shall not be entitled to the benefits of the provision in, and Burgundy will not be obligated to take any efforts under, Section 2.7(d) in respect of any Spinco Asset, Spinco Liability, Excluded Asset or Excluded Liability which Conveyance is subject to such third-party Consents or

 

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Governmental Approvals.  With respect to the Necessary Licenses, Spinco and Burgundy shall share equally any costs related to obtaining Consents (including any remedies related thereto whether negotiated or the result of a judicial process) to separate the Shared Contracts or assign the Necessary License, as applicable; provided, however, that if any Prime Counterparty to a Necessary License requires any payment in the nature of a license fee to be made directly to the Prime Counterparty by a Spinco Group member pursuant to a new license agreement between such Spinco Group member and such Prime Counterparty that will grant rights to such Spinco Group member in complete or partial substitution for rights of a Burgundy Group member under the Shared Contract in question (as opposed to a payment in the nature of a transfer fee or fee for granting consent), such license fee will be borne entirely by such Spinco Group member.  For the avoidance of doubt, the required efforts and responsibilities of the Parties (i) to seek the Consents necessary to provide the Services (as defined in the Transition Services Agreement) will be governed by Article 3 of the Transition Services Agreement and (ii) to seek approval pursuant to the HSR Act or Foreign Competition Laws (each as defined in the Merger Agreement) and the Grizzly Stockholder Approval (as defined in the Merger Agreement) will be governed by the Merger Agreement.  The obligations set forth in this Section 2.7(a) will terminate on the two-year anniversary of the Distribution Date; provided, however, with respect to Real Estate Approvals, the obligations in this Section 2.7(a) will survive in perpetuity.

 

(b)                                 Transfer in Violation of Laws or Requiring Consent or Governmental Approval.

 

(i)                                     If and to the extent that the valid, complete and perfected Conveyance to the Spinco Group of any Spinco Asset or Spinco Liability, or to the Burgundy Group of any Excluded Asset or Excluded Liability, would be a violation of applicable Laws or require any Consent or Governmental Approval (including Real Estate Approvals) in connection with the Spinco Reorganization, the Recapitalization or the Distribution, then subject to subpart (ii) below, the Conveyance to the Spinco Group of any such Spinco Asset or Spinco Liability, or to the Burgundy Group of any such Excluded Asset or Excluded Liability, will automatically be deferred, and no Conveyance will occur until all legal or Contractual impediments are removed or such Consents or Governmental Approvals have been obtained.  Other than the TCI Interests, the treatment of which shall be governed by Section 2.7(e), any Asset or Liability with respect to which Conveyance has been so deferred will still be considered a Spinco Asset, a Spinco Liability, an Excluded Asset, or an Excluded Liability, as applicable, and will be subject to Section 2.7(d).

 

(ii)                                  Notwithstanding subpart (i), other than the TCI Interests, the treatment of which shall be governed by Section 2.7(e), (A) Burgundy (subject to Spinco’s rights under subpart (B)) or Spinco may elect to require the immediate Conveyance of any Spinco Asset, Spinco Liability, Excluded Asset or Excluded Liability notwithstanding any requirement that a Consent or Governmental Approval be obtained or (B) with respect to Real Property that includes both a Spinco Asset and an Excluded Asset, Spinco or Burgundy may elect to require the immediate Conveyance of all such Real Property that includes both the Spinco Asset and the Excluded Asset notwithstanding any requirement that a Consent or

 

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Governmental Approval (including any Real Estate Approvals) be obtained; provided, that (A) if Spinco so elects to require the immediate Conveyance of any such Asset or Liability, any Liabilities arising from such Conveyance relating to such violation of Law or failure to secure the requisite Consent or Governmental Approval will be deemed to be Spinco Liabilities, and (B) if Burgundy so elects to require the immediate Conveyance of any such Asset or Liability, any Liabilities arising from such Conveyance relating to such violation of Law or failure to secure the requisite Consent or Governmental Approval will be deemed to be Excluded Liabilities, and (C) if Spinco and Burgundy jointly agree to immediately Convey such Asset or Liability, any Liabilities arising from such Conveyance will be shared evenly between Spinco and Burgundy and, notwithstanding any provision in Section 5.5(b) to the contrary, the defense of any Third-Party Claim relating thereto will be jointly managed by Spinco and Burgundy.  The Parties will use their commercially reasonable efforts promptly to obtain any Consents or Governmental Approvals as required by Section 2.7(a) and to take the actions required by Section 2.7(d) pending removal of legal or Contractual impediments or receipt of Consents or Governmental Approvals.  If and when the legal or Contractual impediments the presence of which caused the deferral of transfer of any Asset or Liability pursuant to this Section 2.7(b) are removed or any Consents and/or Governmental Approvals the absence of which caused the deferral of transfer of any Asset or Liability pursuant to this Section 2.7(b) are obtained, the transfer of the applicable Asset or Liability will be effected promptly in accordance with the terms of this Agreement and/or the applicable Ancillary Agreement(s).  The obligations set forth in this Section 2.7(b) will terminate on the two-year anniversary of the Distribution Date; provided, however, with respect to Real Estate Approvals and transfers of Assets and Liabilities in connection therewith, the obligations in this Section 2.7(b) will survive in perpetuity.

 

(c)                                  Shared Contracts.  The Parties will use their respective commercially reasonable efforts to separate the Shared Contracts into separate Contracts effective as of the Business Transfer Time so that from and after the Business Transfer Time Spinco Group will be entitled to rights and benefits and shall assume the related portion of Liabilities with respect to each Shared Contract to the extent related to the Eagle Business and the Burgundy Group will have the rights and benefits and shall assume the related portion of Liabilities with respect to each Shared Contract to the extent not related to the Eagle Business.  Upon such separation of a Shared Contract, the separated Contract will be a Spinco Asset or Excluded Asset, as applicable.  If the counterparty to any Shared Contract that is entitled under the terms of the Shared Contract to Consent to the separation of the Shared Contract in the manner set forth in this Section 2.7(c) (a “Prime Counterparty”) has not provided such Consent or if the separation of a Shared Contract has not been completed as of the Business Transfer Time for any other reason, then the Parties will use their respective commercially reasonable efforts promptly to develop and implement arrangements to make the portion of the Shared Contract related to the Eagle Business available for use by (and for the benefit of) Spinco Group and to make the portion of the Shared Contract not related to the Eagle Business available for use by (and for the benefit of) Burgundy Group, in each case in accordance with Section 2.7(d).  If and when any such Consent is obtained, the Shared Contract will be separated in accordance with this Section 2.7(c).  The obligations set

 

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forth in this Section 2.7(c) will terminate on the two-year anniversary of the Distribution Date.  Spinco and Burgundy shall share equally any costs related to separating the Shared Contracts.

 

(d)                                 Conveyances Not Consummated Prior To or At the Business Transfer Time.  Other than (i) the TCI Interests, the treatment of which shall be governed by Section 2.7(e), and (ii) with respect to Real Property that requires Real Estate Approval that has not been secured or Conveyed to Spinco or a Spinco Subsidiary prior to the Business Transfer Time, the treatment of which shall be governed by Section 2.7(f), if the Conveyance of any Asset or Liability intended to be Conveyed is not consummated prior to or at the Business Transfer Time, whether as a result of the provisions of Section 2.7(b) or Section 2.7(c) or for any other reason (including any misallocated transfers subject to Section 2.3), then, insofar as reasonably possible (taking into account any applicable restrictions or considerations relating to the contemplated Tax treatment of the Transactions) and to the extent permitted by applicable Law, the Person retaining such Asset or Liability, as the case may be, (i) will thereafter hold such Asset or Liability, as the case may be, in trust for the use and benefit and burden of the Person entitled thereto (and at such Person’s sole expense) until the consummation of the Conveyance thereof (or as otherwise determined by Burgundy and Spinco, as applicable, in accordance with Section 2.7(b) or Section 2.7(c)); and (ii) use commercially reasonable efforts to take such other actions as may be reasonably requested by the Person to whom such Asset or Liability is to be Conveyed (at the expense of the Person to whom such Asset or Liability is to be Conveyed) in order to place such Person in substantially the same position as if such Asset or Liability had been Conveyed as contemplated hereby and so that all the benefits and burdens relating to such Asset or Liability, as the case may be, including possession, use, risk of loss, potential for gain, any Tax liabilities in respect thereof and dominion, control and command over such Asset or Liability, as the case may be, are to inure from and after the Business Transfer Time to the Person to whom such Asset or Liability is to be Conveyed.  Any Person retaining an Asset or a Liability due to the deferral of the Conveyance of such Asset or Liability, as the case may be, will not be required, in connection with the foregoing, to make any payments or offer or grant any accommodation (financial or otherwise, regardless of any provision to the contrary in the underlying Contract, including any requirements for the securing or posting of any bonds, letters of credit or similar instruments, or the furnishing of any guarantees) to any third party, except to the extent that the Person entitled to the Asset or responsible for the Liability, as applicable, agrees to reimburse and make whole the Person retaining an Asset or a Liability, to such Person’s reasonable satisfaction, for any payment or other accommodation made by the Person retaining an Asset or a Liability at the request of the Person entitled to the Asset or responsible for the Liability.  The obligations set forth in this Section 2.7(d) will terminate on the two-year anniversary of the Distribution Date.

 

(e)                                  Transfer of TCI Interests.  Subject to the terms set forth in Schedule 2.7(e), promptly after the date of this Agreement, Burgundy shall use its commercially reasonable efforts to take such steps as may be necessary to permit the Conveyance of the TCI Interests to Spinco at or prior to the Business Transfer Time.  In the event that Burgundy does not Convey the TCI Interests at or prior to the Business Transfer Time to Spinco, the Above Basis Amount shall be reduced by the TCI Value and the TCI Interests (and any Assets relating to the TCI Interests) shall be deemed to be Excluded Assets.

 

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(f)                                    Failure to Secure Real Property Approvals Prior to Transfer.  Notwithstanding anything to the contrary set forth herein, in the event that (i) Burgundy shall have failed to obtain a Real Estate Approval to transfer one or more Spinco Assets (whether individually or as part of Real Property that includes Excluded Assets) on or prior to the Business Transfer Date or (ii) the Parties have not exercised their respective rights under Section 2.7(b)(ii) to transfer certain Spinco Assets to Spinco or a Spinco Entity, Burgundy and the applicable Spinco Entity shall enter into a lease agreement effective as of the Business Transfer Time in a commercially reasonable form acceptable to Burgundy and such Spinco Entity (a “Temporary Lease Agreement”), pursuant to which, inter alia, such Spinco Entity shall lease from Burgundy the applicable Real Property from and after the Business Transfer Date through and until such time, if any, as Burgundy shall have received the applicable Real Estate Approval with respect to such Real Property.  Upon receipt of such Real Estate Approval, the Temporary Lease Agreement shall terminate and Burgundy shall Convey the applicable Spinco Active Site to the Spinco, or its designated Subsidiary or Affiliate, pursuant to one or more applicable Burgundy Transfer Documents in the manner provided in Section 3.5 hereof.  For the term of the Temporary Lease Assignment, notwithstanding any term to the contrary herein, (i) rent shall be payable in a nominal amount but the Spinco Entity that is party to the Temporary Lease Agreement shall be responsible for the payment of all taxes, insurance premiums and maintenance and operating charges with respect to the applicable Real Property thereunder from and after the Business Transfer Date, (ii) such Spinco Entity shall be allowed to continue to operate such Real Property as it has been operated prior to the Business Transfer Time in the ordinary course, and (iii) such Spinco Entity shall have the right to assign the Temporary Lease Agreement or sublet the applicable Real Property to Spinco or another Spinco Entity without Burgundy’s consent.

 

Section 2.8                                      No Representation or Warranty.  EXCEPT TO THE EXTENT OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT, THE MERGER AGREEMENT OR ANY ANCILLARY AGREEMENT, SPINCO (ON BEHALF OF ITSELF AND MEMBERS OF THE SPINCO GROUP) ACKNOWLEDGES THAT NEITHER BURGUNDY NOR ANY MEMBER OF THE BURGUNDY GROUP MAKES ANY EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY HEREIN AS TO ANY MATTER WHATSOEVER, INCLUDING ANY REPRESENTATION OR WARRANTY WITH RESPECT TO:  (A) THE CONDITION OR THE VALUE OF ANY SPINCO ASSET OR THE AMOUNT OF ANY SPINCO LIABILITY; (B) THE FREEDOM FROM ANY SECURITY INTEREST OF ANY SPINCO ASSET; (C) THE ABSENCE OF DEFENSES OR FREEDOM FROM COUNTERCLAIMS WITH RESPECT TO ANY CLAIM TO BE CONVEYED TO SPINCO OR HELD BY A MEMBER OF THE SPINCO GROUP; OR (D) ANY IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE OR TITLE.  EXCEPT TO THE EXTENT OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT, THE MERGER AGREEMENT OR ANY ANCILLARY AGREEMENT, SPINCO (ON BEHALF OF ITSELF AND MEMBERS OF THE SPINCO GROUP) FURTHER ACKNOWLEDGES THAT ALL OTHER WARRANTIES THAT BURGUNDY OR ANY MEMBER OF THE BURGUNDY GROUP GAVE OR MIGHT HAVE GIVEN, OR WHICH MIGHT BE PROVIDED OR IMPLIED BY APPLICABLE LAW OR COMMERCIAL PRACTICE, ARE HEREBY EXPRESSLY EXCLUDED.  EXCEPT TO THE EXTENT OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT, THE MERGER AGREEMENT OR ANY ANCILLARY AGREEMENT, ALL ASSETS TO BE

 

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TRANSFERRED TO SPINCO (AND ALL OF THE SPINCO ASSETS HELD BY THE SPINCO ENTITIES) WILL BE TRANSFERRED WITHOUT ANY COVENANT, REPRESENTATION OR WARRANTY (WHETHER EXPRESS OR IMPLIED) AND ARE HELD “AS IS, WHERE IS” AND FROM AND AFTER THE CLOSING SPINCO WILL BEAR THE ECONOMIC AND LEGAL RISK THAT ANY CONVEYANCE WILL PROVE TO BE INSUFFICIENT TO VEST IN SPINCO GOOD AND MARKETABLE TITLE, FREE AND CLEAR OF ANY SECURITY INTEREST OR ANY NECESSARY CONSENTS OR GOVERNMENTAL APPROVALS THAT ARE NOT OBTAINED OR THAT ANY REQUIREMENTS OF LAWS ARE NOT COMPLIED WITH.

 

Section 2.9                                      Waiver of Bulk-Sales Laws.  Each Party hereby waives compliance by each member of its Group with the requirements and provisions of the “bulk-sale” or “bulk-transfer” Laws of any jurisdiction that may otherwise be applicable with respect to the transfer or sale of any or all of the Assets to any member of the Burgundy Group or Spinco Group, as applicable.

 

Section 2.10                                Guarantees.

 

(a)                                  On or prior to the Business Transfer Time or as soon as practicable thereafter, Spinco will (with the reasonable cooperation of the applicable member(s) of the Burgundy Group) use its reasonable best efforts to have any member(s) of the Burgundy Group removed as guarantor of or obligor for any Spinco Liability to the extent that they relate to Spinco Liabilities.

 

(b)                                 On or prior to the Business Transfer Time, to the extent required to obtain a release from an agreement (including any lease of a Real Property) or a guarantee (a “Guarantee Release”) of any member of the Burgundy Group, a Spinco Subsidiary will execute a guarantee agreement in the form of the existing agreement or guarantee or such other form as is reasonably agreed to by such Spinco Subsidiary and the relevant parties to such agreement or guarantee.

 

(c)                                  If the Parties are unable to obtain, or to cause to be obtained, any such required removal as set forth in clauses (a) and (b) of this Section 2.10, (i) Spinco will, and will cause the other members of the Spinco Group (including after the Effective Time, Grizzly) to indemnify, defend and hold harmless each of the Burgundy Indemnitees for any Liability arising from or relating to such guarantee and will, as agent or subcontractor for the applicable Burgundy Group guarantor or obligor, pay, perform and discharge fully all the obligations or other Liabilities of such guarantor or obligor thereunder, and (ii) Spinco will not, and will cause the other members of the Spinco Group not to, agree to renew or extend the term of, increase any obligations under, or transfer to a third Person, any loan, guarantee, lease, Contract or other obligation for which a member of the Burgundy Group is or may be liable unless all obligations of the members of the Burgundy Group with respect thereto are thereupon terminated by documentation satisfactory in form and substance to Burgundy in its sole discretion.

 

(d)                                 On or prior to the Business Transfer Time or as soon as practicable thereafter, Burgundy will, at its expense, use its reasonable best efforts to have any member(s) of the Spinco Group removed as guarantor of or obligor for any Excluded Liability to the extent

 

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that they relate to Excluded Liabilities (with the reasonable cooperation of the applicable member(s) of the Spinco Group).

 

(e)                                  On or prior to the Business Transfer Time, to the extent required to obtain a Guarantee Release of any member of the Spinco Group, Burgundy will execute a guarantee agreement in the form of the existing agreement or guarantee or such other form as is reasonably agreed to by Burgundy and the relevant parties to such guarantee agreement or guarantee.

 

(f)                                    If the Parties are unable to obtain, or to cause to be obtained, any such required removal as set forth in clauses (d) and (e) of this Section 2.10, (i) Burgundy will, and will cause the other members of the Burgundy Group to, indemnify, defend and hold harmless each of the Spinco Indemnitees for any Liability arising from or relating to such agreement or guarantee and will, as agent or subcontractor for the applicable Spinco Group guarantor or obligor, pay, perform and discharge fully all the obligations or other Liabilities of such guarantor or obligor thereunder, and (ii) Burgundy will not, and will cause the other members of the Burgundy Group not to, agree to renew or extend the term of, increase any obligations under, or transfer to a third Person, any loan, guarantee, lease, Contract or other obligation for which a member of the Spinco Group is or may be liable unless all obligations of the members of the Spinco Group with respect thereto are thereupon terminated by documentation satisfactory in form and substance to Spinco in its sole discretion.

 

Section 2.11                                Bank Accounts; Cash Balances.  Burgundy and Spinco each agrees to take, or cause the respective members of their respective Groups to take, from and after the Business Transfer Time (or such earlier time as Burgundy and Spinco may agree), all actions necessary to amend all Contracts or agreements governing each bank and brokerage account owned by Spinco or any other member of the Spinco Group and used exclusively for the Eagle Business (collectively, the “Spinco Accounts”) so that such Spinco Accounts, if currently linked (whether by automatic withdrawal, automatic deposit or any other authorization to transfer funds from or to, hereinafter “linked”) to any bank or brokerage account owned by (i) Burgundy or any other member of the Burgundy Group or (ii) Spinco or any other member of the Spinco Group that is not used exclusively for the Eagle Business (the accounts described in (i) or (ii), collectively, the “Burgundy Accounts”), are delinked from the Burgundy Accounts.  Burgundy and Spinco each agrees to take, or cause the respective members of their respective Groups to take, from and after the Business Transfer Time (or such earlier time as Burgundy and Spinco may agree), all actions necessary to amend all Contracts or agreements governing the Burgundy Accounts so that such Burgundy Accounts, if currently linked to a Spinco Account, are de-linked from the Spinco Accounts.

 

ARTICLE III

 

CLOSING OF THE SPINCO REORGANIZATION;
 POST-CLOSING WORKING CAPITAL ADJUSTMENT

 

Section 3.1                                      Business Transfer Time.  Unless otherwise provided in this Agreement or in any Ancillary Agreement, and subject to the satisfaction and waiver of the conditions set forth in Section 3.2, the effective time and date of each Conveyance and assumption of any Asset or Liability in accordance with Article II in connection with the Spinco

 

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Reorganization will be 12:01 a.m., Eastern Time on the date that is no less than two (2) days prior to the Distribution Date (such time, the “Business Transfer Time,” and such date the “Business Transfer Date”).

 

Section 3.2                                      Conditions to the Spinco Reorganization.  The obligations of Burgundy pursuant to this Agreement to effect the Spinco Reorganization are subject to the fulfillment (or waiver by Burgundy) at or prior to the Business Transfer Time of the following conditions:

 

(a)                                  each of the parties to the Merger Agreement has irrevocably confirmed to each other that each condition in Article IX of the Merger Agreement to such party’s respective obligations to effect the Merger (i) has been fulfilled, (ii) will be fulfilled at the Effective Time, or (iii) is or has been waived by such party, as the case may be;

 

(b)                                 Burgundy shall have received the IRS D Reorganization Ruling and the IRS Debt Exchange Ruling, each in form and substance reasonably satisfactory to Burgundy, and such rulings shall continue to be valid and in full force and effect (and, for the avoidance of doubt, such rulings shall not have been invalidated, modified or otherwise affected by any change in any Law on or after the date such rulings were issued by the IRS);

 

(c)                                  Burgundy shall have received an opinion from Wachtell, Lipton, Rosen & Katz, counsel to Burgundy, to the effect that (i) the Distribution will be treated as satisfying the business purpose requirement described in Treasury Regulation Section 1.355-2(b)(1); (ii) the Distribution will not be treated as being used principally as a device for the distribution of earnings and profits of the distributing corporation or the controlled corporation or both under Section 355(a)(1)(B); (iii) the stock of Spinco distributed in the Distribution will not be treated as other than “qualified property” by reason of the application of Section 355(e)(1); and (iv) the Spinco Securities will constitute “securities” for purposes of the application of Section 361(a) of the Code (together with clauses (i), (ii), and (iii), the “Distribution Tax Opinion”); and

 

(d)                                 Burgundy and Spinco shall have received any necessary permits and authorizations under state securities or “blue sky” laws, the Securities Act and the Exchange Act in connection with the Distribution and such permits and authorizations shall be in effect.

 

Section 3.3                                      Recapitalization of Spinco.  Burgundy and Spinco shall cause the following to occur at the Business Transfer Time:

 

(a)                                  In consideration for the transfer of Assets contemplated by Section 2.1, Spinco shall:

 

(i)                                     issue to Burgundy shares of Spinco Common Stock as set forth in Section 8.17 of the Merger Agreement (the “Spinco Stock Issuance”), which Spinco Common Stock, together with the 100 shares of Spinco Common Stock owned by Burgundy as of the date hereof, will constitute all of the issued and outstanding common stock of Spinco outstanding as of the Business Transfer Time;

 

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(ii)                                  declare a special distribution, which will be payable no later than immediately prior to the Distribution, and will be comprised of (A) an amount in cash equal to the Below Basis Amount (the “Special Below Basis Cash Distribution”), and (B) Spinco Exchange Debt in an amount equal to the Above Basis Amount, subject to adjustment as set forth in Section 2.7(e) and Section 3.7(a) or an amount in cash determined in accordance with and to the extent provided in Section 8.11(f)(v) of the Merger Agreement (the “Special Above Basis Debt/Cash Distribution,” and together with the Special Below Basis Cash Distribution, the “Special Distribution”);

 

(iii)                               pay, in accordance with Section 6.2(d) of the Employee Matter Agreement, the Grizzly True Up Amount, if any; and

 

(iv)                              assume the Spinco Liabilities in accordance with Section 2.1.

 

(b)                                 Financing Arrangements.  Prior to or concurrently with the Spinco Reorganization, Spinco, together with the other members of the Spinco Group, will enter into the Spinco Financing Arrangements and incur the debt contemplated thereby, all on such terms and conditions as are contemplated by the Spinco Commitment Letter and Spinco Related Letter and the Burgundy Commitment Letter and the Burgundy Related Letter, as further described in the Merger Agreement.

 

Section 3.4                                      Transfer of the Eagle Business.

 

(a)                                  Agreements to be Delivered by Burgundy.  On the Business Transfer Date, Burgundy will deliver, or will cause its appropriate Subsidiaries to deliver, to Spinco all of the following instruments:

 

(i)                                     a Tax Matters Agreement in substantially the form attached hereto as Exhibit A (the “Tax Matters Agreement”), duly executed by the members of the Burgundy Group party thereto;

 

(ii)                                  a Transition Services Agreement negotiated in good faith reflecting the form attached hereto as Exhibit B (the “Transition Services Agreement”) in accordance with Section 8.26 of the Merger Agreement, duly executed by the members of the Burgundy Group party thereto;

 

(iii)                               an Electric Generation, Distribution and Transmission Facilities Lease negotiated in good faith reflecting the form attached hereto as Exhibit C (the “Electric Generation, Distribution and Transmission Facilities Lease”) in accordance with Section 8.26 of the Merger Agreement, duly executed by the members of the Burgundy Group party thereto;

 

(iv)                              a Shared Facilities, Services and Supply Agreement negotiated in good faith reflecting the form attached hereto as Exhibit D (the “Shared Facilities, Services and Supply Agreement”) in accordance with Section 8.26 of the Merger Agreement, duly executed by the members of the Burgundy Group party thereto;

 

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(v)                                 a Servitude Agreement negotiated in good faith reflecting the form attached hereto as Exhibit E (the “Servitude Agreement”) in accordance with Section 8.26 of the Merger Agreement, duly executed by the members of the Burgundy Group party thereto;

 

(vi)                              a Liquid Caustic Soda Sales Agreement (Fresno) in substantially the form attached hereto as Exhibit F (the “Liquid Caustic Soda Sales Agreement (Fresno)”), duly executed by the members of the Burgundy Group party thereto;

 

(vii)                           a Liquid Caustic Soda Sales Agreement (Strongsville) in substantially the form attached hereto as Exhibit G (the “Liquid Caustic Soda Sales Agreement (Strongsville)”), duly executed by the members of the Burgundy Group party thereto;

 

(viii)                        a Hydrochloric Acid Sales Agreement - Lake Charles (Silica) in substantially the form attached hereto as Exhibit H (the “Hydrochloric Acid Sales Agreement - Lake Charles (Silica)”), duly executed by the members of the Burgundy Group party thereto;

 

(ix)                                a Chlorine and Liquid Caustic Soda Sales Agreement (Barberton) in substantially the form attached hereto as Exhibit I (the “Chlorine and Liquid Caustic Soda Sales Agreement (Barberton)”), duly executed by the members of the Burgundy Group party thereto;

 

(x)                                   a Liquid Caustic Soda Sales Agreement (Wichita Falls) in substantially the form attached hereto as Exhibit J (the “Liquid Caustic Soda Sales Agreement (Wichita Falls)”), duly executed by the members of the Burgundy Group party thereto;

 

(xi)                                a Hydrochloric Acid Sales Agreement in substantially the form attached hereto as Exhibit K (the “Hydrochloric Acid Sales Agreement”), duly executed by the members of the Burgundy Group party thereto;

 

(xii)                             a Shared Facilities Agreement (Monroeville) negotiated in good faith reflecting the form attached hereto as Exhibit L (the “Shared Facilities Agreement (Monroeville)”) in accordance with Section 8.26 of the Merger Agreement, duly executed by the members of the Burgundy Group party thereto;

 

(xiii)                          a Master Terminal Agreement in substantially the form attached hereto as Exhibit M (the “Master Terminal Agreement”), duly executed by the members of the Burgundy Group party thereto;

 

(xiv)                         all necessary Transfer Documents as described in Section 3.5 and Section 3.6; and

 

(xv)                            resignations of each of the individuals who serves as an officer or director of members of the Spinco Group as set forth on Schedule 3.4(a)(xiii) in his or her capacity as such and the resignation of any other Person who will be an

 

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employee of any member of the Burgundy Group after the Business Transfer Time and who is a director or officer of any member of the Spinco Group, to the extent requested by Spinco.

 

(b)                                 Agreements to be Delivered by Spinco.  On the Business Transfer Date, Spinco will deliver, or will cause its Subsidiaries to deliver, as appropriate, to Burgundy all of the following instruments:

 

(i)                                     in each case where any member of the Spinco Group is a party to any Ancillary Agreement, a counterpart of such Ancillary Agreement duly executed by the member of the Spinco Group party thereto;

 

(ii)                                  all necessary Transfer Documents as described in Section 3.5 and Section 3.6; and

 

(iii)                               resignations of each of the individuals who serve as an officer or director of members of the Burgundy Group as set forth on Schedule 3.4(b)(iii) in their capacity as such and the resignations of any other Persons that will be employees of any member of the Spinco Group after the Business Transfer Time and that are directors or officers of any member of the Burgundy Group, to the extent requested by Burgundy.

 

Section 3.5                                      Transfer of Spinco Assets and Assumption of Spinco Liabilities.  In furtherance of the Conveyance of Spinco Assets and the assumption of Spinco Liabilities provided in Section 2.1:  (a) Burgundy will execute and deliver, and will cause its Subsidiaries to execute and deliver, such bills of sale, quitclaim deeds, stock powers, certificates of title, assignments of Contracts and other instruments of transfer, Conveyance and assignment, as and to the extent reasonably necessary to evidence the Conveyance of all of Burgundy’s and its Subsidiaries’ (other than Spinco and its Subsidiaries) right, title and interest in and to the Spinco Assets to Spinco and its Subsidiaries and (b) a Spinco Subsidiary will execute and deliver such assumptions of Contracts and other instruments of assumption as and to the extent reasonably necessary to evidence the valid and effective assumption of the Spinco Liabilities by the applicable Spinco Subsidiary.  All of the foregoing documents contemplated by this Section 3.5 will be referred to collectively herein as the “Burgundy Transfer Documents.”  For the avoidance of doubt, the obligations with respect to the Conveyance of Spinco Assets and the assumption of Spinco Liabilities provided in Section 2.1, and the execution and delivery of documents provided in this Section 3.5, does not extend to the Conveyance of, or execution of delivery of documents with respect to, any Spinco Assets that are already held as of the Business Transfer Time by a Spinco Entity (which Spinco Asset will continue to be held by such Spinco Entity) or any Spinco Liabilities that as of the Business Transfer Time are already a Liability of a Spinco Entity (which Spinco Liability will continue to be a Liability of such Spinco Entity).

 

Section 3.6                                      Transfer of Excluded Assets; Assumption of Excluded Liabilities.  In furtherance of the Conveyance of Excluded Assets and the assumption of Excluded Liabilities provided in Section 2.2:  (a) Spinco will execute and deliver, and will cause its Subsidiaries to execute and deliver, such bills of sale, quitclaim deeds, stock powers, certificates of title, assignments of Contracts and other instruments of transfer, Conveyance and assignment as and

 

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to the extent reasonably necessary to evidence the Conveyance of all of Spinco’s and its Subsidiaries’ right, title and interest in and to the Excluded Assets to Burgundy and its Subsidiaries and (b) Burgundy will execute and deliver such assumptions of Contracts and other instruments of assumption as and to the extent reasonably necessary to evidence the valid and effective assumption of the Excluded Liabilities by Burgundy.  All of the foregoing documents contemplated by this Section 3.6 will be referred to collectively herein as the “Spinco Transfer Documents” and, together with the Burgundy Transfer Documents, the “Transfer Documents.”

 

Section 3.7             Working Capital Adjustment.  (a)  At least five (5) Business Days prior to the Business Transfer Date, Spinco, in consultation with Grizzly, will prepare and deliver to Burgundy a statement setting forth a good-faith estimate of the amount of Working Capital as of the Business Transfer Date, calculated in accordance with the Accounting Exhibit (such estimate, the “Estimated Closing Adjustment Statement”).  On the Business Transfer Date, (i) if the Estimated Adjustment Payment, if any, is positive, Spinco shall pay to Burgundy the Estimated Adjustment Payment by increasing both the Below Basis Amount and the Above Basis Amount by the absolute value of the Estimated Adjustment Payment and (ii) if the Estimated Adjustment Payment, if any, is negative, Burgundy shall pay to Spinco the absolute value of the Estimated Adjustment Payment by reducing both the Below Basis Amount and the Above Basis Amount by the absolute value of the Estimated Adjustment Payment.  For example, on the Business Transfer Date, if the Above Basis Amount, before adjusting for any Estimated Adjustment Payment, is $675 million and (i) the Estimated Adjustment Payment is positive $10 million, then Spinco shall pay to Burgundy the Estimated Adjustment Payment by increasing the Below Basis Amount by the absolute value of the Estimated Adjustment Payment, such that the Below Basis Amount shall be equal to $235 million (or $225 million plus $10 million), before any further adjustments in respect of the TCI Basis or any elective reduction of increase in the Below Basis Amount as provided in Section 1.8,  and the Above Basis Amount shall remain equal to $675 million (or $900 million, minus $235 million, plus $10 million), before any further adjustments in respect of the TCI Value as provided in this Agreement or (ii) the Estimated Adjustment Payment is negative $10 million, then Burgundy shall pay to Spinco the absolute value of the Estimated Adjustment Payment by reducing both the Below Basis Amount and the Above Basis Amount by the absolute value of the Estimated Adjustment Payment, such that the Below Basis Amount shall be equal to $215 million (or $225 million less $10 million), before any further adjustments in respect of the TCI Basis or any elective reduction or increase in the Below Basis Amount as provided in Section 1.8,  and the Above Basis Amount shall remain equal to $675 million (or $900 million, minus $215 million, minus $10 million), before any further adjustments in respect of the TCI Value as provided in this Agreement.  The “Estimated Adjustment Payment” will be equal to the Working Capital as reflected on the Estimated Closing Adjustment Statement (after satisfaction of the intercompany accounts pursuant to Section 2.6(c)), minus the Target Working Capital Amount.  Within 180 days following the Distribution Date, Spinco will prepare and deliver to Burgundy a statement setting forth the amount of Working Capital, as of the Business Transfer Date, calculated in accordance with the Accounting Exhibit (the “Closing Adjustment Statement”).  Upon the reasonable request of Spinco, Burgundy will provide (or will cause a member of the Burgundy Group to provide) to Spinco and its accountants reasonable access to the books and records, any other information, including working papers of its accountants, and to any employees of Burgundy or any other member of the Burgundy Group necessary for Spinco to prepare the Closing Adjustment Statement, to respond to the Burgundy Objection (if any) and to prepare materials for presentation to the

 

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Accounting Firm in connection with this Section 3.7 and Burgundy will otherwise cooperate with and assist Spinco as may be reasonably necessary to carry out the purposes of this Section 3.7.

 

(b)           For a period of sixty (60) days after delivery of the Closing Adjustment Statement, Spinco will make available to Burgundy, as reasonably requested by Burgundy, all books, records, work papers, personnel (including their accountants and employees) and other materials and sources used by Spinco to prepare the Closing Adjustment Statement and not already in the possession or under the control of Burgundy.  The Closing Adjustment Statement will be binding and conclusive upon, and deemed accepted (including a waiver of objection with respect to) by, Burgundy unless Burgundy has notified Spinco in writing within sixty (60) days after delivery of the Closing Adjustment Statement of any good faith objection thereto (the “Burgundy Objection”).  Any Burgundy Objection will set forth a reasonably specific description of the basis of the Burgundy Objection and the adjustments to the line items reflected on the Closing Adjustment Statement which Burgundy believes should be made.  Any items not disputed during the foregoing sixty (60) day period will be deemed to have been accepted (including a waiver of objection with respect to) by Burgundy.

 

(c)           If Burgundy and Spinco are unable to resolve any of their disputes with respect to the Closing Adjustment Statement within 30 days following Spinco’s receipt of the Burgundy Objection to such Closing Adjustment Statement pursuant to Section 3.7(b), they will refer their remaining differences to a nationally recognized firm of independent public accountants to which Burgundy and Spinco mutually agree (the “Accounting Firm”) for a decision, which decision will be final and binding and unappealable absent fraud or willful misconduct on the Parties.  The Accounting Firm will act as an expert and not an arbitrator and will address only those items in dispute, in accordance with any provisions or policies set forth herein and in accordance with the Accounting Exhibit, and for each item may not assign a value greater than the greatest value for such item claimed by either Party or smaller than the smallest value for such item claimed by either Party.  Any expenses relating to the engagement of the Accounting Firm will be shared equally by Burgundy, on the one hand, and Spinco, on the other hand.

 

(d)           The Closing Adjustment Statement will become final and binding on the Parties upon the earliest of (i) if no Burgundy Objection has been given, the expiration of the period within which Burgundy must make its objection pursuant to Section 3.7(b), (ii) agreement in writing by Burgundy and Spinco that the Closing Adjustment Statement, together with any modifications thereto agreed by Burgundy and Spinco and (iii) the date on which the Accounting Firm issues its written determination with respect to any dispute relating to such Closing Adjustment Statement.  The Closing Adjustment Statement, as submitted by Spinco if no timely Burgundy Objection has been given, as adjusted pursuant to any agreement between the Parties or as determined pursuant to the decision of the Accounting Firm, when final and binding on all Parties and upon which a judgment may be entered by a court of competent jurisdiction, is herein referred to as the “Final Closing Adjustment Statement.”

 

(e)           Within five (5) Business Days following issuance of the Final Closing Adjustment Statement, the Adjustment Payment and interest thereon will be paid by wire transfer of immediately available funds to a bank account designated by Burgundy or Spinco, as the case

 

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may be.  The “Adjustment Payment” will be equal to the amount of the Working Capital as reflected on the Final Closing Adjustment Statement, minus the Target Working Capital Amount, minus the amount paid pursuant to Section 3.7(a) if the Estimated Adjustment Payment was paid by Spinco to Burgundy or plus the amount paid pursuant to Section 3.7(a) if the Estimated Adjustment Payment was made by Burgundy to Spinco.  The Adjustment Payment, if any, will be payable by Spinco to Burgundy, if positive, and if the Adjustment Payment is negative, an amount equal to the absolute value of such Adjustment Payment will be payable by Burgundy to Spinco.  The Adjustment Payment will bear interest from the Distribution Date to the date of payment at the prime rate (as published in the Wall Street Journal, Northeastern Edition) in effect on the Distribution Date, which interest will be calculated on the basis of a 365-day year and the actual number of days elapsed and such interest will be paid on the same date and in the same manner as such Adjustment Payment.

 

ARTICLE IV

 

THE DISTRIBUTION

 

Section 4.1             Form of Distribution.  (a)  Burgundy may elect, in its sole discretion, to effect the Distribution in the form of either (i) a One-Step Spin-Off or (ii) an Exchange Offer (including any Clean-Up Spin-Off, as set forth below).

 

(b)           If Burgundy elects to effect the Distribution in the form of a One-Step Spin-Off, the Board of Directors of Burgundy, in accordance with applicable Law, will establish (or designate Persons to establish) a Record Date and the Distribution Date and Burgundy will establish appropriate procedures in connection with, and to effectuate in accordance with applicable Law, the Distribution.  All shares of Spinco Common Stock held by Burgundy on the Distribution Date will be distributed to the Record Holders in the manner determined by Burgundy and in accordance with Section 4.5(b).

 

(c)           If Burgundy elects to effect the Distribution as an Exchange Offer, Burgundy will determine the terms of such Exchange Offer, including the number of shares of Spinco Common Stock that will be offered for each validly tendered share of Burgundy Common Stock, the period during which such Exchange Offer will remain open, the procedures for the tender and exchange of shares and all other terms and conditions of such Exchange Offer, which terms and conditions will comply with all securities Law requirements applicable to such Exchange Offer.  In the event that Burgundy’s stockholders subscribe for less than all of the Spinco Common Stock in the Exchange Offer, Burgundy will consummate the Clean-Up Spin-Off on the Distribution Date immediately following the consummation of the Exchange Offer and the Record Date for the Clean-Up Spin-Off shall be established as of such date in the same manner as provided in Section 4.1(b).  The terms and conditions of any Clean-Up Spin-Off shall be as determined by Burgundy and will comply with the requirements of all applicable Laws; provided, however, that any shares of Spinco Common Stock that are not subscribed for in the Exchange Offer must be distributed to Burgundy’s stockholders in the Clean-Up Spin-Off.

 

Section 4.2             Manner of Distribution.  (a)  To the extent the Distribution is effected as a One-Step Spin-Off, subject to the terms thereof, in accordance with Section 4.5(b), each Record Holder will be entitled to receive for each share of Burgundy Common Stock held

 

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by such Record Holder a number of shares of Spinco Common Stock equal to the total number of shares of Spinco Common Stock held by Burgundy on the Distribution Date, multiplied by a fraction, the numerator of which is number of shares of Burgundy Common Stock held by such Record Holder and the denominator of which is the total number of shares of Burgundy Common Stock outstanding on the Distribution Date.

 

(b)           To the extent the Distribution is effected as an Exchange Offer, subject to the terms thereof, in accordance with Section 4.5(b), each Burgundy stockholder may elect in the Exchange Offer to exchange a number of shares of Burgundy Common Stock held by such Burgundy stockholder for shares of Spinco Common Stock in such quantities, at such an exchange ratio and subject to such other terms and conditions as may be determined by Burgundy and set forth in the Spinco Registration Statement; provided, however, the completion of the Exchange Offer shall be subject to a condition (which condition Burgundy may not amend or waive without the written consent of Grizzly) that no one stockholder of Spinco (individually or together with all members of any “group” as defined in the Exchange Act) after giving effect to the Exchange Offer and the Merger, hold greater than 20% of the outstanding common stock of Grizzly; provided  further, however, that Burgundy may, in its sole discretion, revise the terms of the Exchange Offer, including the number of shares of Spinco Common Stock that will be offered for each validly tendered share of Burgundy Common Stock, and the Clean-Up Spin Off, such that no one stockholder of Spinco (individually or together with all members of any “group” as defined in the Exchange Act) after giving effect to the Exchange Offer and the Merger, will hold greater than 20% of the outstanding common stock of Grizzly.  The terms and conditions of any Clean-Up Spin-Off will be as determined by Burgundy, subject to the provisions of Section 4.2(a), mutatis mutandis.

 

(c)           None of the Parties, nor any of their Affiliates hereto will be liable to any Person in respect of any shares of Spinco Common Stock (or dividends or distributions with respect thereto) that are properly delivered to a public official pursuant to any applicable abandoned property, escheat or similar Law.

 

Section 4.3             Conditions to the Distribution.  The obligations of Burgundy pursuant to this Agreement to effect the Distribution will be subject to the fulfillment (or waiver by Burgundy) at or prior to the Distribution Date of the following conditions:

 

(a)           the Spinco Reorganization has been consummated;

 

(b)           the Recapitalization shall have occurred on the terms contemplated by this Agreement and the Merger Agreement and Burgundy shall have received the Special Distribution;

 

(c)           Burgundy and Spinco shall have received the IRS D Reorganization Ruling and the IRS Debt Exchange Ruling, each in form and substance reasonably satisfactory to Burgundy and Spinco, and such rulings shall continue to be valid and in full force and effect (and, for the avoidance of doubt, such rulings shall not have been invalidated, modified or otherwise affected by any change in any Law on or after the date such rulings were issued by the IRS);

 

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(d)           Burgundy shall have received the Distribution Tax Opinion;

 

(e)           Burgundy and Spinco shall have prepared and mailed to the holders of record of Burgundy Common Stock such information concerning Spinco, its business, operations and management, the Distribution and such other matters as Burgundy shall determine and as may otherwise be required by Law; and

 

(f)            each of the conditions to Burgundy’s obligation to effect the transactions contemplated in the Merger Agreement shall have been satisfied or waived (other than those conditions that by their nature are to be satisfied at the Distribution Date and other than the conditions set forth in Section 9.1(a) of the Merger Agreement).

 

Section 4.4             Actions Prior to Distribution.  (a)  Spinco will cooperate with Burgundy to accomplish the Distribution, including in connection with the preparation of all documents and the making of all filings required in connection with the Distribution.  Burgundy will be permitted to reasonably direct and control the efforts of the Parties in connection with the Distribution (including the selection of investment bank or manager in connection with the Distribution, as well as any financial printer, solicitation and/or exchange agent and financial, legal, accounting and other advisors for Burgundy), and Spinco will use commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all other things reasonably necessary to facilitate the Distribution as reasonably directed by Burgundy in good faith.  Without limiting the generality of the foregoing, Spinco will and will cause its employees, advisors, agents, accountants, counsel and other representatives to, as reasonably directed by Burgundy in good faith, reasonably cooperate in and take the following actions:  (i) preparing and filing the registration under the Securities Act or the Exchange Act of Spinco Common Stock on an appropriate registration form or forms to be designated by Burgundy (the “Spinco Registration Statement”), (ii) participating in meetings, drafting sessions, due diligence sessions, management presentation sessions, and “road shows” in connection with the Distribution (including any marketing efforts), which participation shall be subject to, and may be concurrent with, any such activities required with respect to the Exchange Offer, (iii) furnishing to any dealer manager or other similar agent participating in the Distribution (A) “cold comfort” letters from independent public accountants in customary form and covering such matters as are customary for an underwritten public offering (including with respect to events subsequent to the date of financial statements included in any offering document) and (B) opinions and negative assurance letters of counsel in customary form and covering such matters as may be reasonably requested, and (iv) furnishing all historical and forward-looking financial and other pertinent financial and other information that is available to Spinco and is reasonably required in connection with the Distribution.  Without limiting the foregoing, the Parties will perform the marketing activities set forth in Schedule 4.4 as provided therein.

 

(b)           Burgundy and Spinco will prepare and mail, prior to any Distribution Date, to the holders of Burgundy Common Stock, such information concerning Spinco, Grizzly, their respective businesses, operations and management, the Distribution and such other matters as Burgundy will reasonably determine and as may be required by Law.  Burgundy and Spinco will prepare, and Spinco will, to the extent required under applicable Law, file with the SEC any such documentation and any requisite no-action letters which Burgundy determines are necessary or desirable to effectuate the Distribution and Burgundy and Spinco will each use its reasonable

 

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best efforts to obtain all necessary approvals from the SEC with respect thereto as soon as practicable.

 

(c)           Burgundy and Spinco will take all such action as may be necessary or appropriate under the securities or blue sky Laws of the United States (and any comparable Laws under any foreign jurisdiction) in connection with the Distribution.

 

(d)           Burgundy and Spinco will take all reasonable steps necessary and appropriate to cause the conditions set forth in Section 4.3 to be satisfied and to effect the Distribution on any Distribution Date.

 

Section 4.5             Additional Matters.

 

(a)           Tax Withholding.  Burgundy, Spinco, or the transfer agent or the exchange agent in the Distribution, as applicable, shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement such amounts as are required to be deducted and withheld with respect to the making of such payments under the Code or any provision of local or foreign Tax Law.  Any withheld amounts will be treated for all purposes of this Agreement as having been paid to the Persons otherwise entitled thereto.

 

(b)           Delivery of Certificate.  Upon the consummation of the One-Step Spin-Off or the Exchange Offer, Burgundy will deliver to the Agent, a global certificate representing the Spinco Common Stock being distributed in the One-Step Spin-Off or exchanged in the Exchange Offer, as the case may be, for the account of the Burgundy stockholders that are entitled thereto.  Upon a Clean-Up Spin-Off, if any, Burgundy will deliver to the Agent an additional global certificate representing the Spinco Common Stock being distributed in the Clean-Up Spin-Off for the account of the Burgundy stockholders that are entitled thereto.  The Agent will hold such certificate or certificates, as the case may be, for the account of the Burgundy stockholders pending the Merger, as provided in Section 3.2 of the Merger Agreement.  Immediately after the time of the Distribution and prior to the Effective Time, the shares of Spinco Common Stock will not be transferable and the transfer agent for the Spinco Common Stock will not transfer any shares of Spinco Common Stock.  The Distribution will be deemed to be effective upon written authorization from Burgundy to the transfer agent or the exchange agent in the Distribution to proceed as set forth in Section 4.2.

 

ARTICLE V

 

MUTUAL RELEASES; INDEMNIFICATION

 

Section 5.1             Release of Pre-Business Transfer Time Claims.

 

(a)           Spinco Release.  Except as provided in Section 5.1(c), effective as of the Business Transfer Time, Spinco will, for itself and each other member of the Spinco Group, and their respective successors and assigns, remise, release and forever discharge the Burgundy Indemnitees from any and all Liabilities whatsoever, whether at Law or in equity (including any right of contribution), whether arising under any Contract, by operation of Law or otherwise, existing or arising from any acts or events occurring or failing to occur or alleged to have occurred or to have failed to occur at or before the Business Transfer Time or any conditions

 

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existing or alleged to have existed at or before the Business Transfer Time, including in connection with the transactions and all other activities to implement the Spinco Reorganization, the Recapitalization and the Distribution. Without limitation, the foregoing release includes a release of any rights and benefits with respect to such Liabilities that Spinco and each member of the Spinco Group, and their respective successors and assigns, now has or in the future may have conferred upon them by virtue of any statute or common law principle which provides that a general release does not extend to claims which a party does not know or suspect to exist in its favor at the time of executing the release, if knowledge of such claims would have materially affected such party’s settlement with the obligor.  In this connection, Spinco hereby acknowledges that it is aware that factual matters now unknown to it may have given or may hereafter give rise to Liabilities that are presently unknown, unanticipated and unsuspected, and it further agrees that this release has been negotiated and agreed upon in light of that awareness and it nevertheless hereby intends to release the Burgundy Indemnitees from the Liabilities described in the first sentence of this Section 5.1(a).

 

(b)           Burgundy Release.  Except as provided in Section 5.1(c), effective as of the Business Transfer Time, Burgundy will, for itself and each other member of the Burgundy Group, and their respective successors and assigns, remise, release and forever discharge the Spinco Indemnitees from any and all Liabilities whatsoever, whether at Law or in equity (including any right of contribution), whether arising under any Contract, by operation of Law or otherwise, existing or arising from any acts or events occurring or failing to occur or alleged to have occurred or to have failed to occur at or before the Business Transfer Time or any conditions existing or alleged to have existed at or before the Business Transfer Time, including in connection with the transactions and all other activities to implement any of the Spinco Reorganization, the Recapitalization and the Distribution.  Without limitation, the foregoing release includes a release of any rights and benefits with respect to such Liabilities that Burgundy and each member of the Burgundy Group, and their respective successors and assigns, now has or in the future may have conferred upon them by virtue of any statute or common law principle which provides that a general release does not extend to claims which a party does not know or suspect to exist in its favor at the time of executing the release, if knowledge of such claims would have materially affected such party’s settlement with the obligor.  In this connection, Burgundy hereby acknowledges that it is aware that factual matters now unknown to it may have given or may hereafter give rise to Liabilities that are presently unknown, unanticipated and unsuspected, and it further agrees that this release has been negotiated and agreed upon in light of that awareness and it nevertheless hereby intends to release the Spinco Indemnitees from the Liabilities described in the first sentence of this Section 5.1(b).

 

(c)           No Impairment.  Nothing contained in Section 5.1(a) or 5.1(b) releases or will release any Person from (nor impairs or will impair any right of any Person to enforce the applicable agreements, arrangements, commitments or understandings relating thereto) the obligations under this Agreement, the Merger Agreement or any Ancillary Agreement, in each case in accordance with its terms.  In addition, nothing in Section 5.1(a) or 5.1(b) shall release any Person from:

 

(i)            any Liability provided in or resulting from any agreement or obligation among any members of the Burgundy Group or the Spinco Group that

 

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is specified in this Agreement, the Merger Agreement or any Ancillary Agreement as not terminating on or before Distribution Date;

 

(ii)           any Liability assumed, transferred, assigned or allocated to the Group of which such Person is a member in accordance with this Agreement, the Merger Agreement or any other Ancillary Agreement, or any other Liability of any member of any Group under this Agreement, the Merger Agreement or any other Ancillary Agreement;

 

(iii)          any Liability for unpaid amounts for products or services or refunds owing on products or services due on a value-received basis for work done by a member of one Group at the request or on behalf of a member of the other Group;

 

(iv)          any Liability that the Parties may have with respect to indemnification or contribution pursuant to this Agreement for claims brought against the Parties by third Persons, and, if applicable, the appropriate provisions of the Merger Agreement and Ancillary Agreements;

 

(v)           any Liability the release of which would result in the release of any Person other than a Person released pursuant to this Section 5.1; or

 

(vi)          any Liability for fraud or willful misconduct.

 

(d)           No Actions as to Released Pre-Business Transfer Time Claims.  Following the Business Transfer Time, Spinco will not, and will cause its Affiliates not to, make any claim or demand, or commence any Action asserting any claim or demand, including any claim of contribution or any indemnification, against Burgundy or any member of the Burgundy Group, or any other Person released pursuant to Section 5.1(a), with respect to any Liabilities released pursuant to Section 5.1(a).  Following the Business Transfer Time, Burgundy will not, and will cause each other member of the Burgundy Group not to, make any claim or demand, or commence any Action asserting any claim or demand, including any claim of contribution or any indemnification, against Spinco or any member of the Spinco Group, or any other Person released pursuant to Section 5.1(b), with respect to any Liabilities released pursuant to Section 5.1(b).

 

(e)           General Intent.  It is the intent of each of Burgundy and Spinco, by virtue of the provisions of this Section 5.1, to provide for a full and complete release and discharge of all Liabilities existing or arising from all acts and events occurring or failing to occur or alleged to have occurred or to have failed to occur and all conditions existing or alleged to have existed on or before the Business Transfer Time, between or among Spinco or any member of the Spinco Group, on the one hand, and Burgundy or any member of the Burgundy Group, on the other hand (including any Contractual agreements or arrangements existing or alleged to exist between or among any such members on or before the Business Transfer Time), except as expressly set forth in Section 5.1(c).  At any time, at the request of any other Party, each Party will cause each member of its Group to execute and deliver releases reflecting the provisions hereof.

 

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Section 5.2             Indemnification by the Spinco Group.  Without limiting or otherwise affecting the indemnity provisions of the Ancillary Agreements, from and after the Business Transfer Time, Spinco, and each member of the Spinco Group will, on a joint and several basis, indemnify, defend (or, where applicable, pay the defense costs for) and hold harmless the Burgundy Indemnitees from and against, and will reimburse such Burgundy Indemnitees with respect to, any and all Losses that result from, relate to or arise, whether prior to, at or following the Business Transfer Time, out of any of the following items (without duplication):

 

(a)           any failure of Spinco or any other member of the Spinco Group or any other Person to pay, perform, fulfill, discharge and, to the extent applicable, comply with, in due course and in full, any Spinco Liabilities;

 

(b)           any breach by Spinco or any other member of the Spinco Group of any agreement or obligation to be performed by such Persons pursuant to this Agreement or any Ancillary Agreement unless such Ancillary Agreement expressly provides for separate indemnification therein (which shall be controlling); and

 

(c)           the enforcement by the Burgundy Indemnitees of their rights to be indemnified, defended and held harmless under this Section 5.2.

 

Section 5.3             Indemnification by Burgundy.  Without limiting or otherwise affecting the indemnity provisions of the Ancillary Agreements, from and after the Business Transfer Time, Burgundy, and each member of the Burgundy Group will, on a joint and several basis, indemnify, defend (or, where applicable, pay the defense costs for) and hold harmless the Spinco Indemnitees from and against, and will reimburse such Spinco Indemnitee with respect to, any and all Losses that result from, relate to or arise, whether prior to or following the Business Transfer Time, out of any of the following items (without duplication):

 

(a)           any failure of Burgundy or any other member of the Burgundy Group or any other Person to pay, perform, fulfill, discharge and, to the extent applicable, comply with, in due course and in full the Excluded Liabilities, whether prior to or after the Business Transfer Date or the date hereof;

 

(b)           any breach by Burgundy or any other member of the Burgundy Group of any agreement or obligation to be performed by such Persons pursuant to this Agreement or any Ancillary Agreement unless such Ancillary Agreement expressly provides for separate indemnification therein (which, including any limitations on liability contained therein, shall be controlling); and

 

(c)           the enforcement by the Spinco Indemnitees of their rights to be indemnified, defended and held harmless under this Section 5.3.

 

Section 5.4             Payments; Reductions for Insurance Proceeds and Other Recoveries.

 

(a)           Payments.  Indemnification payments in respect of any Liabilities for which an Indemnitee is entitled to indemnification under this Article V will be paid by the

 

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Indemnifying Party to the Indemnitee as such Liabilities are incurred upon demand by the Indemnitee, including reasonably satisfactory documentation setting forth the basis for the amount of such indemnification payment, including documentation with respect to calculations made and consideration of any Insurance Proceeds that actually reduce the amount of such Liabilities.  The indemnity agreements contained in this Article V will remain operative and in full force and effect, regardless of (i) any investigation made by or on behalf of any Indemnitee, (ii) the knowledge by the Indemnitee of Liabilities for which it might be entitled to indemnification hereunder and (iii) any termination of this Agreement.

 

(b)           Insurance Proceeds.  The amount that any Indemnifying Party is or may be required to provide indemnification to or on behalf of any Indemnitee pursuant to Section 5.2 or Section 5.3 as applicable, will be reduced (retroactively or prospectively) by any Insurance Proceeds or other amounts actually recovered from unaffiliated third parties (and excluding any captive insurance companies of the Indemnitee or its Affiliates or any Taxing Authority) by or on behalf of such Indemnitee in respect of the related Loss (net of increased insurance premiums and charges related directly and solely to the related indemnifiable Losses and costs and expenses (including reasonable legal fees and expenses) incurred by such Indemnitee in connection with seeking to collect and collecting such amounts).  The existence of a claim by an Indemnitee for monies from an insurer or against a third party in respect of any indemnifiable Loss will not, however, delay any payment pursuant to the indemnification provisions contained herein and otherwise determined to be due and owing by an Indemnifying Party.  Rather, the Indemnifying Party will make payment in full of the amount determined to be due and owing by it against an assignment by the Indemnitee to the Indemnifying Party of the entire claim of the Indemnitee for Insurance Proceeds or against such third party.  Notwithstanding any other provisions of this Agreement, it is the intention of the Parties that no insurer or any other third party will be (i) entitled to a “windfall” or other benefit it would not be entitled to receive in the absence of the foregoing indemnification provisions or otherwise have any subrogation rights with respect thereto, or (ii) relieved of the responsibility to pay any claims for which it is obligated.  The Indemnitee will use and will cause its Affiliates to use commercially reasonable efforts to pursue claims against applicable insurers for coverage of such Loss under such policies, subject to Section 6.11.

 

(c)           Tax Treatment; Adjustments for Tax Benefits and Cost.

 

(i)            In the absence of a Final Determination to the contrary and except for any interest for any period beginning after the Distribution Date, any amount payable by Spinco to Burgundy or by Burgundy to Spinco under this Agreement shall be treated for Tax purposes as a distribution or capital contribution, respectively, occurring immediately prior to the Distribution.

 

(ii)           Notwithstanding the foregoing, the amount that any Indemnifying Party is or may be required to provide indemnification to or on behalf of any Indemnitee pursuant to Section 5.2 or Section 5.3 as applicable, will be (i) decreased to take into account the present value of any Tax benefit made allowable to the Indemnitee (or an Affiliate thereof) arising from the incurrence or payment of the relevant indemnified item, and (ii) increased to take into account any Tax cost of the Indemnitee (or an Affiliate thereof) arising from the receipt of

 

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the relevant indemnity payment.  For purposes of this Section 5.4(c)(ii), any Tax benefit or Tax cost, as applicable, shall be determined (i) using the highest marginal rates in effect at the time of the determination, (ii) assuming the Indemnitee will be liable for such Taxes at such rate and has no Tax attributes at the time of the determination, and (iii) assuming that any such Tax benefit is used at the earliest date allowable by applicable Law.  The present value referred to in the first sentence of this Section 5.4(c)(ii) shall be determined using a discount rate equal to the mid term applicable federal rate in effect at the time of the payment of the relevant indemnity payment.

 

Section 5.5             Procedures for Defense, Settlement and Indemnification of Third-Party Claims.

 

(a)           Direct Claims.  All claims made hereunder on account of indemnifiable Losses that do not involve Third-Party Claims shall be asserted by reasonably prompt written notice given by the Indemnitee to the Indemnifying Party from whom such indemnification is sought.  Notwithstanding the foregoing, the delay or failure of any Indemnitee to give notice as provided in this Section 5.5(a) will not relieve the relevant Indemnifying Party of its obligations under this Article V, except to the extent that such Indemnifying Party is actually prejudiced by such delay or failure to give notice.

 

(b)           Third-Party Claims.

 

(i)            Notice of Claims.  If an Indemnitee receives notice or otherwise learns of the assertion by a Person (including any Governmental Authority) who is not a member of the Burgundy Group or Grizzly or any of its Affiliates (including after the Spinco Reorganization, the Spinco Group) of any claim or of the commencement by any such Person of any Action with respect to which an Indemnifying Party may be obligated to provide indemnification under this Agreement (collectively, a “Third-Party Claim”), such Indemnitee will give such Indemnifying Party prompt written notice (a “Claims Notice”) thereof but in any event within 15 calendar days after becoming aware of such Third-Party Claim.  Any such notice will describe the Third-Party Claim in reasonable detail and include copies of all notices and documents (including court papers) received by the Indemnitee relating to the Third-Party Claim.  Notwithstanding the foregoing, the delay or failure of any Indemnitee or other Person to give notice as provided in this Section 5.5 will not relieve the related Indemnifying Party of its obligations under this Article V, except to the extent that such Indemnifying Party is actually prejudiced by such delay or failure to give notice.

 

(ii)           Opportunity to Defend.  The Indemnifying Party shall have the right, exercisable by written notice to the Indemnitee within 30 days after receipt of a Claims Notice from the Indemnitee of the commencement or assertion of any Third-Party Claim in respect of which indemnity may be sought under this Article V, to assume and conduct the defense of such Third-Party Claim in accordance with the limits set forth in this Agreement with counsel selected by the Indemnifying Party and reasonably acceptable to the Indemnitee; provided,

 

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however, that the (A) defense of such Third-Party Claim by the Indemnifying Party will not, in the reasonable judgment of the Indemnitee, (1) if Burgundy or any member of the Burgundy Group is the Indemnifying Party, reasonably be expected to affect Grizzly or any of its controlled Affiliates (including after the Merger, any member of the Spinco Group) in a materially adverse manner (for the avoidance of doubt, any Third Party Claim relating to or arising in connection with any criminal proceeding, Action, indictment, allocation or investigation against Grizzly or its Affiliates shall be deemed materially adverse), and (2) if Spinco or any member of the Spinco Group is the Indemnifying Party, reasonably be expected to affect Burgundy or any of its controlled Affiliates in a materially adverse manner (for the avoidance of doubt, any Third Party Claim relating to or arising in connection with any criminal proceeding, Action, indictment, allocation or investigation against Burgundy or its Affiliates shall be deemed materially adverse) and (B) the Third-Party Claim solely seeks (and continues to seek) monetary damages (the conditions set forth in clauses (A) and (B) are, collectively, the “Litigation Conditions”).  If the Indemnifying Party does not assume the defense of a Third-Party Claim in accordance with this Section 5.5, the Indemnitee may continue to defend the Third-Party Claim.  If the Indemnifying Party has assumed the defense of a Third-Party Claim as provided in this Section 5.5, the Indemnifying Party will not be liable for any legal expenses subsequently incurred by the Indemnitee in connection with the defense of the Third-Party Claim; provided, however, that if (x) either of the Litigation Conditions ceases to be met or (y) the Indemnifying Party fails to take reasonable steps necessary to defend diligently such Third-Party Claim, the Indemnitee may assume its own defense, and the Indemnifying Party will be liable for all reasonable costs or expenses paid or incurred in connection with such defense.  The Indemnifying Party or the Indemnitee, as the case may be, has the right to participate in (but, subject to the prior sentence, not control), at its own expense, the defense of any Third-Party Claim that the other is defending as provided in this Agreement.  The Indemnifying Party, if it has assumed the defense of any Third-Party Claim as provided in this Agreement, may not, without the prior written consent of the Indemnitee, consent to a settlement of, or the entry of any judgment arising from, any such Third-Party Claim that (I) does not include as an unconditional term thereof the giving by the claimant or the plaintiff to the Indemnitee of a complete release from all liability in respect of such Third-Party Claim, (II) provides for injunctive or other nonmonetary relief affecting the Indemnitee or any of its Affiliates, or (III) in the reasonable opinion of the Indemnitee, would otherwise materially adversely affect the Indemnitee or any of its Affiliates.  The Indemnitee may settle any Third-Party Claim, the defense of which has not been assumed by the Indemnifying Party, only with the prior written consent of the Indemnifying Party, not to be unreasonably withheld, conditioned or delayed.

 

Section 5.6             Additional Matters.

 

(a)           Cooperation in Defense and Settlement.  With respect to any Third-Party Claim for which Spinco, on the one hand, and Burgundy, on the other hand, may have Liability

 

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under this Agreement or any of the Ancillary Agreements, the Parties agree to cooperate fully and maintain a joint defense (in a manner that will preserve the attorney-client privilege, joint defense or other privilege with respect thereto) so as to seek to minimize such Liabilities and defense costs associated therewith.  The Party that is not responsible for managing the defense of such Third-Party Claims will, upon reasonable request, be consulted with respect to significant matters relating thereto and may retain counsel to monitor or assist in the defense of such claims at its own cost.

 

(b)           Certain Actions.

 

(i)            Notwithstanding anything to the contrary set forth in Section 5.5, Burgundy may elect to have exclusive authority and control over the investigation, prosecution, defense and appeal of all Actions (excluding any Actions relating to the Ohio River/Calcesieu Liabilities, which are subject to Section 5.6(e)) pending at the Business Transfer Time which relate to or arise out of the Eagle Business, the Spinco Assets or the Spinco Liabilities if such Action primarily relates to the Excluded Assets and Excluded Liabilities and a member of the Burgundy Group is also named as a target or defendant thereunder; provided that (i) Burgundy will consult with Spinco on a regular basis with respect to strategy and developments with respect to any such Action, (ii) if Burgundy fails to take reasonable steps necessary to defend diligently such Action, Spinco may assume such defense, and Burgundy will be liable for all reasonable costs or expenses paid or incurred in connection with such defense, (iii) Spinco has the right to participate in (but, subject to clause (ii) above, not control) the defense of such Action, and (iv) Burgundy obtains the written consent of Spinco, such consent not to be unreasonably withheld or delayed, to settle or compromise or consent to the entry of judgment with respect to such Action if such settlement, consent or judgment would (x) provide for injunctive or other nonmonetary relief affecting Spinco or any of its Affiliates, or (y) in the reasonable opinion of Spinco, would otherwise materially adversely affect Spinco or any of its Affiliates or reasonably expected to result in a payment by Spinco Group in excess of $2 million.  After any such compromise, settlement, consent to entry of judgment or entry of judgment, Burgundy and Spinco will agree upon a reasonable allocation to Spinco and Spinco will be responsible for or receive, as the case may be, Spinco’ proportionate share of any such compromise, settlement, consent or judgment attributable to the Spinco Business, the Spinco Assets or the Spinco Liabilities, including its proportionate share of the reasonable costs and expenses associated with defending same.

 

(ii)           Notwithstanding anything to the contrary set forth in Section 5.5, Burgundy shall have exclusive authority and control over the investigation, prosecution, defense and appeal of all Actions relating to the matters set forth on Schedule 2.5(b)(viii).

 

(c)           Substitution.  In the event of an Action that involves solely matters that are indemnifiable and in which the Indemnifying Party is not a named defendant, if either the

 

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Indemnitee or the Indemnifying Party so requests, the Parties will endeavor to substitute the Indemnifying Party for the named defendant.  If such substitution or addition cannot be achieved for any reason or is not requested, the rights and obligations of the Parties regarding indemnification and the management of the defense of claims as set forth in this Article V will not be affected.

 

(d)           Subrogation.  In the event of payment by or on behalf of any Indemnifying Party to or on behalf of any Indemnitee in connection with any Third-Party Claim, such Indemnifying Party will be subrogated to and will stand in the place of such Indemnitee, in whole or in part based upon whether the Indemnifying Party has paid all or only part of the Indemnitee’s Liability, as to any events or circumstances in respect of which such Indemnitee may have any right, defense or claim relating to such Third-Party Claim against any claimant or plaintiff asserting such Third-Party Claim or against any other Person.  Such Indemnitee will cooperate with such Indemnifying Party in a reasonable manner, and at the cost and expense of such Indemnifying Party, in prosecuting any subrogated right, defense or claim.

 

(e)           Special Provisions Related to Environmental Matters.  Without limiting Section 2.5(b), but subject to the Parties entering into a written agreement with respect thereto, Spinco shall provide reasonable cooperation to enable Burgundy to satisfy its obligations relating to the Ohio River/Calcesieu Estuary Liabilities including providing reasonable access to, through and over the Natrium and Lake Charles sites that are Spinco Active Sites for Burgundy, its employees, contractors, and consultants.  In the event that Spinco brings a claim for indemnification for the Ohio River/Calcesieu Estuary Liabilities against Burgundy related to the Ohio River sediments, Burgundy shall have the right, but not the obligation, to control any such Remediation; provided, however, Burgundy (i) keeps Spinco apprised of the status of the Remediation; (ii) provides drafts of any significant workplan, report, study or other deliverable before submission to a Governmental Authority or interested third party for review and comment by Spinco; and (iii) promptly provides Spinco with copies of any and all data, analyses, reports, or other documents and significant communications generated in connection with the Remediation.  Burgundy shall elect to either control the Remediation of the Ohio River sediments set forth in such notice or not to control the Remediation of the Ohio River sediments in writing within thirty (30) days of receiving written notice of the Claim.  Should Burgundy elect not to assume control of the Remediation of the Ohio River sediments pursuant to this section, then Spinco shall (i) keep Burgundy apprised of the status of the Remediation; (ii) provide drafts of any significant workplan, report, study or other deliverable before submission to a Governmental Authority or interested third party for review and comment by Burgundy; and (iii) promptly provide Burgundy with copies of any and all data, analyses, reports, or other documents and significant communications generated in connection with the Remediation.  Subject to the satisfaction of the terms and conditions of Section 5.5(b), Burgundy may take control of all negotiations and proceedings with Governmental Agencies and relevant third parties relating to the Ohio River/Calcasieu Estuary Liabilities.

 

Section 5.7             Exclusive Remedy.  Each of Grizzly and Burgundy is an established business entity that has been represented by experienced counsel in connection with the execution and delivery of this Agreement and the Ancillary Agreements, and intends and hereby agrees that this Article V sets forth the exclusive remedy and rights of the Parties following the Business Transfer Time in respect of the matters indemnified under this Article V, except that

 

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nothing contained in this Section 5.7 will impair any right of any Person (a) to exercise all of their rights and seek all damages available to them under Law in the event of claims or causes of action arising from fraud or willful misconduct; (b) to specific performance under this Agreement; and (c) to equitable relief as provided in Section 7.15 hereof.  In furtherance of the foregoing, each of the Parties hereto hereby waives, to the fullest extent permitted under applicable Law, any and all rights, claims and causes of action it may have against the other Party in connection herewith, arising under or based upon any Law other than the right to seek indemnity pursuant to this Article V and the right to seek the relief described in clauses (a), (b) and (c) of the preceding sentence.

 

Section 5.8             Survival of Indemnities.  The rights and obligations of Burgundy and Spinco and its Indemnitees under this Article V will survive the sale or other transfer by any Party of any Assets or businesses or the assignment by any Party of any Liabilities.

 

ARTICLE VI

 

ADDITIONAL AGREEMENTS

 

Section 6.1             Further Assurances.  Subject to the limitations of Section 2.7:

 

(a)           In addition to the actions specifically provided for elsewhere in this Agreement, the Merger Agreement or in any Ancillary Agreement, each of the Parties hereto will cooperate with each other and use (and will cause its Subsidiaries and Affiliates to use) commercially reasonable efforts, prior to, at and after the Business Transfer Time, to take, or to cause to be taken, all actions, and to do, or to cause to be done, all things reasonably necessary, proper or advisable on its part under applicable Law or Contractual obligations to consummate and make effective the transactions contemplated by this Agreement and the Ancillary Agreements as promptly as reasonably practicable.

 

(b)           Without limiting the generality of Section 6.1(a), where the cooperation of third parties such as insurers or trustees would be necessary in order for a Party to completely fulfill its obligations under this Agreement or the Ancillary Agreements, such Party will use commercially reasonable efforts to cause such third Parties to provide such cooperation.  If any Affiliate of Burgundy or Spinco is not a party to this Agreement or, as applicable, any Ancillary Agreement, and it becomes necessary or desirable for such Affiliate to be a party hereto or thereto to carry out the purpose hereof or thereof, then Burgundy or Spinco, as applicable, will cause such Affiliate to become a party hereto or thereto or cause such Affiliate to undertake such actions as if such Affiliate were such a party.

 

Section 6.2             Agreement for Exchange of Information.

 

(a)           Generally.  Except as otherwise provided in the Transition Services Agreement, each Party, on behalf of its Group, will provide, or cause to be provided, to the other Party’s Group, at any time after the Business Transfer Time and until the later of (x) the sixth anniversary of the Business Transfer Time and (y) the expiration of the relevant statute of limitations period, if applicable, as soon as reasonably practicable after written request therefor, any Shared Information in its possession or under its control.  Each of Burgundy and Spinco

 

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agree to make its personnel available during regular business hours to discuss the Information exchanged pursuant to this Section 6.2.  The obligations set forth in this Section 6.2 with respect to the data required for worker’s compensation claim handling and filings will survive the sixth anniversary time period herein and will instead survive indefinitely.  The parties agree that, after Closing, Shared Information will be subject to the confidentiality obligations in the Confidentiality Agreement as if such Information were provided prior to the Business Transfer Time.

 

(b)           Financial Information for Burgundy.  Without limitation to Section 6.2(a), until the end of the first full fiscal year occurring after the Distribution Date (and for a reasonable period of time afterwards as required by Law for Burgundy to prepare consolidated financial statements or complete a financial statement audit for any period during which the financial results of the Spinco Group were consolidated with those of Burgundy), Spinco will use its reasonable best efforts to enable Burgundy to meet its timetable for dissemination of its financial statements and to enable Burgundy’s auditors to timely complete their annual audit and quarterly reviews of financial statements. As part of such efforts, to the extent reasonably necessary for the preparation of financial statements or completing an audit or review of financial statements or an audit of internal control over financial reporting, (i) Spinco will authorize and direct its auditors to make available to Burgundy’s auditors, within a reasonable time prior to the date of Burgundy’s auditors’ opinion or review report, both (x) the personnel who performed or will perform the annual audits and quarterly reviews of Spinco and (y) work papers related to such annual audits and quarterly reviews, to enable Burgundy’s auditors to perform any procedures they consider reasonably necessary to take responsibility for the work of Spinco’s auditors as it relates to Burgundy’s auditors’ opinion or report and (ii) until all governmental audits are complete, Spinco will provide reasonable access during normal business hours for Burgundy’s internal auditors, counsel and other designated representatives to (x) the premises of Spinco and its Subsidiaries and all Information (and duplicating rights) within the knowledge, possession or control of Spinco and its Subsidiaries and (y) the officers and employees of Spinco and its Subsidiaries, so that Burgundy may conduct reasonable audits relating to the financial statements provided by Spinco and its Subsidiaries; provided, however, that such access will not be unreasonably disruptive to the business and affairs of the Spinco Group.

 

(c)           Financial Information for Spinco.  Without limitation to Section 6.2(a), until the end of the first full fiscal year occurring after the Distribution Date (and for a reasonable period of time afterwards or as required by Law), Burgundy will use its reasonable best efforts to enable Spinco to meet its timetable for dissemination of its financial statements and to enable Spinco’s auditors to timely complete their annual audit and quarterly reviews of financial statements. As part of such efforts, to the extent reasonably necessary for the preparation of financial statements or completing an audit or review of financial statements or an audit of internal control over financial reporting, (i) Burgundy will authorize and direct its auditors to make available to Spinco’s auditors, within a reasonable time prior to the date of Spinco’s auditors’ opinion or review report, both (x) the personnel who performed or will perform the annual audits and quarterly reviews of Burgundy and (y) work papers related to such annual audits and quarterly reviews, to enable Spinco’s auditors to perform any procedures they consider reasonably necessary to take responsibility for the work of Burgundy’s auditors as it relates to Spinco’s auditors’ opinion or report and (ii) until all governmental audits are complete, Burgundy will provide reasonable access during normal business hours for Spinco’s internal

 

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auditors, counsel and other designated representatives to (x) the premises of Burgundy and its Subsidiaries and all Information (and duplicating rights) within the knowledge, possession or control of Burgundy and its Subsidiaries and (y) the officers and employees of Burgundy and its Subsidiaries, so that Spinco may conduct reasonable audits relating to the financial statements provided by Burgundy and its Subsidiaries; provided, however, that such access will not be unreasonably disruptive to the business and affairs of the Burgundy Group.

 

(d)           Limitations of Liability.  Neither Party will have any Liability to the other Party in the event that any Information exchanged or provided pursuant to this Agreement that is an estimate or forecast, or that is based on an estimate or forecast, is found to be inaccurate in the absence of fraud or willful misconduct by the providing Person.

 

(e)           Ownership of Information.  Any Information owned by a Party that is provided to the other Party pursuant to this Section 6.2(e) remains the property of the Party that owned and provided such Information.  Each Party will, and will cause members of its Group to, remove and destroy any hard drives or other electronic data storage devices from any computer or server that is reasonably likely to contain Information that is protected by this Section 6.2(e) and that is transferred or sold to a third-party or otherwise disposed of in accordance with this Section 6.2(e), unless required by Law to retain such materials.

 

(f)            Record Retention.  Each Party agrees to use its commercially reasonable efforts to retain all Information that relates to the operations of the Eagle Business in its possession or control at the Business Transfer Time in accordance with the policies of such Person as in effect on the Business Transfer Time or such other policies as may be adopted by such Person thereafter (provided, in the case of Spinco, that Burgundy notify Spinco of any such change).  No Party will destroy, or permit any of its Subsidiaries to destroy, any Information which the other Party may have the right to obtain pursuant to this Agreement without notifying the other Party of the proposed destruction and giving the other Party the reasonable opportunity to take possession or make copies of such Information prior to such destruction.  Notwithstanding the foregoing, Section 7.02 of the Tax Matters Agreement will govern the retention of Tax Returns, schedules and work papers and all material records or other documents relating thereto.

 

(g)           Other Agreements Providing for Exchange of Information.  The rights and obligations granted under this Section 6.2 are subject to any specific limitations, qualifications or additional provisions on the sharing, exchange or confidential treatment of Information set forth in this Agreement, the Confidentiality Agreement and any Ancillary Agreement.

 

(h)           Compensation for Providing Information.  The Party requesting Information agrees to reimburse the other Party for the reasonable out-of-pocket costs, if any, actually incurred in creating, gathering and copying such Information, to the extent that such costs are incurred for the benefit of the requesting Party.

 

(i)            Production of Witnesses; Records; Cooperation.

 

(i)            After the Business Transfer Time, except in the case of any Action by one Party or its Affiliates against another Party or its Affiliates, each Party will

 

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use its commercially reasonable efforts to make available to each other Party, upon written request, the former, current and future directors, officers, employees, other personnel and agents of the members of its Group as witnesses and any books, records or other documents within its control or which it otherwise has the ability to make available, to the extent that any such person (giving consideration to business demands of such directors, officers, employees, other personnel and agents) or books, records or other documents may reasonably be required in connection with any Action in which the requesting Party may from time to time be involved, regardless of whether such Action is a matter with respect to which indemnification may be sought hereunder.  The requesting Party agrees to reimburse the other Party for the reasonable out-of-pocket costs, if any, incurred in connection therewith.

 

(ii)           If an Indemnifying Party chooses to defend or to seek to compromise or settle any Third-Party Claim, the other Party will make available to such Indemnifying Party, upon written request, the former, current and future directors, officers, employees, other personnel and agents of the members of its Group as witnesses and any books, records or other documents within its control or which it otherwise has the ability to make available, to the extent that any such person (giving consideration to business demands of such directors, officers, employees, other personnel and agents) or books, records or other documents may reasonably be required in connection with such defense, settlement or compromise, or the prosecution, evaluation or pursuit thereof, as the case may be, and will otherwise cooperate in such defense, settlement or compromise, or such prosecution, evaluation or pursuit, as the case may be.

 

(iii)          Without limiting the foregoing, the Parties will cooperate and consult to the extent reasonably necessary with respect to Third-Party Claims.

 

(iv)          The obligation of the Parties to provide witnesses pursuant to this Section 6.2(i) is intended to be interpreted in a manner so as to facilitate cooperation and will include the obligation to provide witnesses without regard to whether the witness or the employer of the witness could assert a possible business conflict.

 

(v)           In connection with any matter contemplated by this Section 6.2(i), the Parties will enter into a mutually acceptable joint defense agreement so as to maintain to the extent practicable any applicable attorney-client privilege or work product immunity of any member of any Group.

 

(j)            Restrictions.  Except as expressly provided in this Agreement or the Ancillary Agreements, no Party or member of such Party’s Group hereunder grants or confers rights of license in any Information owned by any member of such Party’s Group to any member of the other Party’s Group hereunder.

 

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Section 6.3             Privileged Matters.

 

(a)           The respective rights and obligations of the Parties to maintain, preserve, assert or waive any or all privileges belonging to either Party or its Subsidiaries with respect to the Spinco Business or the Non-Spinco Business, including the attorney-client and work product privileges (collectively, “Privileges”), will be governed by the provisions of this Section 6.3.  With respect to Privileged Information of Burgundy, Burgundy will have sole authority in perpetuity to determine whether to assert or waive any or all Privileges, and Spinco will not take any action (or permit any member of its Group to take action) without the prior written consent of Burgundy that could result in any waiver of any Privilege that could be asserted by Burgundy or any member of its Group under applicable Law and this Agreement.  With respect to Privileged Information of Spinco arising after the Business Transfer Time, Spinco will have sole authority in perpetuity to determine whether to assert or waive any or all Privileges, and Burgundy will take no action (nor permit any member of its Group to take action) without the prior written consent of Spinco that could result in any waiver of any Privilege that could be asserted by Spinco or any member of its Group under applicable Law and this Agreement.  The rights and obligations created by this Section 6.3 will apply to all Information as to which a Party or its Group would be entitled to assert or have asserted a Privilege without regard to the effect, if any, of the Spinco Reorganization, the Recapitalization or the Distribution (“Privileged Information”).

 

(b)           Privileged Information of Burgundy and its Group includes (i) any and all Information regarding the Non-Spinco Business and the Burgundy Group (other than Information relating to the Eagle Business (“Spinco Information”)), whether or not such Information (other than Spinco Information) is in the possession of Spinco or any Affiliate thereof, (ii) all communications subject to a Privilege between counsel for Burgundy (other than counsel for the Eagle Business) (including any person who, at the time of the communication, was an employee of Burgundy or its Group in the capacity of in-house counsel, regardless of whether such employee is or becomes an employee of Grizzly, Spinco or any Affiliate thereof) and any person who, at the time of the communication, was an employee of Burgundy, regardless of whether such employee is or becomes an employee of Spinco or any Affiliate thereof, and (iii) all Information generated, received or arising after the Business Transfer Time that refers or relates to and discloses Privileged Information of Burgundy or its Group generated, received or arising prior to the Business Transfer Time.

 

(c)           Privileged Information of Spinco and its Group includes (i) any and all Spinco Information, whether or not it is in the possession of Burgundy or any member of its Group, (ii) all communications subject to a Privilege between counsel for the Eagle Business (including any person who, at the time of the communication, was an employee of Burgundy or its Group in the capacity of in-house counsel, regardless of whether such employee is or remains an employee of Burgundy or any Affiliate thereof) and any person who, at the time of the communication, was an employee of Burgundy, Spinco or any member of either Group or the Eagle Business regardless of whether such employee was, is or becomes an employee of Burgundy or any of its Subsidiaries, and (iii) all Information generated, received or arising after the Business Transfer Time that refers or relates to and discloses Privileged Information of Spinco or its Group generated, received or arising after the Business Transfer Time.

 

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(d)           Upon receipt by Burgundy or Spinco, or any of their respective Affiliates, as the case may be, of any subpoena, discovery or other request from any third-party that actually or arguably calls for the production or disclosure of Privileged Information of the other or if Burgundy or Spinco, or any of their respective Affiliates, as the case may be, obtains knowledge that any current or former employee of Burgundy or Spinco, or any of their respective Affiliates, as the case may be, receives any subpoena, discovery or other request from any third-party that actually or arguably calls for the production or disclosure of Privileged Information of the other, Burgundy or Spinco, as the case may be, will promptly notify the relevant other Party of the existence of the request and will provide such other Party a reasonable opportunity to review the Information and to assert any rights it may have under this Section 6.3 or otherwise to prevent the production or disclosure of Privileged Information.  Burgundy or Spinco, as the case may be, will not, and will cause their respective Affiliates not to, produce or disclose to any third-party any of the other Party’s Privileged Information under this Section 6.3 unless (i) the other Party has provided its express written consent to such production or disclosure or (ii) a court of competent jurisdiction has entered an Order not subject to interlocutory appeal or review finding that the Information is not entitled to protection from disclosure under any applicable privilege, doctrine or rule.

 

(e)           Burgundy’s transfer of books and records pertaining to the Eagle Business and other Information to Spinco, Burgundy’s agreement to permit Spinco to obtain Information existing prior to the Spinco Reorganization, Spinco’s transfer of books and records pertaining to Burgundy, if any, and other Information to Burgundy and Spinco’s agreement to permit Burgundy to obtain Information existing prior to the Spinco Reorganization are made in reliance on Burgundy’s and Spinco’s respective agreements, as set forth in Section 6.2 and this Section 6.3, to maintain the confidentiality of such Information and to take the steps provided herein for the preservation of all Privileges that may belong to or be asserted by Burgundy or Spinco, as the case may be.  The access to Information, witnesses and individuals being granted pursuant to Section 6.2 and the disclosure to Spinco and Burgundy of Privileged Information relating to the Spinco Business or the Non-Spinco Business pursuant to this Agreement in connection with the Spinco Reorganization will not be asserted by Burgundy or Spinco to constitute, or otherwise deemed, a waiver of any Privilege that has been or may be asserted under this Section 6.3 or otherwise.  Nothing in this Agreement will operate to reduce, minimize or condition the rights granted to Burgundy and Spinco in, or the obligations imposed upon Burgundy and Spinco by, this Section 6.3.

 

Section 6.4             Intellectual Property Assignment/Recordation.  Each Party will be responsible for, and will pay all expenses (whether incurred before, at or after the Business Transfer Time) involved in notarization, authentication, legalization and/or consularization of the signatures of any representatives of its Group on any of the Transfer Documents relating to the transfer of Intellectual Property Rights.  Spinco will be responsible for, and will pay all expenses (whether incurred before or after the Business Transfer Time) relating to, the recording of any such Transfer Documents relating to the transfer of Intellectual Property Rights to any member of the Spinco Group with any Governmental Authorities as may be necessary or appropriate.

 

Section 6.5             Intellectual Property Matters.  Except as specifically set forth in this Section 6.5, from and after the Effective Time, Spinco will take all actions necessary to assure that no member of the Spinco Group operates the Spinco Business utilizing, based on or

 

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taking advantage of the name, reputation, Trademarks or goodwill of any member of the Burgundy Group, provided that Grizzly and members of the Spinco Group may refer to the Burgundy Group and Trademarks of the Burgundy Group in connection with describing the historical relationship of the Spinco Group to the Burgundy Group.  In addition, Spinco and each member of the Spinco Group may use labeling, packaging, advertising, sale and promotional materials, printed stationery, brochures and literature bearing any of the corporate names, Trademarks, product identification numbers or consumer information telephone numbers of the Burgundy Group after the Business Transfer Time; provided, that Spinco will, and will cause each member of the Spinco Group to, cease use of the labeling, packaging, advertising, sale and promotional materials, printed stationery, brochures and literature bearing any of the corporate names, Trademarks, product identification numbers or consumer information telephone numbers beginning on the six (6) month anniversary of the Effective Time; provided, further, that there will be no time limit with respect to Spinco’s sale of products bearing the corporate name, Trademarks or consumer information telephone numbers or that use any packaging bearing the same included in the Spinco Inventory.  The Spinco Group will use commercially reasonable efforts to cease the sale or use of such products, product labeling or packaging as promptly as reasonably practicable following the Business Transfer Time, consistent with their ordinary course of business.  Spinco will, and will cause each member of the Spinco Group to, maintain quality standards for products of the Spinco Business not materially different from those maintained by the Eagle business prior to the Business Transfer Time for so long as any member of the Spinco Group continues to use any labeling, packaging, advertising, sales or promotional materials, printed stationery, brochures or literature bearing the corporate names, Trademarks, product identification numbers or consumer information telephone numbers of any member of the Burgundy Group.

 

Section 6.6                                      Assigned Domain Names.  At the Business Transfer Time, the domain name registrations set forth on Schedule 2.4(a)(vi), including all content, text, descriptions, photographs, drawings, or other work comprising the associated web pages (collectively the “Assigned Domains”), shall be assigned to, and subsequently owned and maintained by, the Spinco Group.  The Burgundy Group will take commercially reasonable steps to effectuate the assignment of the Assigned Domains.  On or before the three (3) month anniversary of the Business Transfer Time, the Spinco Group will be required to remove any and all references to any name, Trademarks, or goodwill owned by any member of the Burgundy Group that exist on the Assigned Domain Names.

 

Section 6.7                                      Unassigned Domain Names.  The domain names and web pages set forth on Schedule 2.4(b)(i) include a Trademark owned by the Burgundy Group and were used primarily for the Eagle Business prior to the Business Transfer Time (“Unassigned Domains”).  The Unassigned Domains are registered in the name of the Burgundy Group and will not be assigned to the Spinco Group.  However, from and after the Business Transfer Time, each member of the Spinco Group may coordinate with the Burgundy Group to redirect Internet traffic and site visits from the Unassigned Domains to a domain name or web page of its choosing.  On or before the three (3) month anniversary of the Business Transfer Time, the Unassigned Domains will be disabled and the registrations will be permitted to lapse.  From and after the Business Transfer Time, no member of the Spinco Group will take steps to register or utilize the Unassigned Domains or any other domain name or web page that includes a Trademark owned by the Burgundy Group.

 

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Section 6.8                                      Unassigned Domain Name Content.  From and after the Business Transfer Time, all right, title, and interest, including any copyrights, related to the content, text, descriptions, photographs, drawings, or other work included on the Unassigned Domains prior to the Business Transfer Time shall be the sole and exclusive property of the Spinco Group, except for any text, descriptions, photographs, drawings, or other work that primarily relates to any name, reputation, Trademarks or goodwill primarily associated with any member of the Burgundy Group.

 

Section 6.9                                      Shared IP Licenses.

 

(a)                                  Notwithstanding anything in this Agreement to the contrary, each member of the Burgundy Group shall retain an irrevocable, non-terminable, perpetual, worldwide, nonexclusive, royalty-free, fully paid-up license to use the Shared Spinco IP solely and exclusively for the purpose of conducting the Burgundy Group’s business in substantially the same manner as it was conducted immediately prior to the Effective Date (the “Shared Spinco IP License”).  No member of the Burgundy Group may assign or sublicense its rights under the Shared Spinco IP License to any Person other than an Affiliate thereof without Spinco’s prior written consent; provided, however, that without consent any member of the Burgundy Group may (a) assign its rights under the Shared Spinco IP License to any entity that acquires all or substantially all of the assets of such Burgundy Group member’s business; (b) assign its rights under the Shared Spinco IP License to any successor by merger, consolidation, or acquisition to a member of the Burgundy Group for the purpose of conducting such Burgundy Group member’s business; (c) sublicense its rights under the Shared Spinco IP License to any purchaser of substantially all the assets of one of the plants used in the Burgundy Business only to the extent reasonably necessary to enable such purchaser to operate such plant in the same manner as the licensed member of the Burgundy Group operated the same; and (d)  assign its rights under the Shared Spinco IP License to any lender (or agent for any lender) to the owner of any such assets for collateral purposes only.   Following the grant of any sublicense permitted hereinabove to the transferee of any such plant, the sublicensee may further sublicense the Shared Spinco IP to which it has been sublicensed but only together with a transfer of substantially all the assets of such plant and only to the extent reasonably necessary to enable the transferee to operate such plant in the same manner as the sublicensing Person operated the same.  Any attempted assignment or sublicense in breach of this Section 6.9(a) will be null and void.

 

(b)                                 At the Business Transfer Time, each member of the Burgundy Group hereby grants each member of the Spinco Group an irrevocable, non-terminable, perpetual, worldwide, nonexclusive, royalty-free, fully paid-up license to use the Shared Burgundy IP solely and exclusively for the purpose of conducting the Spinco Group’s business in substantially the same manner as it was conducted immediately prior to the Effective Date (the “Shared Burgundy IP License”).  No member of the Spinco Group may assign or sublicense its rights under the Shared Burgundy IP License to any Person other than an Affiliate thereof without Burgundy’s prior written consent; provided, however, that without consent any member of the Spinco Group may (a) assign its rights under the Shared Burgundy IP License to any entity that acquires all or substantially all of the assets of such Spinco Group member’s business; (b) assign its rights under the Shared Burgundy IP License to any successor by merger, consolidation, or acquisition to a member of the Spinco Group for the purpose of conducting such Spinco Group member’s business; (c) sublicense its rights under the Shared Burgundy IP License to any

 

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purchaser of substantially all the assets of one of the plants used in the Spinco Business only to the extent reasonably necessary to enable such purchaser to operate such plant in the same manner as the licensed member of the Spinco Group operated the same; and (d) assign its rights under the Shared Burgundy IP License to any lender (or agent for any lender) to the owner of any such assets for collateral purposes only.   Following the grant of any sublicense permitted hereinabove to the transferee of any such plant, the sublicensee may further sublicense the Shared Burgundy IP to which it has been sublicensed but only together with a transfer of substantially all the assets of such plant and only to the extent reasonably necessary to enable the transferee to operate such plant in the same manner as the sublicensing Person operated the same.  Any attempted assignment or sublicense in breach of this Section 6.9(b) will be null and void.

 

Section 6.10                                Removal of Tangible Assets.  (a) Except as may be otherwise provided in the Transition Services Agreement, or otherwise agreed to by the Parties, all tangible Spinco Assets that are located at any sites of Burgundy or its Subsidiaries that are not Spinco Active Sites will be moved as promptly as practicable after the Business Transfer Time from such sites, at Spinco’s expense and in a manner so as not to unreasonably interfere with the operations of any member of the Burgundy Group and to not cause damage to such facility, and such member of the Burgundy Group will provide reasonable access to such facility to effectuate same.  Spinco will remove any Spinco Assets that remain at any such sites in connection with the performance of services under the Transition Services Agreement as promptly as practicable after the termination of such service pursuant to the same terms and conditions stated in the immediately preceding sentence.

 

(b)                                 Except as may be otherwise provided in the Transition Services Agreement or otherwise agreed to by the Parties, all tangible Excluded Assets that are located at any of the Spinco Active Sites will be moved as promptly as practicable after the Business Transfer Time from such facilities, at Burgundy’s expense and in a manner so as not to unreasonably interfere with the operations of any member of the Spinco Group and to not cause damage to such Spinco Facility, and such member of the Spinco Group will provide reasonable access to such Spinco Facility to effectuate such movement.  Burgundy will remove any Excluded Assets that remain at any such Spinco Active Sites in connection with the performance of services under the Transition Services Agreement as promptly as practicable after the termination of such service pursuant to the same terms and conditions stated in the immediately preceding sentence.

 

Section 6.11                                Insurance.

 

(a)                                  Rights Under Policies.  Notwithstanding any other provision of this Agreement, from and after the Business Transfer Date, none of Spinco nor any other member of the Spinco Group will have any rights whatsoever with respect to any Policies, except that Burgundy will, if requested by Spinco, use commercially reasonable efforts (as set forth in Section 5.4 above) to pursue Insurance Proceeds under Claims-Made Policies for any liabilities for which indemnification is sought from Spinco pursuant to this Agreement (to the extent such Claims-Made Policies provide coverage for such liabilities); provided that all of Burgundy’s and each member of the Burgundy Group’s reasonable costs and expenses incurred in connection with the foregoing shall be promptly paid by Spinco.  All claims for Insurance Proceeds under Claims-Made Policies pursued by Burgundy will be subject to all of the terms and conditions of

 

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the applicable Claims Made Policy and Spinco shall promptly pay to Burgundy any applicable deductible or retention that applies to the Claim subject to indemnification.

 

(b)                                 Commutations or Buyouts of Claims-Made Policies.  Burgundy may, at any time, without Liability or obligation to Spinco (other than as set forth in this Section 6.11(b)), amend, commute, terminate, buy-out, extinguish liability under or otherwise modify or reduce the amount of coverage available under any Claims-Made Policies after the Distribution Date.  In the event that any such transaction would affect or reduce the amount of Insurance Proceeds that otherwise would be available to Spinco for a claim that is subject to indemnification under this Agreement, Burgundy will give Spinco prior written notice thereof.  In the event of an insurance transaction described in this section, Burgundy will pay to Spinco its equitable share (which must be determined in good faith based on the amount of premiums paid or allocated to the Eagle Business in respect of the applicable Claims-Made Policies and the effect the insurance transaction would have on Spinco’s actual or potential indemnification obligations) of any net proceeds actually received by Burgundy from the insurer under the applicable Claims-Made Policy as a result of such transaction (after deducting Burgundy’s reasonable costs and expenses incurred in connection with such action).  The Tax treatment of any such payments to Spinco by Burgundy will be handled in accordance with Section 5.4(c).

 

(c)                                  No Limitation to Indemnity.  Nothing in this Section 6.11 will be construed to limit or otherwise alter in any way the indemnity obligations of the parties to this Agreement, including those created by this Agreement.

 

Section 6.12                                Right of First Refusal.

 

(a)                                  If at any time and each time prior to the twenty (20) year anniversary of the Business Transfer Time, Burgundy desires to sell all or a portion of the Natrium Excess Land to a third party, Burgundy shall give notice (the “Offer Notice”) thereof to Spinco, together with the price and a summary of the other material terms and conditions pursuant to which Burgundy desires to sell all or a portion of the Natrium Excess Land.  Spinco shall have the right (the “First Refusal Right”) to give to Burgundy a notice (the “Election Notice”), which shall specify that Spinco elects to purchase, as applicable, all or the portion of Natrium Excess Land proposed to be sold upon the same material terms and conditions (subject to the execution of a mutually satisfactory Contract of sale as hereinafter provided) as set forth in the Offer Notice.  Spinco and Burgundy shall record in the appropriate public land records an instrument setting forth the foregoing First Refusal Right.  The Election Notice must be delivered within 15 Business Days following Burgundy’s delivery to Spinco of the Offer Notice (such period is hereinafter referred to as the “Response Period”).  Notwithstanding anything to the contrary in this Agreement, the First Refusal Right described in this Section 6.12 shall not be applicable to any sale of the Natrium Excess Land by Burgundy to a Subsidiary or Affiliate of Burgundy, provided, that following any such sale, such Subsidiary or Affiliate of Burgundy shall be subject in all respects to this Agreement.

 

(b)                                 If Spinco shall give the Election Notice within the Response Period, Spinco and Burgundy shall promptly proceed to negotiate an agreement (the “Natrium Excess Land Agreement”) to purchase the Natrium Excess Land at the price and otherwise on all of the material terms and conditions set forth in the Offer Notice and otherwise on such other

 

59

 

customary terms for the purchase of comparable properties, as Spinco and Burgundy may mutually agree upon.

 

(c)                                  If Spinco shall fail to give an Election Notice within the Response Period, (i) Burgundy shall have the right to sell the Natrium Excess Land at the price and on other terms and conditions no less advantageous in any material respect to Burgundy than that set forth in the Offer Notice, free and clear of any rights or claims of Spinco under this Section 6.12, and (ii) provided Burgundy has not materially breached its obligations under this Section 6.12, this Section 6.12 shall terminate and be null, void and of no further force or effect; provided, that Spinco shall again have the right to exercise the First Refusal Right pursuant to the provisions of this Section 6.12 if any of the following conditions occurs:  (a) the terms and conditions of sale to the third party are less advantageous in any material respect to Burgundy than set forth in the Offer Notice, or (b) the definitive agreement(s) providing for the sale are not executed and delivered with a purchaser within 120 days after the giving of the applicable Offer Notice and subsequently consummated with such purchaser within six (6) months of execution of the definitive agreements.

 

ARTICLE VII

 

MISCELLANEOUS

 

Section 7.1                                      Expenses.  Except as otherwise provided in this Agreement, each Party will be responsible for the fees and expenses of the Parties as provided in the Merger Agreement.

 

Section 7.2                                      Entire Agreement.  This Agreement, the Merger Agreement and the Ancillary Agreements and the Confidentiality Agreement, including any related annexes, schedules and exhibits, as well as any other agreements and documents referred to herein and therein, will together constitute the entire agreement between the Parties with respect to the subject matter hereof and thereof and will supersede all prior negotiations, agreements and understandings of the Parties of any nature, whether oral or written, with respect to such subject matter.

 

Section 7.3                                      Governing Law.  This Agreement and, unless expressly provided therein, each Ancillary Agreement (and any claims or disputes arising out of or related hereto or thereto or to the transactions contemplated hereby and thereby or to the inducement of any Party to enter herein and therein, whether for breach of Contract, tortious conduct or otherwise and whether predicated on common law, statute or otherwise) is governed by and construed and interpreted in accordance with the Laws of the State of Delaware irrespective of the choice of laws principles of the State of Delaware, including all matters of validity, construction, effect, enforceability, performance and remedies.

 

Section 7.4                                      Notices.  All notices, requests, permissions, waivers and other communications under this Agreement will be in writing and will be deemed to have been duly given (a) five (5) Business Days following sending by registered or certified mail, postage prepaid, (b) when sent, if sent by facsimile, provided that the facsimile transmission is promptly

 

60

 

confirmed by telephone, (c) when delivered, if delivered personally to the intended recipient, and (d) one Business Day following sending by overnight delivery via a national courier service and, in each case, addressed to a Party at the following address for such Party:

 

If to Burgundy or, prior to the Effective Time, Spinco:

 

PPG Industries, Inc.
 One PPG Place
 Pittsburgh, PA  15272

	
Attention:
    	
General Counsel
    
	
Facsimile:
    	
(412) 434-2490
    

 

with a copy (which shall not constitute notice) to:

 

Wachtell, Lipton, Rosen & Katz
 51 West 52nd Street
 New York, New York  10019

	
Attention:
    	
Steven A.   Rosenblum
    
	
Facsimile:
    	
(212) 403-2000
    

 

If to Spinco, after the Effective Time:

 

Georgia Gulf Corporation
 115 Perimeter Center Place, Suite 460 
 Atlanta, GA  30346

	
Attention:
    	
Chief Executive   Officer
    
	
Facsimile:
    	
(770) 390-9673
    

 

with a copy (which shall not constitute notice) to:

 

Jones Day
 1420 Peachtree St., N.E.
 Suite 800
 Atlanta, GA  30309-3053

	
Attention:
    	
John E. Zamer
    
	
Facsimile:
    	
404-581-8330
    

 

or to such other address(es) as will be furnished in writing by any such party to the other party in accordance with the provisions of this Section 7.4.

 

Section 7.5                                      Priority of Agreements.  If there is a conflict between any provision of this Agreement and a provision in any of the Ancillary Agreements (other than the Tax Matters Agreement and Employee Matters Agreement), the provision of this Agreement shall control unless specifically provided otherwise in this Agreement or in the Ancillary Agreement.  Except as otherwise specifically provided herein, this Agreement will not apply to matters relating to Taxes or employees, employee benefits plans, and related assets and liabilities including pension and other post-employment benefit assets and liabilities, which shall be exclusively governed by the Tax Matters Agreement and Employee Matters Agreement,

 

61

 

respectively.  In the case of any conflict between this Agreement and the Tax Matters Agreement or Employee Matters Agreement, respectively, in relation to any matters addressed by the Tax Matters Agreement or Employee Matters Agreement, the Tax Matters Agreement or Employee Matters Agreement, as applicable, will prevail.

 

Section 7.6                                      Amendments and Waivers.  (a)  This Agreement may be amended and any provision of this Agreement may be waived; provided that any such amendment or waiver will be binding upon a Party only if such amendment or waiver is set forth in a writing executed by such Party.  In addition, unless the Merger Agreement shall have been terminated in accordance with its terms, any such amendment or waiver shall be subject to the written consent of Grizzly.  No course of dealing between or among any Persons having any interest in this Agreement will be deemed effective to modify, amend or discharge any part of this Agreement or any rights or obligations of any Party hereto under or by reason of this Agreement.

 

(b)                                 No delay or failure in exercising any right, power or remedy hereunder will affect or operate as a waiver thereof; nor will any single or partial exercise thereof or any abandonment or discontinuance of steps to enforce such a right, power or remedy preclude any further exercise thereof or of any other right, power or remedy.  Any waiver, permit, consent or approval of any kind or character of any breach or default under this Agreement or any such waiver of any provision of this Agreement must satisfy the conditions set forth in Section 7.6(a) and will be effective only to the extent in such writing specifically set forth.

 

Section 7.7                                      Termination.  This Agreement will terminate without further action at any time before the Effective Time upon termination of the Merger Agreement. If terminated, no Party will have any Liability of any kind to the other Party or any other Person on account of this Agreement, except as provided in the Merger Agreement.

 

Section 7.8                                      Parties in Interest.  This Agreement is binding upon and is for the benefit of the Parties hereto and their respective successors and permitted assigns.  Grizzly shall be a third party beneficiary of the rights of Spinco under this Agreement and of the provisions of Section 4.2(b).  As of the Effective Time, this Agreement shall be binding on Grizzly and Grizzly shall, as between Burgundy and Grizzly, be subject to the obligations and restrictions imposed on, and shall be the beneficiary of the rights of, Spinco under this Agreement.  This Agreement is not made for the benefit of any Person not a Party hereto, and no Person other than the Parties hereto or their respective successors and permitted assigns will acquire or have any benefit, right, remedy or claim under or by reason of this Agreement, except (i) as contemplated in the preceding sentence and (ii) for the provisions of Article V with respect to indemnification of Indemnitees.

 

Section 7.9                                      Assignability.  No Party may assign its rights or delegate its duties under this Agreement without the written consent of the other Party, except that a Party may assign its rights or delegate its duties under this Agreement to a member of its Group and a Party may assign or sublicense the rights granted in Section 6.9 as provided therein; provided that the member agrees in writing to be bound by the terms and conditions contained in this Agreement; provided, further, that the assignment or delegation will not relieve any Party of its indemnification obligations or obligations in the event of a breach of this Agreement; and provided, further, that Spinco may assign this agreement, without obtaining the prior written

 

62

 

consent of Burgundy, to any lender (or agent for any lender) for collateral purposes only (and upon any assignment permitted by this proviso, the references to Spinco Group shall also apply to any such assignee unless the context otherwise acquires).  Any attempted assignment or delegation in breach of this Section 7.9 will be null and void.

 

Section 7.10                                Interpretation.  When a reference is made in this Agreement to an Article or Section, such reference shall be to an Article or Section of this Agreement unless otherwise indicated.  The table of contents to this Agreement is for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. The descriptive headings herein are inserted for convenience of reference only and are not intended to be a substantive part of or to affect the meaning or interpretation of this Agreement. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.”  The words “hereof,” “hereby,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement.  All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant thereto unless otherwise defined therein.  The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such term. Any agreement, instrument or statute defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement, instrument or statute as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes) by succession of comparable successor statutes, including all attachments thereto and instruments incorporated therein. References to a Person are also to its permitted successors and assigns.  References to a date or time shall be deemed to be such date or time in New York City, unless otherwise specified. References to dollar amounts are to U.S. dollars, unless otherwise specified. Each of the parties has participated in the drafting and negotiation of this Agreement.  If an ambiguity or question of intent or interpretation arises, this Agreement must be construed as if it is drafted by all the parties and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of authorship of any of the provisions of this Agreement.  Except as otherwise expressly provided elsewhere in this Agreement, the Merger Agreement, or any Ancillary Agreement, any provision herein which contemplates the agreement, approval or consent of, or exercise of any right of, a Party, such Party may give or withhold such agreement, approval or consent, or exercise such right, in its sole and absolute discretion, the Parties hereto hereby expressly disclaim any implied duty of good faith and fair dealing or similar concept.

 

Section 7.11                                Severability.  If any provision of this Agreement or any Ancillary Agreement, or the application of any provision to any Person or circumstance, shall be declared judicially to be invalid, unenforceable or void, such decision shall not have the effect of invalidating or voiding the remainder of this Agreement or such Ancillary Agreement, it being the intent and agreement of the parties hereto that this Agreement and any Ancillary Agreement shall be deemed amended by modifying such provision to the extent necessary to render it valid, legal and enforceable while preserving its intent or, if such modification is not possible, by substituting therefor another provision that is legal and enforceable and that achieves the same objective.

 

63

 

Section 7.12                                Counterparts.  This Agreement may be executed in multiple counterparts (any one of which need not contain the signatures of more than one Party), each of which will be deemed to be an original but all of which taken together will constitute one and the same agreement.  This Agreement, and any amendments hereto, to the extent signed and delivered by means of a facsimile machine or other electronic transmission, will be treated in all manner and respects as an original agreement and will be considered to have the same binding legal effects as if it were the original signed version thereof delivered in person.  At the request of a Party, the other Party will re-execute original forms thereof and deliver them to the requesting Party.  No Party will raise the use of a facsimile machine or other electronic means to deliver a signature or the fact that any signature was transmitted or communicated through the use of facsimile machine or other electronic means as a defense to the formation of a Contract and each such Party forever waives any such defense.

 

Section 7.13                                Survival of Covenants.  Except as expressly set forth in any Ancillary Agreement, the covenants, representations and warranties contained in this Agreement and each Ancillary Agreement, and liability for the breach of any obligations contained herein, will survive each of the Spinco Reorganization, the Recapitalization and the Distribution and will remain in full force and effect.

 

Section 7.14                                Jurisdiction; Consent to Jurisdiction.

 

(a)                                  Exclusive Jurisdiction.  Except as otherwise expressly provided in any Ancillary Agreement, each of the Parties irrevocably agrees that any claim, dispute or controversy (of any and every kind or type, whether based on Contract, tort, statute, regulation or otherwise, and whether based on state, federal, foreign or any other law), arising out of, relating to or in connection with this Agreement, the Ancillary Agreements, the documents referred to in this Agreement, or any of the transactions contemplated thereby, and including disputes relating to the existence, validity, breach or termination of this Agreement (any such claim being a “Covered Claim”) will be brought and determined in any federal or state court located in the State of Delaware, and each of the Parties hereto hereby irrevocably submits and consents in respect of Covered Claims for itself and in respect to its property, generally and unconditionally, to the exclusive jurisdiction of the aforesaid courts and agrees that it may be served with such legal process at the address and in the manner set forth in Section 7.4.  Each of the Parties hereto hereby irrevocably waives, and agrees not to assert, by way of motion, as a defense, counterclaim or otherwise, in any Action in respect of Covered Claims (a) any claim that it is not personally subject to the jurisdiction of the above-named courts for any reason other than the failure to lawfully serve process, (b) that it or its property is exempt or immune from jurisdiction of any such court or from any legal process commenced in such courts (whether through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise) and (c) to the fullest extent permitted by applicable Laws, that (i) the Action in any such court is brought in an inconvenient forum, (ii) the venue of such Action is improper and (iii) this Agreement, or the subject matter hereof, may not be enforced in or by such courts.

 

(b)                                 Waiver of Jury Trial.  EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT OR THE ANCILLARY AGREEMENTS IS LIKELY TO INVOLVE COMPLICATED AND

 

64

 

DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE ANCILLARY AGREEMENTS OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT AND THE ANCILLARY AGREEMENTS.  EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF ANY LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 7.14(b).

 

Section 7.15                                Specific Performance.  In the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of this Agreement or any other Ancillary Agreement, the Party who is, or is to be, thereby aggrieved will have the right to specific performance and injunctive or other equitable relief in respect of its rights under this Agreement or such Ancillary Agreement, in addition to any and all other rights and remedies at law or in equity, subject to Section 5.7.  The Parties agree that the remedies at law for any breach or threatened breach, including monetary damages, are inadequate compensation for any loss and that any defense in any Action for specific performance that a remedy at law would be adequate is waived.  Any requirements for the securing or posting of any bond with such remedy are waived by each of the Parties to this Agreement.

 

Section 7.16                                Limitations of Liability.  Notwithstanding anything in this Agreement to the contrary, neither Spinco or its Affiliates, on the one hand, nor Burgundy or its Affiliates, on the other hand, will be liable under this Agreement to the other for any punitive, exemplary, special or similar damages in excess of compensatory damages, except to the extent awarded by a court of competent jurisdiction in connection with a Third-Party Claim.

 

[Signature Page Follows]

 

65

 

IN WITNESS WHEREOF, each of the Parties has caused this Separation Agreement to be executed on its behalf by its officers hereunto duly authorized effective on the day and year first above written.

 

	
 
    	
PPG   INDUSTRIES, INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Charles E.   Bunch
    
	
 
    	
 
    	
Name: Charles E.   Bunch
    
	
 
    	
 
    	
Title: Chairman   and Chief Executive Officer
    
	
 
    	
 
    	
 
    
	
 
    	
EAGLE SPINCO   INC.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/ Charles E.   Bunch
    
	
 
    	
 
    	
Name: Charles E.   Bunch
    
	
 
    	
 
    	
Title: Chairman   of the Board of Directors
    

 

[Signature Page to Separation Agreement]Exhibit 4.1

 

Execution Version

 

 

INDENTURE

 

between

 

FORD CREDIT AUTO OWNER TRUST 2012-C,
 as Issuer

 

and

 

THE BANK OF NEW YORK MELLON,
 as Indenture Trustee

 

Dated as of July 1, 2012

 

 

 

TABLE OF CONTENTS

 

	
ARTICLE I USAGE AND DEFINITIONS
    	
1
    
	
Section 1.1.
    	
Usage and Definitions
    	
1
    
	
Section 1.2.
    	
Incorporation by Reference of Trust Indenture Act
    	
1
    
	
 
    	
 
    
	
ARTICLE II THE NOTES 
    	
2
    
	
Section 2.1.
    	
Form
    	
2
    
	
Section 2.2.
    	
Execution, Authentication and Delivery
    	
2
    
	
Section 2.3.
    	
Tax Treatment
    	
3
    
	
Section 2.4.
    	
Registration; Registration of Transfer and Exchange
    	
3
    
	
Section 2.5.
    	
Mutilated, Destroyed, Lost or Stolen Notes
    	
6
    
	
Section 2.6.
    	
Persons Deemed Owners
    	
7
    
	
Section 2.7.
    	
Payment of Principal and Interest
    	
7
    
	
Section 2.8.
    	
Cancellation
    	
7
    
	
Section 2.9.
    	
Release of Collateral
    	
8
    
	
Section 2.10.
    	
Book-Entry Notes
    	
8
    
	
Section 2.11.
    	
Definitive Notes
    	
9
    
	
Section 2.12.
    	
Authenticating Agents
    	
9
    
	
Section 2.13.
    	
Note Paying Agents
    	
10
    
	
 
    	
 
    
	
ARTICLE III COVENANTS AND   REPRESENTATIONS 
    	
10
    
	
Section 3.1.
    	
Payment of Principal and Interest
    	
10
    
	
Section 3.2.
    	
Maintenance of Office or Agency
    	
10
    
	
Section 3.3.
    	
Money for Payments To Be Held in Trust
    	
10
    
	
Section 3.4.
    	
Existence
    	
12
    
	
Section 3.5.
    	
Protection of Collateral
    	
12
    
	
Section 3.6.
    	
Performance of Obligations; Servicing of Receivables
    	
13
    
	
Section 3.7.
    	
Negative Covenants
    	
13
    
	
Section 3.8.
    	
Opinions as to Collateral
    	
14
    
	
Section 3.9.
    	
Annual Statement as to Compliance
    	
14
    
	
Section 3.10.
    	
Consolidation and Merger; Sale of Assets
    	
15
    
	
Section 3.11.
    	
Successor or Transferee
    	
15
    
	
Section 3.12.
    	
No Other Activities
    	
16
    
	
Section 3.13.
    	
Further Instruments and Acts
    	
16
    
	
Section 3.14.
    	
Restricted Payments
    	
16
    
	
Section 3.15.
    	
Notice of Events of Default
    	
16
    
	
Section 3.16.
    	
Representations and Warranties of the Issuer as to Security   Interest
    	
16
    
	
Section 3.17.
    	
Audits of the Issuer
    	
17
    
	
Section 3.18.
    	
Representations and Warranties of the Issuer
    	
18
    
	
 
    	
 
    
	
ARTICLE IV SATISFACTION AND   DISCHARGE
    	
19
    
	
Section 4.1.
    	
Satisfaction and Discharge of Indenture
    	
19
    
	
 
    	
 
    
	
ARTICLE V REMEDIES
    	
19
    
	
Section 5.1.
    	
Events of Default
    	
19
    
	
Section 5.2.
    	
Acceleration of Maturity; Rescission
    	
20
    
	
Section 5.3.
    	
Collection of Indebtedness by the Indenture Trustee
    	
21
    
	
Section 5.4.
    	
Trustee May File Proofs of Claim
    	
21
    

 

 

	
Section 5.5.
    	
Trustee May Enforce Claims Without Possession of Notes
    	
22
    
	
Section 5.6.
    	
Remedies; Priorities
    	
22
    
	
Section 5.7.
    	
Optional Preservation of the Collateral
    	
24
    
	
Section 5.8.
    	
Limitation on Suits
    	
24
    
	
Section 5.9.
    	
Unconditional Rights of Noteholders to Receive Principal   and Interest
    	
25
    
	
Section 5.10.
    	
Restoration of Rights and Remedies
    	
25
    
	
Section 5.11.
    	
Rights and Remedies Cumulative
    	
25
    
	
Section 5.12.
    	
Delay or Omission Not a Waiver
    	
25
    
	
Section 5.13.
    	
Control by Noteholders
    	
26
    
	
Section 5.14.
    	
Waiver of Defaults and Events of Default
    	
26
    
	
Section 5.15.
    	
Undertaking for Costs
    	
26
    
	
Section 5.16.
    	
Waiver of Stay or Extension Laws
    	
27
    
	
Section 5.17.
    	
Performance and Enforcement of Certain Obligations
    	
27
    
	
 
    	
 
    
	
ARTICLE VI THE INDENTURE   TRUSTEE
    	
27
    
	
Section 6.1.
    	
Duties of Indenture Trustee
    	
27
    
	
Section 6.2.
    	
Rights of Indenture Trustee
    	
29
    
	
Section 6.3.
    	
Individual Rights of Indenture Trustee
    	
30
    
	
Section 6.4.
    	
Indenture Trustee’s Disclaimer
    	
30
    
	
Section 6.5.
    	
Notice of Defaults
    	
30
    
	
Section 6.6.
    	
Reports by Indenture Trustee
    	
30
    
	
Section 6.7.
    	
Compensation and Indemnity
    	
32
    
	
Section 6.8.
    	
Replacement of Indenture Trustee
    	
33
    
	
Section 6.9.
    	
Successor Indenture Trustee by Merger
    	
34
    
	
Section 6.10.
    	
Appointment of Separate Indenture Trustee or Co-Indenture   Trustee
    	
34
    
	
Section 6.11.
    	
Eligibility; Disqualification
    	
35
    
	
Section 6.12.
    	
Preferential Collection of Claims Against Issuer
    	
36
    
	
Section 6.13.
    	
Audits of the Indenture Trustee
    	
36
    
	
Section 6.14.
    	
Representations and Warranties of the Indenture Trustee
    	
37
    
	
Section 6.15.
    	
Duty to Update Disclosure
    	
38
    
	
Section 6.16.
    	
Covenants for Reporting of Repurchase Demands due to   Breaches of Representations and Warranties
    	
38
    
	
 
    	
 
    
	
ARTICLE VII NOTEHOLDERS’   LISTS AND REPORTS
    	
39
    
	
Section 7.1.
    	
Names and Addresses of Noteholders
    	
39
    
	
Section 7.2.
    	
Preservation of Information; Communications to Noteholders
    	
39
    
	
Section 7.3.
    	
Reports by Issuer
    	
39
    
	
Section 7.4.
    	
Reports by Indenture Trustee
    	
40
    
	
 
    	
 
    
	
ARTICLE VIII ACCOUNTS,   DISBURSEMENTS AND RELEASES
    	
40
    
	
Section 8.1.
    	
Collection of Money
    	
40
    
	
Section 8.2.
    	
Trust Accounts; Distributions and Disbursements
    	
40
    
	
Section 8.3.
    	
General Provisions Regarding Bank Accounts
    	
44
    
	
Section 8.4.
    	
Release of Collateral
    	
44
    
	
 
    	
 
    
	
ARTICLE IX SUPPLEMENTAL   INDENTURES
    	
45
    
	
Section 9.1.
    	
Supplemental Indentures Without Consent of Noteholders
    	
45
    

 

ii

 

	
Section 9.2.
    	
Supplemental Indentures with Consent of Noteholders
    	
47
    
	
Section 9.3.
    	
Execution of Supplemental Indentures
    	
48
    
	
Section 9.4.
    	
Effect of Supplemental Indenture
    	
48
    
	
Section 9.5.
    	
Conformity with Trust Indenture Act
    	
48
    
	
Section 9.6.
    	
Reference in Notes to Supplemental Indentures
    	
48
    
	
 
    	
 
    
	
ARTICLE X REDEMPTION OF   NOTES
    	
48
    
	
Section 10.1.
    	
Redemption
    	
48
    
	
 
    	
 
    
	
ARTICLE XI MISCELLANEOUS
    	
49
    
	
Section 11.1.
    	
Compliance Certificates and Opinions, etc.
    	
49
    
	
Section 11.2.
    	
Form of Documents Delivered to Indenture Trustee
    	
51
    
	
Section 11.3.
    	
Acts of Noteholders
    	
51
    
	
Section 11.4.
    	
Notices, etc., to Indenture Trustee, Issuer and   Rating Agencies
    	
52
    
	
Section 11.5.
    	
Notices to Noteholders; Waiver
    	
52
    
	
Section 11.6.
    	
Conflict with Trust Indenture Act
    	
53
    
	
Section 11.7.
    	
Benefits of Indenture
    	
53
    
	
Section 11.8.
    	
GOVERNING LAW
    	
53
    
	
Section 11.9.
    	
Submission to Jurisdiction
    	
53
    
	
Section 11.10.
    	
WAIVER OF JURY TRIAL
    	
53
    
	
Section 11.11.
    	
Severability
    	
54
    
	
Section 11.12.
    	
Counterparts
    	
54
    
	
Section 11.13.
    	
Headings
    	
54
    
	
Section 11.14.
    	
Issuer Obligation
    	
54
    
	
Section 11.15.
    	
Subordination of Claims against the Depositor
    	
54
    
	
Section 11.16.
    	
No Petition
    	
55
    
	
 
    	
 
    	
 
    
	
Exhibit A
    	
Form of   Class A Note
    	
A-1
    
	
Exhibit B
    	
Form of   Class B / C / D Note
    	
B-1
    
	
Schedule   A
    	
Schedule   of Receivables
    	
SA-1
    
				

 

iii

 

INDENTURE, dated as of July 1, 2012 (this “Indenture”), between FORD CREDIT AUTO OWNER TRUST 2012-C, a Delaware statutory trust, as Issuer, and THE BANK OF NEW YORK MELLON, a New York banking corporation, as Indenture Trustee for the benefit of the Secured Parties.

 

Each party agrees as follows for the benefit of the other party and for the equal and ratable benefit of the Secured Parties.

 

GRANTING CLAUSE

 

The Issuer Grants to the Indenture Trustee at the Closing Date, as Indenture Trustee for the benefit of the Secured Parties, all of the Issuer’s right, title and interest in, to and under, whether now owned or hereafter acquired, the Collateral.

 

The foregoing Grant is made in trust to secure (a) the payment of principal of, interest on and any other amounts owing in respect of the Notes as provided in this Indenture and (b) compliance by the Issuer with the provisions of this Indenture for the benefit of the Secured Parties.

 

The Indenture Trustee acknowledges such Grant, accepts the trusts under this Indenture in accordance with this Indenture and agrees to perform the duties required in this Indenture so that the interests of the Secured Parties may be adequately and effectively protected.

 

ARTICLE I
 USAGE AND DEFINITIONS

 

Section 1.1.                                 Usage and Definitions.  Capitalized terms used but not otherwise defined in this Indenture are defined in Appendix A to the Sale and Servicing Agreement, dated as of July 1, 2012, among Ford Credit Auto Owner Trust 2012-C, as Issuer, Ford Credit Auto Receivables Two LLC, as Depositor, and Ford Motor Credit Company LLC, as Servicer.  Appendix A also contains rules as to usage applicable to this Indenture.  Appendix A is incorporated by reference into this Indenture.

 

Section 1.2.                                 Incorporation by Reference of Trust Indenture Act.  Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture.  The following TIA terms used in this Indenture have the following meanings:

 

“indenture securities” means the Notes;

 

“indenture security holder” means a Noteholder;

 

“indenture to be qualified” means this Indenture;

 

“indenture trustee” or “institutional trustee” means the Indenture Trustee; and

 

“obligor” on the indenture securities means the Issuer and any other obligor on the indenture securities.

 

 

All other TIA terms used in this Indenture that are defined in the TIA, defined by TIA reference to another statute or defined by Securities and Exchange Commission rule have the meaning assigned to them by such definitions.

 

ARTICLE II
 THE NOTES

 

Section 2.1.                                 Form.

 

(a)                                 Each Class of Notes, together with the Indenture Trustee’s certificates of authentication, will be in substantially the form set forth in the related Exhibit with such variations as are required or permitted by this Indenture.  The Notes may have such marks of identification and such legends or endorsements placed on them as may be determined, consistent with this Indenture, by the Responsible Person of the Issuer executing such Notes, as evidenced by their execution of such Notes.  The physical Notes will be produced by any method as determined by the Responsible Person of the Issuer executing such Notes, as evidenced by their execution of such Notes.

 

(b)                                 Each Note will be dated the date of its authentication.  The terms of the Notes set forth in Exhibit A and Exhibit B are part of this Indenture and are incorporated into this Indenture by reference.

 

Section 2.2.                                 Execution, Authentication and Delivery.

 

(a)                                 A Responsible Person of the Issuer will execute the Notes on behalf of the Issuer.  The signature of such Responsible Person on the Notes may be manual or facsimile.  Notes bearing the manual or facsimile signature of an individual who was a Responsible Person of the Issuer will bind the Issuer, notwithstanding that such individual has ceased to hold such office before the authentication and delivery of such Notes or did not hold such office at the date of issuance of such Notes.

 

(b)                                 The Indenture Trustee will, upon Issuer Order, authenticate and deliver the Notes for original issue in the Classes, Note Interest Rates and initial Note Balances as set forth below.

 

	
Class
    	
 
    	
Note Interest Rate
    	
 
    	
Initial Note Balance
    	
 
    
	
Class A-1 Notes
    	
 
    	
0.27214
    	
%
    	
$
    	
366,700,000
    	
 
    
	
Class A-2 Notes
    	
 
    	
0.47
    	
%
    	
$
    	
497,600,000
    	
 
    
	
Class A-3 Notes
    	
 
    	
0.58
    	
%
    	
$
    	
502,000,000
    	
 
    
	
Class A-4 Notes
    	
 
    	
0.79
    	
%
    	
$
    	
133,250,000
    	
 
    
	
Class B Notes
    	
 
    	
1.27
    	
%
    	
$
    	
47,350,000
    	
 
    
	
Class C Notes
    	
 
    	
1.69
    	
%
    	
$
    	
31,570,000
    	
 
    
	
Class D Notes
    	
 
    	
2.43
    	
%
    	
$
    	
31,570,000
    	
 
    

 

(c)                                  The Notes will initially be issued as Book-Entry Notes.  The Notes will be issuable in minimum denominations of $100,000 and in multiples of $1,000 in excess of $100,000.  Notwithstanding the foregoing, one Note of each Class may fail to be in such minimum denomination due to the difference between such minimum denomination requirement and the initial Note Balance of the Notes.

 

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(d)                                 No Note will be entitled to any benefit under this Indenture or be valid for any purpose, unless it bears a certificate of authentication substantially in the form provided for in this Indenture executed by the Indenture Trustee by the manual signature of one of its authorized signatories, and such certificate upon any Note will be conclusive evidence, and the only evidence, that such Note has been duly authenticated and delivered under this Indenture.

 

Section 2.3.                                 Tax Treatment.  The Issuer intends that Notes that are owned or beneficially owned by a Person other than Ford Credit or its Affiliates will be indebtedness of the Issuer, secured by the Collateral, for U.S. federal, State and local income and franchise tax purposes.  The Issuer, by entering into this Indenture, and each Noteholder, by its acceptance of a Note (and each Note Owner by its acceptance of an interest in the applicable Book-Entry Note), agree to treat the Notes for U.S. federal, State and local income and franchise tax purposes as indebtedness of the Issuer.

 

Section 2.4.                                 Registration; Registration of Transfer and Exchange.

 

(a)                                 The Issuer appoints the Indenture Trustee to be the “Note Registrar” and to keep a register (the “Note Register”) for the purpose of registering Notes and transfers of Notes as provided in this Indenture.  Upon any resignation of the Note Registrar, the Issuer will promptly appoint a successor or, if it elects not to make such an appointment, assume the duties of Note Registrar.  If the Issuer appoints a Person other than the Indenture Trustee as Note Registrar, (i) the Issuer will notify the Indenture Trustee of such appointment, (ii) the Indenture Trustee will have the right to inspect the Note Register at all reasonable times and to obtain copies of the Note Register and (iii) the Indenture Trustee will have the right to rely upon a certificate executed by an officer of the Note Registrar as to the names and addresses of the Noteholders and the principal amounts and number of the Notes.

 

(b)                                 Upon surrender for registration of transfer of any Note at the office or agency of the Issuer maintained under Section 3.2, if the requirements of Section 8-401(a) of the UCC are met, the Issuer will execute, the Indenture Trustee will authenticate and the Noteholder will obtain from the Indenture Trustee, in the name of the designated transferee or transferees, one or more new Notes of the same Class, in any authorized denomination, in the same aggregate principal amount.

 

(c)                                  A Noteholder may exchange Notes for other Notes of the same Class, in any authorized denominations, in the same aggregate principal amount, by surrendering the Notes to be exchanged at the office or agency of the Issuer maintained under Section 3.2.  If the requirements of Section 8-401(a) of the UCC are met, the Issuer will execute, the Indenture Trustee will authenticate and the Noteholder will obtain from the Indenture Trustee the Notes that the Noteholder making such exchange is entitled to receive.

 

(d)                                 All Notes issued upon any registration of transfer or exchange of Notes will be the valid obligations of the Issuer, evidencing the same debt, and entitled to the same benefits under this Indenture as the Notes surrendered upon such registration of transfer or exchange.

 

(e)                                  Every Note presented or surrendered for registration of transfer or exchange will be (i) duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory

 

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to the Note Registrar or the Indenture Trustee duly executed by, the Noteholder of such Note or such Noteholder’s attorney duly authorized in writing, with such signature guaranteed by an “eligible guarantor institution” meeting the requirements of the Note Registrar which requirements include membership or participation in the Securities Transfer Agents Medallion Program or such other “signature guarantee program” as may be determined by the Note Registrar in addition to, or in substitution for, the Securities Transfer Agents Medallion Program, all in accordance with the Exchange Act and (ii) accompanied by such other documents as the Indenture Trustee may require.

 

(f)                                   None of the Issuer, the Note Registrar or the Indenture Trustee will impose a service charge on a Noteholder for any registration of transfer or exchange of Notes.  The Issuer, the Note Registrar or the Indenture Trustee may require such Noteholder to pay an amount sufficient to cover any tax or other governmental charge that may be imposed in connection with such registration of transfer or exchange of the Notes.

 

(g)                                  Neither the Issuer nor the Note Registrar will be required to register transfers or exchanges of Notes selected for redemption or Notes whose next Payment Date is not more than 15 days after the requested date of such transfer or exchange.

 

(h)                                 The Class A-1 Notes (the “Rule 144A Notes”) have not been registered under the Securities Act or any State securities law.  None of the Issuer, the Note Registrar or the Indenture Trustee is obligated to register the Rule 144A Notes under the Securities Act or any State securities or “blue sky” laws or to take any other action not otherwise required under this Indenture or the Trust Agreement to permit the transfer of any Rule 144A Note without registration.  The Issuer, at the direction of the Depositor or the Administrator, may elect to register, or cause the registration of, the Rule 144A Notes under the Securities Act and any applicable State securities law, in which case the Issuer will deliver, or cause to be delivered, to the Indenture Trustee and the Registrar such Opinions of Counsel, Officer’s Certificates and other information as determined by the Depositor as necessary to effect such registration.

 

(i)                                     Until such time as the Rule 144A Notes have been registered under the Securities Act and any applicable State securities law pursuant to Section 2.4(h), no Rule 144A Note may be sold, transferred, assigned, participated, pledged or otherwise disposed of (any such act, a “ Rule 144A Note Transfer”) to any Person except in accordance with the provisions of this Section 2.4, and any purported Rule 144A Note Transfer in violation of this Section 2.4 will be null and void (a “Void Rule 144A Note Transfer”).

 

(j)                                    Each Rule 144A Note will bear the legend contained in Exhibit A unless determined otherwise by the Administrator (as certified to the Indenture Trustee in an Officer’s Certificate) consistent with applicable law.

 

As a condition to the registration of any Rule 144A Note Transfer, the prospective transferee of such Rule 144A Note will be deemed to represent to the Indenture Trustee, the Note Registrar and the Issuer the following:

 

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(i)                       It understands that the Rule 144A Notes have not been and will not be registered under the Securities Act or any State or other applicable securities or “blue sky” law.

 

(ii)                    It understands that Rule 144A Note Transfers are only permitted if made in compliance with the Securities Act and other applicable laws and only to a person that the holder reasonably believes is a “qualified institutional buyer” within the meaning of Rule 144A under the Securities Act (a “QIB”).

 

(iii)                 It (A) is a QIB, (B) is aware that the sale to it is being made in reliance on Rule 144A under the Securities Act and if it is acquiring such Rule 144A Notes or any interest or participation in the Rule 144A Notes for the account of another QIB, such other QIB is aware that the sale is being made in reliance on Rule 144A under the Securities Act and (C) is acquiring such Rule 144A Notes or any interest or participation in the Rule 144A Notes for its own account or for the account of another QIB.

 

(iv)                It is purchasing the Rule 144A Notes for its own account or for one or more investor accounts for which it is acting as fiduciary or agent, in each case for investment, and not with a view to offer, transfer, assign, participate, pledge or otherwise dispose of such Rule 144A Notes in connection with any distribution of such Rule 144A Notes that would violate the Securities Act.

 

(k)                                 By acceptance of any Rule 144A Note, the Rule 144A Noteholder specifically agrees with and represents to the Depositor, the Issuer and the Note Registrar, that no Rule 144A Note Transfer will be made unless (i) the registration requirements of the Securities Act and any applicable State securities laws have been complied with in respect of such Rule 144A Note in accordance with Section 2.4(h), (ii) such Rule 144A Note Transfer is to the Depositor or its Affiliates or (iii) such Rule 144A Note Transfer is exempt from the registration requirements under the Securities Act because such Rule 144A Note Transfer is in compliance with Rule 144A under the Securities Act, to a transferee who the transferor reasonably believes is a QIB that is purchasing for its own account or for the account of a QIB and to whom notice is given that such Rule 144A Note Transfer is being made in reliance upon Rule 144A under the Securities Act.

 

(l)                                     The Administrator will make available to the prospective transferor and transferee of a Rule 144A Note information requested to satisfy the requirements of paragraph (d)(4) of Rule 144A (the “Rule 144A Information”). The Rule 144A Information will include any or all of the following items requested by the prospective transferee:

 

(i)                       the offering memorandum relating to the Rule 144A Notes and any amendments or supplements to such offering memorandum;

 

(ii)                    the Monthly Investor Report for each Payment Date preceding such request; and

 

(iii)                 such other information as is reasonably available to the Administrator in order to comply with requests for information pursuant to Rule 144A.

 

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(m)                             Each Note Owner that is subject to Title I of ERISA, Section 4975 of the Code or any Similar Law, by accepting a beneficial interest in a Note, is deemed to represent that its purchase, holding and disposition of such beneficial interest does not constitute and will not result in a non-exempt prohibited transaction under Title I of ERISA or Section 4975 of the Code due to the applicability of a statutory or administrative exemption from the prohibited transaction rules (or, if the Note Owner is subject to any Similar Law, such purchase, holding and disposition does not constitute and will not result in a violation of such Similar Law).

 

Section 2.5.                                 Mutilated, Destroyed, Lost or Stolen Notes.

 

(a)                                 If a mutilated Note is surrendered to the Indenture Trustee or the Indenture Trustee receives evidence to its satisfaction of the destruction, loss or theft of a Note, then the Issuer will execute and, upon Issuer Request, the Indenture Trustee will authenticate and deliver a replacement Note of the same Class and principal amount in exchange for or in lieu of such Note so long as (i) the Indenture Trustee receives such security or indemnity as may be required by it to hold the Issuer and the Indenture Trustee harmless, (ii) none of the Issuer, the Note Registrar or the Indenture Trustee have received notice that such Note has been acquired by a protected purchaser, as defined in Section 8-303 of the UCC and (iii) the requirements of Section 8-405 of the UCC are met.  However, if any such destroyed, lost or stolen Note (but not a mutilated Note) is due and payable within 15 days or has been called for redemption, instead of issuing a replacement Note, the Issuer may pay such destroyed, lost or stolen Note when so due or payable or upon the Redemption Date without surrender of such Note.  If a protected purchaser of the original Note in lieu of which such replacement Note was issued (or such payment made) presents for payment such original Note, the Issuer and the Indenture Trustee will be entitled to recover such replacement Note (or such payment) from the Person to whom it was delivered or any Person taking such replacement Note (or such payment) from such Person to whom such replacement Note (or such payment) was delivered or any assignee of such Person, except a protected purchaser, and will be entitled to recover upon the security or indemnity provided for such replacement Note (or such payment) for any cost, expense, loss, damage, claim or liability incurred by the Issuer or the Indenture Trustee in connection with such replacement Note (or such payment).

 

(b)                                 Upon the issuance of any replacement Note under Section 2.5(a), the Issuer may require the Noteholder of such Note to pay an amount sufficient to cover any tax or other governmental charge imposed and any other reasonable expenses incurred in connection with such replacement Note.

 

(c)                                  Each replacement Note issued pursuant to Section 2.5(a) will constitute an original additional contractual obligation of the Issuer, whether or not the mutilated, destroyed, lost or stolen Note will be enforceable by anyone and, except as otherwise provided in this Indenture, will be entitled to all the benefits of this Indenture equally and proportionately with all other Notes of the same Class duly issued under this Indenture.

 

(d)                                 This Section 2.5 is exclusive and precludes (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes.

 

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Section 2.6.                                 Persons Deemed Owners.  On any date, the Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture Trustee may treat the Person in whose name any Note is registered as of such date as the owner of such Note for the purpose of receiving payments of principal of and any interest on such Note and for all other purposes, and none of the Issuer, the Indenture Trustee or any agent of the Issuer or the Indenture Trustee will be affected by notice to the contrary.

 

Section 2.7.                                 Payment of Principal and Interest.

 

(a)                                 Each Class of Notes will accrue interest at the applicable Note Interest Rate.  Interest on each Note will be due and payable on each Payment Date as specified in such Note.  Interest on the Class A-1 Notes will be computed on the basis of actual number of days elapsed and a 360-day year.  Interest on the Notes (other than the Class A-1 Notes) will be computed on the basis of a 360-day year consisting of twelve 30-day months.

 

(b)                                 Interest and principal payments on each Class of Notes will be made ratably to the Noteholders of such Class entitled to such payments.  On each Payment Date, distributions to be made with respect to interest on and principal of the Book-Entry Notes will be paid to the Registered Noteholder by wire transfer in immediately available funds to the account designated by the nominee of the Clearing Agency (initially, such nominee will be Cede & Co.).  Distributions to be made with respect to interest on and principal of the Definitive Notes will be paid to the Registered Noteholder (i) if such Noteholder has provided to the Note Registrar appropriate instructions at least five Business Days before such Payment Date and the aggregate original principal amount of such Noteholder’s Notes is at least $1,000,000, by wire transfer in immediately available funds to the account of such Noteholder or (ii) by check mailed first class mail, postage prepaid, to such Registered Noteholder’s address as it appears on the Note Register on the related Record Date.  However, the final installment of principal (whether payable by wire transfer or check) of each Note on a Payment Date, the Redemption Date or the applicable Final Scheduled Payment Date will be payable only upon presentation and surrender of such Note.  The Indenture Trustee will notify each Registered Noteholder of the date on which the Issuer expects that the final installment of principal of and interest on such Registered Noteholder’s Notes will be paid not later than five days before such date.  Such notice will specify the place where such Notes may be presented and surrendered for payment of such installment.  All funds paid by wire transfers or checks that are returned undelivered will be held in accordance with Section 3.3.

 

(c)                                  The principal of each Note will be payable in installments on each Payment Date as specified in such Note.  The entire unpaid Note Balance of each Class of Notes will be due and payable on the earlier of its applicable Final Scheduled Payment Date and the Redemption Date.  Notwithstanding the foregoing, the entire unpaid principal amount of the Notes will be due and payable on the date on which the Notes are declared to be immediately due and payable in the manner provided in Section 5.2(a).

 

Section 2.8.                                 Cancellation.  Any Person that receives a Note surrendered for payment, registration of transfer, exchange or redemption will deliver such Note to the Indenture Trustee.  The Indenture Trustee will promptly cancel all Notes it receives that have been surrendered for payment, registration of transfer or exchange, or redemption.  The Issuer may deliver to the

 

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Indenture Trustee for cancellation any Notes previously authenticated and delivered under this Indenture which the Issuer may have acquired in any manner, and the Indenture Trustee will promptly cancel such Notes.  No Notes will be authenticated in lieu of or in exchange for any Notes cancelled as provided in this Section 2.8.  The Indenture Trustee may hold or dispose of all cancelled Notes in accordance with its standard retention or disposal policy unless the Issuer directs, by Issuer Order, that they be destroyed or returned to it (so long as such Notes have not been disposed of previously by the Indenture Trustee).

 

Section 2.9.                                 Release of Collateral.  The Indenture Trustee will release property from the Lien of this Indenture only in accordance with Sections 8.4 and 10.1.

 

Section 2.10.                          Book-Entry Notes.  The Class A-1 Notes, Class A-2 Notes, Class A-3 Notes, Class A-4 Notes, Class B Notes, Class C Notes and Class D Notes will be issued as Book-Entry Notes on the Closing Date.  The Book-Entry Notes, upon original issuance, will be issued in the form of typewritten Notes representing the Book-Entry Notes and delivered to The Depository Trust Company, the initial Clearing Agency, by, or on behalf of, the Issuer.  The Book-Entry Notes will be registered initially on the Note Register in the name of Cede & Co., the nominee of the initial Clearing Agency, and no Note Owner will receive a Definitive Note representing such Note Owner’s interest in such Note, except as provided in Section 2.11.  Unless and until definitive, fully registered Notes (the “Definitive Notes”) have been issued to Note Owners pursuant to Section 2.11:

 

(a)                                 with respect to Book-Entry Notes, the Note Registrar and the Indenture Trustee will be entitled to deal with the Clearing Agency for all purposes of this Indenture (including the payment of principal of and interest on the Book-Entry Notes and the giving of notices, instructions or directions under this Indenture) as the sole Noteholder of the Book-Entry Notes, and will have no obligation to the Note Owners;

 

(b)                                 the Clearing Agency will make book-entry transfers among its participants and receive and transmit payments of principal of and interest on the Book-Entry Notes to such participants;

 

(c)                                  to the extent that this Section 2.10 conflicts with any other provisions of this Indenture, this Section 2.10 will control;

 

(d)                                 the rights of Note Owners may be exercised only through the Clearing Agency and will be limited to those established by law and agreements between such Note Owners and the Clearing Agency and/or its participants pursuant to the DTC Letter; and

 

(e)                                  whenever this Indenture requires or permits actions to be taken based upon instructions or directions of Noteholders of a specified percentage of the Note Balance of the Notes (or the Controlling Class), the Clearing Agency will be deemed to represent such percentage only to the extent that it has received instructions to such effect from Note Owners and/or the Clearing Agency’s participants owning or representing, respectively, such required percentage of the beneficial interest of the Notes (or the Controlling Class) and has delivered such instructions to the Indenture Trustee.

 

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Section 2.11.                          Definitive Notes.  With respect to any Class or Classes of Book-Entry Notes, if (a) the Administrator notifies the Indenture Trustee that the Clearing Agency is no longer willing or able to properly discharge its responsibilities as depository for the Book-Entry Notes and the Administrator is unable to reach an agreement on satisfactory terms with a qualified successor, (b) the Administrator notifies the Indenture Trustee that it elects to terminate the book-entry system through the Clearing Agency or (c) after the occurrence of an Event of Default or a Servicer Termination Event, so long as any Book-Entry Notes are Outstanding, Note Owners of a majority of the Note Balance of the Controlling Class notify the Indenture Trustee and the Clearing Agency that they elect to terminate the book-entry system through the Clearing Agency, then the Clearing Agency will notify all Note Owners and the Indenture Trustee of the occurrence of such election and of the availability of Definitive Notes to the Note Owners.  After the Clearing Agency has surrendered the typewritten Notes representing the Book-Entry Notes and delivered the registration instructions to the Indenture Trustee, the Issuer will execute and the Indenture Trustee, upon Issuer Request, will authenticate the Definitive Notes in accordance with the instructions of the Clearing Agency.  None of the Issuer, the Note Registrar or the Indenture Trustee will be liable for any delay in delivery of such instructions and may conclusively rely, and will be protected in relying, on such instructions.  Upon the issuance of Definitive Notes to Note Owners, the Indenture Trustee will recognize the holders of such Definitive Notes as Noteholders.

 

Section 2.12.                          Authenticating Agents.

 

(a)                                 The Indenture Trustee may appoint one or more Persons (each, an “Authenticating Agent”) with the power to act on its behalf and subject to its direction in the authentication of Notes in connection with issuances, transfers and exchanges under Sections 2.2, 2.4, 2.5 and 9.6, as though each such Authenticating Agent had been expressly authorized by those Sections to authenticate such Notes.  For all purposes of this Indenture, the authentication of Notes by an Authenticating Agent pursuant to this Section 2.12 is deemed to be the authentication of Notes “by the Indenture Trustee.”

 

(b)                                 Any Person into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any Person resulting from any merger or consolidation or conversion to which an Authenticating Agent is a party, or any Person succeeding to all or substantially all of the corporate trust business of an Authenticating Agent, will be the successor of such Authenticating Agent under this Indenture without the execution or filing of any document or any further act.

 

(c)                                  An Authenticating Agent may resign by giving notice of resignation to the Indenture Trustee and the Owner Trustee.  The Indenture Trustee may terminate the agency of an Authenticating Agent by giving notice of termination to such Authenticating Agent and the Owner Trustee.  Upon receiving such notice of resignation or upon such a termination, the Indenture Trustee may appoint a successor Authenticating Agent and will notify the Owner Trustee of any such appointment.

 

(d)                                 Sections 2.8 and 6.4 will apply to each Authenticating Agent.

 

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Section 2.13.                          Note Paying Agents.

 

(a)                                 The Indenture Trustee may appoint one or more Note Paying Agents that meet the eligibility standards for the Indenture Trustee specified in Section 6.11(a).  The Note Paying Agents will have the power to make distributions from the Trust Accounts.

 

(b)                                 Any Person into which a Note Paying Agent may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, consolidation or conversion to which a Note Paying Agent is a party, or any Person succeeding to all or substantially all of the corporate trust business of a Note Paying Agent, will be the successor of such Note Paying Agent under this Indenture without the execution or filing of any document or any further act.

 

(c)                                  A Note Paying Agent may resign by giving notice of resignation to the Indenture Trustee, the Administrator and the Issuer.  The Indenture Trustee may terminate the agency of a Note Paying Agent by giving notice of termination to such Note Paying Agent, the Administrator and the Issuer.  Upon receiving such notice of resignation or upon such a termination, the Indenture Trustee may appoint a successor Note Paying Agent and will notify the Administrator and the Issuer of any such appointment.

 

(d)                                 Sections 2.8 and 6.4 will apply to each Note Paying Agent.

 

ARTICLE III
 COVENANTS AND REPRESENTATIONS

 

Section 3.1.                                 Payment of Principal and Interest.  The Issuer will duly and punctually pay the principal of and interest on the Notes in accordance with the Notes and this Indenture.  Amounts withheld under the Code or any State or local tax law by any Person from a payment to any Noteholder will be considered as having been paid by the Issuer to such Noteholder.

 

Section 3.2.                                 Maintenance of Office or Agency.  The Issuer will maintain an office or agency in the Borough of Manhattan, The City of New York, where Notes may be surrendered for registration of transfer or exchange, and where notices and demands to or upon the Issuer in respect of the Notes and this Indenture may be served.  The Issuer initially appoints the Indenture Trustee to serve as its agent for such purposes.  The Issuer will promptly notify the Indenture Trustee of any change in the location of such office or agency.  If the Issuer fails to maintain any such office or agency or fails to furnish the Indenture Trustee with the address of such office or agency, such surrenders, notices and demands may be made or served at the Corporate Trust Office, and the Issuer appoints the Indenture Trustee as its agent to receive all such surrenders, notices and demands.

 

Section 3.3.                                 Money for Payments To Be Held in Trust.

 

(a)                                 All payments of amounts with respect to any Notes that are to be made from amounts withdrawn from the Bank Accounts will be made on behalf of the Issuer by the Indenture Trustee or by another Note Paying Agent, and no amounts so withdrawn for payments on the Notes may be paid over to or at the direction of the Issuer, except as provided in this Section 3.3.

 

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(b)                                 The Indenture Trustee (including, if applicable, in its capacity as Note Paying Agent) will, and will cause each Note Paying Agent (other than the Indenture Trustee itself) to, execute and deliver to the Indenture Trustee, an instrument in which such Note Paying Agent agrees with the Indenture Trustee to:

 

(i)                       hold all sums held by it for the payment of amounts with respect to the Notes in trust for the benefit of the Persons entitled to such sums until such sums are paid to such Persons or otherwise disposed of as provided in this Indenture and pay such sums to such Persons as provided in this Indenture;

 

(ii)                    give the Indenture Trustee notice of any default by the Issuer of which it has actual knowledge in the making of any payment required to be made with respect to the Notes;

 

(iii)                 during the continuance of any such default, upon the request of the Indenture Trustee, immediately pay to the Indenture Trustee all sums held in trust by such Note Paying Agent;

 

(iv)                immediately resign as a Note Paying Agent and immediately pay to the Indenture Trustee all sums held by it in trust for the payment of Notes if it ceases to meet the eligibility standards specified in Section 6.11(a) with respect to the Indenture Trustee; and

 

(v)                   comply with all requirements of the Code and any State or local tax law with respect to withholding and reporting requirements in connection with payments on the Notes.

 

(c)                                  The Issuer may by Issuer Order, direct any Note Paying Agent to pay to the Indenture Trustee all sums held in trust by such Note Paying Agent, such sums to be held by the Indenture Trustee upon the same terms as those upon which the sums were held by such Note Paying Agent.  Upon a Note Paying Agent’s payment of all sums held in trust to the Indenture Trustee, such Note Paying Agent will be released from all further liability with respect to such money.

 

(d)                                 Subject to laws with respect to escheat of funds, any money held by the Indenture Trustee or any Note Paying Agent in trust for the payment of any amount due with respect to any Note and remaining unclaimed for two years after such amount has become due and payable will be discharged from such trust and paid to the Issuer upon Issuer Request.  After such discharge and payment, the Noteholder of such Note will, as an unsecured general creditor, look only to the Issuer for payment of such amount due and unclaimed (but only to the extent of the amounts so paid to the Issuer), and all liability of the Indenture Trustee or such Note Paying Agent with respect to such trust money will thereupon cease.  However, the Indenture Trustee or such Note Paying Agent, before making any such repayment, will publish once, at the expense and direction of the Issuer, in a newspaper customarily published on each Business Day in the English language and of general circulation in The City of New York, notice that such money remains unclaimed and that after a date specified in such notice, which must be at least 30 days from the date of such publication, any unclaimed balance of such money then remaining will be

 

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repaid to the Issuer.  The Indenture Trustee will also adopt and employ, at the expense of the Administrator and direction of the Issuer, any other reasonable means of notification of such repayment (including notifying Noteholders whose Notes have been called but have not been surrendered for redemption or whose right to or interest in monies due and payable but not claimed is determinable from the records of the Indenture Trustee or of any Note Paying Agent of such repayment, at the last address of record for each such Noteholder).

 

Section 3.4.           Existence.  The Issuer will keep in full effect its existence, rights and franchises as a statutory trust under the Delaware Statutory Trust Act (unless it becomes, or any successor Issuer under this Indenture is or becomes, organized under the laws of any other State or of the United States, in which case the Issuer will keep in full effect its existence, rights and franchises under the laws of such other jurisdiction) and will obtain and preserve its qualification in each jurisdiction in which such qualification is or will be necessary to protect the validity and enforceability of this Indenture, the Notes, the Collateral and each other instrument or agreement included in the Collateral.

 

Section 3.5.           Protection of Collateral.

 

(a)           The Issuer will (i) execute and deliver all such supplements and amendments to this Indenture and instruments of further assurance and other instruments, (ii) file or authorize and cause to be filed all such financing statements and amendments and continuations of such financing statements and (iii) take such other action, in each case necessary or advisable to:

 

(A)                               maintain or preserve the Lien and security interest (and the priority of such security interest) of this Indenture or carry out more effectively the purposes of this Indenture;

 

(B)                               perfect, publish notice of or protect the validity of any Grant made or to be made by this Indenture;

 

(C)                               enforce any of the Collateral; or

 

(D)                               preserve and defend title to the Collateral and the rights of the Indenture Trustee and the Secured Parties in the Collateral against the claims of all Persons.

 

(b)           The Issuer authorizes the Administrator and the Indenture Trustee to file any financing or continuation statements, and amendments to such statements, in all jurisdictions and with all filing offices as are necessary or advisable to preserve, maintain and protect the interest of the Indenture Trustee in the Collateral.  Such financing and continuation statements may describe the Collateral in any manner as the Administrator or the Indenture Trustee may reasonably determine to ensure the perfection of the interest of the Indenture Trustee in the Collateral (including describing the Collateral as “all assets” of the Issuer).  The Administrator or the Indenture Trustee, as applicable, will deliver to the Issuer file-stamped copies of, or filing receipts for, any such financing statement and continuation statement promptly upon such document becoming available following filing.

 

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(c)           The Indenture Trustee is under no obligation (i) to make any determination of whether any such financing or continuation statements, and amendments to such statements, are required to be filed pursuant to this Section 3.5 or (ii) to file any such financing or continuation statements, or amendment to such statements, and will not be liable for failure to do so.

 

Section 3.6.           Performance of Obligations; Servicing of Receivables.

 

(a)           No Release of Material Covenants or Obligations.  The Issuer will not take any action, and will use commercially reasonable efforts to prevent any action from being taken by others, that would release any Person from any material covenants or obligations under any instrument or agreement included in the Collateral or that would result in the amendment, hypothecation, subordination, termination or discharge of, or impair the validity or effectiveness of, any such instrument or agreement, except as provided in any Transaction Document.

 

(b)           Contracting.  The Issuer may contract with other Persons to assist it in performing its duties under this Indenture, and any performance of such duties by a Person identified to the Indenture Trustee in an Officer’s Certificate of the Issuer will be deemed to be action taken by the Issuer.  Initially, the Issuer has contracted with the Servicer and the Administrator to assist the Issuer in performing its duties under this Indenture.

 

(c)           Performance of Obligations.  The Issuer will punctually perform and observe all of its obligations and agreements contained in the Transaction Documents and in the instruments and agreements included in the Collateral.

 

(d)           Servicer Termination Event.  If the Issuer has actual knowledge of the occurrence of a Servicer Termination Event, the Issuer will promptly notify the Indenture Trustee and the Rating Agencies of such occurrence and specify in such notice any action the Issuer is taking in respect of such event.  If a Servicer Termination Event arises from the failure of the Servicer to perform any of its duties and obligations under the Sale and Servicing Agreement with respect to the Receivables, the Issuer will take all reasonable steps available to cause the Servicer to remedy such failure.

 

Section 3.7.           Negative Covenants.  So long as any Notes are Outstanding, the Issuer will not:

 

(a)           except as permitted by any Transaction Document, sell, transfer, exchange or otherwise dispose of any portion of the Collateral unless directed to do so by the Indenture Trustee;

 

(b)           claim any credit on, or make any deduction from the principal or interest payable in respect of, the Notes (other than amounts withheld from such payments under the Code or any State or local tax law) or assert any claim against any present or former Noteholder by reason of the payment of the taxes levied or assessed upon the Issuer or the Collateral;

 

(c)           dissolve or liquidate in whole or in part;

 

(d)           permit (i) the validity or effectiveness of this Indenture to be impaired, or permit the Lien of this Indenture to be amended, hypothecated, subordinated, terminated or discharged,

 

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or permit any Person to be released from any covenants or obligations with respect to the Notes under this Indenture except in each case as permitted by this Indenture, (ii) any Lien other than Permitted Liens to be created on or extend to or otherwise arise upon or burden the Collateral or (iii) the Lien of this Indenture not to constitute a valid first priority security interest in the Collateral (other than with respect to Permitted Liens); or

 

(e)           except as otherwise provided in any Transaction Document, amend, modify, waive, supplement, terminate or surrender the terms of any Collateral or any of the Transaction Documents without the consent of the Indenture Trustee or the Noteholders of a majority of the Note Balance of the Notes and upon notice by the Issuer to the Rating Agencies.

 

Section 3.8.           Opinions as to Collateral.

 

(a)           If this Indenture is subject to recording in any appropriate public recording offices, the Issuer, at its expense, will effect such recording and deliver an Opinion of Counsel to the Indenture Trustee (which may be counsel to the Issuer or any other counsel reasonably acceptable to the Indenture Trustee) to the effect that such recording is necessary either for the protection of the Secured Parties or any other Person secured under this Indenture or for the enforcement of any right or remedy granted to the Indenture Trustee under this Indenture.

 

(b)           On the Closing Date, the Issuer will furnish to the Indenture Trustee an Opinion of Counsel to the effect that this Indenture and all financing statements have been properly recorded and filed to make effective the Lien intended to be created by this Indenture, and reciting the details of such action, or stating that in the opinion of such counsel no such action is necessary to make such Lien effective.

 

(c)           On or before April 30 of each year, beginning in the year after the Closing Date, the Issuer will furnish to the Indenture Trustee an Opinion of Counsel either to the effect that, in the opinion of such counsel, such action has been taken with respect to the recording, filing, re-recording and refiling of this Indenture and all financing statements and continuation statements, as is necessary to maintain the Lien of this Indenture, and reciting the details of such action, or to the effect that in the opinion of such counsel no such action is necessary to maintain such Lien.

 

Section 3.9.           Annual Statement as to Compliance.  The Issuer will deliver to the Indenture Trustee within 90 days after the end of each year, beginning in the year after the Closing Date, an Officer’s Certificate signed by a Responsible Person of the Issuer, to the effect that (a) a review of the Issuer’s activities and of its performance under this Indenture during the preceding year has been made under such Responsible Person’s supervision and (b) to such Responsible Person’s knowledge, based on such review, the Issuer has complied in all material respects with all of its conditions and covenants under this Indenture throughout the preceding year or, if there has been a failure to comply in any material respect, specifying each such failure known to such Responsible Person and the nature and status of such failure.  A copy of the Officer’s Certificate referred to in this Section 3.9 may be obtained by any Noteholder or Person certifying it is a Note Owner by a request in writing to the Indenture Trustee at its Corporate Trust Office.  The Issuer’s obligation to deliver an Officer’s Certificate under this Section 3.9 will terminate upon the payment in full of the Notes, including by redemption in whole pursuant to Section 10.1.

 

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Section 3.10.         Consolidation and Merger; Sale of Assets.  The Issuer will not consolidate or merge with or into any other Person or convey or transfer all or substantially all of the assets included in the Collateral to any Person, unless:

 

(a)           the Person (if other than the Issuer) formed by or surviving such consolidation or merger, or that acquires such assets, (i) is organized and existing under the laws of the United States or any State and (ii) assumes, by an indenture supplemental to this Indenture, executed and delivered to the Indenture Trustee, in form reasonably satisfactory to the Indenture Trustee, the due and punctual payment of the principal of and interest on all Notes and the performance or observance of every agreement and covenant of this Indenture to be performed or observed by the Issuer, all as provided in this Indenture;

 

(b)           with respect to a conveyance or transfer of all or substantially all of the assets included in the Collateral, the Person that acquires such assets agrees by means of the supplemental indenture executed and delivered pursuant to clause (a) (i) that all right, title and interest so conveyed or transferred will be subject and subordinate to the rights of the Noteholders, (ii) unless otherwise provided in such supplemental indenture, to indemnify, defend and hold harmless the Issuer from and against any costs, expenses, losses, damages, claims and liabilities (including attorneys’ fees) arising under or related to this Indenture and the Notes and (iii) that such Person will make all filings with the Securities and Exchange Commission (and any other appropriate Person) required by the Exchange Act in connection with the Notes;

 

(c)           immediately after giving effect to such consolidation, merger or sale, no Default or Event of Default will have occurred and be continuing;

 

(d)           the Rating Agency Condition has been satisfied with respect to such consolidation, merger or sale;

 

(e)           the Issuer has received an Opinion of Counsel (and has delivered copies of such Opinion of Counsel to the Indenture Trustee) to the effect that such consolidation, merger or sale will not cause (i) any security issued by the Issuer to be deemed sold or exchanged for purposes of Section 1001 of the Code or (ii) the Issuer to be treated as an association or publicly traded partnership taxable as a corporation for U.S. federal income tax purposes;

 

(f)            any action that is necessary to maintain the Lien and security interest created by this Indenture has been taken; and

 

(g)           the Issuer has delivered to the Depositor, the Servicer, the Owner Trustee and the Indenture Trustee an Officer’s Certificate and an Opinion of Counsel each to the effect that such consolidation, merger or sale and such supplemental indenture comply with this Article III and that all conditions precedent in this Indenture relating to such consolidation, merger or sale have been complied with (including any filing required by the Exchange Act).

 

Section 3.11.         Successor or Transferee.

 

(a)           Upon any consolidation or merger of the Issuer in accordance with Section 3.10, the Person formed by or surviving such consolidation or merger (if other than the Issuer) will succeed to, and be substituted for, and may exercise every right and power of, the Issuer under

 

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this Indenture with the same effect as if such Person had been named as the Issuer in this Indenture.

 

(b)           Upon a conveyance or sale of all or substantially all of the assets of the Issuer pursuant to Section 3.10, the Issuer will be released from every covenant and agreement of this Indenture to be performed or observed by the Issuer with respect to the Notes immediately upon the delivery of notice to the Indenture Trustee stating that the Issuer is to be so released.

 

Section 3.12.         No Other Activities.  The Issuer will not engage in any activities other than financing, acquiring, owning and pledging the Trust Property in the manner contemplated by the Transaction Documents and activities incidental to such activities.

 

Section 3.13.         Further Instruments and Acts.  Upon request of the Indenture Trustee, the Issuer will execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out the purpose of this Indenture.

 

Section 3.14.         Restricted Payments.

 

(a)           The Issuer will not, directly or indirectly, (i) make any distribution (by reduction of capital or otherwise) to the Owner Trustee or any owner of a beneficial interest in the Issuer or otherwise with respect to any ownership or equity interest or security in or of the Issuer or to the Servicer or the Administrator, (ii) redeem, purchase, retire or otherwise acquire for value any such ownership or equity interest or security or (iii) set aside or otherwise segregate any amounts for any such purpose.

 

(b)           Notwithstanding Section 3.14(a), the Issuer may make payments to the Servicer, the Administrator, the Owner Trustee, the Indenture Trustee, the Noteholders, the Depositor and the holders of the Residual Interest to the extent contemplated by the Transaction Documents.

 

(c)           The Issuer will not, directly or indirectly, make payments to or distributions from the Collection Account or the Principal Payment Account except in accordance with the Transaction Documents.

 

Section 3.15.         Notice of Events of Default.  The Issuer will notify the Indenture Trustee, the Servicer and the Rating Agencies within five Business Days after a Responsible Person of the Issuer has actual knowledge of an Event of Default.

 

Section 3.16.         Representations and Warranties of the Issuer as to Security Interest.  The Issuer represents and warrants to the Indenture Trustee as of the Closing Date:

 

(a)           This Indenture creates a valid and continuing security interest (as defined in the applicable UCC) in the Collateral in favor of the Indenture Trustee which security interest is prior to all other Liens, and is enforceable as such against creditors of and purchasers from the Issuer.

 

(b)           The Sponsor has represented that it has commenced procedures that will result in the perfection of a first priority security interest against each Obligor in the Financed Vehicles.

 

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(c)           All of the Permitted Investments have been and will be credited to a Securities Account.  The securities intermediary for each Securities Account has agreed to treat all assets credited to the Securities Accounts as “financial assets” within the meaning of the applicable UCC.  The Collateral (other than those Permitted Investments which have been credited to a Securities Account) constitutes “chattel paper,” “instruments” or “general intangibles” within the meaning of the applicable UCC.

 

(d)           The Issuer owns and has good and marketable title to the Collateral free and clear of any Lien other than Permitted Liens.  The Issuer has received all consents and approvals required by the terms of the Collateral to Grant to the Indenture Trustee all of its interest and rights in the Collateral, except to the extent that any requirement for consent or approval is rendered ineffective under the applicable UCC.

 

(e)           The Issuer has caused, or will cause within ten days after the Closing Date, the filing of all appropriate financing statements in the proper filing office in the appropriate jurisdictions under applicable law in order to perfect the security interest Granted in the Collateral to the Indenture Trustee.

 

(f)            The Issuer has delivered to the Indenture Trustee a fully executed agreement pursuant to which the securities intermediary has agreed to comply with all instructions originated by the Indenture Trustee relating to the Securities Accounts without further consent by the Issuer.

 

(g)           Other than the security interest Granted to the Indenture Trustee pursuant to this Indenture, the Issuer has not pledged, assigned, sold, granted a security interest in, or otherwise conveyed any portion of the Collateral.  The Issuer has not authorized the filing of and is not aware of any financing statements against the Issuer that include a description of collateral covering any portion of the Collateral, other than any financing statements relating to the security interest Granted to the Indenture Trustee.  The Issuer is not aware of any judgment or tax lien filings against it.

 

(h)           The Securities Accounts are not in the name of any Person other than the Issuer or the Indenture Trustee.  The Issuer has not consented to the securities intermediary of any Securities Account complying with entitlement orders of any Person other than the Indenture Trustee.

 

(i)            All financing statements filed or to be filed against the Issuer, or any assignor of which the Issuer is the assignee, in favor of the Indenture Trustee in connection with this Indenture describing the Collateral contain a statement substantially to the following effect:  “The purchase of or grant of a security interest in any collateral described in this financing statement will violate the rights of the Secured Parties.”

 

The representations and warranties in this Section 3.16, (i) will survive the termination of this Indenture and (ii) may not be waived by the Indenture Trustee.

 

Section 3.17.         Audits of the Issuer.  The Issuer agrees that, with reasonable prior notice, it will permit any authorized representative of the Indenture Trustee, the Servicer or the Administrator, during the Issuer’s normal business hours, to examine and audit the books of

 

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account, records, reports and other documents and materials of the Issuer relating to the performance of the Issuer’s obligations under this Indenture.  In addition, the Issuer will permit such representatives to make copies and extracts of any such books and records and to discuss the same with the Issuer’s officers and registered public accountants.  Each of the Indenture Trustee, the Servicer and the Administrator will, and will cause its authorized representatives to, hold in confidence all such information except to the extent (a) disclosure may be required by law (and all reasonable applications for confidential treatment are unavailing) or (b) that the Indenture Trustee, the Servicer or the Administrator, as the case may be, reasonably determines that such disclosure is consistent with its obligations under this Indenture.

 

Section 3.18.         Representations and Warranties of the Issuer.  The Issuer represents and warrants to the Indenture Trustee as of the Closing Date:

 

(a)           Organization and Qualification.  The Issuer is a statutory trust duly formed, validly existing and in good standing under the laws of the State of Delaware.

 

(b)           Power, Authorization and Enforceability.  The Issuer has the power and authority to execute, deliver and perform the terms this Indenture.  The Issuer has authorized the execution, delivery and performance of the terms of this Indenture.  This Indenture is the legal, valid and binding obligation of the Issuer enforceable against the Issuer, except as may be limited by insolvency, bankruptcy, reorganization or other laws relating to the enforcement of creditors’ rights or by general equitable principles.

 

(c)           No Conflicts and No Violation.  The execution and delivery by the Issuer of this Indenture, the consummation by the Issuer of the transactions contemplated by this Indenture and the compliance by the Issuer with this Indenture will not (i) violate any Delaware State law, governmental rule or regulation applicable to the Issuer or any judgment or decree binding on it or (ii) conflict with, result in a breach of, or constitute (with or without notice or lapse of time or both) a default under any indenture, mortgage, deed of trust, loan agreement, guarantee or similar agreement or instrument under which the Issuer is a debtor or guarantor, in each case which conflict, breach, default, Lien or violation would reasonably be expected to have a material adverse effect on the Issuer’s ability to perform its obligations under this Indenture.

 

(d)           No Proceedings.  To the Issuer’s knowledge, there are no proceedings or investigations pending or overtly threatened in writing before any court or other governmental authority of the State of Delaware: (i) asserting the invalidity of this Indenture or the Notes (ii) seeking to prevent the issuance of the Notes or the consummation of any of the transactions contemplated by this Indenture or (iii) seeking any determination or ruling that would reasonably be expected to have a material adverse effect on the Trust Property or the Issuer’s ability to perform its obligations under, or the validity or enforceability of this Indenture or the Notes.

 

(e)           Investment Company Act.  The Issuer is not an “investment company” as defined in the Investment Company Act.

 

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ARTICLE IV
 SATISFACTION AND DISCHARGE

 

Section 4.1.           Satisfaction and Discharge of Indenture.

 

(a)           Subject to Section 4.1(b), this Indenture will cease to be of further effect with respect to the Notes, and the Indenture Trustee, upon Issuer Order and at the expense of the Issuer, will execute proper instruments, in form and substance reasonably satisfactory to the Indenture Trustee, acknowledging satisfaction and discharge of this Indenture with respect to the Notes, if:

 

(i)                       all Notes that have been authenticated and delivered (other than (A) Notes that have been destroyed, lost or stolen and that have been replaced or paid as provided in Section 2.5 and (B) Notes for which payment money has been deposited in trust or segregated and held in trust by the Issuer and subsequently repaid to the Issuer or discharged from such trust, as provided in Section 3.3) have been delivered to the Indenture Trustee for cancellation;

 

(ii)                    the Issuer has paid or caused to be paid all other sums payable by it under the Transaction Documents; and

 

(iii)                 the Issuer has delivered to the Indenture Trustee an Officer’s Certificate and an Opinion of Counsel, each to the effect that all conditions precedent relating to the satisfaction and discharge of this Indenture pursuant to this Section 4.1(a) have been complied with.

 

(b)           After the satisfaction and discharge of this Indenture pursuant to Section 4.1(a), this Indenture will continue as to (i) rights of registration of transfer and exchange, (ii) replacement of mutilated, destroyed, lost or stolen Notes, (iii) the rights of Noteholders to receive payments of principal of and interest on the Notes, (iv) Sections 3.3, 3.4, 3.5, 3.7, 3.10, 3.12, 3.13, 3.14 and 3.15, (v) the rights, obligations and immunities of the Indenture Trustee under this Indenture and (vi) the rights of the Secured Parties as beneficiaries of this Indenture with respect to the property deposited with the Indenture Trustee payable to all or any of them for a period of two years following such satisfaction and discharge.

 

(c)           Upon the satisfaction and discharge of the Indenture pursuant to this Section 4.1, at the request of the Owner Trustee, the Indenture Trustee will deliver to the Owner Trustee a certificate of a Responsible Person stating that all Noteholders have been paid in full.

 

ARTICLE V
 REMEDIES

 

Section 5.1.           Events of Default.

 

(a)           The occurrence of any one of the following events will constitute an event of default under this Indenture (each, an “Event of Default”):

 

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(i)    failure to pay interest due on any Note of the Controlling Class when the same becomes payable on each Payment Date, and such failure continues for a period of five days or more;

 

(ii)   failure to pay the principal of any Note at its Final Scheduled Payment Date or Redemption Date, if any;

 

(iii)  failure to observe or perform any material covenant or agreement of the Issuer made in this Indenture (other than covenants and agreements as to which the failure to observe or perform is specifically covered elsewhere in this Section 5.1) or any representation or warranty of the Issuer made in this Indenture or in any Officer’s Certificate or other document delivered pursuant to or in connection with this Indenture proves to have been incorrect in any material respect as of the time made and, in each case, such failure or incorrectness continues for a period of 60 days after notice was given to the Issuer by the Indenture Trustee or to the Issuer and the Indenture Trustee by the Noteholders of at least 25% of the Note Balance of the Controlling Class specifying such failure or incorrectness, requiring it to be remedied and stating that such notice is a “Notice of Default”; or

 

(iv)  the occurrence of an Insolvency Event with respect to the Issuer.

 

(b)           The Issuer will notify the Indenture Trustee within five Business Days after a Responsible Person of the Issuer has actual knowledge of the occurrence of an event set forth in Section 5.1(a)(iii) which with the giving of notice and the lapse of time would become an Event of Default, which notice will describe such Default, the status of such Default and what action the Issuer is taking or proposes to take with respect to such Default.  The Issuer will deliver a copy of such notice to each Qualified Institution (if not the Indenture Trustee) maintaining a Bank Account.

 

(c)           The Indenture Trustee will notify the Noteholders within five Business Days after a Responsible Person of the Indenture Trustee has actual knowledge of the occurrence of an Event of Default.

 

Section 5.2.           Acceleration of Maturity; Rescission.

 

(a)           If an Event of Default occurs and is continuing, the Indenture Trustee or the Noteholders of a majority of the Note Balance of the Controlling Class may declare all of the Notes to be immediately due and payable, by notice to the Issuer (and to the Indenture Trustee if given by the Noteholders).  Upon any such declaration, the unpaid Note Balance of the Notes, together with accrued and unpaid interest through the date of acceleration, will become immediately due and payable.  If an Event of Default described in Section 5.1(a)(iv) occurs, all unpaid principal of and accrued and unpaid interest on the Notes, and all other amounts payable under this Indenture, will automatically become due and payable without any declaration or other act on the part of the Indenture Trustee or any Noteholder.  Upon any such declaration or automatic acceleration, the Indenture Trustee will promptly notify each Noteholder and each Qualified Institution (if not the Indenture Trustee) maintaining a Bank Account.

 

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(b)           The Noteholders of a majority of the Note Balance of the Controlling Class, by notice to the Issuer and the Indenture Trustee, may rescind a declaration of acceleration before a judgment or decree for payment of the amount due has been obtained by the Indenture Trustee as provided in this Article V if:

 

(i)    the Issuer has paid or deposited with the Indenture Trustee an amount sufficient to (A) pay all principal of and interest on the Notes and all other amounts that would then be due under this Indenture or upon the Notes if the Event of Default giving rise to such acceleration had not occurred, (B) pay all amounts owed to the Indenture Trustee under Section 6.7 and (C) pay all other outstanding fees and expenses of the Issuer; and

 

(ii)   all Events of Default, other than the non-payment of the principal of the Notes that has become due solely by such acceleration, have been cured or waived as provided in Section 5.14.

 

No such rescission will affect any subsequent default or impair any right resulting from such rescission.

 

Section 5.3.           Collection of Indebtedness by the Indenture Trustee.

 

(a)           The Issuer covenants that if an Event of Default under Section 5.1(a)(i) or (ii) occurs and continues, the Issuer, upon demand of the Indenture Trustee, will pay to the Indenture Trustee for the benefit of the Noteholders, such overdue amount with interest on any overdue principal at the applicable Note Interest Rate and, to the extent lawful, with interest on any overdue interest at the applicable Note Interest Rate.  In addition, the Issuer covenants to pay, or to cause the Administrator to pay, the costs and expenses of collection, including all amounts owed to the Indenture Trustee under Section 6.7.

 

(b)           If the Issuer fails to pay such amounts upon such demand, the Indenture Trustee, in its own name and as trustee of an express trust, may institute a Proceeding for the collection of the sums so due and unpaid, and may prosecute such Proceeding to final judgment, and may enforce the same against the Issuer and collect the monies adjudged to be payable in the manner provided by law out of the Collateral.

 

Section 5.4.           Trustee May File Proofs of Claim.

 

(a)           If there is pending, relative to the Issuer, Proceedings under the Bankruptcy Code or any other federal or State bankruptcy, insolvency or other similar law, or in case a trustee, liquidator, receiver or similar official has been appointed for or taken possession of the Issuer or its property, the Indenture Trustee, irrespective of whether the Indenture Trustee has made any demand pursuant to Section 5.3, may:

 

(i)    file and prove a claim or claims for the whole amount of principal and interest owing and unpaid in respect of the Notes and file such other papers or documents as may be necessary or advisable in order to have the claims of the Indenture Trustee on behalf of the Secured Parties allowed in such Proceedings (including any amounts due to the Indenture Trustee pursuant to Section 6.7);

 

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(ii)   unless prohibited by applicable law, vote on behalf of the Secured Parties in any election of a trustee, a standby trustee or a Person performing similar functions in any such Proceedings;

 

(iii)  collect and receive any monies or other property payable or deliverable on any such claims and pay all amounts received with respect to the claims of the Secured Parties, including such claims asserted by the Indenture Trustee on their behalf; and

 

(iv)  file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Indenture Trustee and any Secured Parties allowed in any judicial proceedings relative to the Issuer, its creditors and its property.

 

Any trustee, liquidator, receiver or similar official in any such Proceeding is authorized by each Noteholder to make payments to the Indenture Trustee, and, if the Indenture Trustee consents to the making of payments directly to such Noteholders, to pay to the Indenture Trustee an amount sufficient to cover all amounts owed to the Indenture Trustee under Section 6.7.

 

(b)           Except as provided in Section 5.4(a)(ii), this Indenture does not authorize the Indenture Trustee to authorize or consent to or vote for or accept or adopt on behalf of any Noteholder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Noteholder to authorize the Indenture Trustee to vote in respect of the claim of any Noteholder in any such Proceeding.

 

Section 5.5.           Trustee May Enforce Claims Without Possession of Notes.

 

(a)           All rights of action and claims under this Indenture, or under any of the Notes, may be enforced by the Indenture Trustee without the possession of any of the Notes or the production of any of the Notes in any Proceeding relative to any of the Notes, and any such Proceeding instituted by the Indenture Trustee will be brought in its own name as trustee of an express trust, and any recovery of judgment, subject to the amounts owed to the Indenture Trustee under Section 6.7, will be for the benefit of the Secured Parties in respect of which such judgment has been recovered.

 

(b)           In any Proceeding brought by the Indenture Trustee (and any Proceeding involving the interpretation of this Indenture to which the Indenture Trustee is a party), the Indenture Trustee will be held to represent all the Noteholders, and it will not be necessary to make any Noteholder a party to any such Proceeding.

 

Section 5.6.           Remedies; Priorities.

 

(a)           If the Notes have been accelerated under Section 5.2(a) and the declaration of acceleration has not been rescinded in accordance with Section 5.2(b), the Indenture Trustee may do one or more of the following (subject to Section 5.7), and will upon direction by the Noteholders of a majority of the Note Balance of the Controlling Class:

 

(i)    institute a Proceeding in its own name and as trustee of an express trust for the collection of all amounts then payable on the Notes or under this Indenture with

 

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respect to the Notes, enforce any judgment obtained and collect from the Issuer monies adjudged due;

 

(ii)   institute a Proceeding for the complete or partial foreclosure of this Indenture with respect to the Collateral;

 

(iii)  exercise any remedies of a secured party under the UCC and take any other action to protect and enforce the rights and remedies of the Indenture Trustee and the Noteholders; and

 

(iv)  sell or otherwise liquidate all or any portion of the Collateral or rights or interest in the Collateral at one or more public or private sales called and conducted in any manner permitted by law.

 

The Indenture Trustee will notify each Noteholder and the Depositor of any sale or liquidation pursuant to Section 5.6(a)(iv) at least 15 days before such sale or liquidation.  Any Noteholder, the Depositor or the Servicer may submit a bid with respect to such sale or liquidation.

 

(b)           Notwithstanding Section 5.6(a), the Indenture Trustee is prohibited from selling or otherwise liquidating the Collateral unless:

 

(i)    the Event of Default is described in Section 5.1(a)(i) or (ii); or

 

(ii)   the Event of Default is described in Section 5.1(a)(iii) and:

 

(A)                               the Noteholders representing 100% of the Note Balance of the Notes consent to such sale or liquidation; or

 

(B)                               the proceeds of such sale or liquidation are expected to be sufficient to pay in full all amounts owed by the Issuer to the Secured Parties including all principal of and accrued interest on the Notes;

 

(iii)  the Event of Default is described in Section 5.1(a)(iv) and:

 

(A)                               the Noteholders representing 100% of the Note Balance of the Controlling Class consent to such sale or liquidation; or

 

(B)                               the proceeds of such sale or liquidation are expected to be sufficient to pay in full all amounts owed by the Issuer to the Secured Parties including all principal of and accrued interest on the Notes; or

 

(C)                               the Indenture Trustee (1) determines (but will have no obligation to make such determination) that the Collateral will not continue to provide sufficient funds for the payment of all amounts owed to the Secured Parties, as those payments would have become due if the Notes had not been declared due and payable and (2) obtains the

 

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consent of Noteholders of at least 66-2/3% of the Note Balance of the Controlling Class.

 

In determining whether the condition specified in clause (ii)(B), (iii)(B) or (iii)(C)(1) above has been satisfied, the Indenture Trustee may, but need not, obtain and rely upon an opinion of a nationally recognized Independent investment banking firm or firm of certified public accountants as to the expected proceeds or as to the sufficiency of the Collateral for such purpose.

 

(c)           Any money or property collected by the Indenture Trustee following the occurrence of an Event of Default and an acceleration of the Notes, will be deposited into the Collection Account for distribution in accordance with Section 8.2(e) on the Payment Date following the Collection Period during which such amounts are collected.  In all other circumstances, Section 8.2(c) will continue to apply after an Event of Default.

 

Section 5.7.           Optional Preservation of the Collateral.  If the Notes have been accelerated under Section 5.2(a) and the declaration has not been rescinded in accordance with Section 5.2(b), the Indenture Trustee may elect to maintain possession of the Collateral.  It is the intention of the parties to this Indenture and the Noteholders that there at all times be sufficient funds derived from the Collateral for the payment of principal of and interest on the Notes.  The Indenture Trustee will take such intention into account when determining whether or not to maintain possession of all or any portion of the Collateral.  In determining whether to maintain possession of all or any portion of the Collateral, the Indenture Trustee may obtain and rely upon an opinion of a nationally recognized Independent investment banking firm or firm of certified public accountants as to the feasibility of such proposed action and as to the sufficiency of the Collateral for such purpose.

 

Section 5.8.           Limitation on Suits.

 

(a)           No Noteholder has any right to institute any Proceeding with respect to this Indenture or for the appointment of a receiver or trustee, or for any other remedy under this Indenture, unless:

 

(i)    such Noteholder has given notice to the Indenture Trustee of a continuing Event of Default;

 

(ii)   the Noteholders of at least 25% of the Note Balance of the Controlling Class have requested the Indenture Trustee to institute such Proceeding in respect of such Event of Default in its own name as Indenture Trustee under this Indenture;

 

(iii)  such Noteholders have offered reasonable indemnity satisfactory to the Indenture Trustee against any costs, expenses, losses, damages, claims and liabilities that may be incurred by the Indenture Trustee, or its agents, counsel, accountants and experts, in complying with such request;

 

(iv)  the Indenture Trustee has failed to institute such Proceedings for 60 days after its receipt of such notice, request and offer of indemnity; and

 

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(v)   the Noteholders of a majority of the Note Balance of the Controlling Class have not given the Indenture Trustee any direction inconsistent with such request during such 60 day period.

 

(b)           No Noteholder has any right to affect, disturb or prejudice the rights of any other Noteholder or to obtain or to seek to obtain priority or preference over any other Noteholder or to enforce any right under this Indenture, except in the manner provided in this Indenture.

 

(c)           If the Indenture Trustee receives conflicting requests pursuant to Section 5.8(a)(ii) from two or more groups of Noteholders, each evidencing less than a majority of the Note Balance of the Controlling Class, the Indenture Trustee in its sole discretion may determine what action, if any, will be taken.

 

Section 5.9.           Unconditional Rights of Noteholders to Receive Principal and Interest.  Notwithstanding any other provision in this Indenture, each Noteholder has an absolute and unconditional right to receive payment of the principal of and any interest on its Note on or after the respective due dates expressed in such Note or in this Indenture (or, in the case of redemption, on or after the Redemption Date) in accordance with the provisions of this Indenture and of the other Transaction Documents and to institute a Proceeding for the enforcement of any such payment in accordance with Section 5.8.  Such rights may not be impaired or affected without the consent of such Noteholder.

 

Section 5.10.         Restoration of Rights and Remedies.  If the Indenture Trustee or any Noteholder has instituted any Proceeding to enforce any right or remedy under this Indenture and such Proceeding has been discontinued or abandoned for any reason or has been determined adversely to the Indenture Trustee or to such Noteholder, then the Issuer, the Indenture Trustee and the Noteholders, subject to any determination in such Proceeding, will be restored severally and respectively to their former positions under this Indenture, and subsequently all rights and remedies of the Indenture Trustee and the Noteholders will continue as though no such Proceeding had been instituted.

 

Section 5.11.         Rights and Remedies Cumulative.  No right or remedy conferred upon or reserved to the Indenture Trustee or to the Noteholders in this Indenture is intended to be exclusive of any other right or remedy, and every right and remedy, to the extent permitted by law, will be cumulative and in addition to every other right and remedy given under this Indenture or now or in the future existing at law or in equity or otherwise.  The assertion or employment of any right or remedy under this Indenture, or otherwise, will not prevent the concurrent assertion or employment of any other appropriate right or remedy.  The Indenture Trustee’s right to seek and recover judgment on the Notes or under this Indenture will not be affected by the seeking, obtaining or application of any other relief under or with respect to this Indenture.  Neither the Lien of this Indenture nor any rights or remedies of the Indenture Trustee or the Noteholders will be impaired by the recovery of any judgment by the Indenture Trustee against the Issuer or by the levy of any execution under such judgment upon any of the Collateral.

 

Section 5.12.         Delay or Omission Not a Waiver.  No delay or omission of the Indenture Trustee or any Noteholder to exercise any right or remedy accruing upon any Default or Event of

 

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Default will impair any such right or remedy, or constitute a waiver of any such Default or Event of Default.  Every right and remedy conferred by this Article V or by law to the Indenture Trustee or to the Noteholders may be exercised from time to time, and as often as may be deemed expedient, by the Indenture Trustee or by the Noteholders, as the case may be.

 

Section 5.13.         Control by Noteholders.  The Noteholders of a majority of the Note Balance of the Controlling Class have the right to direct the time, method and place of conducting any Proceeding for any remedy available to the Indenture Trustee with respect to the Notes or exercising any trust or power conferred on the Indenture Trustee; provided that:

 

(a)           such direction does not conflict with any law or with this Indenture;

 

(b)           except as provided in Section 5.6(b), any direction to the Indenture Trustee to sell or liquidate the Collateral must be made by the Noteholders of 100% of the Note Balance of the Controlling Class;

 

(c)           if the Indenture Trustee elects to retain the Collateral pursuant to Section 5.7, then any direction to the Indenture Trustee by Noteholders of less than 100% of the Note Balance of the Controlling Class to sell or liquidate the Collateral will be of no force and effect; and

 

(d)           the Indenture Trustee may take any other action deemed proper by the Indenture Trustee that is not inconsistent with such direction from the Noteholders of a majority of the Note Balance of the Controlling Class.

 

Notwithstanding the rights of Noteholders set forth in this Section 5.13, the Indenture Trustee need not take any action that it determines might materially adversely affect the rights of any Noteholders not consenting to such action.

 

Section 5.14.         Waiver of Defaults and Events of Default.

 

(a)           The Noteholders of a majority of the Note Balance of the Controlling Class may waive any Default or Event of Default, except an Event of Default (i) in the payment of principal of or interest on any of the Notes (other than an Event of Default relating to failure to pay principal due only by reason of acceleration) or (ii) in respect of a covenant or provision of this Indenture that cannot be amended, supplemented or modified without the consent of all Noteholders.

 

(b)           Upon any such waiver, such Default or Event of Default will be deemed not to have occurred for every purpose of this Indenture.  No such waiver will extend to any other Default or Event of Default or impair any right relating to any other Default or Event of Default.

 

Section 5.15.         Undertaking for Costs.  The parties to this Indenture agree, and each Noteholder by such Noteholder’s acceptance of a Note will be deemed to have agreed, that a court may in its discretion require, in any Proceeding for the enforcement of any right or remedy under this Indenture, or in any Proceeding against the Indenture Trustee for any action taken, suffered or omitted by it as Indenture Trustee, the filing by any party litigant in such Proceeding of an undertaking to pay the costs of such Proceeding, and that such court may in its discretion assess reasonable costs, including reasonable attorneys’ fees, against any party litigant in such

 

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Proceeding.  This Section 5.15 will not apply to (a) any Proceeding instituted by the Indenture Trustee, (b) any Proceeding instituted by any Noteholder or group of Noteholders holding more than 10% of the Note Balance of the Notes (or in the case of a Proceeding for the enforcement of any right or remedy under this Indenture that is instituted by the Controlling Class, more than 10% of the Note Balance of the Controlling Class) or (c) any Proceeding instituted by any Noteholder for the enforcement of the payment of principal of or interest on any Note on or after the respective due dates expressed in such Note and in this Indenture (or, in the case of redemption, on or after the Redemption Date).

 

Section 5.16.         Waiver of Stay or Extension Laws.  The Issuer covenants (to the extent that it may lawfully do so) that it will not insist upon, or plead or in any manner whatsoever, claim or take the benefit or advantage of, any stay or extension that may affect the covenants or the performance of this Indenture, and the Issuer (to the extent that it may lawfully do so) waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power in this Indenture granted to the Indenture Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted.

 

Section 5.17.         Performance and Enforcement of Certain Obligations.

 

(a)           At the Administrator’s expense, the Issuer will promptly take all such lawful action as the Indenture Trustee may request to (i) compel the performance by (A) the Depositor and the Servicer of their obligations to the Issuer under the Sale and Servicing Agreement or (B) the Depositor and Ford Credit of their obligations under the Purchase Agreement and (ii) exercise any and all rights, remedies, powers, privileges and claims lawfully available to the Issuer under such agreements to the extent and in the manner directed by the Indenture Trustee.

 

(b)           If an Event of Default has occurred and is continuing, the Indenture Trustee may, and at the direction  of the Noteholders of at least 66-2/3% of the Note Balance of the Controlling Class will, exercise all rights, remedies, powers, privileges and claims of the Issuer against (i) the Depositor or the Servicer under the Sale and Servicing Agreement or (ii) the Depositor or Ford Credit under the Purchase Agreement, including the right or power to take any action to compel or secure performance or observance by such Persons of their obligations to the Issuer under such agreements, and to give any consent, request, notice, direction, approval, extension or waiver under such agreements, and any right of the Issuer to take such action will be suspended.

 

ARTICLE VI
 THE INDENTURE TRUSTEE

 

Section 6.1.           Duties of Indenture Trustee.

 

(a)           If an Event of Default has occurred and is continuing, the Indenture Trustee will exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent person would use under the circumstances in the conduct of such person’s own affairs.

 

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(b)           Except during the continuance of an Event of Default:

 

(i)    the Indenture Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and no implied covenants or obligations are to be read into this Indenture against the Indenture Trustee; and

 

(ii)   in the absence of bad faith or negligence on its part, the Indenture Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions furnished to it, upon any certificates or opinions furnished to it and, if required by this Indenture, conforming to the requirements of this Indenture; provided, that the Indenture Trustee will examine any such certificates and opinions to determine whether or not they conform to the requirements of this Indenture.

 

(c)           The Indenture Trustee will not be relieved from liability for its own willful misconduct, negligent action or negligent failure to act, except that:

 

(i)    this Section 6.1(c) does not limit the effect of Section 6.1(b);

 

(ii)   the Indenture Trustee will not be liable for any error of judgment made in good faith by a Responsible Person unless it is proved that the Indenture Trustee was negligent in ascertaining the pertinent facts; and

 

(iii)  the Indenture Trustee will not be liable for any action it takes or omits to take in good faith in accordance with this Indenture or a direction received by it pursuant to Sections 5.13 and 5.17(b).

 

(d)           The Indenture Trustee will not be liable for interest on any money received by it except as the Indenture Trustee may agree in writing with the Issuer.

 

(e)           Money held in trust by the Indenture Trustee need not be segregated from other funds except to the extent required by law, this Indenture or the Sale and Servicing Agreement.

 

(f)            Every provision of this Indenture relating to the conduct of, affecting the liability of or affording protection to the Indenture Trustee is subject to this Section 6.1 and to the TIA.

 

(g)           The Indenture Trustee will not be charged with knowledge of any Default or any Event of Default unless either (i) a Responsible Person of the Indenture Trustee has actual knowledge of such Default or Event of Default or (ii) notice of such Default or Event of Default has been given to the Indenture Trustee in accordance with this Indenture.

 

(h)           The rights, privileges, protections, immunities and benefits given to the Indenture Trustee, including its right to be indemnified, are extended to, and will be enforceable by, the Indenture Trustee in each of its capacities under this Indenture and the other Transaction Documents.

 

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Section 6.2.           Rights of Indenture Trustee.

 

(a)           The Indenture Trustee may rely and will be protected in acting or refraining from acting upon any certificate, instrument, opinion, report, notice, request, direction, consent or other document believed by it to be genuine and which appears on its face to be properly executed and signed or presented by the proper Person.  The Indenture Trustee need not investigate any fact or matters stated in any such document.

 

(b)           Before the Indenture Trustee acts or refrains from acting, it may require an Officer’s Certificate or an Opinion of Counsel.  The Indenture Trustee will not be liable for any action it takes or omits to take in good faith in reliance on an Officer’s Certificate or Opinion of Counsel.

 

(c)           The Indenture Trustee may exercise any of its rights or powers under this Indenture or perform any duties under this Indenture either directly or by or through agents or attorneys or a custodian or nominee, and the Indenture Trustee will not be responsible for any misconduct or negligence on the part of, or for the supervision of, any such agent, counsel, custodian or nominee appointed with due care by it under this Indenture.

 

(d)           The Indenture Trustee will not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers if such action or omission by the Indenture Trustee does not constitute negligence.

 

(e)           The Indenture Trustee may consult with counsel, and the advice or opinion of counsel with respect to legal matters relating to this Indenture and the Notes will be full and complete authorization and protection from liability with respect to any action taken or not taken by the Indenture Trustee under this Indenture in good faith and in accordance with the advice or opinion of such counsel.

 

(f)            The Indenture Trustee is under no obligation to (i) exercise any of the rights or powers vested in it by this Indenture or to expend or risk its own funds or otherwise incur financial liability in the performance of its duties under this Indenture if it has reasonable grounds to believe that repayment of funds advanced by it or adequate indemnity satisfactory to it against such risk or liability is not reasonably assured to it or (ii) honor the request or direction of any of the Noteholders pursuant to this Indenture unless such Noteholders have offered to the Indenture Trustee reasonable security or indemnity satisfactory to it from and against the reasonable costs, expenses, disbursements, advances and liabilities that might be incurred by the Indenture Trustee, or its agents, counsel, accountants and experts, in complying with such request or direction.

 

(g)           The Indenture Trustee will not be responsible or liable for any failure or delay in the performance of its obligations under this Indenture arising out of or caused by, directly or indirectly, forces beyond its control, including strikes, work stoppages, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of God, and interruptions, loss or malfunctions of utilities, but the Indenture Trustee will use reasonable efforts which are consistent with accepted practices in the banking industry to resume performance as soon as practicable under the circumstances.

 

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(h)           The Indenture Trustee will not be responsible or liable for special, indirect or consequential loss or damage of any kind whatsoever (including loss of profit) irrespective of whether the Indenture Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action.

 

Section 6.3.           Individual Rights of Indenture Trustee.  The Indenture Trustee, in its individual or any other capacity, may become the owner or pledgee of Notes and may otherwise deal with the Issuer or any of its Affiliates with the same rights it would have if it were not Indenture Trustee.  Any Note Paying Agent, Note Registrar, Authenticating Agent, co-registrar or co-paying agent under this Indenture may do the same with like rights.

 

Section 6.4.           Indenture Trustee’s Disclaimer.  The Indenture Trustee (a) will not be responsible for, and makes no representation or warranty as to, the validity or adequacy of this Indenture or the Notes and (b) will not be accountable for the Issuer’s use of the proceeds from the Notes, or responsible for any statement of the Issuer in this Indenture or in any document issued in connection with the sale of the Notes or in the Notes other than the Indenture Trustee’s certificate of authentication.

 

Section 6.5.           Notice of Defaults.  Within 90 days of a Responsible Person of the Indenture Trustee obtaining actual knowledge of, or receiving notice of, any Default under this Indenture, the Indenture Trustee will mail as described in Section 313(c) of the TIA to each Noteholder, notice of such Default, unless such Default has been cured or waived; provided, that (a) except in the case of a Default in the payment of principal of or interest on any Note, the Indenture Trustee may withhold such notice if and so long as a committee of its Responsible Persons in good faith determines that the withholding of such notice is in the interests of the Noteholders and (b) in the case of any Default specified in Section 5.1(a)(iii), the Indenture Trustee will not give notice to the Noteholders until at least 30 days after a Responsible Person of the Indenture Trustee has obtained actual knowledge of, or has received notice of, such Default.

 

Section 6.6.           Reports by Indenture Trustee.

 

(a)           Upon delivery to the Indenture Trustee by the Servicer of the information prepared by the Servicer pursuant to Section 3.4(a) of the Sale and Servicing Agreement to enable each Noteholder to prepare its federal and State income tax returns, the Indenture Trustee will deliver the relevant portions of such information to each Noteholder of record as of the most recent Record Date (which delivery may be made by making such information available to the Noteholders through the Indenture Trustee’s website, which initially is located at https://gctinvestorreporting.bnymellon.com).

 

(b)           On each Payment Date, the Indenture Trustee will deliver the Monthly Investor Report to each Noteholder of record as of the most recent Record Date (which delivery may be made by e-mail to the e-mail addresses in the Note Register without need for confirmation of receipt or by making such report available to the Noteholders through the Indenture Trustee’s website, which initially is located at https://gctinvestorreporting.bnymellon.com).

 

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(c)           If required by Regulation AB and requested by the Depositor or the Servicer, the Indenture Trustee will deliver to the Administrator, the Issuer and the Servicer on or before March 1 of each year, beginning in the year after the Closing Date, an Officer’s Certificate signed by a Responsible Person of the Indenture Trustee (i) to the effect that (A) a review of the Indenture Trustee’s activities during the preceding year and of its performance under this Indenture has been made under such Responsible Person’s supervision and (B) to such Responsible Person’s knowledge, based on such review, the Indenture Trustee has fulfilled in all material respects all of its obligations under this Indenture throughout the preceding year or, if there has been a failure to fulfill any such obligation in any material respect, specifying each such failure known to such Responsible Person and the nature and status of such failure and (ii) certifying to matters related to the Indenture Trustee as required under Form 10-K under the Exchange Act.

 

(d)           If required under Regulation AB, the Indenture Trustee will:

 

(i)    deliver to the Administrator, the Issuer and the Servicer, a report on its assessment of compliance with the minimum servicing criteria described in Items 1122(d)(2)(i), (2)(ii), (2)(iv), (2)(v), (3)(ii) (with respect to remittances only) and (3)(iv) of Regulation AB (the “Applicable Servicing Criteria”) during the preceding year, including disclosure of any material instance of non-compliance identified by the Indenture Trustee, as required by Rule 13a-18 and 15d-18 of the Exchange Act and Item 1122 of Regulation AB under the Securities Act.  Such report on assessment will be addressed to the board of directors of the Servicer and to the Administrator and the Issuer; and

 

(ii)   cause a firm of registered public accountants that is qualified and independent within the meaning of Rule 2-01 of Regulation S-X under the Securities Act to deliver to the Administrator, the Issuer and the Servicer an attestation report that satisfies the requirements of Rule 13a-18 or Rule 15d-18 under the Exchange Act, as applicable, on the assessment of compliance with the Applicable Servicing Criteria with respect to the prior year.  Such attestation report will be in accordance with Rules 1-02(a)(3) and 2-02(g) of Regulation S-X under the Securities Act and the Exchange Act.  The firm may render other services to the Indenture Trustee, but the firm must indicate in each attestation report that it is qualified and independent within the meaning of Rule 2-01 of Regulation S-X under the Securities Act.

 

The reports referred to in this Section 6.6(d) will be delivered on before March 1 of each year, beginning in the year after the Closing Date, in a format suitable for filing with the Securities and Exchange Commission on EDGAR, beginning in the year after the Closing Date.

 

(e)           Each of the parties agrees that (i) the obligations of the parties under Sections 6.6(c) and (d) will be interpreted in such a manner as to accomplish compliance with Regulation AB and (ii) the parties’ obligations under Sections 6.6(c) and (d) will be deemed to be supplemented and modified as necessary to be consistent with any such amendments, interpretive guidance provided by the Securities and Exchange Commission or its staff or established market practice among participants in the asset-backed securities markets in respect of the requirements of Regulation AB, and the parties will comply with reasonable requests

 

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made by the Depositor, the Servicer or the Indenture Trustee in good faith for delivery of additional or different information required to comply with the provisions of Regulation AB.

 

If the parties to this Indenture determine to further clarify or amend Sections 6.6(c) or (d), this Indenture may be amended to reflect the new agreement between the parties covering matters in Sections 6.6(c) or (d) pursuant to Section 9.1(a), which amendment will not require the delivery of any Opinions of Counsel or satisfaction of the Rating Agency Condition.

 

Section 6.7.                                 Compensation and Indemnity.

 

(a)                                 The Issuer will, or will cause the Administrator to, pay the Indenture Trustee as compensation for the Indenture Trustee’s services under this Indenture such fees as have been separately agreed upon on the date of this Indenture between the Issuer and the Indenture Trustee.  The Indenture Trustee’s compensation will not be limited by any law on compensation of a trustee of an express trust.  The Issuer will reimburse the Indenture Trustee for all reasonable out-of-pocket expenses incurred or made by the Indenture Trustee, including costs of collection, and the reasonable compensation, expenses and disbursements of the Indenture Trustee’s agents, counsel, accountants and experts, but excluding any expenses incurred by the Indenture Trustee through the Indenture Trustee’s willful misconduct, bad faith or negligence (except for errors in judgment).

 

(b)                                 The Issuer will, or will cause the Administrator to, indemnify, defend and hold harmless the Indenture Trustee, and its officers, directors, employees and agents, from and against any and all costs, expenses, losses, damages, claims and liabilities (including the reasonable compensation, expenses and disbursements of the Indenture Trustee’s agents, counsel, accountants and experts) incurred by it in connection with the administration of and the performance of its duties under this Indenture, including the costs and expenses of defending itself against any loss, damage, claim or liability incurred by it in connection with the exercise or performance of any of its powers or duties under this Indenture, but excluding any cost, expense, loss, damage, claim or liability (i) incurred by the Indenture Trustee through the Indenture Trustee’s willful misconduct, bad faith or negligence (except for errors in judgment) or (ii) arising out of the Indenture Trustee’s breach of any of its representations or warranties set forth in this Indenture.

 

(c)                                  Promptly upon receipt by the Indenture Trustee, or any of its officers, directors, employees and agents (each, an “Indemnified Person”), of notice of the commencement of any Proceeding against any such Indemnified Person, such Indemnified Person will, if a claim in respect of such Proceeding is to be made under Section 6.7(b), notify the Issuer and the Administrator of the commencement of such Proceeding.  Failure by the Indenture Trustee to so notify the Issuer and the Administrator will not relieve the Issuer or the Administrator of its obligations under this Section 6.7; provided, that neither the Issuer nor the Administrator has been materially prejudiced by such failure to so notify and notice is given within 180 days of a Responsible Person of the Indenture Trustee learning of such Proceeding.  The Issuer, or, if Issuer so causes, the Administrator, may participate in and assume the defense and settlement of any such Proceeding at its expense, and no settlement of such Proceeding may be made without the approval of the Issuer or the Administrator, as applicable, and such Indemnified Person, which approvals will not be unreasonably withheld, delayed or conditioned.  After notice from

 

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the Issuer or the Administrator, as applicable, to the Indemnified Person of the intention of the Issuer or the Administrator, as applicable, to assume the defense of such Proceeding with counsel reasonably satisfactory to the Indemnified Person, and so long as the Issuer or the Administrator, as applicable, so assumes the defense of such Proceeding in a manner reasonably satisfactory to the Indemnified Person, neither the Issuer nor the Administrator will be liable for any legal expenses of counsel to the Indemnified Person unless there is a conflict between the interests of the Issuer or the Administrator, as applicable, on one hand, and an Indemnified Person, on the other hand, in which case the Issuer or the Administrator, will pay for the separate counsel to the Indemnified Person.

 

(d)                                 The obligations of the Issuer and the Administrator to the Indenture Trustee pursuant to this Section 6.7 will survive the resignation or removal of the Indenture Trustee and the discharge of this Indenture.  Expenses incurred by the Indenture Trustee after the occurrence of a Default specified in Section 5.1(a)(iv) are intended to constitute expenses of administration under the Bankruptcy Code or any other applicable federal or State bankruptcy, insolvency or similar law.

 

Section 6.8.                                 Replacement of Indenture Trustee.

 

(a)                                 No resignation or removal of the Indenture Trustee, and no appointment of a successor Indenture Trustee, will become effective until the acceptance of appointment by the successor Indenture Trustee pursuant to this Section 6.8.  Subject to the preceding sentence, the Indenture Trustee may resign by notifying the Issuer.  The Noteholders of a majority of the Note Balance of the Controlling Class may remove the Indenture Trustee without cause by notifying the Indenture Trustee and the Issuer and may appoint a successor Indenture Trustee.

 

(b)                                 The Issuer must remove the Indenture Trustee if:

 

(i)             the Indenture Trustee fails to comply with Section 6.11;

 

(ii)          an Insolvency Event occurs with respect to the Indenture Trustee; or

 

(iii)       the Indenture Trustee becomes legally unable to act or otherwise incapable of acting as Indenture Trustee.

 

(c)                                  If the Indenture Trustee resigns or is removed or if a vacancy exists in the office of Indenture Trustee for any reason, the Issuer must appoint a successor Indenture Trustee promptly.

 

(d)                                 Any successor Indenture Trustee will deliver a written acceptance of its appointment to the retiring Indenture Trustee, the Issuer and the Administrator.  Upon delivery of such acceptance, the resignation or removal of the retiring Indenture Trustee will become effective, and the successor Indenture Trustee will have all the rights, powers, duties and obligations of the Indenture Trustee under this Indenture.  The Issuer will continue to pay all amounts owed to the retiring Indenture Trustee in accordance with Sections 6.7 and 8.2 following the retiring Indenture Trustee’s resignation or removal until all such amounts are paid.  The successor Indenture Trustee will deliver a notice of its succession to the Secured Parties.

 

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The retiring Indenture Trustee will promptly transfer all property held by it as Indenture Trustee to the successor Indenture Trustee.

 

(e)                                  If a successor Indenture Trustee does not take office within 60 days after the retiring Indenture Trustee tenders its resignation or is removed, the retiring Indenture Trustee, the Issuer or the Noteholders of a majority of the Note Balance of the Controlling Class may petition any court of competent jurisdiction for the appointment of a successor Indenture Trustee.

 

(f)                                   Notwithstanding the replacement of the retiring Indenture Trustee pursuant to this Section 6.8, any obligations of the Issuer and the Administrator owing to the retiring Indenture Trustee under Section 6.7 will continue for the benefit of the retiring Indenture Trustee.

 

Section 6.9.                                 Successor Indenture Trustee by Merger.

 

(a)                                 If the Indenture Trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust business or assets to, another Person, the resulting, surviving or transferee Person will be the successor Indenture Trustee so long as such Person is otherwise qualified and eligible under Section 6.11.  The Indenture Trustee will promptly notify the Servicer and the Issuer (who will notify the Rating Agencies) of any such transaction.

 

(b)                                 If, at the time any such successor by merger, conversion or consolidation to the Indenture Trustee succeeds to the trusts created by this Indenture, any of the Notes have been authenticated but not delivered, such successor may adopt the certificate of authentication of any predecessor Indenture Trustee and deliver such Notes so authenticated.  If at such time any of the Notes have not been authenticated, any successor to the Indenture Trustee may authenticate such Notes either in the name of any predecessor Indenture Trustee or in the name of such successor Indenture Trustee.  In all such cases, such certificates will have the same force and effect provided for anywhere in the Notes or in this Indenture as the certificate of the predecessor Indenture Trustee.

 

Section 6.10.                          Appointment of Separate Indenture Trustee or Co-Indenture Trustee.

 

(a)                                 For the purpose of meeting any legal requirement of any jurisdiction in which any portion of the Collateral may at the time be located, after delivering notice to the Issuer and the Servicer, the Indenture Trustee may appoint one or more Persons to act as a separate trustee or separate trustees, or co-trustee or co-trustees, of all or any portion of the Collateral, and to vest in such Persons, in such capacity and for the benefit of the Secured Parties, such title to all or any portion of the Collateral, and, subject to this Section 6.10, such rights, powers, duties and obligations as the Indenture Trustee may consider necessary or desirable.  No separate trustee or co-trustee will be required to meet the terms of eligibility as a successor trustee under Section 6.11 and no notice to the Secured Parties of the appointment of any separate trustee or co-trustee will be required under Section 6.8.

 

(b)                                 Every separate trustee and co-trustee will, to the extent permitted by law, be appointed and act subject to the following:

 

(i)             all rights, powers, duties and obligations conferred or imposed upon the Indenture Trustee will be conferred or imposed upon and exercised or performed by the

 

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Indenture Trustee, or the Indenture Trustee and such separate trustee or co-trustee jointly (it being understood that such separate trustee or co-trustee will not be authorized to act separately without the Indenture Trustee joining in such act), except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed the Indenture Trustee will be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations (including the holding of title to all or any portion of the Collateral in any such jurisdiction) will be exercised and performed singly by such separate trustee or co-trustee, but solely at the direction of the Indenture Trustee;

 

(ii)          no trustee will be personally liable by reason of any act or omission of any other trustee under this Indenture; and

 

(iii)       the Indenture Trustee may accept the resignation of or remove any separate trustee or co-trustee.

 

(c)                                  Any notice, request or other writing given to the Indenture Trustee will be deemed to have been given to each appointed separate trustee and co-trustee, as effectively as if given to each of them.  Every instrument appointing any separate trustee or co-trustee will refer to this Indenture and the conditions of this Section 6.10.  Each separate trustee and co-trustee, upon its acceptance of the trusts conferred, will be vested with the estates or property specified in its instrument of appointment, either jointly with the Indenture Trustee or separately, as may be provided in such instrument of appointment, subject to this Indenture.  Every such instrument will be filed with the Indenture Trustee.

 

(d)                                 Any separate trustee or co-trustee may appoint the Indenture Trustee as its agent or attorney-in-fact with power and authority, to the extent not prohibited by law, to do any lawful act under or in respect of this Indenture on its behalf and in its name.  If any separate trustee or co-trustee dies, becomes incapable of acting, resigns or is removed, all of its estates, properties, rights, remedies and trusts will vest in and be exercised by the Indenture Trustee, to the extent permitted by law, without the appointment of a new or successor trustee.

 

Section 6.11.                          Eligibility; Disqualification.

 

(a)                                 The Indenture Trustee must satisfy the requirements of Section 310(a) of the TIA and must comply with Section 310(b) of the TIA.  The Indenture Trustee or its parent must have a combined capital and surplus of at least $50,000,000 as set forth in its most recent annual published report of condition and must have a long-term debt rating of investment grade by each of the Rating Agencies or must otherwise be acceptable to each of the Rating Agencies.  Within ten days after the Indenture Trustee fails to satisfy any of the requirements set forth in this Section 6.11(a) or ceases to be a Qualified Institution, the Indenture Trustee will notify the Issuer and the Servicer of such failure.

 

(b)                                 Within 90 days after the occurrence of an Event of Default that has not been cured or waived, unless authorized by the Securities and Exchange Commission, the Indenture Trustee will resign with respect to the Class A Notes, the Class B Notes, the Class C Notes and/or the Class D Notes in accordance with Section 6.8, and the Issuer will appoint a successor Indenture

 

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Trustee for any or all of such Class A Notes, Class B Notes, Class C Notes and/or Class D Notes, as applicable, so that there will be separate Indenture Trustees for the Class A Notes, Class B Notes, the Class C Notes and the Class D Notes.  If the Indenture Trustee fails to comply with the terms of the preceding sentence, the Indenture Trustee must comply with TIA Section 310(b)(ii) and (iii).

 

(c)                                  If a successor Indenture Trustee is appointed with respect to any of the Class A Notes, Class B Notes, Class C Notes or Class D Notes pursuant to this Section 6.11, the Issuer, the retiring Indenture Trustee and the successor Indenture Trustee will execute an indenture supplemental to this Indenture.  Such supplemental indenture will contain:

 

(i)             provisions by which the successor Indenture Trustee accepts its appointment;

 

(ii)          provisions necessary or desirable to transfer and confirm to, and to vest in, the successor Indenture Trustee all the rights, powers, duties and obligations of the retiring Indenture Trustee with respect to the Notes to which the appointment of such successor Indenture Trustee relates;

 

(iii)       if the retiring Indenture Trustee is not retiring with respect to all of the Notes, provisions necessary or desirable to confirm that all the rights, powers, duties and obligations of the retiring Indenture Trustee with respect to the Notes as to which the retiring Indenture Trustee is not retiring continue to be vested in the Indenture Trustee; and

 

(iv)      provisions necessary to provide for or facilitate the administration of the trusts hereunder by more than one Indenture Trustee.

 

Nothing in this Indenture or in such supplemental indenture will constitute such Indenture Trustees co-trustees of the same trust and each such Indenture Trustee will be a trustee of a trust or trusts under this Indenture separate and apart from any trust or trusts under this Indenture administered by any other Indenture Trustee.  The indenture supplement will become effective upon the removal of the retiring Indenture Trustee.

 

Section 6.12.                          Preferential Collection of Claims Against Issuer.  The Indenture Trustee will comply with Section 311(a) of the TIA, excluding any creditor relationship listed in Section 311(b) of the TIA.  An Indenture Trustee who has resigned or been removed will be subject to Section 311(c) of the TIA.

 

Section 6.13.                          Audits of the Indenture Trustee.  The Indenture Trustee agrees that, with reasonable prior notice, it will permit any authorized representative of the Issuer, the Servicer or the Administrator, during the Indenture Trustee’s normal business hours, to examine and audit the books of account, records, reports and other documents and materials of the Indenture Trustee relating to (a) the performance of the Indenture Trustee’s obligations under this Indenture, (b) any payments of fees and expenses of the Indenture Trustee in connection with such performance and (c) any claim made by the Indenture Trustee under this Indenture.  In addition, the Indenture Trustee will permit such representatives to make copies and extracts of any such books and records and to discuss the same with the Indenture Trustee’s officers and

 

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employees.  Each of the Issuer, the Servicer and the Administrator will, and will cause its authorized representatives to, hold in confidence all such information except to the extent disclosure may be required by law (and all reasonable applications for confidential treatment are unavailing) and except to the extent that the Issuer, the Servicer or the Administrator, as the case may be, may reasonably determine that such disclosure is consistent with its obligations under this Indenture.  The Indenture Trustee will maintain all such pertinent books, records, reports and other documents and materials for a period of two years after the termination of its obligations under this Indenture.

 

Section 6.14.                          Representations and Warranties of the Indenture Trustee.  The Indenture Trustee represents and warrants to the Issuer as of the Closing Date:

 

(a)                                 Organization and Qualification.  The Indenture Trustee is a banking corporation duly organized, validly existing and in good standing under the laws of the State of New York.  The Indenture Trustee is qualified as a foreign banking corporation in good standing and has obtained all necessary licenses and approvals in all jurisdictions in which the ownership or lease of its properties or the conduct of its activities requires such qualification, license or approval, unless the failure to obtain such qualifications, licenses or approvals would not reasonably be expected to have a material adverse effect on the Indenture Trustee’s ability to perform its obligations under this Indenture or the other Transaction Documents to which it is a party.

 

(b)                                 Power, Authorization and Enforceability.  The Indenture Trustee has the power and authority to execute deliver and perform the terms of this Indenture.  The Indenture Trustee has authorized the execution, delivery and performance of the terms of this Indenture.  This Indenture is the legal, valid and binding obligation of the Indenture Trustee enforceable against the Indenture Trustee, except as may be limited by insolvency, bankruptcy, reorganization or other laws relating to or affecting the enforcement of creditors’ rights or by general equitable principles.

 

(c)                                  No Conflicts and No Violation.  The execution and delivery by the Indenture Trustee of this Indenture, the consummation by the Indenture Trustee of the transactions contemplated by this Indenture and the compliance by the Indenture Trustee with this Indenture will not (i) violate any federal or New York State law, governmental rule or regulation governing the banking or trust powers of the Indenture Trustee or any judgment or order binding on it or (ii) conflict with, result in a breach of, or constitute (with or without notice or lapse of time or both) a default under its charter documents or by-laws or any indenture, mortgage, deed of trust, loan agreement, guarantee or similar agreement or instrument under which the Indenture Trustee is a debtor or guarantor or (iii) violate any law or, to the Indenture Trustee’s knowledge, any order, rule, or regulation applicable to the Indenture Trustee of any court or of any federal or State regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the Indenture Trustee or its properties, in each case which conflict, breach, default, Lien or violation would reasonably be expected to have a material adverse effect on the Indenture Trustee’s ability to perform its obligations under this Indenture.

 

(d)                                 No Proceedings.  To the Indenture Trustee’s knowledge, there are no proceedings or investigations pending or overtly threatened in writing, before any court, regulatory body, administrative agency, or other governmental instrumentality having jurisdiction over the

 

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Indenture Trustee or its properties: (i) asserting the invalidity of any of this Indenture or the Sale and Servicing Agreement, (ii) seeking to prevent the issuance of the Notes or the consummation of any of the transactions contemplated by any of the Transaction Documents or (iii) seeking any determination or ruling that would reasonably be expected to have a material adverse effect on the Indenture Trustee’s ability to perform its obligations under, or the validity or enforceability of, this Indenture.

 

(e)                                  Eligibility.  The Indenture Trustee satisfies the requirements of Section 310(a) of the TIA and is a Qualified Institution.  The Indenture Trustee or its parent has a combined capital and surplus of at least $50,000,000 as set forth in its most recent annual published report of condition.

 

(f)                                   Information Provided by the Indenture Trustee.  The information provided by the Indenture Trustee in any certificate delivered by a Responsible Person of the Indenture Trustee is true and correct in all material respects.

 

Section 6.15.                          Duty to Update Disclosure.  The Indenture Trustee will notify and provide information, and certify such information in an Officer’s Certificate, to the Depositor upon any event or condition relating to the Indenture Trustee or actions taken by the Indenture Trustee that (a) (i) is required to be disclosed by the Depositor under Item 2 (the institution of, material developments in or termination of legal proceedings against The Bank of New York Mellon that are material to Noteholders) of Form 10-D under the Exchange Act within five days of such occurrence or (ii) the Depositor reasonably requests of the Indenture Trustee that the Depositor, in good faith, believes is necessary to comply with Regulation AB within five days of such request or (b) (i) is required to be disclosed under Item 5 (submission of matters to a vote of Noteholders) of Form 10-D under the Exchange Act within five days of a Responsible Person of the Indenture Trustee becoming aware of such submission, (ii) is required to be disclosed under Item 6.02 (resignation, removal, replacement or substitution of The Bank of New York Mellon as Indenture Trustee) or Item 6.04 (failure to make a distribution when required) of Form 8-K under the Exchange Act within two days of a Responsible Person of the Indenture Trustee becoming aware of such occurrence or (iii) causes the information provided by the Indenture Trustee in any certificate delivered by a Responsible Person of the Indenture Trustee to be untrue or incorrect in any material respect or is necessary to make the statements provided by the Indenture Trustee in light of the circumstances in which they were made not misleading within five days of a Responsible Person of the Indenture Trustee becoming aware thereof.

 

Section 6.16.                          Covenants for Reporting of Repurchase Demands due to Breaches of Representations and Warranties.  The Indenture Trustee will (a) notify the Sponsor, the Depositor and the Servicer, as soon as practicable and in any event within five Business Days, of all demands or requests received by a Responsible Person of the Indenture Trustee for the repurchase of any Receivable pursuant to Section 3.3 of the Purchase Agreement or Section 2.4 of the Sale and Servicing Agreement, (b) promptly upon request by the Sponsor, the Depositor or the Servicer, provide to them any other information reasonably requested to facilitate compliance by them with Rule 15Ga-1 under the Exchange Act, and Items 1104(e) and 1121(c) of Regulation AB and (c) if requested by Ford Credit, the Depositor or the Servicer, provide a written certification no later than 15 days following the end of any quarter or year that the Indenture Trustee has not received any repurchase demands for such period, or if repurchase

 

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demands have been received during such period, that the Indenture Trustee has provided all the information reasonably requested under clause (b) above.  In no event will the Indenture Trustee or the Issuer have any responsibility or liability in connection with any filing required to be made by a securitizer under the Exchange Act or Regulation AB.

 

ARTICLE VII
 NOTEHOLDERS’ LISTS AND REPORTS

 

Section 7.1.                                 Names and Addresses of Noteholders.  If the Indenture Trustee is not the Note Registrar, the Issuer will furnish a list of the names and addresses of the Noteholders of any Definitive Notes to the Indenture Trustee (a) not more than five days after each Record Date, as of such Record Date and (b) not more than 30 days after receipt by the Issuer of a request from the Indenture Trustee, as of a date not more than ten days before the time such list is furnished.  If the Indenture Trustee is the Note Registrar, the Indenture Trustee, upon the request of the Owner Trustee, will furnish within ten days to the Owner Trustee a list of Noteholders of all Book-Entry Notes as of the date specified by the Owner Trustee.

 

Section 7.2.                                 Preservation of Information; Communications to Noteholders.

 

(a)                                 The Indenture Trustee will preserve, in as current a form as is reasonably practicable, the names and addresses of the Noteholders contained in the most recent list furnished to the Indenture Trustee pursuant to Section 7.1 and the names and addresses of Noteholders received by the Indenture Trustee in its capacity as Note Registrar.  The Indenture Trustee may destroy any list furnished to it pursuant to Section 7.1 upon receipt of a new list.

 

(b)                                 Noteholders may communicate pursuant to Section 312(b) of the TIA with other Noteholders with respect to their rights under this Indenture or under the Notes.

 

(c)                                  The Issuer, the Indenture Trustee and the Note Registrar will have the protection of Section 312(c) of the TIA.

 

Section 7.3.                                 Reports by Issuer.

 

(a)                                 The Issuer will:

 

(i)             file with the Indenture Trustee, within 15 days after the Issuer is required to file the same with the Securities and Exchange Commission, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the Securities and Exchange Commission may prescribe) that the Issuer is required to file with the Securities and Exchange Commission pursuant to Section 13 or 15(d) of the Exchange Act;

 

(ii)          file with the Indenture Trustee and the Securities and Exchange Commission such additional information, documents and reports with respect to compliance by the Issuer with the conditions and covenants of this Indenture, as may be prescribed by the Securities and Exchange Commission; and

 

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(iii)       supply to the Indenture Trustee such information, documents and reports (or summaries) required to be filed by the Issuer pursuant to Section 7.3(a)(i) and (ii) as may be required by rules and regulations prescribed by the Securities and Exchange Commission.

 

(b)                                 The Indenture Trustee will mail as described in TIA Section 313(c) to all Noteholders the information, documents and reports (or summaries) supplied to the Indenture Trustee pursuant to Section 7.3(a).

 

(c)                                  Unless the Issuer otherwise determines, the fiscal year of the Issuer will be the calendar year.

 

Section 7.4.                                 Reports by Indenture Trustee.

 

(a)                                 Within 90 days after each April 15, beginning in the year after the Closing Date, the Indenture Trustee will prepare and mail to each Noteholder a report dated as of such April 15 that complies with Section 313(a) of the TIA, but only if such report is required pursuant Section 313(a) of the TIA.  The Indenture Trustee will also prepare and mail to Noteholders any report required pursuant to Section 313(b) of the TIA.  Any report mailed to the Noteholders pursuant to this Section 7.4(a) will be mailed in compliance with Section 313(c) of the TIA.

 

(b)                                 The Indenture Trustee will file with the Securities and Exchange Commission and any stock exchange on which the Notes are listed a copy of each report delivered pursuant to Section 7.4(a) at the time of its mailing to Noteholders.  The Issuer will notify the Indenture Trustee if and when the Notes are listed on any stock exchange.

 

ARTICLE VIII
 ACCOUNTS, DISBURSEMENTS AND RELEASES

 

Section 8.1.                                 Collection of Money.  Except as otherwise provided in this Indenture, the Indenture Trustee may demand payment or delivery of, and will receive and collect, directly and without intervention or assistance of any fiscal agent or other intermediary, all money and other property payable to or receivable by the Indenture Trustee pursuant to this Indenture and the Sale and Servicing Agreement.  The Indenture Trustee will apply all such money received by it, and will make deposits to, and distributions from, the Bank Accounts, as provided in this Indenture and the Sale and Servicing Agreement.

 

Section 8.2.                                 Trust Accounts; Distributions and Disbursements.

 

(a)                                 On or before the Closing Date, the Indenture Trustee will establish, and on and after the Closing Date will maintain, the Bank Accounts as provided in Section 4.1 of the Sale and Servicing Agreement.

 

(b)                                 On or before each Payment Date, the Indenture Trustee will withdraw all amounts required to be withdrawn from the Reserve Account and deposit them into the Collection Account pursuant to Section 4.4 of the Sale and Servicing Agreement.

 

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(c)                                  On each Payment Date, the Indenture Trustee (based on the information contained in the most recent Monthly Investor Report) will withdraw from the Collection Account and make deposits and payments, to the extent of Available Funds in the Collection Account with respect to such Payment Date, in the following order of priority (pro rata to the Persons within each priority level based on the amounts due except as otherwise specified):

 

(i)                           first, to the payment of all amounts, including indemnities, then due to the Indenture Trustee and the Owner Trustee and any expenses of the Issuer incurred in accordance with the Transaction Documents, in each case, to the extent not paid by the Depositor or Administrator, up to a maximum of $150,000 per year;

 

(ii)                        second, to the Servicer, the Servicing Fee and all unpaid Servicing Fees from preceding Collection Periods;

 

(iii)                     third, to the Noteholders of Class A Notes, the aggregate Accrued Note Interest for the Class A Notes, pro rata based on the Note Balances of the Class A Notes as of the preceding Payment Date;

 

(iv)                    fourth, to the Principal Payment Account, the First Priority Principal Payment;

 

(v)                       fifth, to the Noteholders of Class B Notes, the Accrued Note Interest for the Class B Notes;

 

(vi)                      sixth, to the Principal Payment Account, the Second Priority Principal Payment;

 

(vii)                 seventh, to the Noteholders of Class C Notes, the Accrued Note Interest for the Class C Notes;

 

(viii)              eighth, to the Principal Payment Account, the Third Priority Principal Payment;

 

(ix)                    ninth, to the Noteholders of Class D Notes, the Accrued Note Interest for the Class D Notes;

 

(x)                       tenth, to the Reserve Account, the amount required to reinstate the amount in the Reserve Account up to the Specified Reserve Balance, unless such Payment Date is on or after the Final Scheduled Payment Date for the Class D Notes;

 

(xi)                    eleventh, to the Principal Payment Account, the Regular Principal Payment;

 

(xii)                 twelfth, to the payment of all amounts due to the Indenture Trustee and the Owner Trustee and any expenses of the Issuer, in each case, to the extent not paid by the Depositor or Administrator or pursuant to Section 8.2(c)(i) on such Payment Date; and

 

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(xiii)        thirteenth, to the Trust Distribution Account (or if the Trust Distribution Account has not been established, to the holder of the Residual Interest), any funds remaining in the Collection Account with respect to the Collection Period preceding such Payment Date.

 

(d)           On each Payment Date, the Indenture Trustee (based on the information contained in the most recent Monthly Investor Report) will withdraw the funds in the Principal Payment Account and make deposits and payments in the following order of priority, in each case, applied ratably in accordance with the Note Balance of the Notes of such Class:

 

(i)            first, to the Noteholders of Class A-1 Notes in payment of principal until the Note Balance of the Class A-1 Notes has been reduced to zero;

 

(ii)           second, to the Noteholders of Class A-2 Notes in payment of principal until the Note Balance of the Class A-2 Notes has been reduced to zero;

 

(iii)          third, to the Noteholders of Class A-3 Notes in payment of principal until the Note Balance of the Class A-3 Notes has been reduced to zero;

 

(iv)          fourth, to the Noteholders of Class A-4 Notes in payment of principal until the Note Balance of the Class A-4 Notes has been reduced to zero;

 

(v)           fifth, to the Noteholders of Class B Notes in payment of principal until the Note Balance of the Class B Notes has been reduced to zero;

 

(vi)          sixth, to the Noteholders of Class C Notes in payment of principal until the Note Balance of the Class C Notes has been reduced to zero;

 

(vii)         seventh, to the Noteholders of Class D Notes in payment of principal until the Note Balance of the Class D Notes has been reduced to zero; and

 

(viii)        eighth, to the Trust Distribution Account (or if the Trust Distribution Account has not been established, to the holder of the Residual Interest), any funds remaining in the Principal Payment Account.

 

(e)           Notwithstanding anything in this Indenture to the contrary, if the Notes are accelerated following an Event of Default, then on each Payment Date following the Collection Period during which such acceleration occurs, the Indenture Trustee (based on the information contained in the most recent Monthly Investor Report) will make the following withdrawals from the Bank Accounts and make payments and distributions on each Payment Date, to the extent of funds in the Bank Accounts with respect to the Collection Period preceding such Payment Date, in the following order of priority (pro rata to the Persons within each priority level based on the amounts due except as otherwise specified):

 

(i)            first, to the payment of all amounts, including indemnities, due to the Indenture Trustee, the Owner Trustee and any expenses of the Issuer incurred in accordance with the Transaction Documents;

 

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(ii)           second, to the Servicer for due and unpaid Servicing Fees;

 

(iii)          third, to the Noteholders of Class A Notes, the aggregate Accrued Note Interest for the Class A Notes, pro rata based on the Note Balances of the Class A Notes as of the preceding Payment Date;

 

(iv)          fourth, to the Noteholders of Class A-1 Notes in payment of principal until the Note Balance of the Class A-1 Notes is reduced to zero;

 

(v)           fifth, to the Noteholders of Class A-2 Notes in payment of principal until the Note Balance of the Class A-2 Notes is reduced to zero;

 

(vi)          sixth, to the Noteholders of Class A-3 Notes in payment of principal until the Note Balance of the Class A-3 Notes is reduced to zero;

 

(vii)         seventh, to the Noteholders of Class A-4 Notes in payment of principal until the Note Balance of the Class A-4 Notes is reduced to zero;

 

(viii)        eighth, to the Noteholders of Class B Notes, the Accrued Note Interest for the Class B Notes;

 

(ix)          ninth, to the Noteholders of Class B Notes in payment of principal until the Note Balance of the Class B Notes is reduced to zero;

 

(x)           tenth, to the Noteholders of Class C Notes, the Accrued Note Interest for the Class C Notes;

 

(xi)          eleventh, to the Noteholders of Class C Notes in payment of principal until the Note Balance of the Class C Notes is reduced to zero;

 

(xii)         twelfth, to the Noteholders of Class D Notes, the Accrued Note Interest for the Class D Notes;

 

(xiii)        thirteenth, to the Noteholders of Class D Notes in payment of principal until the Note Balance of the Class D Notes is reduced to zero; and

 

(xiv)        fourteenth, to the Trust Distribution Account (or if the Trust Distribution Account has not been established, to the holder of the Residual Interest), any remaining money or property.

 

(f)            Each of (i) the subordination of interest payments to the Noteholders of the Class B Notes to the payment of any First Priority Principal Payment to the Noteholders of the Class A Notes, (ii) the subordination of interest payments to the Noteholders of the Class C Notes to the payment of any Second Priority Principal Payment to the Noteholders of the Class A Notes and the Class B Notes and (iii) the subordination of interest payments to the Noteholders of the Class D Notes to the payment of any Third Priority Principal Payment to the Noteholders of the Class A Notes, the Class B Notes and the Class C Notes pursuant to Section 8.2(c) is deemed a subordination agreement within the meaning of Section 510(a) of the Bankruptcy Code.

 

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Section 8.3.           General Provisions Regarding Bank Accounts.

 

(a)           The Indenture Trustee will not be liable by reason of any insufficiency in any of the Bank Accounts resulting from any loss on any Permitted Investment included in the Bank Accounts, except for losses attributable to the Indenture Trustee’s failure to make payments on such Permitted Investments issued by the Indenture Trustee, in its commercial capacity as principal obligor and not as trustee.  In addition, the Indenture Trustee has no duty to monitor the activities of any Qualified Institution (unless such Qualified Institution is also the Indenture Trustee) and will not be liable for the actions or inactions of any Qualified Institution (unless such Qualified Institution is also the Indenture Trustee).

 

(b)           A Responsible Person of the Indenture Trustee will notify the Qualified Institution maintaining the Reserve Account and the Collection Account (if not the Indenture Trustee) if an Event of Default has occurred and is continuing with respect to the Notes.

 

Section 8.4.           Release of Collateral.

 

(a)           The Indenture Trustee may, and when required by this Indenture will, release property from the Lien of this Indenture, in each case, in accordance with this Indenture.  Except as otherwise set forth in Section 8.4(b), 8.4(c) and 10.1(c), the Indenture Trustee will release property from the Lien of this Indenture only upon receipt of an Issuer Request accompanied by an Officer’s Certificate and an Opinion of Counsel and (if required by the TIA) Independent Certificates in accordance with Sections 314(c) and 314(d)(1) of the TIA meeting the requirements of Section 11.1.

 

(b)           To facilitate the Servicer’s servicing of the Receivables pursuant to the Sale and Servicing Agreement, the Indenture Trustee will be deemed to release, and does release, and each Noteholder or Note Owner by its acceptance of a Note or a beneficial interest in a Note respectively acknowledges that the Indenture Trustee will release any and all Liens and other rights and interests it possesses or may possess from time to time, without further action of the parties, in, to and under:

 

(i)            each Receivable and all proceeds of such Receivable, effective on the date on which a Purchase Amount with respect to such Receivable is deposited into the Collection Account;

 

(ii)           each Receivable and the proceeds of such Receivable and the rights of Ford Credit (individually or as Servicer) under any contract or agreement for the sale of such Receivable in accordance with Section 3.3 of the Sale and Servicing Agreement, effective immediately prior to the date on which such contract or agreement arises; (provided that the Servicer will receive and apply all proceeds of such sale in accordance with Section 3.3 of the Sale and Servicing Agreement); and

 

(iii)          each Receivable and the proceeds of such Receivable, effective upon the date (if any) on which such Receivable became a Liquidated Receivable and the proceeds of a sale by auction or other disposition of the related Financed Vehicle have been received and applied.

 

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(c)           Except as otherwise contemplated by Section 10.1, the Indenture Trustee, at such time as there are no Notes Outstanding and all sums due from the Issuer to the Indenture Trustee pursuant to Section 6.7 have been paid in full, will release the Collateral from the Lien of this Indenture and release to the Issuer or any other Person entitled to such funds, the funds then in the Bank Accounts under this Indenture.  The Indenture Trustee will release property from the Lien of this Indenture pursuant to this Section 8.4(c) only upon receipt of an Issuer Request accompanied by an Officer’s Certificate and an Opinion of Counsel meeting the requirements of Section 11.1.

 

(d)           Upon receipt of an Issuer Request accompanied by an Officer’s Certificate and an Opinion of Counsel, the Indenture Trustee will execute any and all instruments reasonably requested of it and authorize the filing of termination statements to release property from the Lien of this Indenture, or convey the Indenture Trustee’s interest in the same, to effect the release of the Collateral permitted by this Section 8.4 and Section 10.1.  No party relying upon an instrument or authorization executed by the Indenture Trustee as provided in this Article VIII is required to ascertain the Indenture Trustee’s authority, inquire into the satisfaction of any conditions precedent or require evidence as to the application of any monies.

 

ARTICLE IX
 SUPPLEMENTAL INDENTURES

 

Section 9.1.           Supplemental Indentures Without Consent of Noteholders.

 

(a)           The Issuer and the Indenture Trustee, when directed by Issuer Order, may enter, without the consent of the Noteholders but with prior notice by the Issuer to the Rating Agencies, into one or more indentures supplemental to this Indenture (which will conform to the provisions of the Trust Indenture Act as in force at the date of the execution of any such indenture supplemental to this Indenture) for any of the following purposes:

 

(i)            to correct or expand the description of any property subject to the Lien of this Indenture, or better to assure, convey and confirm unto the Indenture Trustee any property subject or required to be subjected to the Lien of this Indenture, or to subject additional property to the Lien of this Indenture;

 

(ii)           to evidence the succession, in compliance with this Indenture, of another Person to the Issuer, and the assumption by any such successor of the covenants of the Issuer in this Indenture and in the Notes;

 

(iii)          to add to the covenants of the Issuer, for the benefit of the Noteholders, or to surrender any right or power conferred upon the Issuer in this Indenture;

 

(iv)          to convey, transfer, assign, mortgage or pledge any property to or with the Indenture Trustee;

 

(v)           to cure any ambiguity, to correct or supplement any provision in this Indenture or in any supplemental indenture that may be inconsistent with any other provision in this Indenture or in any supplemental indenture or to add provisions which

 

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are not inconsistent with the provisions of this Indenture so long as such action does not materially adversely affect the interests of the Noteholders;

 

(vi)          to evidence the acceptance of the appointment under this Indenture of a successor trustee with respect to the Notes and to add to or change any of the provisions of this Indenture as will be necessary to facilitate the administration of the trusts under this Indenture by more than one trustee, pursuant to Article VI; or

 

(vii)         to modify, eliminate or add to the provisions of this Indenture as necessary to effect the qualification of this Indenture under the TIA and to add to this Indenture such other provisions as may be required by the TIA.

 

All supplemental indentures pursuant to this Section 9.1(a) will be in form reasonably satisfactory to the Indenture Trustee.  The Indenture Trustee is authorized to join in the execution of any such supplemental indenture and to make any further reasonably appropriate agreements and stipulations that may be contained in such supplemental indenture.

 

(b)           The Issuer and the Indenture Trustee, when directed by Issuer Order, may enter, without the consent of any of the Noteholders, into an indenture or indentures supplemental to this Indenture for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of, this Indenture or of modifying in any manner (other than the modifications set forth in Section 9.2) the rights of the Noteholders under this Indenture or for the purpose of issuing additional securities in exchange for all or a portion of the Residual Interest, subject to the following conditions:

 

(i)            the Issuer delivers, or causes the Administrator to deliver, to the Indenture Trustee an Officer’s Certificate to the effect that such amendment will not have a material adverse effect on the Notes;

 

(ii)           the Issuer delivers an Opinion of Counsel to the Indenture Trustee stating that such amendment will not (A) cause any Note to be deemed sold or exchanged for purposes of Section 1001 of the Code, (B) cause the Issuer to be treated as an association or publicly traded partnership taxable as a corporation for U.S. federal income tax purposes or (C) adversely affect the treatment of the Notes as debt for U.S. federal income tax purposes;

 

(iii)          the Rating Agency Condition has been satisfied with respect to such amendment; and

 

(iv)          with respect to the issuance of additional securities only,  (A) payments of interest and principal on such additional securities on each Payment Date will be subordinate to payments of interest and principal on the Notes and (B) either (1) such additional securities are registered under the Securities Act or (2) the Issuer delivers an Opinion of Counsel to the Indenture Trustee to the effect that the offer, sale and delivery of such additional securities do not require registration under the Securities Act.

 

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Section 9.2.           Supplemental Indentures with Consent of Noteholders.

 

(a)           The Issuer and the Indenture Trustee, when directed by Issuer Order, may enter, with the consent of the Noteholders of a majority of the Note Balance of the Controlling Class and with prior notice by the Issuer to the Rating Agencies, into an indenture or indentures supplemental to this Indenture for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of, this Indenture or modifying in any manner the rights of the Noteholders under this Indenture if the Issuer delivers an Opinion of Counsel to the Indenture Trustee to the effect that such amendment will not (i) cause any Note to be deemed sold or exchanged for purposes of Section 1001 of the Code or (ii) cause the Issuer to be treated as an association or publicly traded partnership taxable as a corporation for U.S. federal income tax purposes; provided, however, that no such supplemental indenture, without the consent of each Noteholder of each Outstanding Note adversely affected by such supplemental indenture, will:

 

(A)                               modify or alter Section 9.1 or this Section 9.2;

 

(B)                               change (1) the Final Scheduled Payment Date or the date of payment of any installment of principal of or interest on any Note, (2) the principal amount of or interest rate on any Note, (3) the price at which the Notes may be redeemed, (4) the provisions of this Indenture relating to the priority of payments on the Notes or relating to the application of collections on, or the proceeds of the sale of, the Collateral to payment of principal of or interest on the Notes, or change any place of payment where, or the coin or currency in which, any Note or the interest on any Note is payable or (5) the right of Noteholders to institute Proceedings to enforce this Indenture;

 

(C)                               modify the percentage of the Note Balance of the Notes or the Controlling Class required for any action;

 

(D)                               modify or alter (1) the second proviso to the definition of “Outstanding” or (2) the definition of “Controlling Class”;

 

(E)                                modify the calculation of the amount of any payment of interest or principal due on any Note on any Payment Date; or

 

(F)                                 permit the creation of any Lien ranking prior or equal to the Lien of this Indenture with respect to any portion of the Collateral other than Permitted Liens, or except as permitted by this Indenture or the other Transaction Documents, release the Lien of this Indenture with respect to any portion of the Collateral.

 

(b)           It will not be necessary for any Act of Noteholders under this Section 9.2 to approve the particular form of any proposed supplemental indenture, but it will be sufficient if such Act of Noteholders approves the substance of such proposed supplemental indenture.

 

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Section 9.3.           Execution of Supplemental Indentures.  In executing, or permitting the additional trusts created by, any supplemental indenture permitted by this Article IX or the modification of the trusts created by this Indenture, the Indenture Trustee will be entitled to receive, and subject to Sections 6.1 and 6.2, will be fully protected in relying upon, an Opinion of Counsel to the effect that the execution of such supplemental indenture is authorized or permitted by this Indenture and that all conditions precedent to the execution and delivery of such supplemental indenture have been satisfied.  The Indenture Trustee may, but is not obligated to, enter into any such supplemental indenture that affects the Indenture Trustee’s own rights, powers, duties, obligations, liabilities or immunities under this Indenture or otherwise.

 

Section 9.4.           Effect of Supplemental Indenture.  Upon the execution of any supplemental indenture pursuant to this Article IX, this Indenture will be modified and amended in accordance with such supplemental indenture, and such supplemental indenture will be part of this Indenture for any and all purposes.  Every Noteholder of Notes authenticated and delivered before or after such supplemental indenture will be bound by such supplemental indenture.

 

Section 9.5.           Conformity with Trust Indenture Act.  Every amendment of this Indenture and every supplemental indenture executed pursuant to this Article IX will conform to the requirements of the Trust Indenture Act as then in effect so long as this Indenture is qualified under the Trust Indenture Act.

 

Section 9.6.           Reference in Notes to Supplemental Indentures.  Notes authenticated and delivered after the execution of any supplemental indenture pursuant to this Article IX may, and if required by the Indenture Trustee will, bear a notation in form approved by the Indenture Trustee as to any matter provided for in such supplemental indenture.  If the Issuer or the Indenture Trustee so determine, new Notes so modified as to conform, in the opinion of the Indenture Trustee and the Issuer, to any such supplemental indenture may be prepared and executed by the Issuer and authenticated and delivered by the Indenture Trustee in exchange for Outstanding Notes.

 

ARTICLE X
 REDEMPTION OF NOTES

 

Section 10.1.         Redemption.

 

(a)           The Notes are subject to redemption in whole, but not in part, at the direction of the Servicer on any Payment Date on which the Servicer exercises its option to purchase the Trust Property pursuant to Section 8.1 of the Sale and Servicing Agreement.  After the Servicer notifies the Indenture Trustee that it will exercise its option pursuant to Section 8.1 of the Sale and Servicing Agreement, the Indenture Trustee will promptly notify the Noteholders:

 

(i)            of the outstanding Note Balance of each Class of the Notes to be prepaid as of the most recent Payment Date and that the Notes plus accrued and unpaid interest on such Notes at the applicable Note Interest Rate to the Redemption Date will be paid in full;

 

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(ii)           of the place where such Notes are to be surrendered for final payment (which will be the office or agency of the Issuer maintained as provided in Section 3.2); and

 

(iii)          that on the Redemption Date, the outstanding principal amount will become due and payable upon the Notes and that interest on the Notes will cease to accrue from and after the Redemption Date, unless the Issuer defaults in the payment of the Notes on the Redemption Date.

 

(b)           The Issuer will cause the Servicer to deposit by 10:00 a.m. (New York City time) on the Business Day preceding the Redemption Date (or, with satisfaction of the Rating Agency Condition, on the Redemption Date) in the Collection Account the amount required pursuant to Section 8.1 of the Sale and Servicing Agreement, whereupon all such Notes will be paid in full on the Redemption Date.

 

(c)           On the Redemption Date, the outstanding principal amount of the Notes will be due and payable and interest on the Notes will cease to accrue from and after the Redemption Date, unless the Issuer defaults in the payment of the Notes on the Redemption Date.  Upon redemption, the Indenture Trustee will release, without further action of the parties, the Collateral from the Lien of this Indenture and release to the Issuer or any other Person entitled to any funds then in the Bank Accounts under this Indenture.

 

ARTICLE XI
 MISCELLANEOUS

 

Section 11.1.         Compliance Certificates and Opinions.

 

(a)           In connection with any order or request by the Issuer to the Indenture Trustee to take any action under this Indenture, the Issuer will deliver the following documents to the Indenture Trustee (such documents, collectively, an “Issuer Order” or “Issuer Request”, as applicable): (i) a written order or a written request, respectively, signed in the name of the Issuer by any one of its Responsible Persons and delivered to the Indenture Trustee, (ii) an Officer’s Certificate stating that all conditions precedent provided for in this Indenture relating to the proposed action have been complied with, (iii) to the extent required by the TIA or upon request of the Indenture Trustee, an Opinion of Counsel to the effect that in the opinion of such counsel all such conditions precedent have been complied with and (iv) (if required by the TIA) an Independent Certificate from a firm of certified public accountants of national reputation selected by the Issuer.  However, in the case of any such order or request as to which the furnishing of such documents is specifically required by this Indenture, no additional certificate or opinion need be furnished.

 

(b)           Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture will include:

 

(i)            a statement that each signatory of such certificate or opinion has read such covenant or condition and the definitions in this Indenture relating to such covenant or condition;

 

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(ii)           a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;

 

(iii)          a statement that, in the opinion of each such signatory, such signatory has made such examination or investigation as is necessary to enable such signatory to express an informed opinion as to whether or not such covenant or condition has been complied with; and

 

(iv)          a statement as to whether, in the opinion of each such signatory, such condition or covenant has been complied with.

 

(c)           (i)            Before depositing any cash or property with the Indenture Trustee that is to be made the basis for the release of any property subject to the Lien of this Indenture, the Issuer will, furnish to the Indenture Trustee (A) an Officer’s Certificate stating the opinion of each Responsible Person signing such certificate as to the fair value (within 90 days of such deposit) to the Issuer of the cash or property to be so deposited and (B) an Independent Certificate as to the same matters, if the fair value to the Issuer of the securities to be so deposited and of all other such securities made the basis of any such withdrawal or release since the commencement of the then-current year, as set forth in the certificates delivered pursuant to Section 11.1(c)(i)(A), is 10% or more of the Note Balance of the Notes, but such a certificate need not be furnished with respect to any property or securities so deposited, if the fair value of such property or securities to the Issuer as set forth in the related Officer’s Certificate is less than $25,000 or less than 1% of the Note Balance of the Notes.

 

(ii)           Whenever any property or securities are to be released from the Lien of this Indenture, the Issuer will furnish to the Indenture Trustee (A) an Officer’s Certificate certifying or stating the opinion of each Responsible Person signing such certificate as to the fair value (within 90 days of such release) of the property or securities proposed to be released and stating that in the opinion of such Responsible Person the proposed release will not impair the security under this Indenture in contravention of the provisions of this Indenture and (B) an Independent Certificate as to the same matters, if the fair value of the property or securities and of all other property, other than property as contemplated by Section 11.1(d), or securities released from the Lien of this Indenture since the commencement of the then-current year, as set forth in the certificates required by Section 11.1(c)(ii)(A) and this Section 11.1(c)(ii)(B), equals 10% or more of the Note Balance of the Notes, but such certificate need not be furnished in the case of any release of property or securities, if the fair value of such property or securities as set forth in the related Officer’s Certificate is less than $25,000 or less than 1% of the Note Balance of the Notes.

 

(d)           Notwithstanding Sections 2.9, 8.4 or 10.1 or any other provisions of this Section 11.1, the Issuer may, without compliance with the requirements of the other provisions of this Section 11.1, (i) collect, liquidate, sell or otherwise dispose of Receivables and Financed Vehicles in the ordinary course of its business provided that all Collections, Recoveries and related amounts and proceeds of such dispositions are applied in accordance with the provisions

 

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of this Indenture and (ii) make cash payments out of the Bank Accounts, in each case, as and to the extent permitted or required by the Transaction Documents.

 

(e)           If the Securities and Exchange Commission issues an exemptive order under Section 304(d) of the TIA modifying the Indenture Trustee’s obligations under Sections 314(c) and 314(d)(1) of the TIA, the Indenture Trustee will release property from the Lien of this Indenture only in accordance with the Transaction Documents and the conditions and procedures set forth in such exemptive order.

 

Section 11.2.         Form of Documents Delivered to Indenture Trustee.

 

(a)           Any Officer’s Certificate of a Responsible Person of the Issuer may be based, insofar as it relates to legal matters, upon an opinion of counsel, unless such Responsible Person knows, or in the exercise of reasonable care should know, that such opinion, with respect to the matters upon which such Officer’s Certificate is based, is erroneous.  Any Officer’s Certificate of a Responsible Person of the Issuer or opinion of counsel may be based, insofar as it relates to factual matters, upon an Officer’s Certificate of or representation by a Responsible Person of the Servicer, the Depositor or the Issuer (including by the Administrator on behalf of the Issuer), stating that the information with respect to such factual matters is in the possession of the Servicer, the Depositor, the Issuer or the Administrator, unless such Responsible Person of the Issuer or counsel knows, or in the exercise of reasonable care should know, that the Officer’s Certificate or representation with respect to such matters is erroneous.

 

(b)           In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents.

 

Section 11.3.         Acts of Noteholders.

 

(a)           Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by the Noteholders or a specified percentage of Noteholders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Noteholders in person or by agents duly appointed in writing.  Except as otherwise provided in this Indenture such action will become effective when such instrument or instruments are delivered to the Indenture Trustee, and, if required, to the Issuer.  Such instrument or instruments (and the action embodied in such instrument or instruments and evidenced by such instrument or instruments) are sometimes referred to in this Indenture as the “Act of Noteholders” signing such instrument or instruments.  Proof of execution of any such instrument or of a writing appointing any such agent will be sufficient for any purpose of this Indenture and (subject to Section 6.1) conclusive in favor of the Indenture Trustee and the Issuer, if made in the manner provided in this Section 11.3.

 

(b)           The fact and date of the execution by any Person of any such instrument or writing may be proved in any manner that the Indenture Trustee deems sufficient.

 

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(c)           Any Act of Noteholders will bind the Noteholder of every Note issued upon the registration of such Note or in exchange for such Note or in lieu of such Note, in respect of anything done, omitted or suffered to be done by the Indenture Trustee or the Issuer in reliance on such Note, whether or not notation of such action is made upon such Note.

 

Section 11.4.         Notices to Indenture Trustee, Issuer and Rating Agencies.

 

(a)           Unless otherwise specified in this Indenture, all notices, requests, demands, consents, waivers or other communications to or from the parties to this Indenture must be in writing and will be deemed to have been given and made:

 

(i)            upon delivery or, in the case of a letter mailed by registered first class mail, postage prepaid, three days after deposit in the mail;

 

(ii)           in the case of a fax, when receipt is confirmed by telephone, reply email or reply fax from the recipient;

 

(iii)          in the case of an email, when receipt is confirmed by telephone or reply email from the recipient; and

 

(iv)          in the case of an electronic posting to a password-protected website to which the recipient has been provided access, upon delivery (without the requirement of confirmation of receipt) of an email to such recipient stating that such electronic posting has occurred.

 

Unless otherwise specified in this Indenture, any such notice, request, demand, consent or other communication must be delivered or addressed as set forth on Schedule B to the Sale and Servicing Agreement or at such other address as any party may designate by notice to the other parties.

 

(b)           Any notice required or permitted to be mailed to a Noteholder (i) in the case of Definitive Notes, must be sent by overnight delivery, mailed by registered first class mail, postage prepaid or sent by fax, to the address of such Person as shown in the Note Register or (ii) in the case of Book-Entry Notes, must be delivered pursuant to the applicable procedures of the Clearing Agency.  Any notice so mailed within the time prescribed in this Indenture will be conclusively presumed to have been duly given, whether or not the Noteholder receives such notice.

 

Section 11.5.         Notices to Noteholders; Waiver.

 

(a)           Any notice to Noteholders will be sufficiently given (unless otherwise provided in this Indenture) if in writing and (i) in the case of Definitive Notes, sent by overnight delivery, mailed by registered first class mail, postage prepaid or sent by fax, to each Noteholder adversely affected by such event, at its address or fax number as it appears on the Note Register or (ii) in the case of Book-Entry Notes, delivered pursuant to the applicable procedures of the Clearing Agency, in each case, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice.  In any case where notice to Noteholders is given by mail, neither the failure to mail such notice nor any defect in any notice so mailed to any

 

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particular Noteholder will affect the sufficiency of such notice with respect to other Noteholders, and any notice that is mailed in the manner provided in this Indenture will conclusively be presumed to have been duly given.

 

(b)           Where this Indenture provides for notice in any manner, such notice may be waived by any Person entitled to receive such notice, either before or after the event, and such waiver will be the equivalent of such notice.  Waivers of notice by Noteholders will be filed with the Indenture Trustee but such filing will not be a condition precedent to the validity of any action taken in reliance upon such a waiver.

 

(c)           In case, by reason of the suspension of regular mail service as a result of a strike, work stoppage or similar activity, it is impractical to mail notice of any event to Noteholders when such notice is required to be given pursuant to this Indenture, then any manner of giving such notice satisfactory to the Indenture Trustee will be deemed to be a sufficient giving of such notice.

 

(d)           Where this Indenture provides for notice to the Rating Agencies, failure to give such notice will not affect any other rights or obligations created under this Indenture, and will not under any circumstance constitute a Default or Event of Default.

 

Section 11.6.         Conflict with Trust Indenture Act.  If any provision of this Indenture limits, qualifies or conflicts with another provision of this Indenture that is required or deemed to be included in this Indenture by any of the provisions of the TIA, such required or deemed provision will control.  The provisions of Sections 310 through 317 of the TIA that impose duties on any Person (including the provisions automatically deemed included in this Indenture unless expressly excluded by this Indenture) are a part of and govern this Indenture.

 

Section 11.7.         Benefits of Indenture.  Nothing in this Indenture or in the Notes, express or implied, will give to any Person, other than the parties to this Indenture and their successors under this Indenture, and the Secured Parties and any other party with rights to payments or distributions under this Indenture, and any other Person with an ownership interest in any portion of the Collateral, any benefit or any legal or equitable right, remedy or claim under this Indenture.

 

Section 11.8.         GOVERNING LAW.  THIS INDENTURE WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

 

Section 11.9.         Submission to Jurisdiction.  The parties submit to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York State Court sitting in New York, New York for purposes of all legal proceedings arising out of or relating to this Indenture. The parties irrevocably waive, to the fullest extent they may do so, any objection that they may now or in the future have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum.

 

Section 11.10.      WAIVER OF JURY TRIAL.  EACH PARTY TO THIS INDENTURE IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED

 

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BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE OR THE TRANSACTIONS CONTEMPLATED BY THIS INDENTURE.

 

Section 11.11.      Severability.  If any of the covenants, agreements or terms of this Indenture is held invalid, illegal or unenforceable, then it will be deemed severable from the remaining covenants, agreements or terms of this Indenture and will in no way affect the validity, legality or enforceability of the remaining Indenture or of the Notes or the rights of the Noteholders.

 

Section 11.12.      Counterparts.  This Indenture may be executed in any number of counterparts.  Each counterpart will be an original, and all counterparts will together constitute one and the same instrument.

 

Section 11.13.      Headings.  The headings in this Indenture are included for convenience only and will not affect the meaning or interpretation of this Indenture.

 

Section 11.14.      Issuer Obligation.  No recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under this Indenture or any certificate or other writing delivered in connection with this Indenture or the Notes, against (a) the Indenture Trustee or the Owner Trustee each in its individual capacity, (b) any holder of a beneficial interest in the Issuer, (c) any partner, owner, beneficiary, agent, officer, director, employee or agent of the Indenture Trustee or the Owner Trustee, each in its individual capacity or (d) any holder of a beneficial interest in the Owner Trustee or the Indenture Trustee, each in its individual capacity, except as any such Person may have agreed (it being understood that the Indenture Trustee and the Owner Trustee have no such obligations in their individual capacities).  For all purposes of this Indenture, in the performance of any duties or obligations of the Issuer under this Indenture, the Owner Trustee will be subject to, and entitled to the benefits of, Articles V, VI and VII of the Trust Agreement.

 

Section 11.15.      Subordination of Claims against the Depositor.

 

(a)           The obligations of the Issuer under this Indenture are solely the obligations of the Issuer and do not represent any obligation or interest in any assets of the Depositor.  The Indenture Trustee, by entering into this Indenture, and each Noteholder and Note Owner, by accepting a Note or a beneficial interest in a Note, acknowledge and agree that they have no right, title or interest in or to any Other Assets of the Depositor.  Notwithstanding the preceding sentence, if such Indenture Trustee, Noteholder or Note Owner either (i) asserts an interest or claim to, or benefit from, the Other Assets or (ii) is deemed to have any such interest, claim to or benefit in or from the Other Assets, whether by operation of law, legal process, pursuant to insolvency laws or otherwise (including by virtue of Section 1111(b) of the Bankruptcy Code), then such Indenture Trustee, Noteholder or Note Owner further acknowledges and agrees that any such interest, claim or benefit in or from the Other Assets is expressly subordinated to the indefeasible payment in full of the other obligations and liabilities, which, under the relevant documents relating to the securitization or conveyance of such Other Assets, are entitled to be paid from, entitled to the benefits of or otherwise secured by such Other Assets (whether or not any such entitlement or security interest is legally perfected or otherwise entitled to a priority of

 

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distributions or application under applicable law, including insolvency laws, and whether or not asserted against the Depositor), including the payment of post-petition interest on such other obligations and liabilities.  This subordination agreement is deemed a subordination agreement within the meaning of Section 510(a) of the Bankruptcy Code.  The Indenture Trustee, each Noteholder and each Note Owner further acknowledges and agrees that no adequate remedy at law exists for a breach of this Section 11.15 and this Section 11.15 may be enforced by an action for specific performance.

 

(b)           This Section 11.15 is for the third party benefit of those entitled to rely on this Section 11.15 and will survive the termination of this Indenture.

 

Section 11.16.      No Petition.  The Indenture Trustee, each Noteholder or Note Owner, by accepting a Note or a beneficial interest in a Note, each covenants and agrees that, before the date that is one year and one day (or, if longer, any applicable preference period) after the payment in full of (a) all securities issued by the Depositor or by a trust for which the Depositor was a depositor and (b) the Notes, it will not institute against, or join any other Person in instituting against, the Depositor or the Issuer, respectively, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or other proceedings under any federal or State bankruptcy or similar law in connection with any obligations relating to the Notes, this Indenture or any of the Transaction Documents.  This Section 11.16 will survive the resignation or removal of the Indenture Trustee under this Indenture and the termination of this Indenture.

 

[Remainder of Page Intentionally Left Blank]

 

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EXECUTED BY:

 

	
 
    	
FORD   CREDIT AUTO OWNER TRUST 2012-C,
    
	
 
    	
 
    	
as   Issuer
    
	
 
    	
 
    
	
 
    	
By:
    	
U.S.   BANK TRUST NATIONAL ASSOCIATION,

not   in its individual capacity but solely as Owner Trustee of Ford Credit Auto   Owner Trust 2012-C
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
THE   BANK OF NEW YORK MELLON,
    
	
 
    	
 
    	
not   in its individual capacity but solely as Indenture Trustee
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

 

[Signature Page to Indenture]

 

 

Exhibit A

 

Form of Class A Note

 

UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE OF THIS NOTE FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER OF THIS NOTE, CEDE & CO., HAS AN INTEREST IN THIS NOTE.

 

[Class A-1 Notes Only: THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR UNDER THE SECURITIES OR BLUE SKY LAWS OF ANY STATE OF THE UNITED STATES. THE HOLDER OF THIS NOTE, BY PURCHASING THIS NOTE, AGREES FOR THE BENEFIT OF THE ISSUER AND THE DEPOSITOR THAT THIS NOTE MAY BE SOLD, TRANSFERRED, ASSIGNED, PARTICIPATED, PLEDGED OR OTHERWISE DISPOSED OF ONLY IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS, AND ONLY (I) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (II) PURSUANT TO RULE 144A UNDER THE SECURITIES ACT (“RULE 144A”) TO A PERSON THAT THE HOLDER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER, WITHIN THE MEANING OF RULE 144A (A “QIB”), PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB, WHOM THE HOLDER HAS INFORMED, IN EACH CASE, THAT THE SALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A OR (III) TO THE DEPOSITOR OR ITS AFFILIATES, IN EACH CASE IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE UNITED STATES AND SECURITIES AND BLUE SKY LAWS OF THE STATES OF THE UNITED STATES.]

 

EACH NOTE OWNER THAT IS SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), OR ANY FEDERAL, STATE, LOCAL OR NON-U.S. LAW OR REGULATION THAT IS SUBSTANTIALLY SIMILAR TO TITLE I OF ERISA OR SECTION 4975 OF THE CODE (“SIMILAR LAW”), BY ACCEPTING A BENEFICIAL INTEREST IN THIS NOTE, IS DEEMED TO REPRESENT THAT ITS PURCHASE, HOLDING AND DISPOSITION OF SUCH BENEFICIAL INTEREST DOES NOT CONSTITUTE AND WILL NOT RESULT IN A NON-EXEMPT PROHIBITED TRANSACTION UNDER TITLE I OF ERISA OR SECTION 4975 OF THE CODE DUE TO THE APPLICABILITY OF A STATUTORY OR ADMINISTRATIVE EXEMPTION FROM THE PROHIBITED TRANSACTION RULES (OR, IF THE NOTE OWNER IS SUBJECT TO ANY SIMILAR LAW, SUCH PURCHASE,

 

A-1

 

HOLDING AND DISPOSITION DOES NOT CONSTITUTE AND WILL NOT RESULT IN A VIOLATION OF SUCH SIMILAR LAW).

 

THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH IN THIS NOTE.  ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE OF THIS NOTE.

 

A-2

 

REGISTERED             $[                      ]

	
No. R-1
    	
 
    	
CUSIP NO.   [                  ]
    

 

FORD CREDIT AUTO OWNER TRUST 2012-C

 

CLASS A-[    ] [      %] ASSET BACKED NOTES

 

Ford Credit Auto Owner Trust 2012-C, a statutory trust organized under the laws of the State of Delaware (the “Issuer”), for value received, promises to pay to CEDE & CO., or registered assigns, the principal sum of [                                ] DOLLARS payable on the fifteenth day of each month, or, if any such day is not a Business Day, the next succeeding Business Day, commencing in [                    ] (each, a “Payment Date”) in an amount equal to the aggregate amount payable to Noteholders of Class A-[    ] Notes on such Payment Date from the Principal Payment Account in respect of principal on the Class A-[    ] Notes pursuant to Section 3.1 of the Indenture, dated as of [                    ] (the “Indenture”), between the Issuer and The Bank of New York Mellon, as Indenture Trustee (the “Indenture Trustee”).  However, the entire unpaid principal amount of this Note will be due and payable on the earlier of the [                    ] Payment Date (the “Class A-[    ] Final Scheduled Payment Date”) or the Redemption Date pursuant to Section 10.1 of the Indenture.  Notwithstanding the foregoing, the entire unpaid principal amount of the Notes will be due and payable on the date on which the Notes are declared to be immediately due and payable in the manner provided in Section 5.2(a) of the Indenture.  All principal payments on the Class A-[    ] Notes will be made ratably to the Noteholders entitled to such principal payments. Capitalized terms used but not otherwise defined in this Note are defined in Article I of the Indenture, which also contains rules as to usage applicable to this Note.

 

The Issuer will pay interest on this Note at the rate per annum shown above on each Payment Date until the principal of this Note is paid or made available for payment, on the principal amount of this Note outstanding on the preceding Payment Date (after giving effect to all payments of principal made on the preceding Payment Date), subject to certain limitations contained in Section 3.1 of the Indenture.  Interest on this Note will accrue for each Payment Date from and including the [15th day of the month preceding each Payment Date][previous Payment Date on which interest has been paid] (or, in the case of the initial Payment Date, from and including the Closing Date) to but excluding [the 15th day of the following month][such Payment Date].  Interest will be computed on the basis of [actual days elapsed and] a 360-day year [of twelve 30 day months].

 

The principal of and interest on this Note are payable in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts.  All payments made by the Issuer with respect to this Note will be applied first to interest due and payable on this Note as provided above and then to the unpaid principal of this Note.

 

This Note is one of a duly authorized issue of Class A-[    ] [      %] Asset Backed Notes (the “Class A-[    ] Notes”) of the Issuer.  Also authorized under the Indenture are the [[Class A-[    ] Notes, the Class B Notes, the Class C Notes and the Class D Notes.]  The Indenture and all indentures supplemental to the Indenture set forth the respective rights and obligations

 

A-3

 

thereunder of the Issuer, the Indenture Trustee and the Noteholders.  The Notes are subject to all terms of the Indenture.

 

The Class A-[    ] Notes are and will be equally and ratably secured by the collateral pledged as security therefor as provided in the Indenture.  Interest on and principal of the Notes will be payable in accordance with the priority of payments set forth in Section 8.2 of the Indenture.

 

Payments of interest on this Note on each Payment Date, together with any installment of principal to the extent not in full payment of this Note, will be made to the Registered Noteholder of this Note either by wire transfer in immediately available funds, to the account of such Noteholder at a bank or other entity having appropriate facilities for such wire transfer, if such Noteholder has provided to the Note Registrar appropriate written instructions at least five Business Days before such Payment Date and such Noteholder’s Notes in the aggregate evidence a denomination of not less than $1,000,000, or, if not, by check mailed first class mail, postage prepaid, to such Registered Noteholder’s address as it appears on the Note Register on each Record Date.  However, unless Definitive Notes have been issued to Note Owners, payment will be made by wire transfer in immediately available funds to the account designated by Cede & Co., as nominee of the Clearing Agency or any successor nominee.  Such payments will be made without requiring that this Note be submitted for notation of payment.  Any reduction in the principal amount of this Note effected by any payments made on any Payment Date will be binding upon all future Noteholders of this Note and of any Note issued upon the registration of transfer of this Note or in exchange of this Note or in lieu of this Note, whether or not noted on this Note.  If funds are expected to be available for payment in full of the then remaining unpaid principal amount of this Note on a Payment Date, then the Indenture Trustee, in the name of and on behalf of the Issuer, will notify the Registered Noteholder of this Note as of the preceding Record Date by notice mailed or transmitted by facsimile before such Payment Date, and the amount then due and payable will be payable only upon presentation and surrender of this Note at the Indenture Trustee’s Corporate Trust Office or at the office of the Indenture Trustee’s agent appointed for such purposes located in The City of New York.

 

The Issuer will pay interest on overdue installments of interest at the Class A-[    ] Note Interest Rate to the extent lawful.

 

The Notes may be redeemed, in whole but not in part, in the manner and to the extent described in the Indenture and the Sale and Servicing Agreement.

 

The transfer of this Note is subject to the restrictions on transfer specified on the face of this Note and to the other limitations set forth in the Indenture.  Subject to the satisfaction of such restrictions and limitations, the transfer of this Note may be registered on the Note Register upon surrender of this Note for registration of transfer at the office or agency designated by the Issuer pursuant to the Indenture, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Indenture Trustee duly executed by, the Noteholder of this Note or such Noteholder’s attorney duly authorized in writing, with such signature guaranteed by an “eligible guarantor institution” meeting the requirements of the Note Registrar, and thereupon one or more new Notes of the same Class in authorized denominations and in the same aggregate principal amount will be issued to the designated transferee or transferees.  No service charge

 

A-4

 

will be charged for any registration of transfer or exchange of this Note, but the transferor may be required to pay an amount sufficient to cover any tax or other governmental charge that may be imposed in connection with any such registration of transfer or exchange.

 

Each Noteholder or Note Owner, by its acceptance of a Note or, in the case of a Note Owner, a beneficial interest in a Note, covenants and agrees that no recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under the Indenture or any certificate or other writing delivered in connection with the Notes and the Indenture, against (i) the Indenture Trustee or the Owner Trustee, each in its individual capacity, (ii) any holder of a beneficial interest in the Issuer, (iii) any partner, owner, beneficiary, agent, officer, director, employee or agent of the Indenture Trustee or the Owner Trustee, each in its individual capacity or (iv) any holder of a beneficial interest in the Owner Trustee or the Indenture Trustee, each in its individual capacity, except as any such Person may have agreed.

 

The obligations of the Issuer under the Indenture are solely the obligations of the Issuer and do not represent any obligation or interest in any assets of the Depositor.  Each Noteholder and Note Owner, by its acceptance of a Note or a beneficial interest in a Note, acknowledges and agrees that it has no right, title or interest in or to any Other Assets of the Depositor.  Notwithstanding the preceding sentence, if such Noteholder or Note Owner either (i) asserts an interest or claim to, or benefit from, Other Assets or (ii) is deemed to have any such interest, claim to or benefit in or from Other Assets, whether by operation of law, legal process, pursuant to insolvency laws or otherwise (including by virtue of Section 1111(b) of the Bankruptcy Code), then such Noteholder or Note Owner further acknowledges and agrees that any such interest, claim or benefit in or from Other Assets is and will be expressly subordinated to the indefeasible payment in full of the other obligations and liabilities, which, under the relevant documents relating to the securitization or conveyance of such Other Assets, are entitled to be paid from, entitled to the benefits of, or otherwise secured by such Other Assets (whether or not any such entitlement or security interest is legally perfected or otherwise entitled to a priority of distributions or application under applicable law, including insolvency laws, and whether or not asserted against the Depositor), including the payment of post-petition interest on such other obligations and liabilities.

 

THIS SUBORDINATION AGREEMENT WILL BE DEEMED A SUBORDINATION AGREEMENT WITHIN THE MEANING OF SECTION 510(a) OF THE BANKRUPTCY CODE.

 

Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a Note Owner, a beneficial interest in a Note, covenants and agrees by accepting the benefits of the Indenture that, before the date that is one year and one day (or, if longer, any applicable preference period) after the payment in full of (a) all securities issued by the Depositor or by a trust for which the Depositor was a depositor and (b) the Notes, such Noteholder or Note Owner will not institute against the Depositor or the Issuer, or join in any institution against the Depositor or the Issuer of, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under any federal or State bankruptcy or similar law in connection with any obligations relating to the Notes, the Indenture or any of the other Transaction Documents.

 

A-5

 

The Issuer has entered into the Indenture and this Note is issued with the intention that, for federal, State, and local income and franchise tax purposes, Notes that are beneficially owned by a Person other than Ford Credit or its Affiliates will qualify as indebtedness of the Issuer secured by the Collateral.  Each Noteholder or Note Owner, by its acceptance of a Note or a beneficial interest in a Note, will be deemed to agree to treat the Notes for federal, State and local income, single business and franchise tax purposes as indebtedness of the Issuer.

 

With respect to any date of determination, the Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture Trustee may treat the Person in whose name this Note is registered as of such date as the owner of such Note for the purpose of receiving payments of principal of and any interest on such Note and for all other purposes, and none of the Issuer, the Indenture Trustee or any agent of the Issuer or the Indenture Trustee will recognize notice to the contrary.

 

The Indenture permits, with certain exceptions requiring the consent of all adversely affected Noteholders as provided in the Indenture, the amendment of the Indenture and the modification of the rights and obligations of the Issuer and the rights of the Noteholders under the Indenture by the Issuer with the consent of the Noteholders of Notes evidencing not less than a majority of the Note Balance of the Controlling Class.  The Indenture also permits the Indenture Trustee to amend or waive certain terms and conditions set forth in the Indenture without the consent of the Noteholders provided certain conditions are satisfied.  In addition, the Indenture contains provisions permitting the Noteholders of Notes evidencing specified percentages of the Note Balance of the Notes or of the Controlling Class, on behalf of all Noteholders, to waive compliance by the Issuer with certain provisions of the Indenture and certain defaults under the Indenture and their consequences.  Any such consent or waiver by the Noteholder of this Note will be conclusive and binding upon such Noteholder and upon all future Noteholders of this Note and of any Note issued upon the registration of transfer of this Note or in exchange of this Note or in lieu of this Note whether or not notation of such consent or waiver is made upon this Note.

 

The term “Issuer”, as used in this Note, includes any successor to the Issuer under the Indenture.

 

The Issuer is permitted by the Indenture, under certain circumstances, to merge or consolidate, subject to the rights of the Indenture Trustee and the Noteholders under the Indenture.

 

The Notes are issuable only in registered form in denominations as provided in the Indenture, subject to certain limitations set forth in the Indenture.

 

THIS NOTE AND THE INDENTURE WILL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

 

No reference in this Note to the Indenture, and no provision of this Note or of the Indenture, will alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay the principal of and interest on this Note at the time, place and rate, and in the coin or currency prescribed in this Note.

 

A-6

 

Anything in this Note to the contrary notwithstanding, except as provided in the Transaction Documents, none of The Bank of New York Mellon, in its individual capacity, U.S. Bank Trust National Association, in its individual capacity, any owner of a beneficial interest in the Issuer, or any of their respective partners, beneficiaries, agents, officers, directors, employees or successors or assigns will be personally liable for, nor will recourse be had to any of them for, the payment of principal or of interest on this Note or performance of, or omission to perform, any of the covenants, obligations or indemnifications contained in the Indenture.  The Noteholder of this Note, by its acceptance of this Note, agrees that, except as provided in the Transaction Documents, in the case of an Event of Default under the Indenture, the Noteholder has no claim against any of the foregoing for any deficiency, loss or claim therefrom; provided, however, that nothing contained in this Note will be taken to prevent recourse to, and enforcement against, the assets of the Issuer for any and all liabilities, obligations and undertakings contained in the Indenture or in this Note.

 

Unless the certificate of authentication on this Note has been executed by the Indenture Trustee whose name appears below by manual signature, this Note will not be entitled to any benefit under the Indenture, or be valid or obligatory for any purpose.

 

[Remainder of Page Intentionally Left Blank]

 

A-7

 

The Issuer has caused this instrument to be signed, manually or in facsimile, by its Responsible Person, as of the date set forth below.

 

Date: [                ]

 

	
 
    	
FORD   CREDIT AUTO OWNER TRUST 2012-C
    
	
 
    	
 
    
	
 
    	
BY:
    	
U.S.   BANK TRUST NATIONAL ASSOCIATION,
    
	
 
    	
 
    	
not   in its individual capacity but solely as Owner Trustee of Ford Credit Auto   Owner Trust 2012-C
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Responsible   Person
    

 

TRUSTEE’S CERTIFICATE OF AUTHENTICATION

 

This is one of the Class A-[    ] Notes designated above and referred to in the Indenture.

 

Date: [                ]

 

	
 
    	
THE   BANK OF NEW YORK MELLON,
    
	
 
    	
 
    	
not   in its individual capacity but
    
	
 
    	
 
    	
solely   as Indenture Trustee
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Responsible   Person
    

 

A-8

 

ASSIGNMENT

 

Social Security or taxpayer I.D. or other identifying number of assignee:

 

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto:

 

	
 
    	
 
    
	
(name   and address of assignee)
    	
 
    

 

the within Note and all rights under said Note, and hereby irrevocably constitutes and appoints                                   , attorney, to transfer said Note on the books kept for registration of said Note, with full power of substitution in the premises.

 

 

	
Dated:
    	
 
    	
 
    	
 
    	
*/
    
	
 
    	
 
    	
Signature   Guaranteed
    	
 
    

 

*/

 

*/                                     NOTICE:  The signature to this assignment must correspond with the name of the registered owner as it appears on the face of the within Note in every particular, without alteration, enlargement or any change whatever.  Such signature must be guaranteed by an “eligible guarantor institution” meeting the requirements of the Note Registrar, which requirements include membership or participation in the Securities Transfer Agents Medallion Program or such other “signature guarantee program” as may be determined by the Note Registrar in addition to, or in substitution for, the Securities Transfer Agents Medallion Program, all in accordance with the Exchange Act.

 

A-9

 

Exhibit B

 

Form of Class B / C / D Note

 

UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE OF THIS NOTE FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER OF THIS NOTE, CEDE & CO., HAS AN INTEREST IN THIS NOTE.

 

EACH NOTE OWNER THAT IS SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), OR ANY FEDERAL, STATE, LOCAL OR NON-U.S. LAW OR REGULATION THAT IS SUBSTANTIALLY SIMILAR TO TITLE I OF ERISA OR SECTION 4975 OF THE CODE (“SIMILAR LAW”), BY ACCEPTING A BENEFICIAL INTEREST IN THIS NOTE, IS DEEMED TO REPRESENT THAT ITS PURCHASE, HOLDING AND DISPOSITION OF SUCH BENEFICIAL INTEREST DOES NOT CONSTITUTE AND WILL NOT RESULT IN A NON-EXEMPT PROHIBITED TRANSACTION UNDER TITLE I OF ERISA OR SECTION 4975 OF THE CODE DUE TO THE APPLICABILITY OF A STATUTORY OR ADMINISTRATIVE EXEMPTION FROM THE PROHIBITED TRANSACTION RULES (OR, IF THE NOTE OWNER IS SUBJECT TO ANY SIMILAR LAW, SUCH PURCHASE, HOLDING AND DISPOSITION DOES NOT CONSTITUTE AND WILL NOT RESULT IN A VIOLATION OF SUCH SIMILAR LAW).

 

THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH IN THIS NOTE.  ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE OF THIS NOTE.

 

B-1

 

$[                      ]

 

	
No. [B/C/D]-1
    	
 
    	
CUSIP NO.   [                  ]
    

 

FORD CREDIT AUTO OWNER TRUST 2012-C

 

CLASS [B/C/D] [        ]% ASSET BACKED NOTES

 

Ford Credit Auto Owner Trust 2012-C, a statutory trust organized under the laws of the State of Delaware (the “Issuer”), for value received, promises to pay to CEDE & CO., or registered assigns, the principal sum of [                                            ] DOLLARS payable on the fifteenth day of each month, or, if any such day is not a Business Day, the next succeeding Business Day, commencing in [                ] (each, a “Payment Date”) in an amount equal to the aggregate amount payable to Noteholders of Class [B/C/D] Notes on such Payment Date from the Principal Payment Account in respect of principal on the Class [B/C/D] Notes pursuant to Section 3.1 of the Indenture, dated as of [                    ] (the “Indenture”), between the Issuer and The Bank of New York Mellon, as Indenture Trustee (the “Indenture Trustee”).  However, the entire unpaid principal amount of this Note will be due and payable on the earlier of the [                ] Payment Date (the “Class [B/C/D] Final Scheduled Payment Date”) or the Redemption Date pursuant to Section 10.1 of the Indenture.  Notwithstanding the foregoing, the entire unpaid principal amount of the Notes will be due and payable on the date on which the Notes are declared to be immediately due and payable in the manner provided in Section 5.2(a) of the Indenture.  All principal payments on the Class [B/C/D] Notes will be made ratably to the Noteholders entitled to such principal payments. Capitalized terms used but not otherwise defined in this Note are defined in Article I of the Indenture, which also contains rules as to usage applicable to this Note.

 

The Issuer will pay interest on this Note at the rate per annum shown above on each Payment Date until the principal of this Note is paid or made available for payment, on the principal amount of this Note outstanding on the preceding Payment Date (after giving effect to all payments of principal made on the preceding Payment Date), subject to certain limitations contained in Section 3.1 of the Indenture.  Interest on this Note will accrue for each Payment Date from and including the 15th day of the month preceding each Payment Date (or, in the case of the initial Payment Date, from and including the Closing Date) to but excluding the 15th day of the following month.  Interest will be computed on the basis of a 360-day year of twelve 30-day months.

 

The principal of and interest on this Note are payable in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts.  All payments made by the Issuer with respect to this Note will be applied first to interest due and payable on this Note as provided above and then to the unpaid principal of this Note.

 

This Note is one of a duly authorized issue of Class [B/C/D] [        ]% Asset Backed Notes (the “Class [B/C/D] Notes”) of the Issuer.  Also authorized under the Indenture are the [Class A-[      ] Notes, the Class [B] Notes, the Class [C] Notes and the Class [D] Notes].  The

 

B-2

 

Indenture and all indentures supplemental to the Indenture set forth the respective rights and obligations thereunder of the Issuer, the Indenture Trustee and the Noteholders.  The Notes are subject to all terms of the Indenture.

 

The Class [B/C/D] Notes are and will be equally and ratably secured by the collateral pledged as security therefor as provided in the Indenture.  The Class [B/C/D] Notes are subordinated in right of payment to the Class A Notes, [the Class B Notes, the Class C Notes].

 

Payments of interest on this Note on each Payment Date, together with any installment of principal to the extent not in full payment of this Note, will be made to the Registered Noteholder of this Note either by wire transfer in immediately available funds, to the account of such Noteholder at a bank or other entity having appropriate facilities for such wire transfer, if such Noteholder has provided to the Note Registrar appropriate written instructions at least five Business Days before such Payment Date and such Noteholder’s Notes in the aggregate evidence a denomination of not less than $1,000,000, or, if not, by check mailed first class mail, postage prepaid, to such Registered Noteholder’s address as it appears on the Note Register on each Record Date.  Such payments will be made without requiring that this Note be submitted for notation of payment.  Any reduction in the principal amount of this Note effected by any payments made on any Payment Date will be binding upon all future Noteholders of this Note and of any Note issued upon the registration of transfer of this Note or in exchange of this Note or in lieu of this Note, whether or not noted on this Note.  If funds are expected to be available for payment in full of the then remaining unpaid principal amount of this Note on a Payment Date, then the Indenture Trustee, in the name of and on behalf of the Issuer, will notify the Registered Noteholder of this Note as of the preceding Record Date by notice mailed or transmitted by facsimile before such Payment Date, and the amount then due and payable will be payable only upon presentation and surrender of this Note at the Indenture Trustee’s Corporate Trust Office or at the office of the Indenture Trustee’s agent appointed for such purposes located in The City of New York.

 

The Issuer will pay interest on overdue installments of interest at the Class [B/C/D] Note Interest Rate to the extent lawful.

 

The Notes may be redeemed, in whole but not in part, in the manner and to the extent described in the Indenture and the Sale and Servicing Agreement.

 

The transfer of this Note is subject to the restrictions on transfer specified on the face of this Note and to the other limitations set forth in the Indenture.  Subject to the satisfaction of such restrictions and limitations, the transfer of this Note may be registered on the Note Register upon surrender of this Note for registration of transfer at the office or agency designated by the Issuer pursuant to the Indenture, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Indenture Trustee duly executed by, the Noteholder of this Note or such Noteholder’s attorney duly authorized in writing, with such signature guaranteed by an “eligible guarantor institution” meeting the requirements of the Note Registrar, and thereupon one or more new Notes of the same Class in authorized denominations and in the same aggregate principal amount will be issued to the designated transferee or transferees.  No service charge will be charged for any registration of transfer or exchange of this Note, but the transferor may

 

B-3

 

be required to pay an amount sufficient to cover any tax or other governmental charge that may be imposed in connection with any such registration of transfer or exchange.

 

Each Noteholder, by its acceptance of a Note, covenants and agrees that no recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer, the Owner Trustee or the Indenture Trustee on the Notes or under the Indenture or any certificate or other writing delivered in connection with the Notes and the Indenture, against (i) the Indenture Trustee or the Owner Trustee, each in its individual capacity, (ii) any holder of a beneficial interest in the Issuer, (iii) any partner, owner, beneficiary, agent, officer, director, employee or agent of the Indenture Trustee or the Owner Trustee, each in its individual capacity or (iv) any holder of a beneficial interest in the Owner Trustee or the Indenture Trustee, each in its individual capacity, except as any such Person may have agreed.

 

The obligations of the Issuer under the Indenture are solely the obligations of the Issuer and do not represent any obligation or interest in any assets of the Depositor. Each Noteholder, by its acceptance of a Note, acknowledges and agrees that it has no right, title or interest in or to any Other Assets of the Depositor.  Notwithstanding the preceding sentence, if such Noteholder either (i) asserts an interest or claim to, or benefit from, Other Assets or (ii) is deemed to have any such interest, claim to, or benefit in or from Other Assets, whether by operation of law, legal process, pursuant to insolvency laws or otherwise (including by virtue of Section 1111(b) of the Bankruptcy Code), then such Noteholder further acknowledges and agrees that any such interest, claim or benefit in or from Other Assets is and will be expressly subordinated to the indefeasible payment in full of the other obligations and liabilities, which, under the relevant documents relating to the securitization or conveyance of such Other Assets, are entitled to be paid from, entitled to the benefits of, or otherwise secured by such Other Assets (whether or not any such entitlement or security interest is legally perfected or otherwise entitled to a priority of distributions or application under applicable law, including insolvency laws, and whether or not asserted against the Depositor), including the payment of post-petition interest on such other obligations and liabilities.

 

THIS SUBORDINATION AGREEMENT WILL BE DEEMED A SUBORDINATION AGREEMENT WITHIN THE MEANING OF SECTION 510(a) OF THE BANKRUPTCY CODE.

 

Each Noteholder, by acceptance of a Note, covenants and agrees by accepting the benefits of the Indenture that, before the date that is one year and one day (or, if longer, any applicable preference period) after the payment in full of (a) all securities issued by the Depositor or by a trust for which the Depositor was a depositor and (b) the Notes, such Noteholder will not institute against the Depositor or the Issuer, or join in any institution against the Depositor or the Issuer of, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under any federal or State bankruptcy or similar law in connection with any obligations relating to the Notes, the Indenture or any of the other Transaction Documents.

 

The Issuer has entered into the Indenture and this Note is issued with the intention that, for federal, State, and local income and franchise tax purposes, Notes that are owned by a Person other than Ford Credit or its Affiliates will qualify as indebtedness of the Issuer secured by the Collateral.  Each Noteholder, by its acceptance of a Note, will be deemed to agree to treat the

 

B-4

 

Notes for federal, State and local income, single business and franchise tax purposes as indebtedness of the Issuer.

 

With respect to any date of determination, the Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture Trustee may treat the Person in whose name this Note is registered as of such date as the owner of such Note for the purpose of receiving payments of principal of and any interest on such Note and for all other purposes, and none of the Issuer, the Indenture Trustee or any agent of the Issuer or the Indenture Trustee will recognize notice to the contrary.

 

The Indenture permits, with certain exceptions requiring the consent of all adversely affected Noteholders as provided in the Indenture, the amendment of the Indenture and the modification of the rights and obligations of the Issuer and the rights of the Noteholders under the Indenture by the Issuer with the consent of the Noteholders of Notes evidencing not less than a majority of the Note Balance of the Controlling Class.  The Indenture also permits the Indenture Trustee to amend or waive certain terms and conditions set forth in the Indenture without the consent of the Noteholders provided certain conditions are satisfied. In addition, the Indenture contains provisions permitting the Noteholders of Notes evidencing specified percentages of the Note Balance of the Notes or of the Controlling Class, on behalf of all Noteholders, to waive compliance by the Issuer with certain provisions of the Indenture and certain defaults under the Indenture and their consequences.  Any such consent or waiver by the Noteholder of this Note will be conclusive and binding upon such Noteholder and upon all future Noteholders of this Note and of any Note issued upon the registration of transfer of this Note or in exchange of this Note or in lieu of this Note whether or not notation of such consent or waiver is made upon this Note.

 

The term “Issuer”, as used in this Note, includes any successor to the Issuer under the Indenture.

 

The Issuer is permitted by the Indenture, under certain circumstances, to merge or consolidate, subject to the rights of the Indenture Trustee and the Noteholders under the Indenture.

 

The Notes are issuable only in registered form in denominations as provided in the Indenture, subject to certain limitations set forth in the Indenture.

 

THIS NOTE AND THE INDENTURE WILL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

 

No reference in this Note to the Indenture, and no provision of this Note or of the Indenture, will alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay the principal of and interest on this Note at the time, place and rate, and in the coin or currency prescribed in this Note.

 

Anything in this Note to the contrary notwithstanding, except as provided in the Transaction Documents, none of The Bank of New York Mellon, in its individual capacity, U.S. Bank Trust National Association, in its individual capacity, any owner of a beneficial interest in the Issuer, or any of their respective partners, beneficiaries, agents, officers, directors, employees or successors or assigns will be personally liable for, nor will recourse be had to any of them for,

 

B-5

 

the payment of principal or of interest on this Note or performance of, or omission to perform, any of the covenants, obligations or indemnifications contained in the Indenture.  The Noteholder of this Note, by its acceptance of this Note, agrees that, except as provided in the Transaction Documents, in the case of an Event of Default under the Indenture, the Noteholder has no claim against any of the foregoing for any deficiency, loss or claim therefrom; provided, however, that nothing contained in this Note will be taken to prevent recourse to, and enforcement against, the assets of the Issuer for any and all liabilities, obligations and undertakings contained in the Indenture or in this Note.

 

Unless the certificate of authentication on this Note has been executed by the Indenture Trustee whose name appears below by manual signature, this Note will not be entitled to any benefit under the Indenture, or be valid or obligatory for any purpose.

 

[Remainder of Page Intentionally Left Blank]

 

B-6

 

The Issuer has caused this instrument to be signed, manually or in facsimile, by its Responsible Person, as of the date set forth below.

 

	
Date:   [                ]
    	
 
    
	
 
    	
 
    
	
 
    	
FORD   CREDIT AUTO OWNER TRUST 2012-C
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
U.S.   BANK TRUST NATIONAL ASSOCIATION,
    
	
 
    	
 
    	
not   in its individual capacity but solely as Owner Trustee of Ford Credit Auto   Owner Trust 2012-C
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Responsible   Person
    

 

TRUSTEE’S CERTIFICATE OF AUTHENTICATION

 

This is one of the Class [B/C/D] Notes designated above and referred to in the Indenture.

 

	
Date:   [                ]
    	
 
    
	
 
    	
 
    
	
 
    	
THE   BANK OF NEW YORK MELLON,
    
	
 
    	
not in its individual capacity but solely as   Indenture Trustee
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Responsible   Person
    

 

B-7

 

ASSIGNMENT

 

Social Security or taxpayer I.D. or other identifying number of assignee:

 

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto:

 

	
 
    	
 
    
	
(name   and address of assignee)
    	
 
    

 

the within Note and all rights under said Note, and hereby irrevocably constitutes and appoints                                   , attorney, to transfer said Note on the books kept for registration of said, with full power of substitution in the premises.

 

 

	
Dated:
    	
 
    	
 
    	
 
    	
*/
    
	
 
    	
 
    	
 
    	
Signature   Guaranteed
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
*/
    	
 
    

 

*/                                     NOTICE:  The signature to this assignment must correspond with the name of the registered owner as it appears on the face of the within Note in every particular, without alteration, enlargement or any change whatever.  Such signature must be guaranteed by an “eligible guarantor institution” meeting the requirements of the Note Registrar, which requirements include membership or participation in the Securities Transfer Agents Medallion Program or such other “signature guarantee program” as may be determined by the Note Registrar in addition to, or in substitution for, the Securities Transfer Agents Medallion Program, all in accordance with the Exchange Act.

 

B-8

 

Schedule A

 

Schedule of Receivables

 

Delivered on CD Rom to the Indenture Trustee at the Closing

 

SA-1

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